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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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CONTROL DEVICES, INC.
(Name of Subject Company)
CONTROL DEVICES, INC.
(Name of Person Filing Statement)
COMMON SHARES, NO PAR VALUE
(Title of Class of Securities)
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21238C 10 3
(CUSIP Number of Class of Securities)
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BRUCE D. ATKINSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CONTROL DEVICES, INC.
228 NORTHEAST ROAD
STANDISH, MAINE 04084
207-642-4535
(Name, Address and Telephone Number of Person Authorized to Receive Notice
and Communications on Behalf of the Person Filing the Statement)
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COPIES TO:
JAMES A. STRAIN
SOMMER & BARNARD, PC
4000 BANK ONE TOWER
INDIANAPOLIS, INDIANA 46204
317-630-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Control Devices, Inc., an Indiana
corporation ("CDI" or the "Company"). The principal executive offices of the
Company are located at 228 Northeast Road, Standish, Maine 04084. The title of
the class of equity securities to which this Solicitation/Recommendation
Statement on Schedule 14D-9 relates is the common shares, no par value, of the
Company ("Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer disclosed in the Tender Offer
Statement on Schedule 14D-1 dated February 26, 1999 (the "Schedule 14D-1") filed
by First Technology PLC, an English public limited company ("First Technology
PLC" or "Parent"), and First Technology Acquisition Corp., an Indiana
corporation and a wholly-owned subsidiary of Parent ("Purchaser"), to purchase
all of the outstanding common shares (the "Shares") at $16.25 per Share, net to
the seller in cash, without interest thereon (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Offer to Purchase dated February
26, 1999 (the "Offer to Purchase") and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, together constitute the
"Offer"), copies of which are filed as Exhibits hereto.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 22, 1999, by and among Parent, Purchaser and the Company (the
"Merger Agreement"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Merger Agreement.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Purchaser are located at 2 Cheapside Court, Buckhurst Road, Ascot,
Berkshire, SL5 7RF, United Kingdom.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b)(1) The election and designation of directors to the Board of Directors
of the Company, as provided for in the Merger Agreement (a summary of which is
contained in this Schedule 14D-9), is subject to Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which requires the
Company to mail to its shareholders an Information Statement (the "Information
Statement") containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. The Information Statement is attached
as Schedule I hereto and is incorporated herein by reference. Certain contracts,
agreements, arrangements or understandings between the Company and certain of
its executive officers, directors or affiliates are described in Schedule I
hereto under the headings "Compensation of Directors," "Security Ownership of
Management," "Compensation of Executive Officers," and
"Atkinson/Wood/Hauser-Kauffmann Termination Benefits Agreements." Except as set
forth in this Item 3(b), to the knowledge of the Company, there are no material
contracts, agreements, arrangements or understanding and no actual or potential
conflicts of interest between (i) the Company or its affiliates and the
Company's executive officers, directors or affiliates; or (ii) Parent or
Purchaser and their respective executive officers, directors or affiliates.
(b)(2) THE MERGER AGREEMENT.
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement, which is incorporated by reference and filed with the
SEC as an exhibit to the Schedule 14D-1. The Merger Agreement may be examined
at, and copies obtained from, the offices of the SEC in the manner set forth in
Section 7 above. All terms not defined herein have the meanings ascribed to such
terms in the Merger Agreement.
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THE OFFER. The Merger Agreement provides for the commencement of the Offer.
Without the prior written consent of the Company, Purchaser will not, and Parent
will not cause Purchaser to, (i) decrease or change the form of the Per Share
Amount, (ii) decrease the number of Shares sought in the Offer, (iii) amend or
waive the Minimum Condition or impose conditions on the Offer other than the
Offer Conditions, (iv) extend the Expiration Date except (A) as required by law
and (B) that, in the event that any Offer Condition is not satisfied or waived
at the time that the Expiration Date would otherwise occur, (1) Purchaser must
extend the Expiration Date for 10 additional business days to the extent
necessary to permit such condition to be satisfied, and (2) Purchaser may, in
its sole discretion, extend the Expiration Date for such additional period as it
may determine to be appropriate (but not beyond June 30, 1999 (the "Outside
Date")), or (v) amend any term of the Offer in any manner materially adverse to
Shareholders (including without limitation amendments resulting in any extension
which would be inconsistent with the preceding provisions of this sentence),
provided, however, that (1) subject to applicable legal requirements, Parent may
cause Purchaser to waive any Offer Condition, other than the Minimum Condition,
in Parent's sole discretion, and (2) the Offer may be extended in connection
with an increase in the consideration to be paid pursuant to the Offer so as to
comply with applicable rules and regulations of the SEC. Except as set forth
above and subject to applicable legal requirements, Purchaser may amend the
Offer or waive any Offer Condition in its sole discretion. Assuming the prior
satisfaction or waiver of the Offer Conditions, Parent will cause Purchaser to
accept for payment, and pay for, in accordance with the terms of the Offer, all
Shares validly tendered and not withdrawn pursuant to the Offer as soon as
practicable after the Expiration Date or any extension thereof.
The Company made representations to Parent in the Merger Agreement that: (a)
the Company Board has, (i) determined that the Merger Agreement, the Offer and
the Merger are fair to and in the best interests of the Company and its
Shareholders, (ii) approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, (iii) taken all other
action necessary to render the limitations on control share acquisitions and
business combinations contained in Chapters 42 and 43 of the IBCL (or any
similar provision) inapplicable to any transactions contemplated by the Merger
Agreement, (iv) amended the Company Rights Agreement to, among other things,
render it inapplicable to any transactions contemplated by the Merger Agreement,
and (v) resolved to recommend acceptance of the Offer by Shareholders and
adoption of the Merger Agreement by Shareholders, and (b) Cleary Gull has
delivered to the Company Board its opinion that the consideration to be received
by Shareholders in the Offer and the Merger is fair to such Shareholders from a
financial point of view.
Pursuant to the Merger Agreement, the Company is not permitted to otherwise
amend the Rights Agreement or take any other action with respect to, or make any
determination under, the Rights Agreement, including a redemption of the Company
Rights (as defined in the Merger Agreement) or any action to facilitate a
Company Takeover Proposal.
BOARD REPRESENTATION. The Merger Agreement provides that promptly upon the
purchase of Shares by Purchaser pursuant to the Offer, and from time to time
thereafter, (i) Parent will be entitled to designate such number of directors
("Parent's Designees"), rounded up to the next whole number, as will give
Parent, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Company Board equal to the product of (A) the number of
directors on the Company Board (giving effect to any increase in the number of
directors pursuant to the Merger Agreement) and (B) the percentage that such
number of Shares so purchased bears to the aggregate number of Shares
outstanding (such number being, the "Board Percentage"); provided, however, that
if the number of Shares purchased pursuant to the Offer equals or exceeds a
majority of the outstanding Shares, the Board Percentage will in all events be a
majority of the members of the Company Board, and (ii) the Company will, upon
request by Parent, promptly satisfy the Board Percentage by (A) increasing the
size of the Company Board or (B) using its reasonable best efforts to secure the
resignations of such number of directors as is necessary to enable Parent's
Designees to be elected to the Company Board, or both, and will use its
reasonable best efforts to
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cause Parent's Designees promptly to be so elected, subject in all instances to
compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. At the request of Parent, the Company will take all lawful action
necessary to effect any such election. Parent will supply to the Company in
writing and be solely responsible for any information with respect to itself,
the Parent's Designees and Parent's officers, directors and affiliates required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder to be
included in the Schedule 14D-9. Notwithstanding the foregoing, at all times
prior to the Effective Time, the Company Board will include at least two
Continuing Directors (as defined below).
The Merger Agreement further provides that, notwithstanding any other
provision of the Merger Agreement, the Company articles of incorporation or
bylaws, or of applicable law to the contrary, following the election or
appointment of Parent's Designees pursuant to the Merger Agreement and prior to
the Effective Time, any amendment or termination of the Merger Agreement by the
Company, extension by the Company for the performance or waiver of the
obligations or other acts of Parent or Purchaser under the Merger Agreement or
waiver by the Company of the Company's rights under the Merger Agreement will
require the affirmative vote of the majority of the Continuing Directors.
"Continuing Directors" means at any time, (i) those directors of the Company who
are directors on the date of the Merger Agreement and who voted to approve the
Merger Agreement, and (ii) such additional directors of the Company who are not
affiliated with Parent, Purchaser or any of their affiliates and who are
designated as "Continuing Directors" for purposes of the Merger Agreement by a
majority of the Continuing Directors in office at the time of such designation.
THE MERGER. The Merger Agreement provides that on its terms and subject to
its conditions, at the Effective Time, Purchaser will be merged with and into
the Company in accordance with the applicable provisions of the IBCL, and the
separate corporate existence of Purchaser will thereupon cease. The Company will
be the surviving corporation in the Merger (as such, the "Surviving
Corporation") in accordance with the IBCL.
The articles of incorporation of the Surviving Corporation to be in effect
from and after the Effective Time until amended in accordance with its terms and
the IBCL will be the articles of incorporation of Purchaser immediately prior to
the Effective Time. The bylaws of the Surviving Corporation to be in effect from
and after the Effective Time until amended in accordance with its terms, the
Surviving Corporation's articles of incorporation and the IBCL will be the
bylaws of Purchaser immediately prior to the Effective Time.
The members of the initial Board of Directors of the Surviving Corporation
will be the members of the Board of Directors of Purchaser immediately prior to
the Effective Time. All of the members of the Board of Directors of the
Surviving Corporation will serve until their successors are duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the articles of incorporation and the bylaws of the Surviving
Corporation. The officers of the Surviving Corporation will consist of the
officers of the Company immediately prior to the Effective Time. Such Persons
will continue as officers of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the articles of incorporation and the
bylaws of the Surviving Corporation.
CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that,
by virtue of the Merger and without any action on the part of Parent, Purchaser,
the Company or Shareholders, each Share issued and outstanding immediately prior
to the Effective Time (other than any Shares to be canceled as described below)
and any Shares issuable upon exercise of any option, conversion or other right
to acquire Shares existing immediately prior to the Effective Time will be
canceled and extinguished and be converted into the right to receive the Per
Share Amount, or such higher per Share amount as is paid in the Offer, in cash
payable to the holder thereof, without interest (the "Merger Consideration"), in
accordance with the
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Merger Agreement. All such Shares, when so converted, will no longer be
outstanding and will automatically be canceled and retired and will cease to
exist, and each holder of a certificate formerly representing any such Share
will cease to have any rights with respect thereto, except the right to receive
the Merger Consideration therefor upon the surrender of such certificate in
accordance with the Merger Agreement. Any payment will be made net of applicable
withholding taxes to the extent such withholding is required by law.
Notwithstanding the foregoing, if between the date of the Merger Agreement and
the Effective Time the outstanding Shares shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Merger Consideration will be correspondingly adjusted on
a per-share basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
The Merger Agreement further provides that each Share held in the treasury
of the Company and each Share owned by Parent, Purchaser or any other direct or
indirect wholly owned subsidiary of Parent immediately before the Effective Time
(other than shares in trust accounts, managed accounts, custodial accounts and
the like that are beneficially owned by third parties) will be automatically
canceled and retired and will cease to exist and no payment or other
consideration will be made with respect thereto.
Each share of common stock, par value $0.01 per share, of Purchaser issued
and outstanding immediately before the Effective Time will be converted into one
validly issued, fully paid and nonassessable share of common stock, par value
$0.01 per share, of the Surviving Corporation, which, in accordance with the
Merger Agreement, will constitute all of the issued and outstanding shares of
capital stock of the Surviving Corporation immediately after the Effective Time.
COMPANY STOCK OPTION PLANS. The Merger Agreement provides that
notwithstanding the provisions of the Merger Agreement applicable to Rights (as
defined therein), the Company will use its reasonable best efforts (which
include satisfying the requirements of Rule 16b-3(e) promulgated under Section
16 of the Exchange Act, without incurring any liability in connection therewith)
to provide that, at the Effective Time, each holder of a then-outstanding option
to purchase Shares under any of the Company's 1996 Stock Compensation Plan, 1997
Stock Compensation Plan and Employee Stock Purchase Plan (collectively, the
"Stock Option Plans"), whether or not then exercisable (the "Options") will, in
settlement thereof, receive from the Company for each Share subject to such
Option, an amount (subject to any applicable withholding tax) in cash equal to
the difference between the Merger Consideration and the per Share exercise price
of such option to the extent such difference is a positive amount ( the "Option
Consideration"); provided, however, that with respect to any Person subject to
Section 16(a) of the Exchange Act, any such amount will be paid as soon as
practicable after the first date payment can be made without liability to such
Person under Section 16(b) of the Exchange Act and otherwise any such amount
will be paid within five business days after the Effective Time. Notwithstanding
anything herein stated, no Option Consideration will be paid with respect to any
Option unless, at or prior to the time of such payment, such Option is canceled
and the holder of such Option has executed and delivered a release of any and
all rights the holder had or may have had in respect of such Option. The Company
will cooperate with Parent in developing and taking any actions reasonably
designed to minimize the exercise of Options by the holders thereof prior to the
Offer Completion Date (as defined in the Merger Agreement).
The Merger Agreement further provides that, notwithstanding the provisions
of the Merger Agreement applicable to Rights, prior to the Effective Time, the
Company will use its reasonable best efforts to obtain all necessary consents or
releases from holders of Options under the Stock Option Plans and take all such
other lawful action as may be necessary to give effect to the transactions
contemplated by the Merger Agreement. Except as otherwise agreed to by the
parties, the Stock Option Plans will terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in respect of the capital stock of the Company or
any subsidiary thereof will be canceled as of the Effective Time.
Notwithstanding the foregoing, if requested by Parent, the Company will use its
reasonable best efforts to assure that following the date of the Merger
Agreement, no participant in the Employee Stock Purchase Plan (as defined in the
Merger Agreement) of
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the Company will have any right to elect, to participate or to make any
contribution thereunder, and the Company will take all actions as may be
available to it to cause such plan to be suspended in respect of equity
securities of the Company or the Surviving Corporation other than as to Shares
the payment for which was deducted from the employee's payroll at or prior to
the date of the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties. These include representations and
warranties by the Company with respect to: (i) existence, standing and corporate
power, (ii) authority and validity and effect of the Merger Agreement, (iii)
capitalization, (iv) subsidiaries, (v) other interests, (vi) no conflicts and
required filings and consents, (vii) compliance with laws, (viii) SEC documents,
(ix) litigation, (x) absence of certain changes, (xi) taxes, (xii) property,
(xiii) millennium compliance, (xiv) contracts, (xv) environmental matters, (xvi)
Company benefit plans and ERISA compliance, (xvii) state takeover statutes,
(xviii) voting requirements, (xix) no brokers, (xx) opinion of the Company,
(xxi) offer documents and proxy statements, and (xxii) the Company Rights
Agreement.
Parent and Purchaser have also made certain representations and warranties
with respect to: (i)existence, standing and corporate power, (ii) authority,
validity and effect of the Merger Agreement, (iii) no conflicts and required
filings and consents, (iv) no brokers, (v) offer documents and proxy statements,
and (vi) financing.
No representations and warranties made by the Company, Parent or Purchaser
will survive beyond the Effective Time.
SHAREHOLDER MEETING. The Merger Agreement provides that the Company will
take all action necessary in accordance with applicable law and its articles of
incorporation and bylaws to convene a meeting of Shareholders (the "Company
Shareholders Meeting") as promptly as practicable after the Offer Completion
Date to consider and vote upon the approval and adoption of the Merger Agreement
and the Merger. The Company Board will recommend approval and adoption of the
Merger Agreement at the request of Parent or Purchaser. The Company Board will
recommend such approval and adoption, and the Company will take all lawful
action to solicit such approval, including without limitation timely mailing any
proxy statement; provided, however, that such recommendation (but not such
actions to convene the Company Shareholders Meeting) is subject to any action,
including any withdrawal or change of its recommendation, taken by, or upon
authority of, the Company Board, as the case may be, in the exercise of its good
faith judgment based upon and in conformity with the written opinion of outside
counsel (notice of which will be promptly given to Parent and Purchaser) that
such action is required in order to satisfy the fiduciary duties of the members
of the Company Board to Shareholders imposed by law. Without limiting the
generality or effect of any other provision of the Merger Agreement, the
Company's obligations to convene the Company Shareholder Meeting will not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal (as defined in the
Merger Agreement).
The Merger Agreement also provides that, notwithstanding the above, in the
event that Parent, Purchaser or any other subsidiary of Parent acquires at least
90% of the outstanding Shares pursuant to the Offer or otherwise, the parties to
the Merger Agreement will take all necessary and appropriate action to cause the
Merger to become effective in accordance with the IBCL without a meeting of
Shareholders as soon as practicable after the acceptance for payment and
purchase of Shares by Purchaser pursuant to the Offer.
CONDUCT OF BUSINESS PENDING THE MERGER. The Company has agreed that during
the period from the date of the Merger Agreement until the Effective Time,
except as expressly provided for in the Merger Agreement, the Company will, and
will cause its subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
previously conducted and in compliance in all material respects with all
applicable laws and, to the extent consistent therewith, use all
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reasonable efforts to preserve intact their current business organizations, use
reasonable efforts to keep available the services of their current officers and
other key employees and preserve their relationships with those Persons having
business dealings with them to the end that their goodwill and ongoing
businesses will be unimpaired at the Effective Time. Without limiting the
generality or effect of the foregoing, during the period from the date of the
Merger Agreement to the Effective Time, the Company will not, and will not
permit any of its subsidiaries to, without the prior written consent of Parent:
(i) other than the Company's regular quarterly dividend of $0.02 per
Share and except as otherwise provided in the Merger Agreement, (A) declare,
set aside or pay any dividends on, or make any other distributions in
respect of, any of its capital stock, (B) 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 (C) 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) except for the issuance of Shares pursuant to the exercise of
Options outstanding on the close of business on the last business day
immediately preceding the date of the Merger Agreement or pursuant to the
Employee Stock Purchase Plan to the extent Shares have been paid for with
payroll deductions at or prior to the date of the Merger Agreement, issue,
deliver, sell, pledge or otherwise encumber any potential voting securities
or convertible securities;
(iii) amend its articles of incorporation, bylaws or other comparable
organizational documents;
(iv) acquire by any means any business or any corporation, limited
liability company, partnership, joint venture, association or other business
organization or division thereof;
(v) dispose of or encumber in any way any of its properties or assets,
other than (A) in the ordinary course of business consistent with past
practice and (B) sales of assets which do not individually or in the
aggregate exceed $200,000;
(vi) (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, or (B) make any loans, advances
or capital contributions to, or investments in, any other person, other than
to the Company or any subsidiary of the Company or to officers and employees
of the Company or any of its subsidiaries for travel, business or relocation
expenses in the ordinary course of business;
(vii) make any capital expenditure or capital expenditures other than
capital expenditures set forth in the operating budget of the Company dated
February 4, 1999, as previously delivered to Parent, other than expenditures
in the ordinary course of business consistent with past practice that
individually or in the aggregate do not exceed $200,000;
(viii) make any change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles, or make or change any tax election or settle or compromise any
material tax liability or refund;
(ix) except as required by law or contemplated by the Merger Agreement,
enter into, adopt or amend in any material respect or terminate any Stock
Option Plan or any other agreement, plan or policy involving the Company or
any of its subsidiaries and one or more of their directors, officers or
employees, or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any Company pension plans, or
change the manner in which contributions to any Company pension plans are
made or the basis on which such contributions are determined;
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(x) other than as disclosed by Company to Parent, hire or terminate the
employment of any executive officer or key employee or increase the
compensation of any director, executive officer or other key employee of the
Company or pay any benefit or amount not required by a plan or arrangement
as in effect on the date of the Merger Agreement to any such person;
(xi) enter into or amend in any material respect any Material Contract
(as defined in the Merger Agreement) or enter into any contract or
agreement, written or oral, with any affiliate, associate or relative of
Parent, or make any payment to or for the benefit of, directly or
indirectly, any of the foregoing;
(xii) authorize, recommend, propose or announce an intention to adopt a
plan of complete or partial liquidation or dissolution of the Company or any
of its subsidiaries; or
(xiii) authorize, or commit or agree to take, any of the foregoing
actions.
CONSENTS, APPROVALS AND FILINGS. The Merger Agreement provides that upon
the terms and subject to the conditions set forth in the Merger Agreement, each
of the parties will use all reasonable efforts to consummate and make effective
the Offer, the Merger and the other transactions contemplated by the Merger
Agreement, including without limitation, (i) obtaining all necessary actions or
nonactions, waivers, consents and approvals from governmental entities and
making of all necessary registrations and filings (including filings with
governmental entities) and 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) obtaining all necessary consents, approvals or waivers
from third parties, and (iii) execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, the Merger Agreement.
In connection with and without limiting the foregoing, the Company and
Parent will, and Parent will cause Purchaser to, (i) take all action necessary
to ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Offer, the Merger or any of the other transactions
contemplated by the Merger Agreement, and (ii) if any state takeover statute or
similar statute or regulation becomes applicable thereto, take all action
necessary to ensure that the Offer and the Merger may be consummated as promptly
as practicable on the terms contemplated by the Merger Agreement and otherwise
to minimize the effect of such statute or regulation thereon.
Notwithstanding any other provision of the Merger Agreement, in no event
will Parent be required to agree to any divestiture, hold-separate or other
requirement in connection with the Merger Agreement or any of the transactions
contemplated thereby.
PUBLICITY. The Merger Agreement provides that the Company and Parent will,
subject to their respective legal obligations (including requirements of stock
exchanges and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated by the Merger Agreement and in making any filings with
any Governmental Entity or with any national securities exchange with respect
thereto.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. The Merger Agreement
provides that all rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time existing in favor
of the current or former directors or officers of the Company or each of its
subsidiaries as provided in their respective articles of incorporation or bylaws
(or comparable organizational documents) will be assumed by the Surviving
Corporation and the Surviving Corporation will be directly responsible for such
indemnification, without further action, as of the Effective Time and
indemnification rights provided in such articles of incorporation will continue
in full force and effect in accordance with their respective terms. In addition,
from and after the Effective Time, directors and officers of the Company who
become or remain directors or officers of the Surviving Corporation will be
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entitled to the same indemnity rights and protections (including those provided
by directors' and officers' liability insurance) of the Surviving Corporation.
These provisions, (i) are intended to be for the benefit of, and will be
enforceable by, each indemnified party, his or her heirs and his or her
representatives, and (ii) are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such person may have by
contract or otherwise.
The Merger Agreement also provides that the Surviving Corporation will
maintain in effect for not less than six years after the Effective Time policies
of directors' and officers' liability insurance equivalent in all material
respects to those maintained by or on behalf of the Company and its subsidiaries
on the date thereof (and having at least the same coverage and containing terms
and conditions which are no less advantageous to the persons currently covered
by such policies as insured) with respect to matters existing or occurring at or
prior to the Effective Time; provided, however, that if the aggregate annual
premiums for such insurance at any time during such period exceed 200% of the
per annum rate of premium currently paid by the Company and its subsidiaries for
such insurance on the date of the Merger Agreement, then the Surviving
Corporation will provide the maximum coverage that shall then be available at an
annual premium equal to 200% of such rate.
EMPLOYEE BENEFIT MATTERS. The Merger Agreement provides that, on and after
the Effective Time, the Surviving Corporation will promptly pay or provide when
due all compensation and benefits as provided pursuant to the terms of, and to
honor in accordance with their current existing terms (except to the extent
amended or terminated in accordance with such terms), all compensation
arrangements, employment agreements and employee or director benefit plans,
programs and policies in existence as of the date of the Merger Agreement for
all employees (and former employees) and directors (and former directors) of the
Company and its subsidiaries.
The Merger Agreement further provides that, for the period commencing at the
Effective Time and ending on December 31, 1999, the Surviving Corporation will
provide employee benefits under plans, programs and arrangements which, in the
aggregate, will provide benefits to the employees of the Surviving Corporation
and its subsidiaries (other than employees covered by a collective bargaining
agreement) that are no less favorable in the aggregate than those provided
pursuant to the plans, programs and arrangements (other than those related to
the equity securities of the Company) of the Company and its subsidiaries in
effect on the date of the Merger Agreement; provided, however, that nothing in
the Merger Agreement will prevent the amendment or termination of any specific
plan, program or arrangement except that the Company's severance plan/policy
will not be amended to reduce the benefits thereunder with respect to
terminations of employees occurring before December 31, 1999, require that the
Surviving Corporation provide or permit investment in the securities of Parent,
the Company or the Surviving Corporation or interfere with the Surviving
Corporation's right or obligation to make such changes as are necessary to
comply with applicable law.
The Merger Agreement also provides that employees of the Surviving
Corporation will be given credit for all service with the Company and its
subsidiaries, to the same extent as such service was credited for such purpose
by the Company, under each employee benefit plan, program, or arrangement of
Parent in which such employees are eligible to participate for all purposes,
except for purposes of benefit accrual, under defined benefit pension plans,
and, in all cases, except to the extent such credit would result in duplication
of benefits. If employees of the Surviving Corporation and its subsidiaries
become eligible to participate in a medical, dental or health plan of Parent or
its subsidiaries, Parent will cause such plan to (i) waive any preexisting
condition limitations for conditions covered under the applicable medical,
health or dental plans of the Company and its subsidiaries and (ii) honor any
deductible and out of pocket expenses incurred by the employees and their
beneficiaries under such plans during the portion of the calendar year prior to
such participation. Notwithstanding the foregoing, in no event will the
employees be entitled to any credit for service, deductibles or out of pocket
expenses to the extent that it would result in a duplication of benefits with
respect to the same period of service, deductible or out of pocket expenses.
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Notwithstanding anything in the Merger Agreement to the contrary, from and
after the Effective Time, the Surviving Company will have sole discretion over
the hiring, promotion, retention, firing and other terms and conditions of the
employment of employees of the Surviving Company.
NO SOLICITATION. The Merger Agreement provides that the Company, its
affiliates and their respective officers, directors, employees, representatives
and agents will immediately cease any existing discussions or negotiations, if
any, with any parties with respect to any Company Takeover Proposal. The Company
will not, nor will it permit any of its subsidiaries to, nor will it authorize
or permit any of its officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
or any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage (including without limitation by way of furnishing information), or
take any other action designed or reasonably likely to facilitate, any inquiries
or the making of any proposal which constitutes or reasonably may give rise to
any Company Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Company Takeover Proposal; provided, however, that
if, at any time prior to the date on which Purchaser purchases Shares in the
Offer (the "Offer Completion Date"), the Company Board determines in good faith,
based upon and in conformity with the written opinion of outside counsel, that
failure to do so would result in a breach of its fiduciary duties to
Shareholders under applicable law, the Company may, in response to a Superior
Proposal (as defined below) which was not solicited by it and did not otherwise
result from a breach of any provision of the Merger Agreement, (A) furnish
information with respect to the Company and each of its subsidiaries to any
person pursuant to a customary confidentiality agreement not more favorable to
the recipient of such information than the Confidentiality Agreement (as defined
in the Merger Agreement) and (B) participate in negotiations regarding such
Superior Proposal. "Company Takeover Proposal" means any inquiry, proposal or
offer from any person relating to any direct or indirect acquisition or purchase
of 20% or more of the assets of the Company and its subsidiaries or 20% or more
of any class of equity securities of the Company or any of its subsidiaries, any
tender offer or exchange offer for Shares for any class of equity securities of
the Company or any of its subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement, or any other transaction that is intended or
could prevent the completion of the transactions contemplated hereby and
"Superior Proposal" means a bona fide written Company Takeover Proposal that (i)
involves the direct or indirect acquisition or purchase of 50% or more of the
assets of the Company and its subsidiaries or 50% or more of any class of equity
securities of the Company or any of its subsidiaries, (ii) involves payment of
consideration to the Company's Shareholders and other terms and conditions that,
taken as a whole, are superior to the Offer and the Merger, and (iii) is made by
a person reasonably capable of completing such Company Takeover Proposal, taking
into account the legal, financial, regulatory and other aspects of such Company
Takeover Proposal and the person making such Company Takeover Proposal.
The Merger Agreement further provides that, except as permitted therein,
neither the Company Board nor any committee thereof may (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Company Board or such committee
of the Offer, the Merger or the Merger Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Company Takeover Proposal, (iii)
cause or authorize the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Company Takeover Proposal (each, a "Company Acquisition Agreement"), or (iv)
release any third party from, or waive any provisions of, any confidentiality or
standstill agreement to which the Company is a party. Notwithstanding the
foregoing, in the event that prior to the Offer Completion Date, the Company
Board determines in good faith, after the Company has received a Superior
Proposal and based upon and in conformity with the written opinion of outside
counsel, that failure to do so would result in a breach of its fiduciary duties
to the Company's Shareholders under applicable law, the Company Board may,
subject to the terms of the Merger Agreement, withdraw or modify its approval or
recommendation of the Offer, the Merger or the Merger Agreement, approve or
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recommend a Superior Proposal or terminate the Merger Agreement; provided,
however, that not less than five business days prior to such termination, the
Company will notify Parent of its intention to terminate the Merger Agreement
pursuant to this paragraph and will cause its financial and legal advisers to
negotiate in good faith with Parent and Parent's financial and legal advisers
during such five-day period to make such adjustments in the terms and conditions
of the Merger Agreement as are acceptable to Parent and would cause such Company
Takeover Proposal not to be a Superior Proposal.
In addition to the obligations of the Company described above, the Company
will (i) immediately advise Parent orally and in writing of any request for
information or of any Company Takeover Proposal, the material terms and
conditions of such request or Company Takeover Proposal and the identity of the
Person making such request or Company Takeover Proposal and (ii) keep Parent
informed of the status and details (including amendments or proposed amendments)
of any such request or Company Takeover Proposal.
PARENT SHAREHOLDERS' MEETING. The Merger Agreement provides that Parent
will use its reasonable best efforts to convene an extraordinary general meeting
of its shareholders (the "Parent Shareholders Meeting") to be duly called and
held as soon as reasonably practicable for the purpose of obtaining Parent
Shareholder Approval. Subject to fiduciary obligations and requirements of
applicable law under the terms of the Merger Agreement, the Board of Directors
of the Parent will recommend to its shareholders each of the matters required
for Parent Shareholder Approval and will use reasonable effects to solicit such
approval. Parent Shareholder Approval means, to the extent required by
applicable law and the rules of the London Stock Exchange, the authorization and
approval by a majority of the holders of ordinary shares of Parent of (a) the
Merger Agreement, the Shareholders Agreement, the Subscription Agreement and the
transactions contemplated thereby, (b) the increase in the authorized share
capital of Parent to the extent necessary to facilitate the transactions
contemplated by the Merger Agreement and by the Subscription Agreements, and (c)
the Directors of Parent to allot securities within the meaning of Section 80 of
the Companies Act of 1985 of England and Wales, as amended, to the extent
necessary to facilitate the transactions contemplated by the Merger Agreement
and by the Subscription Agreements.
FINANCING. The Merger Agreement provides that Parent and Purchaser have
available funds and financing and underwriting commitments for funds which are,
in the aggregate, sufficient for the purchase of the outstanding Shares pursuant
to the Offer and the Merger and to perform their respective obligations under
the Merger Agreement. As of the date of the Merger Agreement, such commitments
had not been withdrawn and, to the knowledge of Parent, there were no facts or
circumstances existing as of the date of the Merger Agreement that would result
in any of the conditions to funding such commitments not being satisfied.
FEES AND EXPENSES. The Merger Agreement provides that, except for
Termination Fees described below, all fees and expenses incurred in connection
with the Offer, the Merger, the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated, except that each of Parent and the
Company will bear and pay one-half of the costs and expenses incurred in
connection with (i) the filing, printing and mailing of the Proxy Statement, the
Schedule 14D-9, the Schedule 14D-1 and the other Offer Documents (including SEC
filing fees) and (ii) the filings of the pre-merger notification and report
forms under the HSR Act (including filing fees).
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger will be subject to the
fulfillment at or written waiver (as applicable) prior to the Closing Date, of
the following conditions:
(a) Purchaser shall have made, or caused to be made, the Offer and shall
have purchased, or caused to be purchased, the Shares pursuant to the Offer,
provided, that this condition shall be deemed to have been satisfied with
respect to the obligations of Parent and Purchaser to effect the
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Merger if Purchaser fails to accept for payment or pay for Shares pursuant
to the Offer in violation of the terms of the Offer or of the Merger
Agreement;
(b) The Merger Agreement and the transactions contemplated thereby shall
have been approved in the manner required by applicable law by Shareholders;
and
(c) No order or law 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.
The obligations of Parent and Purchaser to effect the Merger will be subject
to the fulfillment at or prior to the Closing Date (or such other date as may be
specified in the Merger Agreement) of the additional condition that the Company
shall have performed in all material respects its agreements contained in the
Merger Agreement required to be performed on or prior to the Closing Date.
TERMINATION AND FEES. The Merger Agreement may be terminated at any time
prior to the Effective Time, whether or not Company Shareholder Approval or
Parent Shareholder Approval has been obtained, by the mutual consent of Parent
and the Company.
The Merger Agreement may be terminated by action of the Board of Directors
of either Parent or the Company, whether or not Company Shareholder Approval or
Parent Shareholder Approval has been obtained, if (a) the Offer shall not have
been consummated by the Outside Date; provided, however, that no party may
terminate the Merger Agreement if such party's failure to fulfill any of its
obligations under the Merger Agreement, shall have been the reason that the
Offer Completion Date shall not have occurred on or before such date, (b) any
governmental entity permanently enjoined, restrained or otherwise prohibited the
consummation of the Offer, the Merger or any of the other transactions
contemplated by the Merger Agreement, or (c) the Offer expires or is terminated
or withdrawn pursuant to its terms without any Shares being purchased as a
result of the failure of any of the Offer Conditions to be satisfied prior to
the Expiration Date or any extension thereof, provided that any such termination
will not be effective unless and until the Company shall have paid to Purchaser
the fees and expenses described below.
The Merger Agreement further provides that it may be terminated at any time
prior to the Offer Completion Date, whether or not Parent Shareholder Approval
has been obtained, by action of the Company Board, if (a) there has been a
material breach by Parent or Purchaser of any representation or warranty
contained in the Merger Agreement which is not curable or is not cured by the
Outside Date and such breach had or could reasonably be likely to have a Parent
Material Adverse Effect (as defined in the Merger Agreement), (b) there has been
a material breach of any of the covenants set forth in the Merger Agreement on
the part of Parent or Purchaser, which breach is not curable or is not cured
within 15 calendar days after written notice of such breach is given, or (c) in
accordance with the Company Acquisition Agreement provisions of the Merger
Agreement, provided that any such termination will not be effective unless and
until the Company pays to Purchaser the fees and expenses described below.
In addition, Parent may terminate the Merger Agreement at any time prior to
the Offer Completion Date, whether or not Parent Shareholder Approval has been
obtained, if (a) there has been a material breach by the Company of any
representation or warranty contained in the Merger Agreement which is not
curable or is not cured by the Outside Date and such breach had or could
reasonably be likely to have a Company Material Adverse Effect (as defined in
the Merger Agreement), (b) the Company materially breached any of the covenants
set forth in the Merger Agreement on the part of the Company, which breach is
not curable or is not cured within 15 calendar days after written notice of such
breach is given to the Company, (c) the Company Board (i) withdrew or modified
in a manner adverse to Parent or Purchaser its approval or recommendation of the
Merger Agreement, the Offer or the Merger or failed to reconfirm its approval or
recommendation within five business days after Parent's written request to do
so, (ii) approved or recommended, or proposed publicly to approve or recommend,
a third-party Company
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Takeover Proposal to Shareholders, (iii) caused the Company to take any action
that would have constituted a breach of the Company Acquisition Agreement
prohibitions contained in the Merger Agreement, including without limitation
authorizing the Company to enter into a Company Acquisition Agreement, (iv)
approved the breach of the Company's obligation under the Company Acquisition
Agreement prohibitions, or (v) resolved to take any of the foregoing actions,
(d) any person or group (as defined in Section 13(d)(3) of the Exchange Act)
other than Parent, Purchaser or any of their respective subsidiaries or
affiliates shall have become the beneficial owner of more than 25% of the
outstanding Shares (either on a primary or fully diluted basis), or (e) Parent
Shareholder Approval shall not have been obtained at the Parent Shareholders
Meeting, provided that any termination described in this paragraph will not be
effective unless and until the Company shall have paid to Purchaser the fees and
expenses described below.
The Merger Agreement provides that in the event of termination of the Merger
Agreement, certain obligations of the parties to the Merger Agreement will
terminate. In the event of the termination of the Merger Agreement, nothing
therein will prejudice the ability of the non-breaching party to seek damages
from any other party for any prior deliberate or willful breach of the Merger
Agreement, including without limitation attorneys' fees and the right to pursue
any remedy at law or in equity with respect thereto. Furthermore, the Merger
Agreement provides that the Company will pay to Purchaser an amount equal to
$2.0 million (the "Termination Fee") in any of the following circumstances: (i)
the Merger Agreement is terminated at such time that the Merger Agreement is
terminable pursuant to paragraphs 5(c) or 6(c), above; (ii) the Merger Agreement
is terminated by either Parent or the Company pursuant to paragraph 3 or 4,
above, and at the time of such termination each of the following is true: (1)
the Minimum Condition shall not have been satisfied; (2) the Company shall not
have the right to terminate the Merger Agreement pursuant to paragraph 5(a) or
5(b), above; and (3) the Listing Condition and the Shareholder Approval
Condition shall have been satisfied; or (iii) the Merger Agreement is terminated
by Parent pursuant to paragraph 6(a), 6(b) or 6(d), above, and each of the
following occurs: (A) prior to such termination, a Company Takeover Proposal is
(x) publicly disclosed or has been made directly to Shareholders generally or
(y) any person (including without limitation the Company or any of its
subsidiaries) publicly announces an intention (whether or not conditional) to
make such a Company Takeover Proposal and (B) prior to the termination of the
Merger Agreement or within 12 months after the termination thereof, the Company
or a subsidiary thereof enters into a Company Acquisition Agreement or closes a
Company Takeover Proposal (such termination events, collectively, a "Takeover
Proposal Termination").
If the Merger Agreement is terminated in circumstances where a Termination
Fee is then payable, then in any such case the Company will promptly, but in no
event later than two business days after submission of a request therefor, pay
to Parent an amount equal to Parent's documented expenses; provided, however,
that in no event will the total of the expenses paid by the Company ("Expenses")
plus any Termination Fee paid by the Company exceed $7 million. "Expenses" means
all out-of-pocket fees, costs and other expenses incurred or assumed by Parent
or Purchaser or any of their affiliates or incurred on their behalf in
connection with the Merger Agreement or any of the transactions contemplated
thereby, including but not limited to in connection with the negotiation,
preparation, execution and performance of the Merger Agreement, the structuring
and financing of the Offer, the Merger and the other transactions contemplated
by the Merger Agreement, or any commitments or agreements relating to such
financing, including, without limitation, fees, expenses and selling and
underwriting commissions or other amounts payable to any banks, investment
banking firms, underwriters, other financial institutions and other persons and
their respective agents and counsel for arranging, committing to provide or
providing any financing for the Offer, the Merger and any other transactions
contemplated by the Merger Agreement or structuring, negotiating or advising
with respect to such transactions or financing, and all fees and expenses of
counsel, accountants, experts and computer, environmental, actuarial, insurance
and other consultants to Parent or Purchaser.
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If a Termination Fee is payable pursuant to a Takeover Proposal Termination,
then the Company will pay the Termination Fee and Expenses to Parent upon the
signing of a Company Acquisition Agreement or, if no Company Acquisition
Agreement is signed, then at the closing (and as a condition to the closing) of
a Company Takeover Proposal. Notwithstanding any other provision of the Merger
Agreement, (i) in no event may the Company enter into a Company Acquisition
Agreement unless, prior thereto, the Company has paid any amount due under the
terms described above or which will become due under the terms described above,
(ii) the Company may not terminate the Merger Agreement under paragraph 5(c),
above, unless prior thereto it has paid any amount due under the Merger
Agreement to Parent, (iii) any amount due in the event that the Merger Agreement
is terminated under paragraph 5(c) or 6(c) and in circumstances in which the
Company has not entered into a Company Acquisition Agreement will be payable
promptly, but in no event more than two business days after request therefor is
made, and (iv) any amount due under the Merger Agreement will be paid on the
date due in immediately available funds wire transferred to the account
designated by the person entitled to such payment.
The Merger Agreement further provides that the termination fees and expenses
provisions thereof will survive any termination of the Merger Agreement.
AMENDMENT. The Merger Agreement may be amended by the parties thereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by
Shareholders of the Company but after any such Shareholder approval, no
amendment will be made that by law requires the further approval of such
Shareholders without obtaining such further approval. The Merger Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties thereto.
ASSIGNMENT. Neither the Merger Agreement nor any of the rights, interests
or obligations thereunder may be assigned by any of the parties thereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, the Merger Agreement will be binding
upon and will inure to the benefit of the parties thereto and their respective
successors and assigns. Notwithstanding anything contained in the Merger
Agreement to the contrary, nothing in the Merger Agreement, expressed or
implied, is intended to confer on any person other than the parties thereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of the Merger
Agreement.
TIMING. The exact timing and details for the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Purchaser has agreed to
cause the Merger to be consummated on the terms set forth above, there can be no
assurance as to the timing of the Merger.
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(b)(3) ARRANGEMENTS WITH DIRECTORS, OFFICERS AND EMPLOYEES.
Certain directors, officers and employees of the Company may be deemed to
have interests in the transactions contemplated by the Merger Agreement that are
in addition to their interests as shareholders of the Company generally. The
Company's Board of Directors was aware of these interests when it considered and
approved the Merger Agreement and the transactions contemplated thereby. In
considering the recommendation of the Board in respect of the Offer, the
shareholders of the Company should be aware of these interests.
The Company has granted options to purchase shares of Common Stock to
non-employee directors, executive officers and certain other key employees of
the Company and its subsidiaries pursuant to the terms of the Company's 1996
Stock Compensation Plan and its 1997 Stock Compensation Plan (the "Stock Option
Plans"). Such stock options were intended to provide a long-range incentive and
a shareholder's perspective to those persons principally responsible for the
continued growth and financial success of the Company. Pursuant to the Merger
Agreement, the Company is required to use its reasonable best efforts to provide
that each holder of an outstanding option to purchase Common Stock issued by the
Company which is outstanding at the Effective Time will, in settlement thereof,
receive from the Company for each share subject to such option an amount in cash
equal to the difference between the Option Consideration and the Per Share
Amount (the "Option Consideration"). No Option Consideration will be paid with
respect to any option unless, at or prior to the time of payment, such option is
cancelled and the holder of such option has executed and delivered a release of
any and all rights the holder had or may have had in respect of such option.
ATKINSON AND WOOD EMPLOYMENT AGREEMENTS.
The Company has entered into employment agreements with Bruce D. Atkinson
and Jeffrey G. Wood (each, an "Employment Agreement"). If the Offer and the
Merger are consummated, these Employment Agreements will become agreements of
the Surviving Corporation. The following is a summary of the material terms of
the Employment Agreements. This summary is not a complete description of the
terms and conditions of the Employment Agreements and is qualified in its
entirety by reference to the full texts of the Employment Agreements, which are
incorporated by reference and filed with the SEC as exhibits to the Schedule
14D-1. The Employment Agreements may be examined at, and copies obtained from,
the offices of the SEC as set forth in Section 7 above. All terms not defined
herein have the meanings ascribed to such terms in the Employment Agreements.
TERM, EMPLOYMENT AND DUTIES. Subject to the provisions for termination
described below, the term of the Employment Agreements will be two years,
commencing on the date of the acquisition by Parent of a controlling interest in
the voting securities of the Company (the "Employment Date"). The Employment
Agreements provide that they will be renewed automatically for succeeding
periods of one year each on the same terms and conditions as contained therein
unless one party notifies the other of his or its intent not to renew the
Employment Agreement.
Under the Employment Agreements, the Company will employ Mr. Atkinson as the
President and Chief Executive Officer of the Company and Mr. Wood as the Chief
Financial Officer of the Company. Under Mr. Wood's Employment Agreement, if Mr.
Atkinson vacates his position with the Company, Mr. Wood will receive first
consideration by the Company Board as Mr. Atkinson's successor, subject to Mr.
Atkinson's endorsement. Mr. Atkinson and Mr. Wood will also be nominated to
serve as members of the Company Board and will hold other positions as the
Company may reasonably designate from time to time. The Employment Agreements
will supersede any other employment agreements or arrangements between the
Company and each of Mr. Atkinson and Mr. Wood.
COMPENSATION. The Company will pay Mr. Atkinson $264,600 per year and Mr.
Wood $176,400 per year and each will receive a bonus on or before the end of the
twelfth month following the close of Parent's fiscal year on April 30, 2000. The
amount of the bonus will not be less than $168,000 with respect to Mr. Atkinson
and $112,000 with respect to Mr. Wood. Thereafter, Mr. Atkinson and Mr. Wood
will each
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receive a bonus for each succeeding fiscal year calculated in accordance with
the executive bonus program of the Company. Mr. Atkinson's and Mr. Wood's bonus
opportunity under such executive bonus program will be equivalent to the annual
bonus opportunity available to similarly situated executives of Parent.
TERMINATION AND TERMINATION BENEFITS. The Employment Agreements are
terminable by either party at any time with or without cause upon written notice
to that effect.
If Mr. Atkinson's Employment Agreement is terminated by Mr. Atkinson without
cause or by the Company with cause, the Company's only obligation is to pay Mr.
Atkinson his salary through the termination date. If the Employment Agreement is
terminated without cause by the Company or with cause by Mr. Atkinson during the
twenty-four month period following the Employment Date, the Company will pay Mr.
Atkinson: (i) twice his annual salary in effect at the date of termination; (ii)
twice the average annual bonus actually paid to him for the two preceding fiscal
year periods; and (iii) an amount equal to twice the average amount actually
paid by the Company for Mr. Atkinson's benefits for the two preceding years;
provided that if the sum of the foregoing items (i), (ii) and (iii) is less than
twice Mr. Atkinson's total base salary, bonus and benefits paid for calendar
year 1998 (the "Atkinson Baseline Benefit"), Mr. Atkinson shall instead be paid
the Atkinson Baseline Benefit. If Mr. Atkinson's Employment Agreement is
terminated without cause by the Company or with cause by Mr. Atkinson at any
time following the twenty-four month period following the Employment Date, the
Company will pay Mr. Atkinson the greater of (x) one-half of the amounts
specified in the preceding sentence, or (y) one-half the Atkinson Baseline
Benefit.
If Mr. Wood's Employment Agreement is terminated by Mr. Wood without cause
or by the Company with cause, the Company's only obligation is to pay Mr. Wood
his salary through the termination date. Except as provided in the next
sentence, if Mr. Wood's Employment Agreement is terminated without cause by the
Company or with cause by Mr. Wood, the Company will pay Mr. Wood: (i) twice his
annual salary in effect at the date of termination; (ii) twice the average
annual bonus actually paid to him for the two preceding fiscal year periods; and
(iii) an amount equal to twice the average amount actually paid by the Company
for Mr. Wood's benefits for the two preceding years; provided that if the sum of
the foregoing items (i), (ii) and (iii) is less than twice Mr. Wood's total base
salary, bonus and benefits paid for calendar year 1998 (the "Wood Baseline
Benefit"), Mr. Wood shall instead be paid the Wood Baseline Benefit. If the
Employment Agreement is terminated (x) without cause by the Company or with
cause by Mr. Wood at any time following Mr. Wood's first full year of service as
President and Chief Executive Officer of the Company or (y) with cause by Mr.
Wood following his decision not to accept appointment as President and Chief
Executive Officer of the Company, the Company will pay Mr. Wood the greater of
(x) one-half of the amounts specified in the preceding sentence, or (y) one-half
the Wood Baseline Benefit, which payment will be in lieu of any payment
otherwise payable pursuant to the provision described in the preceding sentence.
NON-SOLICITATION AND NON-COMPETITION. The Employment Agreements provide
that neither Mr. Atkinson nor Mr. Wood will compete with the Company or hold a
material interest in a business that competes with the Company for a period of
two years after the termination of his employment with the Company. The
Employment Agreements also provide that neither Mr. Atkinson nor Mr. Wood will
solicit for employment any person employed in the business of the Company.
KAUFFMANN EMPLOYMENT AGREEMENT.
In contemplation of the Offer and the Merger, Realisations et Diffusion pour
l'Industrie ("RDI"), a wholly owned subsidiary of the Company located in
Villepinte, France, has entered into an employment agreement with Michel Hauser-
Kauffmann (the "Kauffmann Agreement"). The Kauffmann Agreement will be effective
upon the occurrence of the Effective Time. The following is a summary of the
material terms of the Kauffmann Agreement. This summary is not a complete
description of the terms and conditions of the Kauffmann Agreement and is
qualified in its entirety by reference to the full text of the Kauffmann
Agreement, which is incorporated by reference and filed with the SEC as an
exhibit to the
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Schedule 14D-1. The Kauffmann Agreement may be examined at, and copies obtained
from, the offices of the SEC as set forth in Section 7 above. All terms not
defined herein have the meanings ascribed to such terms in the Kauffmann
Agreement.
TERM, EMPLOYMENT AND DUTIES. RDI will continue to employ Mr. Kauffman
pursuant to the National Collective Bargaining Agreement for Engineers and
Executives in the Metallurgical Industries (the "Collective Bargaining
Agreement"), as Directeur Commercial with a position of Executive for an
indefinite term. In this capacity, Mr. Kauffmann will be responsible for the
marketing policy, quality, communication, technical and financial questions
relating to RDI. The Kauffmann Agreement provides that a termination by RDI will
become effective six months after the notice of such termination, except
termination by RDI for willful misconduct, which will be effective immediately.
The Kauffmann Agreement supersedes and cancels any other employment agreement or
arrangement between RDI and Mr. Kauffmann and replaces such agreement or
arrangement in its entirety.
COMPENSATION. Mr. Kauffmann will receive an annual global gross salary of
FRF 1,126,125. RDI may, at any time during the term of the Kauffmann Agreement,
but without any obligation, pay additional sums to Mr. Kauffmann by way of
bonuses or otherwise. Notwithstanding the foregoing, RDI will pay Mr. Kauffmann
a bonus of 50% of his salary earned from January 1, 1999 through April 30, 2000.
This bonus will be paid no later than July 15, 2000. In the fiscal year 2001 and
beyond, Mr. Kauffmann will participate in Parent's executive level bonus plan.
TERMINATION AND TERMINATION BENEFITS. In the event that RDI gives notice of
dismissal to Mr. Kauffmann during the two-year period following the date of the
Kauffmann Agreement for any reason other than willful misconduct, Mr. Kauffmann
will be entitled to a lump sum indemnity, in lieu of the dismissal indemnity
provided by the Collective Bargaining Agreement and in lieu of damages, equal to
two years of compensation and bonus. If, during such two-year period, either (i)
Bruce Atkinson is terminated for reasons other than for cause from his position
as Chief Executive Officer and President of the Company and Jeffrey Wood is not
offered to replace Mr. Atkinson in such position, or (ii) Bruce Atkinson is
revoked from his office of permanent representative of RDI Management Company
Inc. and Jeffrey Wood or Mr. Kauffmann or an individual supported by Mr.
Kauffmann is not offered to replace Mr. Atkinson in such position, then Mr.
Kauffmann may terminate the Kauffmann Agreement and be entitled to the indemnity
described in the immediately preceding sentence. The compensation and bonus to
be used to determine the amount of the lump sum indemnity will be the greater of
(x) the amount of the compensation including benefits in kind and bonus received
by Mr. Kauffmann from January 1 through December 31, 1998 or (y) the amount of
the compensation including benefits in kind and bonus received by Mr. Kauffmann
during the 12 months preceding dismissal or resignation, as the case may be. If
notice of dismissal is given after the two-year period following the date of the
Kauffmann Agreement, Mr. Kauffmann will receive indemnity equal to one year of
compensation and bonus. In the event that RDI dismisses Mr. Kauffmann for
willful misconduct, Mr. Kauffmann will not be entitled to any indemnity
whatsoever. In the event that RDI dismisses Mr. Kauffmann for gross misconduct,
Mr. Kauffmann will be entitled to the indemnity described in either the first
sentence of this paragraph or the immediately preceding sentence, as the case
may be.
NON-SOLICITATION AND NON-COMPETITION. Mr. Kauffmann will undertake for a
period of one year, renewable once, following the termination of the Kauffmann
Agreement for any reason to refrain from engaging in any activity that competes
with RDI or the group of companies to which it belongs. In addition, Mr.
Kauffmann has agreed not to employ or attempt to employ RDI employees or solicit
RDI customers after termination of the Kauffmann Agreement. These noncompetition
and nonsolicitation undertakings are geographically limited to France, Italy,
the United Kingdom and Germany. In consideration for his commitment not to
compete, Mr. Kauffmann will receive after the termination of the Kauffmann
Agreement a monthly indemnity equal to 60% of his average monthly remuneration
during his last 12 months employed by RDI.
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THE SHAREHOLDERS AGREEMENT
In connection with the execution of the Merger Agreement, the Parent,
Purchaser and Management Shareholders entered into a Shareholders Agreement. The
following is a summary of the material terms of the Shareholders Agreement. This
summary is not a complete description of the terms and conditions of the
Shareholders Agreement and it is qualified in its entirety by reference to the
full text of the Shareholders Agreement, which is incorporated by reference and
filed with the SEC as an exhibit to the Schedule 14D-1. The Shareholders
Agreement may be examined at, and copies obtained from, the offices of the SEC
as set forth in Section 7 above. All terms not defined herein have the meanings
ascribed to such terms in the Shareholders Agreement or, if not in the
Shareholders Agreement, in the Merger Agreement.
TENDER OF SHARES. Upon the terms and subject to the conditions of the
Shareholders Agreements, each Management Shareholder has agreed to validly
tender pursuant to and in accordance with the terms of the Offer, not later than
the tenth business day after commencement of the Offer, all of its Management
Shareholder Subject Shares (as defined in the Shareholders Agreement). The
Shareholders Agreement will terminate upon the purchase of all the Subject
Shares by Purchaser pursuant to the Offer.
VOTING OF SHARES. During the Voting Agreement Period (as defined in the
Shareholders Agreement), each Management Shareholder has agreed to vote (or
cause to be voted) all of its Subject Shares (i) in favor of the adoption of the
Merger Agreement and any other matter necessary or appropriate for the
consummation of the transactions contemplated by the Merger Agreement, and (ii)
against any Adverse Proposal (as defined in the Shareholders Agreement), and
against any action or agreement that would be expected to make any
representation or warranty contained in the Shareholder Agreement untrue or
incorrect or have the effect of impairing the ability of a Management
Shareholder to perform his obligations under the Shareholder Agreement or
prevent or delay the consummation of the transactions contemplated thereby.
IRREVOCABLE PROXY. Each Management Shareholder has appointed Parent and
Parent's Designees as proxies to vote all of such Management Shareholder's
Subject Shares or grant a written consent in respect of such Subject Shares to
secure the performance of its duties under the Shareholders Agreement. Each of
these proxies is coupled with an interest and is irrevocable. For Subject Shares
where a Management Shareholder is the beneficial but not the record owner, such
Management Shareholder will use his best efforts to cause any record owner of
such Subject Shares to grant to Parent a proxy to the same effect as contained
herein.
RESTRICTION ON TRANSFER OF SUBJECT SHARES, PROXIES AND
NONINTERFERENCE. Each Management Shareholder has agreed not to directly or
indirectly, (a) except pursuant to the terms of the Shareholders Agreement and
the Merger Agreement, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of, any
or all of its Subject Shares, (b) except pursuant to the terms of the
Shareholders Agreement, grant any proxies or powers of attorney, deposit any of
its Subject Shares into a voting trust or enter into a voting agreement with
respect to such Subject Shares, or (c) except within the terms of a prior
written request of Parent, exercise any of the Subject Options (as defined in
the Shareholders Agreement), or (d) take any action that would reasonably be
expected to make any representation or warranty contained therein untrue or
incorrect or have the effect of impairing the ability of such Management
Shareholder to perform its obligations under the Shareholders Agreement or
preventing or delaying the consummation of any of the transactions contemplated
thereby.
NO SOLICITATION. Each Management Shareholder has agreed not to take, or
authorize or permit any of its officers, directors, employees, agents or
representatives (including any investment banker, financial adviser, attorney or
accountant) to take, any action that the Company would be prohibited from taking
under the "no solicitation" provisions of the Merger Agreement.
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In connection with the Merger, each Management Shareholder waived any
appraisal or dissenter's rights that he or she may have. The Management
Shareholders agreed not to exercise any purchase rights or rights of first
refusal with respect to any Shares.
TERMINATION. The Shareholders Agreement may be terminated in any one of the
following circumstances: (i) upon the purchase of all of the Subject Shares
pursuant to the Offer, or (ii) by the mutual consent of the Company Boards, the
Parent Board and Shareholders representing a majority of the Subject Shares
subject to the Management Shareholders Agreement.
THE SUBSCRIPTION AGREEMENT.
In connection with the execution of the Merger Agreement, Parent and each of
Ralph R. Whitney, Jr., Bruce D. Atkinson, Jeffrey G. Wood, Michel Hauser-
Kauffmann, Forrest E. Crisman, Jr. and Glenn Scolnik, officers and directors of
the Company (the "Investors"), entered into a Subscription Agreement, dated
February 22, 1999 (the "Subscription Agreement"). The following is a summary of
the material terms of the Subscription Agreement. This summary is not a complete
description of the terms and conditions of the Subscription Agreement and is
qualified in its entirety by reference to the full text of the Subscription
Agreement, which is incorporated by reference and filed with the SEC as an
exhibit to the Schedule 14D-1. The Subscription Agreement may be examined at,
and copies obtained from, the offices of the SEC as set forth in Section 7
above. All terms not defined herein have the meanings ascribed to such terms in
the Subscription Agreement or, if not in the Subscription Agreement, in the
Merger Agreement.
SUBSCRIPTION FOR SHARES. Under the Subscription Agreement, upon the
consummation of the Offer, each Investor has agreed to invest a portion of the
cash consideration payable to him (or to certain accounts for his benefit) in
the Offer in Ordinary Shares of Parent ("Parent Shares"). The number of Parent
Shares that each Investor has agreed to purchase will be determined by dividing
the following "Investment Amounts" by the Per Share Purchase Price, which is
defined below:
<TABLE>
<CAPTION>
INVESTOR INVESTMENT AMOUNT
- -------------------------------------------------------------------------- ------------------
<S> <C>
R. Whitney................................................................ $ 2,732,725
B. Atkinson............................................................... $ 1,310,987
J. Wood................................................................... $ 873,991
M. Hauser-Kauffmann....................................................... $ 349,566
F. Crisman................................................................ $ 1,366,366
G. Scolnik................................................................ $ 1,366,366
------------------
$ 8,000,001
------------------
------------------
</TABLE>
In the event the division of an Investment Amount by the Per Share Purchase
Price gives rise to a fractional Parent Share, the applicable Investment Amount
will be reduced by an amount equal to such fractional Parent Share multiplied by
the Per Share Purchase Price.
