0000950112-95-002340.txt : 19950914
0000950112-95-002340.hdr.sgml : 19950914
ACCESSION NUMBER: 0000950112-95-002340
CONFORMED SUBMISSION TYPE: S-4
PUBLIC DOCUMENT COUNT: 7
FILED AS OF DATE: 19950907
SROS: NYSE
SROS: PSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: GENERAL SIGNAL CORP
CENTRAL INDEX KEY: 0000040834
STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669]
IRS NUMBER: 160445660
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 033-62437
FILM NUMBER: 95571892
BUSINESS ADDRESS:
STREET 1: ONE HIGH RIDGE PARK
CITY: STAMFORD
STATE: CT
ZIP: 06904
BUSINESS PHONE: 2033578800
MAIL ADDRESS:
STREET 1: P O BOX 10010
CITY: STAMFORD
STATE: CT
ZIP: 06904
FORMER COMPANY:
FORMER CONFORMED NAME: GENERAL RAILWAY SIGNAL CO
DATE OF NAME CHANGE: 19710926
S-4
1
GENERAL SIGNAL CORP
As filed with the Securities and Exchange Commission on September 7, 1995
Registration No. ________
---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________
GENERAL SIGNAL CORPORATION
(Exact name of Registrant as specified in its charter)
NEW YORK 38230 16-0445660
(State or other jurisdiction of (Primary Standard (IRS Employer
incorporation or organization) Industrial Classification Identification
Code Number) No.)
ONE HIGH RIDGE PARK
STAMFORD, CONNECTICUT 06904
(203) 329-4100
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
_________________________
EDGAR J. SMITH, JR.
GENERAL SIGNAL CORPORATION
ONE HIGH RIDGE PARK
STAMFORD, CONNECTICUT 06904
(203) 329-4330
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_________________________
Copies to:
W. LESLIE DUFFY, ESQ. SHAWN A. SMITH, ESQ.
CAHILL GORDON & REINDEL DATA SWITCH CORPORATION
80 PINE STREET ONE WATERVIEW DRIVE
NEW YORK, NY 10005 SHELTON, CT 06484
(212) 701-3000 (203) 926-1801
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective and
all other conditions to the merger (the "Merger") of General Signal
Acquisition Corporation ("Merger Sub") with and into Data Switch
Corporation ("Data Switch") pursuant to the Merger Agreement described in
the enclosed Prospectus have been satisfied or are waived.
If the only securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. /__/
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Offering Aggregate Amount of
Class of Securities Amount to Be Price Offering Registration
to Be Registered(1) Registered(1)(2) Per Share(3) Price(4) Fee(5)
------------------- ---------------- ------------ ----------- ------------
Common Stock, $1.00
par value......... 2,055,310 $ 31.00 $63,716,425 $ 21,971.18
(1) Also includes associated General Signal Purchase Rights. See
"Description of General Signal Capital Stock; The Merger Agreement."
(2) The amount of common stock, par value $1.00 per share, of the
Registrant (the "Common Stock") to be registered has been determined by
multiplying the maximum exchange ratio of 0.14677 for such shares in
the Merger by the maximum number of shares of common stock, par value
$.01 per share, of Data Switch Corporation (the "Data Switch Common
Stock") to be exchanged in the Merger, assuming the exercise prior to
the effective time of the Merger (the "Effective Time") of all Data
Switch stock options and warrants (whether or not currently
exercisable).
(3) The proposed maximum offering price per share has been determined by
dividing the maximum aggregate offering price (calculated in accordance
with footnote (4) below) by the number of shares being registered
hereby.
(4) The maximum aggregate offering price is determined by multiplying
$4.55 (the value assigned to each share of Data Switch Common Stock
pursuant to the Merger Agreement) by the maximum number of shares of
Data Switch Common Stock to be exchanged in the Merger as calculated
in footnote (2) above.
(5) In accordance with Rule 457(b), the total registration fee of
$21,971.18 has been reduced by $11,830.52, which was previously paid
on June 30, 1995 at the time of filing under the Securities Exchange
Act of 1934, as amended, of a preliminary copy of Data Switch's proxy
materials included herein. Accordingly, the registration fee payable
upon filing of this Registration Statement is $10,140.66
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Cross-Reference Sheet Between Items in
Form S-4 and Prospectus/Proxy Statement Pursuant to
Item 501(b) of Regulation S-K
Item No. Form S-4 Caption Heading in Prospectus
-------- ---------------- ---------------------
Item 1 Forepart of Registration Statement Outside Front Cover
and Outside Front Cover Page of Page of Prospectus
Prospectus
Item 2 Inside Front and Outside Back Available Information;
Cover Pages of Prospectus Incorporation of Documents
by Reference; Table of
Contents
Item 3 Risk Factors, Ratio of Earnings Summary; The Merger; The
to Fixed Charges and Other Merger Agreement; The
Information Special Meeting
Item 4 Terms of the Transaction Summary; The Merger; The
Merger Agreement; Certain
Related Matters; Certain Tax
Consequences; Description of
General Signal Capital
Stock; Comparative Rights of
Stockholders
Item 5 Pro Forma Financial Information Summary; Unaudited Pro Forma
Combined Condensed Financial
Statements
Item 6 Material Contacts with the Summary; The Merger; Certain
Company Being Acquired Related Matters
Item 7 Additional Information Required Not Applicable
for Reoffering by Persons and
Parties Deemed to be Underwriters
Item 8 Interests of Named Experts and Legal Matters; Experts
Counsel
Item 9 Disclosure of Commission Position Not Applicable
on Indemnification for Securities
Act Liabilities
Item 10 Information with Respect to S-3 Not Applicable
Registrants
Item No. Form S-4 Caption Heading in Prospectus
-------- ---------------- ---------------------
Item 11 Incorporation of Certain Incorporation of
Information by Reference Documents by Reference
Item 12 Information with Respect to S-2 Not Applicable
or S-3 Registrants
Item 13 Incorporation of Certain Not Applicable
Information by Reference
Item 14 Information with Respect Not Applicable
to Registrants Other Than
S-2 or S-3 Registrants
Item 15 Information with Respect to S-3 Not Applicable
Companies
Item 16 Information with Respect to S-2 Outside Front Cover Page of
or S-3 Companies Prospectus; Incorporation of
Documents by Reference;
Summary
Item 17 Information with Respect to Not Applicable
Companies Other Than S-2 or
S-3 Companies
Item 18 Information if Proxies, Consents Outside Front Cover Page of
or Authorizations are to be Prospectus; Available
Solicited Information; Incorporation
of Documents by Reference;
The Special Meeting; The
Merger; The Merger Agreement
Item 19 Information if Proxies, Consents Not Applicable
or Authorizations are not to be
Solicited, or in an Exchange Offer
[LOGO]
CONFIDENTIAL, FOR USE OF
THE COMMISSION ONLY
DATA SWITCH CORPORATION
One Waterview Drive
Shelton, Connecticut 06484
September __, 1995
To the Stockholders of Data Switch Corporation:
The Board of Directors of Data Switch Corporation
(herein "Data Switch") invites you to the Special Meeting of
the Stockholders, which will be held on October __, 1995, commencing
at _____________ at the __________________.