The "Per Share Purchase Price" will be equal to the higher of (i) the middle
market price of a Parent Share, as derived from the Official List of the London
Stock Exchange, on the last business day in London immediately prior to the
Subscription Closing Date (defined below), and (ii) 80% of the Adjusted
Pre-Offer Market Price. The "Adjusted Pre-Offer Market Price" means the middle
market price of a Parent Share, as derived from the Official List of the London
Stock Exchange on the last business day (the "Pre-Offer Date") in London
immediately prior to the date on which the Offer is publicly announced by
Parent, as adjusted to reflect the Rights Offering. The Adjusted Pre-Offer
Market Price will be calculated by (i) adding (a) Parent's aggregate market
capitalization on the Pre-Offer Date, plus (b) the aggregate proceeds of the
Rights Offering, and (ii) dividing the sum of (a) and (b) by the sum of the
number of Parent Shares outstanding on the Pre-Offer Date and the number of
Parent Shares sold in the Rights Offering.
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The closing of the transactions contemplated by the Subscription Agreement
(the "Subscriptions") will take place on the next business day (the
"Subscription Closing Date") following the payment by Parent or its subsidiary
to the Investors of the cash consideration payable to them upon the consummation
of the Offer. Each Investor has agreed that, to accomplish the payment of his
Investment Amount, Parent will withhold from the cash consideration payable to
him in connection with the Offer an amount equal to his Investment Amount. The
Subscription Agreement provides for an adjustment to the type and number or
amount of Parent Shares and the Per Share Purchase Price payable therefor in the
event of any change in the capital stock of Parent by reason of a stock
dividend, subdivision, reclassification, recapitalization, split, combination,
exchange of shares, extraordinary distribution or similar transaction.
COVENANTS OF INVESTORS. Each Investor has agreed to comply with one of the
following two restrictions on transfer and resale of the Parent Shares: (i) for
a period of 18 months from the Subscription Closing Date, such Investor will not
sell, transfer or otherwise dispose of his legal or beneficial interest in any
of the Parent Shares issued to him pursuant to the Subscription Agreement or any
further shares allotted and issued by way of capitalization or bonus issue in
respect of or with reference to such Parent Shares; or (ii) (a) for a period of
12 months from the Subscription Closing Date, such Investor will not sell,
transfer or otherwise dispose of his legal or beneficial interest in any of the
Parent Shares issued to him pursuant to the Subscription Agreement or any
further shares allotted and issued by way of capitalization or bonus issue in
respect of or with reference to such Parent Shares, (b) on the first anniversary
of the Subscription Closing Date, or if such day is not a business day in
London, the next following business day in London, such Investor shall be
entitled to sell, transfer or otherwise dispose of the legal and/or beneficial
interest in not more than half of his then holdings of Parent Shares, and (c) if
such Investor sells, transfers or disposes of any of his Parent Shares in
accordance with clause (b), he shall not be entitled to sell, transfer or
otherwise dispose of the legal or beneficial interest in the remaining Parent
Shares held by him until the second anniversary of the Subscription Closing
Date.
Further, each Investor has agreed that if he wishes to sell, transfer or
otherwise dispose of any of his Parent Shares within two years from the
Subscription Closing Date, he must give prior written notice to Parent's brokers
of such intention. The notice must set out the number of Parent Shares intended
to be sold, transferred or otherwise disposed of. Parent's brokers will then be
entitled to purchase or procure purchasers for all or any of the Parent Shares
desired to be sold. To the extent Parent's brokers do not promptly so purchase
or procure purchasers for the Parent Shares desired to be sold, the selling
Investor may sell the remaining Parent Shares within 10 business days
thereafter.
If Parent registers its Parent Shares with the SEC and those shares are
publicly traded on a national securities exchange or listed for quotation on the
Nasdaq in the United States, the Investors may, subject to the restrictions
described above, sell their Parent Shares in the United States in compliance
with United States securities laws. Otherwise, each Investor has agreed that in
no event at any time will he sell, transfer or otherwise dispose of any interest
in his Parent Shares to a person or entity located in the United States. This
restriction will not, however, prevent any transfer to the personal
representative or heirs of such Investor, but such personal representative or
heirs will be bound by all of the covenants of the applicable Investor.
AMENDMENT AND TERMINATION. The Subscription Agreement may be amended only
by an instrument in writing signed on behalf of the party against whom such
amendment is sought to be enforced. The Subscription Agreement will terminate
upon the termination of the Merger Agreement in accordance with its terms.
(b)(4) CONFIDENTIALITY AND STANDSTILL AGREEMENT.
The Company and Parent entered into a Confidentiality and Standstill
Agreement which constitutes part of the entire agreement between the parties.
The Company and Parent agreed to furnish certain confidential non-public
information to each other in contemplation of a possible business combination
and they agreed to use such information solely for the sole purpose of
evaluating a possible business transaction and that such information would be
kept confidential unless required by law to disclose it. In
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<PAGE>
consideration of the exchange of confidential non-public information, Parent and
the Company agreed that until June 30, 2000, neither party would acquire,
directly or indirectly, any securities of the other or any subsidiaries of the
other party or seek to vote or influence the voting of the securities of the
other party without the prior written consent of the Board of Directors of the
other party. The parties further agreed not to solicit employees, customers,
suppliers or competitors of the other party or their subsidiaries (other than
customer, supplier or competitor contacts in the ordinary course of business)
until the earlier of the consummation of a business combination between the
parties or June 30, 2000. Parent and the Company agreed that monetary damages in
the event of a breach would be insufficient and a non-breaching party shall be
entitled to equitable relief. The Merger Agreement amends the standstill
provisions of the Confidentiality Agreement to permit Parent, Purchaser or any
of their respective affiliates or representatives to (a) effect any transaction
permitted or contemplated by the Merger Agreement or the Shareholders Agreement
and (b) take any action otherwise prohibited thereby (i) in the event that
another person publicly announces a Company Takeover Proposal and (ii) after the
Offer Completion Date.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
At a meeting held on February 22, 1999, at which all the directors were
present, the Board of Directors of the Company unanimously approved and adopted
the Merger Agreement, including the Offer, the Merger and the other transactions
contemplated thereby. The Board of Directors has determined that the Merger
Agreement is fair to and in the best interests of the Company and its
shareholders. The Board recommends that shareholders accept the Offer and tender
their shares of Common Stock pursuant to the Offer and if a meeting of the
Company's shareholders is required to be called and held in accordance with
applicable law, recommends that shareholders approve the Merger Agreement and
the transactions contemplated thereby, including the Merger. For a discussion of
the Board's reasons for its recommendation, see "Reasons for Recommendation,"
below.
A joint press release announcing the Merger Agreement and related
transactions and a letter to the shareholders of the Company communicating the
Board's recommendation are filed as Exhibits to this Schedule 14D-9 and are
incorporated herein by reference.
(b) BACKGROUND TO THE OFFER; REASONS FOR THE RECOMMENDATION OF THE COMPANY'S
BOARD OF DIRECTORS
BACKGROUND OF THE OFFER
On March 3, 1998, Dresdner Kleinwort Benson North America LLC (together with
Kleinwort Benson Securities Limited, "Dresdner Kleinwort Benson"), Parent's
financial adviser, sent a letter to Bruce D. Atkinson, the President, Chief
Executive Officer and a Director of the Company, offering to introduce
representatives of Parent to the Company for the purpose of exploring a
potential alliance. On March 24, 1998, representatives of Dresdner Kleinwort
Benson met with Mr. Atkinson and Jeffrey G. Wood, Vice President, Chief
Financial Officer, Secretary and Treasurer of the Company at the Company's
headquarters in Standish, Maine, for the purpose of obtaining information about
the Company.
On April 29 and 30, 1998, Dr. Fred Westlake, Executive Chairman of Parent,
and Oliver G. Burns, Finance Director of Parent, met with Mr. Atkinson and Mr.
Wood at the Company's headquarters. The meeting consisted of a general
discussion regarding the background of the two companies and their strategic
alternatives. On May 18, 1998, Dr. Westlake met in New York City with Ralph R.
Whitney, the Chairman of the Board of the Company, to discuss the possibility of
a business combination between the Company and Parent. The foregoing discussions
and various subsequent discussions focused principally on an exchange of shares
resulting in a combined company and various management, governance and similar
issues related thereto. The possibility of a small cash component was also
considered.
Following a series of telephonic and fax communications, a confidentiality
agreement was entered into between the Company and Parent on June 4, 1998. The
confidentiality agreement provided for the mutual exchange of certain
information between Parent and the Company and also contained customary
"standstill" provisions extending to June 30, 2000.
On June 15, 1998, Mr. Burns met with Mr. Atkinson and Mr. Wood at the
Company's headquarters to learn more about the Company. On June 16, 1998, Dr.
Westlake advised the Parent Board of the discussions with the Company. On June
19, 1998, Messrs. Whitney and Atkinson met with Dr. Westlake and Mr. Burns and
representatives of Dresdner Kleinwort Benson in Detroit. No agreement could be
reached as to price or structure during the meeting and the parties agreed to
suspend further negotiations until the Company's design, marketing and
consulting services agreement and licensing arrangements with an unaffiliated
person (the "Consultant") could be renegotiated.
In late June 1998 the parties recognized that a significant period of time
would be required to complete the negotiations with the Consultant and they
agreed to defer further due diligence investigations
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<PAGE>
until that matter was resolved. At the July 30, 1998 meeting of the Company
Board, Mr. Whitney reported that discussions with Parent were continuing and
that Parent seemed to have a strong desire to complete a transaction. Mr.
Whitney stated, however, that Parent was concerned about the relationship with
the Consultant. The Company Board then directed Mr. Atkinson to work toward
resolving the issues with the Consultant. In mid-August 1998, the Company
advised Parent that it had reached an agreement in principle with this
individual on the restructuring of their arrangements. As discussed herein, the
restructuring was finalized in late December 1998.
On August 24, 1998, after consultation with various members of Parent's
Board of Directors (the "Parent Board"), Dr. Westlake sent a fax to Mr. Whitney
seeking to resolve the issues of price and structure. He expressed his
preference that a substantial portion of the consideration be in the form of
Parent shares and said that he would be prepared to recommend $18.00 per Company
share. Dr. Westlake and Mr. Whitney discussed these issues on August 27 and
concurred that they would each support a transaction valued at $18.00 per
Company share, payable half in Parent stock and half in cash, subject to due
diligence, definitive documentation, satisfactory market conditions and board
approvals. Accordingly, a due diligence meeting among representatives of Parent
and the Company and their advisers was held in Portland, Maine, on September 2,
1998.
Prior to such meeting, however, stock market conditions in New York and
London had deteriorated markedly. The closing price of Parent shares on the
London Stock Exchange (the "Closing Price") dropped from 390.5p on August 21,
1998 (the last trading day preceding Dr. Westlake's fax), to 388.0p on August
26, 1998 (the last trading day preceding the conversation between Dr. Westlake
and Mr. Whitney) to 326.0p on September 1, 1998 (the last trading day preceding
the Portland meeting). The closing price of the Company's shares dropped from
$13.25 on August 21 to $11.63 on September 1.
Due to these market disruptions, Parent decided to suspend further due
diligence investigation of the Company. On September 5, 1998, a representative
of Dresdner Kleinwort Benson requested that Mr. Whitney explore alternative
prices and structures. Mr. Whitney responded that he wished to let market
conditions stabilize, but expressed a willingness to consider an all cash
transaction.
During September and October, various efforts were made to address the
issues of price and structure in light of then prevailing US and UK market
conditions.
On September 18, 1998, Parent received a report on the Company from
AutoFina, a consulting firm experienced in the automotive parts business.
AutoFina's report on September 18, 1998 was cautious as to the Company's growth
prospects.
At a September 10, 1998 meeting, various members of the Parent Board
concluded that Parent should not continue to proceed to acquire the Company on
the basis of an $18.00 per share price substantially payable in Parent shares.
At a September 29, 1998 meeting, the Parent Board considered the possibility
of acquiring the Company entirely for cash, but concluded that this should not
be done entirely on the basis of debt financing. It was agreed to explore the
possibility of a rights offering with Dresdner Kleinwort Benson. Dr. Westlake
and Mr. Whitney met in Denver on October 5, 1988 to discuss the situation. On
October 9, 1998, the closing price of the Company shares on the Nasdaq reached
its 1998 low of $8.75 per share.
On October 19, 1998, the Parent Board again reviewed the possibility of
acquiring the Company in an all cash transaction and reaffirmed that borrowing
all the funds required would over-leverage Parent. The Parent Board also
concluded, after receiving advice from Dresdner Kleinwort Benson, that the use
of a rights offering to partially finance such an acquisition was not
practicable due to then prevailing UK stock market conditions. In light of the
factors described above, the Parent Board decided to terminate further
negotiations with the Company. Dr. Westlake so advised Mr. Whitney on the same
day.
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<PAGE>
On November 17, 1998, during a review of the Company's operations in Europe,
Messrs. Atkinson and Wood met with Dr. Westlake and Mr. Burns at Parent's
headquarters in Ascot, England and discussed the Company's business.
In late November, based upon improving conditions in the UK market and a
rise in Parent's stock price on the London Stock Exchange, Dresdner Kleinwort
Benson advised Parent that the prospects for a successful rights offering had
improved. After deliberation, Parent's management concluded that the acquisition
of the Company in an all-cash transaction would be attractive, but only at a
price significantly lower than $18.00 per share. Among the factors contributing
to the latter decision were Parent's lower estimation of the Company's growth
prospects and the continued uncertainty of the worldwide automotive parts
markets.
On December 7, 1998, Dr. Westlake, after consultation with certain Parent
Board members, faxed to the Company a draft term sheet proposing to acquire all
the Company shares at $16.00 per share in cash, subject to various conditions,
including the renegotiation of employment and severance arrangements with
Messrs. Atkinson and Wood and Michel Hauser-Kauffmann, Managing Director of the
Company's French operations, the agreement of certain officers and directors of
the Company to invest $13 million of the proceeds of their Company stock and
stock options in Parent stock, and the payment of a termination fee and expenses
under customary conditions. On December 9, 1998, the Parent Board reviewed the
situation. Price and structure negotiations by telephonic and fax communications
continued between the Company and Parent during December.
On December 27, 1998, the Company and the Consultant entered into an
additional license agreement which provides for minimum cash royalty payments.
On December 28, 1998, the Consultant and the Company terminated the consulting
services agreement signed in April of 1995 and amended the Company's 1995
license agreements with the Consultant to reduce the minimum cash royalty and
license payments on certain products. In connection with the termination of such
consulting services agreement, the Company paid the Consultant a one time
payment of $635,553.
On January 4, 1999, Dr. Westlake and Mr. Burns met with Mr. Whitney at
Parent's headquarters. Mr. Whitney inquired whether Parent would reconsider a
share-for-share transaction. Alternatively, he said, he would be prepared to
recommend an all cash transaction at a price of $16.25 per share. On January 7,
1999, Mr. Burns sent Mr. Whitney a fax declining to reconsider a share-for-share
proposal, but agreeing to proceed on the basis of $16.25 per share in cash,
subject to various conditions. After Mr. Whitney consulted with each member of
the Company Board about the proposed terms and conditions (including price) of
the exclusivity letter, on January 14, 1999, the parties entered into a letter
agreement in which the Company agreed to give Parent a period of exclusivity for
six weeks in order for Parent to proceed with negotiations and a due diligence
investigation. Attached to the letter agreement was a draft "proposed term
sheet," which was expressly subject to Parent's completion of due diligence and
a working capital review and the signing of definitive documentation. The
document contemplated a purchase price of $16.25 per share in cash, investment
in Parent stock of $8 million of proceeds by certain officers and directors, a
termination fee of $3 million (plus expenses) payable by the Company in
customary circumstances, renegotiated employment arrangements with Messrs.
Atkinson, Wood and Hauser-Kauffmann, and binding undertakings to accept Parent's
offer by the Company directors and Messrs. Wood and Hauser-Kauffmann.
At the January 22, 1999 Company Board meeting, Mr. Whitney reported to the
full Company Board that matters were progressing with the Parent.
During January and February, 1999, representatives of Parent and its
financial, accounting and legal advisors conducted a due diligence investigation
of the Company. During the same period, negotiations continued between
representatives of Parent and Messrs. Atkinson, Wood and Hauser-Kauffmann on the
revised employment arrangements of such Company executives. Negotiations
commenced in February,
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1999 as to the terms of the Merger Agreement, the Shareholders Agreement and the
Subscription Agreement (the "Definitive Company Agreements").
On February 20, 1999, Dr. Westlake and Mr. Whitney had a telephone
conversation in which they agreed that the termination payment would be a $2
million fee plus expenses, such fees and expenses not to exceed $7 million in
the aggregate. They also agreed as to various provisions of the Shareholders
Agreement.
From time to time throughout the period from the signing of the
Confidentiality and Standstill Agreement until the Company Board meeting on
February 22, 1999, Mr. Whitney consulted with and updated various Company Board
members regarding the ongoing discussions with the Parent.
On February 22, 1999, the Parent Board approved the Definitive Company
Agreements and the financing arrangements described in Section 9, after the
review of such agreements and arrangements with its financial and legal
advisors. Also on February 22, 1999, the Company Board approved the Merger
Agreement and the Shareholders Agreement after review of such agreements and
arrangements with its financial and legal advisors. At such meeting, Cleary Gull
rendered its opinion that as of the date of such opinion and subject to certain
matters stated therein, the Per Share Amount was fair to the Company's
shareholders from a financial point of view.
A press release announcing the transaction was issued by Parent and the
Company on February 23, 1999.
REASONS FOR RECOMMENDATION
The Company's Board of Directors determined that the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, taken
together, are fair to, and in the best interests of, the Company and its
shareholders. In arriving at its decision regarding its recommendation set forth
above, the Board of Directors considered, among other things, the following:
(1) the terms and conditions of the Merger Agreement, the Offer and the
Merger, including the amount and form of the consideration being offered,
the parties' representations, warranties and covenants and the conditions to
their respective obligations;
(2) the financial condition, results of operations, cash flows and
prospects of the Company, as well as the Board of Directors' knowledge of
the business, operations, assets and properties of the Company on both a
historical and prospective basis;
(3) the recent and historical market prices and trading volume of the
Company Common Stock and the premium to such market prices represented by
the Offer Price;
(4) the current status of the industry in which the Company competes and
the Company's position in that industry;
(5) the financial condition and business reputation of Parent and the
ability of Parent and Purchaser to complete the Offer and the Merger in a
timely manner;
(6) the extensive arms-length negotiations between the Company and the
Parent that resulted in the Merger Agreement and the Offer Price;
(7) the fact that the Merger Agreement permits the Company's Board of
Directors, in the exercise of its fiduciary duties, to terminate the Merger
Agreement in favor of a Superior Proposal (Upon the consummation of
transaction resulting from a Superior Proposal, the Company must pay Parent
a topping fee of $7,000,000); and
(8) the oral opinion of Cleary Gull & Reiland Inc.("Cleary Gull")(which
opinion was confirmed by delivery of a written opinion dated February 22,
1999, the date of the Merger Agreement) to the
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<PAGE>
effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the Offer Price to be received in the Offer
and the Merger by the holders of the Company Common Stock other than the
Investors and the Management Shareholders (the "Public Shareholders") was
fair, from a financial point of view, to such holders. See "Opinion of the
Company's Financial Advisor", below.
The foregoing discussion of factors considered by the Board of Directors is
not intended to be exhaustive. The Company's Board of Directors did not assign
relative weights to the above factors or determine that any factor was of
particular importance. Rather, the Board viewed its position and recommendations
as being based on the totality of the information presented and considered by
it. In addition, it is possible that different members of the Board assigned
different weights to the factors.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR.
The Company retained Cleary Gull to render an opinion, as to the fairness
from a financial point of view of the Offer Price to the Public Shareholders in
the Tender Offer and the Merger. The Tender Offer and the Merger are hereinafter
collectively referred to as the "Acquisition". Cleary Gull has delivered a
written opinion to the Board of Directors of the Company, dated February 22,
1999, to the effect that, subject to the various assumptions and limitations set
forth therein, as of the date thereof, the Offer Price to be received by the
Public Shareholders in the Acquisition is fair to the Public Shareholders from a
financial point of view. Cleary Gull's opinion is for the benefit and use of the
Company's Board of Directors in its consideration of the Offer and the Merger
and may not be used for any other purpose. Cleary Gull was not requested to
express a view, and its opinion does not express a view, as to the fairness of
the Offer Price to the Management Shareholders and the Investors due to their
obligations under the Subscription Agreements and the Shareholders Agreement.
THE FULL TEXT OF THE WRITTEN OPINION OF CLEARY GULL DIRECTED TO THE COMPANY
BOARD DATED FEBRUARY 22, 1999, WHICH SETS FORTH, AMONG OTHER THINGS, THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS SCHEDULE
II AND IS INCORPORATED HEREIN BY REFERENCE. THE OPINION OF CLEARY GULL WAS
DELIVERED TO THE COMPANY BOARD FOR ITS USE IN CONNECTION WITH ITS CONSIDERATION
OF THE OFFER AND THE MERGER AND IS NOT INTENDED TO BE, AND DOES NOT CONSTITUTE,
A RECOMMENDATION TO ANY SHAREHOLDER OF THE COMPANY AS TO WHETHER SUCH
SHAREHOLDER SHOULD TENDER HIS SHARES IN THE OFFER OR VOTE IN FAVOR OF THE
MERGER, IF SUCH A VOTE OCCURS. THE FAIRNESS OPINION DOES NOT ADDRESS THE
COMPANY'S UNDERLYING BUSINESS DECISION TO PURSUE THE ACQUISITION. THE SUMMARY OF
THE OPINION OF CLEARY GULL SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION. PUBLIC SHAREHOLDERS ARE URGED TO, AND
SHOULD, READ THE OPINION OF CLEARY GULL CAREFULLY IN ITS ENTIRETY.
In connection with rendering its opinion, Cleary Gull among other things,
(i) reviewed and analyzed the financial terms and conditions of the Merger
Agreement; (ii) reviewed and analyzed certain publicly available business and
financial information relating to the Company; (iii) reviewed and analyzed
various operating and financial forecasts, projections and analyses provided by
the Company; (iv) reviewed and discussed the business, financial condition,
results of operations and prospects of the Company with representatives of the
Company's management; (v) reviewed and considered certain financial and stock
market data relating to the Company and compared that data with similar data for
certain other public companies that Cleary Gull believed might be relevant or
comparable in certain respects to the Company or one or more of its businesses
or assets; (vi) reviewed and considered the financial terms of certain recent
acquisitions and business combination transactions which Cleary Gull believed to
be reasonably comparable in certain respects to the Acquisition or otherwise
relevant to its analysis; (vii) calculated the value of the Shares based on an
unleveraged after-tax discounted cash flow analysis utilizing three different
five-year financial forecasts; (viii) calculated the value a financial investor
might be willing to pay to
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acquire the Shares if it were interested in pursuing such a transaction; (ix)
compared the purchase price premium to be paid for the Shares to premiums paid
in recent transactions believed by Cleary Gull to be reasonably comparable to
the Acquisition; and (x) performed such other financial studies, analyses and
investigations and reviewed such other financial, economic and market
information that Cleary Gull deemed appropriate. Although Cleary Gull evaluated
the financial terms of the Acquisition, Cleary Gull did not recommend the
specific consideration to be paid in the Acquisition. The consideration to be
received by the Shareholders as a result of the Offer and the Merger was
determined by negotiations between the Company and Parent. Cleary Gull did not
participate in those negotiations. No limitations were imposed by the Company
upon Cleary Gull with respect to the investigations made, procedures followed or
factors considered in rendering its opinion. In the context of its engagement,
Cleary Gull was not authorized to solicit and did not solicit alternative offers
for the Company or its assets, or investigate any other alternative transactions
which may have been available to the Company.
In its review and analysis and in formulating its opinion, Cleary Gull
assumed and relied on the accuracy and completeness of all the financial and
other information provided to or discussed with it or made publicly available,
without assuming any responsibility for independent verification of, or
expressing an opinion as to, any of such information. Cleary Gull relied upon
the management of the Company as to the reasonableness and achieveability of the
financial and operating projections (and the assumptions and bases therefor)
provided to it and, with the Company's consent, assumed that such projections
reflect the best currently available estimates and judgments of the Company's
management. Cleary Gull was not engaged to assess the achieveability of such
projections or the assumptions on which they were based and, as such, expresses
no view as to such projections or assumptions. Other than a tour of the
Company's Standish, Maine facility, Cleary Gull did not complete a physical
inspection of the properties or facilities of the Company and did not assume
responsibility for making or obtaining an independent valuation or appraisal of
the assets or liabilities of the Company, and no such independent valuation or
appraisal was provided to it. Cleary Gull did not evaluate the reasonableness,
adequacy or feasibility of Parent's plans for financing the Acquisition and its
opinion assumes that Parent has, or at closing will have, financing adequate to
complete the Acquisition in accordance with the Merger Agreement. Cleary Gull
has not been provided with nor has it reviewed any term sheets, engagement
letters, letters of intent or other documentation relating to such financing.
Finally, Cleary Gull has assumed that the Acquisition will be consummated on the
terms described in the Merger Agreement, without any waiver of any material term
or condition. Cleary Gull's opinion is based on economic, monetary and market
conditions existing on the date thereof.
The following is a summary of the various financial analyses utilized by
Cleary Gull and presented to the Company's Board of Directors in connection with
the delivery of its opinion on February 22, 1999.
COMPARABLE PUBLIC COMPANY TRADING ANALYSIS. Cleary Gull reviewed and
compared certain financial information of the Company to corresponding financial
information for twelve publicly traded companies that Cleary Gull believed were
comparable in certain respects to the Company: BEI Technologies, Inc.; Breed
Technologies, Inc.; The Cherry Corporation; CTS Corporation; Donnelly
Corporation; Dura Automotive Systems, Inc.; Littelfuse, Inc.; Methode
Electronics, Inc.; Optek Technology, Inc.; The Standard Products Company;
Stoneridge, Inc.; and Strattec Security Corp. (collectively, the "Auto OEM
Suppliers") and eight additional companies that are distributors of electrical
and industrial component parts used by original equipment manufacturers ("OEMs")
in the automotive, industrial and telecommunications markets (collectively, the
"Distribution Companies" and together with the Auto OEM Suppliers, the
"Comparable Companies"). The distribution and sale of electrical and industrial
component parts represent less than 25% of the Company's historic business mix.
Cleary Gull selected the Comparable Companies as companies that, based on
publicly available data, possess general business, operating and financial
characteristics representative of companies in the industries in which the
Company operates, although Cleary Gull recognizes that each of the Comparable
Companies is distinguishable from the Company in certain respects.
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For each of the Comparable Companies, Cleary Gull examined certain publicly
available financial data, including sales, operating income before interest,
taxes, depreciation and amortization ("EBITDA"), operating income before
interest and taxes ("EBIT"), net income, earnings per share ("EPS"), book value
and operating margins. Cleary Gull also examined balance sheet data and
published earnings forecasts for each of the Comparable Companies. Such
financial information was used to calculate the ratio of each Comparable
Company's "Enterprise Value" (the total equity market value based on the closing
stock price as of February 18, 1999 (the "Measurement Date"), plus the principal
amount of total debt and capitalized leases, less cash and marketable
securities) to that Comparable Company's sales, EBITDA and EBIT for the latest
twelve month ("LTM") period. In addition, Cleary Gull calculated the ratio of
each of the Comparable Company's stock price as of the Measurement Date to that
Comparable Company's EPS for the LTM period and for calendar years 1999 and 2000
and to the book value per share as of the most recent period. Finally, Cleary
Gull calculated the ratio of each of the Comparable Company's closing stock
price as of the Measurement Date divided by calendar year 2000 EPS to that
Comparable Company's consensus three to five year earnings growth rate (the "PEG
ratio"). All projected EPS numbers for calendar years 1999 and 2000 were derived
from I/B/E/S, a data service that monitors and publishes compilations of
earnings estimates from selected research analysts.
Cleary Gull compared the trading multiples derived for the Company assuming
a share price equal to the Offer Price to the trading multiples for the
Comparable Companies. Cleary Gull's analysis indicated that the Company traded
at an Enterprise Value equal to a multiple of (a) sales of 1.62x, as compared to
a range of 0.29x to 1.49x for the Auto OEM Suppliers and a range of 0.40x to
1.02x for the Distribution Companies; (b) EBITDA of 9.7x, as compared to a range
of 3.3x to 9.4x for the Auto OEM Suppliers and a range of 5.2x to 15.8x for the
Distribution Companies; and (c) EBIT of 12.4x, as compared to a range of 5.7x to
16.1x for the Auto OEM Suppliers and a range of 6.0x to 22.1x for the
Distribution Companies. Cleary Gull's analysis indicated that, at the Offer
Price, the Company traded at a share price equal to a multiple of (a) LTM EPS of
18.1x, as compared to arrange of 7.2x to 30.9x for the Auto OEM Suppliers and a
range of 6.9x to 42.3x for the Distribution Companies; (b) calendar 1999 EPS of
17.0x, as compared to a range of 6.6x to 17.1x for the Auto OEM Suppliers and a
range of 6.7x to 19.8x for the Distribution Companies; (c) calendar 2000 EPS of
14.3x, as compared to a range of 6.1x to 14.1x for the Auto OEM Supplies and a
range of 8.4x to 10.0x for the Distribution Companies; and (d) book value of
3.7x, as compared to a range of 0.8x to 5.7x for the Auto OEM Suppliers and a
range of 0.6x to 2.8x for the Distribution Companies. Cleary Gull's analysis
indicated that, at the Offer Price, the Company's PEG Ratio was 136.8% as
compared to a range of 32.4% to 110.1% for the Auto OEM Suppliers and a range of
27.9% to 66.5% for the Distribution Companies. Cleary Gull noted that the
derived multiples for the Company based on the Offer Price were in the range of
the multiples for the Auto OEM Suppliers and the Distribution Companies in every
case.
SELECTED TRANSACTIONS ANALYSIS. Cleary Gull reviewed and analyzed the
aggregate consideration paid in 42 merger and acquisition transactions (the
"Transactions") completed or pending since March 31, 1995 in the automotive
component and electrical supply industries for which relevant information was
available. For each of the Transactions, Cleary Gull examined certain publicly
available financial data, including LTM sales, EBITDA, EBIT and total asset
value. Cleary Gull also examined balance sheet data and trading performance to
establish the aggregate consideration paid for the acquired company. Of the
Transactions, Cleary Gull focused on 17 acquisition targets deemed most similar
to the Company (the "Comparable Transactions") in terms of business focus, size
and profitability, although Cleary Gull recognizes that each of the Comparable
Transactions is distinguishable from the Acquisition in certain respects. Cleary
Gull noted, among other things, that (i) the reasons for, and circumstances
surrounding, each of the Comparable Transactions analyzed were diverse; (ii) the
characteristics of the companies involved were not necessarily comparable to the
Company and Parent; and (iii) premiums fluctuated based on perceived growth,
synergies, strategic value and other factors.
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Cleary Gull compared the trading multiples derived for the Company assuming
a share price equal to the Offer Price to the trading multiples for the
Comparable Transactions. Cleary Gull's analysis indicated that the Company was
trading at an Enterprise Value equal to a multiple of (a) LTM sales of 1.62x, as
compared to a range of 0.38x to 2.31x for the Comparable Transactions; (b) LTM
EBITDA of 9.7x, as compared to a range of 5.7x to 12.3x for the Comparable
Transactions; (c) LTM EBIT of 12.4x, as compared to a range of 9.2x to 18.8x for
the Comparable Transactions; and (d) total assets as of the most recent period
of 2.1x, as compared to a range of 0.7x to 2.9x for the Comparable Transactions.
Cleary Gull noted that the derived multiples for the Company based on the Per
Share Amount were in the range of the multiples for the Comparable Transactions
in every case.
DISCOUNTED CASH FLOW ANALYSIS. Cleary Gull analyzed the Company's per share
value based on an unleveraged after-tax discounted cash flow ("DCF") analysis of
the Company utilizing certain financial forecasts. The base case (the "Base
Case") considered by Cleary Gull was predicated on the forecasts for 1999
through 2003 that were developed by the Company's management and reflected the
elimination of certain expenses, including those related to being a public
company (the "Public Expenses"). For analytical purposes only, Cleary Gull also
considered two alternative cases (i) an upside case (the "Upside Case") which
was predicated on the Base Case and assumed an increase over Base Case net sales
of 5% beginning in 2000, a slight improvement in margins due to operating
leverage beginning in 2000 and a slightly lower effective income tax rate
beginning in 2000 and (ii) a downside case (the "Downside Case") which was
predicated on lower net sales and operating income from the Company's ceramics
business in all five projection years, a mild recession in 2001 and 2002 and a
return to historical growth and profitability levels in 2003. The management of
the Company reviewed the Upside and Downside Cases and indicated that they were
reasonable.
In performing the DCF analyses, Cleary Gull, using the forecasts described
above, discounted the unlevered free cash flows of the Company (net income, plus
depreciation and amortization, less changes in working capital and capital
expenditures) over the specified forecast period using a range of risk adjusted
discount rates between 12.0% and 14.5%. The sum of the present values of such
free cash flows for the Company was then added to the present value of the
Company's terminal value computed using a multiple range of EBITDA of 7.0x to
9.0x. Based on this analysis, Cleary Gull calculated implied price per share
ranges for the Company. The Base Case DCF analysis resulted in a per share
valuation range from (i) $14.10 to $16.45 using a discount rate of 14.5%; (ii)
$14.68 to $17.16 using a discount rate of 13.25%; and (iii) $15.30 to $17.92
using a discount rate of 12.0%. The Upside Case DCF analysis resulted in a per
share valuation range from (i) $15.44 to $18.05 using a discount rate of 14.5%;
(ii) $16.09 to $18.85 using a discount rate of 13.25%; and (iii) $16.78 to
$19.70 using a discount rate of 12.0%. The Downside Case DCF analysis resulted
in a per share valuation range from (i) $12.39 to $14.43 using a discount rate
of 14.5%; (ii) $12.89 to $15.04 using a discount rate of 13.25%; and (iii)
$13.42 to $15.69 using a discount rate of 12.0%. In all cases, these values were
calculated without giving any effect to any expense savings (other than the
elimination of the Public Expenses), or revenue enhancement opportunities that
may result from the Merger. Cleary Gull noted that the Offer Price was in the
per share range calculated in the Base and Upside Case DCF analyses (with the
exception of the Upside Case DCF analysis using a discount rate of 12.0%) and
was higher than the range calculated in the Downside Case DCF analysis.
The risk adjusted discount rates or weighted average cost of capital
("WACC") was calculated consistent with the Capital Asset Pricing Model. Cleary
Gull calculated the median two and one half year weekly S&P 500 equity beta for
the Auto OEM Suppliers. Cleary Gull calculated a range for the cost of equity
using a market risk premium range of 8.0% to 8.4% (based on published Ibbotson
data), a small company premium range of 3.0% to 3.5% (based on published
Ibbotson data) and a risk free rate of 5.25%. Cleary Gull calculated the cost of
equity to be between 13.9% and 15.5%. Cleary Gull estimated the Comparable
Companies' after-tax borrowing cost between 4.7% and 5.3% and long-term debt to
capital ratio between 10.0% and 20.0%. The WACC was then calculated as an
average of the cost of equity
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capital (weighted at 80.0% to 90.0%) and the cost of debt capital (weighted at
20.0% to 10%). Based on this analysis, Cleary Gull estimated the WACC to be
between 12.0% and 14.5%.
LEVERAGED BUYOUT ANALYSIS. Cleary Gull also analyzed a leveraged buyout
("LBO") of the Company as a means of comparing the Offer Price to the value of
the Company assuming that it were sold to a typical financial buyer. An LBO
involves the acquisition and recapitalization of a company financed primarily by
incurring indebtedness that is serviced by the post-LBO free cash flow of the
company. Cleary Gull used Base Case projections and assumed, for purposes of the
LBO analysis, a leveraged capital structure (49.8% senior debt, 17.7%
subordinated debt and 32.5% equity) based on financial ratios required by the
senior debt and high yield debt markets, current interest rates and market
required returns. The capital structure resulted in total debt divided by LTM
EBITDA less capital expenditures initially of 5.7x and LTM EBITDA less capital
expenditures divided by total interest expense of 1.8x. Assuming terminal values
at the end of the fifth year equal to a range of 7.0x to 9.0x EBITDA, this
methodology indicated that a leveraged buyout transaction could earn the equity
holders a market return (25% to 38%) on their investment at approximately $12.75
to $13.25 per share. Cleary Gull noted that the Offer Price exceeded the range
determined by the LBO analysis.
PURCHASE PRICE PREMIUM. Cleary Gull reviewed the purchase price premiums in
12 completed cash tender offers over the two year period ending February 17,
1999, for publicly-held, industrial manufacturers of electrical and electronic
components, communications, transportation, aerospace, measuring and
miscellaneous equipment and durable goods wholesalers which involved equity
consideration of $50 million to $500 million (the "Public Transactions"). For
each of the Public Transactions, Cleary Gull utilized information from
Securities Data Corporation to examine the purchase price premiums one day prior
to announcement date, one week prior to announcement date and four weeks prior
to announcement date. Cleary Gull noted that the Offer Price represents a
premium of (a) 18.2% over the closing price one day prior to the Measurement
Date as compared to a range of 7.0% to 108.7% for the Public Transactions; (b)
16.1% over the closing price one week prior to the Measurement Date as compared
to a range of 5.7% to 97.3% for the Public Transactions; and (iii) 8.3% over the
closing price four weeks prior to the Measurement Date as compared to a range of
10.8% to 100.0% for the Public Transactions.
The summary set forth above does not purport to be a complete description of
the analyses performed by Cleary Gull in arriving at its opinion. The
preparation of a fairness opinion is a complex process not necessarily
susceptible to partial or summary description. Cleary Gull 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 such factors
and analyses, could create an incomplete or misleading view of the process
underlying the analyses performed in reaching its opinion. In addition, Cleary
Gull considered the results of all such analyses and did not assign relative
weights to any of the analyses, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Cleary Gull's
view of the actual value of the Company.
The analyses considered by Cleary Gull in arriving at its opinion were
prepared solely for the purpose of providing its opinion as to the fairness from
a financial point of view of the Offer Price to the Public Shareholders and do
not purport to be appraisals or necessarily to reflect the prices at which
businesses or securities actually may be sold, which are inherently subject to
uncertainty and may be significantly more or less favorable than as set forth in
these analyses. None of the Comparable Companies is identical to the Company,
and none of the Comparable Transactions or the Public Transactions is identical
to the Acquisition. Accordingly, an analysis of publicly traded comparable
companies and comparable business combinations is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the Comparable Companies and the
companies involved in the Comparable Transactions and the Public Transactions
and other factors that could affect the public trading value of the Comparable
Companies or the company to which they are being compared, or the value of the
Comparable Transactions or the Public Transactions or the transaction to which
they are being compared. The discount rates, terminal values and multiples used
in the analyses were considered
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appropriate after consideration of current economic and financial market
conditions, including price earnings multiples and capital structures of
selected public companies and rates of return on debt and equity investments in
public and private companies and a qualitative judgment as to the most relevant
information and its application to the Company. In connection with the analyses,
Cleary Gull made numerous assumptions, and was provided with estimates and
forecasts by the Company's management, with respect to the industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of the Company and its advisors. Similarly, analyses based
upon 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. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the Company or
its advisors, none of the Company, Cleary Gull or any other person assumes
responsibility if future results or actual values are materially different from
these forecasts or assumptions. The opinion of Cleary Gull was one of many
factors taken into consideration by the Company Board in making its
determination to approve the Merger Agreement.
Cleary Gull was selected by the Company as its financial advisor in
connection with the Acquisition because of Cleary Gull's reputation and
expertise as an investment banking firm. Cleary Gull, 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, secondary distributions of listed and unlisted securities,
private placements, leveraged buyouts, recapitalizations and valuations for
estate, corporate and other purposes.
Pursuant to the terms of a letter agreement, dated February 18, 1999 between
Cleary Gull and the Company (the "Cleary Gull Letter Agreement"), the Company
Board retained Cleary Gull to render a fairness opinion. The Company agreed to
pay Cleary Gull $50,000 upon signing the Cleary Gull Letter Agreement and
$150,000 upon delivery of the written fairness opinion to the Board of
Directors. Cleary Gull's fees were not contingent upon the content of the
opinion or the approval and consummation of the Offer and the Merger. If Cleary
Gull is requested to perform services in connection with this assignment after
delivery of the fairness opinion, then it will be compensated for its time. In
addition, the Company has agreed to reimburse Cleary Gull for its reasonable
out-of-pocket expenses (including the fees and disbursements of its attorneys)
up to $50,000 and to indemnify Cleary Gull and certain other persons affiliated
with Cleary Gull against certain liabilities arising out of its engagement,
including certain liabilities under the federal securities laws.
Cleary Gull was a co-manager of the Company's initial public offering in
October 1996. In the ordinary course of business, Cleary Gull and their
respective affiliates may actively trade in the securities of the Company for
their own account and for the accounts of their customers and, accordingly, may
at any time hold a long or short position in such securities. Cleary Gull
currently provides research coverage on the Company and makes a market in the
Shares on the Nasdaq National Market. Cleary Gull has never provided investment
banking services to Parent.
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ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Cleary Gull as its financial advisor in connection with
the Offer and the Merger. Pursuant to the terms of Cleary Gull's engagement, the
Company has agreed to pay Cleary Gull for its services an aggregate financial
advisory fee of $200,000, $50,000 of which was paid on retention of Cleary Gull
and $150,000 of which was due on delivery of Cleary Gull's fairness opinion. The
Company also has agreed to reimburse Cleary Gull for reasonable travel and other
out-of-pocket expenses, including the reasonable fees and disbursements of its
legal counsel, and to indemnify Cleary Gull and certain related parties against
certain liabilities, including liabilities under the federal securities laws,
arising out of Cleary Gull's engagement. In the ordinary course of business,
Cleary Gull and its affiliates may actively trade or hold the securities of the
Company for their own account or for the account of customers and, accordingly,
may at any time hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to the shareholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected by
the Company or, to the best of the Company's knowledge, by any of its executive
officers, directors, affiliates or subsidiaries, except that executive officers
of the Company may have acquired beneficial ownership of Shares under the
Company's Employee Stock Purchase Plan, which acquisitions are not material.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by such persons (other
than shares issuable upon the exercise of stock options and Shares, if any,
which if tendered could cause such persons to incur liability under the
provisions of Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, the Company is not engaged in any
negotiation in response to the Offer that relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as described in Items 3(b) or 4, there are no transactions, Board
of Director resolutions, agreements in principle, or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
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ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
(A) STATE TAKEOVER LAWS
A number of states throughout the United States have enacted takeover
statutes that purport, in varying degrees, to be applicable to attempts to
acquire securities of corporations that are incorporated or have assets,
Shareholders, executive offices or places of business in those states. In EDGAR
V. MITE CORP., the Supreme Court of the United States invalidated on
constitutional grounds the Illinois Business Takeover Act, which, as a matter of
state securities law, made certain corporate acquisitions more difficult. In CTS
CORP. V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United
States held that a state may, as a matter of corporate law and, in particular,
those laws concerning corporate governance, constitutionally disqualify a
potential acquiror from voting on the affairs of a target corporation without
prior approval of the remaining shareholders, provided that the laws were
applicable only under certain conditions.
Chapter 42 of the IBCL ("Chapter 42") states that unless the articles of
incorporation or the bylaws of an "issuing public corporation" provide that the
provisions of Chapter 42 do not apply to acquisitions of shares of such issuing
public corporation, an acquiring person, such as Purchaser, who makes a "control
share acquisition" with respect to such issuing public corporation may not
exercise voting rights pertaining to any "control shares" unless such rights are
conferred by holders of a majority of the outstanding shares of voting stock of
such issuing public corporation, excluding shares held by such acquiring person
or any officer or employee director of such issuing public corporation
("interested shares"), at a meeting of the shareholders. Chapter 42 defines
"issuing public corporation" as any corporation that has: (i) 100 or more
shareholders, (ii) its principal office or substantial assets within Indiana,
and (iii) more than 10% of its shareholders residing in Indiana, more than 10%
of its shares owned by Indiana residents or 10,000 shareholders residing in
Indiana. Chapter 42 defines "control shares" as an aggregate number of shares
owned by a person or in respect of which the person may exercise or direct the
exercise of the voting power of the issuing public corporation in an election of
directors within any of the following ranges: (a) one-fifth or more but less
than one-third, (b) one-third or more but less than a majority, or (c) a
majority or more. Chapter 42 defines a "control share acquisition" as the
acquisition of either ownership or the power to direct the voting power of
issued and outstanding control shares. The Company does not have its principal
office or substantial assets in Indiana, so Chapter 42 is inapplicable to the
Offer.
Chapter 43 of the IBCL ("Chapter 43") generally prohibits an Indiana
corporation from engaging in a "business combination" (defined as a variety of
transactions, including mergers) with an "interested shareholder" (defined
generally as a person that is the beneficial owner of 10% or more of a
corporation's outstanding voting stock) for a period of five years following the
date that such person became an interested shareholder, unless, among other
things, prior to the date such person became an interested shareholder, the
board of directors of the corporation approved either the business combination
or the transaction that resulted in the shareholder becoming an interested
shareholder. The Company Board has approved the Merger Agreement and the
Purchaser's acquisition of Shares pursuant to the Offer. Therefore, Chapter 43
does not apply to the Merger.
Indiana also has a takeover offers statute that by its terms would be
inapplicable to the Offer because the Company does not have its principal place
of business in Indiana.
Based on information supplied by the Company and the Company's
representations in the Merger Agreement, Purchaser does not believe that any
other state takeover statutes apply to the Offer or the Merger. Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger and nothing in this Offer To
Purchase or any action taken in connection with the Offer or the Merger is
intended as a waiver of that right. If it is asserted that any state takeover
statute is applicable to the Offer or the Merger and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer or the
Merger, Purchaser might be required to file
32
<PAGE>
certain information with, or to receive approvals from, the relevant state
authorities, and Purchaser might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer or be delayed in consummating the Offer or
the Merger. In such case, Purchaser may not be obligated to accept for payment
or pay for any Shares tendered pursuant to the Offer.
(B) ANTITRUST
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules that have been promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
and the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by the Purchaser pursuant to the Offer may be subject to
such requirements. First Technology PLC and Control Devices, Inc. have concluded
that no filing under the HSR Act is required with respect to the Offer or
Merger. The Antitrust Division and the FTC frequently scrutinize the legality
under the antitrust laws of transactions. At any time before or after the
consummation of any such transaction, the Antitrust Division or the FTC could,
notwithstanding that there may be no filing required, take such action under the
antitrust laws as either deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or
seeking divestiture of the Shares so acquired or divestiture of substantial
assets of Parent or the Company. Private parties may also bring legal actions
under the antitrust laws. There can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or if such a challenge is made,
what the results will be.
(C) PURCHASER'S DESIGNATION OF PERSONS TO BE ELECTED TO THE COMPANY'S BOARD
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of Directors of the
Company other than at a meeting of the Company's shareholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
99.1 Agreement and Plan of Merger dated as of February 22, 1999 by and
among Parent, Purchaser and the Company.
99.2 Offer to Purchase dated February 26, 1999.
99.3 Confidentiality Agreement dated June 4, 1998 by and between Parent and
the Company.
99.4 Joint Press Release issued by Parent and the Company on February 23,
1999.
99.5 Opinion of Cleary Gull & Reiland Inc. dated February 22, 1999.*
99.6 Letter to the Shareholders dated February 26, 1999.*
99.7 Reference is made to the information under the captions "Compensation
of Directors," "Security Ownership of Management," "Compensation of Executive
Officers," and "Atkinson/Wood/ Hauser-Kauffmann Termination Benefits
Agreements." which are included in Schedule I hereto.
- ------------------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
33
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DATE: February 26, 1999
CONTROL DEVICES, INC.
/S/ BRUCE D. ATKINSON
---------------------------------------------------------------
Name: Bruce D. Atkinson
Title: President and Chief
Executive Officer
34
<PAGE>
SCHEDULE I
CONTROL DEVICES, INC.
228 NORTHEAST ROAD
STANDISH, MAINE 04084
207-642-4535
INFORMATION STATEMENT PURSUANT
TO SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND
RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about February 24, 1999 as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9"). You are receiving this Information Statement in
connection with the possible election of persons designated by Parent to a
majority of seats on the Board of Directors of the Company (the "Board"). The
Merger Agreement requires the Company, upon the purchase by the Purchaser of
outstanding common shares, no par value, of the Company (the "Shares"), pursuant
to the Offer, promptly to cause a number of the Purchaser's designees to be
elected to the Board equal, rounded up to the next whole number, to the product
of (i) the number of directors on the Board and (ii) the percentage that the
number of Shares so purchased bears to the aggregate number of Shares
outstanding. If any time the number of Shares equals or exceeds a majority of
the outstanding Shares, the Parent will be entitled to designate a majority of
the members of the Board. See "Rights to Designate Directors; Purchaser's
Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on Thursday,
February 24, 1999. The Offer is scheduled to expire at 12:00 midnight on Monday,
March 1, 1999, New York City time, unless the Offer is extended. The
consummation of the Offer and the Merger pursuant to the terms of the Merger
Agreement would result in a change in control of the Company.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent and Purchaser, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS
GENERAL
The Company had 8,325,967 Shares outstanding on February 22, 1999. Holders
of Common Stock are entitled to one vote for each Share held.
RIGHTS TO DESIGNATE DIRECTORS; PURCHASER'S DESIGNEES
PURCHASER'S DESIGNEES
Pursuant to the terms of the Merger Agreement, it is expected that Parent's
designees will take office as directors of the Company upon Purchaser's payment
for any Shares.
I-1
<PAGE>
Purchaser has advised the Company that its designees will be the persons
named in the following table and has provided the information below regarding
such individuals.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
AGE AT EMPLOYMENT AND
NAME 12/31/98 FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------------------- ------------- ---------------------------------------------------
<S> <C> <C>
Frederick J. Westlake.............................. 56 Director and Executive Chairman, First Technology
PLC since 1984 Member of the Boards of Directors of
First Technology Capital, Inc., a Michigan company
and subsidiary of Parent, and First Technology
Acquisition, Inc., an Indiana company and
subsidiary of Parent
Oliver G. Burns.................................... 42 Finance Director, First Technology PLC since 1997
Finance Director of Siltrona International, Ltd.
from 1993 to 1997
Member of the Boards of Directors of First
Technology Capital, Inc., a Michigan company and
subsidiary of Parent, and First Technology
Acquisition, Inc., an Indiana company and
subsidiary of Parent
Muir A. Parker..................................... 54 Managing Director of First Technology PLC since
1997 Chief Executive, Safety & Analysis Division
from 1994 to 1997.
Neil Clayton....................................... 36 Secretary, First Technology Acquisition Corp. since
1999
Secretary, First Technology PLC for last five years
Walter J. Borda.................................... 53 Director of First Technology PLC since 1998
Managing Partner, Borda & Clemmons law firm since
1999
Managing Partner, Stroble & Borda law firm prior to
1999
John H. Feltham.................................... 73 Director of First Technology PLC since 1994
Retired
</TABLE>
BOARD OF DIRECTORS OF THE COMPANY
RALPH R. WHITNEY, JR., 64, has been Chairman of the Board of the Company
since 1994. Mr. Whitney has been a principal of Hammond, Kennedy, Whitney &
Company, Inc. (HKW), a New York, New York financial intermediary and private
investment banking firm, since 1971. Mr. Whitney is also a director of Excel
Industries, Inc., Baldwin Technology Company, Inc., Adage, Inc., IFR Systems,
Inc., and Selas Corp. of America.
BRUCE D. ATKINSON, 58, has been President and a Director of the Company
since 1994, and has been Chief Executive Officer since 1995. Mr. Atkinson was
General Manager of the predecessor company from 1978 until 1994.
CHARLES M. BRENNAN, III, 57, has been a Director of the Company since 1994.
Mr. Brennan has been Chairman of the Board and Chief Executive Officer of the
MYR Group Inc., a specialty electrical and telecommunications contractor, since
1989. Mr. Brennan is also a Director of UNR Industries, Inc.
I-2
<PAGE>
JOHN D. COOKE, 58, has been a Director of the Company since 1994. Mr. Cooke
has been a Senior Vice President-Investments of Prudential Securities, Inc.
since 1991. For more than five years prior thereto he was Senior Vice
President-Investments of Thompson McKinnon Securities.
FORREST E. CRISMAN, JR., 42, has been a Director of the Company since
January 24, 1998. Mr. Crisman has been a principal of HKW since 1987 and sits on
the Boards of several private companies. Mr. Crisman previously served on the
Company's Board from July 1994 until September 1996.
JAMES O. FUTTERKNECHT, JR., 52, has been a Director of the Company since
1995. Mr. Futterknecht has been Chairman of the Board, President and Chief
Executive Officer of Excel Industries Inc., an Elkhart, Indiana automotive parts
supplier, since 1995. Mr. Futterknecht was President and Chief Operating Officer
of Excel from 1993 to 1995, and Executive Vice President of Excel from 1990 to
1992.
ALAN I. MOSSBERG, 66, has been a Director of the Company since 1994. Mr.
Mossberg has been Chief Executive Officer and President of O.F. Mossberg & Sons,
Inc., a North Haven, Connecticut manufacturer of shotguns, for more than five
years.
GLENN SCOLNIK, 47, has been a Director of the Company since 1994. Mr.
Scolnik has been a principal of HKW since 1993. Mr. Scolnik was a member of the
law firm of Sommer & Barnard, PC, Indianapolis, Indiana, for more than five
years prior to 1993, and was of counsel to such firm from 1993 to 1995. Mr.
Scolnik is a director of WavePhore, Inc., a data broadcasting company, and sits
on the Boards of several private companies.
COMPENSATION OF DIRECTORS
Directors of the Company who are not employees receive $16,000 per year
payable quarterly plus $1000 per Board meeting attended and $800 per committee
meeting if not held immediately prior to or subsequent to a regular Board
meeting. Non-employee directors are also granted options to purchase 1,666
Common Shares, at the fair market value on the date of grant, upon their initial
election and annually upon reelection. The options expire at the earlier of one
year after the termination of the director's Board membership or ten years after
the date of grant. Directors who are employees are not compensated for their
Board responsibilities.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met five times in 1998. The Board has an audit
committee, a compensation committee, and an executive committee.
The purpose and function of the audit committee is to recommend the
engagement or discharge of independent public accountants; to review year-end
and interim financial statements prior to issuance; to review the services being
performed by the public accountants; and to make appropriate reports and
recommendations to the Board of Directors. Messrs. Brennan, Cooke, and Crisman
were members of the audit committee. The audit committee met twice in 1998.
Messrs. Mossberg, Cooke, Scolnik and Whitney are members of the compensation
committee. The compensation committee formulates executive compensation for the
Company, and determines the compensation of all executive officers. The
compensation committee administers the Company's 1996 and 1997 Stock
Compensation Plans. The Committee met once in 1998.
Messrs. Whitney, Atkinson, Futterknecht, and Scolnik are members of the
executive committee. The executive committee did not meet in 1998.
I-3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 5, 1999, information
regarding the beneficial ownership of Common Shares of the Company by each
director of the Company, each of the executive officers named in the Summary
Compensation Table below, and by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS SHARES
- ----------------------------------------------------------- -------------------- ----- -----------
<S> <C> <C> <C>
Ralph R. Whitney, Jr. ..................................... 537,813 (1) 6.5%
Bruce D. Atkinson.......................................... 318,735 (2) 3.8%
Charles M. Brennan, III ................................... 36,665 (3) 0.4%
John D. Cooke.............................................. 36,665 (3) 0.4%
Forrest E. Crisman, Jr. ................................... 270,572 (3) 3.2%
James O. Futterknecht, Jr. ................................ 36,665 (4) 0.4%
Alan I. Mossberg........................................... 28,332 (5) 0.3%
Glenn Scolnik.............................................. 270,572 (3) 3.2%
Jeffrey G. Wood............................................ 228,265 (6) 2.7%
Michel Hauser-Kauffmann.................................... 96,369 (7) 1.2%
-
---------- ---
All executive officers and directors as a group (10
persons)................................................. 1,860,655 (8) 21.9%
</TABLE>
- ------------------------
(1) Includes 3,332 shares which may be acquired pursuant to a stock options
exercisable within 60 days and 133,620 shares owned by Mr. Whitney's wife,
as to which Mr. Whitney disclaims beneficial ownership.
(2) Includes 62,325 shares which may be acquired pursuant to a stock options
exercisable within 60 days and 125,000 shares owned by Mr. Atkinson's wife,
as to which Mr. Atkinson disclaims beneficial ownership.
(3) Includes 3,332 shares which may be acquired pursuant to a stock options
exercisable within 60 days.
(4) Includes 3,332 shares which may be acquired pursuant to a stock options
exercisable within 60 days and 8,332 shares held by a revokable trust of
which Mr. Futterknecht is trustee, 8,332 shares held by a revokable trust of
which Mr. Futterknecht's wife is trustee, and 16,666 shares held by two
irrevocable trusts for the benefit of Mr. Futterknecht's children, all of
such shares as to which Mr. Futterknecht disclaims beneficial ownership.
(5) Represents 3,332 shares which may be acquired pursuant to a stock options
exercisable within 60 days and 25,000 shares owned by Mr. Mossberg's wife,
as to which Mr. Mossberg disclaims beneficial ownership.
(6) Includes 57,325 shares which may be acquired pursuant to a stock options
exercisable within 60 days.
(7) Includes 28,000 shares which may be acquired pursuant to a stock options
exercisable within 60 days.
(8) The total percentage includes all options exercisable within 60 days in both
the numerator and denominator.
I-4
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Mossberg, Cooke, Scolnik, and Whitney were members of the
compensation committee of the Board of Directors during the year ended December
31, 1998. Mr. Whitney was formerly the CEO of the Company and is currently the
Chairman of the Company's Board of Directors.
Messrs. Whitney, Scolnik, and Crisman are directors, officers and principals
of HKW. The board of directors of HKW determines the compensation of its
officers. HKW provides management services and acquisition advice and assistance
to the Company. The Company pays HKW monthly management fees of $15,000 and pays
director fees to Messrs. Whitney, Scolnik, and Crisman who are Directors of the
Company. The management fees amounted to $180,000 for the year ended December
31, 1998.
Mr. Mossberg is an executive officer of O.F. Mossberg. Mr. Whitney is a
director and a member of the compensation committee of the Board of Directors of
O.F. Mossberg.
Mr. Scolnik also assists the Company in the management of its legal affairs
and is paid for such services. Such fees amounted to $36,000 in 1998. Such
amount includes payment for services rendered by associated co-counsel and a
paralegal.