At the Special Meeting you will be asked to consider
and approve the proposed merger of General Signal Acquisition
Corporation ("Merger Sub"), a wholly-owned subsidiary of
General Signal Corporation ("General Signal"), with and into
Data Switch (the "Merger") pursuant to the Agreement and Plan
of Merger (the "Merger Agreement") dated May 8, 1995 among
General Signal, Merger Sub and Data Switch. A copy of the
Merger Agreement is included as Annex A to the Prospectus/Proxy
Statement. If approved, the Data Switch stockholders will
receive shares of General Signal Common Stock in exchange for
their Data Switch shares, based on a valuation of $4.55 per
share of Data Switch, and, in accordance with Delaware law,
will not have statutory appraisal rights.
The proposed Merger has been approved by the Boards
of Directors of Data Switch and General Signal and is subject
to approval by holders of a majority of the outstanding common
stock of Data Switch.
The Board of Directors of Data Switch believes that
the Merger is in the best interests of Data Switch and its
stockholders and therefore unanimously recommends that you vote
FOR the Merger. Details of the background and reasons for the
proposed Merger appear in the attached Prospectus/Proxy
Statement. Additional information regarding Data Switch and
General Signal is also set forth in the Prospectus/Proxy
Statement. I urge you to read this material carefully.
The Data Switch Board of Directors has received the
opinion of Needham & Company, Inc., Data Switch's financial
advisor, that the consideration being offered in the Merger is
fair from a financial point of view to Data Switch
stockholders. A copy of this opinion is included as Annex B to
the Prospectus/Proxy Statement.
To ensure that you are represented at the meeting,
please promptly sign and return the enclosed proxy. You may
revoke your proxy at any time prior to its exercise, by written
notice to Data Switch, by executing and delivering to Data
Switch a later proxy prior to the meeting, or by attending the
meeting and voting your shares in person.
Proxies which are signed without being marked AGAINST
the Merger will be voted FOR the Merger.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS
TIME. IF THE MERGER IS APPROVED YOU WILL BE SENT INSTRUCTIONS
REGARDING THE EXCHANGE OF YOUR EXISTING STOCK CERTIFICATES.
Sincerely,
WILLIAM J. LIFKA
Chairman of the Board
and Chief Executive
Officer
CONFIDENTIAL, FOR USE OF
THE COMMISSION ONLY
DATA SWITCH CORPORATION
One Waterview Drive
Shelton, Connecticut 06484
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
, 1995
____________________________
A Special Meeting of Stockholders of Data Switch
Corporation (herein "Data Switch") will be held on
October __, 1995 commencing at _____________ at ___________
to consider and vote upon the proposed merger of General Signal
Acquisition Corporation ("Merger Sub"), a wholly-owned
subsidiary of General Signal Corporation ("General Signal"),
with and into Data Switch pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") dated May 8, 1995, among
General Signal, Merger Sub and Data Switch.
At the meeting, there shall be presented to the
shareholders:
(i) A resolution to approve the Merger and Merger
Agreement in accordance with the terms of which (a) Merger
Sub shall be merged with and into Data Switch, and
(b) holders of common stock, par value $.01, of Data
Switch ("Data Switch Common Stock") will be entitled to
receive shares of common stock, par value $1.00, of
General Signal ("General Signal Common Stock") based upon
an exchange value of $4.55 per share of Data Switch Common
Stock. The number of shares of General Signal Common
Stock issuable to each shareholder of Data Switch shall be
determined by dividing $4.55 by the Average Market Value,
as defined in the Merger Agreement, during the thirty (30)
consecutive trading days ending with the last trading day
prior to the scheduled date of the Special Meeting.
Approval of the Merger and Merger Agreement requires
the affirmative vote of holders of a majority of the
outstanding Data Switch Common Stock. If the Merger is
approved, Data Switch stockholders, in accordance with
Delaware law, will not have statutory appraisal rights.
The Board of Directors unanimously recommends a vote FOR
the Merger and Merger Agreement; and
(ii) In the event that less than a majority of the
outstanding Data Switch Common Stock is voted FOR the
Merger and Merger Agreement on the scheduled date of the
Special Meeting, a proposal to adjourn the meeting for up
to 30 days in order to permit further solicitation of
proxies in connection therewith.
Pursuant to the Bylaws of Data Switch, the Board of
Directors has fixed the close of business on September 18, 1995
as the date for determination of stockholders of record
entitled to notice of, and to vote at, the Special Meeting.
After reviewing the accompanying Prospectus/Proxy
Statement, please vote your shares in connection with the
Merger and Merger Agreement, by signing and returning the Proxy
card in the enclosed envelope.
Proxies which are signed without being marked AGAINST
the Merger will be voted FOR the Merger.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS
TIME. IF THE MERGER IS APPROVED, YOU WILL BE SENT INSTRUCTIONS
REGARDING THE EXCHANGE OF YOUR EXISTING STOCK CERTIFICATES.
By Order of the Board of Directors
SHAWN A. SMITH
Secretary and Corporate Counsel
Shelton, Connecticut
September __, 1995
CONFIDENTIAL, FOR USE OF
THE COMMISSION ONLY
SUBJECT TO COMPLETION, DATED SEPTEMBER __, 1995
_______________
GENERAL SIGNAL CORPORATION DATA SWITCH CORPORATION
Prospectus and Proxy Statement
_______________
This Prospectus/Proxy Statement ("Prospectus/Proxy
Statement") is being furnished to stockholders of Data Switch
Corporation, a Delaware corporation ("Data Switch") in
connection with the solicitation of proxies by the Board of
Directors of Data Switch for use at the Special Meeting of
Stockholders (including any adjournment or postponement
thereof) to be held on October __, 1995 (the "Special
Meeting"). At the Special Meeting, stockholders of Data Switch
will be asked to approve, and this Prospectus/Proxy Statement
relates to, the proposed merger of General Signal Acquisition
Corporation, a Delaware corporation ("Merger Sub") and a wholly
owned subsidiary of General Signal Corporation, a New York
corporation ("General Signal"), with and into Data Switch (the
"Merger") with Data Switch as the Surviving Corporation,
pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), dated May 8, 1995, among General Signal, Merger
Sub and Data Switch.
If the Merger is approved by the stockholders of Data
Switch, each share of common stock, par value $.01 of Data
Switch ("Data Switch Common Stock"), shall be converted into
the right to receive the fraction of a share of common stock,
par value $1.00, of General Signal ("General Signal Common
Stock"), determined by dividing $4.55 by a valuation of General
Signal Common Stock based upon the average price per share of
General Signal Common Stock on the New York Stock Exchange for
the thirty trading days prior to the Special Meeting; provided
that such fraction shall not be greater than 0.14677 nor less
than 0.10581 of a share of General Signal Common Stock. This
Prospectus/Proxy Statement also constitutes a prospectus of
General Signal with respect to the General Signal Common Stock.