COMPENSATION OF EXECUTIVE OFFICERS
Furnished below is a summary concerning the compensation awarded and/or paid
in each of the last three years to the Company's chief executive officer and
each other executive officer whose aggregate salary and bonus exceeded $100,000
in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS--SECURITIES
ANNUAL COMPENSATION -----------------------
------------------------ UNDERLYING ALL OTHER(2)
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTION(#) COMPENSATION
- -------------------------------------------------- --------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Ralph R. Whitney, Jr. ............................ 1998 $ -- $ -- 1,666 $ 16,000
Chairman 1997 $ -- $ -- 1,666 $ 16,000
1996 $ -- $ -- -- $ 15,000
Bruce D. Atkinson................................. 1998 $ 256,846 $ 126,000 0 $ 11,340
President and CEO 1997 $ 240,000 $ 120,000 75,000 $ 10,214
1996 $ 204,900 $ 95,818 75,000 $ 8,356
Jeffrey G. Wood................................... 1998 $ 171,230 $ 84,000 0 $ 9,222
Vice President and CFO 1997 $ 160,000 $ 80,000 50,000 $ 8,133
1996 $ 144,000 $ 67,339 50,000 $ 8,202
Michel Hauser-Kauffmann........................... 1998 $ 177,332 $ 88,666 0 $ 0
Managing Director--RDI 1997 $ 165,000 $ 43,000 23,332 $ 0
1996 $ 140,660(3) $ 0 23,332 $ 0
</TABLE>
- ------------------------
(1) Represents compensation for a 53 week fiscal year in 1998.
(2) Represents director's fees paid to Mr. Whitney. Includes for Mr. Atkinson
and Mr. Wood the value of Company paid life insurance, and contributions by
the Company to the Company's deferred compensation and savings plan.
(3) Includes Company paid compensation from April 1, 1996 (date of acquisition
of RDI) to December 31, 1996.
I-5
<PAGE>
OPTIONS
The following table shows the options to purchase Common Shares granted to
the named executive officers in 1998 pursuant to the Company's Stock
Compensation Plans. The option to Mr. Whitney was a director option granted
pursuant to the Company's 1996 Stock Compensation Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM
OPTIONS TO EMPLOYEES PRICE ($ EXPIRATION --------------------
NAME GRANTED IN FISCAL YEAR PER SHARE) DATE 5%($) 10%($)
- -------------------------------------- ---------- ----------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ralph R. Whitney, Jr. ................ 1,666(1) 25% 12.95 4/24/2008 $ 5,961 $ 13,568
</TABLE>
- ------------------------
(1) Option is exercisable at anytime prior to its expiration.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY
OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END
EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE($)
-------------------------- --------------------------
<S> <C> <C>
Ralph R. Whitney, Jr. .................................... 3,332/0 $ 19,066/0 (1)
Bruce D. Atkinson......................................... 46,550/103,450 $ 382,852/$731,836 (1)
Jeffrey G. Wood........................................... 41,550/58,450 $ 356,852/$386,273 (1)
Michel Hauser-Kauffmann................................... 27,999/18,666 $ 271,593/$97,068 (1)
</TABLE>
- ------------------------
(1) Based on the December 31, 1998 closing price of $16.00 per share. No options
were exercised by any executive officer in 1998.
ATKINSON/WOOD/HAUSER-KAUFFMANN TERMINATION BENEFITS AGREEMENTS
The Corporation has entered into Executive Separation Agreements (the
"Separation Agreements") with Messrs. Atkinson, Wood and Hauser-Kauffmann. The
Separation Agreements provide for separation pay should a Change in Control of
the Corporation occur. The Separation Agreements were unanimously approved by
the non-employee directors. Under the Separation Agreements, the executive's
employment must be terminated involuntarily (other than for serious misconduct),
or voluntarily by the executive officer for good reason, i.e. if the executive
officer is demoted, relocated, or has a reduction in compensation, for
separation pay to be available. Separation pay equals 2.90 times the executive
officer's average annual compensation for the most recent five taxable years
ending before a Change in Control, and certain benefits are also extended for
three years after termination. The executive officer is also entitled to
continue to participate in the Corporation's retirement plans for three years
after termination, or if such plans prohibit continued participation after
termination, to receive benefits equal to the incremental benefit the executive
officer would have received had his employment terminated three years after the
actual date of termination. The Corporation believes that by assuring these
executive officers of some financial security, the Separation Agreements protect
the shareholders by neutralizing any bias of the executive officers in
considering proposals to acquire the Corporation. The Corporation believes these
advantages outweigh the disadvantage of the cost of the benefits.
I-6
<PAGE>
PRINCIPAL SHAREHOLDERS
Set forth below is certain information concerning the only shareholders
known to the Company, as of February 22, 1999, to beneficially own 5% or more of
the Company's outstanding Common Shares (including stock options exercisable
within 60 days).
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF OWNERSHIP OF CLASS
- ------------------------------------------------------------- ------------------ -----------
<S> <C> <C>
Massachusetts Mutual Life Insurance Co. ..................... 1,666,657(1) 20.0%
Wellington Management Company, LLP........................... 819,908 9.8%
Ralph R. Whitney, Jr. ....................................... 537,813(2) 6.5%
Lord, Abbett & Co. .......................................... 457,104 5.5%
State of Wisconsin Investment Board.......................... 441,665 5.3%
</TABLE>
- ------------------------
(1) Includes 290,332 shares (3.5%) owned by MassMutual Corporate Investors,
96,666 (1.2%) shares owned by MassMutual Participation Investors, each of
which is a mutual fund managed by Massachusetts Mutual Life Insurance
Company, and 290,332 (3.5%) shares owned by MassMutual Corporate Value
Partners Limited, for which Massachusetts Mutual Life Insurance Company acts
as an investment advisor. Pursuant to a Security and Exchange Commission
Executive Order issued pursuant to Section 17(d) of the Investment Company
Act, Massachusetts Mutual Life Insurance Company, MassMutual Corporate
Investors, MassMutual Participation Investors and MassMutual Corporate Value
Partners Limited must sell shares in proportion to their respective
holdings, unless the joint transaction committees of the Boards of Trustees
of MassMutual Corporate Investors and MassMutual Participation Investors
approve a disproportionate disposition of the shares. Massachusetts Mutual
Life Insurance Company disclaims beneficial ownership of any shares in which
it has no actual pecuniary interest. The address of each of these
shareholders is Massachusetts Mutual Life Insurance Company, 1295 State
Street, Springfield, Massachusetts 01111.
(2) Includes 3,332 shares which may be acquired pursuant to a stock options
exercisable within 60 days and 133,620 shares owned by Mr. Whitney's wife,
as to which Mr. Whitney disclaims beneficial ownership. The address for Mr.
Whitney is the principal office of the Company.
I-7
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
February 22, 1999, by and among Control Devices, Inc., an Indiana corporation
(the "COMPANY"), First Technology PLC, an English public limited company
("PARENT"), and First Technology Acquisition Corp., an Indiana corporation
and an indirect wholly owned subsidiary of Parent ("PURCHASER").
RECITALS
A. The Board of Directors of the Company has determined that it is in
the best interests of the Company and its Shareholders for Purchaser to acquire
the Company on the terms and subject to the conditions set forth herein (the
"ACQUISITION");
B. As a first step in the Acquisition, the Company, Parent and
Purchaser each desire that Parent cause Purchaser to commence a cash tender
offer (the "OFFER") to purchase all of the Company's issued and outstanding
common shares, no par value (the "SHARES") for $16.25 per Share (the "PER SHARE
AMOUNT"), on the terms and subject to the conditions set forth in this
Agreement;
C. To complete the Acquisition, each of the Boards of Directors of the
Company, Parent and Purchaser has approved this Agreement and the merger of
Purchaser with and into the Company (the "MERGER"), wherein any issued and
outstanding Shares not tendered and purchased by Purchaser pursuant to the Offer
(other than Shares described in Section 2.6(b)) will be converted into the right
to receive the Per Share Amount, on the terms and subject to the conditions of
this Agreement and in accordance with the Indiana Business Corporation Law (the
"IBCL");
D. The Board of Directors of the Company (the "COMPANY BOARD") has
unanimously resolved to recommend that the holders of the Shares
("SHAREHOLDERS") accept the Offer and the Merger and approve this Agreement and
has determined that the consideration to be paid for each Share in the Offer and
the Merger is fair to the Shareholders;
E. The parties desire to make certain representations, warranties and
covenants in connection with the Offer and the
<PAGE>
Merger and also to prescribe various conditions to the Offer and the Merger; and
F. In order to induce Parent and Purchaser to enter into this
Agreement, concurrently with the execution and delivery hereof, Parent,
Purchaser, the Company and certain Shareholders, who on a combined basis
beneficially own 18.8% of the outstanding Shares, are entering into a
Shareholders Agreement, dated as of the date hereof (the "SHAREHOLDERS
AGREEMENT") and Parent and certain Shareholders of the Company are entering into
Subscription Agreements, dated as of the date hereof (the "SUBSCRIPTION
AGREEMENTS").
NOW THEREFORE, in consideration of the representations, warranties and
covenants contained in this Agreement, the parties agree as follows:
I. THE TENDER OFFER
1.1. THE OFFER. (a) Subject to the last sentence of this Section
1.1(a), as promptly as practicable (but in any event not later than five
business days after the public announcement of the execution and delivery of
this Agreement), Parent will cause Purchaser to commence (within the meaning of
Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT")), the Offer whereby Purchaser will offer to purchase for cash all of the
Shares at the Per Share Amount, net to the seller in cash (subject to reduction
for any stock transfer taxes payable by the seller, if payment is to be made to
a Person other than the Person in whose name the certificate for such Shares is
registered, or any applicable federal back-up withholding), provided, however,
that Parent may designate another direct or indirect subsidiary of Parent as the
bidder thereunder (within the meaning of Rule 14d-1(c) under the Exchange Act,
in which case references herein to Purchaser will be deemed to apply to such
subsidiary, as applicable). Notwithstanding the foregoing, if between the date
of this Agreement and the Effective Time the outstanding Shares shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Per Share Amount will be correspondingly
adjusted on a per-share basis to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
The obligation of Parent to cause Purchaser to commence the Offer, to consummate
the Offer and to accept for payment and to pay for Shares validly
2
<PAGE>
tendered in the Offer and not validly withdrawn in accordance therewith will be
subject to, and only to, those conditions set forth in Annex A hereto (the
"OFFER CONDITIONS").
(b) Without the prior written consent of the Company, Purchaser will
not, and Parent will cause Purchaser not to, (i) decrease or change the form of
the Per Share Amount, (ii) decrease the number of Shares sought in the Offer,
(iii) amend or waive the Minimum Condition (as defined in Annex A hereto) or
impose conditions other than the Offer Conditions on the Offer, (iv) extend the
expiration date of the Offer (the "EXPIRATION DATE") except (A) as required by
Law and (B) that, in the event that any Offer Condition is not satisfied or
waived at the time that the Expiration Date would otherwise occur, (1) Purchaser
must extend the Expiration Date for an aggregate of 10 additional business days
to the extent necessary to permit such condition to be satisfied and (2)
Purchaser may, in its sole discretion, extend the Expiration Date for such
period as it may determine to be appropriate (but not beyond the Outside Date),
or (v) amend any term of the Offer in any manner materially adverse to the
Shareholders (including without limitation amendments resulting in any extension
which would be inconsistent with the preceding provisions of this sentence),
provided, however, that (1) subject to applicable legal requirements, Parent may
cause Purchaser to waive any Offer Condition, other than the Minimum Condition,
in Parent's sole discretion, and (2) the Offer may be extended in connection
with an increase in the consideration to be paid pursuant to the Offer so as to
comply with applicable rules and regulations of the Securities and Exchange
Commission (the "SEC"). Except as set forth above and subject to applicable
legal requirements, Purchaser may amend the Offer or waive any Offer Condition
in its sole discretion. Assuming the prior satisfaction or waiver of the Offer
Conditions, Parent will cause Purchaser to accept for payment, and pay for, in
accordance with the terms of the Offer, all Shares validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after the Expiration Date
or any extension thereof.
1.2. OFFER DOCUMENTS. (a) As soon as practicable on the date of
commencement of the Offer, Parent and Purchaser will file or cause to be filed
with the SEC a tender offer statement on Schedule 14D-1 ("SCHEDULE 14D-1") which
will contain an offer to purchase and related letter of transmittal and other
ancillary Offer documents and instruments pursuant to which the Offer will be
made (collectively with any supplements or amendments thereto, the "OFFER
DOCUMENTS") and which Parent and Purchaser represent,
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warrant and covenant will comply in all material respects with the Exchange Act
and other applicable Laws and will contain (or will be amended in a timely
manner so as to contain) all information which is required to be included
therein in accordance with the Exchange Act and the rules and regulations
thereunder and other applicable Laws; provided, however, that (i) no agreement
or representation hereby is made or will be made by Parent or Purchaser with
respect to information supplied by the Company in writing expressly for
inclusion in, or information derived from the Company's public SEC filings which
is incorporated by reference or included in, the Offer Documents (such supplied,
derived, incorporated or included information, the "COMPANY SEC INFORMATION")
and (ii) no representation, warranty or covenant is made or will be made herein
by the Company with respect to information contained in the Offer Documents
other than the Company SEC Information.
(b) Parent, Purchaser and the Company will each promptly correct any
information provided by them for use in the Offer Documents if and to the extent
that it becomes false or misleading in any material respect and Parent and
Purchaser will jointly and severally take all lawful action necessary to cause
the Offer Documents as so corrected to be filed promptly with the SEC and to be
disseminated to the Shareholders, in each case as and to the extent required by
applicable Law. In conducting the Offer, Parent and Purchaser will comply in all
material respects with the provisions of the Exchange Act and other applicable
Laws. Parent and Purchaser will endeavor to afford the Company and its counsel a
reasonable opportunity to review and comment on the Offer Documents and any
amendments thereto prior to the filing thereof with the SEC.
1.3. COMPANY ACTIONS. The Company hereby consents to the Offer and
represents that (a) the Company Board (at a meeting duly called and held) has
(i) determined that this Agreement, the Offer and the Merger are fair to and in
the best interests of the Company and its Shareholders, (ii) approved this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, (iii) took all other action necessary to render the limitations on
control share acquisitions and business combinations contained in Chapters 42
and 43 of the IBCL (or any similar provision) inapplicable to the transactions
contemplated hereby, including the Offer and the Merger, (iv) amended the
Company Rights Agreement as described in Section 3.22, and (v) resolved to
recommend acceptance of the Offer by the Shareholders and adoption of this
Agreement by the Shareholders and (b) Cleary
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Gull & Reiland Inc.(the "COMPANY FINANCIAL ADVISER") has delivered to the
Company Board the opinion described in Section 3.20. The Company will use its
reasonable best efforts to cause the Company Financial Adviser to permit the
inclusion of the opinion referred to in Section 3.20 in Schedule 14D-9 and the
Proxy Statement and a reference to such opinion in the Offer Documents. The
Company hereby consents to the inclusion in the Offer Documents of the
recommendation referred to in this Section 1.3; provided, however, that the
Company Board may withdraw, modify or change such recommendation to the extent,
and only to the extent and on the conditions, specified in Section 5.2(b). The
Company will file with the SEC simultaneously with the filing by Parent and
Purchaser of the Schedule 14D-1, a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto, "SCHEDULE
14D-9") containing such recommendations of the Company Board in favor of the
Offer and the Merger. The Company represents, warrants and covenants to Parent
and Purchaser that Schedule 14D-9 will comply in all material respects with the
Exchange Act and any other applicable Laws and will contain (or will be amended
in a timely manner so as to contain) all information that is required to be
included therein in accordance with the Exchange Act and the rules and
regulations thereunder and other applicable Laws; provided, however, (i) that no
representation, warranty or covenant is made or will be made herein by the
Company with respect to information supplied by Parent or Purchaser expressly
for inclusion in, or information derived from Parent's public SEC filings which
is incorporated or included in, Schedule 14D-9 (the "PARENT SEC INFORMATION"),
and (ii) no representation, warranty or covenant is made or will be made herein
by Parent or Purchaser with respect to information contained in Schedule 14D-9
other than the Parent SEC Information (which Parent SEC Information will include
the information furnished by Parent as contemplated by the next sentence). The
Company will include in Schedule 14D-9 information urnished by Parent in writing
concerning Parent's Designees as required by Section 14(f) of the Exchange Act
and Rule 14f-1 thereunder and will use its reasonable best efforts to have
Schedule 14D-9 available for inclusion in the initial mailing (and any
subsequent mailing) of the Offer Documents to the Shareholders. Each of the
Company and Parent will promptly correct any information provided by it for use
in Schedule 14D-9 if and to the extent that it becomes false or misleading in
any material respect and the Company will further take all lawful action
necessary to cause Schedule 14D-9 as so corrected to be filed promptly with the
SEC and disseminated to the Shareholders, in each case as and to the extent
required by applicable Law.
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Parent and its counsel will be given a reasonable opportunity to review Schedule
14D-9 and any amendments thereto prior to the filing thereof with the SEC. In
connection with the Offer, the Company will promptly furnish Parent with mailing
labels, security position listings and all available listings or computer files
containing the names and addresses of the record Shareholders as of the latest
practicable date and will furnish Parent such information and assistance
(including updated lists of Shareholders, mailing labels and lists of security
positions) as Parent or its agents may reasonably request in communicating the
Offer to the record and beneficial Shareholders. Subject to the requirements of
applicable Law, and except for such actions as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer and
the Merger, Parent and Purchaser will, and will instruct each of their
respective Affiliates, associates, partners, employees, agents and advisors to,
hold in confidence the information contained in such labels, lists and files,
will use such information only in connection with the Offer and the Merger, and,
if this Agreement is terminated in accordance with its terms, will deliver
promptly to the Company (or destroy and certify to the Company the destruction
of) all copies of such information (and any copies, compilations or extracts
thereof or based thereon) then in their possession or under their control.
1.4. DIRECTORS. (a) Promptly upon the purchase of Shares by Purchaser
pursuant to the Offer, and from time to time thereafter, (i) Parent will be
entitled to designate such number of directors ("PARENT'S DESIGNEES"), rounded
up to the next whole number, as will give Parent, subject to compliance with
Section 14(f) of the Exchange Act, representation on the Company Board equal to
the product of (A) the number of directors on the Company Board (giving effect
to any increase in the number of directors pursuant to this Section 1.4) and (B)
the percentage that such number of Shares so purchased bears to the aggregate
number of Shares outstanding (such number being, the "BOARD PERCENTAGE");
provided, however, that if the number of Shares purchased pursuant to the Offer
equals or exceeds a majority of the outstanding Shares, the Board Percentage
will in all events be a majority of the members of the Company Board, and (ii)
the Company will, upon request by Parent, promptly satisfy the Board Percentage
by (A) increasing the size of the Company Board or (B) using its reasonable best
efforts to secure the resignations of such number of directors as is necessary
to enable Parent's Designees to be elected to the Company Board, or both, and
will use its reasonable best efforts to cause Parent's Designees
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promptly to be so elected, subject in all instances to compliance with Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. At the request
of Parent, the Company will take all lawful action necessary to effect any such
election. Parent will supply to the Company in writing and be solely responsible
for any information with respect to itself, Parent's Designees and Parent's
officers, directors and Affiliates required by Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder to be included in Schedule 14D-9.
Notwithstanding the foregoing, at all times prior to the Effective Time, the
Company Board will include at least two Continuing Directors.
(b) Notwithstanding any other provision hereof, of the articles of
incorporation or bylaws of the Company or of applicable Law to the contrary,
following the election or appointment of Parent's Designees pursuant to this
Section 1.4 and prior to the Effective Time, any amendment or termination of
this Agreement by the Company, extension by the Company for the performance or
waiver of the obligations or other acts of Parent or Purchaser hereunder or
waiver by the Company of the Company's rights hereunder will require the
affirmative vote of the majority of the Continuing Directors. For purposes of
this Agreement, the term the "CONTINUING DIRECTORS" means at any time (i) those
directors of the Company who are directors on the date hereof and who voted to
approve this Agreement and (ii) such additional directors of the Company who are
not affiliated with Parent, Purchaser or any of their affiliates and who are
designated as "Continuing Directors" for purposes of this Agreement by a
majority of the Continuing Directors in office at the time of such designation.
II. THE MERGER
2.1. THE MERGER. (a) On the terms and subject to the conditions of this
Agreement, at the Effective Time, Purchaser will be merged with and into the
Company in accordance with the applicable provisions of the IBCL, and the
separate corporate existence of Purchaser will thereupon cease. The Company will
be the surviving corporation in the Merger (as such, the "SURVIVING
CORPORATION") in accordance with the IBCL.
(b) The Merger will have the effects specified in Section 23-1-40-6 of
the IBCL.
2.2. THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place at
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the offices of Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New York, New
York, at 10:00 a.m., local time, on the first business day after the date on
which the last of the conditions (excluding conditions that by their terms
cannot be satisfied until the Closing Date) set forth in Article VI is satisfied
or waived in accordance herewith, or at such other place, time or date as the
parties may agree. The date on which the Closing occurs is hereinafter referred"
to as the "CLOSING DATE."
2.3. EFFECTIVE TIME. On the Closing Date or as soon as practicable
following the date on which the last of the conditions set forth in Article VI
is satisfied or waived in accordance herewith, Purchaser and the Company will
cause articles of merger to be filed with the Secretary of State of the State of
Indiana as provided in Section 23-1-40-5 of the IBCL. Upon completion of such
filing, the Merger will become effective in accordance with the IBCL. The time
and date on which the Merger becomes effective is herein referred to as the
"EFFECTIVE TIME." Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, immunities,
powers and franchises of the Company will vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company will become the debts
liabilities and duties of the Surviving Corporation.
2.4. ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.
(a) The articles of incorporation of the Surviving Corporation to be in effect
from and after the Effective Time until amended in accordance with their terms
and the IBCL will be the articles of incorporation of Purchaser immediately
prior to the Effective Time (in the form attached hereto as Exhibit A).
(b) The bylaws of the Surviving Corporation to be in effect from and
after the Effective Time until amended in accordance with their terms, the
articles of incorporation of the Surviving Corporation and the IBCL will be the
bylaws of Purchaser immediately prior to the Effective Time.
2.5. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. (a) The
members of the initial Board of Directors of the Surviving Corporation will be
the members of the Board of Directors of Purchaser immediately prior to the
Effective Time. All of the members of the Board of Directors of the Surviving
Corporation will serve until their successors are duly elected or appointed and
qualified or until their earlier death, resignation
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or removal in accordance with the articles of incorporation and the bylaws of
the Surviving Corporation.
(b) The officers of the Surviving Corporation will consist of the
officers of the Company immediately prior to the Effective Time. Such Persons
will continue as officers of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the articles of incorporation and the
bylaws of the Surviving Corporation.
2.6. CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Purchaser, the Company or
the holder of any of the following securities:
(a) CONVERSION OF SHARES. Each Share issued and outstanding immediately
prior to the Effective Time (other than any Shares to be canceled pursuant to
Section 2.6(b)) and any Shares issuable upon exercise of any option, conversion
or other right to acquire Shares existing immediately prior to the Effective
Time (collectively, "RIGHTS") will be canceled and extinguished and be converted
into the right to receive the Per Share Amount, or such higher per Share amount
as is paid in the Offer, in cash payable to the holder thereof, without interest
(the "MERGER CONSIDERATION"), in accordance with Section 2.8. All such Shares,
when so converted, will no longer be outstanding and will automatically be
canceled and retired and will cease to exist, and each holder of a certificate
formerly representing any such Share will cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.8. Any payment made
pursuant to this Section 2.6(a) and Section 2.8 will be made net of applicable
withholding taxes to the extent such withholding is required by Law.
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time the outstanding Shares shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Merger Consideration will be correspondingly adjusted on a
per-share basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
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(b) CANCELLATION OF TREASURY SHARES AND PARENT-OWNED SHARES. Each Share
held in the treasury of the Company and each Share owned by Parent, Purchaser or
any other direct or indirect wholly owned subsidiary of Parent immediately
before the Effective Time (other than shares in trust accounts, managed
accounts, custodial accounts and the like that are beneficially owned by third
parties) will be automatically canceled and retired and will cease to exist and
no payment or other consideration will be made with respect thereto.
(c) COMMON STOCK OF PURCHASER. Each share of common stock, par value
$0.01 per share, of Purchaser issued and outstanding immediately before the
Effective Time will be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation, which, in accordance with this Agreement, will constitute
all of the issued and outstanding shares of capital stock of the Surviving
Corporation immediately after the Effective Time.
2.7. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a) Prior to the
Effective Time, Purchaser will designate a bank or trust company selected by it
and reasonably acceptable to the Company to act as agent for the Shareholders in
connection with the Merger (the "EXCHANGE AGENT") to receive the funds necessary
to make the payments contemplated by Section 2.6. When and as needed, Parent
will make available to the Exchange Agent for the benefit of Shareholders the
aggregate consideration to which such holders will be entitled at the Effective
Time pursuant to Section 2.6(a).
(b) Each holder of a certificate or certificates representing any
Shares canceled upon the Merger pursuant to Section 2.6(a) (the "CERTIFICATES")
may thereafter surrender such Certificate or Certificates to the Exchange Agent,
as agent for such holder, to effect the surrender of such Certificate or
Certificates on such holder's behalf for a period ending one year after the
Effective Time. Parent agrees that promptly after the Effective Time it will
cause the distribution to Shareholders of record as of the Effective Time of
appropriate materials to facilitate such surrender. Upon the surrender of
Certificates for cancellation, together with such materials, Parent will cause
the Exchange Agent to pay the holder of such Certificates in exchange therefor
cash in an amount equal to the Merger Consideration multiplied by the number of
Shares represented by such Certificate. Until so surrendered, each such
Certificate
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(other than certificates representing Shares to be canceled pursuant to Section
2.6(b)) will represent solely the right to receive the aggregate Merger
Consideration relating thereto.
(c) If payment of cash in respect of canceled Shares is to be made to a
Person other than the Person in whose name a surrendered Certificate or
instrument is registered, it will be a condition to such payment that the
Certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the Certificate or
instrument surrendered or shall have established to the satisfaction of the
Surviving Corporation or the Exchange Agent that such tax either has been paid
or is not payable.
(d) At the Effective Time, the stock transfer books of the Company will
be closed and there will not be any further registration of transfers of Shares
outstanding prior to the Effective Time or otherwise issuable pursuant to Rights
on the records of the Company. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they will be canceled and exchanged for
the Merger Consideration as provided in Section 2.6(a). No interest will accrue
or be paid on any cash payable upon the surrender of a Certificate or
Certificates which immediately before the Effective Time represented outstanding
Shares or Shares issuable upon exercise of Rights.
(e) Promptly following the date that is six months after the Effective
Time, the Exchange Agent will deliver to the Surviving Corporation all cash,
certificates and other documents in its possession relating to the transactions
contemplated hereby, and the Exchange Agent's duties will terminate. Thereafter,
each holder of a Certificate (other than Certificates representing Shares held
by Parent, Purchaser, any other direct or indirect wholly owned subsidiary of
Parent or in the treasury of the Company) may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat and
similar Laws) receive in consideration thereof the aggregate Merger
Consideration relating thereto, without any interest or dividends thereon.
(f) The Merger Consideration will be net to the holder of Shares in
cash, subject to reduction only for any applicable
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federal back-up withholding or, as set forth in Section 2.7(c), stock transfer
taxes payable by such holder.
(g) In the event any Certificate has been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with Section 2.6;
provided that the Person to whom the Merger Consideration is paid shall, as a
condition precedent to the payment thereof, give the Surviving Corporation a
bond in such sum as the Surviving Corporation may direct or otherwise indemnify
the Surviving Corporation in a manner satisfactory to it against any claim that
may be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
2.8. STOCK PLANS. (a) Without limiting the generality or effect of
Sections 2.6 or 2.7 and notwithstanding the provisions hereof applicable to the
Rights, the Company will use its reasonable best efforts (which include
satisfying the requirements of Rule 16b-3(e) promulgated under Section 16 of the
Exchange Act, without incurring any liability in connection therewith) to
provide that, at the Effective Time, each holder of a then-outstanding option to
purchase Shares under any of the Company's 1996 Stock Compensation Plan and 1997
Stock Compensation Plan (collectively, the "STOCK OPTION PLANS") (true and
correct copies of which have been delivered or made available by the Company to
Parent), whether or not then exercisable (the "OPTIONS"), will, in settlement
thereof, receive from the Company for each Share subject to such Option an
amount (subject to any applicable withholding tax) in cash equal to the
difference between the Merger Consideration and the per Share exercise price of
such Option to the extent such difference is a positive number (such amount
being hereinafter referred to as, the "OPTION CONSIDERATION"); provided,
however, that with respect to any Person subject to Section 16(a) of the
Exchange Act, any such amount will be paid as soon as practicable after the
first date payment can be made without liability to such Person under Section
16(b) of the Exchange Act and otherwise any such amount will be paid within five
business days after the Effective Time. Notwithstanding anything herein stated,
no Option Consideration will be paid with respect to any Option unless, at or
prior to the time of such payment, such Option is canceled and the holder of
such Option has executed and delivered a release of any and all rights the
holder had or may have had in respect of such
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Option. The Company will cooperate with Parent in developing and taking any
actions reasonably designed to minimize the exercise of Options by the holders
thereof prior to the Offer Completion Date.
(b) Without limiting the generality or effect of Sections 2.6
or 2.7 and notwithstanding the provisions hereof applicable to Rights, prior to
the Effective Time, the Company will use its reasonable best efforts to obtain
all necessary consents or releases from holders of Options under the Stock
Option Plans and take all such other lawful action as may be necessary to give
effect to the transactions contemplated by this Section 2.8. Except as otherwise
agreed to by the parties, (i) the Stock Option Plans will terminate as of the
Effective Time and the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any Subsidiary thereof will be canceled as of
the Effective Time and (ii) the Company shall use its best efforts to assure
that following the Effective Time no participant in the Stock Option Plans or
other plans, programs or arrangements shall have any right thereunder to acquire
any equity securities of the Company, the Surviving Corporation or any
Subsidiary thereof and to terminate all such plans and any Options or other
Rights thereunder.
(c) Notwithstanding the foregoing, if requested by Parent, the
Company will use its reasonable best efforts to assure that following the date
of this Agreement, no participant in the Employee Stock Purchase Plan of the
Company will have any right to elect to participate or to make any contribution
thereunder, and the Company will take all actions as may be available to it to
cause such plan to be suspended in respect of equity securities of the Company
or the Surviving Corporation other than as to Shares the payment for which was
deducted from the employee's payroll at or prior to the date hereof.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Purchaser, except as set forth in the letter, dated the date hereof, from the
Company to Parent initialed by those parties (the "COMPANY DISCLOSURE LETTER"),
as follows:
3.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. The Company is a
corporation duly incorporated and validly existing
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under the laws of Indiana. The Company is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of any
other state of the United States in which the character of the properties owned
or leased by it or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified or to be in
good standing could not reasonably be expected to have a Company Material
Adverse Effect. The Company has all requisite corporate power and authority to
own, operate and lease its properties and carry on its business as now
conducted. Each of the Company's Subsidiaries is a corporation or partnership
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or partnership
power and authority to own its properties and to carry on its business as it is
now being conducted, and is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good standing could not
reasonably be expected to have a Company Material Adverse Effect. The copies of
the Company's articles of incorporation and bylaws previously made available to
Parent are true and correct. As used in this Agreement, (a) the term "COMPANY
MATERIAL ADVERSE EFFECT" means any change, effect, event or condition that has
had or could reasonably be expected to (i) have a material adverse effect on the
business, results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole, or (ii) prevent or materially delay the
Company's ability to consummate the transactions contemplated hereby, and
(b) the term "SUBSIDIARY" when used with respect to any party, means any
corporation or other organization, whether incorporated or unincorporated, of
which such party directly or indirectly owns or controls more than 50% of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions.
3.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement, the Shareholders Agreement and all agreements and documents
contemplated hereby and thereby to be executed and delivered by it. Subject only
to the approval of this Agreement, the Merger and the transactions contemplated
hereby by the holders of a majority of the outstanding Shares, this Agreement,
the Shareholders Agreement, the Offer, the Merger and the consummation by the
Company of the transactions
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contemplated hereby and thereby have been duly authorized by all requisite
corporate action. This Agreement and the Shareholders Agreement constitute, and
all agreements and documents contemplated hereby to be executed and delivered by
the Company (when executed and delivered pursuant hereto) will constitute, the
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
3.3. CAPITALIZATION. The authorized capital stock of the Company
consists of 16,000,000 Shares and 3,000,000 shares of preferred stock. As of the
close of business on the last business day immediately preceding the date hereof
(the "MEASUREMENT DATE"), (a) 8,325,967 Shares were issued and outstanding, each
of which was duly authorized, validly issued, fully paid and nonassessable, (b)
no shares of preferred stock of the Company had been designated or issued, (c)
312,660 Shares were reserved for issuance pursuant to the Employee Stock
Purchase Plan, (d) 1,113,333 Shares were reserved for issuance under the Stock
Option Plans, (e) options to purchase 829,999 Shares in the aggregate had been
granted under the Stock Option Plans as more particularly described in Section
3.3 of the Company Disclosure Letter (including the exercise prices thereof),
(f) an option to purchase 333,333 Shares had been granted pursuant to the option
agreement described in Section 3.3 of the Company Disclosure Letter, and (g) no
Shares were reserved for issuance pursuant to the Company Rights Agreement.
Since the Measurement Date, no additional shares of capital stock of the Company
have been issued and no other options, warrants or other rights to acquire
shares of the Company's capital stock (collectively, the "RIGHTS TO ACQUIRE")
have been granted. Except as described in the second preceding sentence, the
Company has no outstanding bonds, debentures, notes or other securities or
obligations the holders of which have the right to vote or which are convertible
into or exercisable for securities having the right to vote on any matter on
which any shareholder of the Company has a right to vote. All issued and
outstanding Shares are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. There are not at the date of this
Agreement any existing options, warrants, calls, subscriptions, convertible
securities or other Rights to Acquire which obligate the Company or any of its
Subsidiaries to issue, exchange, transfer or sell any shares of capital stock of
the Company or any of its Subsidiaries other than Shares issuable under the
Stock Option Plans or awards granted pursuant thereto, the Employee Stock
Purchase Plan and the Option referred to in clause (f) above. As of the
Measurement Date, there were no outstanding
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contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its Subsidiaries. As of the Measurement Date, there were no outstanding
contractual obligations of the Company to vote or to dispose of any shares of
the capital stock of any of its Subsidiaries. The Company has delivered to
Parent a complete, true and correct copy of the Rights Agreement, dated as of
May 7, 1998, as amended to date (the "COMPANY RIGHTS AGREEMENT"), relating to
rights (the "COMPANY RIGHTS") to purchase Shares.
3.4. SUBSIDIARIES. Exhibit 21.1 to the Company's Annual Report on Form
10-K for the fiscal year ended January 2, 1999 lists all of the Subsidiaries of
the Company. The Company owns, directly or indirectly, all of the outstanding
shares of capital stock (or other ownership interests having by their terms
ordinary voting power to elect a majority of directors or others performing
similar functions with respect to such Subsidiary) of each of the Company's
Subsidiaries free and clear of all liens, pledges, security interests, claims or
other encumbrances (collectively, "LIENS"). Each of the outstanding shares of
capital stock (or such other ownership interests) of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable.
The following information for each Subsidiary of the Company has been previously
provided to Parent, if applicable: (i) its jurisdiction of incorporation or
organization; (ii) its authorized capital stock or share capital; and (iii) the
number of issued and outstanding shares of capital stock, share capital or other
equity interests.
3.5. OTHER INTERESTS. Except for interests in the Company's
Subsidiaries, neither the Company nor any of the Company's Subsidiaries owns,
directly or indirectly, any interest or investment (whether equity or debt) in
any domestic or foreign corporation, partnership, joint venture, business, trust
or entity, other than (a) non-controlling investments in the ordinary course of
business and corporate partnering, development, cooperative marketing and
similar undertakings and arrangements entered into in the ordinary course of
business and (b) other investments of less than $1.0 million in the aggregate.
3.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and
delivery of this Agreement and the Shareholders Agreement by the Company do not,
and the consummation by the Company of the transactions contemplated hereby and
thereby will not, (i) conflict with or violate the articles of incorporation
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or bylaws or equivalent organizational documents of the Company or any of its
Subsidiaries, (ii) subject to making the filings and obtaining the approvals
identified in Section 3.6(b), conflict with or violate any domestic or foreign
statute, rule, regulation or other legal requirement ("LAW") or order, judgment
or decree ("ORDER") applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, or (iii) subject to making the filings, obtaining the approvals and
effecting any other matters identified in Section 3.6 of the Company Disclosure
Letter, result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, result in the
loss of a material benefit under, or give to others any right of purchase or
sale, or any right of termination, amendment, acceleration, increased payments
or cancellation of, or result in the creation of a Lien on any property or asset
of the Company or any of its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any property or
asset of the Company or any of its Subsidiaries is bound or affected, except, in
the case of clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults, events, losses, rights, payments, cancellations,
encumbrances or other occurrences that, individually or in the aggregate, could
not be reasonably expected to have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement and the Shareholders
Agreement by the Company does not, and the performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby and thereby
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, including without limitation, any quasi-governmental, supranational,
statutory, environmental entity and any stock exchange or court (each a
"GOVERNMENTAL ENTITY"), except (i) for (A) applicable requirements, if any, of
the Exchange Act, (B) the applicable pre-merger notification requirements of the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, if any, and
the rules and regulations thereunder and any other required filings with or
approvals of foreign competition Law authorities, and (C) the filing of articles
of merger pursuant to the IBCL and (ii) where the failure to obtain any such
consent, approval, authorization or permit, or to make any such filing or
notification, could not,
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individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
3.7. COMPLIANCE WITH LAWS. Neither the Company nor any of its
Subsidiaries is in conflict with, or in default or violation of, (a) any Law or
Order applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
or (b) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property or asset of the Company or any of its Subsidiaries
is bound or affected, in each case except for such conflicts, defaults or
violations that could not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. The Company and its
Subsidiaries have obtained all licenses, permits and other authorizations and
have taken all actions required by applicable Law or government regulations in
connection with their business as now conducted, except where the failure to
obtain any such item or to take any such action could not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
3.8. SEC DOCUMENTS. (a) The Company has filed all forms, reports and
documents required to be filed by it with the SEC since September 1, 1996
(collectively, the "COMPANY REPORTS"). As of their respective dates, the Company
Reports and any such reports, forms and other documents filed by the Company
with the SEC after the date of this Agreement (i) complied, or will comply, in
all material respects with the applicable requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), the Exchange Act and the rules and
regulations thereunder and (ii) did not, or will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. The representation
in clause (ii) of the preceding sentence does not apply to any misstatement or
omission in any Company Report filed prior to the date of this Agreement which
was superseded by a subsequent Company Report filed prior to the date of this
Agreement. No Subsidiary of the Company is required to file any report, form or
other document with the SEC.
(b) Each of the financial statements included in or incorporated by
reference into the Company Reports (including the
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related notes and schedules) presents fairly, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of its
date or, if applicable, the results of operations, retained earnings or cash
flows, as the case may be, of the Company and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments, none of which is material in kind or amount), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein.
(c) Neither the Company nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on, or reserved against in, a
consolidated balance sheet of the Company or described or referred to in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except for (i) liabilities or obligations that
were so reserved on, or reflected in (including the notes to), the consolidated
balance sheet of the Company as of January 2, 1999, (ii) liabilities or
obligations arising in the ordinary course of business (including trade
indebtedness) since January 2, 1999, and (iii) liabilities or obligations which
could not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(d) Set forth in Section 3.8(d) of the Company Disclosure Letter is a
listing of all of the Company's and its Subsidiaries' indebtedness for borrowed
money outstanding as of the Measurement Date, setting forth in each case the
principal amount thereof. No payment defaults have occurred and are continuing
under the agreements and instruments governing the terms of such indebtedness.
3.9. LITIGATION. Except as disclosed in Section 3.9 of the Company
Disclosure Letter, there are no actions, suits or proceedings pending, publicly
announced or, to the Knowledge of the Company, threatened against or affecting
the Company or any of its Subsidiaries and there are no Orders of any
Governmental Entity or arbitrator outstanding against the Company or any of its
Subsidiaries, that, individually or in the aggregate, are reasonably likely to
have a Company Material Adverse Effect.
3.10. ABSENCE OF CERTAIN CHANGES. Except as described in the Company
Reports filed and publicly available prior to the date hereof (the "COMPANY
FILED REPORTS") or disclosed in Section
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3.10 of the Company Disclosure Letter, since January 2, 1999, there has not been
(a) any Company Material Adverse Effect, (b) any declaration, setting aside or
payment of any dividend of other distribution with respect to its capital stock,
(c) any split, combination or reclassification of any of the Company's 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 any shares of the
Company's capital stock, (d) any granting by the Company or any of its
Subsidiaries to any director, executive officer or other key employee of the
Company of any increase in compensation, (e) any granting by the Company or any
of its Subsidiaries to any such director, executive officer or key employee of
any increase in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date of the
most recent financial statements included in the Company Filed Reports or
referred to in Section 3.10 of the Company Disclosure Letter, (f) any entry by
the Company or any of its Subsidiaries into any employment, severance or
termination agreement with any such director, executive officer or key employee,
or (g) except insofar as may be required by a change in generally accepted
accounting principles, any change in accounting methods, principles or practices
by the Company. For purposes of this Agreement, "key employee" means any
employee whose current salary and targeted bonus exceeds $100,000 per annum.
3.11. TAXES. (a) Except as could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, (i) the
Company has timely filed with the appropriate governmental authorities all Tax
Returns required to be filed by or with respect to the Company, (ii) all Taxes
shown to be due on such Tax Returns, all Taxes required to be paid on an
estimated or installment basis, and all Taxes required to be withheld with
respect to the Company have been timely paid or, if applicable, withheld and
paid to the appropriate taxing authority in the manner provided by Law, (iii)
the reserve for Taxes set forth on the consolidated balance sheet of the Company
and its Subsidiaries as of January 2, 1999 is adequate for the payment of all
Taxes through the date thereof and no Taxes have been incurred after January 2,
1999 which were not incurred in the ordinary course of business, (iv) except as
disclosed in Section 3.11 of the Company Disclosure Letter, no Federal, state,
local or foreign audits, administrative proceedings or court proceedings are
pending with regard to any Taxes or Tax Returns of the Company and there are no
outstanding deficiencies or
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assessments asserted or proposed, and (v) there are no outstanding agreements,
consents or waivers extending the statutory period of limitations applicable to
the assessment of any Taxes or deficiencies against the Company, and the Company
is not a party to any agreement providing for the allocation or sharing of
Taxes.
(b) The Company has not filed a consent to the application of Section
341(f) of the Internal Revenue Code of 1986, as amended (the "CODE").
(c) The Company is not and has not been a United States real property
holding company (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(ii) of the Code.
(d) No indebtedness of the Company is "corporate acquisition
indebtedness" within the meaning of Section 279(b) of the Code.
(e) The Company has not been a member of an affiliated group filing
consolidated or combined Tax Returns other than a federal income tax group the
common parent of which is the Company.
(f) For purposes of this Agreement, "TAXES" means all taxes, charges,
fees, levies or other assessments imposed by any United States Federal, state,
or local taxing authority or by any non-U.S. taxing authority, including but not
limited to, income, gross receipts, excise, property, sales, use, transfer,
payroll, license, ad valorem, value added, withholding, social security,
national insurance (or other similar contributions or payments), franchise,
estimated, severance, stamp, and other taxes (including any interest, fines,
penalties or additions attributable to or imposed on or with respect to any such
taxes, charges, fees, levies or other assessments).
(g) For purposes of this Agreement, "TAX RETURN" means any return,
report, information return or other document (including any related or
supporting information and, where applicable, profit and loss accounts and
balance sheets) with respect to Taxes.
3.12. PROPERTY. (a) Section 3.12(a) of the Company Disclosure Letter
contains a true and complete list of all (i) material patents and patent
applications in the name of the
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Company or any of its Subsidiaries, (ii) material trademark and service mark
registrations and applications in the name of the Company or any of its
Subsidiaries, (iii) copyright registrations and applications for works, (iv)
Internet domain names used or held for use in connection with the business of
the Company, and (v) all material licenses related to the foregoing.
(b) Except as set forth in Section 3.12(b) of the Company Disclosure
Letter, (i) the Company owns or, to the Knowledge of the Company, has the valid
right to use all intellectual property used by it in connection with its
business, including without limitation (A) trademarks and service marks
(registered or unregistered) and trade names, and all goodwill associated
therewith, (B) patents, patentable inventions, discoveries, improvements, ideas,
know-how, processes and Computer Software, (C) trade secrets and the right to
limit the use or disclosure thereof, (D) copyrights in all works, including
software programs and mask works, (E) domain names, and (F) the intellectual
property licensed from Dr. Dennis J. Hegyi (collectively "INTELLECTUAL
PROPERTY"), except where the failure to own or have the valid right to use the
Intellectual Property could not reasonably be expected to have a Company
Material Adverse Effect, (ii) all grants, registrations and applications for
Intellectual Property that are used in and are material to the conduct of the
businesses of the Company as currently conducted (A) are valid, subsisting, in
proper form and, to the Knowledge of the Company, have been duly maintained,
including the submission of all necessary filings and fees in accordance with
the legal and administrative requirements of the appropriate jurisdictions and
(B) have not lapsed, expired or been abandoned, (iii) to the Knowledge of the
Company, (A) there are no material conflicts with or infringements of any
Intellectual Property by any third party, and (B) the conduct of the businesses
of the Company as currently conducted does not materially conflict with or
infringe any proprietary right of any third party, (iv) there is no claim, suit,
action or proceeding pending or, to the Knowledge of the Company, threatened
against the Company (A) alleging any such conflict or infringement with any
third party's proprietary rights or (B) challenging the ownership, use, validity
or enforceability of the Intellectual Property, except for claims, suits,
actions, proceedings or challenges which could not reasonably be expected to
have a Company Material Adverse Effect, (v) all consents, filings and
authorizations by or with third parties necessary with respect to the
consummation of the transactions contemplated hereby as they may affect the
Intellectual Property have been obtained, except where the
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failure to have obtained such consents, filings or authorizations could not
reasonably be expected to have a Company Material Adverse Effect, (vi) the
Company is not, nor will it be as a result of the execution and delivery of this
Agreement or the performance of its obligations under this Agreement, in breach
of any material license, sublicense or other agreement relating to the
Intellectual Property, except for breaches which could not reasonably be
expected to have a Company Material Adverse Effect, and (vii) no former or
present employees, officers or directors of the Company hold any right, title or
interest directly or indirectly, in whole or in part, in or to any Intellectual
Property. For purposes of this Agreement, the term "COMPUTER SOFTWARE" means (A)
any and all computer programs and applications consisting of sets of statements
and instructions to be used directly or indirectly in computer software or
firmware whether in source code or object code form, (B) databases and
compilations, including without limitation any and all data and collections of
data, whether machine readable or otherwise, (C) all versions of the foregoing
including, without limitation, all screen displays and designs thereof, and all
component modules of source code or object code or natural language code
therefor, and whether recorded on papers, magnetic media or other electronic or
non-electronic device, (D) all descriptions, flowcharts and other work product
used to design, plan, organize and develop any of the foregoing, and (E) all
documentation, including without limitation all technical and user manuals and
training materials, relating to the foregoing.
(c) Section 3.12(c) of the Company Disclosure Letter sets forth all of
the real property owned in fee by the Company or any of its Subsidiaries (the
"OWNED REAL PROPERTY"). The Company or one of its Subsidiaries has good and
valid title to each parcel of Owned Real Property and to each other asset
reflected in the latest balance sheet of the Company included in the Company
Filed Reports (other than as disclosed in the Company Filed Reports, or any such
other asset disposed of or consumed in the ordinary course of business or as
specified in Section 3.12(c) of the Company Disclosure Letter) free and clear of
all Liens except (i) those specified in Section 3.12(c) of the Company
Disclosure Letter or reflected or reserved against in the latest balance sheet
of the Company included in the Company Filed Reports, (ii) taxes and general and
special assessments not in default and payable without penalty and interest or
the validity of which are being contested in good faith by appropriate actions,
(iii) Liens that constitute a statutory landlord lien or a carrier,
warehouseman, mechanic, supplier, materialman, repairman or
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similar Lien arising in the ordinary course of business, (iv) Liens granted in
favor of the senior lenders to the Company or any of its Subsdiaries, (v) rights
of third parties under leases of real property and tangible personal property,
(vi) all easements, covenants, ordinances, zoning regulations, restrictions and
other encumbrances which do not destroy marketability of title, materially
detract from the value or materially interfere with the present use of any Owned
Real Property, and (vii) other Liens that individually or in the aggregate could
not reasonably be expected to have a Company Material Adverse Effect
(collectively, "PERMITTED LIENS").
(d) The Company has heretofore made available to Parent true, correct
and complete copies of all leases, subleases and other agreements (the "REAL
PROPERTY LEASES") under which the Company or any of its Subsidiaries uses or
occupies or has the right to use or occupy, now or in the future, any real
property or facility (the "LEASED REAL PROPERTY"), including without limitation
all modifications, amendments and supplements thereto. Except in each case where
the failure could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect: (i) the Company or one of its
Subsidiaries has a valid leasehold interest in each parcel of Leased Real
Property free and clear of all Liens except Permitted Liens and each Real
Property Lease is in full force and effect, (ii) all rent and other sums and
charges due and payable by the Company or its Subsidiaries as tenants thereunder
are current in all material respects, (iii) no termination event or condition or
uncured default of a material nature on the part of the Company or any such
Subsidiary or, to the Knowledge of the Company, the landlord, exists under any
Real Property Lease, and (iv) the Company or one of its Subsidiaries is in
actual possession of each leased Real Property and is entitled to quiet
enjoyment thereof in accordance with the terms of the applicable Real Property
Lease.
3.13. MILLENNIUM COMPLIANCE. (a) To the Knowledge of the Company and
except as disclosed in the Company Filed Reports, achieving Millennium
Compliance for all Technology could not reasonably be expected to have a Company
Material Adverse Effect.
(b) For purposes of this Agreement, "TECHNOLOGY" means all proprietary
technology used in the business of the Company, including without limitation all
Intellectual Property and Computer Software so used, but excluding all
technology that is not located either at the Owned Real Property or Leased Real
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Property or on equipment which is owned, leased or controlled by the Company.
(c) For purposes of this Agreement, the Technology will be "MILLENNIUM
COMPLIANT" if:
(i) The functions, calculations and other computing processes
of the applicable Technology (collectively "PROCESSES"), perform in a
consistent manner and correctly track and account for dates and passage
of time, regardless of the date in time on which the Processes are
actually performed and regardless of the date on which data were input
into the product, whether before, on or after January 1, 2000 and
whether or not the dates are affected by leap years;
(ii) The Technology accepts, calculates, compares, sorts,
extracts, sequences and otherwise processes date inputs and date
values, and returns and displays date values in a consistent manner and
correctly tracks and accounts for dates and the passage of time,
regardless of the dates used, whether before, on or after January 1,
2000;
(iii) The Technology functions without interruptions caused by
the date in time on which the Processes are actually performed or by
the date input to the system, whether before, on or after January 1,
2000;
(iv) The Technology accepts and responds to year input in a
manner that resolves any ambiguities as to century in a defined and
predetermined and appropriate manner; and
(v) The Technology stores and displays date information in
ways that are unambiguous as to the determination of the century.
3.14. CONTRACTS. (a) There have been made available to Parent true,
correct and complete copies of all of the following contracts to which Company
or any of its Subsidiaries is a party or by which any of them is bound
(collectively, the "MATERIAL CONTRACTS"): (i) contracts with any current officer
or director of the Company or any of its Subsidiaries; (ii) contracts (A) for
the sale of any of the material assets of the Company or any of its
Subsidiaries, other than contracts entered into in the ordinary course of
business or (B) for the grant to any person of any preferential rights to
purchase any of its material assets;
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(iii) contracts which restrict the Company or any of its Subsidiaries from
competing in any line of business or with any person in any geographical area
in any material manner or which restrict any other person from competing with
the Company or any of its Subsidiaries in any line of business or in any
geographical area in any material manner; (iv) indentures, credit agreements,
security agreements, mortgages, guarantees, promissory notes and other
contracts relating to the borrowing of money; and (v) all other agreements,
contracts or instruments that are material to the Company and its
Subsidiaries taken as a whole.
(b) All of the Material Contracts are in full force and effect and are
the legal, valid and binding obligations of the Company and/or its Subsidiaries,
enforceable against them in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), except where the
failure of such Material Contracts to be in full force and effect or to be
legal, valid, binding or enforceable against the Company and/or its Subsidiaries
has not had and could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Except as set forth in Section
3.14 of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is in breach or default in any material respect under any Material
Contract nor, to the Knowledge of the Company, is any other party to any
Material Contract in breach or default thereunder in any material respect,
except for such breaches or defaults that have not had and could not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
3.15. ENVIRONMENTAL MATTERS. (a) Except as disclosed in the Company
Filed Reports, as specified in Section 3.15 of the Company Disclosure Letter or
as could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company, to the Knowledge of the Company: (i)
neither the Company nor any of its current or former Subsidiaries has violated
or is in violation of any Environmental Law; (ii) none of the currently or
formerly Owned Real Property or Leased Real Property (including without
limitation soils and surface and ground waters) are contaminated with any
Hazardous Substance in levels or in quantities which require investigation
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or remediation under Environmental Laws; (iii) neither the Company nor any of
its current or former Subsidiaries is liable for any off-site contamination;
(iv) neither the Company nor any of its current or former Subsidiaries has any
liability or remediation obligation under any Environmental Law; (v) no assets
of the Company or any of its current or former Subsidiaries are subject to
pending or, to the Knowledge of the Company, threatened Liens under any
Environmental Law; (vi) the Company and its Subsidiaries have all material
Permits required under any Environmental Law ("ENVIRONMENTAL PERMITS"); (vii)
the Company and its Subsidiaries are in compliance with their respective
Environmental Permits in all material respects; and (viii) neither the Company
nor any of its current or former Subsidiaries has received any claim, notice or
request for information concerning any material violation or alleged violation
of, or any liability or alleged liability under, any Environmental Law.
(b) For purposes of this Agreement, the term (i) "ENVIRONMENTAL LAWS"
means any national, federal, state or local (whether domestic or foreign) Law
relating to: (A) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (C) otherwise relating to
pollution of the environment or the protection of human health, and (ii)
"HAZARDOUS SUBSTANCES" means: (A) those materials, pollutants and/or substances
defined in or regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide
Act, the Toxic Substances Act and the Clean Air Act; (B) petroleum and petroleum
products including crude oil and any fractions thereof; (C) natural gas,
synthetic gas and any mixtures thereof; (D) radon; (E) any other contaminant;
and (F) any materials, pollutants and/or substance with respect to which any
Governmental Entity requires environmental investigation, monitoring, reporting
or remediation.
3.16 COMPANY BENEFIT PLANS; ERISA COMPLIANCE. (a) Except as disclosed
in the Company Filed Reports or disclosed in Section 3.16(a) of the Company
Disclosure Letter there are no United States bonus, pension, profit sharing,
deferred compensation,
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incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, fringe benefit, retirement, vacation, disability, death benefit,
hospitalization, medical, life, severance or other plan, agreement, arrangement,
policies or understanding, or change of control agreement whether formal or
informal, oral or written, legally binding or not providing benefits to any
current or former employee, officer, director, shareholder, consultant or
independent contractor of the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries contributes or is or was obligated to
contribute (collectively, the "COMPANY BENEFIT PLANS") which will include each
"employee benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") whether or not
subject to ERISA. For purposes of this Agreement, the term "FOREIGN PLAN" will
refer to each plan, agreement, arrangement or understanding that is subject to
or governed by the Laws of any jurisdiction other than the United States, and
which would have been treated as a Company Benefit Plan had it been a United
States plan, agreement, arrangement or understanding. Section 3.16(a) of the
Company Disclosure Letter contains a true and complete list of all agreements or
plans providing for termination or severance pay to any employee of the Company.
(b) Except as set forth on Section 3.16(b) of the Company Disclosure
Letter, each Company Benefit Plan has been administered in accordance with its
terms, all applicable Laws, including ERISA and the Code, except for any
failures to administer any Company Benefit Plan that could not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. The Company and all Company Benefit Plans are in compliance with the
applicable provisions of ERISA, the Code and all other applicable Laws, except
for any failures to be in such compliance that could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
Each Company Benefit Plan that is intended to be qualified under Section 401(a)
or 401(k) of the Code is so qualified and each trust established in connection
with any Company Benefit Plan that is intended to be exempt from federal income
taxation under Section 501(a) of the Code is so exempt. No fact or event has
occurred which is reasonably likely to affect adversely the qualified status of
any such Company Benefit Plan or the exempt status of any such trust, except for
any occurrence that could not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, and all contributions to,
and payments from, such Company Benefit
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Plans that are required to be made in accordance with such Company Benefit
Plans, ERISA or the Code have been timely made other than any failures that
could not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. Each Company Benefit Plan intended to meet the
requirements of Section 501(c)(9) of the Code meets such requirements in all
material respects and provides no disqualified benefits (as defined in
Section 4976(b) of the Code).
(c) The Internal Revenue Service (the "IRS") has issued favorable
determination letters with respect to the qualification of each qualified
Company Benefit Plan and related trust, and the IRS has not taken any action to
revoke any such letter and nothing has occurred, whether by action or failure to
act, that could reasonably be expected to cause the loss of such qualification.
The qualified Company Benefit Plans and trusts are set forth in Section 3.16(c)
of the Company Disclosure Letter.
(d) There are no leased employees within the meaning of Section 414(n)
of the Code who perform services for the Company or any of its Subsidiaries.
(e) No Company Benefit Plan is or at any time was (i) subject to Title
IV of ERISA; (ii) subject to the minimum funding standards of Section 302 of
ERISA or Section 412 of the Code; (iii) a "multiemployer plan" within the
meaning of Section 3(37) or 4001(a)(13) of ERISA or Section 414(f) of the Code;
or (iv) a "multiple employer plan" within the meaning of Section 413(c) of the
Code.
(f) No Company Benefit Plan provides medical benefits (whether or not
insured) with respect to current or former employees or officers or directors
after retirement or other termination of service.
(g) Except for Company Benefit Plans set forth on Section 3.16(g) of
the Company Disclosure Letter, the consummation of the transactions contemplated
by this Agreement will not, either alone or in combination with another event,
(i) entitle any current or former employee, officer or director of the Company
to severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee, officer
or director.
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(h) Except for Company Benefit Plans set forth on Section 3.16(h) of
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
is a party to any agreement, contract or arrangement (including this Agreement)
that could result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code, or
accelerate or provide any other rights or benefits to any present or former
employee of the Company or any of its Subsidiaries. No Company Benefit Plan
provides for the reimbursement of excise taxes under Section 4999 of the Code or
any income taxes under the Code.
(i) With respect to each Company Benefit Plan, the Company has
delivered or made available to Parent a true and complete copy of: (A) each
writing constituting a part of such Company Benefit Plan, including, without
limitation, all Company Benefit Plan documents, and trust agreements; (B) the
most recent Annual Report (Form 5500 Series) and accompanying schedule, if any;
(C) the most recent annual financial report, if any; (D) the most recent
actuarial report, if any; and (E) the most recent determination letter from the
IRS, if any. Except as specifically provided in the foregoing documents
delivered or made available to Parent, there are no amendments to any Company
Benefit Plan that have been adopted or approved nor has the Company or any of
its Subsidiaries undertaken to make any such amendments or to adopt or approve
any new Company Benefit Plan.
(j) Except as set forth on Section 3.16(j) of the Company Disclosure
Letter, there are no pending or, to the Knowledge of the Company, threatened
claims (other than claims for benefits in the ordinary course), lawsuits or
arbitrations that have been asserted or instituted, or to the Company's
knowledge, no set of circumstances exists that may reasonably give rise to a
claim or lawsuit, against the Company Benefit Plans, any fiduciaries thereof
with respect to their duties to the Company Benefit Plans or the assets of any
of the trusts under any of the Company Benefit Plans that could reasonably be
expected to result in any liability of the Company or any of its Subsidiaries to
the United States Department of Treasury, the United States Department of Labor,
any Company Benefit Plan or any participant in a Company Benefit Plan, other
than any liability that could not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.
(k) With respect to each a Foreign Plan: (A) all amounts required to be
reserved under each book reserved Foreign Plan
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have been so reserved in accordance with reasonable accounting practices
prevailing in the country where such Foreign Plan is established; (B) each
Foreign Plan required to be registered with a Governmental Entity has been
registered, has been maintained in good standing with the appropriate
Governmental Entities, and has been maintained and operated in accordance with
its terms and applicable Law; and (C) the fair market value of the assets of
each funded Foreign Plan that is a defined pension plan (or termination
indemnity plan), and the liability of each insurer for each Foreign Plan that is
a defined benefit pension plan (or termination indemnity plan) and is funded
through insurance or the book reserve established for each Foreign Plan that is
a defined benefit pension plan (or termination indemnity plan) that utilizes
book reserves, together with any accrued contributions, is sufficient to procure
or provide for the liability for accrued benefits with respect to those current
and former employees of the Company and any of its Subsidiaries that participate
in such Foreign Plan according to the reasonable actuarial or other applicable
assumptions and valuations most recently used to determine employer
contributions to or the funded status or book reserve of such Foreign Plans.
(l) For purposes of this Section 3.16(l), the term "employee" will be
considered to include individuals rendering personal services to the Company or
any of its Subsidiaries as independent contractors.
(m) With respect to each Company Benefit Plan, there have been no
prohibited transactions or breaches of any of the duties imposed on
"fiduciaries" (within the meaning of Section 3(21) of ERISA) by ERISA with
respect to the Company Benefit Plans that could reasonably be expected to result
in any liability or excise tax under ERISA or the Code other than any liability
or Tax that could not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.
(n) All trusts providing funding for Company Benefit Plans that are
intended to comply with Section 501(c)(9) of the Code are exempt from federal
income taxation and, together with any other welfare benefit funds (as defined
in Section 419(e)(1) of the Code) maintained in connection with any of the
Company Benefit Plans, have been operated and administered in compliance with
all applicable requirements such that neither the Company or any of its
Subsidiaries, any Company Benefit Plan nor such trust or fund is subject to any
taxes, penalties or other liabilities imposed as a consequence of failure to
comply with such
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requirements other than any liability or Tax that could not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
(o) All contributions, transfers, and payments in respect of any
Company Benefit Plan, other than transfers incident to an incentive stock option
plan within the meaning of Section 422 of the Code, have been or are fully
deductible under the Code.
(p) All (i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses, and other amounts due and payable under, and (iii)
contributions, transfers, or payments required to be made by the Company to, any
Company Benefit Plan prior to the Closing Date will have been paid, made or
accrued on or before the Closing Date.
(q) With respect to any insurance policy that provides funding for
benefits under any Company Benefit Plan, to the Knowledge of the Company, no
insurance company issuing any such policy is in receivership, conservatorship,
liquidation or similar proceeding and, to the Knowledge of the Company, no such
proceedings with respect to any insurer are imminent.
(r) The Financial Statements contain adequate accruals for (i) bonuses,
sales commissions and vacation pay earned but not paid as of the date of this
Agreement and (ii) incurred but unpaid claims under Company Benefit Plans not
funded by insurance.
(s) Except as disclosed in Section 3.16(s) of the Company Disclosure
Letter, the disallowance of a deduction under Section 162(m) of the Code for
employee remuneration will not apply to any amount paid or payable by the
Company or any Subsidiary of the Company under any contract, Company Benefit
Plan, program, arrangement or understanding currently in effect.
(t) Neither the Company nor any of the Company's affiliates has any
liability with respect to any "employee benefit plans" (within the meaning of
Section 3(3) of ERISA) previously maintained or contributed to by the Company,
any of the Company's affiliates, any other trade or business which together with
the Company is treated by ERISA or the Code as a single employer, or any
predecessor of the Company, or to which the Company, any of the Company's
affiliates, any such trade or business or any such predecessor previously had an
obligation to contribute.
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3.17. STATE TAKEOVER STATUTES. The Company Board has approved the
Offer, the Merger, this Agreement and the transactions contemplated hereby and
such approval is sufficient to render inapplicable to the Offer, the Merger,
this Agreement, the Shareholders Agreement, the Subscription Agreements and the
transactions contemplated hereby and thereby, the limitation on control share
acquisitions and business combinations contained in Chapters 42 and 43 of the
IBCL (or any similar provision). Neither Chapter 42 of the IBCL nor any other
"fair price," "merger moratorium," "control share acquisition" or other
anti-takeover statute or similar statute or regulation applies or purports to
apply to the Offer, the Merger, this Agreement, the Shareholders Agreement, the
Subscription Agreements or any of the transactions contemplated hereby or
thereby.
3.18. VOTING REQUIREMENTS. The affirmative vote of the holders of a
majority of the issued and outstanding Shares, voting as a single class, at the
Company Shareholders Meeting to adopt this Agreement and approve the Merger
("COMPANY SHAREHOLDER APPROVAL") is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve and/or adopt this
Agreement and the Shareholders Agreement and the transactions contemplated
hereby and thereby and to approve the Merger.
3.19. NO BROKERS. The Company has not entered into any
contract, arrangement or understanding with any Person or firm
which may result in the obligation of the Company or Parent to pay any
investment banker's or finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby, except that the
Company has retained Company Financial Adviser as its financial advisor, the
arrangements with which have been disclosed to Parent and Purchaser prior to the
date hereof. Other than the foregoing arrangements, none of the executive
officers of the Company is aware of any claim for payment of any investment
banker's or finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby. The Company or, if the
Effective Time occurs, the Surviving Corporation, will pay all amounts owed
pursuant to the foregoing arrangements.
3.20. OPINION OF COMPANY FINANCIAL ADVISER. The Company has received
the opinion of Company Financial Adviser to the
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effect that, as of the date hereof, the consideration to be received by the
Shareholders in the Offer and the Merger is fair to the Shareholders from a
financial point of view.
3.21. OFFER DOCUMENTS; PROXY STATEMENT. (a) The proxy statement to be
sent to the Shareholders in connection with a meeting of the Shareholders to
consider the Merger (the "COMPANY SHAREHOLDERS MEETING") or the information
statement to be sent to the Shareholders, as appropriate (such proxy statement
or information statement, as amended or supplemented, is herein referred to as
the "PROXY STATEMENT"), at the date mailed to the Shareholders and at the time
of the Company Shareholders Meeting (i) will comply in all material respects
with the applicable requirements of the Exchange Act and the rules and
regulations thereunder and (ii) will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Neither the Schedule
14D-9 nor any of the information relating to the Company or its Affiliates
provided by or on behalf of the Company specifically for inclusion in the
Schedule 14D-1 or the Offer Documents will, at the respective times the Schedule
14D-9, the Schedule 14D-1 and the other Offer Documents or any amendments or
supplements thereto are filed with the SEC and are first published, sent or
given to Shareholders, 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 made therein, in light of the circumstances under which
they were made, not misleading. No representation or warranty is made by the
Company with respect to any Parent SEC Information.
3.22. THE COMPANY RIGHTS AGREEMENT. The Company Rights
Agreement has been amended (the "COMPANY RIGHTS PLAN AMENDMENT") as set forth in
Section 3.22 of the Company Disclosure Letter to, among other things, (i) render
the Company Rights Agreement inapplicable to the Offer, the Merger and the other
transactions contemplated hereby and the Shareholders Agreement and (ii) ensure
that (A) neither Parent nor any of its Subsidiaries nor any of its permitted
assignees or transferees is an Acquiring Person (as defined in the Company
Rights Agreement) pursuant to the Company Rights Agreement and (B) a
Distribution Date or Share Acquisition Date (in each case as defined in the
Company Rights Agreement) does not occur by reason of the execution of this
Agreement or the Shareholders Agreement, the commencement or
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completion of the Offer, the consummation of the Merger or the other
transactions contemplated hereby or thereby.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Each of Parent and Purchaser represents and warrants to the Company as
follows:
4.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Parent and
Purchaser is a corporation duly incorporated, validly existing and in good
standing (to the extent such a concept exists) under the laws of the
jurisdiction of its incorporation or organization. Parent is duly licensed or
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the character of the properties owned or leased by it
or in which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified or to be in good standing could not
reasonably be expected to have a Parent Material Adverse Effect. A "PARENT
MATERIAL ADVERSE EFFECT" means any change, effect, event or condition that has
had or could reasonably be expected to (i) have a material adverse effect on the
business, results of operations or financial condition of Parent, Purchaser or
Parent's Subsidiaries, taken as a whole, or (ii) prevent or materially delay
Parent's or Purchaser's ability to consummate the transactions contemplated
hereby. Parent has all requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted. The copies
of the articles of incorporation and bylaws or equivalent organizational
documents of Parent and Purchaser previously made available to the Company are
true and correct.
4.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT. Each of Parent
and Purchaser has the requisite corporate power and authority to execute and
deliver this Agreement, the Shareholders Agreement and all agreements and
documents contemplated hereby and thereby to be executed respectively by it.
This Agreement, the Shareholders Agreement, the Offer, the Merger and the
consummation by Parent and Purchaser of the transactions contemplated hereby and
thereby have been duly and validly authorized by the respective Boards of
Directors of Parent and Purchaser and by Parent as sole shareholder of
Purchaser, and no other corporate action on the part of Parent and Purchaser is
necessary to authorize this Agreement, the Shareholders Agreement, the Offer and
the Merger or to consummate the transactions contemplated hereby or thereby
other than Parent
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Shareholder Approval. For purposes of this Agreement, "PARENT SHAREHOLDER
APPROVAL" means, to the extent required by applicable Law and the rules of the
London Stock Exchange, the authorization and approval by a majority of the
holders of ordinary shares of Parent of (a) this Agreement, the Shareholders
Agreement, the Subscription Agreement and the transactions contemplated hereby
and thereby, (b) the increase in the authorized share capital of Parent to the
extent necessary to facilitate the transactions contemplated hereby and by the
Subscription Agreements, and (c) the Directors of Parent to allot securities
within the meaning of Section 80 of the Companies Act of 1985 of England and
Wales, as amended, to the extent necessary to facilitate the transactions
contemplated hereby and by the Subscription Agreements. This Agreement and the
Shareholders Agreement constitute, and all agreements and documents contemplated
hereby to be executed and delivered by Parent or Purchaser (when executed and
delivered pursuant hereto) will constitute, the valid and binding obligations of
Parent or Purchaser, as the case may be, enforceable respectively against them
in accordance with their respective terms.
4.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and
delivery of this Agreement and the Shareholders Agreement by Parent and
Purchaser do not, and the consummation by Parent and Purchaser of the
transactions contemplated hereby and thereby will not, (i) conflict with or
violate the articles of incorporation or bylaws of Parent or Purchaser, (ii)
subject to making the filings and obtaining the approvals identified in Section
4.3(b), conflict with or violate any Law or Order applicable to Parent or any of
its Subsidiaries or by which any property or asset of Parent or any of its
Subsidiaries is bound or affected, or (iii) subject to making the filings,
obtaining the approvals and effecting any other matters identified in Section
4.3(b), result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, result in the
loss of a material benefit under, or give to others any right of termination,
amendment, acceleration, increased payments or cancellation of, or result in the
creation of a Lien on any property or asset of Parent or any of its Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries
or any property or asset of Parent or any of its Subsidiaries is bound or
affected, except in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches,
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defaults, events, losses, rights, payments, cancellations, encumbrances or other
occurrences that could not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement and the Shareholders
Agreement by Parent and Purchaser do not, and the performance of this Agreement
and the Shareholders Agreement and the consummation of the transactions
contemplated hereby and thereby by either of them will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of the
Exchange Act, (B) the applicable pre-merger notification requirements of the HSR
Act, if any, and any other required filings with or approvals of foreign
competition authorities, (C) obtaining Parent Shareholder Approval, and (D) the
filing of articles of merger pursuant to the IBCL, and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, could not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
4.4. NO BROKERS. Except for arrangements with Kleinwort Benson
Securities Limited, neither Parent nor Purchaser has entered into any contract,
arrangement or understanding with any Person or firm which may result in the
obligation of the Company to pay any investment banker's or finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. Parent will pay all amounts owed to Kleinwort Benson
Securities Limited, subject to Section 7.5(b).
4.5. OFFER DOCUMENTS; PROXY STATEMENT. None of the information supplied
by Parent, Purchaser, their respective officers, directors, representatives,
agents or employees, for inclusion in the Proxy Statement, or in any amendments
thereof or supplements thereto, will, on the date the Proxy Statement is first
mailed to Shareholders or at the time of the Company Shareholders Meeting,
contain any statement which, at such time and in light of the circumstances
under which it will be made, will be false or misleading with respect to any
material fact, or will omit to state any material fact necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Shareholders
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Meeting which has become false or misleading. Neither the Offer Documents nor
any amendments thereof or supplements thereto will, at any time the Offer
Documents or any such amendments or supplements are filed with the SEC or first
published, sent or given to the Shareholders, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, Parent and Purchaser do not make
any representation or warranty with respect to any Company SEC Information.
4.6. FINANCING. Parent and Purchaser have available funds and financing
and underwriting commitments (the "COMMITMENTS") for funds which are, in the
aggregate, sufficient for the purchase of the outstanding Shares pursuant to the
Offer and the Merger and to perform their respective obligations under this
Agreement (the funding of such amounts, the "FINANCING"). As of the date of this
Agreement, such commitments have not been withdrawn and, to the Knowledge of
Parent, there are no facts or circumstances existing as of the date of this
Agreement that would result in any of the conditions to funding such commitments
not being satisfied.
V. COVENANTS
5.1. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY THE COMPANY.
During the period from the date of this Agreement to the Effective Time, the
Company will, and will 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 in compliance in all material respects with
all applicable Laws and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations, use reasonable
efforts to keep available the services of their current officers and other key
employees and preserve their relationships with those Persons having business
dealings with them to the end that their goodwill and ongoing businesses will be
unimpaired at the Effective Time. Without limiting the generality or effect of
the foregoing, except as expressly and specifically described in Section 5.1 of
the Company Disclosure Letter or as expressly provided by this Agreement, during
the period from the date of this Agreement to the Effective Time, the Company
will not, and will not permit any
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of its Subsidiaries to, without the prior written consent of Parent:
(i) other than the Company's regular quarterly dividend of
$0.02 per Share and dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned Subsidiary of the
Company to its parent, or by a Subsidiary that is partially owned by
the Company or any of its Subsidiaries, provided that the Company or
any such Subsidiary receives or is to receive its proportionate share
thereof, (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (B) 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 (C) 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) except for the issuance of Shares pursuant to the
exercise of Options that are outstanding on the Measurement Date or
pursuant to the Employee Stock Purchase Plan to the extent Shares have
been paid for with payroll deductions at or prior to the date of this
Agreement, 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;
(iii) amend its articles of incorporation, bylaws or other
comparable organizational documents;
(iv) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or in any other
manner, any business or any corporation, limited liability company,
partnership, joint venture, association or other business organization
or division thereof;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, other than (x) in the ordinary course of business consistent
with past practice and (y)
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sales of assets which do not individually or in the aggregate exceed
$200,000;
(vi) (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any
debt securities of another Person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
Person or enter into any arrangement having the economic effect of any
of the foregoing, or (B) make any loans, advances or capital
contributions to, or investments in, any other Person, other than to
the Company or any Subsidiary of the Company or to officers and
employees of the Company or any of its Subsidiaries for travel,
business or relocation expenses in the ordinary course of business;
(vii) make any capital expenditure or capital expenditures
other than capital expenditures set forth in the operating budget of
the Company dated February 4, 1999 previously delivered to Parent,
other than expenditures in the ordinary course of business consistent
with past practice which individually or in the aggregate do not
exceed $200,000;
(viii) make any change to its accounting methods, principles
or practices, except as may be required by generally accepted
accounting principles, or make or change any Tax election or settle or
compromise any material Tax liability or refund;
(ix) except as required by Law or contemplated hereby, enter
into, adopt or amend in any material respect or terminate any Stock
Option Plan or any other agreement, plan or policy involving the
Company or any of its Subsidiaries and one or more of their directors,
officers or employees, or materially change any actuarial or other
assumption used to calculate funding obligations with respect to any
Company pension plans, or change the manner in which contributions to
any Company pension plans are made or the basis on which such
contributions are determined;
(x) except as disclosed in Section 5.1 of the Company
Disclosure Letter, hire or terminate the employment of any executive
officer or key employee or increase the
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compensation of any director, executive officer or other key employee
of the Company or pay any benefit or amount not required by a plan
or arrangement as in effect on the date of this Agreement to any such
Person;
(xi) enter into or amend in any material respect any Material
Contract or enter into any contract or agreement, written or oral, with
any Affiliate, associate or relative of Parent, or make any payment to
or for the benefit of, directly or indirectly, any of the foregoing;
(xii) authorize, recommend, propose or announce an intention
to adopt a plan of complete or partial liquidation or dissolution of
the Company or any of its Subsidiaries; or
(xiii) authorize, or commit or agree to take, any of the
foregoing actions.
(b) OTHER ACTIONS. Except as required by Law, neither the Company, on
the one hand, nor Parent or Purchaser, on the other hand, will, and will not
permit any of their respective Subsidiaries to, voluntarily take any action that
would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party becoming untrue in any material
respect, or (ii) any of the conditions set forth in Annex A or Article VI not
being satisfied.
(c) NOTICE OF CHANGES. Each of the Company and Parent will promptly
advise the other party orally and in writing of (i) any representation or
warranty made by it or, in the case of Parent, it or Purchaser contained in this
Agreement becoming untrue or inaccurate in any material respect, (ii) the
failure by it or, in the case of Parent, it or Purchaser to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement, or
(iii) any change or event having, or which, insofar as can reasonably be
foreseen, could reasonably be expected to have, a material adverse effect on
such party or on the truth of their respective representations and warranties or
the ability of the conditions set forth in Annex A or Article VI to be
satisfied; provided, however, that no such notification will 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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(d) COMPANY SHAREHOLDERS MEETING. (i) The Company will take all action
necessary in accordance with applicable Law and its articles of incorporation
and bylaws to convene a meeting of the Shareholders as promptly as practicable
after the Offer Completion Date to consider and vote upon the approval and
adoption of this Agreement and the Merger. The Company Board will recommend such
approval and adoption and the Company will take all lawful action to solicit
such approval, including without limitation timely mailing any Proxy Statement;
provided, however, that such recommendation (but not such actions to convene the
Company Shareholders Meeting) is subject to any action, including any withdrawal
or change of its recommendation, taken by, or upon authority of, the Company
Board, as the case may be, in the exercise of its good faith judgment based upon
and in conformity with the written opinion of outside counsel (notice of which
will be promptly given to Parent and Purchaser) that such action is required in
order to satisfy the fiduciary duties of the members of the Company Board to the
Shareholders imposed by Law. Without limiting the generality or effect, the
Company's obligations pursuant to the first sentence of this Section 5.1(d) will
not be affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal.
(ii) Notwithstanding Section 5.1(d)(i) hereof, in the event that
Parent, Purchaser or any other Subsidiary of Parent acquires at least 90% of the
outstanding Shares pursuant to the Offer or otherwise, the parties hereto agree,
at the request of Parent or Purchaser, to take all necessary and appropriate
action to cause the Merger to become effective in accordance with Section 23-1-
40-4 of the IBCL without a meeting of Shareholders as soon as practicable after
the acceptance for payment and purchase of Shares by Purchaser pursuant to the
Offer.
5.2. NO SOLICITATION. (a) The Company, its affiliates and their
respective officers, directors, employees, representatives and agents will
immediately cease any existing discussions or negotiations, if any, with any
parties with respect to any Company Takeover Proposal. The Company will not, nor
will it permit any of its Subsidiaries to, nor will it authorize or permit any
of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
(including without limitation by way of furnishing information), or take any
other action designed or reasonably likely to
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facilitate, any inquiries or the making of any proposal which constitutes or
reasonably may give rise to any Company Takeover Proposal or (ii) participate in
any discussions or negotiations regarding any Company Takeover Proposal;
provided, however, that if, at any time prior to the date on which Purchaser
purchases Shares in the Offer (the "OFFER COMPLETION DATE"), the Company Board
determines in good faith, based upon and in conformity with the written opinion
of outside counsel, that failure to do so would result in a breach of its
fiduciary duties to the Shareholders under applicable Law, the Company may, in
response to a Superior Proposal which was not solicited by it and did not
otherwise result from a breach of any provision of this Agreement, (A) furnish
information with respect to the Company and each of its Subsidiaries to any
Person pursuant to a customary confidentiality agreement not more favorable to
the recipient of such information than the Confidentiality Agreement and (B)
participate in negotiations regarding such Superior Proposal. For purposes of
this Agreement, "COMPANY TAKEOVER PROPOSAL" means any inquiry, proposal or offer
from any Person relating to any direct or indirect acquisition or purchase of
20% or more of the assets of the Company and its Subsidiaries or 20% or more of
any class of equity securities of the Company or any of its Subsidiaries, any
tender offer or exchange offer for Shares for any class of equity securities of
the Company or any of its Subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement, or any other transaction that is intended or
could prevent the completion of the transactions contemplated hereby and
"SUPERIOR PROPOSAL" means a bona fide written Company Takeover Proposal that (x)
involves the direct or indirect acquisition or purchase of 50% or more of the
assets of the Company and its Subsidiaries or 50% or more of any class of equity
securities of the Company or any of its Subsidiaries, (y) involves payment of
consideration to the Company's Shareholders and other terms and conditions that,
taken as a whole, are superior to the Offer and the Merger, and (z) is made by a
Person reasonably capable of completing such Company Takeover Proposal, taking
into account the legal, financial, regulatory and other aspects of such Company
Takeover Proposal and the Person making such Company Takeover Proposal.
(b) Except as expressly permitted by this Section 5.2(b), neither the
Company Board nor any committee thereof may (i) withdraw or modify, or propose
publicly to withdraw or
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modify, in a manner adverse to Parent or Purchaser, the approval or
recommendation by the Company Board or such committee of the Offer, the Merger
or this Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Company Takeover Proposal,(iii) cause the Company to enter into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement related to any Company Takeover Proposal (each, a "COMPANY
ACQUISITION AGREEMENT"), or (iv) release any third party from, or waive any
provisions of, any confidentiality or standstill agreement to which the Company
is a party. Notwithstanding the foregoing, in the event that prior to the Offer
Completion Date, the Company Board determines in good faith, after the Company
has received a Superior Proposal and based upon and in conformity with the
written opinion of outside counsel, that failure to do so would result in a
breach of its fiduciary duties to the Shareholders under applicable Law, the
Company Board may, subject to Section 7.5(b), withdraw or modify its approval or
recommendation of the Offer, the Merger or this Agreement, approve or recommend
a Superior Proposal or terminate this Agreement pursuant to Section 7.3(c),
provided, however, that not less than five business days prior to such
termination, the Company will notify Parent of its intention to terminate this
Agreement pursuant to this Section 5.2(b) and Section 7.3(c) and will cause its
financial and legal advisers to negotiate in good faith with Parent and Parent's
financial and legal advisers during such five-day period to make such
adjustments in the terms and conditions of this Agreement as are acceptable to
Parent and would cause such Company Takeover Proposal not to be a Superior
Proposal.
(c) In addition to the obligations of the Company set forth in Sections
5.2(a) and (b), the Company will (i) immediately advise Parent orally and in
writing of any request for information or of any Company Takeover Proposal, the
material terms and conditions of such request or Company Takeover Proposal and
the identity of the Person making such request or Company Takeover Proposal and
(ii) keep Parent informed of the status and details (including amendments or
proposed amendments) of any such request or Company Takeover Proposal.
(d) Nothing contained in this Section 5.2 will prohibit the Company
from taking and disclosing to its Shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act; provided, however, that neither the
Company nor the Company Board nor any committee thereof may, except as expressly
permitted by Section 5.2, withdraw or modify, or propose publicly to withdraw
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or modify, its position with respect to the Offer, this Agreement or the Merger
or approve or recommend, or propose publicly to approve or recommend, a Company
Takeover Proposal.
5.3. FILINGS, REASONABLE EFFORTS. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties will use all
reasonable 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 Offer, the Merger and the other
transactions contemplated by this Agreement, including without limitation, (i)
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and making of all necessary registrations
and filings (including filings with Governmental Entities) and 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) obtaining of all
necessary consents, approvals or waivers from third parties, and (iii) execution
and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. Nothing set forth in this Section 5.3 will limit or affect actions
permitted to be taken pursuant to Section 5.2.
(b) In connection with and without limiting the foregoing, the Company
and Parent will, and Parent will cause Purchaser to, (i) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Offer, the Merger or any of the other
transactions contemplated hereby, and (ii) if any state takeover statute or
similar statute or regulation becomes applicable thereto, take all action
necessary to ensure that the Offer and the Merger and such other transactions
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise to minimize the effect of such statute or regulation thereon.
(c) Notwithstanding any other provision hereof, in no event will Parent
be required to agree to any divestiture, hold-separate or other requirement in
connection with this Agreement or any of the transactions contemplated thereby.
5.4. INSPECTION OF RECORDS. (a) From the date hereof to the Effective
Time, the Company will (i) allow all designated officers, attorneys, accountants
and other representatives of
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Parent reasonable access at all reasonable times to the offices, records and
files, correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs, of the parties and their respective
Subsidiaries, as the case may be and (ii) furnish to Parent and its counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information as such Persons may reasonably request.
(b) Subject to the requirements of applicable Law, and except for such
actions as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer and the Merger, the parties will,
and will instruct each of their respective Affiliates, associates, partners,
employees, agents and advisors to, hold in confidence all such information as is
confidential or proprietary, will use such information only in connection with
the Offer and the Merger and, if this Agreement is terminated in accordance with
its terms, will deliver promptly to the other (or destroy and certify to the
other the destruction of) all copies of such information (and any copies,
compilations or extracts thereof or based thereon) then in their possession or
under their control.
5.5. PUBLICITY. The initial press release in the United States relating
to this Agreement will be a joint press release and thereafter the Company and
Parent will, subject to their respective legal obligations (including
requirements of stock exchanges and other similar regulatory bodies), consult
with each other, and use reasonable efforts to agree upon the text of any press
release, before issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby and in making
any filings with any Governmental Entity or with any national securities
exchange with respect thereto.
5.6. PROXY STATEMENT. If required by applicable Law, Parent and the
Company will cooperate and promptly prepare and Parent will file with the SEC as
soon as practicable after the Offer Completion Date the Proxy Statement, and
promptly thereafter will mail the Proxy Statement to the Shareholders. Any Proxy
Statement will contain the recommendation of the Company Board that the
Shareholders approve and adopt this Agreement and approve the Merger and the
other transactions contemplated hereby. The Company agrees not to mail the Proxy
Statement to the Shareholders until Parent confirms that the information
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provided by Parent and Purchaser continues to be accurate. If at any time prior
to the Company Shareholders Meeting any event or circumstance relating to the
Company or any of its Subsidiaries or Affiliates, or its or their respective
officers or directors, should be discovered by the Company that is required to
be set forth in a supplement to any Proxy Statement, the Company will promptly
inform Parent and Purchaser to supplement such Proxy Statement and mail such
supplement to the Shareholders.
5.7. FURTHER ACTIONS. (a) Each party hereto will, subject
to the fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
(b) If, at any time after the Effective Time, the Surviving Corporation
considers or is advised that any deeds, bills of sale, assignments, assurances
or any other actions or things are necessary or desirable to vest, perfect or
confirm of record or otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets of Purchaser or
the Company or otherwise to carry out this Agreement, the officers and directors
of the Surviving Corporation will be authorized to execute and deliver, in the
name and on behalf of Purchaser or the Company, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Purchaser or the Company, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out this Agreement.
5.8. INSURANCE; INDEMNITY. (a) All rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time existing in favor of the current or former directors or officers
of the Company or each of its Subsidiaries as provided in their respective
articles of incorporation or bylaws (or comparable organizational documents)
will be assumed by the Surviving Corporation and the Surviving Corporation will
be directly responsible for such indemnification, without further action, as of
the Effective Time and will continue in full force and effect in accordance with
their respective terms. In addition, from and after the Effective Time,
directors and officers of the Company who become or remain directors or officers
of the Surviving Corporation will be entitled to the same indemnity rights and
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protections (including those provided by directors' and officers' liability
insurance) of the Surviving Corporation. Notwithstanding any other provision
hereof, the provisions of this Section 5.8 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such Person may have by contract or otherwise.
(b) The Surviving Corporation will maintain in effect for not less than
six years after the Effective Time policies of directors' and officers'
liability insurance equivalent in all material respects to those maintained by
or on behalf of the Company and its Subsidiaries on the date hereof (and having
at least the same coverage and containing terms and conditions which are no less
advantageous to the Persons currently covered by such policies as insured) with
respect to matters existing or occurring at or prior to the Effective Time;
provided, however, that if the aggregate annual premiums for such insurance at
any time during such period exceed 200% of the per annum rate of premium
currently paid by the Company and its Subsidiaries for such insurance on the
date of this Agreement, then the Surviving Corporation will provide the maximum
coverage that is then available at an annual premium equal to 200% of such rate.
5.9. EMPLOYEE BENEFITS MATTERS. (a) On and after the Effective Time,
the Surviving Corporation will promptly pay or provide when due all compensation
and benefits as provided pursuant to the terms of, and to honor in accordance
with their current existing terms (except to the extent amended or terminated in
accordance with such terms), all compensation arrangements, employment
agreements and employee or director benefit plans, programs and policies in
existence as of the date hereof for all employees (and former employees) and
directors (and former directors) of the Company and its Subsidiaries.
(b) The Surviving Corporation, for the period commencing at the
Effective Time and ending on December 31, 1999, will provide employee benefits
under plans, programs and arrangements which, in the aggregate, will provide
benefits to the employees of the Surviving Corporation and its Subsidiaries
(other than employees covered by a collective bargaining agreement) that are no
less favorable in the aggregate than those provided pursuant to the plans,
programs and arrangements (other than those related to the equity securities of
the Company) of the Company and its
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Subsidiaries in effect on the date hereof; PROVIDED, HOWEVER, that nothing
herein will prevent the amendment or termination of any specific plan, program
or arrangement except that the Company's severance plan/policy will not be
amended to reduce the benefits thereunder with respect to terminations of
employees occurring before December 31, 1999, require that the Surviving
Corporation provide or permit investment in the securities of Parent, the
Company or the Surviving Corporation or interfere with the Surviving
Corporation's right or obligation to make such changes as are necessary to
comply with applicable Law.
(c) Employees of the Surviving Corporation will be given credit for all
service with the Company and its Subsidiaries, to the same extent as such
service was credited for such purpose by the Company, under each employee
benefit plan, program, or arrangement of Parent in which such employees are
eligible to participate for all purposes, except for purposes of benefit
accrual, under defined benefit pension plans, and, in all cases, except to the
extent such credit would result in duplication of benefits. If employees of the
Surviving Corporation and its Subsidiaries become eligible to participate in a
medical, dental or health plan of Parent or its Subsidiaries, Parent will cause
such plan to (i) waive any preexisting condition limitations for conditions
covered under the applicable medical, health or dental plans of the Company and
its Subsidiaries and (ii) honor any deductible and out of pocket expenses
incurred by the employees and their beneficiaries under such plans during the
portion of the calendar year prior to such participation. Notwithstanding the
foregoing, in no event will the employees be entitled to any credit for service,
deductibles or out of pocket expenses to the extent that it would result in a
duplication of benefits with respect to the same period of service, deductible
or out of pocket expenses.
(d) Nothing in this Section 5.9 will require the continued employment
of any person.
5.10. CONVEYANCE TAXES. The Company and Parent will cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time and each party
will pay
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any such tax or fee which becomes payable by it on or before the Effective Time.
5.11. COMPANY RIGHTS AGREEMENT. The Company Board will take all further
action (in addition to that referred to in Section 3.22) reasonably requested in
writing by Parent (including redeeming the Company Rights immediately prior to
the Effective Time or amending the Company Rights Agreement) in order to render
the Company Rights inapplicable to the Offer and the Merger and the other
transactions contemplated hereby to the extent provided herein and the Company
Rights Plan Amendment. Except as provided above with respect to the Offer, the
Merger and the other transactions contemplated hereby, in connection with
actions permitted under Section 5.2(b), the Company Board will not (a) amend the
Rights Agreement or (b) take any other action with respect to, or make any
determination under, the Company Rights Agreement, including a redemption of the
Company Rights or any action to facilitate a Company Takeover Proposal.
5.12. PARENT SHAREHOLDERS' MEETING. Parent will use its reasonable best
efforts to convene an extraordinary general meeting of its shareholders (the
"PARENT SHAREHOLDERS MEETING") to be duly called and held as soon as reasonably
practicable for the purpose of obtaining Parent Shareholder Approval. Subject to
fiduciary obligations and requirements of applicable Law under the terms of this
Agreement, the Board of Directors of the Parent will recommend to its
shareholders each of the matters required for Parent Shareholder Approval and
will use reasonable efforts to solicit such approval.
5.13. VOTING OF SHARES. Parent will, and will cause Purchaser to, vote
all Shares owned by Parent, Purchaser or any of their controlled affiliates in
favor of the approval and adoption of this Agreement, the Offer, the Merger and
any other transactions contemplated by this Agreement at the Company
Shareholders Meeting.
5.14. FINANCING. Parent will use its reasonable best efforts to obtain
the Financing. In the event that any portion of the Financing becomes
unavailable, regardless of the reason therefor, Parent will use its reasonable
best efforts to obtain alternative financing, provided, however, that reasonable
best efforts will not be deemed to include acceptance of financial or other
terms that Parent determines are not, taken as a whole, at least as favorable in
all material respects to Parent as the terms contained in the Commitments.
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VI. CONDITIONS PRECEDENT
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger will be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Purchaser shall have made, or caused to be made, the Offer and
shall have purchased, or caused to be purchased, the Shares pursuant to the
Offer, provided, that this condition shall be deemed to have been satisfied with
respect to the obligation of Parent and Purchaser to effect the Merger if
Purchaser fails to accept for payment or pay for Shares pursuant to the Offer in
violation of the terms of the Offer or of this Agreement;
(b) This Agreement and the transactions contemplated hereby shall have
been approved in the manner required by applicable Law by the holders of the
issued and outstanding shares of capital stock of the Company; and
(c) No Order or Law enacted, entered, promulgated, enforced or issued
by any court of competent jurisdiction or other Governmental Entity or other
legal restraint or prohibition (collectively, "RESTRAINTS") preventing the
consummation of the Merger shall be in effect.
6.2. CONDITIONS TO OBLIGATION OF PARENT AND PURCHASER TO EFFECT THE
MERGER. The obligation of Parent and Purchaser to effect the Merger will be
subject to the fulfillment at or prior to the Closing Date (or such other date
as may be specified below) of the additional condition that the Company shall
have performed in all material respects its covenants contained in this
Agreement required to be performed on or prior to the Closing Date.
VII. TERMINATION
7.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time prior to the Effective Time, whether or not Company Shareholder
Approval or Parent Shareholder Approval has been obtained, by the mutual consent
of Parent and the
Company.
7.2. TERMINATION BY EITHER PARENT OR COMPANY. This Agreement may be
terminated by action of the Board of Directors of either Parent or the Company,
whether or not Company
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Shareholder Approval or Parent Shareholder Approval has been obtained, if (a)
the Offer shall not have been consummated by June 30, 1999 (the "OUTSIDE DATE");
provided, however, that no party may terminate this Agreement pursuant to this
Section 7.2(a) if such party's failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Offer Completion Date shall
not have occurred on or before said date, (b) any Governmental Entity shall have
issued a Restraint or taken any other action permanently enjoining, restraining
or otherwise prohibiting the consummation of the Offer, the Merger or any of the
other transactions contemplated by this Agreement and such Restraint or other
action shall have become final and nonappealable, or (c) the Offer expires or is
terminated or withdrawn pursuant to its terms without any Shares being purchased
thereunder by Purchaser as a result of the failure of any of the Offer
Conditions to be satisfied prior to the Expiration Date or any extension
thereof, provided that any termination described in this Section 7.2 (a) or (c)
will not be effective unless and until the Company shall have paid to Purchaser
the fees and expenses described in Section 7.5(b).
7.3. TERMINATION BY COMPANY. This Agreement may be terminated at any
time prior to the Offer Completion Date, whether or not Parent Shareholder
Approval has been obtained, by action of the Board of Directors of the
Company, if (a) there has been a material breach by Parent or Purchaser of
any representation or warranty contained in this Agreement which is not
curable or, if curable, is not cured by the Outside Date and such breach had
or could reasonably be likely to have a Parent Material Adverse Effect, (b)
there has been a material breach of any of the covenants set forth in this
Agreement on the part of Parent or Purchaser, which breach is not curable or,
if curable, is not cured within 15 calendar days after written notice of such
breach is given by the Company to Parent, or (c) in accordance with Section
5.2(b), provided that any termination described in this Section 7.3(c) will
not be effective unless and until the Company pays to Purchaser the fees and
expenses described in Section 7.5(b).
7.4. TERMINATION BY PARENT. This Agreement may be terminated at
any time prior to the Offer Completion Date, whether or not Parent
Shareholder Approval has been obtained, by Parent, if (a) there has been a
material breach by the Company of any representation or warranty contained in
this Agreement which is not curable or, if curable, is not cured by the
Outside Date and such breach had or could reasonably be likely to have a
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Company Material Adverse Effect, (b) there has been a material breach of any
of the covenants set forth in this Agreement on the part of the Company,
which breach is not curable or, if curable, is not cured within 15 calendar
days after written notice of such breach is given by Parent to the Company,
(c) the Board of Directors of the Company shall have (i) withdrawn or
modified in a manner adverse to Parent or Purchaser its approval or
recommendation of this Agreement, the Offer or the Merger or failed to
reconfirm its approval or recommendation within five business days after a
written request to do so, (ii) approved or recommended, or proposed publicly
to approve or recommend, a third-party Company Takeover Proposal to the
Shareholders, (iii) caused the Company to take any action referred to in
Section 5.2 that would have constituted a breach thereof but for the
exceptions thereunder, including without limitation authorizing the Company
to enter into a Company Acquisition Agreement, (iv) approved the breach of
the Company's obligation under Section 5.2, or (v) resolved to take any of
the foregoing actions, (d) any Person or group (as defined in Section
13(d)(3) of the Exchange Act) other than Parent, Purchaser or any of their
respective Subsidiaries or Affiliates shall have become the beneficial owner
of more than 25% of the outstanding Shares (either on a primary or fully
diluted basis), or (e) Parent Shareholder Approval shall not have been
obtained at the Parent Shareholders Meeting, provided that any termination
described in this Section 7.4 (a), (b), (c) or (d) will not be effective
unless and until the Company shall have paid to Purchaser the fees and
expenses described in Section 7.5(b).
7.5. EFFECT OF TERMINATION AND ABANDONMENT; TERMINATION FEE. (a) In the
event of termination of this Agreement pursuant to this Article VII, all
obligations of the parties hereto will terminate, except the obligations of the
parties pursuant to this Section 7.5, the last sentence of Section 1.3, Sections
5.4(b), 8.4 and 8.14. Notwithstanding the foregoing or any other provision of
this Agreement, in the event of termination of this Agreement, nothing herein
will prejudice the ability of the non-breaching party to seek damages from any
other party for any prior deliberate or willful breach of this Agreement,
including without limitation attorneys' fees and the right to pursue any remedy
at law or in equity with respect thereto.
(b)(i) The Company will pay to Purchaser an amount equal to $2.0
million (the "TERMINATION FEE") in any of the following circumstances:
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(A) This Agreement is terminated at such time that
this Agreement is terminable pursuant to Sections 7.3(c) or 7.4(c); or
(B) This Agreement is terminated by either Parent or
the Company pursuant to Section 7.2(a) or 7.2(c) and at the time of
such termination each of the following is true:
(1) the Minimum Condition shall not have
been satisfied; and
(2) the Company shall not have the right to
terminate this Agreement pursuant to Section 7.3(a) or 7.3(b);
and
(3) the Listing Condition (as defined in
Annex A) and the Shareholder Approval Condition (as
defined in Annex A) shall have been satisfied; or
(C) This Agreement is terminated by Parent pursuant
to Sections 7.4(a), 7.4(b) or 7.4(d), and each of the following occurs:
(1) prior to such termination, a Company
Takeover Proposal is (x) publicly disclosed or has been made
directly to Shareholders generally or (y) any Person
(including without limitation the Company or any of its
Subsidiaries) publicly announces an intention (whether or not
conditional) to make such a Company Takeover Proposal; and
(2) prior to the termination of this
Agreement or within 12 months after the termination of this
Agreement, the Company or a Subsidiary thereof enters into a
Company Acquisition Agreement or closes a Company Takeover
Proposal.
(ii) If this Agreement is terminated in circumstances where a
Termination Fee is then payable, then in any such case the Company will
promptly, but in no event later than two business days after submission of a
request therefor, pay to Parent an amount equal to Parent's documented Expenses,
provided, however, that in no event will the total of the Expenses paid by the
Company pursuant to this Section 7.5(b) plus any Termination Fee paid by the
Company pursuant to this Secton 7.5(b), exceed $7 million.
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(iii) If a Termination Fee is payable pursuant to Section 7.5(b)(i)(C),
then the Company will pay the Termination Fee and Expenses to Parent upon the
signing of a Company Acquisition Agreement or, if no Company Acquisition
Agreement is signed, then at the closing (and as a condition to the closing) of
a Company Takeover Proposal. Notwithstanding any other provision hereof, (A) in
no event may the Company enter into a Company Acquisition Agreement unless,
prior thereto, the Company has paid any amount due under Section 7.5(b) or which
will become due under Section 7.5(b), (B) the Company may not terminate this
Agreement under Sections 5.2(b) or 7.3(c) unless prior thereto it has paid all
amounts due under Section 7.5(b) to Parent, (C) all amounts due in the event
that this Agreement is terminated under Section 7.3(c) or 7.4(c) and in
circumstances in which the Company has not entered into a Company Acquisition
Agreement will be payable promptly, but in no event more than two business days
after request therefor is made, and (D) all amounts due under this Section
7.5(b) will be paid on the date due in immediately available funds wire
transferred to the account designated by the Person entitled to such payment.
(iv) This Section 7.5(b) will survive any termination of this
Agreement. For purposes of this Agreement, the term "EXPENSES" means all
out-of-pocket fees, costs and other expenses incurred or assumed by Parent or
Purchaser or any of their Affiliates or incurred on their behalf in connection
with this Agreement or any of the transactions contemplated hereby, including
but not limited to in connection with the negotiation, preparation, execution
and performance of this Agreement, the structuring and financing of the Offer,
the Merger and the other transactions contemplated hereby, or any commitments or
agreements relating to such financing, including, without limitation, fees,
expenses and selling and underwriting commissions or other amounts payable to
any banks, investment banking firms, underwriters, other financial institutions
and other Persons and their respective agents and counsel for arranging,
committing to provide or providing any financing for the Offer, the Merger and
any other transactions contemplated hereby or structuring, negotiating or
advising with respect to such transactions or financing, and all fees and
expenses of counsel, accountants, experts and computer, environmental,
actuarial, insurance and other consultants to Parent or Purchaser.
(v) The Company acknowledges that the agreements contained in this
Section 7.5(b) are an integral part of the transactions
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contemplated by this Agreement, and that, without these agreements, Parent and
Purchaser would not enter into this Agreement; accordingly, if the Company fails
promptly to pay any amount due pursuant to this Section 7.5, and, in order to
obtain such payment, Parent or Purchaser commences a suit which results in a
judgment against the Company for any amounts set forth in this Section 7.5(b),
the Company will pay to Parent and Purchaser their costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank N.A. in effect
on the date such payment was required to be made.
VIII. GENERAL PROVISIONS
8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement will terminate at the Effective
Time or the termination of this Agreement pursuant to Article VII, as the case
may be, except that the covenants set forth in Article II and Sections 5.3, 5.8,
5.9 and 5.10 will survive the Effective Time indefinitely or, if applicable, for
the period therein specified and those set forth in the last sentence of Section
1.3 and in Sections 5.4(b), 7.5 and 8.14 will survive termination indefinitely
or, if applicable, for the period therein specified.
8.2. NOTICES. Any notice or other communication required to be given
hereunder will be sufficient if in writing, and sent by facsimile transmission
and by courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
If to Parent or Purchaser:
First Technology PLC
2 Cheapside Court
Buckhurst Road
Ascot
Berkshire SL5 7RF
United Kingdom
Attn: Dr. Fred Westlake
Fax No.: 44-1344-622-773
With copies to:
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Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: Jere R. Thomson, Esq.
Fax No.: 212-755-7306
If to the Company:
Control Devices, Inc.
228 Northeast Road
Standish, Maine 04084
Attn: Bruce D. Atkinson
Fax No.: 207-642-0111
With copies to:
Sommer & Barnard
4000 Bank One Tower
111 Monument Circle
Indianapolis, Indiana 46204
Attn: James A. Strain, Esq.
Fax No.: 317-236-9802
or to such other address as any party will specify by written notice so given,
and such notice will be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by any of the
parties hereto (whether by operation of Law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon and will inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Section 5.8, nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
57
<PAGE>
8.4. ENTIRE AGREEMENT. This Agreement, Annex A, Exhibit A, the Company
Disclosure Letter and any documents delivered by the parties in connection
herewith, together with the Confidentiality and Standstill Agreement, effective
as of June 1, 1998, between Parent and the Company (the "CONFIDENTIALITY
AGREEMENT") which will survive the execution and delivery of this Agreement, and
the Shareholders Agreement constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement will be binding upon any party
hereto unless made in writing and signed by all parties hereto. Notwithstanding
the foregoing, the first paragraph of Section 3 of the Confidentiality Agreement
is hereby amended so as to permit Parent, Purchaser or any of its respective
Affiliates or Representatives (as defined therein) to (a) effect any transaction
permitted or contemplated by this Agreement or the Shareholders Agreement and
(b) take any action otherwise prohibited by the first paragraph of Section 3 of
the Confidentiality Agreement (i) in the event that another Person publicly
announces a Company Takeover Proposal and (ii) after the Offer Completion Date.
Except as provided in the preceding sentence, no provision of this Agreement,
including without limitation Sections 1.3 and 5.4(b), will be deemed to limit
the parties' obligations under the Confidentiality Agreement.
8.5. AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
Shareholders but after any such Shareholder approval, no amendment will be made
which by Law requires the further approval of the Shareholders without obtaining
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
8.6. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Indiana without regard to its conflict
of laws principles.
8.7. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered will be
an original, but all such counterparts will together constitute one and the same
instrument. Each counterpart may consist of a number of copies
58
<PAGE>
hereof each signed by less than all, but together signed by all of the parties
hereto.
8.8. HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and will be given no substantive or
interpretive effect whatsoever.
8.9. CERTAIN DEFINITIONS/INTERPRETATIONS. (a) For purposes
of this Agreement:
(i) 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;
(ii) "KNOWLEDGE" of any Person which is not an individual
means the knowledge of any of such Person's executive officers after
reasonable inquiry (in the case of the Company, such executive officers
being Bruce D. Atkinson and Jeffrey Wood); and
(iii) "PERSON" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(b) When a reference is made in this Agreement to an Article, Section
or Annex, such reference will be to an Article or Section of, or an Annex to,
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and will 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 will 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
will refer to this Agreement as a whole and not to any particular provision of
this Agreement. All terms used herein with initial capital letters have the
meanings ascribed to them herein and all terms defined in this Agreement will
have such defined meanings when used in any certificate or other document made
or delivered pursuant hereto unless otherwise defined therein. 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
59
<PAGE>
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.
8.10. WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, will be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder will not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
Subject to Section 1.4(b), at any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
8.11. INCORPORATION OF ANNEX A. Annex A attached hereto is hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
8.12. SEVERABILITY. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
will, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision will be interpreted to be only so broad as is
enforceable.
8.13. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with
60
<PAGE>
its specific terms or was otherwise breached. It is accordingly agreed that the
parties will be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.14. EXPENSES. Except as set forth in Section 7.5, all fees and
expenses incurred in connection with the Offer, the Merger, this Agreement and
the transactions contemplated thereby will be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated, except that each of
Parent and the Company will bear and pay one-half of the costs and expenses
incurred in connection with (i) the filing, printing and mailing of the Proxy
Statement, the Schedule 14D-9, the Schedule 14D-1 and the other Offer Documents
(including SEC filing fees) and (ii) the filings of the premerger notification
and report forms under the HSR Act (including filing fees).
61
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
CONTROL DEVICES, INC.
By: /s/ Bruce D. Atkinson
-----------------------------------
Name: Bruce D. Atkinson
-------------------------------
Title: President and Chief Executive
------------------------------
Officer
FIRST TECHNOLOGY PLC
By: /s/ Dr. Frederick Westlake
-----------------------------------
Name: Dr. Frederick Westlake
-------------------------------
Title: Chairman
------------------------------
FIRST TECHNOLOGY ACQUISITION CORP.
By: /s/ Dr. Frederick Westlake
-----------------------------------
Name: Dr. Frederick Westlake
-------------------------------
Title: Chairman
------------------------------
62
<PAGE>
CONDITIONS TO COMPLETION OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser will not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
expiration or termination of the Offer), to pay for any Shares, and (subject to
any such rules or regulations) may postpone the acceptance for payment or
payment for any Shares tendered, and, subject to the terms of the Agreement, may
amend or terminate the Offer (whether or not any Shares have theretofore been
purchased or paid for pursuant to the Offer) (i) unless the following conditions
have been satisfied: (a) there have been validly tendered and not withdrawn
prior to the Expiration Date a number of Shares which represent at least a
majority of the total voting power of the outstanding securities of the Company
entitled to vote in the election of directors or in a merger ("VOTING
SECURITIES"), calculated on a fully diluted basis, on the date of purchase (the
"MINIMUM CONDITION") ("ON A FULLY DILUTED BASIS" having the following meaning;
as of any date, the number of Shares outstanding, together with the number of
Shares the Company is then required to issue pursuant to obligations outstanding
at that date under employee stock option or other benefit plans or otherwise),
(b) any waiting periods applicable to the Offer or the Merger under the HSR Act
shall have expired or been terminated prior to the expiration of the Offer, and
(c) the admission of the convertible unsecured loan stock to be issued by Filly
Funding Plc, a wholly owned subsidiary of Parent, as necessary to facilitate the
transactions contemplated by this Agreement to the Official List of the London
Stock Exchange shall have become effective in accordance with the Rules of the
London Stock Exchange, provided Parent shall have used its best efforts to
obtain such effectiveness (such condition, the "LISTING CONDITION"), or (ii) if
at any time on or after the date of this Agreement and before the Expiration
Date (whether or not any Shares have theretofore been accepted for payment or
paid for pursuant to the Offer), any of the following shall have occurred:
(A) any governmental entity or authority or any court shall
have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, executive order, decree, injunction or other order
which is in effect and which (1) restricts, prevents or prohibits
consummation of the transactions contemplated by any of this Agreement,
including the Offer or the Merger, (2)
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<PAGE>
prohibits, limits or otherwise adversely affects the ownership or
operation by Parent or any of its Subsidiaries of all or any portion
of the business or assets of the Company and its Subsidiaries or
compels the Company, Parent or any of their Subsidiaries to dispose of
or hold separate all or any portion of the business or assets of the
Company and its Subsidiaries, or (3) imposes limitations on the
ability of Parent, Purchaser or any other Subsidiary of Parent to
exercise effectively full rights of ownership of any Shares, including
without limitation the right to vote any Shares acquired by Purchaser
pursuant to the Offer or otherwise on all matters properly presented
to the Shareholders, including without limitation the approval and
adoption of the Agreement and the transactions contemplated thereby;
(B) there shall be instituted or pending any action or
proceeding before any United States or foreign court or governmental
entity or authority by any United States or foreign governmental entity
or authority seeking any order, decree or injunction having any effect
set forth in paragraph (A) above;
(C) the representations and warranties of the Company
contained in this Agreement shall not be true and correct as of the
Expiration Date (as the same may be extended from time to time) as
though made anew on and as of such date (except for representations
and warranties made as of a specified date, which shall not be true
and correct as of the specified date), except for any breach or
breaches of any representations or warranties in Sections 3.4
through 3.16 and Section 3.19 of this Agreement which, in the
aggregate, could not be reasonably expected to have a material
adverse effect on the business, financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole, or
on the ability of the Company to perform any of its obligations
under this Agreement;
(D) the Company shall not have performed or complied in all
material respects with its covenants under this Agreement to which it
is a party and such failure continues until the later of (1) 15
calendar days after actual receipt by it of written notice from Parent
setting forth in detail the nature of such failure or (2) the
Expiration Date;
(E) there shall have occurred any material adverse change, or
any development that is reasonably likely to result in a material
adverse change, in the business, financial condition or
64
<PAGE>
results of operations of the Company and its Subsidiaries, taken as a
whole;
(F) the Merger Agreement shall have been terminated in
accordance with its terms;
(G) the Company Board shall have (1) withdrawn or materially
modified or changed its recommendation of the Offer, the Merger or this
Agreement (including by amendment of Schedule 14D-9) in a manner
adverse to Purchaser or Parent, (2) taken a position inconsistent with,
its recommendation of the Offer, the Merger or any of this Agreement,
(3) approved, endorsed or recommended any Company Takeover Proposal,
(4) taken any action referred to in Section 5.2 of this Agreement that
is prohibited thereby or would be so prohibited but for the exceptions
thereto, or (5) resolved or publicly disclosed any intention to do any
of the foregoing;
(H) there shall have occurred (1) any general suspension of,
or limitation on prices for, trading in securities on the NYSE, (2) a
decline of at least 10% in either the Dow Jones Average of Industrial
Stocks, the Standard & Poor's 500 Index or the Financial Times-Stock
Exchange all shares index from the date of the Agreement, (3) the
declaration of a banking moratorium or any limitation or suspension of
payments in respect of the extension of credit by banks or other
lending institutions in the United States,(4) any commencement of war,
armed hostilities or other international or national calamity directly
involving the United States or having a significant adverse effect on
the functionality of financial markets in the United States, or (5) in
the case of any of the foregoing, existing at the time of commencement
of the Offer, a material acceleration or worsening thereof;
(I) Parent Shareholder Approval shall not have been obtained
at the Parent Shareholder Meeting (the "SHAREHOLDER APPROVAL
CONDITION"); or
(J) it shall have been publicly disclosed or Parent shall have
otherwise learned that (1) any Person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or its affiliates or
any group of which any of them is a member or any affiliates controlled
by it or which is referred to in clause (2) below, shall have acquired
beneficial ownership (determined pursuant to Rule 13d-3 promulgated
under the Exchange Act) of more than 21% of the outstanding Shares, (2)
any such Person or
65
<PAGE>
group which has filed a Schedule 13D or 13G prior to the date of the
Merger Agreement disclosing beneficial ownership of 10% or more of the
outstanding Shares shall have acquired beneficial ownership of 21% or
more of the outstanding Shares, or (3) any Person or group shall have
entered into a definitive agreement or agreement in principle with the
Company with respect to a merger, consolidation or other business
combination with the Company.
The foregoing conditions are for the sole benefit of Purchaser and its
affiliates and may be asserted by Purchaser, or Parent on behalf of Purchaser,
regardless of the circumstances (including without limitation any action or
inaction by Purchaser or any of its affiliates other than a material breach by
Purchaser or Parent of this Agreement) giving rise to any such condition or may
be waived by Purchaser, in whole or in part, from time to time in its sole
discretion, except as otherwise provided in this Agreement. The failure by
Purchaser at any time to exercise any of the foregoing rights will not be deemed
a waiver of any such right and each such right will be deemed an ongoing right
and may be asserted at any time and from time to time. Any good faith
determination by Purchaser concerning any of the events described herein will be
final and binding.