This Prospectus/Proxy Statement is accompanied by a
copy of Data Switch's Annual Report on Form 10-K for the year
ended December 31, 1994.
This Prospectus/Proxy Statement and accompanying form
of proxy are first being mailed to stockholders of Data Switch
on or about September __, 1995.
_______________
THE SECURITIES ISSUABLE IN THE MERGER HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PRO-
SPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
_______________
The date of this Prospectus/Proxy Statement is September __,
1995
-ii-
AVAILABLE INFORMATION
General Signal and Data Switch are subject to the
informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance
therewith file reports and other information with the
Securities and Exchange Commission (the "Commission") relating
to their business, financial position, results of operations
and other matters. Such reports and other information can be
inspected and copied at the Public Reference Section maintained
by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its Regional Offices located at
The Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661, and 7 World Trade Center, 15th Floor, New York, New York
10048. Copies of such material also can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The General
Signal Common Stock is listed on the New York Stock Exchange
("NYSE") and the Pacific Stock Exchange ("PSE"). The Data
Switch Common Stock is quoted on the Nasdaq National Market
System ("NASDAQ"). Such material can also be inspected at the
offices of such exchanges and NASDAQ. The offices of such
exchanges and NASDAQ are: the New York Stock Exchange, 20
Broad Street, New York, New York 10005; the Pacific Stock
Exchange, 115 Sansome Street, Suite 1104, San Francisco,
California 94104; and the Nasdaq Stock Market, 1735 K Street,
N.W., Washington, D.C. 20006.
General Signal has filed with the Commission a
registration statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Common Stock offered
hereby. This Prospectus/Proxy Statement does not contain all
the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules
and regulations of the Commission. Reference is made to the
Registration Statement and to the exhibits relating thereto for
further information with respect to General Signal, Data Switch
and the General Signal Common Stock offered hereby.
No person is authorized to give any information or to
make any representation not contained in this Prospectus/Proxy
Statement and, if given or made, such information or
representation should not be relied upon as having been
authorized by General Signal, Data Switch or any other person.
This Prospectus/Proxy Statement does not constitute an offer to
sell or a solicitation of an offer to buy any securities in any
jurisdiction to any person to whom it is not lawful to make any
such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus/Proxy Statement nor any
distribution of the securities made under this Prospectus/Proxy
-iii-
Statement shall, under any circumstances, create an implication
that there has been no change in the affairs of General Signal
or Data Switch since the date of this Prospectus/Proxy
Statement.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Commission by
General Signal (File No. 1-996) and Data Switch (File
No. 1-9780) pursuant to the Exchange Act are incorporated by
reference in this Prospectus/Proxy Statement:
1. General Signal's Annual Report on Form 10-K for
the year ended December 31, 1994;
2. General Signal's Quarterly Reports on Form 10-Q
for the three months ended March 31, 1995 and the six
months ended June 30, 1995;
3. General Signal's Current Reports on Form 8-K
dated March 7, 1986, June 21, 1990, June 17, 1993 and
June 26, 1995;
4. Data Switch's Annual Report on Form 10-K for the
year ended December 31, 1994, as amended by Form 10-K/A
dated August 29, 1995;
5. Data Switch's Quarterly Reports on Form 10-Q for
the three months ended March 31, 1995 and the six months
ended June 30, 1995; and
6. Data Switch's Current Report on Form 8-K dated
June 21, 1988.
All documents and reports filed by General Signal and
Data Switch pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus/Proxy
Statement and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Prospectus/Proxy
Statement and to be a part hereof from the dates of filing of
such documents or reports. Any statement contained in a
document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for
purposes of this Prospectus/Proxy Statement to the extent that
a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of
this Prospectus/Proxy Statement.
-iv-
This Prospectus/Proxy Statement incorporates
documents by reference which are not presented herein or
delivered herewith. Such documents (other than exhibits to
such documents unless such exhibits are specifically
incorporated by reference) are available, without charge, to
any person, including any beneficial owner, to whom this
Prospectus/Proxy Statement is delivered, on written or oral
request, in the case of documents relating to General Signal,
to General Signal Corporation, One High Ridge Park, Stamford,
Connecticut 06904 (telephone number (203) 329-4100), Attn:
Secretary, or, in the case of documents relating to Data
Switch, to Data Switch Corporation, One Waterview Drive,
Shelton, Connecticut 06484 (telephone number (203) 926-1801),
Attn: Secretary. In order to ensure timely delivery of the
incorporated documents, requests should be received prior to
October __, 1995.
-v-
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION ................................................iii
INCORPORATION OF DOCUMENTS BY REFERENCE .............................. iv
SUMMARY .............................................................. 1
INTRODUCTION ......................................................... 27
THE COMPANIES......................................................... 27
THE SPECIAL MEETING .................................................. 28
Date, Time and Place .............................................. 28
Purpose of Special Meeting ........................................ 28
Record Date; Voting Rights; Proxies ............................... 28
Required Vote ..................................................... 29
Proxy Solicitation ................................................ 30
THE MERGER ........................................................... 30
Background of the Merger .......................................... 30
Merger ............................................................ 32
Merger Terms; Average Market Value ................................ 33
Data Switch's Reasons for the Merger;
Recommendation of the Data Switch Board of
Directors ...................................................... 34
Opinion of Data Switch's Financial Advisor ........................ 35
Interest of Certain Persons in the Merger ......................... 41
Possible Effect of Merger Termination Fee on
Other Bids ..................................................... 43
Resales by Affiliates of Data Switch .............................. 43
Governmental Regulation ........................................... 44
Accounting Treatment .............................................. 45
THE MERGER AGREEMENT ................................................. 45
General............................................................ 45
Representations and Warranties .................................... 48
Covenants ......................................................... 48
No Solicitation ................................................... 49
Conditions ........................................................ 50
Termination ....................................................... 50
Termination Fees and Expenses ..................................... 52
Indemnification; Insurance ........................................ 53
Amendment ......................................................... 54
Waivers; Consents ................................................. 54
Appraisal Rights .................................................. 54
CERTAIN RELATED MATTERS .............................................. 54
Data Switch Rights Agreement Amendment ............................ 54
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS ..................................................... 56
CERTAIN TAX CONSEQUENCES ............................................. 69
General ........................................................... 69
Federal Income Tax Consequences of the Merger ..................... 69
DESCRIPTION OF GENERAL SIGNAL CAPITAL STOCK .......................... 71
COMPARATIVE RIGHTS OF STOCKHOLDERS ................................... 73
Amendments to Certificate of Incorporation ........................ 73
-vi-
Amendments to By-Laws ............................................. 73
Directors ......................................................... 74
Removal of Directors .............................................. 75
Newly Created Directorships and Vacancies ......................... 75
Vote Required for Certain Transactions ............................ 76
Business Combinations ............................................. 76
Appraisal Rights .................................................. 78
Limitation on Directors' Liability ................................ 79
Indemnification ................................................... 80
Loans to Directors and Officers ................................... 81
Special Meetings .................................................. 81
Stockholder Action ................................................ 82
Stockholder Action by Written Consent ............................. 82
Payment of Dividends .............................................. 83
Rights or Options ................................................. 83
Preemptive Rights ................................................. 84
LEGAL MATTERS ........................................................ 84
EXPERTS .............................................................. 84
STOCKHOLDER PROPOSALS ................................................ 85
Annex A -- Agreement and Plan of Merger
Annex B -- Form of Fairness Opinion of Needham &
Company, Inc.