66
<PAGE>
TABLE OF DEFINED TERMS
PAGE
<TABLE>
<CAPTION>
<S> <C>
Acquisition .................................................... 1
Affiliate ...................................................... 52
Agreement ...................................................... 1
Board Percentage ............................................... 6
Certificates ................................................... 9
Closing ........................................................ 7
Closing Date ................................................... 7
Code .......................................................... 18
Commitments .................................................... 33
Company ........................................................ 1
Company Acquisition Agreement .................................. 39
Company Benefit Plans .......................................... 25
Company Board .................................................. 1
Company Disclosure Letter ...................................... 12
Company Filed Reports........................................... 17
Company Material Adverse Effect ................................ 12
Company Reports ................................................ 16
Company Rights Agreement ....................................... 14
Company Rights Plan Amendment .................................. 30
Company SEC Information ........................................ 3
Company Shareholder Approval ................................... 29
Company Shareholders Meeting ................................... 30
Company Takeover Proposal ...................................... 38
Computer Software .............................................. 20
Confidentiality Agreement ...................................... 51
Continuing Directors ........................................... 6
Dresdner Bank .................................................. 49
Effective Time .............. .................................. 7
Environmental Laws ............................................. 24
Environmental Permits .......................................... 24
ERISA .......................................................... 25
Exchange Act ................................................... 2
Exchange Agent ..............,,................................. 9
Expenses ....................................................... 49
Expiration Date ................................................ 2
Financing ...................................................... 34
Foreign Plan ................................................... 25
Governmental Entity ............................................ 15
Hazardous Substances ........................................... 24
IBCL ........................................................... 1
Intellectual Property .......................................... 19
IRS ............................................................ 26
Knowledge ...................................................... 52
Law ............................................................ 15
Leased Real Property ........................................... 21
Liens .......................................................... 14
Listing Condition .............................................. 56
Material Contracts ............................................. 23
Measurement Date ............................................... 13
Merger ......................................................... 1
Merger Consideration ........................................... 8
Millennium Compliant ........................................... 22
Minimum Condition .............................................. 56
Offer .......................................................... 1
Offer Completion Date .......................................... 38
Offer Conditions ............................................... 2
Offer Documents ................................................ 3
on a fully diluted basis ....................................... 56
Option Consideration ........................................... 11
Options ........................................................ 11
Order .......................................................... 15
Outside Date ................................................... 46
Owned Real Property ............................................ 21
Parent ......................................................... 1
Parent Material Adverse Effect ................................. 31
Parent SEC Information ......................................... 5
Parent Shareholder Approval .................................... 31
Parent's Designees ............................................. 5
Per Share Amount ............................................... 1
Permitted Liens ................................................ 21
Person ......................................................... 52
Processes ...................................................... 22
Proxy Statement ................................................ 30
Purchaser ...................................................... 1
Real Property Leases ........................................... 21
Restraints ..................................................... 45
Rights ......................................................... 8
Rights to Acquire .............................................. 13
Schedule 14D-1 ................................................. 3
Schedule 14D-9 ................................................. 4
SEC ............................................................ 3
Securities Act ................................................. 16
Shareholder Approval Condition ................................. 58
Shareholders ................................................... 1
Shareholders Agreement ......................................... 2
Shareholders Meeting ........................................... 44
Shares ......................................................... 1
Stock Option Plans ............................................. 11
Subscription Agreements ........................................ 2
Subsidiary ..................................................... 13
Superior Proposal .............................................. 38
Surviving Corporation .......................................... 7
Tax Return ..................................................... 19
Taxes .......................................................... 19
Technology ..................................................... 22
Termination Fee ................................................ 47
Voting Securities .............................................. 56
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CONTROL DEVICES, INC.
AT
$16.25 NET PER SHARE
BY
FIRST TECHNOLOGY ACQUISITION CORP.
AN INDIRECT, WHOLLY OWNED SUBSIDIARY
OF
FIRST TECHNOLOGY PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, MARCH 25, 1999, UNLESS THE OFFER IS EXTENDED.
The Offer is not conditioned upon the receipt of financing. See Section 9
regarding the financing commitments obtained by Parent.
The Offer is conditioned upon, among other things: (i) there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in Section
1) that number of common shares ("Shares") of Control Devices, Inc. (the
"Company") that (together with any Shares owned by First Technology PLC
("Parent") or any of its subsidiaries) constitutes at least a majority of the
total voting power of the outstanding securities of the Company entitled to vote
in the election of directors or in a merger, calculated on a fully diluted basis
on the date of purchase (the "Minimum Condition"), (ii) the approval by the
shareholders of Parent of each of the acquisition of the Company, an increase in
share capital and certain other related matters at an extraordinary general
meeting ("Parent Shareholder Approval"), and (iii) the admission of certain
securities (to be issued in a rights offering by an affiliate of Parent) to the
Official List of the London Stock Exchange (the "Listing Condition"). The Offer
is also subject to certain other conditions. See Sections 1 and 14. For
additional information regarding Parent Shareholder Approval and the Listing
Condition, see Section 9.
The Board of Directors of the Company has unanimously recommended that
holders of Shares ("Shareholders") accept the Offer and approve and adopt the
Merger Agreement and the transactions contemplated thereby and has unanimously
determined that the Offer and the Merger are fair to and in the best interests
of the Company and the Shareholders.
In connection with the execution of the Merger Agreement, certain directors
and executive officers of the Company and related persons have agreed to tender
into the Offer, all the Shares that such Shareholders beneficially owned on
February 22, 1999 (in the aggregate, approximately 19% of all then outstanding
Shares), as well as any Shares thereafter acquired by them, including upon the
exercise of options to acquire Shares. See Section 11.
------------------------
The Dealer Manager for the Offer is:
[LOGO]
------------------------
February 26, 1999
<PAGE>
IMPORTANT
Any Shareholder desiring to tender all or any portion of its Shares should
either (1) complete and sign the appropriate Letter(s) of Transmittal (or a
manually signed facsimile thereof) in accordance with the instructions in such
Letter(s) of Transmittal, mail or deliver such Letter(s) of Transmittal and any
other required documents to IBJ Whitehall Bank & Trust Company (the
"Depositary"), and either deliver the certificates for those Shares to the
Depositary along with such Letter(s) of Transmittal or tender those Shares
pursuant to the procedures for book-entry transfer set forth in Section 3
hereof, or (2) request its broker, dealer, commercial bank, trust company or
other nominee to effect the tender on its behalf. Any Shareholder whose Shares
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee must contact that broker, dealer, commercial bank, trust
company or other nominee if the Shareholder desires to tender such Shares.
Any Shareholder who desires to tender Shares and whose certificate(s)
representing those Shares are not immediately available or who cannot comply
with the procedure for book-entry transfer on a timely basis should tender those
Shares by following the procedures for guaranteed delivery set forth in Section
3 hereof.
Questions and requests for assistance may be directed to MacKenzie Partners,
Inc. (the "Information Agent") or Dresdner Kleinwort Benson North America LLC
(the "Dealer Manager") at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other related materials may be directed to the
Information Agent or to brokers, dealers, commercial banks or trust companies.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
INTRODUCTION..................................................................................................... 1
1. Terms of the Offer.................................................................................... 3
2. Acceptance for Payment and Payment for Shares......................................................... 5
3. Procedure for Tendering Shares........................................................................ 6
4. Withdrawal Rights..................................................................................... 8
5. Certain Federal Income Tax Consequences of the Offer and the Merger................................... 9
6. Price Range of the Shares; Dividends on the Shares.................................................... 10
7. Certain Information Concerning the Company............................................................ 11
8. Certain Information Concerning Purchaser and Parent................................................... 13
9. Source and Amount of Funds............................................................................ 14
10. Background of the Offer; Contacts with the Company.................................................... 16
11. Purpose of the Offer and the Merger; Plans for the Company; the Merger Agreement; the Shareholders
Agreement; Other Related Agreements; and Other Matters................................................ 19
12. Dividends and Distributions........................................................................... 37
13. Effect of the Offer on the Market for the Shares, Stock Exchange Listing and Exchange Act
Registration, and Margin Securities................................................................... 38
14. Certain Conditions of the Offer....................................................................... 39
15. Certain Legal Matters................................................................................. 41
16. Fees and Expenses..................................................................................... 43
17. Miscellaneous......................................................................................... 43
Schedule I--DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
AND PARENT..................................................................................................... I-1
Annex A Audited Financial Statements of Parent for the financial year ended April 30, 1998...................... A-1
Annex B 1998 Interim Report of Parent (Unaudited)............................................................... B-1
Annex C Summary of Significant Differences Between UK GAAP and US GAAP.......................................... C-1
</TABLE>
i
<PAGE>
To the Holders of Common Stock of
Control Devices, Inc.:
INTRODUCTION
First Technology Acquisition Corp., an Indiana corporation ("Purchaser") and
an indirect, wholly owned subsidiary of First Technology PLC, an English public
limited company ("Parent"), hereby offers to purchase all of the outstanding
shares of common stock, no par value (the "Shares"), of Control Devices, Inc.,
an Indiana corporation (the "Company"), at a purchase price of $16.25 per Share,
net to the seller in cash, without interest thereon (the "Per Share Amount"),
upon the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). The common
share purchase rights (the "Rights") provided for in a Rights Agreement dated as
of May 7, 1998, as amended by Amendment No. 1, dated as of February 22, 1999
(the "Rights Agreement"), between the Company and BankBoston, N.A., are not
applicable to the Offer, the Merger Agreement or any of the transactions
contemplated thereby.
Tendering Shareholders who have Shares registered in their own name and who
tender directly to the Depositary will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
Shareholders who hold their Shares through their broker or bank should consult
with such institution as to whether it charges any service fees. Purchaser will
pay all charges and expenses of Dresdner Kleinwort Benson North America LLC, as
the dealer manager (the "Dealer Manager"), IBJ Whitehall Bank & Trust Company,
as the depositary (the "Depositary"), and MacKenzie Partners, Inc., as the
information agent (the "Information Agent"), in connection with the Offer. See
Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
RECOMMENDED THAT HOLDERS OF SHARES ("SHAREHOLDERS") ACCEPT THE OFFER AND APPROVE
AND ADOPT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND HAS
UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND SHAREHOLDERS. THE COMPANY HAS ADVISED PARENT THAT
ALL MEMBERS OF THE COMPANY BOARD INTEND TO TENDER THEIR SHARES PURSUANT TO THE
OFFER.
CLEARY GULL & REILAND INC., THE COMPANY'S FINANCIAL ADVISER ("CLEARY GULL"),
HAS DELIVERED TO THE COMPANY ITS OPINION THAT THE CONSIDERATION TO BE RECEIVED
BY SHAREHOLDERS IN THE OFFER AND THE MERGER IS FAIR, FROM A FINANCIAL POINT OF
VIEW, TO THE SHAREHOLDERS. (THAT OPINION DOES NOT EXPRESS A VIEW AS TO THE
COMPANY DIRECTORS AND OFFICERS WHO ARE PARTIES TO THE SHAREHOLDERS AGREEMENT AND
THE SUBSCRIPTION AGREEMENT). A COPY OF THE WRITTEN OPINION OF CLEARY GULL IS
CONTAINED IN THE COMPANY'S SOLICITATION/ RECOMMENDATION STATEMENT ON SCHEDULE
14D-9 (THE "SCHEDULE 14D-9") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "SEC") IN CONNECTION WITH THE OFFER, A COPY OF WHICH IS BEING MAILED TO
SHAREHOLDERS CONCURRENTLY WITH THIS OFFER TO PURCHASE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS: (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES THAT (TOGETHER WITH ANY SHARES OWNED BY PARENT OR ANY
OF ITS SUBSIDIARIES) CONSTITUTES AT LEAST A MAJORITY OF THE TOTAL VOTING POWER
OF THE OUTSTANDING SECURITIES OF THE COMPANY ENTITLED TO VOTE IN THE ELECTION OF
DIRECTORS OR IN A MERGER, CALCULATED ON A FULLY DILUTED BASIS ON THE DATE OF
PURCHASE (THE "MINIMUM CONDITION"), (II) THE APPROVAL BY THE SHAREHOLDERS OF
PARENT OF EACH OF THE ACQUISITION OF THE COMPANY, AN INCREASE IN SHARE CAPITAL
AND CERTAIN OTHER RELATED MATTERS AT AN EXTRAORDINARY GENERAL MEETING ("PARENT
SHAREHOLDER APPROVAL"), AND (III) THE ADMISSION OF CERTAIN SECURITIES (TO BE
ISSUED IN A RIGHTS OFFERING BY AN AFFILIATE OF PARENT) TO THE OFFICIAL LIST OF
THE LONDON STOCK EXCHANGE (THE "LISTING CONDITION"). THE OFFER IS ALSO SUBJECT
TO CERTAIN OTHER CONDITIONS. SEE SECTIONS 1 AND 14. THE PARENT SHAREHOLDER
APPROVAL IS TO BE SOUGHT AT THE EXTRAORDINARY GENERAL MEETING SCHEDULED TO BE
HELD ON MARCH 11, 1999. THE LISTING CONDITION IS EXPECTED TO BE SATISFIED
SHORTLY AFTER THE PARENT SHAREHOLDER APPROVAL IS GIVEN. FOR ADDITIONAL
INFORMATION REGARDING PARENT SHAREHOLDER APPROVAL AND THE LISTING CONDITION, SEE
SECTION 9.
In connection with the execution of the Merger Agreement, Parent, Purchaser,
the Company and Ralph R. Whitney, Jr., Bruce D. Atkinson, Jeffrey G. Wood,
Michel Hauser-Kauffmann, Forrest E.
<PAGE>
Crisman, Jr., Glenn Scolnik and the spouses of Messrs. Whitney and Atkinson
(collectively, the "Management Shareholders," and each individually, a
"Management Shareholder") entered into a Shareholders Agreement, dated as of
February 22, 1999 (the "Shareholders Agreement"), pursuant to which each
Management Shareholder has unconditionally agreed to tender into the Offer all
the Shares that such Management Shareholder beneficially owned on February 22,
1999 (in the aggregate, approximately 19% of all then outstanding Shares
(approximately 16.5% of the Shares calculated on a fully diluted basis as of
such date)), as well as any Shares thereafter acquired by any of them, including
upon the exercise of options to acquire Shares (collectively, the "Subject
Shares"). Under the Shareholders Agreement, each Management Shareholder has
agreed to vote in favor of the Merger and against competing transactions and has
granted to Parent and Parent's designees an irrevocable proxy with respect to
the Subject Shares to vote such Shares under certain circumstances. The
Shareholders Agreement is more fully described in Section 11.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 22, 1999 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and that, after the purchase of Shares
pursuant to the Offer, subject to the satisfaction or waiver of certain
conditions, Purchaser will be merged with and into the Company (the "Merger"),
with the Company surviving the Merger as an indirect, wholly owned subsidiary of
Parent (the "Surviving Corporation"). In the Merger, each Share (excluding
Shares owned by the Company or any of its subsidiaries or by Parent, Purchaser
or any other subsidiary of Parent) issued and outstanding immediately prior to
the effective time of the Merger (the "Effective Time") will be converted at the
Effective Time into the right to receive the Per Share Amount (or any greater
per share amount paid for Shares pursuant to the Offer), in cash payable to the
holder thereof without interest and less any required withholding taxes and, in
certain circumstances, stock transfer taxes (the "Merger Consideration"). The
Merger Agreement is more fully described in Section 11.
The Merger Agreement provides that the Company will use its reasonable best
efforts to provide that, at the Effective Time, each holder of a
then-outstanding option to purchase Shares under any of the Company's 1996 Stock
Compensation Plan and 1997 Stock Compensation Plan (collectively, the "Stock
Option Plans"), whether or not then exercisable (the "Options"), will, in
settlement thereof, receive from the Company for each Share subject to such
Option an amount (subject to any applicable withholding tax) in cash equal to
the difference between the Merger Consideration and the per Share exercise price
of such Option to the extent such difference is a positive number (such amount
being hereinafter referred to as the "Option Consideration"). The treatment of
Options is more fully described in Section 11.
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including, if required, the approval of the Merger by the
requisite vote or consent of Shareholders. The Shareholder vote necessary to
approve the Merger is the affirmative vote of the holders of a majority of the
issued and outstanding Shares, including Shares held by Purchaser and its
affiliates, voting as a single class, at a special meeting of Shareholders. If
the Minimum Condition is satisfied and Purchaser purchases Shares pursuant to
the Offer, Purchaser will be able to effect the Merger regardless of how any
other Shareholder votes. Further, if Purchaser acquires at least 90% of the
outstanding Shares pursuant to the Offer or otherwise, Purchaser will be able to
effect the Merger pursuant to the "short-form" merger provisions of the Indiana
Business Corporation Law (the "IBCL"), without further notice to, or any action
by, any other Shareholder. In that event, Purchaser intends to effect the Merger
as promptly as practicable following the purchase of Shares in the Offer, and
Shareholders should consider this Offer to Purchase as notice to that effect.
See Section 11.
The Company has informed Purchaser that, as of February 22, 1999, there were
(i) 8,325,967 Shares issued and outstanding, (ii) options to purchase 1,163,332
Shares reserved for issuance upon exercise of outstanding stock options granted
by the Company, (iii) up to 4,000 Shares in the aggregate issuable pursuant to
the Company's Employee Stock Purchase Plan (as described in the 1998 10-K), and
(iv) no Shares of preferred stock of the Company issued and outstanding. Based
upon the Shares and stock
2
<PAGE>
options outstanding as of such date, at least 4,746,650 Shares would need to be
validly tendered pursuant to the Offer and not withdrawn in order for the
Minimum Condition to be satisfied.
No dissenters' rights will be available in connection with the Merger if (i)
as of the record date for the Shareholder vote on the Merger the Shares are
still listed for quotation on the Nasdaq (as defined in Section 6), or (ii)
Purchaser effects a "short-form" merger.
Certain federal income tax consequences of the sale of Shares pursuant to
the Offer and the exchange of Shares for the Merger Consideration pursuant to
the Merger are described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment (and thereby purchase) all Shares
that are validly tendered and not withdrawn in accordance with Section 4 prior
to the Expiration Date. The term "Expiration Date" means 12:00 midnight, New
York City time, on March 25, 1999, unless and until Purchaser, in accordance
with the terms of the Merger Agreement, shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date" means
the latest time and date at which the Offer, as so extended, expires. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or a federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.
In the event that the Offer is not consummated, Purchaser may seek to
acquire Shares through open-market purchases, privately negotiated transactions
or otherwise, upon such terms and conditions and at such prices as Purchaser
shall determine, which may be more or less than the Per Share Amount and could
be for cash or other consideration.
The Offer is conditioned upon, among other things, (i) satisfaction of the
Minimum Condition, (ii) satisfaction of the Listing Condition, and (iii) receipt
of Parent Shareholder Approval. The Offer is also subject to certain other
conditions set forth in Section 14 (the "Offer Conditions," and each condition
individually, an "Offer Condition"). For additional information regarding the
Listing Condition and Parent Shareholder Approval, see Section 9.
Subject to the terms of the Merger Agreement, without the prior written
consent of the Company, Purchaser will not, and Parent will cause Purchaser not
to, (i) decrease or change the form of the Per Share Amount, (ii) decrease the
number of Shares sought in the Offer, (iii) amend or waive the Minimum Condition
or impose conditions on the Offer other than the Offer Conditions, (iv) extend
the Expiration Date of the Offer except (A) as required by Law and (B) that, in
the event that any Offer Condition is not satisfied or waived at the time that
the Expiration Date would otherwise occur, (1) Purchaser must extend the
Expiration Date for 10 additional business days to the extent necessary to
permit such condition to be satisfied and (2) Purchaser may, in its sole
discretion, extend the Expiration Date for such period as it may determine to be
appropriate (but not beyond June 30, 1999), or (v) amend any term of the Offer
in any manner materially adverse to Shareholders (including without limitation
amendments resulting in any extension that would be inconsistent with the
preceding provisions of this sentence), provided, however, that (1) subject to
applicable legal requirements, Parent may cause Purchaser to waive any Offer
Condition, other than the Minimum Condition, in Parent's sole discretion, and
(2) the Offer may be extended in connection with an increase in the
consideration to be paid pursuant to the Offer so as to comply with applicable
rules and regulations of the SEC. Except as set forth above, and subject to
applicable legal requirements, Purchaser may amend the Offer or waive any Offer
Condition in its sole discretion. Assuming the prior satisfaction or waiver of
the Offer Conditions, Parent will cause Purchaser
3
<PAGE>
to accept for payment, and pay for, in accordance with the terms of the Offer,
all Shares validly tendered and not withdrawn pursuant to the Offer as soon as
practicable after the Expiration Date.
Subject to the terms of the Merger Agreement and the rights of tendering
Shareholders to withdraw their Shares, as described in Section 4, Purchaser will
retain all tendered Shares until the Expiration Date.
Subject to the applicable regulations of the SEC and the terms of the Merger
Agreement described above, Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time, to (i) delay the acceptance for
payment of or, regardless of whether such Shares were theretofore accepted for
payment, payment for Shares pending receipt of any regulatory or governmental
approvals specified in Section 15, (ii) terminate the Offer (whether or not any
Shares have theretofore been accepted for payment) if any condition referred to
in Section 14 has not been satisfied or upon the occurrence of any event
specified in Section 14, (iii) waive any condition (except, without the prior
written consent of the Company, the Minimum Condition), or (iv) except as set
forth in the Merger Agreement, otherwise amend the Offer in any respect, in each
case by giving oral or written notice of such termination, waiver or amendment
to the Depositary. The rights reserved by Purchaser in this paragraph are in
addition to Purchaser's rights pursuant to Section 14.
Any extension, delay in payment, termination or amendment of the Offer will
be followed as promptly as practicable by public announcement thereof and such
announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which Purchaser may choose to
make any public announcement, subject to applicable law (including Rules
14d-4(c) and 14d-6(d) under the Exchange Act, which require that material
changes be promptly disseminated to Shareholders in a manner reasonably designed
to inform them of such changes), Purchaser will have no obligation to publish,
advertise or otherwise communicate any such public announcement, other than by
issuing a release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer, or if it
waives a material condition to the Offer, Purchaser will extend the Offer and
disseminate additional tender offer materials to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during
which an offer must remain open following material changes in the terms of the
Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances, including the materiality
of the changes. If a change is made with respect to the price and the percentage
of securities sought, a minimum of 10 business days must be required to allow
for adequate dissemination and investor response. The requirement to extend the
Offer will not apply to the extent that the number of business days remaining
between the occurrence of the change and the then-scheduled Expiration Date
equals or exceeds the minimum extension period that would be required because of
such amendment.
The Company has provided Purchaser with its Shareholder list and security
position listings for the purpose of disseminating the Offer to Shareholders.
This Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Company's Shareholder list
or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
The Rights Agreement, as amended, is inapplicable to the Offer, the
Shareholders Agreement, the Merger Agreement and the transactions contemplated
thereby. In the Merger Agreement, the Company represents and warrants that
neither the execution of the Merger Agreement or Shareholders Agreement nor the
commencement or completion of the Offer or consummation of the Merger or the
other transactions contemplated thereby will trigger the Rights Agreement.
4
<PAGE>
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment (and thereby purchase) and pay for
Shares that are validly tendered and not properly withdrawn prior to the
Expiration Date as soon as practicable after the later of the following dates:
(i) the Expiration Date, (ii) the satisfaction of the Minimum Condition, (iii)
subject to compliance with the applicable rules and regulations of the SEC, the
date of satisfaction or waiver of all the other conditions to the Offer set
forth in this Offer to Purchase. Subject to the applicable rules of the SEC and
the terms of the Merger Agreement, Purchaser expressly reserves the right to
delay acceptance for payment of, or payment for, Shares in order to comply, in
whole or in part, with any other applicable law or regulation.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates for the
Shares (or a timely Book-Entry Confirmation (as defined in Section 3) with
respect to the Shares), (ii) the appropriate Letter(s) of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed with
any required signature guarantees (or in the case of a book-entry transfer of
Shares, an Agent's Message), and (iii) all other documents required by the
Letter of Transmittal. See Section 3. The term "Agent's Message" means a
message, transmitted by a Book-Entry Transfer Facility (as defined in Section 3)
to and received by the Depositary and forming part of a Book-Entry Confirmation,
which states that (i) such Book-Entry Transfer Facility has received an express
acknowledgment from the participant in such Book-Entry Transfer Facility
tendering the Shares that are the subject of such Book-Entry Confirmation, (ii)
such participant has received and agrees to be bound by the terms of the
applicable Letter of Transmittal, and (iii) Purchaser may enforce such agreement
against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) tendered Shares as, if and when Purchaser gives
oral or written notice to the Depositary of Purchaser's acceptance of such
Shares for payment. In all cases, payment for Shares purchased pursuant to the
Offer will be made by deposit of the purchase price with the Depositary, which
will act as agent for the tendering Shareholders for the purpose of receiving
payment from Purchaser and transmitting payment to the tendering Shareholders
whose Shares shall have been accepted for payment. If, for any reason,
acceptance for payment of any Shares tendered pursuant to the Offer is delayed,
or Purchaser is unable to accept for payment Shares tendered pursuant to the
Offer, then, without prejudice to Purchaser's rights under Section 14, the
Depositary may, nevertheless, on behalf of Purchaser, retain the tendered
Shares, and such Shares may not be withdrawn, except to the extent that the
tendering Shareholders are entitled to withdrawal rights as described in Section
4 and as otherwise required by Rule 14e-1(c) under the Exchange Act. Under no
circumstances will interest accrue on the consideration to be paid for the
Shares by Purchaser, regardless of any delay in making such payment.
If any tendered Shares are not purchased for any reason or if certificates
are submitted for more Shares than are tendered, certificates for the Shares not
purchased or tendered will be returned pursuant to the instructions of the
tendering Shareholder without expense to the tendering Shareholder (or, in the
case of Shares delivered by book-entry transfer into the Depositary's account at
a Book-Entry Transfer Facility pursuant to the procedures set forth in Section
3, the Shares will be credited to an account maintained at the appropriate
Book-Entry Transfer Facility) as promptly as practicable following the
expiration, termination or withdrawal of the Offer.
Purchaser reserves the right, subject to the provisions of the Merger
Agreement, to assign, in whole or, from time to time, in part, to one or more of
Parent's subsidiaries or affiliates, the right to purchase all or any portion of
the Shares tendered pursuant to the Offer, but no such assignment will relieve
Purchaser of its obligations under the Offer or prejudice the rights of
tendering Shareholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
5
<PAGE>
IF, PRIOR TO THE EXPIRATION DATE, PURCHASER INCREASES THE CONSIDERATION TO
BE PAID PER SHARE PURSUANT TO THE OFFER, PURCHASER WILL PAY THE INCREASED
CONSIDERATION FOR ALL OF THE SHARES PURCHASED PURSUANT TO THE OFFER, WHETHER OR
NOT THE SHARES WERE TENDERED PRIOR TO THE INCREASE IN CONSIDERATION.
3. PROCEDURE FOR TENDERING SHARES
VALID TENDERS. For Shares to be validly tendered pursuant to the Offer,
either (i) the appropriate Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer of
Shares, and any other documents required by the Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date, and either (a)
certificates representing tendered Shares must be received by the Depositary at
any one of those addresses prior to the Expiration Date, or (b) the Shares must
be delivered pursuant to the procedures for book-entry transfer set forth below
and a Book-Entry Confirmation must be received by the Depositary prior to the
Expiration Date, or (ii) the tendering Shareholder must comply with the
guaranteed delivery procedures set forth below. No alternative, conditional or
contingent tenders will be accepted.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
SHAREHOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility system may make book-entry delivery of Shares by
causing the applicable Book-Entry Transfer Facility to transfer the Shares into
the Depositary's account at the Book-Entry Transfer Facility in accordance with
the Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of the Shares may be effected through book-entry transfer into
the Depositary's account at the Book-Entry Transfer Facility, the appropriate
Letter of Transmittal (or a manually signed facsimile thereof), properly
completed and duly executed with any required signature guarantees, or an
Agent's Message, and any other required documents must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering Shareholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at a Book-Entry Transfer Facility as described above is
referred to as a "Book-Entry Confirmation." DELIVERY OF THE LETTER OF
TRANSMITTAL OR OTHER DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY OF THE LETTER OF TRANSMITTAL OR SUCH OTHER DOCUMENTS TO THE
DEPOSITARY.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal, (i) if the Letter of Transmittal is signed by the registered holder
(which term, for purposes of this Section, includes any participant in the
Book-Entry Transfer Facility system whose name appears on a security position
listing as the owner of the Shares) of Shares tendered therewith and such
registered holder has not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal, or (ii) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of
the Letter of Transmittal.
6
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If the certificates representing Shares are registered in the name of a
person other than the signer of the Letter of Transmittal or if payment is to be
made or if certificates for Shares not tendered or not accepted for payment are
to be returned to a person other than the registered holder of the certificates
surrendered, then the tendered certificates representing Shares must be endorsed
or accompanied by appropriate stock powers, in each case signed exactly as the
name or names of the registered holder or owner appears on the certificates,
with the signatures on the certificates or stock powers guaranteed by an
Eligible Institution as described above and as provided in the Letter of
Transmittal. See Instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a Shareholder wishes to tender Shares pursuant to
the Offer and the Shareholder's certificates are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to be received by the Depositary
prior to the Expiration Date, the Shares may nevertheless be tendered if all the
following guaranteed delivery procedures are complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser with this Offer to
Purchase, is received by the Depositary as provided below prior to the
Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer or a Book-Entry Confirmation with respect to all tendered Shares,
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof) and any required signature
guarantees (or in the case of a book-entry transfer of Shares, an Agent's
Message), and any other documents required by the Letter of Transmittal, are
received by the Depositary within three New York Stock Exchange trading days
after the date of execution of the Notice of Guaranteed Delivery and a
representation that the Shareholder on whose behalf the tender is being made
is deemed to own the Shares being tendered within the meaning of Rule 14e-4
under the Exchange Act.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mailed to the Depositary and must include an
endorsement by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery and a representation that the Shareholder on whose behalf
the tender is being made is deemed to own the Shares being tendered within the
meaning of Rule 14e-4 under the Exchange Act.
Notwithstanding any other provision of this Offer to Purchase, payment for
Shares accepted for payment pursuant to the Offer in all cases will be made only
after timely receipt by the Depositary of certificates for (or Book-Entry
Confirmation with respect to) the Shares, a Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed with all
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and all other documents required by the Letter of Transmittal.
Accordingly, payments may not be made to all tendering Shareholders at the same
time, and will depend upon when Share certificates are received by the
Depositary or Book-Entry Confirmations of such Shares are received into the
Depositary's account at the Book-Entry Transfer Facility.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent backup federal income tax
withholding with respect to the payment of the purchase price for Shares
purchased pursuant to the Offer, a Shareholder must provide the Depositary with
his or her correct taxpayer identification number and certify that he or she is
not subject to backup federal income tax withholding by completing the
substitute Form W-9 included in the Letter of Transmittal. See Instruction 10 of
the Letter of Transmittal. See Section 5 below.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares pursuant to any of the
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<PAGE>
procedures described above will be determined by Purchaser in its sole
discretion, which determination will be final and binding on all parties.
Purchaser reserves the absolute right to reject any or all tenders of Shares
determined not to be in proper form or the acceptance of or payment for which
may, in the opinion of counsel, be unlawful and reserves the absolute right to
waive any defect or irregularity in any tender of Shares. Subject to the terms
of the Merger Agreement, Purchaser also reserves the absolute right to waive or
amend any or all of the Offer Conditions, other than the Minimum Condition.
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letters of Transmittal and the instructions thereto) will be final and
binding on all parties. No tender of Shares will be deemed to have been validly
made until all defects and irregularities have been cured or waived. None of
Purchaser, Parent, Depositary, the Dealer Manager, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
APPOINTMENT AS PROXY. By executing a Letter of Transmittal, a tendering
Shareholder irrevocably appoints designees of Purchaser as his or her
attorneys-in-fact and proxies, with full power of substitution and
resubstitution, in the manner set forth in the Letter of Transmittal, to the
full extent of the Shareholder's rights with respect to the Shares tendered by
the Shareholder and purchased by Purchaser and with respect to any and all other
Shares or other securities issued or issuable in respect of those Shares, on or
after the date of the Offer. All such powers of attorney and proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Purchaser accepts the
Shares for payment. Upon acceptance for payment, all prior powers of attorney
and proxies given by the Shareholder with respect to the Shares (and any other
Shares or other securities so issued in respect of such purchased Shares) will
be revoked, without further action, and no subsequent powers of attorney and
proxies may be given (and, if given, will not be deemed effective) by the
Shareholder. Purchaser or its designees, as the case may be, will be empowered
to exercise all voting and other rights of the Shareholder with respect to such
Shares (and any other Shares or securities so issued in respect of such
purchased Shares) as they in their sole discretion may deem proper, including
without limitation in respect of any annual or special meeting of Shareholders,
or any adjournment or postponement of any such meeting.
Purchaser reserves the absolute right to require that, in order for Shares
to be validly tendered, immediately upon Purchaser's acceptance for payment of
the Shares, Purchaser must be able to exercise full voting and other rights with
respect to the Shares, including voting at any meeting of Shareholders then
scheduled.
Purchaser's acceptance for payment of Shares tendered pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering Shareholder and Purchaser upon the terms and subject to the conditions
of the Offer.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except as
otherwise provided in this Section 4. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser as provided in this Offer to Purchase, may
also be withdrawn at any time after April 26, 1999. If Purchaser extends the
Offer, is delayed in its purchase of or payment for Shares, or is unable to
purchase or pay for Shares for any reason, then, without prejudice to the rights
of Purchaser, tendered Shares may be retained by the Depositary on behalf of
Purchaser and may not be withdrawn, except to the extent that tendering
Shareholders are entitled to withdrawal rights as set forth in this Section 4.
The reservation by Purchaser of the right to delay the acceptance or
purchase of or payment for Shares is subject to the terms of the Merger
Agreement and provisions of Rule 14e-1(c) under the Exchange Act, which requires
Purchaser to pay the consideration offered or to return Shares deposited by or
on behalf of Shareholders promptly after the termination or withdrawal of the
Offer.
8
<PAGE>
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered the Shares.
If certificates evidencing Shares have been delivered or otherwise identified to
the Depositary, then, prior to the release of the certificates, the tendering
Shareholder must also submit the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn, and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution (except in
the case of Shares tendered for the account of an Eligible Institution). If
Shares have been tendered pursuant to the procedure for book-entry transfer set
forth in Section 3, the notice of withdrawal must specify the name and number of
the account at the applicable Book-Entry Transfer Facility to be credited with
the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding on all parties. No withdrawal of
Shares will be deemed to have been made properly until all defects and
irregularities have been cured or waived. None of Parent, Purchaser, the Dealer
Manager, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failing to give such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be tendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3 above.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER
The following is a summary of the material federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted into the right to receive the Merger
Consideration in the Merger. This discussion is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the applicable Treasury
Regulations promulgated and proposed thereunder and published judicial authority
and administrative rulings and practice. Legislative, judicial or administrative
authorities or interpretations are subject to change, possibly on a retroactive
basis, at any time, and a change could alter or modify the statements and
conclusions set forth below. It is assumed for purposes of this discussion that
the Shares are held as "capital assets" within the meaning of Section 1221 of
the Code. This discussion does not address all aspects of federal income
taxation that may be relevant to a particular Shareholder in light of such
Shareholder's personal investment circumstances, or those Shareholders subject
to special treatment under the federal income tax laws (for example, life
insurance companies, tax-exempt organizations, foreign corporations and
nonresident alien individuals) or to Shareholders who acquired their Shares
through the exercise of employee stock options or other compensation
arrangements. In addition, the discussion does not address any aspect of
foreign, state or local income taxation or any other form of taxation that may
be applicable to a Shareholder.
CONSEQUENCES OF THE OFFER AND THE MERGER TO SHAREHOLDERS. The receipt of
the Per Share Amount and the Merger Consideration will be a taxable transaction
for federal income tax purposes (and also may be a taxable transaction under
applicable foreign, state, local and other income tax laws). In general, for
federal income tax purposes, a Shareholder will recognize gain or loss equal to
the difference between his or her adjusted tax basis in the Shares sold pursuant
to the Offer or converted to cash in the Merger and the amount of cash received
therefor. Such gain or loss will be capital gain or loss and will be long-term
gain or loss, if, on the date of sale (or, if applicable, the date of the
Merger), the Shares were held for more than one year.
9
<PAGE>
BACKUP TAX WITHHOLDING. Under the Code, a Shareholder may be subject, under
certain circumstances, to "backup withholding" at a 31% rate with respect to
payments made in connection with the Offer or the Merger. Backup withholding
generally applies if the Shareholder (i) fails to furnish his or her social
security number or other taxpayer identification number ("TIN"), (ii) furnishes
an incorrect TIN, (iii) fails properly to report interest or dividends, or (iv)
under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN provided is his or her correct number
and that he or she is not subject to backup withholding. Backup withholding is
not an additional tax but merely an advance payment, which may be refunded to
the extent it results in an overpayment of tax. Certain persons generally are
exempt from backup withholding, including corporations and financial
institutions. Certain penalties apply for failure to furnish correct information
and for failure to include the reportable payments in income. Each Shareholder
should consult with his or her own tax advisor as to its qualifications for
exemption from withholding and the procedure for obtaining such exemption.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE OFFER
AND THE MERGER TO THEM IN VIEW OF THEIR OWN PARTICULAR CIRCUMSTANCES.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 (the "1997 10-K") and Annual Report on Form 10-K for the
fiscal year ended January 2, 1999 (the "1998 10-K," and, together with the 1997
10-K, the "Company 10-K") and information supplied to Parent by the Company, the
principal trading market for the Shares is the Nasdaq Stock Market, Inc.'s
National Market (the "Nasdaq") and the Shares trade on the Nasdaq under the
symbol "SNSR." The following table sets forth, for the periods indicated, the
high and low sale prices per Share reported by the Nasdaq Composite Reporting
System, retroactively adjusted to reflect a 4-for-3 stock split effective
December 15, 1997, and a 5-for-4 stock split effective June 15, 1998.
According to the Company 10-K, the Company commenced trading on the Nasdaq
on October 2, 1996.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1996
Fourth Quarter (commencing October 2, 1996).................................................... $ 7.80 $ 5.55
1997
First Quarter.................................................................................. $ 9.38 $ 6.91
Second Quarter................................................................................. 7.88 6.91
Third Quarter.................................................................................. 9.45 7.66
Fourth Quarter................................................................................. 14.41 9.00
1998
First Quarter.................................................................................. $ 14.59 $ 10.00
Second Quarter................................................................................. 15.00 10.80
Third Quarter.................................................................................. 15.50 11.06
Fourth Quarter................................................................................. 17.00 8.75
1999
First Quarter (through February 22, 1999)...................................................... $ 17.13 $ 13.25
</TABLE>
The Company declared (and later paid) a dividend of $0.02 per Share in the
second quarter of 1998 and in each quarter thereafter. The Company dividend of
$0.02 per Share declared on January 22, 1999, to Shareholders of record on
February 26, 1999, will be paid in accordance with its terms on March 19, 1999.
10
<PAGE>
On February 22, 1999, the last full trading day before the public
announcement of Purchaser's intention to acquire the Shares, the last reported
sale price on the Nasdaq was $13.50 per Share. On February 25, 1999, the last
full trading day before the commencement of the Offer, the last reported sale
price on the Nasdaq was $15.91 per Share. SHAREHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
GENERAL INFORMATION. The Company is an Indiana corporation with its
principal executive offices located at 228 Northeast Road, Standish, Maine
04084. The Company designs, manufactures and markets circuit breakers,
electronic sensors and electronic ceramic component parts used by original
equipment manufacturers in the automotive, appliance and telecommunications
markets.
HISTORICAL FINANCIAL INFORMATION. Set forth below is certain selected
consolidated financial information with respect to the Company and its
subsidiaries excerpted from the Company 10-K. More comprehensive financial
information is included in such reports and other documents filed by the Company
with the SEC, and the following summary is qualified in its entirety by
reference to such reports and other documents and all of the financial
information (including any related notes) contained therein. The 1997 10-K and
the 1998 10-K are incorporated herein by reference. Such reports and other
documents should be available for inspection and copies should be obtainable in
the manner set forth below under "Available Information."
11
<PAGE>
CONTROL DEVICES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------
<S> <C> <C> <C>
JANUARY 2,
1999(1) DECEMBER 27, 1997 DECEMBER 28, 1996(1)
----------------- ----------------- --------------------
STATEMENT OF INCOME DATA:
Net sales............................................ $ 79,979 $ 70,204 $ 60,495
Cost of sales........................................ 52,080 45,279 38,929
------- ------- -------
Gross profit....................................... 27,899 24,925 21,566
Operating Expenses:
Selling, general and administrative.................. 12,077 10,755 9,209
Research and development............................. 5,377 4,421 3,847
------- ------- -------
Operating income..................................... 10,445 9,749 8,510
Interest expense..................................... (297) 170 1,562
------- ------- -------
Income before income taxes........................... 10,742 9,579 6,948
Income tax provision................................. 2,878 3,676 2,673
------- ------- -------
Net income........................................... $ 7,864 $ 5,903 $ 4,275
------- ------- -------
------- ------- -------
Net income applicable to common Shareholders......... 7,864 5,903 4,066
Net income per share:(2)
Basic.............................................. $ 0.95 $ 0.71 $ 0.77
Diluted............................................ $ 0.90 $ 0.69 $ 0.77
Weighted average common shares and equivalents
outstanding:(2)
Basic.............................................. 8,298 8,274 5,252
Diluted............................................ 8,778 8,524 5,271
BALANCE SHEET DATA (AT PERIOD END):
Working capital...................................... $ 22,563 $ 15,025 $ 10,761
Total assets......................................... 60,893 51,049 44,243
Long-term debt, net of current maturities............ 152 640 1,320
Redeemable preferred shares.......................... -- -- --
Shareholders' equity................................. 41,948 34,089 28,329
</TABLE>
- ------------------------
(1) The Selected Consolidated Financial Data presented for the fiscal year ended
December 28, 1996 includes the results of operations of Realisations et
Diffusion pour l'Industrie from April 1, 1996, the date of its acquisition
by the Company. The Selected Consolidated Financial Data presented for the
fiscal year ended January 2, 1999 includes the results of operations of
Arnould Electro-Industrie from June 26, 1998, the date of its acquisition by
the Company.
(2) On December 15, 1997, the Company effected a 4-for-3 stock split of its
Shares which entitled each Shareholder to receive one additional Share for
each three outstanding Shares held of record as of the close of business on
December 1, 1997. On June 15, 1998, the Company effected a 5-for-4 stock
split of its Shares which entitled each Shareholder to receive one
additional Share for each four outstanding Shares held of record as of the
close of business on May 29, 1998. All Share and per Share amounts in the
Selected Consolidated Financial Data have been restated to give retroactive
effect to the stock splits.
AVAILABLE INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act. In accordance with the Exchange Act, the
Company files periodic reports, proxy statements and other information with the
SEC relating to its business, financial condition and other matters. The Company
is required to disclose in such proxy statements certain information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the
12
<PAGE>
principal holders of the Company's securities and any material interest of those
persons in transactions with the Company. Such reports, proxy statements and
other information may be inspected at the SEC's office at 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection and
copying at the regional offices of the SEC located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies may be obtained upon payment of the
SEC's prescribed fees by writing to its principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549, or through the SEC's Website (http://www.sec.gov).
Although neither Parent nor Purchaser has any knowledge that would indicate
that statements contained herein based upon information furnished by the Company
or documents and records relating to the Company (collectively, the "Company
Information") are untrue, none of Parent, Purchaser, the Dealer Manager or the
Information Agent assumes any responsibility for the accuracy or completeness of
the Company Information or for any failure by the Company to disclose events
that may have occurred or may affect the significance or accuracy of any such
information but that are unknown to Parent and Purchaser.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
Purchaser, an Indiana corporation, was organized to acquire all of the
Shares pursuant to the Offer and the Merger and has not conducted any unrelated
activities since its organization. All of the outstanding capital stock of
Purchaser is owned indirectly by Parent. The principal executive offices of
Purchaser are located at 2 Cheapside Court, Buckhurst Road, Ascot, Berkshire,
England SL5 7RF, United Kingdom.
Parent is a public limited company registered in England and Wales, with its
principal executive offices located at 2 Cheapside Court, Buckhurst Road, Ascot,
Berkshire, England SL5 7RF, United Kingdom. Parent is engaged in the design,
development, manufacture and supply of products and services in the fields of
sensing, measurement and safety testing for the global transportation industry.
Neither Parent nor Purchaser is subject to the information requirements of
the Exchange Act and, therefore, reports relating to each of its business,
financial condition and other matters have not been filed with, and will not be
available from, the SEC. However, copies of Parent's audited consolidated
accounts for the year ended April 30, 1998 and Parent's unaudited interim
consolidated accounts for the six months ended October 31, 1998 and a summary of
the significant differences between U.S. and U.K. generally accepted accounting
principles are attached hereto as Annexes A, B and C, respectively.
Because the Purchaser is newly formed and has minimal assets and
capitalization, no meaningful financial information regarding Purchaser is
available.
Except as set forth elsewhere in this Offer to Purchase or Schedule I
hereto, (i) neither Parent nor Purchaser nor, to the knowledge of Parent or
Purchaser, any of the persons listed in Schedule I hereto or any associate or
majority-owned subsidiary of Parent or Purchaser or any of the persons so
listed, (a) beneficially owns or has a right to acquire any Shares or any other
equity securities of the Company, (b) has effected any transaction in the Shares
or any other equity securities of the Company during the past 60 days, or (c)
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company (including any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss or the giving or withholding
of proxies, consents or authorizations), (ii) there have been no transactions
which would require reporting under the rules and regulations of the SEC between
Parent or Purchaser or any of their respective subsidiaries or, to the knowledge
of Parent or Purchaser, any of the persons listed in Schedule I hereto, on the
one hand, and the Company or any of its executive officers, directors or
affiliates, on the other hand, and (iii) there have been no contacts,
negotiations or transactions between Parent or Purchaser or any of their
respective subsidiaries or, to the knowledge of Parent or Purchaser, any of the
persons listed in Schedule 1 hereto, on the one hand, and the Company or its
subsidiaries or affiliates, on the other hand, concerning a merger,
13
<PAGE>
consolidation or acquisition, a tender offer or other acquisition of securities
of any class of the Company, an election of directors of the Company or a sale
or other transfer of a material amount of assets of the Company or any of its
subsidiaries.
9. SOURCE AND AMOUNT OF FUNDS
The Purchaser estimates that the total amount of funds required to purchase,
pursuant to the Offer and the Merger, the number of Shares that were
outstanding, and subject to future issuance pursuant to outstanding options and
purchase plan rights, on a fully diluted basis as of February 22, 1999 will be
approximately $145.1 million (net of the exercise price payable with respect to
such Options and rights) and that approximately $6.7 million of additional funds
will be required to pay fees and expenses related to the Offer and the Merger.
The Purchaser plans to obtain all funds needed for the Offer and the Merger
through a capital contribution from Parent. Parent intends to fund substantially
all of this capital contribution from cash on hand and bank facilities,
including a bridge financing facility intended to be repaid through a rights
offering by First Technology Funding plc, a wholly owned subsidiary of Parent
("FT Funding"). The rights offering is fully underwritten by Dresdner Kleinwort
Benson.
The descriptions below of the Loan Agreement, the Bridging Agreement and the
Underwriting Agreement are qualified in their entirety by reference to the text
of such agreements filed as exhibits to the Tender Offer Statement on Schedule
14D-1 (the "Schedule 14D-1") filed by Parent and Purchaser with the SEC in
connection with the Offer, which agreements are incorporated herein by
reference.
BANK FACILITIES. Parent will obtain a portion of the funds from a credit
facility (the "Credit Facility") pursuant to a loan agreement (the "Loan
Agreement"), dated February 23, 1999, among Parent, HSBC Investment Bank PLC, as
agent, and The First National Bank of Chicago, HSBC Investment Bank PLC and
Dresdner Bank AG, London Branch (the "Banks"). Under the Credit Facility, the
Banks will provide Parent with a $40 million term loan and a $40 million
revolving credit facility. The proceeds of the Credit Facility will be used to
finance, in part, the payment of cash consideration for Shares that have been
accepted for payment by the Purchaser and the balance will be used to meet costs
and expenses associated with the Merger. The Credit Facility carries interest at
a rate equal to 1.1 percent over the U.S. dollar-denominated London Interbank
Offered Rate ("LIBOR").
The term loan facility is repayable in annual installments on April 30th of
each year until April 30, 2004. The revolving credit facility is repayable in
full on April 30, 2004. The term loan and revolving credit facilities are
unsecured, but Parent's subsidiaries will give guarantees for Parent's
obligations to the Banks and the Agent. Parent has agreed to cause the Company
and its subsidiaries to give guarantees on similar terms upon completion of the
Merger.
The Credit Facility is subject to various customary representations and
warranties, financial covenants, cancellation events and a change of control
provision. The availability of the Credit Facility depends on the fulfillment of
various conditions, including the satisfaction of the Minimum Condition. In
addition, if certain representations or warranties are incorrect in any material
respect when made or deemed to be made and have not been remedied within a
specified cure period, Parent will not be able to obtain funds from the Credit
Facility.
Parent plans to repay borrowings under the Credit Facility and interest
thereon out of cash from operations.
BRIDGING FACILITY. Dresdner Bank AG, London Branch ("Dresdner Bank"), has
agreed, in an Agreement dated February 23, 1999, between Parent and Dresdner
Bank (the "Bridging Agreement"), to provide a term loan facility of up to L40
million (or $65.2 million, calculated at the February 19, 1999 exchange rate of
1.6295 dollars for each pound) to Parent. The Bridging Agreement is repayable
directly from the proceeds of the underwritten rights issue described below, and
in any event before April 16, 1999. The Bridging Agreement will carry interest
at LIBOR plus mandatory costs, which interest rate is
14
<PAGE>
increased by one percent 14 days after the first advance thereunder is made. The
Bridging Agreement is unsecured.
The Bridging Agreement is subject to various customary representations,
warranties, and undertakings and an indemnity to Dresdner Bank. The availability
of funds under the Bridging Agreement depends on the fulfillment of various
conditions, including the obtaining of Parent Shareholder Approval and the
satisfaction of the Minimum Condition. In addition, if certain representations
or warranties are incorrect in any material respect when made or deemed to be
made and have not been remedied within a specified cure period, Parent will not
be able to obtain funds from the Bridging Agreement.
RIGHTS ISSUE. Parent intends to repay funds borrowed under the Bridging
Agreement with proceeds from the issuance (the "Rights Issue") of up to
12,029,189 units of convertible unsecured loan stock ("Loan Stock") by way of
offering each qualifying shareholder of Parent the right to receive one unit of
Loan Stock for every four ordinary shares ("Ordinary Shares") of Parent at a
price of 320 pence per unit of Loan Stock, for aggregate proceeds of
approximately L38.5 million (or $62.7 million, calculated at the February 19,
1999 exchange rate of 1.6295 dollars for each pound). If the Offer is not
consummated, the Loan Stock will be redeemed for its purchase price, plus
interest; if the Offer is consummated, the Loan Stock will be converted, into
Ordinary Shares.
The Rights Issue has been fully underwritten in accordance with an
underwriting agreement, dated February 23, 1999, among Parent, FT Funding and
Kleinwort Benson Securities Limited (the "Underwriting Agreement"). The
Underwriting Agreement is conditional, among other things, upon the passing of
the resolutions described below under "Parent Shareholder Approval" and the
admission of the Loan Stock to the Official List of the London Stock Exchange
(the "Admission") becoming effective by 10:00 a.m., London time, on March 12,
1999, or such later date as the parties to the Underwriting Agreement may agree,
but not later than March 22, 1999. The Parent Shareholder Approval and the
Admission are also conditions to the Offer and are referred to herein as the
"Shareholder Approval Condition" and the "Listing Condition."
Under the listing rules of the London Stock Exchange, a company listed on
that exchange is required to make application for admission to listing of any of
its shares where dealings are to take place on the London Stock Exchange.
Admission of any shares to listing only becomes effective when the decision of
the London Stock Exchange to admit the shares to listing has been announced by
being disseminated by the electronic systems used by the London Stock Exchange
for communicating with its member firms. In the case of the Rights Issue,
Admission is expected to take place at 9:00 a.m., London Time, on March 12,
1999, the day following the obtaining of Parent Shareholder Approval at the
extraordinary general meeting of Parent's shareholders scheduled to be held on
March 11, 1998.
Under the Underwriting Agreement, Parent has given certain representations,
warranties and undertakings and an indemnity to Kleinwort Benson Securities
Limited. In certain circumstances, including if a material breach of such
representations, warranties and undertakings occurs or is discovered before
Admission, Kleinwort Benson Securities Limited has the right to terminate the
Underwriting Agreement prior to Admission becoming effective.
PARENT SHAREHOLDER APPROVAL. The Offer itself is conditioned upon Parent
Shareholder Approval. See Section 14.
15
<PAGE>
On February 23, 1999, Parent mailed to its shareholders a notice of and
circular pertaining to an Extraordinary General Meeting (the "Meeting") of
Parent to be held on March 11, 1999. At the Meeting, the following resolutions
will be proposed and voted upon:
1. to approve the acquisition of the Company and authorize the borrowings
pursuant to the Bridging Facility; and
2. to increase Parent's authorized share capital in order to permit, among
other things, the issuance of the Ordinary Shares contemplated by the
Rights Issue.
Parent's Directors have recommended that Parent's shareholders vote in favor
of these resolutions. The affirmative vote of holders of a majority of the
Ordinary Shares of Parent represented in person or by proxy at the Meeting is
required for Parent Shareholder Approval.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
Over the past seven years, Parent has considered a number of possible
acquisitions, business combinations and other transactions of or with other
companies serving the global transportation industry in the supply of sensing,
measurement and safety-testing products.
On March 3, 1998, Dresdner Kleinwort Benson North America LLC (together with
Kleinwort Benson Securities Limited, "Dresdner Kleinwort Benson"), Parent's
financial adviser, sent a letter to Bruce D. Atkinson, the President, Chief
Executive Officer and a Director of the Company, offering to introduce
representatives of Parent to the Company for the purpose of exploring a
potential alliance. On March 24, 1998, representatives of Dresdner Kleinwort
Benson met with Mr. Atkinson and Jeffrey G. Wood, Vice President, Chief
Financial Officer, Secretary and Treasurer of the Company at the Company's
headquarters in Standish, Maine, for the purpose of obtaining information about
the Company.
On April 29 and 30, 1998, Dr. Fred Westlake, Executive Chairman of Parent,
and Oliver G. Burns, Finance Director of Parent, met with Mr. Atkinson and Mr.
Wood at the Company's headquarters. The meeting consisted of a general
discussion regarding the background of the two companies and their strategic
alternatives. On May 18, 1998, Dr. Westlake met in New York City with Ralph R.
Whitney, the Chairman of the Board of the Company, to discuss the possibility of
a business combination between the Company and Parent. The foregoing discussions
and various subsequent discussions focused principally on an exchange of shares
resulting in a combined company and various management, governance and similar
issues related thereto. The possibility of a small cash component was also
considered.
Following a series of telephonic and fax communications, a confidentiality
agreement was entered into between the Company and Parent on June 4, 1998. The
confidentiality agreement provided for the mutual exchange of certain
information between Parent and the Company and also contained customary
"standstill" provisions extending to June 30, 2000.
On June 15, 1998, Mr. Burns met with Mr. Atkinson and Mr. Wood at the
Company's headquarters to learn more about the Company. On June 16, 1998, Dr.
Westlake advised the Parent Board of the discussions with the Company. On June
19, 1998, Messrs. Whitney and Atkinson met with Dr. Westlake and Mr. Burns and
representatives of Dresdner Kleinwort Benson in Detroit. No agreement could be
reached as to price or structure during the meeting and the parties agreed to
suspend further negotiations until the Company's design, marketing and
consulting services agreement and licensing arrangements with an unaffiliated
person (the "Consultant") could be renegotiated.
In late June 1998 the parties recognized that a significant period of time
would be required to complete the negotiations with the Consultant and they
agreed to defer further due diligence investigations until that matter was
resolved. In mid-August 1998, the Company advised Parent that it had reached an
agreement in principle with this individual on the restructuring of their
arrangements. As discussed herein, the restructuring was finalized in late
December 1998.
On August 24, 1998, after consultation with various members of Parent's
Board of Directors (the "Parent Board"), Dr. Westlake sent a fax to Mr. Whitney
seeking to resolve the issues of price and structure. He expressed his
preference that a substantial portion of the consideration be in the form of
16
<PAGE>
Parent shares and said that he would be prepared to recommend $18.00 per Company
share. Dr. Westlake and Mr. Whitney discussed these issues on August 27 and
concurred that they would each support a transaction valued at $18.00 per
Company share, payable half in Parent stock and half in cash, subject to due
diligence, definitive documentation, satisfactory market conditions and board
approvals. Accordingly, a due diligence meeting among representatives of Parent
and the Company and their advisers was held in Portland, Maine, on September 2,
1998.
Prior to such meeting, however, stock market conditions in New York and
London had deteriorated markedly. The closing price of Parent shares on the
London Stock Exchange (the "Closing Price") dropped from 390.5p on August 21,
1998 (the last trading day preceding Dr. Westlake's fax), to 388.0p on August
26, 1998 (the last trading day preceding the conversation between Dr. Westlake
and Mr. Whitney) to 326.0p on September 1, 1998 (the last trading day preceding
the Portland meeting). The closing price of the Company's shares dropped from
$13.25 on August 21 to $11.63 on September 1.
Due to these market disruptions, Parent decided to suspend further due
diligence investigation of the Company. On September 5, 1998, a representative
of Dresdner Kleinwort Benson requested that Mr. Whitney explore alternative
prices and structures. Mr. Whitney responded that he wished to let market
conditions stabilize, but expressed a willingness to consider an all cash
transaction. At a September 10, 1998 meeting, various members of the Parent
Board concluded that Parent should not continue to proceed to acquire the
Company on the basis of an $18.00 per share price substantially payable in
Parent shares.
During September and October, various efforts were made to address the
issues of price and structure in light of then prevailing US and UK market
conditions.
On September 18, 1998, Parent received a report on the Company from
AutoFina, a consulting firm experienced in the automotive parts business.
AutoFina's report on September 18, 1998 was cautious as to the Company's growth
prospects.
At a September 29, 1998 meeting, the Parent Board considered the possibility
of acquiring the Company entirely for cash, but concluded that this should not
be done entirely on the basis of debt financing. It was agreed to explore the
possibility of a rights offering with Dresdner Kleinwort Benson. Dr. Westlake
and Mr. Whitney met in Denver on October 5, 1988 to discuss the situation. On
October 9, 1998, the closing price of the Company shares on the Nasdaq reached
its 1998 low of $8.75 per share.
On October 19, 1998, the Parent Board again reviewed the possibility of
acquiring the Company in an all cash transaction and reaffirmed that borrowing
all the funds required would over-leverage Parent. The Parent Board also
concluded, after receiving advice from Dresdner Kleinwort Benson, that the use
of a rights offering to partially finance such an acquisition was not
practicable due to then prevailing UK stock market conditions. In light of the
factors described above, the Parent Board decided to terminate further
negotiations with the Company. Dr. Westlake so advised Mr. Whitney on the same
day.
On November 17, 1998, during a review of the Company's operations in Europe,
Messrs. Atkinson and Wood met with Dr. Westlake and Mr. Burns at Parent's
headquarters in Ascot, England and discussed the Company's business.
In late November, based upon improving conditions in the UK market and a
rise in Parent's stock price on the London Stock Exchange, Dresdner Kleinwort
Benson advised Parent that the prospects for a successful rights offering had
improved. After deliberation, Parent's management concluded that the acquisition
of the Company in an all-cash transaction would be attractive, but only at a
price significantly lower than $18.00 per share. Among the factors contributing
to the latter decision were Parent's lower estimation of the Company's growth
prospects and the continued uncertainty of the worldwide automotive parts
markets.
On December 7, 1998, Dr. Westlake, after consultation with certain Parent
Board members, faxed to the Company a draft term sheet proposing to acquire all
the Company shares at $16.00 per share in cash, subject to various conditions,
including the renegotiation of employment and severance arrangements with
Messrs. Atkinson and Wood and Michel Hauser-Kauffmann, Managing Director of the
Company's French operations, the agreement of certain officers and directors of
the Company to invest $13 million of the
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proceeds of their Company stock and stock options in Parent stock, and the
payment of a termination fee and expenses under customary conditions. On
December 9, 1998, the Parent Board reviewed the situation. Price and structure
negotiations by telephonic and fax communications continued between the Company
and Parent during December.
On December 27, 1998, the Company and the Consultant entered into an
additional license agreement which provides for minimum cash royalty payments.
On December 28, 1998, the Consultant and the Company terminated the consulting
services agreement signed in April of 1995 and amended the Company's 1995
license agreements with the Consultant to reduce the minimum cash royalty and
license payments on certain products. In connection with the termination of such
consulting services agreement, the Company paid the Consultant a one time
payment of $635,553.
On January 4, 1999, Dr. Westlake and Mr. Burns met with Mr. Whitney at
Parent's headquarters. Mr. Whitney inquired whether Parent would reconsider a
share-for-share transaction. Alternatively, he said, he would be prepared to
recommend an all cash transaction at a price of $16.25 per share. On January 7,
1999, Mr. Burns sent Mr. Whitney a fax declining to consider a share-for-share
proposal, but agreeing to proceed on the basis of $16.25 per share in cash,
subject to various conditions. On January 14, 1999, the parties entered into a
letter agreement in which the Company agreed to give Parent a period of
exclusivity for six weeks in order for Parent to proceed with negotiations and a
due diligence investigation. Attached to the letter agreement was a draft
"proposed term sheet," which was expressly subject to Parent's completion of due
diligence and a working capital review and the signing of definitive
documentation. The document contemplated a purchase price of $16.25 per share in
cash, investment in Parent stock of $8 million of proceeds by certain officers
and directors, a termination fee of $3 million (plus expenses) payable by the
Company in customary circumstances, renegotiated employment arrangements with
Messrs. Atkinson, Wood and Hauser-Kauffmann, and binding undertakings to accept
Parent's offer by the Company directors and Messrs. Wood and Hauser-Kauffmann.
During January and February 1999 representatives of Parent and its
financial, accounting and legal advisors conducted a due diligence investigation
of the Company. During the same period, negotiations continued between
representatives of Parent and Messrs. Atkinson, Wood and Hauser-Kauffmann on the
revised employment arrangements of such Company executives. Negotiations
commenced in February, 1999 as to the terms of the Merger Agreement, the
Shareholders Agreement and the Subscription Agreement (the "Definitive Company
Agreements").
On February 20, 1999, Dr. Westlake and Mr. Whitney had a telephone
conversation in which they agreed that the termination payment would be a $2
million fee plus expenses not to exceed $7 million in the aggregate. They also
agreed as to various provisions of the Shareholders Agreement.
On February 22, 1999, the Parent Board approved the Definitive Company
Agreements and the financing arrangements described in Section 9, after the
review of such agreements and arrangements with its financial and legal
advisors. Also on February 22, 1999, the Company Board approved the Merger
Agreement and the Shareholders Agreement after review of such agreements and
arrangements with its financial and legal advisors. At such meeting, Cleary Gull
rendered its opinion that as of the date of such opinion and subject to certain
matters stated therein, the Per Share Amount was fair to the Company's
Shareholders from a financial point of view.
A press release announcing the transaction was issued by Parent and the
Company on February 23, 1999.
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11. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER
AGREEMENT; THE SHAREHOLDERS AGREEMENT; OTHER RELATED AGREEMENTS; AND OTHER
MATTERS
PURPOSE OF THE OFFER AND THE MERGER. The purpose of the Offer and the
Merger is to enable Purchaser to acquire, in one or more transactions, control
of the Company and the entire equity interest in the Company. The Offer is
intended to facilitate the acquisition of all of the Shares and to increase the
likelihood that the Merger will be completed promptly. The acquisition of the
entire equity interest in the Company has been structured as a cash tender offer
followed by a cash merger in order to provide a prompt and orderly transfer of
ownership of the Company from Shareholders to Parent and to provide Shareholders
promptly with cash equal to the Per Share Amount for all of their Shares.
PLANS FOR THE COMPANY. Following the Merger, the Company will be operated
as an indirect, wholly owned subsidiary of Parent. Except as otherwise described
in this Offer to Purchase, and for possible transactions between the Company and
other subsidiaries of Parent in connection with the integration of business
conducted by the Company with the other businesses of Parent and its
subsidiaries, Purchaser, Parent and the directors and officers of Purchaser and
Parent listed on Schedule I hereto have no current plans or proposals that would
result in (i) an extraordinary corporate transaction, such as a merger,
reorganization, liquidation or sale or transfer of a material amount of assets
involving the Company or any of its subsidiaries, (ii) except as otherwise
described in the Merger Agreement, any change in the present Company Board or
management of the Company, or (iii) any material change in the Company's
corporate structure or business.
Parent intends, from time to time, after completion of the Offer, to
evaluate and review the Company's and its subsidiaries' operations and the
potential opportunities for rationalization and the achievement of synergies
with Parent's operations, and to consider what, if any, changes would be
desirable in light of the results of such evaluations and reviews. After any
such review, Parent will determine what actions or changes, if any, would be
desirable in light of the circumstances that then exist, and it reserves the
right to effect such actions or changes.
THE MERGER AGREEMENT.
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement, which is incorporated by reference and filed with the
SEC as an exhibit to the Schedule 14D-1. The Merger Agreement may be examined
at, and copies obtained from, the offices of the SEC in the manner set forth in
Section 7 above. All terms not defined herein have the meanings ascribed to such
terms in the Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer.
Without the prior written consent of the Company, Purchaser will not, and Parent
will not cause Purchaser to, (i) decrease or change the form of the Per Share
Amount, (ii) decrease the number of Shares sought in the Offer, (iii) amend or
waive the Minimum Condition or impose conditions on the Offer other than the
Offer Conditions, (iv) extend the Expiration Date except (A) as required by law
and (B) that, in the event that any Offer Condition is not satisfied or waived
at the time that the Expiration Date would otherwise occur, (1) Purchaser must
extend the Expiration Date for 10 additional business days to the extent
necessary to permit such condition to be satisfied, and (2) Purchaser may, in
its sole discretion, extend the Expiration Date for such additional period as it
may determine to be appropriate (but not beyond June 30, 1999 (the "Outside
Date")), or (v) amend any term of the Offer in any manner materially adverse to
Shareholders (including without limitation amendments resulting in any extension
which would be inconsistent with the preceding provisions of this sentence),
provided, however, that (1) subject to applicable legal requirements, Parent may
cause Purchaser to waive any Offer Condition, other than the Minimum Condition,
in Parent's sole discretion, and (2) the Offer may be extended in connection
with an increase in the consideration to be paid pursuant to the Offer so as to
comply with applicable rules and regulations of the SEC. Except as
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set forth above and subject to applicable legal requirements, Purchaser may
amend the Offer or waive any Offer Condition in its sole discretion. Assuming
the prior satisfaction or waiver of the Offer Conditions, Parent will cause
Purchaser to accept for payment, and pay for, in accordance with the terms of
the Offer, all Shares validly tendered and not withdrawn pursuant to the Offer
as soon as practicable after the Expiration Date or any extension thereof.
The Company made representations to Parent in the Merger Agreement that: (a)
the Company Board has, (i) determined that the Merger Agreement, the Offer and
the Merger are fair to and in the best interests of the Company and its
Shareholders, (ii) approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, (iii) taken all other
action necessary to render the limitations on control share acquisitions and
business combinations contained in Chapters 42 and 43 of the IBCL (or any
similar provision) inapplicable to any transactions contemplated by the Merger
Agreement, (iv) amended the Company Rights Agreement to, among other things,
render it inapplicable to any transactions contemplated by the Merger Agreement,
and (v) resolved to recommend acceptance of the Offer by Shareholders and
adoption of the Merger Agreement by Shareholders, and (b) Cleary Gull has
delivered to the Company Board its opinion that the consideration to be received
by Shareholders in the Offer and the Merger is fair to such Shareholders from a
financial point of view.
Pursuant to the Merger Agreement, the Company is not permitted to otherwise
amend the Rights Agreement or take any other action with respect to, or make any
determination under, the Rights Agreement, including a redemption of the Company
Rights (as defined in the Merger Agreement) or any action to facilitate a
Company Takeover Proposal.
BOARD REPRESENTATION. The Merger Agreement provides that promptly upon the
purchase of Shares by Purchaser pursuant to the Offer, and from time to time
thereafter, (i) Parent will be entitled to designate such number of directors
("Parent's Designees"), rounded up to the next whole number, as will give
Parent, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Company Board equal to the product of (A) the number of
directors on the Company Board (giving effect to any increase in the number of
directors pursuant to the Merger Agreement) and (B) the percentage that such
number of Shares so purchased bears to the aggregate number of Shares
outstanding (such number being, the "Board Percentage"); provided, however, that
if the number of Shares purchased pursuant to the Offer equals or exceeds a
majority of the outstanding Shares, the Board Percentage will in all events be a
majority of the members of the Company Board, and (ii) the Company will, upon
request by Parent, promptly satisfy the Board Percentage by (A) increasing the
size of the Company Board or (B) using its reasonable best efforts to secure the
resignations of such number of directors as is necessary to enable Parent's
Designees to be elected to the Company Board, or both, and will use its
reasonable best efforts to cause Parent's Designees promptly to be so elected,
subject in all instances to compliance with Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. At the request of Parent, the Company
will take all lawful action necessary to effect any such election. Parent will
supply to the Company in writing and be solely responsible for any information
with respect to itself, the Parent's Designees and Parent's officers, directors
and affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder to be included in the Schedule 14D-9. Notwithstanding the
foregoing, at all times prior to the Effective Time, the Company Board will
include at least two Continuing Directors (as defined below).
The Merger Agreement further provides that, notwithstanding any other
provision of the Merger Agreement, the Company articles of incorporation or
bylaws, or of applicable law to the contrary, following the election or
appointment of Parent's Designees pursuant to the Merger Agreement and prior to
the Effective Time, any amendment or termination of the Merger Agreement by the
Company, extension by the Company for the performance or waiver of the
obligations or other acts of Parent or Purchaser under the Merger Agreement or
waiver by the Company of the Company's rights under the Merger Agreement will
require the affirmative vote of the majority of the Continuing Directors.
"Continuing Directors" means at any time, (i) those directors of the Company who
are directors on the date of the
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Merger Agreement and who voted to approve the Merger Agreement, and (ii) such
additional directors of the Company who are not affiliated with Parent,
Purchaser or any of their affiliates and who are designated as "Continuing
Directors" for purposes of the Merger Agreement by a majority of the Continuing
Directors in office at the time of such designation.
THE MERGER. The Merger Agreement provides that on its terms and subject to
its conditions, at the Effective Time, Purchaser will be merged with and into
the Company in accordance with the applicable provisions of the IBCL, and the
separate corporate existence of Purchaser will thereupon cease. The Company will
be the surviving corporation in the Merger (as such, the "Surviving
Corporation") in accordance with the IBCL.
The articles of incorporation of the Surviving Corporation to be in effect
from and after the Effective Time until amended in accordance with its terms and
the IBCL will be the articles of incorporation of Purchaser immediately prior to
the Effective Time. The bylaws of the Surviving Corporation to be in effect from
and after the Effective Time until amended in accordance with its terms, the
Surviving Corporation's articles of incorporation and the IBCL will be the
bylaws of Purchaser immediately prior to the Effective Time.
The members of the initial Board of Directors of the Surviving Corporation
will be the members of the Board of Directors of Purchaser immediately prior to
the Effective Time. All of the members of the Board of Directors of the
Surviving Corporation will serve until their successors are duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the articles of incorporation and the bylaws of the Surviving
Corporation. The officers of the Surviving Corporation will consist of the
officers of the Company immediately prior to the Effective Time. Such Persons
will continue as officers of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the articles of incorporation and the
bylaws of the Surviving Corporation.
CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that,
by virtue of the Merger and without any action on the part of Parent, Purchaser,
the Company or Shareholders, each Share issued and outstanding immediately prior
to the Effective Time (other than any Shares to be canceled as described below)
and any Shares issuable upon exercise of any option, conversion or other right
to acquire Shares existing immediately prior to the Effective Time will be
canceled and extinguished and be converted into the right to receive the Per
Share Amount, or such higher per Share amount as is paid in the Offer, in cash
payable to the holder thereof, without interest (the "Merger Consideration"), in
accordance with the Merger Agreement. All such Shares, when so converted, will
no longer be outstanding and will automatically be canceled and retired and will
cease to exist, and each holder of a certificate formerly representing any such
Share will cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor upon the surrender of such certificate
in accordance with the Merger Agreement. Any payment will be made net of
applicable withholding taxes to the extent such withholding is required by law.
Notwithstanding the foregoing, if between the date of the Merger Agreement and
the Effective Time the outstanding Shares shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Merger Consideration will be correspondingly adjusted on
a per-share basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
The Merger Agreement further provides that each Share held in the treasury
of the Company and each Share owned by Parent, Purchaser or any other direct or
indirect wholly owned subsidiary of Parent immediately before the Effective Time
(other than shares in trust accounts, managed accounts, custodial accounts and
the like that are beneficially owned by third parties) will be automatically
canceled and retired and will cease to exist and no payment or other
consideration will be made with respect thereto.
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Each share of common stock, par value $0.01 per share, of Purchaser issued
and outstanding immediately before the Effective Time will be converted into one
validly issued, fully paid and nonassessable share of common stock, par value
$0.01 per share, of the Surviving Corporation, which, in accordance with the
Merger Agreement, will constitute all of the issued and outstanding shares of
capital stock of the Surviving Corporation immediately after the Effective Time.
COMPANY STOCK OPTION PLANS. The Merger Agreement provides that
notwithstanding the provisions of the Merger Agreement applicable to Rights (as
defined therein), the Company will use its reasonable best efforts (which
include satisfying the requirements of Rule 16b-3(e) promulgated under Section
16 of the Exchange Act, without incurring any liability in connection therewith)
to provide that, at the Effective Time, each holder of an Option will, in
settlement thereof, receive from the Company for each Share subject to such
Option, the Option Consideration; provided, however, that with respect to any
Person subject to Section 16(a) of the Exchange Act, any such amount will be
paid as soon as practicable after the first date payment can be made without
liability to such Person under Section 16(b) of the Exchange Act and otherwise
any such amount will be paid within five business days after the Effective Time.
Notwithstanding anything herein stated, no Option Consideration will be paid
with respect to any Option unless, at or prior to the time of such payment, such
Option is canceled and the holder of such Option has executed and delivered a
release of any and all rights the holder had or may have had in respect of such
Option. The Company will cooperate with Parent in developing and taking any
actions reasonably designed to minimize the exercise of Options by the holders
thereof prior to the Offer Completion Date (as defined in the Merger Agreement).
The Merger Agreement further provides that, notwithstanding the provisions
of the Merger Agreement applicable to Rights, prior to the Effective Time, the
Company will use its reasonable best efforts to obtain all necessary consents or
releases from holders of Options under the Stock Option Plans and take all such
other lawful action as may be necessary to give effect to the transactions
contemplated by the Merger Agreement. Except as otherwise agreed to by the
parties, the Stock Option Plans will terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in respect of the capital stock of the Company or
any subsidiary thereof will be canceled as of the Effective Time.
Notwithstanding the foregoing, if requested by Parent, the Company will use its
reasonable best efforts to assure that following the date of the Merger
Agreement, no participant in the Employee Stock Purchase Plan (as defined in the
Merger Agreement) of the Company will have any right to elect, to participate or
to make any contribution thereunder, and the Company will take all actions as
may be available to it to cause such plan to be suspended in respect of equity
securities of the Company or the Surviving Corporation other than as to Shares
the payment for which was deducted from the employee's payroll at or prior to
the date of the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties. These include representations and
warranties by the Company with respect to: (i) existence, standing and corporate
power, (ii) authority and validity and effect of the Merger Agreement, (iii)
capitalization, (iv) subsidiaries, (v) other interests, (vi) no conflicts and
required filings and consents, (vii) compliance with laws, (viii) SEC documents,
(ix) litigation, (x) absence of certain changes, (xi) taxes, (xii) property,
(xiii) millennium compliance, (xiv) contracts, (xv) environmental matters, (xvi)
Company benefit plans and ERISA compliance, (xvii) state takeover statutes,
(xviii) voting requirements, (xix) no brokers, (xx) opinion of the Company,
(xxi) offer documents and proxy statements, and (xxii) the Company Rights
Agreement.
Parent and Purchaser have also made certain representations and warranties
with respect to: (i) existence, standing and corporate power, (ii) authority,
validity and effect of the Merger Agreement, (iii) no conflicts and required
filings and consents, (iv) no brokers, (v) offer documents and proxy statements,
and (vi) financing.
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No representations and warranties made by the Company, Parent or Purchaser
will survive beyond the Effective Time.
SHAREHOLDER MEETING. The Merger Agreement provides that the Company will
take all action necessary in accordance with applicable law and its articles of
incorporation and bylaws to convene a meeting of Shareholders (the "Company
Shareholders Meeting") as promptly as practicable after the Offer Completion
Date to consider and vote upon the approval and adoption of the Merger Agreement
and the Merger. The Company Board will recommend approval and adoption of the
Merger Agreement at the request of Parent or Purchaser. The Company Board will
recommend such approval and adoption, and the Company will take all lawful
action to solicit such approval, including without limitation timely mailing any
proxy statement; provided, however, that such recommendation (but not such
actions to convene the Company Shareholders Meeting) is subject to any action,
including any withdrawal or change of its recommendation, taken by, or upon
authority of, the Company Board, as the case may be, in the exercise of its good
faith judgment based upon and in conformity with the written opinion of outside
counsel (notice of which will be promptly given to Parent and Purchaser) that
such action is required in order to satisfy the fiduciary duties of the members
of the Company Board to Shareholders imposed by law. Without limiting the
generality or effect of any other provision of the Merger Agreement, the
Company's obligations to convene the Company Shareholder Meeting will not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal (as defined in the
Merger Agreement).
The Merger Agreement also provides that, notwithstanding the above, in the
event that Parent, Purchaser or any other subsidiary of Parent acquires at least
90% of the outstanding Shares pursuant to the Offer or otherwise, the parties to
the Merger Agreement will take all necessary and appropriate action to cause the
Merger to become effective in accordance with the IBCL without a meeting of
Shareholders as soon as practicable after the acceptance for payment and
purchase of Shares by Purchaser pursuant to the Offer.
CONDUCT OF BUSINESS PENDING THE MERGER. The Company has agreed that during
the period from the date of the Merger Agreement until the Effective Time,
except as expressly provided for in the Merger Agreement, the Company will, and
will cause its subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
previously conducted and in compliance in all material respects with all
applicable laws and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations, use reasonable
efforts to keep available the services of their current officers and other key
employees and preserve their relationships with those Persons having business
dealings with them to the end that their goodwill and ongoing businesses will be
unimpaired at the Effective Time. Without limiting the generality or effect of
the foregoing, during the period from the date of the Merger Agreement to the
Effective Time, the Company will not, and will not permit any of its
subsidiaries to, without the prior written consent of Parent:
(i) other than the Company's regular quarterly dividend of $0.02 per
Share and except as otherwise provided in the Merger Agreement, (A) declare,
set aside or pay any dividends on, or make any other distributions in
respect of, any of its capital stock, (B) 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 (C) 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) except for the issuance of Shares pursuant to the exercise of
Options outstanding on the close of business on the last business day
immediately preceding the date of the Merger Agreement or pursuant to the
Employee Stock Purchase Plan to the extent Shares have been paid for with
payroll deductions at or prior to the date of the Merger Agreement, issue,
deliver, sell, pledge or otherwise encumber any potential voting securities
or convertible securities;
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(iii) amend its articles of incorporation, bylaws or other comparable
organizational documents;
(iv) acquire by any means any business or any corporation, limited
liability company, partnership, joint venture, association or other business
organization or division thereof;
(v) dispose of or encumber in any way any of its properties or assets,
other than (A) in the ordinary course of business consistent with past
practice and (B) sales of assets which do not individually or in the
aggregate exceed $200,000;
(vi) (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, or (B) make any loans, advances
or capital contributions to, or investments in, any other person, other than
to the Company or any subsidiary of the Company or to officers and employees
of the Company or any of its subsidiaries for travel, business or relocation
expenses in the ordinary course of business;
(vii) make any capital expenditure or capital expenditures other than
capital expenditures set forth in the operating budget of the Company dated
February 4, 1999, as previously delivered to Parent, other than expenditures
in the ordinary course of business consistent with past practice that
individually or in the aggregate do not exceed $200,000;
(viii) make any change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles, or make or change any tax election or settle or compromise any
material tax liability or refund;
(ix) except as required by law or contemplated by the Merger Agreement,
enter into, adopt or amend in any material respect or terminate any Stock
Option Plan or any other agreement, plan or policy involving the Company or
any of its subsidiaries and one or more of their directors, officers or
employees, or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any Company pension plans, or
change the manner in which contributions to any Company pension plans are
made or the basis on which such contributions are determined;
(x) other than as disclosed by Company to Parent, hire or terminate the
employment of any executive officer or key employee or increase the
compensation of any director, executive officer or other key employee of the
Company or pay any benefit or amount not required by a plan or arrangement
as in effect on the date of the Merger Agreement to any such person;
(xi) enter into or amend in any material respect any Material Contract
(as defined in the Merger Agreement) or enter into any contract or
agreement, written or oral, with any affiliate, associate or relative of
Parent, or make any payment to or for the benefit of, directly or
indirectly, any of the foregoing;
(xii) authorize, recommend, propose or announce an intention to adopt a
plan of complete or partial liquidation or dissolution of the Company or any
of its subsidiaries; or
(xiii) authorize, or commit or agree to take, any of the foregoing
actions.
CONSENTS, APPROVALS AND FILINGS. The Merger Agreement provides that upon
the terms and subject to the conditions set forth in the Merger Agreement, each
of the parties will use all reasonable efforts to consummate and make effective
the Offer, the Merger and the other transactions contemplated by the Merger
Agreement, including without limitation, (i) obtaining all necessary actions or
nonactions, waivers, consents and approvals from governmental entities and
making of all necessary registrations and filings (including filings with
governmental entities) and 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,
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(ii) obtaining all necessary consents, approvals or waivers from third parties,
and (iii) execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, the Merger Agreement.
In connection with and without limiting the foregoing, the Company and
Parent will, and Parent will cause Purchaser to, (i) take all action necessary
to ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Offer, the Merger or any of the other transactions
contemplated by the Merger Agreement, and (ii) if any state takeover statute or
similar statute or regulation becomes applicable thereto, take all action
necessary to ensure that the Offer and the Merger may be consummated as promptly
as practicable on the terms contemplated by the Merger Agreement and otherwise
to minimize the effect of such statute or regulation thereon.
Notwithstanding any other provision of the Merger Agreement, in no event
will Parent be required to agree to any divestiture, hold-separate or other
requirement in connection with the Merger Agreement or any of the transactions
contemplated thereby.
PUBLICITY. The Merger Agreement provides that the Company and Parent will,
subject to their respective legal obligations (including requirements of stock
exchanges and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated by the Merger Agreement and in making any filings with
any Governmental Entity or with any national securities exchange with respect
thereto.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. The Merger Agreement
provides that all rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time existing in favor
of the current or former directors or officers of the Company or each of its
subsidiaries as provided in their respective articles of incorporation or bylaws
(or comparable organizational documents) will be assumed by the Surviving
Corporation and the Surviving Corporation will be directly responsible for such
indemnification, without further action, as of the Effective Time and
indemnification rights provided in such articles of incorporation will continue
in full force and effect in accordance with their respective terms. In addition,
from and after the Effective Time, directors and officers of the Company who
become or remain directors or officers of the Surviving Corporation will be
entitled to the same indemnity rights and protections (including those provided
by directors' and officers' liability insurance) of the Surviving Corporation.
These provisions, (i) are intended to be for the benefit of, and will be
enforceable by, each indemnified party, his or her heirs and his or her
representatives, and (ii) are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such person may have by
contract or otherwise.
The Merger Agreement also provides that the Surviving Corporation will
maintain in effect for not less than six years after the Effective Time policies
of directors' and officers' liability insurance equivalent in all material
respects to those maintained by or on behalf of the Company and its subsidiaries
on the date thereof (and having at least the same coverage and containing terms
and conditions which are no less advantageous to the persons currently covered
by such policies as insured) with respect to matters existing or occurring at or
prior to the Effective Time; provided, however, that if the aggregate annual
premiums for such insurance at any time during such period exceed 200% of the
per annum rate of premium currently paid by the Company and its subsidiaries for
such insurance on the date of the Merger Agreement, then the Surviving
Corporation will provide the maximum coverage that shall then be available at an
annual premium equal to 200% of such rate.
EMPLOYEE BENEFIT MATTERS. The Merger Agreement provides that, on and after
the Effective Time, the Surviving Corporation will promptly pay or provide when
due all compensation and benefits as provided pursuant to the terms of, and to
honor in accordance with their current existing terms (except to the extent
amended or terminated in accordance with such terms), all compensation
arrangements, employment
25
<PAGE>
agreements and employee or director benefit plans, programs and policies in
existence as of the date of the Merger Agreement for all employees (and former
employees) and directors (and former directors) of the Company and its
subsidiaries.
The Merger Agreement further provides that, for the period commencing at the
Effective Time and ending on December 31, 1999, the Surviving Corporation will
provide employee benefits under plans, programs and arrangements which, in the
aggregate, will provide benefits to the employees of the Surviving Corporation
and its subsidiaries (other than employees covered by a collective bargaining
agreement) that are no less favorable in the aggregate than those provided
pursuant to the plans, programs and arrangements (other than those related to
the equity securities of the Company) of the Company and its subsidiaries in
effect on the date of the Merger Agreement; provided, however, that nothing in
the Merger Agreement will prevent the amendment or termination of any specific
plan, program or arrangement except that the Company's severance plan/policy
will not be amended to reduce the benefits thereunder with respect to
terminations of employees occurring before December 31, 1999, require that the
Surviving Corporation provide or permit investment in the securities of Parent,
the Company or the Surviving Corporation or interfere with the Surviving
Corporation's right or obligation to make such changes as are necessary to
comply with applicable law.
The Merger Agreement also provides that employees of the Surviving
Corporation will be given credit for all service with the Company and its
subsidiaries, to the same extent as such service was credited for such purpose
by the Company, under each employee benefit plan, program, or arrangement of
Parent in which such employees are eligible to participate for all purposes,
except for purposes of benefit accrual, under defined benefit pension plans,
and, in all cases, except to the extent such credit would result in duplication
of benefits. If employees of the Surviving Corporation and its subsidiaries
become eligible to participate in a medical, dental or health plan of Parent or
its subsidiaries, Parent will cause such plan to (i) waive any preexisting
condition limitations for conditions covered under the applicable medical,
health or dental plans of the Company and its subsidiaries and (ii) honor any
deductible and out of pocket expenses incurred by the employees and their
beneficiaries under such plans during the portion of the calendar year prior to
such participation. Notwithstanding the foregoing, in no event will the
employees be entitled to any credit for service, deductibles or out of pocket
expenses to the extent that it would result in a duplication of benefits with
respect to the same period of service, deductible or out of pocket expenses.
26
<PAGE>
Notwithstanding anything in the Merger Agreement to the contrary, from and
after the Effective Time, the Surviving Company will have sole discretion over
the hiring, promotion, retention, firing and other terms and conditions of the
employment of employees of the Surviving Company.
NO SOLICITATION. The Merger Agreement provides that the Company, its
affiliates and their respective officers, directors, employees, representatives
and agents will immediately cease any existing discussions or negotiations, if
any, with any parties with respect to any Company Takeover Proposal. The Company
will not, nor will it permit any of its subsidiaries to, nor will it authorize
or permit any of its officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
or any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage (including without limitation by way of furnishing information), or
take any other action designed or reasonably likely to facilitate, any inquiries
or the making of any proposal which constitutes or reasonably may give rise to
any Company Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Company Takeover Proposal; provided, however, that
if, at any time prior to the date on which Purchaser purchases Shares in the
Offer (the "Offer Completion Date"), the Company Board determines in good faith,
based upon and in conformity with the written opinion of outside counsel, that
failure to do so would result in a breach of its fiduciary duties to
Shareholders under applicable law, the Company may, in response to a Superior
Proposal (as defined below) which was not solicited by it and did not otherwise
result from a breach of any provision of the Merger Agreement, (A) furnish
information with respect to the Company and each of its subsidiaries to any
person pursuant to a customary confidentiality agreement not more favorable to
the recipient of such information than the Confidentiality Agreement (as defined
in the Merger Agreement) and (B) participate in negotiations regarding such
Superior Proposal. "Company Takeover Proposal" means any inquiry, proposal or
offer from any person relating to any direct or indirect acquisition or purchase
of 20% or more of the assets of the Company and its subsidiaries or 20% or more
of any class of equity securities of the Company or any of its subsidiaries, any
tender offer or exchange offer for Shares for any class of equity securities of
the Company or any of its subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement, or any other transaction that is intended or
could prevent the completion of the transactions contemplated hereby and
"Superior Proposal" means a bona fide written Company Takeover Proposal that (i)
involves the direct or indirect acquisition or purchase of 50% or more of the
assets of the Company and its subsidiaries or 50% or more of any class of equity
securities of the Company or any of its subsidiaries, (ii) involves payment of
consideration to the Company's Shareholders and other terms and conditions that,
taken as a whole, are superior to the Offer and the Merger, and (iii) is made by
a person reasonably capable of completing such Company Takeover Proposal, taking
into account the legal, financial, regulatory and other aspects of such Company
Takeover Proposal and the person making such Company Takeover Proposal.
The Merger Agreement further provides that, except as permitted therein,
neither the Company Board nor any committee thereof may (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Company Board or such committee
of the Offer, the Merger or the Merger Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Company Takeover Proposal, (iii)
cause or authorize the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Company Takeover Proposal (each, a "Company Acquisition Agreement"), or (iv)
release any third party from, or waive any provisions of, any confidentiality or
standstill agreement to which the Company is a party. Notwithstanding the
foregoing, in the event that prior to the Offer Completion Date, the Company
Board determines in good faith, after the Company has received a Superior
Proposal and based upon and in conformity with the written opinion of outside
counsel, that failure to do so would result in a breach of its fiduciary duties
to the Company's Shareholders under applicable law, the Company Board may,
subject to the terms of the Merger Agreement, withdraw or modify its approval or
recommendation of the Offer, the Merger or the Merger Agreement, approve or
27
<PAGE>
recommend a Superior Proposal or terminate the Merger Agreement; provided,
however, that not less than five business days prior to such termination, the
Company will notify Parent of its intention to terminate the Merger Agreement
pursuant to this paragraph and will cause its financial and legal advisers to
negotiate in good faith with Parent and Parent's financial and legal advisers
during such five-day period to make such adjustments in the terms and conditions
of the Merger Agreement as are acceptable to Parent and would cause such Company
Takeover Proposal not to be a Superior Proposal.
In addition to the obligations of the Company described above, the Company
will (i) immediately advise Parent orally and in writing of any request for
information or of any Company Takeover Proposal, the material terms and
conditions of such request or Company Takeover Proposal and the identity of the
Person making such request or Company Takeover Proposal and (ii) keep Parent
informed of the status and details (including amendments or proposed amendments)
of any such request or Company Takeover Proposal.
PARENT SHAREHOLDERS' MEETING. The Merger Agreement provides that Parent
will use its reasonable best efforts to convene an extraordinary general meeting
of its shareholders (the "Parent Shareholders Meeting") to be duly called and
held as soon as reasonably practicable for the purpose of obtaining Parent
Shareholder Approval. Subject to fiduciary obligations and requirements of
applicable law under the terms of the Merger Agreement, the Board of Directors
of the Parent will recommend to its shareholders each of the matters required
for Parent Shareholder Approval and will use reasonable effects to solicit such
approval. Parent Shareholder Approval means, to the extent required by
applicable law and the rules of the London Stock Exchange, the authorization and
approval by a majority of the holders of ordinary shares of Parent of (a) the
Merger Agreement, the Shareholders Agreement, the Subscription Agreement and the
transactions contemplated thereby, (b) the increase in the authorized share
capital of Parent to the extent necessary to facilitate the transactions
contemplated by the Merger Agreement and by the Subscription Agreements, and (c)
the Directors of Parent to allot securities within the meaning of Section 80 of
the Companies Act of 1985 of England and Wales, as amended, to the extent
necessary to facilitate the transactions contemplated by the Merger Agreement
and by the Subscription Agreements.
FINANCING. The Merger Agreement provides that Parent and Purchaser have
available funds and financing and underwriting commitments for funds which are,
in the aggregate, sufficient for the purchase of the outstanding Shares pursuant
to the Offer and the Merger and to perform their respective obligations under
the Merger Agreement. As of the date of the Merger Agreement, such commitments
had not been withdrawn and, to the knowledge of Parent, there were no facts or
circumstances existing as of the date of the Merger Agreement that would result
in any of the conditions to funding such commitments not being satisfied.
FEES AND EXPENSES. The Merger Agreement provides that, except for
Termination Fees described below, all fees and expenses incurred in connection
with the Offer, the Merger, the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated, except that each of Parent and the
Company will bear and pay one-half of the costs and expenses incurred in
connection with (i) the filing, printing and mailing of the Proxy Statement, the
Schedule 14D-9, the Schedule 14D-1 and the other Offer Documents (including SEC
filing fees) and (ii) the filings of the pre-merger notification and report
forms under the HSR Act (including filing fees).
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger will be subject to the
fulfillment at or written waiver (as applicable) prior to the Closing Date, of
the following conditions:
(a) Purchaser shall have made, or caused to be made, the Offer and shall
have purchased, or caused to be purchased, the Shares pursuant to the Offer,
provided, that this condition shall be deemed to have been satisfied with
respect to the obligations of Parent and Purchaser to effect the Merger if
Purchaser fails to accept for payment or pay for Shares pursuant to the
Offer in violation of the terms of the Offer or of the Merger Agreement;
28
<PAGE>
(b) The Merger Agreement and the transactions contemplated thereby shall
have been approved in the manner required by applicable law by Shareholders;
and
(c) No order or law 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.
The obligations of Parent and Purchaser to effect the Merger will be subject
to the fulfillment at or prior to the Closing Date (or such other date as may be
specified in the Merger Agreement) of the additional condition that the Company
shall have performed in all material respects its agreements contained in the
Merger Agreement required to be performed on or prior to the Closing Date.
TERMINATION AND FEES. The Merger Agreement may be terminated at any time
prior to the Effective Time, whether or not Company Shareholder Approval or
Parent Shareholder Approval has been obtained, by the mutual consent of Parent
and the Company.
The Merger Agreement may be terminated by action of the Board of Directors
of either Parent or the Company, whether or not Company Shareholder Approval or
Parent Shareholder Approval has been obtained, if (a) the Offer shall not have
been consummated by the Outside Date; provided, however, that no party may
terminate the Merger Agreement if such party's failure to fulfill any of its
obligations under the Merger Agreement, shall have been the reason that the
Offer Completion Date shall not have occurred on or before such date, (b) any
governmental entity permanently enjoined, restrained or otherwise prohibited the
consummation of the Offer, the Merger or any of the other transactions
contemplated by the Merger Agreement, or (c) the Offer expires or is terminated
or withdrawn pursuant to its terms without any Shares being purchased as a
result of the failure of any of the Offer Conditions to be satisfied prior to
the Expiration Date or any extension thereof, provided that any such termination
will not be effective unless and until the Company shall have paid to Purchaser
the fees and expenses described below.
The Merger Agreement further provides that it may be terminated at any time
prior to the Offer Completion Date, whether or not Parent Shareholder Approval
has been obtained, by action of the Company Board, if (a) there has been a
material breach by Parent or Purchaser of any representation or warranty
contained in the Merger Agreement which is not curable or is not cured by the
Outside Date and such breach had or could reasonably be likely to have a Parent
Material Adverse Effect (as defined in the Merger Agreement), (b) there has been
a material breach of any of the covenants set forth in the Merger Agreement on
the part of Parent or Purchaser, which breach is not curable or is not cured
within 15 calendar days after written notice of such breach is given, or (c) in
accordance with the Company Acquisition Agreement provisions of the Merger
Agreement, provided that any such termination will not be effective unless and
until the Company pays to Purchaser the fees and expenses described below.
In addition, Parent may terminate the Merger Agreement at any time prior to
the Offer Completion Date, whether or not Parent Shareholder Approval has been
obtained, if (a) there has been a material breach by the Company of any
representation or warranty contained in the Merger Agreement which is not
curable or is not cured by the Outside Date and such breach had or could
reasonably be likely to have a Company Material Adverse Effect (as defined in
the Merger Agreement), (b) the Company materially breached any of the covenants
set forth in the Merger Agreement on the part of the Company, which breach is
not curable or is not cured within 15 calendar days after written notice of such
breach is given to the Company, (c) the Company Board (i) withdrew or modified
in a manner adverse to Parent or Purchaser its approval or recommendation of the
Merger Agreement, the Offer or the Merger or failed to reconfirm its approval or
recommendation within five business days after Parent's written request to do
so, (ii) approved or recommended, or proposed publicly to approve or recommend,
a third-party Company Takeover Proposal to Shareholders, (iii) caused the
Company to take any action that would have constituted a breach of the Company
Acquisition Agreement prohibitions contained in the Merger Agreement, including
without limitation authorizing the Company to enter into a Company Acquisition
Agreement, (iv) approved the breach of the Company's obligation under the
Company Acquisition
29
<PAGE>
Agreement prohibitions, or (v) resolved to take any of the foregoing actions,
(d) any person or group (as defined in Section 13(d)(3) of the Exchange Act)
other than Parent, Purchaser or any of their respective subsidiaries or
affiliates shall have become the beneficial owner of more than 25% of the
outstanding Shares (either on a primary or fully diluted basis), or (e) Parent
Shareholder Approval shall not have been obtained at the Parent Shareholders
Meeting, provided that any termination described in this paragraph will not be
effective unless and until the Company shall have paid to Purchaser the fees and
expenses described below.
The Merger Agreement provides that in the event of termination of the Merger
Agreement, certain obligations of the parties to the Merger Agreement will
terminate. In the event of the termination of the Merger Agreement, nothing
therein will prejudice the ability of the non-breaching party to seek damages
from any other party for any prior deliberate or willful breach of the Merger
Agreement, including without limitation attorneys' fees and the right to pursue
any remedy at law or in equity with respect thereto. Furthermore, the Merger
Agreement provides that the Company will pay to Purchaser an amount equal to
$2.0 million (the "Termination Fee") in any of the following circumstances: (i)
the Merger Agreement is terminated at such time that the Merger Agreement is
terminable pursuant to paragraphs 5(c) or 6(c), above; (ii) the Merger Agreement
is terminated by either Parent or the Company pursuant to paragraph 3 or 4,
above, and at the time of such termination each of the following is true: (1)
the Minimum Condition shall not have been satisfied; (2) the Company shall not
have the right to terminate the Merger Agreement pursuant to paragraph 5(a) or
5(b), above; and (3) the Listing Condition and the Shareholder Approval
Condition shall have been satisfied; or (iii) the Merger Agreement is terminated
by Parent pursuant to paragraph 6(a), 6(b) or 6(d), above, and each of the
following occurs: (A) prior to such termination, a Company Takeover Proposal is
(x) publicly disclosed or has been made directly to Shareholders generally or
(y) any person (including without limitation the Company or any of its
subsidiaries) publicly announces an intention (whether or not conditional) to
make such a Company Takeover Proposal and (B) prior to the termination of the
Merger Agreement or within 12 months after the termination thereof, the Company
or a subsidiary thereof enters into a Company Acquisition Agreement or closes a
Company Takeover Proposal (such termination events, collectively, a "Takeover
Proposal Termination").
If the Merger Agreement is terminated in circumstances where a Termination
Fee is then payable, then in any such case the Company will promptly, but in no
event later than two business days after submission of a request therefor, pay
to Parent an amount equal to Parent's documented expenses; provided, however,
that in no event will the total of the expenses paid by the Company ("Expenses")
plus any Termination Fee paid by the Company exceed $7 million. "Expenses" means
all out-of-pocket fees, costs and other expenses incurred or assumed by Parent
or Purchaser or any of their affiliates or incurred on their behalf in
connection with the Merger Agreement or any of the transactions contemplated
thereby, including but not limited to in connection with the negotiation,
preparation, execution and performance of the Merger Agreement, the structuring
and financing of the Offer, the Merger and the other transactions contemplated
by the Merger Agreement, or any commitments or agreements relating to such
financing, including, without limitation, fees, expenses and selling and
underwriting commissions or other amounts payable to any banks, investment
banking firms, underwriters, other financial institutions and other persons and
their respective agents and counsel for arranging, committing to provide or
providing any financing for the Offer, the Merger and any other transactions
contemplated by the Merger Agreement or structuring, negotiating or advising
with respect to such transactions or financing, and all fees and expenses of
counsel, accountants, experts and computer, environmental, actuarial, insurance
and other consultants to Parent or Purchaser.
If a Termination Fee is payable pursuant to a Takeover Proposal Termination,
then the Company will pay the Termination Fee and Expenses to Parent upon the
signing of a Company Acquisition Agreement or, if no Company Acquisition
Agreement is signed, then at the closing (and as a condition to the closing) of
a Company Takeover Proposal. Notwithstanding any other provision of the Merger
Agreement, (i) in no event may the Company enter into a Company Acquisition
Agreement unless, prior thereto, the Company has paid any amount due under the
terms described above or which will become due under the terms
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<PAGE>
described above, (ii) the Company may not terminate the Merger Agreement under
paragraph 5(c), above, unless prior thereto it has paid any amount due under the
Merger Agreement to Parent, (iii) any amount due in the event that the Merger
Agreement is terminated under paragraph 5(c) or 6(c) and in circumstances in
which the Company has not entered into a Company Acquisition Agreement will be
payable promptly, but in no event more than two business days after request
therefor is made, and (iv) any amount due under the Merger Agreement will be
paid on the date due in immediately available funds wire transferred to the
account designated by the person entitled to such payment.
The Merger Agreement further provides that the termination fees and expenses
provisions thereof will survive any termination of the Merger Agreement.
AMENDMENT. The Merger Agreement may be amended by the parties thereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by
Shareholders of the Company but after any such Shareholder approval, no
amendment will be made that by law requires the further approval of such
Shareholders without obtaining such further approval. The Merger Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties thereto.
ASSIGNMENT. Neither the Merger Agreement nor any of the rights, interests
or obligations thereunder may be assigned by any of the parties thereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, the Merger Agreement will be binding
upon and will inure to the benefit of the parties thereto and their respective
successors and assigns. Notwithstanding anything contained in the Merger
Agreement to the contrary, nothing in the Merger Agreement, expressed or
implied, is intended to confer on any person other than the parties thereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of the Merger
Agreement.
TIMING. The exact timing and details for the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Purchaser has agreed to
cause the Merger to be consummated on the terms set forth above, there can be no
assurance as to the timing of the Merger.
CONFIDENTIALITY AND STANDSTILL AGREEMENT.
The Company and Parent entered into a Confidentiality and Standstill
Agreement which constitutes part of the entire agreement between the parties.
The Company and Parent agreed to furnish certain confidential non-public
information to each other in contemplation of a possible business combination
and they agreed to use such information solely for the sole purpose of
evaluating a possible business transaction and that such information would be
kept confidential unless required by law to disclose it. In consideration of the
exchange of confidential non-public information, Parent and the Company agreed
that until June 30, 2000, neither party would acquire, directly or indirectly,
any securities of the other or any subsidiaries of the other party or seek to
vote or influence the voting of the securities of the other party without the
prior written consent of the Board of Directors of the other party. The parties
further agreed not to solicit employees, customers, suppliers or competitors of
the other party or their subsidiaries (other than customer, supplier or
competitor contacts in the ordinary course of business) until the earlier of the
consummation of a business combination between the parties or June 30, 2000.
Parent and the Company agreed that monetary damages in the event of a breach
would be insufficient and a non-breaching party shall be entitled to equitable
relief. The Merger Agreement amends the standstill provisions of the
Confidentiality Agreement to permit Parent, Purchaser or any of their respective
affiliates or representatives to (a) effect any transaction permitted or
contemplated by the Merger Agreement or the Shareholders Agreement and (b) take
any action otherwise prohibited thereby (i) in the event that another person
publicly announces a Company Takeover Proposal and (ii) after the Offer
Completion Date.
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<PAGE>
THE SHAREHOLDERS AGREEMENT.
In connection with the execution of the Merger Agreement, the Parent,
Purchaser and Management Shareholders entered into a Shareholders Agreement. The
following is a summary of the material terms of the Shareholders Agreement. This
summary is not a complete description of the terms and conditions of the
Shareholders Agreement and it is qualified in its entirety by reference to the
full text of the Shareholders Agreement, which is incorporated by reference and
filed with the SEC as an exhibit to the Schedule 14D-1. The Shareholders
Agreement may be examined at, and copies obtained from, the offices of the SEC
as set forth in Section 7 above. All terms not defined herein have the meanings
ascribed to such terms in the Shareholders Agreement or, if not in the
Shareholders Agreement, in the Merger Agreement.
TENDER OF SHARES. Upon the terms and subject to the conditions of the
Shareholders Agreements, each Management Shareholder has agreed to validly
tender pursuant to and in accordance with the terms of the Offer, not later than
the tenth business day after commencement of the Offer, all of its Management
Shareholder Subject Shares (as defined in the Shareholders Agreement). The
Shareholders Agreement will terminate upon the purchase of all the Subject
Shares by Purchaser pursuant to the Offer.
VOTING OF SHARES. During the Voting Agreement Period (as defined in the
Shareholders Agreement), each Management Shareholder has agreed to vote (or
cause to be voted) all of its Subject Shares (i) in favor of the adoption of the
Merger Agreement and any other matter necessary or appropriate for the
consummation of the transactions contemplated by the Merger Agreement, and (ii)
against any Adverse Proposal (as defined in the Shareholders Agreement), and
against any action or agreement that would be expected to make any
representation or warranty contained in the Shareholder Agreement untrue or
incorrect or have the effect of impairing the ability of a Management
Shareholder to perform his obligations under the Shareholder Agreement or
prevent or delay the consummation of the transactions contemplated thereby.
IRREVOCABLE PROXY. Each Management Shareholder has appointed Parent and
Parent's Designees as proxies to vote all of such Management Shareholder's
Subject Shares or grant a written consent in respect of such Subject Shares to
secure the performance of its duties under the Shareholders Agreement. Each of
these proxies is coupled with an interest and is irrevocable. For Subject Shares
where a Management Shareholder is the beneficial but not the record owner, such
Management Shareholder will use his best efforts to cause any record owner of
such Subject Shares to grant to Parent a proxy to the same effect as contained
herein.
RESTRICTION ON TRANSFER OF SUBJECT SHARES, PROXIES AND
NONINTERFERENCE. Each Management Shareholder has agreed not to directly or
indirectly, (a) except pursuant to the terms of the Shareholders Agreement and
the Merger Agreement, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of, any
or all of its Subject Shares, (b) except pursuant to the terms of the
Shareholders Agreement, grant any proxies or powers of attorney, deposit any of
its Subject Shares into a voting trust or enter into a voting agreement with
respect to such Subject Shares, or (c) except within the terms of a prior
written request of Parent, exercise any of the Subject Options (as defined in
the Shareholders Agreement), or (d) take any action that would reasonably be
expected to make any representation or warranty contained therein untrue or
incorrect or have the effect of impairing the ability of such Management
Shareholder to perform its obligations under the Shareholders Agreement or
preventing or delaying the consummation of any of the transactions contemplated
thereby.
NO SOLICITATION. Each Management Shareholder has agreed not to take, or
authorize or permit any of its officers, directors, employees, agents or
representatives (including any investment banker, financial adviser, attorney or
accountant) to take, any action that the Company would be prohibited from taking
under the "no solicitation" provisions of the Merger Agreement.
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<PAGE>
In connection with the Merger, each Management Shareholder waived any
appraisal or dissenter's rights that he or she may have. The Management
Shareholders agreed not to exercise any purchase rights or rights of first
refusal with respect to any Shares.
TERMINATION. The Shareholders Agreement may be terminated in any one of the
following circumstances: (i) upon the purchase of all of the Subject Shares
pursuant to the Offer, or (ii) by the mutual consent of the Company Boards, the
Parent Board and Shareholders representing a majority of the Subject Shares
subject to the Management Shareholders Agreement.
THE SUBSCRIPTION AGREEMENT.
In connection with the execution of the Merger Agreement, Parent and each of
Ralph R. Whitney, Jr., Bruce D. Atkinson, Jeffrey G. Wood, Michel
Hauser-Kauffmann, Forrest E. Crisman, Jr. and Glenn Scolnik, officers and
directors of the Company (the "Investors"), entered into a Subscription
Agreement, dated February 22, 1999 (the "Subscription Agreement"). The following
is a summary of the material terms of the Subscription Agreement. This summary
is not a complete description of the terms and conditions of the Subscription
Agreement and is qualified in its entirety by reference to the full text of the
Subscription Agreement, which is incorporated by reference and filed with the
SEC as an exhibit to the Schedule 14D-1. The Subscription Agreement may be
examined at, and copies obtained from, the offices of the SEC as set forth in
Section 7 above. All terms not defined herein have the meanings ascribed to such
terms in the Subscription Agreement or, if not in the Subscription Agreement, in
the Merger Agreement.
SUBSCRIPTION FOR SHARES. Under the Subscription Agreement, upon the
consummation of the Offer, each Investor has agreed to invest a portion of the
cash consideration payable to him (or to certain accounts for his benefit) in
the Offer in Ordinary Shares of Parent ("Parent Shares"). The number of Parent
Shares that each Investor has agreed to purchase will be determined by dividing
the following "Investment Amounts" by the Per Share Purchase Price, which is
defined below:
<TABLE>
<CAPTION>
INVESTOR INVESTMENT AMOUNT
- -------------------------------------------------------------------------- ------------------
<S> <C>
R. Whitney................................................................ $ 2,732,725
B. Atkinson............................................................... $ 1,310,987
J. Wood................................................................... $ 873,991
M. Hauser-Kauffmann....................................................... $ 349,566
F. Crisman................................................................ $ 1,366,366
G. Scolnik................................................................ $ 1,366,366
------------------
$ 8,000,001
------------------
------------------
</TABLE>
In the event the division of an Investment Amount by the Per Share Purchase
Price gives rise to a fractional Parent Share, the applicable Investment Amount
will be reduced by an amount equal to such fractional Parent Share multiplied by
the Per Share Purchase Price.
The "Per Share Purchase Price" will be equal to the higher of (i) the middle
market price of a Parent Share, as derived from the Official List of the London
Stock Exchange, on the last business day in London immediately prior to the
Subscription Closing Date (defined below), and (ii) 80% of the Adjusted
Pre-Offer Market Price. The "Adjusted Pre-Offer Market Price" means the middle
market price of a Parent Share, as derived from the Official List of the London
Stock Exchange on the last business day (the "Pre-Offer Date") in London
immediately prior to the date on which the Offer is publicly announced by
Parent, as adjusted to reflect the Rights Offering. The Adjusted Pre-Offer
Market Price will be calculated by (i) adding (a) Parent's aggregate market
capitalization on the Pre-Offer Date, plus (b) the aggregate proceeds of the
Rights Offering, and (ii) dividing the sum of (a) and (b) by the sum of the
number of Parent Shares outstanding on the Pre-Offer Date and the number of
Parent Shares sold in the Rights Offering.
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The closing of the transactions contemplated by the Subscription Agreement
(the "Subscriptions") will take place on the next business day (the
"Subscription Closing Date") following the payment by Parent or its subsidiary
to the Investors of the cash consideration payable to them upon the consummation
of the Offer. Each Investor has agreed that, to accomplish the payment of his
Investment Amount, Parent will withhold from the cash consideration payable to
him in connection with the Offer an amount equal to his Investment Amount. The
Subscription Agreement provides for an adjustment to the type and number or
amount of Parent Shares and the Per Share Purchase Price payable therefor in the
event of any change in the capital stock of Parent by reason of a stock
dividend, subdivision, reclassification, recapitalization, split, combination,
exchange of shares, extraordinary distribution or similar transaction.
COVENANTS OF INVESTORS. Each Investor has agreed to comply with one of the
following two restrictions on transfer and resale of the Parent Shares: (i) for
a period of 18 months from the Subscription Closing Date, such Investor will not
sell, transfer or otherwise dispose of his legal or beneficial interest in any
of the Parent Shares issued to him pursuant to the Subscription Agreement or any
further shares allotted and issued by way of capitalization or bonus issue in
respect of or with reference to such Parent Shares; or (ii) (a) for a period of
12 months from the Subscription Closing Date, such Investor will not sell,
transfer or otherwise dispose of his legal or beneficial interest in any of the
Parent Shares issued to him pursuant to the Subscription Agreement or any
further shares allotted and issued by way of capitalization or bonus issue in
respect of or with reference to such Parent Shares, (b) on the first anniversary
of the Subscription Closing Date, or if such day is not a business day in
London, the next following business day in London, such Investor shall be
entitled to sell, transfer or otherwise dispose of the legal and/or beneficial
interest in not more than half of his then holdings of Parent Shares, and (c) if
such Investor sells, transfers or disposes of any of his Parent Shares in
accordance with clause (b), he shall not be entitled to sell, transfer or
otherwise dispose of the legal or beneficial interest in the remaining Parent
Shares held by him until the second anniversary of the Subscription Closing
Date.
Further, each Investor has agreed that if he wishes to sell, transfer or
otherwise dispose of any of his Parent Shares within two years from the
Subscription Closing Date, he must give prior written notice to Parent's brokers
of such intention. The notice must set out the number of Parent Shares intended
to be sold, transferred or otherwise disposed of. Parent's brokers will then be
entitled to purchase or procure purchasers for all or any of the Parent Shares
desired to be sold. To the extent Parent's brokers do not promptly so purchase
or procure purchasers for the Parent Shares desired to be sold, the selling
Investor may sell the remaining Parent Shares within 10 business days
thereafter.
If Parent registers its Parent Shares with the SEC and those shares are
publicly traded on a national securities exchange or listed for quotation on the
Nasdaq in the United States, the Investors may, subject to the restrictions
described above, sell their Parent Shares in the United States in compliance
with United States securities laws. Otherwise, each Investor has agreed that in
no event at any time will he sell, transfer or otherwise dispose of any interest
in his Parent Shares to a person or entity located in the United States. This
restriction will not, however, prevent any transfer to the personal
representative or heirs of such Investor, but such personal representative or
heirs will be bound by all of the covenants of the applicable Investor.
AMENDMENT AND TERMINATION. The Subscription Agreement may be amended only
by an instrument in writing signed on behalf of the party against whom such
amendment is sought to be enforced. The Subscription Agreement will terminate
upon the termination of the Merger Agreement in accordance with its terms.
ATKINSON AND WOOD EMPLOYMENT AGREEMENTS.
The Company has entered into employment agreements with Bruce D. Atkinson
and Jeffrey G. Wood (each, an "Employment Agreement"). If the Offer and the
Merger are consummated, these Employment Agreements will become agreements of
the Surviving Corporation. The following is a summary of the
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material terms of the Employment Agreements. This summary is not a complete
description of the terms and conditions of the Employment Agreements and is
qualified in its entirety by reference to the full texts of the Employment
Agreements, which are incorporated by reference and filed with the SEC as
exhibits to the Schedule 14D-1. The Employment Agreements may be examined at,
and copies obtained from, the offices of the SEC as set forth in Section 7
above. All terms not defined herein have the meanings ascribed to such terms in
the Employment Agreements.
TERM, EMPLOYMENT AND DUTIES. Subject to the provisions for termination
described below, the term of the Employment Agreements will be two years,
commencing on the date of the acquisition by Parent of a controlling interest in
the voting securities of the Company (the "Employment Date"). The Employment
Agreements provide that they will be renewed automatically for succeeding
periods of one year each on the same terms and conditions as contained therein
unless one party notifies the other of his or its intent not to renew the
Employment Agreement.
Under the Employment Agreements, the Company will employ Mr. Atkinson as the
President and Chief Executive Officer of the Company and Mr. Wood as the Chief
Financial Officer of the Company. Under Mr. Wood's Employment Agreement, if Mr.
Atkinson vacates his position with the Company, Mr. Wood will receive first
consideration by the Company Board as Mr. Atkinson's successor, subject to Mr.
Atkinson's endorsement. Mr. Atkinson and Mr. Wood will also be nominated to
serve as members of the Company Board and will hold other positions as the
Company may reasonably designate from time to time. The Employment Agreements
will supersede any other employment agreements or arrangements between the
Company and each of Mr. Atkinson and Mr. Wood.
COMPENSATION. The Company will pay Mr. Atkinson $264,600 per year and Mr.
Wood $176,400 per year and each will receive a bonus on or before the end of the
twelfth month following the close of Parent's fiscal year on April 30, 2000. The
amount of the bonus will not be less than $168,000 with respect to Mr. Atkinson
and $112,000 with respect to Mr. Wood. Thereafter, Mr. Atkinson and Mr. Wood
will each receive a bonus for each succeeding fiscal year calculated in
accordance with the executive bonus program of the Company. Mr. Atkinson's and
Mr. Wood's bonus opportunity under such executive bonus program will be
equivalent to the annual bonus opportunity available to similarly situated
executives of Parent.
TERMINATION AND TERMINATION BENEFITS. The Employment Agreements are
terminable by either party at any time with or without cause upon written notice
to that effect.
If Mr. Atkinson's Employment Agreement is terminated by Mr. Atkinson without
cause or by the Company with cause, the Company's only obligation is to pay Mr.
Atkinson his salary through the termination date. If the Employment Agreement is
terminated without cause by the Company or with cause by Mr. Atkinson during the
twenty-four month period following the Employment Date, the Company will pay Mr.
Atkinson: (i) twice his annual salary in effect at the date of termination; (ii)
twice the average annual bonus actually paid to him for the two preceding fiscal
year periods; and (iii) an amount equal to twice the average amount actually
paid by the Company for Mr. Atkinson's benefits for the two preceding years;
provided that if the sum of the foregoing items (i), (ii) and (iii) is less than
twice Mr. Atkinson's total base salary, bonus and benefits paid for calendar
year 1998 (the "Atkinson Baseline Benefit"), Mr. Atkinson shall instead be paid
the Atkinson Baseline Benefit. If Mr. Atkinson's Employment Agreement is
terminated without cause by the Company or with cause by Mr. Atkinson at any
time following the twenty-four month period following the Employment Date, the
Company will pay Mr. Atkinson the greater of (x) one-half of the amounts
specified in the preceding sentence, or (y) one-half the Atkinson Baseline
Benefit.