-vii-
SUMMARY
The following is a summary of certain information
contained in this Prospectus/Proxy Statement. This summary
does not contain a complete statement of all material
information relating to General Signal, Merger Sub, Data
Switch, the Merger or the Merger Agreement and is qualified in
all respects by reference to the more detailed information and
financial statements contained elsewhere or incorporated by
reference in this Prospectus/Proxy Statement.
General
This Prospectus/Proxy Statement is being furnished in
connection with the Merger Agreement among General Signal,
Merger Sub and Data Switch. A copy of the Merger Agreement is
attached as Annex A to this Prospectus/Proxy Statement.
The Companies
General Signal Corporation
One High Ridge Park
P.O. Box 10010
Stamford, Connecticut 06904
(203) 329-4100 ...................... General Signal Corporation,
incorporated in New York in
1904, designs, manufactures and
sells equipment and instruments
for the process control,
electrical, automotive, mass
transportation and
telecommunications industries.
General Signal serves these
markets through three product
sectors: (1) Process Controls,
(2) Electrical Controls, and
(3) Industrial Technology. The
Telenex unit of General Signal,
a part of the Industrial
Technology sector, designs,
develops, manufactures, sells
and services network
connectivity control and
management systems; cable
management and building wiring
systems; and network
diagnostics and analysis tools.
-2-
Data Switch Corporation
One Waterview Drive
Shelton, Connecticut 06484
(203) 926-1801....................... Data Switch Corporation,
incorporated in Delaware in
1977, designs, develops,
manufactures, markets and
services products for large
scale data center networks.
Product categories include
fiber-based systems, channel
networking systems,
communication systems and
channel switches.
THE SPECIAL MEETING
Date, Place and Time ................ The Special Meeting will be
held in [place], on [date and
time], Eastern Daylight Savings
Time ("EDT").
Purpose of the Special
Meeting ............................. At the Special Meeting, the
holders of shares of Common
Stock, par value $.01 per
share, of Data Switch (the
"Data Switch Common Stock")
will consider and vote upon the
adoption of the Merger
Agreement and the transactions
contemplated therein.
Record Date ......................... The record date for the Special
Meeting is September 18, 1995.
Required Vote ....................... Under Section 252 of the
Delaware General Corporation
Law ("DGCL"), the affirmative
vote or written consent of more
than 50% of the outstanding
shares of Data Switch Common
Stock is required to approve
the Merger Agreement. Each of
the directors and executive
officers of Data Switch has
advised Data
-3-
Switch that he or
she intends to vote or direct
the vote of all shares of Data
Switch Common Stock over which
he or she has voting control (a
total of 194,441 or
approximately 1.6%, of the
outstanding shares of Data
Switch Common Stock as of
June 30, 1995) in favor of
approval of the Merger
Agreement. Richard E. Greene
has entered into a letter
agreement with General Signal,
pursuant to which he has agreed
to vote all shares of Data
Switch Common Stock over which
he has voting control (a total
of 2,041,275 shares, or
approximately 16% of the
outstanding shares of Data
Switch Common Stock as of
June 30, 1995) in favor of
approval of the Merger
Agreement. See "The Special
Meeting -- Required Vote."
THE MERGER
Merger .............................. Subject to the requisite
approval of Data Switch's
stockholders and the satisfaction
or waiver of certain other
conditions, at the effective time
of the Merger, Merger Sub shall
be merged with and into Data
Switch. Data Switch shall be the
Surviving Corporation and shall
continue its corporate existence
under the laws of the State of
Delaware as a wholly owned
subsidiary of General Signal.
The Merger shall have the effects
on Data Switch and Merger Sub as
constituent corporations of the
Merger as provided under the
DGCL. At the effective time of
the Merger, the separate
existence of Merger Sub shall
cease.
-4-
Merger Terms; Average
Market Value ...................... Upon consummation of the
Merger, each share of Data Switch
Common Stock, shall be converted
into the right to receive the
fraction of a share of General
Signal Common Stock determined by
dividing $4.55 by the Average
Market Value (as hereinafter
defined) of General Signal Common
Stock; provided that such
fraction shall be not greater
than 0.14677 nor less than
0.10581 of a share of General
Signal Common Stock. See "The
Merger Agreement."
Based on the closing price of
General Signal Common Stock on
the New York Stock Exchange
composite tape during the thirty
trading days ended September __,
1995, the exchange ratio would
have resulted in each share of
Data Switch Common Stock being
converted into _____ of a share
of General Signal Common Stock.
The market price for shares of
General Signal Common Stock
fluctuates daily. The exchange
ratio will be adjusted in
accordance with the Merger
Agreement based upon the closing
prices for the General Signal
Common Stock over the thirty
trading days ending on the day
prior to the scheduled date of
the Special Meeting.
Accordingly, the exchange ratio,
the aggregate number of shares of
General Signal Common Stock to be
issued to Data Switch
shareholders and the aggregate
market value thereof will be
subject to adjustment up to the
day prior to the scheduled
special meeting date.
-5-
General Signal shall also issue
shares of General Signal Common
Stock in connection with its
assumption of outstanding Data
Switch employee stock options, to
the extent such options are
exercised after the Merger.
There are currently outstanding
options for 476,172 shares of
Data Switch Common Stock held by
officers and non-employee
directors of Data Switch to
purchase shares of Data Switch
Common Stock with exercise prices
ranging from $2.00 to $8.13 per
share. The exercise price of
87.3% of the Data Switch options
is at or below $4.55 per share.
Data Switch's Reasons for
Merger; Recommendation of
the Board of Directors of
Data Switch........................ On May 5, 1995, the Board of
Directors of Data Switch
unanimously approved the Merger
Agreement and the Merger as being
in the best interest of its
stockholders and resolved to
recommend that its stockholders
approve the Merger Agreement and
the transactions contemplated
thereby. See "The Merger -- Data
Switch's Reasons for the Merger;
Recommendation of the Board of
Directors of Data Switch."
Opinion of Financial
Advisor.............................. Needham & Company, Inc.