If Mr. Wood's Employment Agreement is terminated by Mr. Wood without cause
or by the Company with cause, the Company's only obligation is to pay Mr. Wood
his salary through the termination date. Except as provided in the next
sentence, if Mr. Wood's Employment Agreement is terminated without cause by the
Company or with cause by Mr. Wood, the Company will pay Mr. Wood: (i) twice his
annual
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salary in effect at the date of termination; (ii) twice the average annual bonus
actually paid to him for the two preceding fiscal year periods; and (iii) an
amount equal to twice the average amount actually paid by the Company for Mr.
Wood's benefits for the two preceding years; provided that if the sum of the
foregoing items (i), (ii) and (iii) is less than twice Mr. Wood's total base
salary, bonus and benefits paid for calendar year 1998 (the "Wood Baseline
Benefit"), Mr. Wood shall instead be paid the Wood Baseline Benefit. If the
Employment Agreement is terminated (x) without cause by the Company or with
cause by Mr. Wood at any time following Mr. Wood's first full year of service as
President and Chief Executive Officer of the Company or (y) with cause by Mr.
Wood following his decision not to accept appointment as President and Chief
Executive Officer of the Company, the Company will pay Mr. Wood the greater of
(x) one-half of the amounts specified in the preceding sentence, or (y) one-half
the Wood Baseline Benefit, which payment will be in lieu of any payment
otherwise payable pursuant to the provision described in the preceding sentence.
NON-SOLICITATION AND NON-COMPETITION. The Employment Agreements provide
that neither Mr. Atkinson nor Mr. Wood will compete with the Company or hold a
material interest in a business that competes with the Company for a period of
two years after the termination of his employment with the Company. The
Employment Agreements also provide that neither Mr. Atkinson nor Mr. Wood will
solicit for employment any person employed in the business of the Company.
KAUFFMANN EMPLOYMENT AGREEMENT.
In contemplation of the Offer and the Merger, Realisations et Diffusion pour
l'Industrie ("RDI"), a wholly owned subsidiary of the Company located in
Villepinte, France, has entered into an employment agreement with Michel
Hauser-Kauffmann (the "Kauffmann Agreement"). The Kauffmann Agreement will be
effective upon the occurrence of the Effective Time. The following is a summary
of the material terms of the Kauffmann Agreement. This summary is not a complete
description of the terms and conditions of the Kauffmann Agreement and is
qualified in its entirety by reference to the full text of the Kauffmann
Agreement, which is incorporated by reference and filed with the SEC as an
exhibit to the Schedule 14D-1. The Kauffmann Agreement may be examined at, and
copies obtained from, the offices of the SEC as set forth in Section 7 above.
All terms not defined herein have the meanings ascribed to such terms in the
Kauffmann Agreement.
TERM, EMPLOYMENT AND DUTIES. RDI will continue to employ Mr. Kauffmann
pursuant to the National Collective Bargaining Agreement for Engineers and
Executives in the Metallurgical Industries (the "Collective Bargaining
Agreement"), as Directeur Commercial with a position of Executive for an
indefinite term. In this capacity, Mr. Kauffmann will be responsible for the
marketing policy, quality, communication, technical and financial questions
relating to RDI. The Kauffmann Agreement provides that a termination by RDI will
become effective six months after the notice of such termination, except
termination by RDI for willful misconduct, which will be effective immediately.
The Kauffmann Agreement supersedes and cancels any other employment agreement or
arrangement between RDI and Mr. Kauffmann and replaces such agreement or
arrangement in its entirety.
COMPENSATION. Mr. Kauffmann will receive an annual global gross salary of
FRF 1,126,125. RDI may, at any time during the term of the Kauffmann Agreement,
but without any obligation, pay additional sums to Mr. Kauffmann by way of
bonuses or otherwise. Notwithstanding the foregoing, RDI will pay Mr. Kauffmann
a bonus of 50% of his salary earned from January 1, 1999 through April 30, 2000.
This bonus will be paid no later than July 15, 2000. In the fiscal year 2001 and
beyond, Mr. Kauffmann will participate in Parent's executive level bonus plan.
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TERMINATION AND TERMINATION BENEFITS. In the event that RDI gives notice of
dismissal to Mr. Kauffmann during the two-year period following the date of the
Kauffmann Agreement for any reason other than willful misconduct, Mr. Kauffmann
will be entitled to a lump sum indemnity, in lieu of the dismissal indemnity
provided by the Collective Bargaining Agreement and in lieu of damages, equal to
two years of compensation and bonus. If, during such two-year period, either (i)
Bruce Atkinson is terminated for reasons other than for cause from his position
as Chief Executive Officer and President of the Company and Jeffrey Wood is not
offered to replace Mr. Atkinson in such position, or (ii) Bruce Atkinson is
revoked from his office of permanent representative of RDI Management Company
Inc. and Jeffrey Wood or Mr. Kauffmann or an individual supported by Mr.
Kauffmann is not offered to replace Mr. Atkinson in such position, then Mr.
Kauffmann may terminate the Kauffmann Agreement and be entitled to the indemnity
described in the immediately preceding sentence. The compensation and bonus to
be used to determine the amount of the lump sum indemnity will be the greater of
(x) the amount of the compensation including benefits in kind and bonus received
by Mr. Kauffmann from January 1 through December 31, 1998 or (y) the amount of
the compensation including benefits in kind and bonus received by Mr. Kauffmann
during the 12 months preceding dismissal or resignation, as the case may be. If
notice of dismissal is given after the two-year period following the date of the
Kauffmann Agreement, Mr. Kauffmann will receive indemnity equal to one year of
compensation and bonus. In the event that RDI dismisses Mr. Kauffmann for
willful misconduct, Mr. Kauffmann will not be entitled to any indemnity
whatsoever. In the event that RDI dismisses Mr. Kauffmann for gross misconduct,
Mr. Kauffmann will be entitled to the indemnity described in either the first
sentence of this paragraph or the immediately preceding sentence, as the case
may be.
NON-SOLICITATION AND NON-COMPETITION. Mr. Kauffmann will undertake for a
period of one year, renewable once, following the termination of the Kauffmann
Agreement for any reason to refrain from engaging in any activity that competes
with RDI or the group of companies to which it belongs. In addition, Mr.
Kauffmann has agreed not to employ or attempt to employ RDI employees or solicit
RDI customers after termination of the Kauffmann Agreement. These noncompetition
and nonsolicitation undertakings are geographically limited to France, Italy,
the United Kingdom and Germany. In consideration for his commitment not to
compete, Mr. Kauffmann will receive after the termination of the Kauffmann
Agreement a monthly indemnity equal to 60% of his average monthly remuneration
during his last 12 months employed by RDI.
OTHER MATTERS.
GOING PRIVATE TRANSACTIONS. Rule 13e-3 under the Exchange Act is applicable
to certain "going-private" transactions. Purchaser does not believe that Rule
13e-3 will be applicable to the Merger, unless, among other things, the Merger
is completed more than one year after termination of the Offer. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
regarding the Company and certain information regarding the fairness of the
Merger and the consideration offered to minority Shareholders be filed with the
SEC and disclosed to minority Shareholders prior to consummation of the Merger.
12. DIVIDENDS AND DISTRIBUTIONS
The Merger Agreement provides that if, between the date of the Merger
Agreement and the Effective Time, the outstanding Shares are changed into a
different number of shares or a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Merger Consideration will be correspondingly adjusted on a
per-share basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
The Merger Agreement further provides that, during the period from the date
of the Merger Agreement to the Effective Time, the Company will not, and will
not permit any of its subsidiaries to, without the prior written consent of
Parent: (i) other than the Company's dividend of $0.02 per Share
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declared on January 22, 1999, which is payable on March 19, 1999 to holders of
record on February 26, 1999, and dividends and distributions (including
liquidating distributions) by a direct or indirect wholly owned subsidiary of
the Company to its parent, or by a subsidiary that is partially owned by the
Company or any of its subsidiaries, provided that the Company or any such
subsidiary receives or is to receive its proportionate share thereof, (A)
declare, set aside or pay any dividends on, or make any other distributions in
respect of, any of its capital stock, (B) 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
(C) 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, and
(ii) except for the issuance of Shares pursuant to the exercise of Options that
are outstanding on the Measurement Date (as defined in the Merger Agreement) or
pursuant to the Company's Employee Stock Purchase Plan to the extent Shares have
been paid for with payroll deductions at or prior to the date of the Merger
Agreement, 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.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the preceding paragraph and nothing
in this Offer to Purchase shall constitute a waiver by Purchaser or Parent of
any of its rights under the Merger Agreement or a limitation of remedies
available to Purchaser or Parent for any breach of the Merger Agreement,
including termination of the Merger Agreement.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION, AND MARGIN SECURITIES.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of holders
of Shares, both of which could adversely affect the liquidity and market value
of the remaining Shares held by Shareholders other than Purchaser. Purchaser
cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether such reduction
would cause future market prices to be greater or less than the Per Share
Amount.
STOCK EXCHANGE LISTING. Depending upon the number of Shares purchased
pursuant to the Offer, the Shares may no longer meet the requirements of the
Nasdaq for continued listing and may, therefore, be delisted from such exchange.
According to the Nasdaq's published guidelines, the Nasdaq would consider
delisting the Shares if, among other things, the number of publicly held Shares
was less than 1,100,000, there were less than 400 round lot holders (as defined
in Section 4200(a)(30) of the NASD Manual--the Nasdaq Stock Market) of the
Shares or the aggregate market capitalization of the Company was less than $15.0
million. If, as a result of the purchase of Shares pursuant to the Offer, the
Shares no longer meet the requirements of the Nasdaq for continued listing and
the listing of Shares is discontinued, the market for the Shares will be
adversely affected.
The Company has advised Purchaser that, as of February 22, 1999, there were
8,325,967 Shares issued and outstanding. Purchaser intends to cause the Company
to seek to delist the Shares if it acquires control of the Company.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application of the
Company to the SEC if the Shares are not listed on a national securities
exchange and there are fewer than 300 record holders of the Shares. The
termination of the registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
holders of Shares and to the SEC and would make certain of the provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b) and the requirement of furnishing a proxy statement in connection with
Shareholders' meetings pursuant to
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Section 14(a), no longer applicable to the Shares. Furthermore, if the Shares
are no longer registered under the Exchange Act, the requirements of Rule 13e-3
under the Exchange Act with respect to "going private" transactions would no
longer be applicable to the Company. In addition, "affiliates" of the Company
and persons holding "restricted securities" of the Company may be deprived of
the ability to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended. Purchaser believes that the purchase of
the Shares pursuant to the Offer may result in the Shares becoming eligible for
termination of registration under the Exchange Act, and it is the intention of
Purchaser to cause the Company to make an application for termination of
registration of the Shares as soon as possible after successful completion of
the Offer if the Shares are then eligible for such termination.
MARGIN REGULATIONS. The Shares are currently "margin securities," as such
term is defined under the rules of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), which has the effect, among other things,
of allowing brokers to extend credit on the collateral of such securities.
Depending upon factors similar to those described above regarding listing and
market quotations, following the Offer, it is possible that the Shares might no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations and, therefore, could no longer be used as collateral
for loans made by brokers.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be "margin securities." Purchaser intends to seek to
cause the Company to terminate the registration of the Shares under the Exchange
Act as soon after consummation of the Offer as the requirements for termination
of the registration of the Shares are met.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser will not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
expiration or termination of the Offer), to pay for any Shares, and (subject to
any such rules or regulations) may postpone the acceptance for payment or
payment for any Shares tendered, and subject to the terms of the Merger
Agreement, may amend or terminate the Offer (whether or not any Shares have
theretofore been purchased or paid for pursuant to the Offer) (i) unless the
following conditions have been satisfied: (a) there have been validly tendered
and not withdrawn prior to the Expiration Date a number of Shares which
represent at least a majority of the total voting power of the outstanding
securities of the Company entitled to vote in the election of directors or in a
merger, calculated on a fully-diluted basis, on the date of purchase ("on a
fully diluted basis") having the following meaning; as of any date, the number
of Shares outstanding, together with the number of Shares the Company is then
required to issue pursuant to obligations outstanding at that date under
employee stock option or other benefit plans or otherwise), (b) any waiting
periods applicable to the Offer or the Merger under the HSR Act shall have
expired or been terminated prior to the expiration of the Offer, and, (c) the
admission of the convertible unsecured loan stock to be issued by First
Technology Funding plc, a wholly owned subsidiary of Parent, as necessary to
facilitate the transactions contemplated by the Merger Agreement to the Official
List of the London Stock Exchange shall have become effective in accordance with
the Rules of the London Stock Exchange, provided Parent shall have used its best
efforts to obtain such effectiveness (see Section 9), or (ii) if at any time on
or after the date of the Merger Agreement and before the Expiration Date
(whether or not any Shares have theretofore been accepted for payment or paid
pursuant to the Offer), any of the following events have occurred:
(A) any governmental entity or authority or any court shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order which is in
effect and which (1) restricts, prevents or prohibits consummation of the
transactions contemplated by any of the Merger Agreement, including the
Offer or the Merger, (2) prohibits,
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<PAGE>
limits or otherwise adversely affects the ownership or operation by Parent
or any of its subsidiaries of all or any portion of the business or assets
of the Company and its subsidiaries or compels the Company, Parent or any of
their subsidiaries to dispose of or hold separate all or any portion of the
business or assets of the Company and its subsidiaries, or (3) imposes
limitations on the ability of Parent, Purchaser or any other subsidiary of
Parent to exercise effectively full rights of ownership of any Shares,
including without limitation, the right to vote any Shares acquired by
Purchaser pursuant to the Offer or otherwise on all matters properly
presented to the Shareholders, including without limitation the approval and
adoption of the Merger Agreement and the transactions contemplated thereby;
(B) there shall be instituted or pending any action or proceeding before
any United States or foreign court or governmental entity or authority by
any United States or foreign governmental entity or authority seeking any
order, decree or injunction having any effect set forth in paragraph (A)
above;
(C) the representations and warranties of the Company contained in the
Merger Agreement shall not be true and correct as of the Expiration Date (as
the same may be extended from time to time) as though made anew on and as of
such date (except for representations and warranties made as of a specified
date, which shall not be true and correct as of the specified date), except
for any breach or breaches of any representations or warranties in Sections
3.4 through 3.16 and Section 3.19 of the Merger Agreement which, in the
aggregate, could not be reasonably expected to have a material adverse
effect on the business, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, or on the ability of the
Company to perform any of its obligations under the Merger Agreement;
(D) the Company shall not have performed or complied in all material
respects with its covenants under the Merger Agreement to which it is a
party and such failure continues until the later of (1) 15 calendar days
after actual receipt by it of written notice from Parent setting forth in
detail the nature of such failure or (2) the Expiration Date;
(E) there shall have occurred any material adverse change, or any
development that is reasonably likely to result in a material adverse
change, in the business, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole;
(F) the Merger Agreement shall have been terminated in accordance with
its terms;
(G) the Company Board shall have (1) withdrawn or materially modified or
changed its recommendation of the Offer, the Merger or the Merger Agreement
(including by amendment of Schedule 14D-9) in a manner adverse to Purchaser
or Parent, (2) taken a position inconsistent with, its recommendation of the
Offer, the Merger or any of the Merger Agreement, (3) approved, endorsed or
recommended any Company Takeover Proposal, (4) taken any action referred to
in Section 5.2 of the Merger Agreement that is prohibited thereby or would
be so prohibited but for the exceptions thereto, or (5) resolved or publicly
disclosed any intention to do any of the foregoing;
(H) there shall have occurred (1) any general suspension of, or
limitation on prices for, trading in securities on the NYSE, (2) a decline
of at least 10% in either the Dow Jones Average of Industrial Stocks, the
Standard & Poor's 500 Index or the Financial Times-Stock Exchange all shares
index from the date of the Merger Agreement, (3) the declaration of a
banking moratorium or any limitation or suspension of payments in respect of
the extension of credit by banks or other lending institutions in the United
States, (4) any commencement of war, armed hostilities or other
international or national calamity directly involving the United States or
having a significant adverse effect on the functionality of financial
markets in the United States, or (5) in the case of any of the foregoing,
existing at time of commencement of the Offer, a material acceleration or
worsening thereof;
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(I) Parent Shareholder Approval shall not have been obtained at the
Parent Shareholder meeting; or
(J) it shall have been publicly disclosed or Parent shall have otherwise
learned that (1) any Person or "group" (as defined in Section 13(d)(3) of
the Exchange Act), other than Parent or its affiliates or any group of which
any of them is a member or any affiliates controlled by it or which is
referred to in clause (2) below, shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of
more than 21% of the outstanding Shares, (2) any such Person or group which
has filed a Schedule 13D or 13G prior to the date of the Merger Agreement
disclosing beneficial ownership of 10% or more of the outstanding Shares
shall have acquired beneficial ownership of 21% or more of the outstanding
Shares, or (3) any Person or group shall have entered into a definitive
agreement or agreement in principle with the Company with respect to a
merger, consolidation or other business combination with the Company.
The foregoing conditions are for the sole benefit of Purchaser and its
affiliates and may be asserted by Purchaser, or Parent on behalf of Purchaser,
regardless of the circumstances (including without limitation any action or
inaction by Purchaser or any of its affiliates other than a material breach by
Purchaser or Parent of the Merger Agreement) giving rise to any such condition
or may be waived by Purchaser, in whole or in part, from time to time in its
sole discretion, except as otherwise provided in the Merger Agreement. The
failure by Purchaser at any time to exercise any of the foregoing rights will
not be deemed a waiver of any such right and each such right will be deemed an
ongoing right and may be asserted at any time and from time to time. Any good
faith determination by Purchaser concerning any of the events described herein
will be final and binding.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the SEC and other publicly available
information concerning the Company, but without any independent investigation,
neither Purchaser nor Parent is aware of any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by Purchaser's acquisition of
Shares as contemplated in this Offer to Purchase or of any approval or other
action by any governmental authority that would be required for the acquisition
or ownership of Shares by Purchaser as contemplated in this Offer to Purchase.
Should any such approval or other action be required, Purchaser and Parent
presently contemplate that such approval or other action will be sought, except
as described below under "State Takeover Laws." While, except as otherwise
expressly described in this Section 15, Purchaser does not presently intend to
delay the acceptance for payment of or payment for Shares tendered pursuant to
the Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or other actions were
not taken or in order to obtain any such approval or other action. If certain
types of adverse action are taken with respect to the matters discussed below,
Purchaser could decline to accept for payment or pay for any Shares tendered.
See Section 14 above for certain conditions to the Offer.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, shareholders, executive offices or places of business in those states.
In EDGAR V. MITE CORP., the Supreme Court of the United States invalidated on
constitutional grounds the Illinois Business Takeover Act, which, as a matter of
state securities law, made certain corporate acquisitions more difficult. In CTS
CORP. V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United
States held that a state may, as a matter of corporate law and, in particular,
those laws concerning corporate
41
<PAGE>
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without prior approval of the remaining
shareholders, provided that the laws were applicable only under certain
conditions.
Chapter 42 of the IBCL ("Chapter 42") states that unless the articles of
incorporation or the bylaws of an "issuing public corporation" provide that the
provisions of Chapter 42 do not apply to acquisitions of shares of such issuing
public corporation, an acquiring person, such as Purchaser, who makes a "control
share acquisition" with respect to such issuing public corporation may not
exercise voting rights pertaining to any "control shares" unless such rights are
conferred by holders of a majority of the outstanding shares of voting stock of
such issuing public corporation, excluding shares held by such acquiring person
or any officer or employee director of such issuing public corporation
("interested shares"), at a meeting of the shareholders. Chapter 42 defines
"issuing public corporation" as any corporation that has: (i) 100 or more
shareholders, (ii) its principal office or substantial assets within Indiana,
and (iii) more than 10% of its shareholders residing in Indiana, more than 10%
of its shares owned by Indiana residents or 10,000 shareholders residing in
Indiana. Chapter 42 defines "control shares" as an aggregate number of shares
owned by a person or in respect of which the person may exercise or direct the
exercise of the voting power of the issuing public corporation in an election of
directors within any of the following ranges: (a) one-fifth or more but less
than one-third, (b) one-third or more but less than a majority, or (c) a
majority or more. Chapter 42 defines a "control share acquisition" as the
acquisition of either ownership or the power to direct the voting power of
issued and outstanding control shares. The Company does not have its principal
office or substantial assets in Indiana, so Chapter 42 is inapplicable to the
Offer.
Chapter 43 of the IBCL ("Chapter 43") generally prohibits an Indiana
corporation from engaging in a "business combination" (defined as a variety of
transactions, including mergers) with an "interested shareholder" (defined
generally as a person that is the beneficial owner of 10% or more of a
corporation's outstanding voting stock) for a period of five years following the
date that such person became an interested shareholder, unless, among other
things, prior to the date such person became an interested shareholder, the
board of directors of the corporation approved either the business combination
or the transaction that resulted in the shareholder becoming an interested
shareholder. The Company Board has approved the Merger Agreement, the
Shareholders Agreement and the Purchaser's acquisition of Shares pursuant to the
Offer. Therefore, Chapter 43 does not apply to the Merger.
Indiana also has a takeover offers statute that by its terms would be
inapplicable to the Offer because the Company does not have its principal place
of business in Indiana.
Based on information supplied by the Company and the Company's
representations in the Merger Agreement, Purchaser does not believe that any
other state takeover statutes apply to the Offer or the Merger. Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger and nothing in this Offer to
Purchase or any action taken in connection with the Offer or the Merger is
intended as a waiver of that right. If it is asserted that any state takeover
statute is applicable to the Offer or the Merger and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer or the
Merger, Purchaser might be required to file certain information with, or to
receive approvals from, the relevant state authorities, and Purchaser might be
unable to accept for payment or pay for Shares tendered pursuant to the Offer or
be delayed in consummating the Offer or the Merger. In such case, Purchaser may
not be obligated to accept for payment or pay for any Shares tendered pursuant
to the Offer.
ANTITRUST. Based on Parent's and Purchaser's analyses to date, the purchase
of Shares under the Offer and the Merger is not subject to the notification
requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), because the jurisdictional thresholds under the HSR Act
are not met by the transactions contemplated by the Merger Agreement. In
addition, based on Parent's and Purchaser's analysis to date, no pre-merger
notifications are required with respect to the transactions contemplated by the
Offer and the Merger in any foreign jurisdictions. This does not exempt
42
<PAGE>
the Offer and the Merger from U.S. or foreign antitrust laws, however. The
Federal Trade Commission (the "FTC"), the Antitrust Division of the United
States Department of Justice (the "Antitrust Division") and foreign governmental
authorities frequently scrutinize the legality under the antitrust laws of
transactions such as Purchaser's proposed acquisition of the Company. At any
time before or after Purchaser's purchase of Shares pursuant to the Offer, the
Antitrust Division, the FTC or a foreign governmental authority could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by Purchaser or the divestiture of substantial assets of Purchaser or
its subsidiaries, or the Company or its subsidiaries. Private parties may also
bring legal action under the antitrust laws under certain circumstances. There
can be no assurance that a challenge to the Offer on antitrust grounds will not
be made or, if such a challenge is made, of the result of that challenge. See
Section 14 for certain conditions to the Offer, including conditions with
respect to litigation.
16. FEES AND EXPENSES
Dresdner Kleinwort Benson North America LLC ("DKBNA") is acting as Dealer
Manager in connection with the Offer, and DKBNA and its affiliate, Kleinwort
Benson Securities Limited ("KB" and, with DKBNA, "Dresdner Kleinwort Benson"),
are providing certain financial advisory services to Purchaser and Parent in
connection with the Offer. Pursuant to an engagement letter dated January 21,
1999, between Parent and KB, and a Dealer Manager Agreement dated as of February
25, 1999, among Parent, Purchaser and DKBNA, fees of $700,000 are currently
payable to Dresdner Kleinwort Benson, and an additional fee of $1,100,000, in
addition to amounts already paid, will be payable to Dresdner Kleinwort Benson
in the event the Offer is consummated. Parent has also agreed to reimburse
Dresdner Kleinwort Benson for its reasonable out-of-pocket expenses, including
certain fees and expenses of its counsel and any other advisor retained by
Dresdner Kleinwort Benson in connection with its engagement, not to exceed
L20,000 without Parent's approval, and to indemnify Dresdner Kleinwort Benson
and certain related persons against certain liabilities and expenses.
In the ordinary course of its business, Dresdner Kleinwort Benson engages in
securities trading, market-making and brokerage activities and may, at any time,
hold long or short positions and may trade or otherwise effect transactions in
securities of the Company or Parent. As of the date of this Offer to Purchase,
Dresdner Kleinwort Benson had no long or short positions in Shares held for its
own accounts.
Purchaser and Parent have retained MacKenzie Partners, Inc. to act as the
Information Agent and IBJ Whitehall Bank & Trust Company to serve as the
Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities and expenses under the Federal securities laws.
Except as set forth above, neither Purchaser nor Parent will pay any fees or
commission to any broker or dealer or other person in connection with the
solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks
and trust companies will be reimbursed by Purchaser upon request for customary
mailing and handling expense incurred by them in forwarding material to their
customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) Shareholders residing in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the securities,
blue sky or other laws of the jurisdiction. However, Purchaser may, in its
discretion, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to Shareholders in that jurisdiction. In any
jurisdiction where the securities, blue sky or other laws
43
<PAGE>
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of Purchaser by one or more registered brokers or
dealers that are licensed under the laws of the jurisdiction.
Purchaser has filed with the SEC the Schedule 14D-1 pursuant to Rule 14d-1
under the Exchange Act containing certain additional information with respect to
the Offer. The Schedule 14D-1 and any amendments to the Schedule 14D-1,
including exhibits, may be examined and copies may be obtained from the
principal office of the SEC in the manner set forth in Section 7 above (except
that they will not be available at the regional offices of the SEC).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR PARENT NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THE INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Neither the delivery of the Offer to Purchase nor any purchase pursuant to
the Offer will under any circumstances create any implication that there has
been no change in the affairs of Parent, Purchaser, the Company or any of their
respective subsidiaries since the date as of which information is furnished or
the date of this Offer to Purchase.
44
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND PARENT
A. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The directors of Purchaser are Frederick J. Westlake and Oliver G. Burns.
The executive officers of Purchaser are Messrs. Westlake and Burns and Neil
Clayton. Each of the directors and executive officers of Purchaser other than
Mr. Clayton is also an executive officer of Parent. Information concerning the
name, present principal occupation or employment and material occupation,
positions, offices or employment for the past five years of each director and
executive officer of Purchaser who is an executive officer of Parent is set
forth in the table of the directors and executive officers of Parent. Such
information is set forth below for Mr. Clayton. The business address of each
director and executive officer of Purchaser is 2 Cheapside Court, Buckhurst
Road, Ascot, Berkshire SL5 7RF, United Kingdom. All directors and officers of
Purchaser are citizens of the United Kingdom.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
AGE AT EMPLOYMENT AND
NAME 12/31/98 FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------------------- ------------- ---------------------------------------------------
<S> <C> <C>
Neil Clayton 36 Secretary since 1999
Secretary, First Technology PLC for last five years
</TABLE>
B. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employment for the
past five years of each director and executive officer of Parent and Purchaser.
Unless otherwise indicated below, (i) each individual has held his or her
positions for more than the past five years and (ii) the business address of
each person is 2 Cheapside Court, Buckhurst Road, Ascot, Berkshire SL5 7RF,
United Kingdom. Except as otherwise stated below, all directors and officers
listed below are citizens of the United Kingdom. Directors are identified with a
single asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
AGE AT EMPLOYMENT AND
NAME 12/31/98 FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------------------- ------------- ---------------------------------------------------
<S> <C> <C>
Frederick J. Westlake.............................. 56 Director and Executive Chairman since 1984 Member
of the Boards of Directors of First Technology
Capital, Inc., a Michigan company and subsidiary of
Parent, and First Technology Acquisition, Inc., an
Indiana company and subsidiary of Parent
Oliver G. Burns.................................... 42 Finance Director since 1997
Finance Director of Siltrona International, Ltd.
from 1993 to 1997
Member of the Boards of Directors of First
Technology Capital, Inc., a Michigan company and
subsidiary of Parent, and First Technology
Acquisition, Inc., an Indiana company and
subsidiary of Parent
Muir A. Parker..................................... 54 Managing Director of Parent since 1997 Chief
Executive, Safety & Analysis Division from 1994 to
1997
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
AGE AT EMPLOYMENT AND
NAME 12/31/98 FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------------------------------- ------------- ---------------------------------------------------
<S> <C> <C>
Walter J. Borda.................................... 53 Director since 1998
(United States Citizen) Managing Partner, Borda & Clemmons law firm since
1999
Managing Partner, Stroble & Borda law firm prior to
1999
Patrick Burgess.................................... 53 Director since 1997
Partner, Gouldens solicitors firm for last 25 years
Member of the Boards of Directors of Hart Ventures
Plc, Jokyo Holdings Limited, Kaye Enterprises
Limited, London Forfeiting Company Plc and Strand
Partners Limited
John H. Feltham.................................... 73 Director since 1994
Retired
</TABLE>
I-2
<PAGE>
ANNEX A
AUDITORS' REPORT ON CORPORATE GOVERNANCE MATTERS
The following Auditors' Report and Annual Accounts appear in First
Technology PLC's Report and Accounts to Shareholders dated 21 August 1998.
Arthur Andersen has advised the Company that its audit opinion on the
financial statements for the year ended 30 April 1998 was expressed for the
purpose and the persons defined in the United Kingdom Companies Act 1985 and for
no other purposes or persons and that it does not accept any responsibility for
the audit report beyond that they owed to those to whom their report was issued
at the date of its issue.
Auditors' Report to
First Technology PLC on
Corporate Governance Matters
In addition to our audit of the financial statements, we have reviewed the
directors' statements on pages 21 and 22 concerning the Company's compliance
with the paragraphs of the Cadbury Code of Best Practice specified for our
review by the London Stock Exchange and their adoption of the going concern
basis in preparing the financial statements. The objective of our review is to
draw attention to non-compliance with Listing Rules 12.43(j) and 12.43(v).
We carried out our review in accordance with guidance issued by the Auditing
Practices Board. That guidance does not require us to perform the additional
work necessary to, and we do not, express any opinion on the effectiveness of
either the Company's system of internal financial control or its corporate
governance procedures nor on the ability of the Company and Group to continue in
operational existence.
OPINION
With respect to the directors' statements on internal financial control and
going concern on pages 21 and 22, in our opinion the directors have provided the
disclosures required by the Listing Rules referred to above and such statements
are not inconsistent with the information of which we are aware from our audit
work on the financial statements.
Based on enquiry of certain directors and officers of the Company, and
examination of relevant documents, in our opinion the directors' statement on
pages 21 and 22 appropriately reflects the Company's compliance with the other
aspects of the Code specified for our review by Listing Rule 12.43(j).
Arthur Andersen
Chartered Accountants
London 21st August 1998
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 23
A-1
<PAGE>
AUDITORS' REPORT
TO THE SHAREHOLDERS OF FIRST TECHNOLOGY PLC
We have audited the financial statements on pages 26 to 47 which have been
prepared under the historical cost convention and the accounting policies set
out on page 29 and 30.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 19 the Company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Group's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of affairs of the Company and of the Group at 30th April 1998 and of the
Group's profit and cash flows for the year then ended and have been properly
prepared in accordance with the Companies Act 1985.
Arthur Andersen
Chartered Accountants
and Registered Auditors
London 21st August 1998
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 24
A-2
<PAGE>
During the past year, the Group has recorded further growth in underlying sales
and profitability and combined with strong cash flows, has shown further
improvement in its key financial ratios.
Oliver Burns
FINANCE DIRECTOR
<TABLE>
<S> <C>
Group Profit and Loss Account.......................................................... 26
Balance Sheets......................................................................... 27
Group Cash Flow Statement.............................................................. 28
Principal Accounting Policies.......................................................... 29
Notes to the Financial Statements...................................................... 31
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 25
A-3
<PAGE>
GROUP PROFIT AND LOSS ACCOUNT
YEAR ENDED 30TH APRIL 1998
<TABLE>
<CAPTION>
CONTINUING DISCONTINUED
ACTIVITIES ACTIVITIES TOTAL
1998 1998 1998
NOTES L000 L000 L000
----- ----------- -------------------- ---------
<S> <C> <C> <C> <C>
Turnover................................. 1 51,928 2,343 54,271
Cost of sales............................ 2 (32,431) (1,565) (33,996)
----------- ------ ---------
Gross profit............................. 19,497 778 20,275
Other operating costs.................... 2 (8,017) (552) (8,569)
----------- ------ ---------
Operating profit......................... 1 11,480 226 11,706
Profit on sale of surplus property....... 3 387
Profit on the disposal of discontinued
activities............................. 3 958
Interest................................. 4 531
----------- ------ ---------
Profit on ordinary activities before
taxation............................... 6 13,582
Tax on profit on ordinary activities..... 7 (4,258)
----------- ------ ---------
Profit for the financial year............ 9,324
Dividends................................ 8 (2,396)
----------- ------ ---------
Transfer to reserves..................... 19 6,928
----------- ------ ---------
Basic earnings per share................. 9 19.49p
Headline earnings per share.............. 9 16.68p
Dividends per share...................... 8 5.00p
<CAPTION>
CONTINUING DISCONTINUED
ACTIVITIES ACTIVITIES TOTAL
1997 1997 1997
L000 L000 L000
-- ------------- ---------
<S> <C> <C>
Turnover.................................46,543 3,933 50,476
Cost of sales............................(28,583) (2,499) (31,082)
-- ------ ---------
Gross profit.............................17,960 1,434 19,394
Other operating costs....................(9,071) (1,129) (10,200)
-- ------ ---------
Operating profit.........................8,889 305 9,194
Profit on sale of surplus property....... --
Profit on the disposal of discontinued
activities............................. --
Interest................................. 36
-- ------ ---------
Profit on ordinary activities before
taxation............................... 9,230
Tax on profit on ordinary activities..... (3,216)
-- ------ ---------
Profit for the financial year............ 6,014
Dividends................................ (1,716)
-- ------ ---------
Transfer to reserves..................... 4,298
-- ------ ---------
Basic earnings per share................. 12.70p
Headline earnings per share.............. 12.70p
Dividends per share...................... 3.60p
</TABLE>
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
YEAR ENDED 30TH APRIL 1998
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Profit attributable to shareholders.............................................................. 9,324 6,014
Currency translation difference on foreign currency net investments.............................. (492) (910)
--------- ---------
Total gains and losses for the year.............................................................. 8,832 5,104
--------- ---------
--------- ---------
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 26
A-4
<PAGE>
BALANCE SHEETS
YEAR ENDED 30TH APRIL 1998
<TABLE>
<CAPTION>
GROUP COMPANY
-------------------- --------------------
1998 1997 1998 1997
NOTES L000 L000 L000 L000
----- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Fixed assets
Tangible assets......................................................... 10 7,987 7,694 -- --
Investments............................................................. 11 -- -- 15,738 15,886
--------- --------- --------- ---------
7,987 7,694 15,738 15,886
--------- --------- --------- ---------
--------- --------- --------- ---------
Current assets
Surplus property held for resale........................................ 3 -- 800 -- --
Stocks.................................................................. 12 4,353 3,523 -- --
Debtors................................................................. 13 9,786 13,042 1,646 2,067
Cash.................................................................... 15,806 6,223 8,210 2,286
--------- --------- --------- ---------
29,945 23,588 9,856 4,353
Creditors: amounts falling due within one year.......................... 14 (11,424) (11,050) (12,028) (5,608)
--------- --------- --------- ---------
Net current assets/(liabilities)........................................ 18,521 12,538 (2,172) (1,255)
--------- --------- --------- ---------
--------- --------- --------- ---------
Total assets less current liabilities................................... 26,508 20,232 13,566 14,631
Creditors: amounts falling due after more than one year................. 15 (479) (988) -- --
Provisions for liabilities and charges.................................. 16 (184) (468) -- --
--------- --------- --------- ---------
Net assets.............................................................. 25,845 18,776 13,566 14,631
--------- --------- --------- ---------
--------- --------- --------- ---------
Capital and reserves
Called up share capital................................................. 18 4,795 1,590 4,795 1,590
Share premium account................................................... 19 6,077 9,052 6,077 9,052
Other reserves.......................................................... 19 -- (10,024) -- --
Profit and loss account................................................. 19 14,973 18,158 2,694 3,989
--------- --------- --------- ---------
Equity shareholders' funds.............................................. 25,845 18,776 13,566 14,631
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The financial statements on pages 26 to 47 were approved by the Board on
21st August 1998.
O G Burns F J Westlake
Director Chairman
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 27
A-5
<PAGE>
GROUP CASH FLOW STATEMENT
YEAR ENDED 30TH APRIL 1998
<TABLE>
<CAPTION>
1998 1997
NOTES L000 L000 L000 L000
----- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net cash inflow from operating activities........................... 22 14,894 10,585
Returns on investments and servicing of finance
Interest paid....................................................... (64) (108)
Interest received................................................... 553 158
--------- --------- --------- ---------
--------- --------- --------- ---------
Net cash inflow from returns on investment and servicing of
finance........................................................... 489 50
Taxation
UK corporation tax paid............................................. (1,269) (1,335)
Overseas tax paid................................................... (3,075) (1,692)
--------- --------- --------- ---------
--------- --------- --------- ---------
Taxation paid....................................................... (4,344) (3,027)
Capital expenditure and financial investment
Purchase of tangible fixed assets................................... (2,781) (2,600)
Sale of tangible fixed assets....................................... 126 49
Sale of surplus property............................................ 1,187 --
Disposal of businesses.............................................. 23 2,433 --
--------- --------- --------- ---------
--------- --------- --------- ---------
Net cash inflow/(outflow) from capital expenditure and financial
investment........................................................ 965 (2,551)
Equity dividends paid............................................... (1,914) (1,499)
Management of liquid resources
(Increase)/decrease in short term deposits.......................... 23 (3,843) 750
--------- --------- --------- ---------
--------- --------- --------- ---------
Net cash (inflow)/outflow from management of liquid resources....... (3,843) 750
--------- --------- --------- ---------
--------- --------- --------- ---------
Net cash inflow before financing.................................... 6,247 4,308
Financing
Repayment of term loans............................................. (485) (500)
Issue of share capital.............................................. 230 453
--------- --------- --------- ---------
--------- --------- --------- ---------
Net cash outflow from financing activities.......................... (255) (47)
--------- --------- --------- ---------
--------- --------- --------- ---------
Increase in cash in the year........................................ 23 5,992 4,261
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 28
A-6
<PAGE>
PRINCIPAL ACCOUNTING POLICIES
BASIS OF PREPARATION
The financial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the accounts of First
Technology PLC and all its subsidiaries. The results of subsidiaries acquired or
sold are included from the date of acquisition or to the date of disposal. As
permitted by Section 230 of the Companies Act 1985, the profit and loss account
of the Company is not presented as part of these financial statements.
GOODWILL
Goodwill previously written off on acquisition is charged to the profit and
loss account on disposal of subsidiary companies. Under the new accounting
standard FRS 10, GOODWILL AND INTANGIBLE ASSETS, goodwill arising on
acquisitions of subsidiaries after 30th April 1998 will be capitalised and
amortised over a period not exceeding 20 years. Goodwill arising on acquisitions
prior to 30th April 1998 has been written off to reserves.
FOREIGN CURRENCY
Assets and liabilities denominated in a foreign currency are translated at
the exchange rate ruling at the balance sheet date and the trading results of
the overseas subsidiaries at the average rate for the year. Translation
differences arising on the restatement of the net investment in these companies
and related hedging instruments are dealt with as adjustments to reserves. All
other differences are taken to the profit and loss account.
TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at cost less depreciation. Depreciation is
charged at annual rates calculated to write down assets to their residual values
over their expected useful lives as follows:
<TABLE>
<S> <C>
Freehold land................................ nil
Freehold buildings........................... 2%
Short leaseholds............................. over the term of the lease
Plant, computers and fixtures................ 10%-33%
Motor vehicles............................... 25%-33%
</TABLE>
LEASED ASSETS
Fixed assets held under finance leases are capitalised and depreciated over
their expected useful lives. The finance charge is allocated to the profit and
loss account over the primary period of the lease in proportion to the capital
element outstanding. Operating lease rentals are charged to the profit and loss
account on a straight line basis.
FIXED ASSET INVESTMENTS
Investments held as fixed assets are included at cost less provision for any
permanent diminution in value.
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 29
A-7
<PAGE>
RESEARCH AND DEVELOPMENT
Development expenditure relating to specific projects intended for
commercial exploitation is charged against profit in the year in which it is
incurred, other than that which is considered fully recoverable over the periods
expected to benefit from the project. Such expenditure is carried forward and
amortised over the periods expected to benefit from it, commencing with the
period in which related sales are first made. Expenditure on research is written
off to the profit and loss account as incurred.
PROPERTY HELD FOR SALE
Property held for sale is included in current assets and is valued at the
lower of cost and net realisable value.
STOCKS
Stocks and work in progress are valued at the lower of cost and net
realisable value. Work in progress and finished goods include an appropriate
proportion of attributable production overheads.
DEFERRED TAXATION
Deferred taxation is provided using the liability method on all timing
differences only to the extent that they are expected to reverse in the future
without being replaced.
PENSION COMMITMENTS
The cost of pensions in respect of the Group's defined benefit pension
scheme is charged to the profit and loss account so as to spread the cost over
the service lives of employees in the scheme. Variations from the regular cost
are spread over the expected remaining service lives of current employees in the
scheme. The pension cost is assessed in accordance with the advice of qualified
actuaries. Full provision is made for the related deferred tax.
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 30
A-8
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30TH APRIL 1998
1. SEGMENTAL INFORMATION
(a) Turnover by destination:
<TABLE>
<CAPTION>
1998 1998 1998 1997 1997 1997
L000 L000 L000 L000 L000 L000
CONTINUING DISCONTINUED TOTAL CONTINUING DISCONTINUED TOTAL
---------- ------------ --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
UK............................................... 4,026 1,267 5,293 3,449 2,019 5,468
Rest of Europe................................... 16,200 798 16,998 14,498 1,433 15,931
USA.............................................. 22,199 19 22,218 16,327 32 16,359
Asia............................................. 5,170 229 5,399 8,227 397 8,624
South America.................................... 1,549 2 1,551 2,095 4 2,099
Other............................................ 2,784 28 2,812 1,947 48 1,995
---------- ------------ --------- ---------- ------------ ---------
51,928 2,343 54,271 46,543 3,933 50,476
---------- ------------ --------- ---------- ------------ ---------
---------- ------------ --------- ---------- ------------ ---------
</TABLE>
The discontinued activities comprise the businesses of the Industrial
Products section of First Technology Protection Systems Limited and First
Technology Fire and Safety Limited, the disposal of which was approved by
shareholders at the Extraordinary General Meeting held on 21st November 1997.
(b) Turnover by origin:
<TABLE>
<CAPTION>
1998 1998 1998 1997 1997 1997
L000 L000 L000 L000 L000 L000
CONTINUING DISCONTINUED TOTAL CONTINUING DISCONTINUED TOTAL
---------- ------------ --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Europe........................................... 19,605 2,343 21,948 17,793 3,933 21,726
USA.............................................. 27,896 -- 27,896 23,845 -- 23,845
Japan............................................ 4,427 -- 4,427 4,905 -- 4,905
---------- ------------ --------- ---------- ------------ ---------
51,928 2,343 54,271 46,543 3,933 50,476
---------- ------------ --------- ---------- ------------ ---------
---------- ------------ --------- ---------- ------------ ---------
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 31
A-9
<PAGE>
(c) Operating profit by origin:
<TABLE>
<CAPTION>
1998 1998 1998 1997 1997 1997
L000 L000 L000 L000 L000 L000
CONTINUING DISCONTINUED TOTAL CONTINUING DISCONTINUED TOTAL
---------- ------------ --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Europe........................................... 4,944 226 5,170 3,386 305 3,691
USA.............................................. 6,132 -- 6,132 4,942 -- 4,942
Japan............................................ 404 -- 404 561 -- 561
---------- ------------ --------- ---------- ------------ ---------
11,480 226 11,706 8,889 305 9,194
Exceptional items................................ 1,345 -- 1,345 -- -- --
Interest......................................... 531 -- 531 36 -- 36
---------- ------------ --------- ---------- ------------ ---------
Profit before taxation........................... 13,356 226 13,582 8,925 305 9,230
---------- ------------ --------- ---------- ------------ ---------
---------- ------------ --------- ---------- ------------ ---------
</TABLE>
(d) Net assets by origin:
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Europe......................................................................................... 5,951 9,118
USA............................................................................................ 8,229 7,506
Japan.......................................................................................... (722) (504)
--------- ---------
Net operating assets........................................................................... 13,458 16,120
Net cash....................................................................................... 14,849 4,741
Taxation....................................................................................... (928) (1,032)
Dividends...................................................................................... (1,534) (1,053)
--------- ---------
Net assets..................................................................................... 25,845 18,776
--------- ---------
--------- ---------
</TABLE>
In the opinion of the directors, there is only one class of business.
2. COST OF SALES AND OTHER OPERATING COSTS
Certain costs directly attributable to sales have been reclassified from
Other Operating Costs to Cost of Sales, as the directors consider that this
gives a better presentation. These amounted to L697,000 in the year (1997:
L1,037,000). The comparatives have been restated. Other Operating Costs
represent other selling, general and administrative expenses.
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 32
A-10
<PAGE>
3. EXCEPTIONAL ITEMS
The exceptional items comprise the profit on the disposal of surplus
property of L387,000 and the profit on the disposal of discontinued activities
of L958,000. The latter is after charging L403,000 of identified goodwill
previously written off to reserves on acquisition. The discontinued activities
comprised of First Technology Fire and Safety Limited and the Industrial section
of First Technology Protection Systems Limited. There was no taxation arising
from either transaction.
4. INTEREST
<TABLE>
<CAPTION>
1998 1997
L000 L000
----- ---------
<S> <C> <C>
Interest payable on bank loans and overdrafts....................................................... (71) (122)
Interest receivable................................................................................. 602 158
--- ---
Net interest receivable............................................................................. 531 36
--- ---
--- ---
</TABLE>
5. DIRECTORS AND EMPLOYEES
(a) Staff costs (including directors):
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Salaries......................................................................................... 8,691 8,261
Social security costs............................................................................ 786 780
Other pension costs.............................................................................. 369 445
--------- ---------
9,846 9,486
--------- ---------
--------- ---------
</TABLE>
(b) The average monthly number of employees during the year was as follows:
<TABLE>
<CAPTION>
1998 1997
NUMBER NUMBER
--------- ---------
<S> <C> <C>
Engineering and production.................................................................... 333 299
Office and managerial......................................................................... 63 66
Sales......................................................................................... 14 23
--------- ---------
410 388
--------- ---------
--------- ---------
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 33
A-11
<PAGE>
(c) Directors' aggregate remuneration:
<TABLE>
<CAPTION>
1998 1997
L000 L000
----- -----
<S> <C> <C>
Emoluments.......................................................................................... 607 583
Gains on exercise of share options.................................................................. 91 365
Contributions to money purchase schemes............................................................. 32 32
--- ---
730 980
--- ---
--- ---
</TABLE>
Directors' emoluments:
<TABLE>
<CAPTION>
SALARY BENEFITS ANNUAL 1998
OR FEES IN KIND BONUS TOTAL
L000 L000 L000 L000
----------- ------------- ----------- -----
<S> <C> <C> <C> <C>
F J Westlake (Executive Chairman)....................................... 200 15 67 282
O G Burns (appointed 17th November 1997)................................ 48 3 19 70
M A Parker.............................................................. 94 10 31 135
A R Adams (resigned 21st November 1997)................................. 54 3 -- 57
N R Young (resigned 20th July 1997)..................................... 20 2 -- 22
D P H Burgess (appointed 8th May 1997).................................. 18 -- -- 18
J H F Feltham........................................................... 23 -- -- 23
E M Irving.............................................................. -- -- -- --
--
--- --- ---
Total................................................................... 457 33 117 607
--
--
--- --- ---
--- --- ---
<CAPTION>
1997
TOTAL
L000
-----
<S> <C>
F J Westlake (Executive Chairman)....................................... 192
O G Burns (appointed 17th November 1997)................................ --
M A Parker.............................................................. 139
A R Adams (resigned 21st November 1997)................................. 122
N R Young (resigned 20th July 1997)..................................... 109
D P H Burgess (appointed 8th May 1997).................................. --
J H F Feltham........................................................... 21
E M Irving.............................................................. --
---
Total................................................................... 583
---
---
</TABLE>
(d) Directors' pension entitlements
Dr F J Westlake is a member of the First Technology Retirements Benefits
Scheme, which is a defined benefit scheme and details of which are set out in
note 17. Mr A R Adams is a deferred member of the scheme. They had accrued
entitlements as follows:
<TABLE>
<CAPTION>
ACCRUED PENSION ACCRUED PENSION INCREASE
30TH APRIL 1997 30TH APRIL 1998 INCREASE AFTER INDEXATION
L000 L000 L000 L000
------------------- ------------------- --------------- -------------------
<S> <C> <C> <C> <C>
F J Westlake....................... 97 104 7 4
A R Adams (resigned 21st November
1997)............................ 15 16 1 --
- --
--- ---
Total.............................. 112 120 8 4
- --
- --
--- ---
--- ---
<CAPTION>
TRANSFER VALUE
OF INCREASE
AFTER INDEXATION
L000
-------------------
<S> <C>
F J Westlake....................... 52
A R Adams (resigned 21st November
1997)............................ 4
--
Total.............................. 56
--
--
</TABLE>
Pension amounts disclosed above in respect of these directors represent the
value of benefits which accrued to them during the year.
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 34
A-12
<PAGE>
Mr O G Burns, Dr M A Parker and Mr N R Young are members of their own
personal money purchase schemes. The company has paid contributions during the
year as follows:
<TABLE>
<CAPTION>
1998 1997
L000 L000
----- -----
<S> <C> <C>
O G Burns (appointed 17th November 1997)............................................................ 8 --
M A Parker.......................................................................................... 19 19
N R Young (resigned 20th July 1997)................................................................. 5 13
-- --
32 32
-- --
-- --
</TABLE>
Messrs W J Borda, D P H Burgess, J H Feltham and E M Irving are
non-executive directors, whose service is not pensionable.
(e) The directors' share options were as follows:
<TABLE>
<CAPTION>
AT NUMBER NUMBER NUMBER AT MARKET DATE
1ST MAY OF OPTIONS OF OPTIONS OF OPTIONS 30TH APRIL EXERCISE PRICE AT FROM WHICH
DIRECTOR 1997 EXERCISED GRANTED LAPSED 1998 PRICE EXERCISE EXERCISABLE
- ---------------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
O G Burns
Executive options........... -- -- 70,000 -- 70,000 340p -- 24.2.01
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
Total....................... -- -- 70,000 -- 70,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
M A Parker
Executive options........... 15,000 -- -- -- 15,000 102p -- 31.1.97
-- -- 70,000 -- 70,000 340p -- 24.2.01
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
15,000 70,000 85,000
SAYE options................ 17,424 -- -- -- 17,424 99p -- 1.3.00
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
Total....................... 32,424 -- 70,000 -- 102,424
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
F J Westlake
Executive options........... 100,000 100,000 340p -- 24.2.01
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
-- -- 100,000 -- 100,000
SAYE options................ 17,424 -- -- -- 17,424 99p -- 1.3.00
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
Total....................... 17,424 -- 100,000 -- 117,424
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
A R Adams
Executive options........... 30,804 (30,804) -- -- -- 137p 241p --
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
15,000 (15,000) -- -- -- 127p 241p --
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
30,000 (30,000) -- -- -- 102p 241p --
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
75,804 (75,804) -- -- --
SAYE options................ 11,856 -- -- (5,790) 6,066 99p -- --
----------- ----------- ----------- ----------- ----------- ----- ----- -----------
5,253 -- -- (5,253) 131p -- --
----------- ----------- ----------- ----------- -----------
Total....................... 92,913 (75,804) -- (11,043) 6,066
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
EXPIRY
DIRECTOR DATE
- ---------------------------- ---------
<S> <C>
O G Burns
Executive options........... 24.2.08
---------
Total.......................
M A Parker
Executive options........... 31.1.04
24.2.08
---------
SAYE options................ 1.9.00
---------
Total.......................
F J Westlake
Executive options........... 24.2.08
---------
SAYE options................ 1.9.00
---------
Total.......................
A R Adams
Executive options........... --
---------
--
---------
--
---------
---------
SAYE options................ --
---------
--
Total.......................
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 35
A-13
<PAGE>
N R Young had no options
The number of options and the relevant exercise price have been adjusted for
the 2 for 1 capitalisation issue during the year (note 18). A R Adams realised a
gain of L91,000 on executive options. Under the rules of the SAYE scheme, A R
Adams exercised 6,066 of his options on 28th May 1998 and realised a gain of
L18,000. Total gains realised on executive options during the year were L91,000:
(1997 N R Young L19,000, F J Westlake L346,000).
6. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1998 L997
L000 L000
--------- ---------
<S> <C> <C>
Is stated after charging:
Operating lease charges--other................................................................... 373 508
Auditors' remuneration--audit fees............................................................... 90 89
Depreciation of tangible fixed assets............................................................ 2,015 1,984
Research and development......................................................................... 1,971 2,238
</TABLE>
Non-audit fees payable to the Group's auditors of L85,000 (1997: L19,000)
were incurred in the United Kingdom.
7. TAXATION
<TABLE>
<CAPTION>
1998 L997
L000 L000
--------- ---------
<S> <C> <C>
UK corporation tax at 31%........................................................................ 1,436 1,250
Overseas taxation................................................................................ 2,808 2,161
Deferred taxation................................................................................ (35) (203)
Prior year....................................................................................... 49 8
--------- ---------
4,258 3,216
</TABLE>
8. DIVIDENDS
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Interim dividend--paid 1.8p (1997: 1.4p)......................................................... 861 663
Final dividend--proposed 3.2p (1997: 2.2p)....................................................... 1,535 1,053
--------- ---------
2,396 1,716
</TABLE>
The comparative dividends have been restated to reflect the 2 for 1
capitalisation issue during the year.
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 36
A-14
<PAGE>
9. EARNINGS PER SHARE
Basic earnings per share is calculated on earnings of L9,324,000 (1997:
L6,014,000) and 47,847,698 ordinary shares (1997: 47,347,758) ordinary shares,
being the weighted average number of shares in issue for the year, as adjusted
for the 2 for 1 capitalisation issue (note 18). Headline earnings per share is
based on profit attributable to shareholders after taxation, excluding the
exceptional items, of L7,979,000 (1997: L6,014,000) and the same weighted
average number of shares.
10. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FREEHOLD PLANT
LAND & SHORT COMPUTERS & MOTOR
BUILDINGS LEASEHOLDS FIXTURES VEHICLES TOTAL
GROUP L000 L000 L000 L000 L000
- ----------------------------------------------------------------- ----------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
COST
1st May 1997..................................................... 3,260 411 14,154 600 18,425
Additions........................................................ 79 24 2,345 288 2,736
Disposals........................................................ -- -- (138) (206) (344)
Discontinued activities.......................................... -- (52) (160) (133) (345)
Exchange differences............................................. (102) (5) (309) (5) (421)
----- ----- ------ ----- ---------
30th April 1998.................................................. 3,237 378 15,892 544 20,051
----- ----- ------ ----- ---------
----- ----- ------ ----- ---------
DEPRECIATION
1st May 1997..................................................... 757 262 9,357 355 10,731
Charge for the year.............................................. 99 41 1,736 139 2,015
Disposals........................................................ -- -- (71) (170) (241)
Discontinued activities.......................................... -- (19) (126) (74) (219)
Exchange differences............................................. (25) (3) (191) (3) (222)
----- ----- ------ ----- ---------
30th April 1998.................................................. 831 281 10,705 247 12,064
----- ----- ------ ----- ---------
----- ----- ------ ----- ---------
NET BOOK VALUE
30th April 1998.................................................. 2,406 97 5,187 297 7,987
----- ----- ------ ----- ---------
----- ----- ------ ----- ---------
30th April 1997.................................................. 2,503 149 4,797 245 7,694
----- ----- ------ ----- ---------
----- ----- ------ ----- ---------
</TABLE>
Freehold land and buildings include land at a cost of L255,000 (1997:
L255,000) which is not subject to depreciation. The cost of freehold land and
buildings includes capitalised interest of L118,000 (1997: L118,000).
Capital expenditure contracted for at 30th April 1998 was L997,000 (1997:
L412,000).
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 37
A-15
<PAGE>
11. FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
SHARES IN LOANS TO
SUBSIDIARIES SUBSIDIARIES TOTAL
COMPANY L000 L000 L000
- ------------------------------------------------------------------------------ ----------- ------------- ---------
<S> <C> <C> <C>
COST
1st May 1997.................................................................. 12,276 3,613 15,889
Exchange differences.......................................................... -- (148) (148)
----------- ----- ---------
30th April 1998............................................................... 12,276 3,465 15,741
----------- ----- ---------
----------- ----- ---------
PROVISIONS FOR DIMINUTION IN VALUE
1st May 1997 and 30th April 1998.............................................. (3) -- (3)
----------- ----- ---------
----------- ----- ---------
NET BOOK VALUE
30th April 1998............................................................... 12,273 3,465 15,738
----------- ----- ---------
30th April 1997............................................................... 2,273 3,613 15,886
----------- ----- ---------
----------- ----- ---------
</TABLE>
Details of the company's principal subsidiaries are given on page 47.
12. STOCKS
<TABLE>
<CAPTION>
1998 1997
GROUP L000 L000
- ------------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Raw materials.................................................................................... 1,402 1,340
Work in progress................................................................................. 180 273
Finished goods................................................................................... 2,771 1,910
--------- ---------
4,353 3,523
--------- ---------
--------- ---------
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 38
A-16
<PAGE>
13. DEBTORS
<TABLE>
<CAPTION>
GROUP COMPANY
-------------------- --------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
L000 L000 L000 L000
--------- --------- --------- ---------
AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade debtors.................................................................. 8,104 11,061 -- --
Amounts owed by subsidiaries................................................... -- -- 1,093 1,794
Other debtors.................................................................. 488 974 120 10
Corporation tax................................................................ 153 3 -- --
Deferred taxation (note 16).................................................... 211 173 -- --
Prepayments and accrued income................................................. 180 226 49 --
Pension prepayment............................................................. 60 60 -- --
--------- --------- --------- ---------
9,196 12,497 1,262 1,804
--------- --------- --------- ---------
--------- --------- --------- ---------
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Advance corporation tax........................................................ 384 263 384 263
Other debtors.................................................................. 50 66 -- --
Pension prepayment............................................................. 156 216 -- --
--------- --------- --------- ---------
9,786 13,042 1,646 2,067
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
-------------------- --------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
L000 L000 L000 L000
--------- --------- --------- ---------
Bank loans and overdrafts................................................... 478 494 5,833 2,077
Trade creditors............................................................. 3,264 4,017 -- --
Amounts owed to subsidiaries................................................ -- -- 4,248 2,027
Corporation tax............................................................. 1,281 1,208 28 --
Advance corporation tax..................................................... 384 263 384 263
Other taxes and social security............................................. 211 273 -- --
Other creditors............................................................. 85 148 -- 109
Pension contributions....................................................... 23 -- -- --
Accruals and deferred income................................................ 4,164 3,594 1 79
Dividend proposed........................................................... 1,534 1,053 1,534 1,053
--------- --------- --------- ---------
11,424 11,050 12,028 5,608
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Bank loans and overdrafts include L478,000 (1997: L494,000) of Economic
Development Bonds (see note 15).
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 39
A-17
<PAGE>
15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
----------- -----------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
L000 L000 L000 L000
---- ---- ---- ----
Bank loans repayable:
Between one and two years....................................................... 479 494 -- --
Between two and five years...................................................... -- 494 -- --
---- ---- ---- ----
479 988 -- --
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
Bank loans at 30th April 1998 and 30th April 1997 comprise Economic
Development Bonds which were issued to finance, and are secured upon, the
Group's investment in freehold land, buildings and equipment at its facilities
in Plymouth and Grand Blanc, Michigan. The Economic Development Bonds are
repayable by annual installments by December 1999 and interest is charged
quarterly at a variable economic rate.
16. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
DEFERRED OTHER
TAXATION PROVISIONS TOTAL
L000 L000 L000
--------- ------------- ---------
<S> <C> <C> <C>
1st May 1997........................................................................ -- 468 468
Charged/(utilised) in the year...................................................... (35) (295) (330)
Transferred to deferred tax debtor.................................................. 38 -- 38
Exchange differences................................................................ 8 -- 8
--------- --- ---
30th April 1998 11 173 184
--------- --- ---
--------- --- ---
</TABLE>
During the year the provision for restructuring costs of L255,000 was
credited to the exceptional profit arising on the disposal of the discontinued
activities. Other provisions at 30th April 1998 are in respect of vacant
leasehold costs.
The analysis of deferred tax is as follows:
<TABLE>
<CAPTION>
GROUP COMPANY
------------- -----------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
L000 L000 L000 L000
----- ----- ---- ----
Deferred tax debtor (note 13)................................................... (211) (173) -- --
Deferred tax provision.......................................................... 11 -- -- --
----- ----- ---- ----
(200) (173) -- --
----- ----- ---- ----
----- ----- ---- ----
</TABLE>
The analysis of the amounts provided:
<TABLE>
<S> <C> <C> <C> <C>
Accelerated capital allowances...................................... (10) (26) -- --
Short term timing differences....................................... (190) (147) -- --
-- --
--- ---
(200) (173) -- --
-- --
-- --
--- ---
--- ---
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 40
A-18
<PAGE>
17. PENSION FUNDING
The Group operates a pension scheme providing benefits based on final
pensionable pay. The scheme is closed to new members. The assets of the scheme
are held separately from those of the Group, being held in a trustee
administered fund. Contributions to the scheme are charged to the profit and
loss account so as to spread the cost of pensions over the employees' working
lives with the Group. The contributions are determined by an independent
qualified actuary on the basis of triennial valuations using the discounted
income method. The most recent valuation of the scheme was at 5th April 1997.
The assumptions which have the most significant effect on the results of the
valuation are those relating to the rate of return on investments and the rates
of increase in salaries and pensions. It was assumed that the investment returns
would be 9% per annum, salary increases would average 6.5% per annum and the
allowance for Limited Price Indexation on pensions accruing after April 1997
would be 4.3% per annum.
The most recent actuarial valuation showed that the value of the schemes
assets was L4,403,000 and that the actuarial value of those assets represented
101% of the benefits that had accrued to members after allowing for expected
future increases in earnings. The impact of the withdrawal of tax credits on
dividend income is not expected to have a significant effect on the assessed
contribution rates.
The Group also operates various defined contribution schemes established in
accordance with local conditions and practices in the countries concerned.
18. CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
<S> <C> <C> <C> <C>
NUMBER NUMBER
OF SHARES L000 OF SHARES L000
------------ --------- ------------ ---------
Authorised:
Ordinary shares of 10p each.......................................... 60,000,000 6,000 20,000,000 2,000
Allotted, called up and fully paid:
Ordinary shares of 10p each.......................................... 47,948,025 4,795 15,902,725 1,590
</TABLE>
At the Extraordinary General Meeting held on 21st November 1997, the
shareholders approved a 2 for 1 capitalisation issue.
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 41
A-19
<PAGE>
The Company issued Ordinary Shares of 10p each, credited as fully paid, at
prices between 13p and 197p per share under the First Technology Employee, 1994
Executive and 1994 Savings Related Share Option Schemes on the following dates:
<TABLE>
<CAPTION>
NUMBER
DATE OF SHARES
- ------------------------------------------------------------------------------------------------------- ---------
<S> <C>
9th May 1997........................................................................................... 75,804
10th June 1997......................................................................................... 36,000
4th August 1997........................................................................................ 23,367
10th February 1998..................................................................................... 15,414
24th February 1998..................................................................................... 53,100
26th March 1998........................................................................................ 27,765
17th April 1998........................................................................................ 8,400
---------
239,850
---------
---------
</TABLE>
The number of shares issued has been adjusted to reflect the capitalisation
issue.
The share price at 30th April 1998 was 398p (1997: 229p) and the highest and
lowest share prices during the year were 398p and 229p respectively.
The following outstanding options have been granted to directors and
employees of the Group under the First Technology Employee Share Option Scheme
all of which are normally exercisable between 3 and 10 years from the date of
grant.
<TABLE>
<CAPTION>
NUMBER EXERCISE
LAST DATE WHEN EXERCISABLE OF SHARES PRICE
- --------------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
3rd February 2002............................................................................ 8,400 13p
31st January 2004............................................................................ 27,000 l02p
19th January 2006............................................................................ 197,400 153p
24th February 2008........................................................................... 700,000 340p
</TABLE>
The following outstanding options have been granted to directors and
employees of the Group under the First Technology PLC 1994 Savings Related Share
Option Scheme. Options are normally exercisable after 3, 5 or 7 years from the
date of grant and within 6 months thereafter.
<TABLE>
<CAPTION>
NUMBER EXERCISE
DATE OF GRANT OF SHARES PRICE
- --------------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
13th January 1995............................................................................ 133,924 99p
23rd August 1995............................................................................. 13,076 131p
9th January 1997............................................................................. 14,106 180p
14th August 1997............................................................................. 9,015 197p
</TABLE>
The number of options and the relevant exercise prices have been adjusted to
reflect the 2 for 1 capitalisation issue.
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 42
A-20
<PAGE>
19. RESERVES
<TABLE>
<CAPTION>
SHARE OTHER PROFIT & LOSS
PREMIUM RESERVES ACCOUNT
L000 L000 L000
----------- --------- -------------
<S> <C> <C> <C>
GROUP
1st May 1997.................................................................. 9,052 (10,024) 18,158
Foreign currency translation.................................................. -- -- (492)
Capitalisation issue (note 18)................................................ (3,223) -- --
Premium on shares issued during the year...................................... 248 -- --
Identified goodwill on discontinued activities (note 3)....................... -- 403 --
Transfer of goodwill previously written off................................... -- 9,621 (9,621)
Retained profit for the year.................................................. -- -- 6,928
----------- --------- ------
30th April 1998............................................................... 6,077 -- 14,973
----------- --------- ------
----------- --------- ------
</TABLE>
Foreign currency translation is stated after a related taxation credit of
L23,000 (1997: L122,000).
<TABLE>
<CAPTION>
SHARE OTHER PROFIT & LOSS
PREMIUM RESERVES ACCOUNT
L000 L000 L000
----------- --------- -------------
<S> <C> <C> <C>
COMPANY
1st May 1997.................................................................. 9,052 -- 3,989
Foreign currency translation.................................................. -- -- (124)
Capitalisation issue (note 18)................................................ (3,223) -- --
Premium on shares issued during the year...................................... 248 -- --
Deficit for the year.......................................................... -- -- (1,171)
----------- --------- ------
30th April 1998............................................................... 6,077 -- 2,694
----------- --------- ------
----------- --------- ------
</TABLE>
Foreign currency translation is stated after a related taxation credit of
L23,000 (1997: L122,000).
The consolidated profit attributable to shareholders includes a profit of
L1,225,000 (1997: L841,000) which is dealt with in the financial statements of
the parent company.
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 43
A-21
<PAGE>
20. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Profit attributable to shareholders............................................................ 9,324 6,014
Dividends...................................................................................... (2,396) (1,716)
--------- ---------
6,928 4,298
Foreign currency translation................................................................... (492) (910)
Identified goodwill on discontinued activities previously written off.......................... 403 --
Issue of ordinary shares net of expenses....................................................... 230 453
--------- ---------
7,069 3,841
Equity shareholders' funds at 1st May 1997..................................................... 18,776 14,935
--------- ---------
Equity shareholders' funds at 30th April 1998.................................................. 25,845 18,776
--------- ---------
--------- ---------
</TABLE>
21. LEASE COMMITMENTS
At 30th April 1998, the Group's annual rental commitments under operating
leases were as shown below, analysed according to the period in which lease
expires.
<TABLE>
<CAPTION>
1998 1997
L000 L000
----- -----
<S> <C> <C>
Land and buildings:
Expiring within 1 year.............................................................................. 76 --
Expiring in years 2 to 5............................................................................ 23 139
Expiring thereafter................................................................................. 232 270
--- ---
331 409
--- ---
--- ---
Other assets:
Expiring within 1 year.............................................................................. 7 7
Expiring in years 2 to 5............................................................................ 13 15
--- ---
20 22
--- ---
--- ---
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 44
A-22
<PAGE>
22. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Operating profit............................................................................... 11,706 9,l94
Depreciation................................................................................... 2,015 1,984
Increase in stocks............................................................................. (1,787) (555)
Decrease/(increase) in debtors................................................................. 2,515 (2,993)
Increase in creditors.......................................................................... 422 2,418
(Profit)/loss on disposal of fixed assets...................................................... (20) 8
Exchange differences........................................................................... 83 450
(Decrease)/increase in provisions.............................................................. (40) 79
--------- ---------
Net cash inflow from operating activities...................................................... 14,894 10,585
--------- ---------
--------- ---------
</TABLE>
23. ANALYSIS AND RECONCILIATION OF NET FUNDS
<TABLE>
<CAPTION>
1ST MAY CASH EXCHANGE 30TH APRIL
1997 FLOW MOVEMENT 1998
L000 L000 L000 L000
----------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Cash in hand, at bank.................................................. 6,223 5,992 (252) 11,963
Short term deposits.................................................... -- 3,843 -- 3,843
----- --------- --- -----------
6,223 9,835 (252) 15,806
Debt due within 1 year................................................. (494) -- 16 (478)
Debt due after 1 year.................................................. (988) 485 24 (479)
----- --------- --- -----------
Net funds.............................................................. 4,741 l0,320 (2l2) 14,849
----- --------- --- -----------
----- --------- --- -----------
</TABLE>
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Increase in cash in the year.................................................................... 5,992 4,261
Cash outflow from decrease in debt.............................................................. 485 500
Cash outflow/(inflow) from the increase/(decrease) in liquid resources.......................... 3,843 (750)
--------- ---------
Increase in net funds resulting from cash flows................................................. 10,320 4,011
Translation differences......................................................................... (212) (401)
--------- ---------
Increase in net funds in the year............................................................... 10,108 3,610
Net funds at 1st May............................................................................ 4,741 1,131
--------- ---------
Net funds at 30th April......................................................................... 14,849 4,74l
--------- ---------
--------- ---------
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 45
A-23
<PAGE>
The cash inflow from the disposal of the discontinued activities may be
analysed as follows:
<TABLE>
<CAPTION>
L000
---------
<S> <C>
Proceeds of the disposal.................................................................................. 2,127
Costs of the disposal..................................................................................... (117)
---------
Net cash consideration.................................................................................... 2,010
Consideration received after year end..................................................................... (118)
Overdraft disposed of..................................................................................... 541
---------
Cash inflow from the disposal............................................................................. 2,433
---------
---------
</TABLE>
24. DISPOSALS
On 21st November 1997 at an Extraordinary General Meeting, the shareholders
approved the disposal of the industrial section of First Technology Protection
Systems Limited and of First Technology Fire and Safety Limited, to a company
controlled by Mr Adams and Mr Brown. Mr Adams is a former director of First
Technology PLC and First Inertia Switch Limited. Mr Brown is a former director
of First Inertia Switch Limited.
<TABLE>
<CAPTION>
L000
---------
<S> <C> <C>
Net cash consideration (note 23).................................................................. 2,010
Net assets disposed of:
Tangible fixed assets............................................................................. (126)
Stocks............................................................................................ (859)
Debtors........................................................................................... (931)
Creditors......................................................................................... 471
Overdraft......................................................................................... 541
---------
(904)
---------
---------
1,106
Identified goodwill............................................................................... (403)
Release of provisions (note 16)................................................................... 255
---------
Profit on disposal (note 3)....................................................................... 958
---------
---------
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 46
A-24
<PAGE>
25. POST BALANCE SHEET EVENT
On 31st July 1998, First Technology (Holdings) Inc. disposed of AVC Inc.
("AVC") to Mr E Summers. Mr Summers is a director of AVC. Prior to the sale, the
Group's shareholding in AVC was redeemed for substantially all of its cash and
debtors. The remaining assets approximated to nil, for which the Group received
a nominal consideration. Goodwill attributable to AVC was written off through
the Profit and Loss Account in 1992.
COMPOSITION OF THE GROUP
First Technology PLC, which is registered in England and Wales, has the
following principal subsidiaries all of which are wholly but indirectly owned:
<TABLE>
<S> <C>
SUBSIDIARY NATURE OF BUSINESS
- --------------------------------------------- ---------------------------------------------
</TABLE>
THIS COMPANY IS REGISTERED IN ENGLAND AND WALES AND OPERATES IN THE UK:
<TABLE>
<S> <C>
First Inertia Switch Limited Designs, manufactures and supplies sensors
and electronic modules.
</TABLE>
THESE COMPANIES ARE INCORPORATED AND OPERATE IN THE USA:
<TABLE>
<S> <C>
First Technology (Holdings) Inc. Investment holding company
First Technology Safety Systems Inc. Designs, manufactures and supplies crash test
dummies and related equipment, services and
analytical products primarily for automotive
applications.
First Inertia Switch Limited Designs, manufactures and supplies sensors
and electronic modules.
</TABLE>
THIS COMPANY IS INCORPORATED AND OPERATES IN JAPAN:
<TABLE>
<S> <C>
K.K. First Technology Safety Systems Distributor of automotive crash test dummies
and related safety equipment and services.
</TABLE>
THIS COMPANY IS INCORPORATED AND OPERATES IN FRANCE:
<TABLE>
<S> <C>
First Technology SA. Manufactures and supplies automotive sensors
and electronic modules.
</TABLE>
FIRST TECHNOLOGY REPORT AND ACCOUNTS 1998 / 47
A-25
<PAGE>
ANNEX B
The following interim financial statements appear in First Technology PLC's
Interim Report to Shareholders.
GROUP PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS TO 31ST OCTOBER 1998 (UNAUDITED)
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED AUDITED
6 MONTHS TO 6 MONTHS TO 12 MONTHS TO
31ST OCTOBER 31ST OCTOBER 30TH APRIL
1998 1997 1998
NOTES L'000 L'000 L'000
----- ------------- ------------- -------------
<S> <C> <C> <C> <C>
TURNOVER
Continuing activities........................................... 26,338 24,910 50,487
Discontinued activities......................................... 2 41 2,780 3,784
------ ------ ------
Total........................................................... 26,379 27,690 54,271
------ ------ ------
OPERATING PROFIT/(LOSS)
Continuing activities........................................... 5,981 5,070 11,596
Discontinued Activities......................................... 2 (102) 135 110
------ ------ ------
Total........................................................... 5,879 5,205 11,706
------ ------ ------
Profit on sale of property...................................... -- 387 387
Profit on the disposal of discontinued activities............... 2 -- -- 958
Net Interest.................................................... 486 180 531
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION................... 6,365 5,772 13,582
------ ------ ------
Tax on profit on ordinary activities............................ 3 (2,228) (1,899) (4,258)
------ ------ ------
PROFIT FOR THE PERIOD........................................... 4,137 3,873 9,324
Dividends....................................................... 4 (1,009) (861) (2,396)
------ ------ ------
TRANSFER TO RESERVES............................................ 3,128 3,012 6,928
------ ------ ------
BASIC EARNINGS PER SHARE........................................ 5 8.62P 8.10p 19.49p
------ ------ ------
HEADLINE EARNINGS PER SHARE..................................... 5 8.62P 7.29p 16.68p
------ ------ ------
DIVIDEND PER SHARE.............................................. 4 2.10P 1.80p 5.00p
</TABLE>
B-1
<PAGE>
GROUP BALANCE SHEET
AS AT 31ST OCTOBER 1998 (UNAUDITED)
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED AUDITED
AS AT AS AT AS AT
31ST OCTOBER 31ST OCTOBER 30TH APRIL
1998 1997 1998
L'000 L'000 L'000
------------ ------------ -----------
<S> <C> <C> <C>
FIXED ASSETS.............................................................. 7,931 7,452 7,987
CURRENT ASSETS
Stocks.................................................................... 4,457 5,012 4,353
Debtors................................................................... 10,655 12,329 9,786
Cash...................................................................... 18,509 10,278 15,806
------------ ------------ -----------
33,621 27,619 29,945
------------ ------------ -----------
CREDITORS: AMOUNTS FALLING DUE ONE YEAR................................... (11,938) (12,347) (11,424)
------------ ------------ -----------
NET CURRENT ASSETS........................................................ 21,683 15,272 18,521
------------ ------------ -----------
TOTAL ASSETS LESS CURRENT LIABILITIES..................................... 29,614 22,724 26,508
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR................... (238) (714) (479)
PROVISIONS FOR LIABILITIES & CHARGES...................................... (164) (448) (184)
------------ ------------ -----------
NET ASSETS................................................................ 29,212 21,562 25,845
------------ ------------ -----------
CAPITAL AND RESERVES
Called up share capital................................................... 4,799 1,596 4,795
Share premium account..................................................... 6,118 9,197 6,077
Other reserves............................................................ -- (10,024) --
Profit and loss account................................................... 18,295 20,793 14,973
------------ ------------ -----------
EQUITY SHAREHOLDERS' FUNDS................................................ 29,212 21,562 25,845
------------ ------------ -----------
</TABLE>
STATEMENT OF RECOGNIZED GAINS AND LOSSES
FOR THE SIX MONTHS TO 31ST OCTOBER 1998 (UNAUDITED)
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED AUDITED
6 MONTHS TO 6 MONTHS TO 12 MONTHS TO
31ST OCTOBER 31ST OCTOBER 30TH APRIL
1998 1997 1998
L'000 L'000 L'000
------------- ------------- -------------
<S> <C> <C> <C>
Profit attributable to shareholders..................................... 4,137 3,873 9,324
Currency translation differences on foreign currency net investments.... 194 (377) (492)
----- ----- -----
Total gains and losses for the period................................... 4,331 3,496 8,832
----- ----- -----
</TABLE>
B-2
<PAGE>
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS TO 31ST OCTOBER 1998 (UNAUDITED)
<TABLE>
<CAPTION>
AUDITED
UNAUDITED UNAUDITED 12 MONTHS
6 MONTHS TO 6 MONTHS TO TO
31ST OCTOBER 31ST OCTOBER 30TH APRIL
1998 1997 1998
L' L'0 L'
NOTES 000 00 000
----- ------------- ------------- -----------
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES......................... 6 6,363 6,415 14,894
Returns on investments and servicing of finance:
Interest paid................................................... (34) (38) (64)
Interest received................................................. 530 175 553
------ ------ -----------
NET CASH INFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE......................................................... 496 137 489
TAXATION
UK corporation tax paid........................................... (18) (4) (1,269)
Overseas tax paid................................................. (1,684) (1,449) (3,075)
------ ------ -----------
TAXATION PAID..................................................... (1,702) (1,453) (4,344)
------ ------ -----------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets................................. (1,028) (1,129) (2,781)
Sale of tangible fixed assets..................................... 12 72 126
Sale of property held for sale.................................... -- 1,187 1,187
Disposal of businesses............................................ 106 -- 2,433
------ ------ -----------
NET CASH (OUTFLOW)/INFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT...................................................... (910) 130 965
EQUITY DIVIDENDS PAID............................................. (1,536) (1,053) (1,914)
MANAGEMENT OF LIQUID RESOURCES
Increase in short term deposits................................... (4,400) (5,785) (3,843)
------ ------ -----------
NET CASH (OUTFLOW) FROM MANAGEMENT OF LIQUID RESOURCES............ (4,400) (5,785) (3,843)
------ ------ -----------
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING........................ (1,689) (1,609) 6,247
FINANCING
Repayment of term loans........................................... (241) (244) (485)
Issue of share capital............................................ 45 151 230
------ ------ -----------
Net cash (outflow) from financing activities...................... (196) (93) (255)
------ ------ -----------
(Decrease)/increase in cash in the period......................... (1,885) (1,702) 5,992
------ ------ -----------
</TABLE>
B-3
<PAGE>
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. The results for the six months ended 31st October 1998 and 1997 are
unaudited. The results for the year ended 30th April 1998, as shown in this
statement, do not constitute statutory accounts within the meaning of
section 240 of the Companies Act 1985, but have been derived from the full
audited financial statements for the year ended 30th April 1998 which have
been filed with the Registrar of Companies. The report of the auditors on
the financial statements for the year ended 30th April 1998 was unqualified.
2. Discontinued activities in the current period comprise AVC Inc. ("AVC"). On
31st July 1998, First Technology (Holdings) Inc. disposed of AVC to Mr. E.
Summers, a director of AVC. Prior to the sale, the Group's shareholding in
AVC was redeemed for substantially all of its cash and debtors. The
remaining assets approximated to nil, for which the Group received a nominal
consideration. Goodwill attributable to AVC was written off through the
Profit and Loss Account in 1992. The comparative figures include the sales
and operating results of the Industrial Products Section of First Technology
Protection Systems Limited and First Technology Fire and Safety Limited,
sold in November 1997. These have been restated to include the sales and
operating results of AVC during those periods.
3. The tax charge reflects the anticipated rate for the full year on profit
before exceptional items.
4. The directors have declared an interim dividend of 2.10p per ordinary share
(1997: 1.80p per ordinary share). The dividend is payable on 1st March 1999
to shareholders on the register on 5th February 1999.
5. Basic earnings per share is based on the profit attributable to shareholders
after taxation of L4,137,000 (1997: L3,873,000) and 47,976,841 shares (1997:
47,820,159, as adjusted for the 2 for 1 capitalisation issue on 21st
November 1997), being the weighted average number of shares in issue for the
period. Headline earnings per share is based on the profit attributable to
shareholders after taxation, excluding the exceptional items, of L4,137,000
(1997: L3,486,000) and the same weighted average number of shares. Earnings
per share diluted in respect of share options is not materially lower.
6. Reconciliation of Operating Profit to Net Cash Inflow from Operating
Activities
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED AUDITED
6 MONTHS TO 6 MONTHS TO 12 MONTHS TO
31ST OCTOBER 31ST OCTOBER 30TH APRIL
1998 1997 1998
L'000 L'000 L'000
------------- ------------- -------------
<S> <C> <C> <C>
Operating profit................................................... 5,879 5,205 11,706
Depreciation....................................................... 1,129 1,077 2,015
Increase in stock.................................................. (79) (1,580) (1,787)
(Increase)/decrease in debtors..................................... (557) 782 2,515
Increase in creditors.............................................. 76 1,063 422
Exchange differences............................................... (68) (74) 83
Loss/(profit) on disposal of fixed assets.......................... 3 (38) (20)
Decrease in provisions............................................. (20) (20) (40)
----- ------ ------
NET CASH INFLOW FROM OPERATING ACTIVITIES.......................... 6,363 6,415 14,894
----- ------ ------
</TABLE>
7. A copy of this report will be circulated to shareholders and copies will
also be available on application to the Company's registered office at 2
Columbus Drive, Summit Avenue, Southwood, Farnborough, Hants., GU14 0NZ.
B-4
<PAGE>
ANNEX C
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK GAAP
AND US GAAP
The consolidated financial statements of First Technology PLC ("the
Company") and its subsidiaries ("the Group") are prepared and presented under
the historical cost convention in accordance with United Kingdom generally
accepted accounting principles ("UK GAAP"). UK GAAP differs in certain
significant respects from United States generally accepted accounting principles
("US GAAP"). Certain significant differences between UK GAAP and US GAAP as they
relate to the financial statements of the Company are summarised below. Such
summary should not be construed to be exhaustive. Given the inherent differences
between UK GAAP and US GAAP, the financial statements presented under UK GAAP
are not presented fairly, in all material respects under US GAAP. The Company
has not quantified these differences, nor prepared consolidated financial
statements under US GAAP, nor undertaken a reconciliation of UK GAAP and US GAAP
financial statements. Had the Company undertaken any such qualification or
preparation or reconciliation, other potentially significant accounting and
disclosure differences may have come to their attention which are not identified
below. Accordingly, the Company can provide no assurance that the identified
differences in the summary below represent all the principal differences
relating to the Company and the Group. Further, no attempt has been made to
identify future differences between UK GAAP and US GAAP as the result of
prescribed changes in accounting standards. Professional bodies that promulgate
UK GAAP and US GAAP have a number of projects that could affect future
comparisons such as this one. Finally, no attempt has been made to identify all
future differences between UK GAAP and US GAAP that may affect the financial
statements as a result of transactions or events that may occur in the future.
GOODWILL AND OTHER INTANGIBLE ASSETS
Until 30 April 1998, under UK GAAP, the Group had written off directly to
reserves the cost of goodwill which had arisen upon acquisitions. Goodwill has
been calculated as the excess of cost over the tangible assets acquired and
liabilities assumed on the basis of their fair value at the date of acquisition.
Subsequent to the Group's 30 April 1998 audited financial statements, UK GAAP
was amended such that the adoption of the new Financial Reporting Standard (FRS)
10 "Goodwill and Intangible Assets" means that purchased goodwill and intangible
assets are capitalised and amortised through the profit and loss account over a
maximum period of 20 years with retrospective application.
Under US GAAP, the cost of the investment should be assigned to tangible and
identified intangible assets acquired and liabilities assumed on the basis of
their fair value at the date of acquisition. Any excess of cost over the fair
value of the net assets acquired should be capitalised and then amortised to
profit and loss over a period, not exceeding 40 years, except where management
consider that there has been a permanent diminution in the value of goodwill,
whereupon this element of the goodwill is charged to profit and loss account
immediately. Identified intangible assets should be amortised to the profit and
loss account over their estimated useful economic lives which may not exceed
forty years.
DEFERRED TAXATION
Under UK GAAP, deferred taxation is only accounted for to the extent that it
is probable that a liability or asset will arise in the foreseeable future. The
calculation of deferred taxation is based upon timing differences between
taxable and accounting income. Under US GAAP, deferred taxation should be
accounted for on all timing differences, and a valuation allowance established
in respect of deferred taxation assets where it is more likely than not that
some portion would not be realised. Additionally, for US GAAP purposes deferred
taxes would be provided in respect of US GAAP adjustments to the book basis of
assets and liabilities.
C-1
<PAGE>
PENSIONS
In respect of defined benefit pension obligations, US GAAP requires the use
of a discount rate which reflects current market conditions in determining the
provision for pension benefits. UK GAAP permits the use of longer term discount
rates. In addition to the difference in discount rates, the amortisation
procedure under US GAAP applies a corridor approach for recognising gains and
losses in the determination of periodic pension expense. Under UK GAAP,
actuarial gains and losses are amortised normally over the expected remaining
service lives without such corridor approach. Additionally, for UK funding and
accounting purposes it is satisfactory to carry out actuarial valuations at
three year intervals whereas annual valuations are required under US GAAP.
DIVIDENDS
Under UK GAAP, proposed ordinary dividends are provided for in the year in
respect of which they are recommended by the Board of Directors. Under US GAAP,
such dividends are provided for in the period they are declared by the
Directors.
CURRENT ASSETS AND LIABILITIES
Current assets under UK GAAP include amounts which fall due after more than
one year. Under US GAAP such assets would be reclassified as non-current assets.
Provisions for liabilities and charges under UK GAAP include amounts due within
one year which would be classified as current liabilities under US GAAP.
CASH FLOW STATEMENTS
Cash flows under UK GAAP represent increases or decreases in cash, which is
comprised of cash at bank and in hand and overdrafts. Under US GAAP, cash flows
represent increases or decreases in cash and cash equivalents, which include
short term, highly liquid investments with original maturities of less than 90
days, and exclude overdrafts.
There are also certain differences in classification of items within the
cash flow statement between UK GAAP and US GAAP. Under UK GAAP, cash flows are
presented in the following categories: (i) operating activities; (ii) returns on
investments and servicing of finance; (iii) taxation; (iv) capital expenditure
and financial investment; (v) acquisitions and disposals; (vi) equity dividends
paid; (vii) management of liquid resources; and (viii) financing. Under US GAAP,
cash flows are segregated into operating, investing and financing activities.
Cash flows from taxation, returns on investments and servicing of finance
are, with the exception of any interest paid but capitalised, included as
operating activities under US GAAP. The payment of any dividends are included
under financing activities and any capitalised interest is included under
investing activities for US GAAP purposes. Additionally, under US GAAP, cash
flows from the purchase and sale of tangible fixed assets and the sale of debt
and equity investments are shown within investing activities.
FINANCIAL INSTRUMENTS
Under UK GAAP, gains and losses on hedges are deferred and recognised in
income when they have crystallised. There are less detailed requirements than
under US GAAP regarding the disclosure of information on financial instruments
not reflected on the balance sheet.
Under US GAAP, the applicable accounting practice for financial instruments
depends on management's intention for their disposition and may require
adjustments to their market or fair values. The following conditions must be met
for an item to be accounted for as a hedge: (i) the item to be hedged must
expose the company to price or interest rate risks; (ii) it must be probable
that the results of the futures contract will substantially offset the effects
of price or interest rate changes on the hedged item;
C-2
<PAGE>
and (iii) the futures contract must be designated by management as a hedge of
the item. For future contracts that are accounted for as a hedge of items
reported at the lower of cost or market, gains and losses on future contracts
are deferred and recognised in income when costs relating to the hedged item are
recognised in income. Any unrealised gains and losses at the balance sheet date
are disclosed in the accounts, together with applicable accounting policies, the
end of the period fair value of the forward contract, and the face or contract
or notional principal amount.
COMPENSATION EXPENSE
Under UK GAAP, qualified Save As You Earn (SAYE) schemes which offer
employees up to a 20% discount on stock prices do not result in compensation
expense. Under US GAAP, if all other qualifications for a non compensatory plan
are met, but the plan offers a discount on the stock price greater than 15%, the
plan is considered compensatory, and compensation expense is recognised.
Under UK GAAP, no compensation expense is recognised upon the issuance of
stock options if the exercise price for the option is equivalent to, or above,
the market price of the stock on the date of issue. Under US GAAP, compensation
expense is based upon the exercise price of the option in comparison to the
market price of the stock on the measurement date. The measurement date is fixed
only when both the number of shares to be issued and the exercise price are
fixed.
DISCLOSURE
In general, disclosures required under US GAAP are more extensive than those
required under UK GAAP. For example, under US GAAP more detailed disclosures
would be required with respect to pension expense (actuarial assumptions,
components of pension expense, reconciliation of funded status), taxes (details
of the components of current and deferred income tax expenses and deferred tax
items, including valuation allowances), and equity (a statement of changes in
shareholders equity and associated rights).
C-3
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each Shareholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
IBJ WHITEHALL BANK
& TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: Telephone: (212) BY HAND OR OVERNIGHT COURIER:
IBJ Whitehall Bank & Trust 858-2103 IBJ Whitehall Bank & Trust
Company By Facsimile Company
P.O. Box 84 Transmission: One State Street
Bowling Green Station (212) 858-2611 New York, NY 10004
New York, NY 10274-0084 To Confirm Facsimile Attn: Securities Processing
Attn: Reorganization Transmissions: Window
Operations (212) 858-2103 Subcellar One, (SC-1)
Department
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent as set forth below and will be furnished promptly at
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR CALL TOLL FREE (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
75 WALL STREET
NEW YORK, NEW YORK 10005
(212) 429-2000 EXT. 2442
OR CALL TOLL FREE (800) 457-0245 EXT. 2442
<PAGE>
Exhibit 99(c)(2)
CONFIDENTIALITY AND STANDSTILL AGREEMENT
----------------------------------------
1. PURPOSE.
The parties hereto, First Technology, PLC, and Control Devices, Inc., an
Indiana corporation, may furnish certain confidential non-public information to
each other to assist them in evaluating a possible business combination. As a
condition to each party's furnishing such information to the other party (each
party furnishing such information being hereinafter referred to, with respect to
such information, as the "Disclosing Party", and each party receiving such
information being hereinafter referred to, with respect to such information, as
the "Receiving Party"), each party agrees, as set forth below, to treat any
information (herein collectively referred to as the "Evaluation Material") which
it receives as a Receiving Party from or on behalf of a Disclosing Party in
accordance with the provisions of this Agreement and to take or abstain from
taking certain other actions herein set forth.
The term "Evaluation Material" includes (i) all information prepared by the
Disclosing Party or its affiliates, directors, officers, employees, agents and
advisors (the affiliates, directors, officers, employees, agents and advisors of
a Disclosing Party or a Receiving Party, as the case may be, being referred to
collectively as the "Representatives") and (ii) all analyses, compilations,
studies or other material prepared by a Receiving Party or its Representatives
containing, based on or reflecting any information furnished by a Disclosing
Party or any of its Representatives. The term "Evaluation Material" does not
include information which (i) is already in the possession of a Receiving Party,
provided that such information is not known by such Receiving Party to be
subject to another confidentiality agreement with or other obligation of secrecy
to the Disclosing Party or a third party, or (ii) is or becomes generally
available to the public other than as a result of a disclosure by a Receiving
Party or any of its Representatives in
<PAGE>
violation of this Agreement, or (iii) becomes available to a Receiving Party
from a source other than the Disclosing Party or its Representatives, provided
that such source is not known by such Receiving Party to be in breach of a
confidentiality agreement or other obligation of secrecy, or (iv) prior to
disclosure hereunder, can be demonstrated by the Receiving Party to be within
the possession of the Receiving Party.
2. CONFIDENTIALITY AND USE OF EVALUATION MATERIAL.
Each Receiving Party hereby agrees that the Evaluation Material will be
used solely for the purpose of evaluating a possible transaction involving the
parties and that the Evaluation Material will be kept confidential by such
Receiving Party and its Representatives; provided, however, that (i) unless
otherwise specified, Evaluation Material may be disclosed to Representatives of
the Receiving Party who need to know such information for the purpose of
evaluating any possible transaction involving the parties (it being understood
that such Representatives shall be informed of the confidential nature of such
information and shall be directed to treat such information confidentially and
in accordance with this Agreement), (ii) any disclosure of Evaluation Material
may be made to which a Disclosing Party consents in writing, and (iii) any
disclosure of Evaluation Material may be made as otherwise required by law in
the written opinion of counsel to the Receiving party (including, without
limitation, pursuant to any federal or state securities laws or pursuant to any
legal, regulatory or legislative proceeding or pursuant to any applicable stock
exchange rules), as contemplated by the immediately following sentence (the
"Legal Exception"):
In the event that a Receiving Party or anyone to whom such Receiving Party
supplies the Evaluation Material receives a request to disclose all or any
part of the information contained in the Evaluation Material under the
terms of a subpoena, order, civil investigation demand or similar process
or other oral or written request, issued by a court of competent
jurisdiction or by a federal, state or local, foreign or domestic,
governmental or regulatory body or agency, such
2
<PAGE>
Receiving Party agrees to the extent practicable to (i) promptly notify the
Disclosing Party of the existence, terms and circumstances surrounding such
a request, (ii) consult with the Disclosing Party as to the advisability of
taking legally available steps to resist or narrow such request, and (iii)
only disclose such information after complying with clauses (i) and (ii)
and exercising reasonable effort, if so requested by the Disclosing Party
and at the Disclosing Party's sole expense, to obtain, to the extent
practical, an order or other reliable assurance that confidential treatment
will be accorded to such portion of any disclosed information which the
Disclosing Party so designates.
Each Receiving Party hereby acknowledges that it is aware, and that it will
advise its Representatives who are informed as to the matters which are the
subject of this Agreement, that the United States securities laws prohibit any
person who has received from an issuer material, non-public information
concerning the matters which are the subject of this Agreement from purchasing
or selling securities of such issuer or from communicating such information to
any other person under circumstances in which it is reasonably foreseeable that
such person is likely to purchase or sell such securities.
In addition, except (i) with the prior written consent of the Disclosing
Party or (ii) as required or permitted under the Legal Exception, each Receiving
Party will not, and will direct its Representatives not to, disclose to any
person (A) the existence of this Agreement or (B) that the Evaluation Material
has been made available to it, or (C) in the event that the parties engage in
discussions or negotiations with each other or their Representatives, the fact
that discussions or negotiations are taking place concerning a possible
transaction among the parties or any of the terms, conditions or other facts
with respect to any such possible transaction, including the status thereof.
If and to the extent it is the written opinion of counsel to a Receiving
Party that it is necessary or advisable in litigation to support or defend
actions taken by such Receiving Party which are being reviewed or challenged in
such proceedings, such Receiving Party may disclose
3
<PAGE>
in such proceedings the matters described in the preceding paragraph and its
analyses, compilations, studies and other materials relating to possible
transactions which were prepared by such Receiving Party or its Representatives.
Each Receiving Party agrees to give the Disclosing Party advance written notice
of any such disclosures to the extent practicable under the circumstances.
3. STANDSTILL.
In consideration of being furnished the Evaluation Material and in view of
the fact that the Evaluation Material consists of confidential and non-public
information, each party agrees that, for the period set forth in the last
sentence of this paragraph, it and its affiliates (as defined in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended) shall not without the prior written authorization of the Board of
Directors of the other party (i) in any manner acquire, agree to acquire or make
any proposal to acquire, directly or indirectly, any securities of the other
party or any of its subsidiaries, (ii) in any manner acquire, agree to acquire
or make any proposal to acquire, directly or indirectly, any property of the
other party or any of its subsidiaries, except in the ordinary course of
business, (iii) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities and Exchange Commission) to vote, or seek to advise or influence any
person with respect to the voting of, any voting securities of the other party
or any of its subsidiaries, (iv) form, join or in any way participate in a
"group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended) with respect to any voting securities of the other party or
any of its subsidiaries, (v) otherwise act, alone or in concert with others, to
seek to control or influence the management, Board of Directors or policies of
the other party, (vi) disclose any intention, plan or arrangement inconsistent
with the foregoing, or (vii)
4
<PAGE>
advise, assist or encourage any other persons in connection with any of the
foregoing. Each party also agrees, for the period set forth in the last
sentence of this paragraph, not to (i) request the other party or its
Representatives, directly or indirectly, to amend or waive any provision of this
paragraph (including this sentence) or (ii) take any action which might require
the other party to make a public announcement regarding the possibility of a
business combination or merger. The agreements set forth in this paragraph
shall otherwise survive the termination of this Agreement and shall not
terminate until June 30, 2000.
Each party further agrees that until a business combination between the
parties has been consummated or June 30, 2000 (whichever is earlier), it shall
not, directly or indirectly, solicit to employ any person who is, at the time of
such solicitation, an employee of the other party or any of its subsidiaries.
Each party understands the importance during the term of this Agreement of
limiting contacts regarding the subject matter of this Agreement to its
authorized personnel and the authorized personnel of the other party. Except
with the written consent of the other party, during the term of this Agreement
any party also agrees that neither it nor its affiliates shall initiate or
maintain any contact (except for those contacts made in the ordinary course of
business) with any customer, supplier or competitor of the other party or its
subsidiaries or any other person having a business or regulatory relationship
with the other party or its subsidiaries, regarding the operations of the other
party or its subsidiaries derived from the Evaluation Material.
4. NO WARRANTIES.
Although each Disclosing Party will endeavor to include in the Evaluation
Material information known to it which it believes to be relevant for the
purpose of the Receiving Party's
5
<PAGE>
investigation, each Receiving Party understands that neither the Disclosing
Party nor its Representatives have made or make any representation or warranty
as to the accuracy or completeness of the Evaluation Material. Each Receiving
Party agrees that neither the Disclosing Party nor its Representatives shall
have any liability to them or any of their Representatives resulting from the
use of the Evaluation Material.
5. RETURN OF EVALUATION MATERIALS.
Each Receiving Party agrees to (i) promptly redeliver to the Disclosing
Party or destroy, upon the latter's request, all written or otherwise tangible
Evaluation Material provided to it by the Disclosing Party or its
Representatives, and (ii) not retain any copies, extracts or other reproductions
in whole or in part of such written or otherwise tangible material. All other
Evaluation Material and documents, memoranda, notes, other writings and
otherwise tangible materials whatsoever prepared by a Receiving Party or its
Representatives based on the information in the Evaluation Material which were
not provided to the Receiving Party or its Representatives by the Disclosing
Party or its Representatives shall be destroyed, and such destruction shall be
certified in writing to the Disclosing Party by an authorized officer of the
Receiving Party supervising such destruction; provided that counsel to a
Receiving Party may, if requested by such Receiving Party, retain one copy of
any documents, memoranda, notes, other writings and otherwise tangible materials
prepared by such Receiving Party or its Representatives based upon the
Evaluation Material (and such Receiving Party shall notify the Disclosing Party
of its retention of any such materials); and provided further that any such
materials retained shall be held subject to the terms of this Agreement. The
agreements set forth in this paragraph shall otherwise survive the termination
of this Agreement and shall not terminate until December 31, 1999.
6
<PAGE>
6. BREACH.
Each Receiving Party agrees to be responsible for any breach of this
Agreement by any of its Representatives. Each party acknowledges and agrees
that money damages would not be a sufficient remedy for any breach of this
Agreement. Therefore, each party shall be entitled to equitable relief
including, without limitation, injunction and specific performance as a remedy
for any breach by the other party; and the party (including its Representatives)
which is in breach hereof shall not oppose the granting of such relief. Such
remedy shall not be deemed to be the exclusive remedy for a breach of this
Agreement, but shall be in addition to all other remedies available to a party
for all damages, costs and expenses (including reasonable attorneys' fees)
incurred by it in this regard.
7. FURTHER AGREEMENTS REQUIRED.
Each party agrees that unless and until a definitive agreement with respect
to a business combination of the parties has been executed and delivered,
neither party will be under any legal obligation of any kind whatsoever with
respect to such a transaction by virtue of this or any written or oral
expression with respect to such a transaction by any of its directors, officers,
employees, agents or any other Representatives thereof except, in the case of
this Agreement, for the matters specifically agreed to herein.
8. AMENDMENT.
This Agreement may be modified or waived only by a separate written
agreement, executed by each party, expressly so modifying or waiving this
Agreement.
9. NON-WAIVER.
Each party acknowledges and agrees that no failure or delay by the other
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any
7
<PAGE>
single or partial exercise thereof preclude any other further exercise thereof
or the exercise of any right, power or privilege hereunder.
10. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the respective successors and assigns
of the parties and shall inure to the benefit of, and be enforceable by, the
respective successors and assigns of the parties.
8
<PAGE>
11. NOTICE.
Any notice, request, demand, or other communication required or permitted
to be made under this Agreement shall be in writing and shall be delivered
personally or shall be sent by facsimile transmission. Any such notice shall be
deemed given when so delivered personally or sent by facsimile transmission (and
confirmed to have been received) to the address set forth below (or to any other
address subsequently furnished in writing by any party in accordance with this
paragraph), if to First Technology, PLC, then to:
First Technology, PLC
2 Cheapside Court
Buckhurst Road, Ascot
Berkshire, UK SL5 7RF
Attn: Dr. Fred J. Westlake
Telephone: 44-1344622322
Facsimile: 44-1344622773
with a copy to:
Walter J. Borda
Strobl & Borda, P.C.
Suite 200
300 East Long Lake Road
Bloomfield Hills, MI 48304
Telephone: (248) 540-2300
Facsimile: (248) 645-2690
if to Control Devices, Inc., then to:
Control Devices, Inc.
228 Northeast Road
Standish, ME 04084
Attn: Mr. Ralph R. Whitney, Jr.
Telephone: (207) 642-4535
Facsimile: (207) 642-0198
with a copy to:
James A. Strain, Esquire
Sommer & Barnard, PC
4000 Bank One Tower
9
<PAGE>
Indianapolis, Indiana 46204
Telephone: (317) 630-4000
Facsimile: (317) 236-9802
Such notice, request, demand or other communication will be deemed to have been
given as of the date so delivered personally or sent by facsimile.
12. SEVERABILITY.
If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, the remainder of the
provisions of this Agreement shall remain in full force and effect. The parties
shall endeavor in good faith negotiations to replace any invalid, illegal or
unenforceable provision with a valid, legal and enforceable provision, the
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provision.
13. TERM.
The term of this Agreement shall commence as of June 1, 1998. Except as
provided in Section 3 hereof, this Agreement shall terminate at Midnight,
December 31, 1999.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Indiana, United States of America, without regard to the
conflict of laws principles thereof.
15. HEADINGS.
The headings in this Agreement are for convenience of reference only and
shall not in any way limit or define the content, substance or effect of the
Agreement.
16. COUNTERPARTS.
10
<PAGE>
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute the same
agreement.
FIRST TECHNOLOGY, PLC. CONTROL DEVICES, INC
By: /s/ Fred J. Westlake By: /s/ Ralph R. Whitney, Jr.
---------------------------- ------------------------------
Fred J. Westlake Ralph R. Whitney, Jr.
Its Executive Chairman Its Chairman of the Board
Date: June , 1998 Date: June , 1998
11
<PAGE>
Exhibit 99(a)(8)
FOR IMMEDIATE RELEASE
MEDIA CONTACTS:
DAN BURCH (MACKENZIE PARTNERS): 212-929-5748
JEFF WOOD (CONTROL DEVICES CFO): 207-642-4535
FIRST TECHNOLOGY PLC TO ACQUIRE CONTROL DEVICES, INC.
FOR $16.25 PER SHARE IN CASH
IN A RECOMMENDED OFFER
BERKSHIRE, ENGLAND and STANDISH, MAINE -- February 23, 1999 -- First
Technology PLC (LSE:FRS) and Control Devices, Inc. (NASDAQ: SNSR) today jointly
announced a definitive agreement for First Technology's acquisition of Control
Devices in a recommended tender offer at $16.25 per share in cash for all of
Control Devices' outstanding shares. The transaction is valued at $154 million
on a fully-diluted equity basis.
In the transaction, Control Devices shareholders will receive $16.25
per share in cash under a tender offer expected to commence within a week and
close by the end of March 1999. Control Devices shares not purchased in the
tender offer will be converted into $16.25 in cash in a subsequent merger.
Certain of Control Devices' directors and executive officers holding shares
representing 19% of Control Devices' outstanding share capital have agreed to
tender their shares and vote for the transaction. In addition, Control Devices'
chairman, three of its executive officers and two of its nonemployee directors
have agreed to invest an aggregate of $8 million in First Technology shares.
The transaction has been unanimously approved by the boards of
directors of both companies. The tender offer is subject to a majority of
Control Devices' shares (on a fully-diluted basis) being tendered and not
withdrawn, as well as other conditions.
The transaction is not subject to financing. First Technology has
obtained an $80 million loan facility from HSBC Investment Bank, plc, The First
National Bank of Chicago and Dresdner Kleinwort Benson and a (pound)40 million
bridge facility from Dresdner Kleinwort Benson. The bridge facility will be
repaid with the proceeds of a First Technology rights offering being
underwritten by Dresdner Kleinwort Benson. The Control Devices acquisition and
related matters are subject to the approval of First Technology shareholders at
a meeting scheduled to be held on March 11, 1999. The rights offering will
commence upon the receipt of such shareholder approval and is expected to close
by April 6, 1999.
"We are very excited by the opportunities presented with the
acquisition of Control Devices," said Fred Westlake, Executive Chairman of First
Technology. "An important part of our growth strategy is to offer an expanded
product range to provide greater value to our automotive OEM customers. The
addition of Control Devices' solar, twilight, steering encoder and interior fog
sensors, as well as its portfolio of circuit breakers, will allow First
Technology to provide customers a broader array of products to enhance passenger
safety and comfort. Furthermore, Control Devices' technical and management
capabilities will be valued assets to our
<PAGE>
combined company. Together we will make the combined company far more than its
individual parts."
"This is an excellent opportunity for our shareholders and a
complementary fit that will benefit both companies," said Bruce Atkinson,
President, CEO and Director, of Control Devices. "Each of First Technology and
Control Devices will be able to cross-sell products to its respective customer
base as a whole and across geographies."
Dresdner Kleinwort Benson is advising First Technology on the
transaction, and Cleary Gull & Reiland is advising Control Devices.
Control Devices, based in Standish, Maine, designs, manufactures and
markets circuit breakers, electronic sensors and electronic ceramic component
parts used by OEMs in the automotive, appliance and telecommunications market.
The company generated fiscal 1998 annual revenues of $80 million from its
operations located in the US, France and the Dominican Republic. Control
Devices' products include over 250 types of circuit breakers, including metal
covered breakers (for wire harness, etc.) and glass enclosed breakers (for
hermetic applications inside small motors); optoelectronic sensors (solar,
twilight, steering encoder and interior fog); and solid state ceramic switches.
The acquisition will enable First Technology to expand its global product
offering of automotive sensing and safety products, increasing critical mass in
the US and Europe.
First Technology, based in Ascot, Berkshire, England, is an
international group serving the global transportation industry in the supply of
products and services in the fields of sensing, measurement and safety testing.
First Technology generated fiscal 1998 revenues of (pound)52 million ($85
million) from its operations based in the UK, the US, France and Japan. First
Technology's shares are traded on the London Stock Exchange and, based on the
closing price for First Technology shares on February 19, 1999, First Technology
had a market capitalization of approximately (pound)180 million ($294 million).
First Technology's products include crash activated sensors for fuel cut-off and
central door lock release, fuel level senders and rollover sensors. First
Technology Safety Systems, Inc., a subsidiary of First Technology, designs and
manufactures crash test dummies and related sensing equipment for use by the
major global automotive OEM and tier one suppliers. Automotive customers of
First Technology include, directly and indirectly, General Motors, Ford, Fiat,
Renault, PSA, Honda, Rover, Daimler- Chrysler, Daewoo and Toyota.
Forward-looking statements contained in this release involve risks and
uncertainties that could cause actual results to differ materially from those
contemplated. Factors that could cause such differences include the risks
associated with the automotive business generally, transactional effects,
integration risks and other investment considerations described from time to
time by the companies in their filings with the Securities and Exchange
Commission or the London Stock Exchange.
<PAGE>
SCHEDULE II
[LOGO]
February 22, 1999
Board of Directors
Control Devices, Inc.
228 Northeast Road
Standish, Maine 04084
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of common stock, no par value per share ("CDI
Common Stock"), of Control Devices, Inc. ("CDI") other than the "Affiliates" (as
such term is defined below) (the "Stockholders") of the "Offer Consideration"
(as defined below) to be received by the Stockholders pursuant to the terms of
the Agreement and Plan of Merger dated as of February 22, 1999 (the "Merger
Agreement") by and among First Technology PLC ("Parent"), First Technology
Acquisition Corp., an indirect wholly-owned subsidiary of Parent ("Subsidiary"),
and CDI. Pursuant to the Merger Agreement, Subsidiary will offer to purchase all
of the outstanding CDI Common Stock in a tender offer (the "Tender Offer") and,
following completion of the Tender Offer, the Subsidiary will be merged (the
"Merger") with and into CDI and CDI will become a wholly owned subsidiary of
Parent. The Tender Offer and the Merger are collectively referred to herein as
the "Acquisition". We have not been requested to express a view, and this
opinion does not express a view, as to the fairness of the Offer Consideration
(as defined below) to certain directors and officers of CDI (the "Affiliates")
due to their obligations under the "Subscription Agreements" and the
"Shareholders Agreement" (as such terms are defined in the Merger Agreement)
entered into by and between the Affiliates and Parent.
Under the Merger Agreement, Subsidiary will offer to purchase all of the issued
and outstanding shares of CDI Common Stock in the Tender Offer for $16.25 per
share, net to the seller in cash (the "Offer Consideration"). Upon consummation
of the Merger, any shares of CDI Common Stock not acquired in the Tender Offer
will be converted into the right to receive the Offer Consideration in the
Merger.
In arriving at our opinion, we have reviewed, among other things, the Merger
Agreement and certain business and financial information relating to CDI,
including certain financial projections, estimates and analyses provided to us
by CDI. We have also reviewed and discussed the business and prospects of CDI
with representatives of CDI's management. In arriving at our opinion, we have
considered (a) certain financial and stock market data relating to CDI and have
compared that information to similar data for other publicly held companies in
businesses considered to be generally comparable to CDI; (b) certain publicly
available information concerning the nature and terms of certain transactions
that Cleary Gull believed to be relevant on a comparative basis; (c) an
unleveraged, after-tax discounted cash flow analysis of CDI; (d) a comparison of
the purchase price premium to be paid for the CDI Common Stock based on the
Offer Consideration to certain other similar-sized acquisitions; (e) a
historical review of CDI's stock market price; (f) the trading history of CDI;
(g) a leveraged buy-out analysis of CDI; and (h) such other information,
financial studies and analyses and financial, economic and market criteria as we
deemed relevant and appropriate.
In connection with our review, we have not independently verified any of the
foregoing information and have relied on its being complete and accurate in all
material respects. We have not made an independent evaluation or appraisal of
any assets or liabilities (contingent or otherwise) of CDI, nor have we been
CLEARY GULL REILAND & MCDEVITT INC. 100 East Wisconsin Avenue, Milwaukee, WI
53202 - 414-291-4500
<PAGE>
furnished with any such evaluation or appraisal. With respect to the financial
plans, estimates and analyses provided to us by CDI, we have assumed, with your
permission, that all such information was reasonably prepared on bases
reflecting the best currently available estimates and judgments of management of
CDI as to future financial performance and was based upon the historical
performance of CDI and certain estimates and assumptions which were reasonable
at the time made. Finally, we have assumed that the Acquisition will be
consummated on the terms described in the Merger Agreement, without any waiver
of any material term or condition. Our opinion is based on economic, monetary
and market conditions existing on the date hereof.
We have not been requested to evaluate the reasonableness, adequacy, or
feasibility of Parent's plans for financing the Acquisition and this opinion
assumes that Parent has, or at closing will have, financing adequate to complete
the Acquisition in accordance with the Merger Agreement. We have not been
provided with nor have we reviewed any term sheets, engagement letters, letters
of intent or other documentation relating to such financing.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Offer Consideration to be received by the Stockholders in the Tender
Offer and the subsequent Merger pursuant to the Merger Agreement is fair, from a
financial point of view, to the Stockholders.
We are acting as financial advisor to the Board of Directors of CDI in this
transaction pursuant to an engagement letter dated February 18, 1999. Under the
engagement letter, we are entitled to a retainer from CDI and an additional fee
for our services, payable upon delivery of this opinion to CDI's Board of
Directors. Our fee is not contingent upon the contents of this opinion or the
approval and consummation of the Acquisition. In addition, CDI has agreed to
indemnify us for certain liabilities that may arise out of the rendering of this
opinion. CDI has also agreed to reimburse Cleary Gull for its reasonable and
properly documented expenses incurred in connection with the performance of its
services under the engagement letter up to $50,000.
Cleary Gull was a co-manager of CDI's initial public offering of CDI Common
Stock in October 1996 and received a fee for such investment banking services.
In addition, Cleary Gull provides research coverage on CDI. In the ordinary
course of business, we and our affiliates actively trade the CDI Common Stock
for our own accounts and for the accounts of our customers and, accordingly, may
at any time hold a long or short position in the CDI Common Stock. We currently
make a market in the CDI Common Stock on the Nasdaq National Market.
This opinion is for the use and benefit of the Board of Directors of CDI and is
rendered to the Board of Directors of CDI in connection with its consideration
of the Acquisition. We are not making any recommendation regarding whether or
not it is advisable for Stockholders to tender their shares of CDI Common Stock
in the Tender Offer. We have not been requested to opine as to, and our opinion
does not in any manner address, CDI's underlying business decision to proceed
with or consummate the Acquisition, or whether stockholders should vote in favor
of the Merger.
Very truly yours,
[LOGO]
CLEARY GULL & REILAND INC.
<PAGE>
[LOGO]
February 24, 1999
Dear Shareholder:
We are pleased to advise you that on February 22, 1999, Control Devices,
Inc. ("CDI") entered into an Agreement and Plan of Merger with First Technology
PLC and one of its subsidiaries, First Technology Acquisition Corp., which
provides for the acquisition of all of the outstanding Common Shares of Control
Devices, Inc. at a price of $16.25 per share in cash. Under the terms of the
proposed transaction, First Technology Acquisition Corp. has today commenced a
tender offer for all of the outstanding CDI Common Shares at $16.25 per share.
Following the completion of the tender offer, and any approvals required by law,
First Technology Acquisition Corp. will be merged with CDI and all Common Shares
not purchased in the tender offer (other than those owned by First Technology
PLC or by shareholders who have perfected dissenters' rights) will be converted
into the right to receive $16.25 per share in cash in the merger.
YOUR BOARD OF DIRECTORS (I) HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE TENDER OFFER AT THE
OFFER PRICE AND THE MERGER, (II) HAS DETERMINED THAT THE TERMS OF THE TENDER
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS SHAREHOLDERS, AND (III) RECOMMENDS THAT SHAREHOLDERS ACCEPT THE TENDER
OFFER, TENDER THEIR SHARES TO FIRST TECHNOLOGY ACQUISITION CORP. AND APPROVE AND
ADOPT THE MERGER AGREEMENT AND MERGER, IF REQUIRED.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors more fully described in the accompanying
materials. The Board of Directors has received the written opinion dated
February 22, 1999 of Cleary Gull & Reiland Inc., financial advisor to Control
Devices, Inc., to the effect that, as of such date and based upon and subject to
certain matters stated therein, the $16.25 per share cash consideration to be
received in the Offer and the Merger by the holders of Common Shares (other than
certain directors and executive officers of CDI) was fair, from a financial
point of view, to such holders.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is First
Technology PLC's Offer to Purchase and related materials, including a Letter of
Transmittal for use in tendering shares. We urge you to read the enclosed
materials carefully.
The management and directors of Control Devices, Inc. thank you for the
support you have given the Company.
On behalf of the Board of Directors,
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Ralph R. Whitney, Jr.
Chairman of the Board
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Bruce D. Atkinson
President and Chief Executive Officer
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