("Needham") delivered its oral
opinion on April 27, 1995 to the
Data Switch Board of Directors to
the effect that, as of the date
of such opinion, the
consideration to be received by
the stockholders of Data Switch
in the Merger was fair, from a
financial point of view, to the
-6-
stockholders of Data Switch.
Needham & Company confirmed its
oral opinion in a written opinion
dated September , 1995. The
full text of Needham's written
opinion, which sets forth the
assumptions made, matters
considered, limitations on and
scope of its review, is attached
hereto as Annex B. Data Switch
stockholders are urged to, and
should, read such opinion in its
entirety. See "The Merger --
Opinion of Data Switch's
Financial Advisor."
Interests of Certain
Persons in the Merger ............. The Merger Agreement includes
certain provisions relating to
the indemnification of Data
Switch's officers and directors
and provides for the continuation
of current directors' and
officers' liability insurance for
Data Switch directors and
officers. See "The Merger
Agreement --Indemnification;
Insurance."
As of June 30, 1995, the twelve
executive officers and directors
of Data Switch (as a group)
beneficially owned an aggregate
of 194,441 shares of Data Switch
Common Stock (excluding shares
subject to outstanding stock
options). All such shares will
be treated in the Merger in the
same manner as shares of Data
Switch Common Stock held by other
stockholders of Data Switch. See
"The Merger -- Merger Terms;
Average Market Value."
As of June 30, 1995, the
executive officers of Data Switch
(as a group) also held options to
purchase an aggregate of 348,672
-7-
shares of Data Switch Common
Stock pursuant to Data Switch's
stock option plans. In addition,
as of June 30, 1995, the non-
employee directors of Data Switch
(as a group) held options to
purchase an aggregate of
127,500 shares of Data Switch
Common Stock. The treatment of
such options is described under
"The Merger Agreement -- Effect
on Company Options."
Data Switch has entered into
Executive Severance Compensation
Agreements with its executive
officers pursuant to which such
officers would be entitled to
receive payments of six months'
salary, plus up to 50% of such
officer's aggregate total
compensation during the five
fiscal years preceding the
Merger, if the individual
officer's employment with Data
Switch is involuntarily
terminated (as defined in such
Agreements) for reasons other
than cause following the Merger,
or during the six-month period
preceding the Merger. See "The
Merger -- Interests of Certain
Persons in the Merger."
Governmental and
Regulatory Matters ................ The Merger is subject to the
Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as
amended (the "HSR Act"), and
the rules and regulations
thereunder, which provide that
certain transactions may not be
consummated until required
information and material have
been furnished to the Antitrust
Division of the Department of
Justice (the "Justice
Department") and the Federal
Trade
-8-
Commission (the "FTC")
and certain waiting periods
have expired or been
terminated. General Signal and
Data Switch filed the required
information and material with
the Justice Department and the
FTC on May 18, 1995 and the
waiting period terminated on
June 2, 1995. See "The
Merger -- Governmental
Regulation."
Accounting Treatment ................ The Merger is expected to
qualify as a
"pooling-of-interests" for
accounting and financial
reporting purposes.
Effective Time of
the Merger ........................ If the Merger Agreement is
approved and adopted by Data
Switch's stockholders and the
other conditions to the Merger
are satisfied or waived, the
Merger will be consummated and
become effective at the time of
filing of, or at such later
time specified in, a
certificate of merger, with the
Secretary of State of the State
of Delaware in accordance with
the provisions of Section 252
of the DGCL (the date and time
of such effectiveness being the
"Effective Time"). Assuming
all other conditions of the
Merger are satisfied or waived,
the Merger is expected to
become effective as promptly as
practicable after obtaining the
necessary approval of Data
Switch's stockholders. See
"The Merger Agreement."
Conditions to the Merger;
Termination ....................... The obligations of General
Signal and Data Switch to
effect the Merger are subject
to the
-9-
satisfaction or waiver
of certain conditions set forth
in the Merger Agreement,
including, among other things,
that General Signal and Data
Switch shall have received a
letter from Cahill Gordon &
Reindel that, in their opinion,
for federal income tax
purposes, the Merger will be
treated as a tax-free
reorganization. See "The
Merger Agreement --
Conditions." The Merger
Agreement may be terminated
(i) by mutual consent of
General Signal and Data Switch,
(ii) by either party if the
Merger is not consummated on or
before December 31, 1995,
(iii) by either party if any
court of competent jurisdiction
in the United States or other
governmental body in the United
States shall have issued an
order (other than a temporary
restraining order), decree or
ruling or taken any other
action restraining, enjoining
or otherwise prohibiting the
Merger, (iv) by either party if
the requisite stockholder
approval of Data Switch has not
been obtained at the Special
Meeting and (v) in certain
other situations. See "The
Merger Agreement -- Termina-
tion."
Termination Fees
and Expenses ...................... Under certain circumstances, if
the Merger Agreement is
terminated, General Signal may
be entitled to receive a
termination fee of $2.4 million
and the payment of up to $1.5
million for fees and expenses
relating to the transaction.
-10-
See "The Merger -- Possible
Effect of Merger Termination
and Fee on Other Bids; The
Merger Agreement -- Termination
Fees and Expenses."
Appraisal Rights .................... Holders of Data Switch Common
Stock do not have statutory
appraisal rights. See "The
Merger Agreement -- Appraisal
Rights."
Certain Federal
Income Tax Consequences ........... It is expected that the Merger
will qualify as a tax-free
reorganization for federal
income tax purposes.
Accordingly, no gain or loss
should be recognized by holders
of Data Switch Common Stock
upon receipt of shares of
General Signal Common Stock in
the Merger in exchange for such
Data Switch Common Stock
(receipt of cash in lieu of a
fractional interest in General
Signal Common Stock will,
however, be taxable). See
"Certain Tax Consequences."
Data Switch stockholders are
urged to consult their own tax
advisors as to the specific tax
consequences to them of the
Merger.
Comparative Rights
of Stockholders ................... For a comparison of New York
and Delaware laws and of the
respective certificates of
incorporation and by-laws of
General Signal and of Data
Switch governing the rights of
General Signal stockholders and
Data Switch stockholders,
-11-
respectively, see "Comparative
Rights of Stockholders."
________________
-12-
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
OF GENERAL SIGNAL CORPORATION
The following selected financial information of General
Signal for each of the years ended December 31, 1994, 1993,
1992, 1991 and 1990 has been derived from General Signal's
audited financial statements contained in its Annual Reports on
Form 10-K for the years then ended and is qualified in its
entirety by such documents. The selected financial information
of General Signal as of and for the six months ended June 30,
1995 and 1994 has been derived from unaudited consolidated
financial statements which, in the opinion of management,
include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such
information for the unaudited interim periods. The operating
results for the six months ended June 30, 1995 are not
necessarily indicative of results for the full year. This
information should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and the
Notes thereto incorporated by reference into this Prospectus/
Proxy Statement.
-13-
Six Months Ended
June 30, Year Ended December 31,
--------------------- --------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
(In millions, except per share data)
Summary of Operations:
Net sales ................. $852.4 $721.1 $1,527.7 $1,354.2 $1,477.8 $1,424.1 $1,497.3
Cost of sales ............. 590.9 512.1 1,109.5 959.0 1,070.2 1,015.7 1,061.8
Selling, general and
administrative expenses.. 147.4 131.4 292.3 259.3 287.7 282.7 304.9
Transaction and
consolidation charge..... -- -- -- 13.2(b) -- -- --
Acquisition of businesses
and special items ....... 7.4 -- (46.2)(a) (33.0)(c) 85.6(d) -- 83.3(e)
------ ------ -------- -------- -------- -------- --------
Total operating costs and
expenses ................ 745.5 643.5 1,355.6 1,198.5 1,443.5 1,298.4 1,450.0
------ ------ -------- -------- -------- -------- --------
Operating earnings ........ 86.9 77.6 172.1 155.7 34.3 125.7 47.3
Interest expense, net ..... (8.9) (5.7) (11.8) (16.6) (24.8) (28.3) (31.8)
------ ------ -------- -------- -------- -------- --------
Earnings (loss) from
continuing operations
before income taxes ..... 78.0 71.9 160.3 139.1 9.5 97.4 15.5
Income taxes .............. 27.3 24.4 56.2 41.0 3.2 28.2 7.3
------ ------ -------- -------- -------- -------- --------
Earnings (loss) from
continuing operations ... 50.7 47.5 104.1 98.1 6.3 69.2 8.2
Discontinued operations ... (49.6)(g) 2.1(f) (23.4)(f)(g) (31.5)(f) 6.1(f) (15.0)(f)(g) (41.1)(f)(g)
Extraordinary charge, net
of taxes................. -- -- -- (6.6)(h) (0.3)(h) -- --
Cumulative effect of
accounting changes ...... -- -- -- (25.3)(i) (92.4)(j) -- --
------ ------ -------- -------- -------- -------- --------
Net earnings (loss) ....... $1.1 $49.6 $80.7 $34.7 $(80.3) $54.2 $(32.9)
-14-
Six Months Ended
June 30, Year Ended December 31,
-------------------- ----------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
(In millions, except per share data)
Earnings (loss) per share
of common stock
Continuing operations ........ $1.07 $1.00 $2.20 $2.17 $0.15 $1.80 $0.21
Discontinued operations ...... (1.05) 0.05 (0.49) (0.70) 0.15 (0.40) (1.07)
Extraordinary charge ......... -- -- -- (0.14) (0.01) -- --
Cumulative effect of
accounting changes ......... -- -- -- (0.56) (2.21) -- --
------ ----- ----- ----- ------- ----- ------
Net earnings (loss) .......... $0.02 $1.05 $1.71 $0.77 $(1.92) $1.40 $(0.86)
------ ----- ----- ----- ------- ----- ------
Cash dividends per share ....... $0.48 $0.45 $0.90 $0.90 $0.90 $0.90 $0.90
Average common shares
outstanding .................. 47.3 47.4 47.3 45.2 41.8 38.6 38.4
-15-
June 30, December 31,
--------- ---------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
(In millions, except per share data)
Summary of Financial Position
-----------------------------
(at end of period):
-------------------
Working capital ................... $388.0 $360.1 $268.8 $347.8 $243.9 $310.6
Property, plant and
equipment, net .................. 298.8 280.5 263.4 246.9 263.7 283.0
Total assets ...................... 1,549.8 1,342.6 1,224.9 1,258.4 1,180.2 1,294.6
Total long-term liabilities ....... 658.2 437.6 373.9 537.7 345.7 440.8
Shareholders' equity .............. 533.6 547.9 525.2 374.8 476.4 450.3
_____________________________
-16-
(a) Includes $55.2 million of proceeds from the break-up of the merger with Reliance Electric Company, partially
offset by related transaction costs of $9.0 million.
(b) Represents a transaction and consolidation charge of $13.2 million for the acquisition of Revco Scientific, Inc.
(c) Represents credits of $53.2 million for the reversal of excess semiconductor equipment operations reserves,
partially offset by $15.0 million provided for factory consolidation and rearrangement, reorganization of
lines of distribution and administration, and product realignment, and $5.2 million for other previously
divested operations.
(d) Represents an $85.6 million charge ($58.2 million, net of related income tax benefits) in the fourth quarter
of 1992 related to the divestiture of the semiconductor equipment operations.
(e) Represents a $76.0 million charge related to the disposal of certain semiconductor units and a $7.3 million
charge related to the reduction of operation capacity, employment and product lines at various General Signal
locations.
(f) Represents the income (loss) from operations of General Signal's discontinued businesses.
(g) Represents net of tax charges for the disposal of General Signal's discontinued businesses.
(h) Represents charges for early extinguishment of debt.
(i) A non-cash charge of $25.3 million was incurred in 1993 as a result of the adoption by General Signal of new
accounting standards for post-employment benefits (FAS 112).
(j) A non-cash charge of $92.4 million was incurred in 1992 as a result of adoption by General Signal of new
accounting standards for post-retirement benefits other than pensions (FAS 106) and income taxes (FAS 109).
-17-
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF DATA SWITCH
The following selected financial information of Data
Switch for each of the years ended December 31, 1994, 1993,
1992, 1991 and 1990 has been derived from Data Switch's audited
financial statements contained in its Annual Reports on
Form 10-K for the years then ended and is qualified in its
entirety by such documents. The selected financial information
of Data Switch as of and for the six months ended June 30, 1995
and 1994 has been derived from unaudited consolidated financial
statements which, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such information for the
unaudited interim periods. The operating results for the six
months ended June 30, 1995 are not necessarily indicative of
results for the full year. This information should be read in
conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the
Consolidated Financial Statements and the Notes thereto
incorporated by reference into this Prospectus/Proxy Statement.
-18-
Six Months Ended
June 30, Year Ended December 31,
----------------- ---------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
(in millions, except per share data)
STATEMENT OF OPERATIONS DATA
Revenues, net $48.1 $43.4 $90.6 $95.1 $84.0 $103.0 $121.8
Cost of revenues 27.1 24.0 49.6 55.0 42.7 52.1 59.4
------ ------ ------ ------ ------ ------ ------
Gross profit 21.0 19.4 41.0 40.1 41.3 50.9 62.4
Selling, general and
administrative 12.1 12.0 24.6 25.0 26.7 32.8 34.1
Engineering and development 4.9 5.6 10.5 13.0 12.7 11.7 11.9
Restructuring charge - - - 1.8(a) - - -
Relocation expense 0.4 - - - - - -
Goodwill amortization and
write-down 0.1 0.1 0.2 0.2 0.2 34.5(b) 2.9
------ ------ ------ ------ ------ ------ ------
Income (loss) from operations 3.5 1.7 5.7 0.1 1.7 (28.1) 13.5
Other expense (0.7) (0.8) (1.7) (2.2) (2.9) (3.8) (5.3)
------ ------ ------ ------ ------ ------ ------
Income (loss) before income taxes 2.8 0.9 4.0 (2.1) (1.2) (31.9) 8.2
Provision for (benefit from)
income taxes 1.0 0.3 1.4 (0.1) (0.2) 0.9 4.9
------ ------ ------ ------ ------ ------ ------
Income (loss) before
extraordinary gain 1.8 0.6 2.6 (2.0) (1.0) (32.8) 3.3
Extraordinary gain 0.1 - - - - 0.4(c) 2.8(c)
------ ------ ------ ------ ------ ------ ------
Net income (loss) $1.9 $0.6 $2.6 ($2.0) ($1.0) ($32.4) $6.1
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Income (loss) before extraordinary
gain per common share $0.14 $0.05 $0.21 ($0.16) ($0.08) ($2.76) $0.28
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Net income (loss) per common share $0.15 $0.05 $0.21 ($0.16) ($0.08) ($2.73) $0.52
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Cash dividends per share - - - - - - -
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Weighted average number of common
shares outstanding 12,801 12,325 12,358 12,120 11,993 11,892 11,693
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
-19-
As of June 30, 1995 Year Ended December 31,
------------------- --------------------------------------------------------------
1994 1993 1992 1991 1990
(in millions, except per share data)
BALANCE SHEET DATA
------------------
Working capital $32.2 $28.6 $34.0 $27.8 $40.8 $41.2
Total assets 61.1 57.7 60.1 56.8 68.7 104.9
Short-term debt and current
portion of long-term debt and
capital lease obligations 2.1 1.8 0.2 1.1 1.8 0.7
Capital lease obligations,
less current portion 0.6 0.5 0.7 0.6 0.6 0.4
Long-term debt, less current portion 20.9 19.6 25.5 19.5 30.6 34.0
Redeemable warrants - - 0.9 0.8 0.7 0.6
Total shareholders' equity 24.7 22.6 19.7 21.5 22.7 55.0
(a) Represents severance and related expenses in connection with a
workforce reduction of approximately 10% that commenced in the fourth
quarter of 1993.
(b) Includes a charge of $33.0 million related to the write down of
goodwill associated with the T-Bar purchase to estimated recoverable
value and write off of goodwill associated with the purchase of a minority
interest in Intellinet Corporation.
(c) Net gain from exchange of convertible debentures in 1990 and from
repurchases of debt in 1991 and 1990.
-20-
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The selected pro forma financial information of
General Signal and Data Switch is derived from the pro forma
combined condensed financial statements and should be read in
conjunction with such pro forma financial statements and notes
thereto. Historical and pro forma information for certain
periods is derived from financial statements for certain
periods that are not included herein. For pro forma purposes,
General Signal's consolidated financial statements for the six-
month periods ended June 30, 1995 and 1994 and for each of the
five years ended December 31, 1994 have been combined with the
financial statements of Data Switch for such periods giving
effect to the proposed transaction under the pooling-of-
interests method of accounting.
The pro forma information is presented for
comparative purposes only and does not purport to be indicative
of the operating results or financial position that would have
resulted if the Merger had been consummated, nor is it
necessarily indicative of future operating results or financial
position.
-21-
Six Months Ended
June 30, Year Ended December 31,
-------------------- ----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
(In millions, except per share data)
Pro Forma - General Signal
and Data Switch:
Operating Earnings .............. $87.9 $84.9 $178.0 $155.7 $35.7 $97.5 $60.7
Earnings from Continuing
Operations .................... 52.5 48.1 106.7 96.1 5.3 36.4 11.5
Net Earnings .................... (4.2) 49.5 83.3 32.7 (81.3) 21.8 (26.8)
Earnings per Share from
Continuing Operations ......... 1.07 0.98 2.18 2.05 0.12 0.90 0.29
Weighted Average Common Stock
and Equivalent Common
Stock ......................... 49.0 49.1 49.0 46.9 43.5 40.3 40.1
Total Assets at End of
Period ........................ 1,605.8 1,358.0 1,400.3 1,285.2 1,315.2 1,248.9 1,399.5
Long-term Obligations............ 679.9 442.8 457.7 400.1 557.9 376.9 475.2
Shareholders' Equity at
End of Period ................. 546.9 576.3 570.5 544.9 396.3 499.1 505.3
Dividends per Share ............. 0.48 0.45 0.90 0.90 0.90 0.90 0.90
-22-
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical and
pro forma combined per share data giving effect to the Merger
on a pooling-of-interest accounting basis as described more
fully in the notes to the unaudited combined condensed pro
forma financial statements. The data should be read in
conjunction with the selected historical and pro forma
financial data, the pro forma financial data, the pro forma
combined condensed financial statements and the separate
historical consolidated financial statements of General Signal
and Data Switch and notes thereto, incorporated into this
Prospectus/Proxy Statement. The unaudited pro forma combined
financial data are not necessarily indicative of the operating
results that would have been achieved had the transaction been
in effect at the beginning of the periods presented and should
not be considered indicative of future operations.
Equivalent pro forma combined Data Switch per share
amounts are calculated by multiplying the pro forma earnings
per share of General Signal Common Stock from continuing
operations, pro forma book value per share of General Signal
Common Stock, and historical dividends per share of General
Signal Common Stock by an assumed exchange ratio so that the
per share amounts are equated to the comparative values for
each share of Data Switch Common Stock. The assumed exchange
ratio used in the following table is 0.12133, which would be
the exchange ratio if the Average Market Value (as hereinafter
defined) of General Signal Common Stock were $37.50. The
actual exchange ratio can range from 0.10581 to 0.14677
(reflecting an Average Market Value ranging from $43 to $31 per
share of General Signal Common Stock). During the last thirty
trading days ended September __, 1995, the price of General
Signal Common Stock has ranged from __________ to __________.
-23-
Six Months Year Ended
Ended June 30, December 31,
--------------------- -----------------------------------
1995 1994 1994 1993 1992
-------- ------- ------ ----- -------
Historical per General Signal Share:
Earnings from Continuing Operations .... $1.07 $1.00 $2.20 $2.17 $0.15
Dividends .............................. 0.48 0.45 0.90 0.90 0.90
Book Value ............................. 11.23 11.64
Historical per Data Switch Share:
Earnings from Continuing Operations .... 0.14 0.05 0.21 (0.16) (0.08)
Dividends .............................. -- -- -- -- --
Book Value ............................. 1.97 1.82
Pro Forma Combined per General
Signal Share:
Earnings from Continuing
Operations (a) ....................... 1.07 0.98 2.18 2.05 0.12
Dividends .............................. 0.48 0.45 0.90 0.90 0.90
Book Value (a) ......................... 11.15 11.69
Pro Forma Combined per Data
Switch Share:
Earnings from Continuing Operations .... 0.13 0.12 0.26 0.25 0.01
Dividends .............................. 0.06 0.05 0.11 0.11 0.11
Book Value ............................. 1.35 1.42
Pro Forma Combined per General
------------------------------
Signal Share assuming minimum and
---------------------------------
maximum exchange ratios (b):
---------------------------
Earnings from Continuing Operations .... 1.06-1.08 0.97-0.98 2.16-2.19 2.04-2.06 0.12-0.12
Dividends .............................. 0.48 0.45 0.90 0.90 0.90
Book Value ............................. 11.05-11.16 11.62-11.74
-24-
Pro Forma Combined per Data
---------------------------
Switch Share assuming minimum and
---------------------------------
maximum exchange ratios (b):
---------------------------
Earnings from Continuing Operations..... 0.11-0.16 0.10-0.14 0.23-0.32 0.22-0.30 0.01-0.02
Dividends .............................. 0.05-0.07 0.05-0.07 0.10-0.13 0.10-0.13 0.10-0.13
Book Value ............................. 1.17-1.64 1.23-1.72
(a) Based on the aggregate of (1) historical General Signal weighted
average shares outstanding and (2) 0.12133 times
the historical Data Switch weighted average shares outstanding.
(b) Reflects minimum and maximum exchange ratios ranging from 0.10581
to 0.14677.
-25-
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
General Signal and Data Switch Common Stock Price Range and
Dividends
The General Signal Common Stock is listed for trading
on the NYSE and the PSE under the symbol GSX. The Data Switch
Common Stock is quoted on the Nasdaq National Market System
under the symbol DASW. The following table sets forth the high
and low sale prices of the General Signal Common Stock as
reported on the NYSE Composite Tape and the Data Switch Common
Stock as reported on NASDAQ for the periods indicated.
General
Signal Data Switch
High Low High Low
1992
First Quarter........................31 25 7/8 3 3/8 1 3/4
Second Quarter.......................32 5/8 28 5/8 2 1/2 7/8
Third Quarter........................29 7/8 26 7/8 2 3/8 1 5/16
Fourth Quarter.......................30 7/8 26 1/2 2 7/8 1 5/8
1993
First Quarter........................31 7/8 30 1/8 4 5/8 2 3/16
Second Quarter.......................33 7/8 30 1/16 4 1/4 2 5/8
Third Quarter........................33 7/8 30 1/2 3 3/8 1 7/8
Fourth Quarter.......................37 7/8 31 1/2 2 3/4 1 1/2
1994
First Quarter........................38 32 1/2 3 1 1/2
Second Quarter.......................34 5/8 30 1/8 2 15/16 2
Third Quarter........................37 1/2 32 1/4 2 5/8 2 1/8
Fourth Quarter.......................37 1/4 31 3 2 1/8
1995
First Quarter........................36 5/8 31 4 1/8 3
Second Quarter ......................40 35 1/8 4 3/8 2 13/16
Third Quarter to
September __, 1995.................
The market value of General Signal Common Stock
received for each share of Data Switch Common Stock is $4.55,
calculated as set forth in the Merger Agreement. See "The
Merger -- Merger Terms; Average Market Value."
On May 5, 1995, the last full day of trading prior to
the announcement of the Merger, the last reported sale prices
-26-
for the Data Switch Common Stock on NASDAQ and for the General
Signal Common Stock on the NYSE Composite Tape were $3.75 and
$37.50, respectively.
On September__, 1995, the last reported sale prices
for the Data Switch Common Stock on NASDAQ and for the General
Signal Common Stock on the NYSE Composite Tape were $______ and
$______, respectively.
General Signal has paid cash dividends of $.90 per
share each year from 1985 through, and including, 1994. In the
first quarter of 1995, General Signal increased its dividend to
$.96 per share. Although it is General Signal's present
intention to continue to pay regular dividends, the payment of
dividends in the future is subject to the discretion of General
Signal's Board of Directors, which may consider such factors as
General Signal's earnings and financial condition and other
factors which it deems relevant. Data Switch has never paid a
cash dividend to its stockholders.
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INTRODUCTION
This Prospectus/Proxy Statement constitutes the proxy
statement of Data Switch relating to the solicitation of
proxies from Data Switch's stockholders by the Board of
Directors of Data Switch for use at the Special Meeting and any
adjournment or postponement thereof. This Prospectus/Proxy
Statement also constitutes the prospectus of General Signal
filed with the Commission as part of the Registration Statement
under the Securities Act relating to the General Signal Common
Stock to be issued to stockholders of Data Switch upon the
consummation of the Merger.
THE COMPANIES
General Signal Corporation
General Signal Corporation, incorporated in New York
in 1904, designs, manufactures and sells equipment and
instruments for the process control, electrical, automotive,
mass transportation and telecommunications industries. General
Signal serves these markets through three product sectors:
(i) Process Controls, (ii) Electrical Controls, and
(iii) Industrial Technology. The Telenex unit of General
Signal, a part of the Industrial Technology sector, designs,
develops, manufactures, sells and services network connectivity
control and management systems; cable management and building
wiring systems; and network diagnostics and analysis tools.
General Signal's corporate strategy is to develop its current
three product sectors and their related core businesses through
internal growth, expansion into international markets and the
acquisition of businesses which extend the product lines of
General Signal's current operations. General Signal seeks to
achieve a critical mass of sales in each of its operating units
to allow each business unit to compete effectively on a global
basis.
Data Switch Corporation
Data Switch Corporation, incorporated in Delaware in
1977, designs, develops, manufactures, markets and services
products for large scale data center networks. Product
categories include fiber-based systems for connecting fiber
processors and peripherals, channel networking systems for
connecting channel-attached devices and processors over
extended distances, communication systems for connecting users
onto the networks entering a data center and channel switches
for
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connecting legacy channels to peripherals. The Company's
products are intended to facilitate the flow of data through
complex information processing resources, such as airline
reservation systems, financial networks and common carrier
networks.
THE SPECIAL MEETING
Date, Time and Place
The Special Meeting will be held on October __, 1995 at
_____, local time, at ___________________________.
Purpose of Special Meeting
At the Special Meeting, Data Switch stockholders of
record on the Record Date will be asked to consider and vote on
a proposal to approve the Merger Agreement pursuant to which,
upon the terms and subject to the conditions thereof, Merger
Sub will be merged with and into Data Switch; Data Switch, as
the Surviving Corporation, will become a wholly-owned
subsidiary of General Signal; and each share of Data Switch
Common Stock issued and outstanding at the Effective Time will
be converted into the right to receive the fraction of a share
of General Signal Common Stock determined by dividing $4.55 by
the Average Market Value (as hereinafter defined) of General
Signal Common Stock. See "The Merger Agreement." No
fractional General Signal Common Stock will be issued in the
Merger. Data Switch stockholders will receive cash in lieu of
fractional shares. The Special Meeting will also transact such
other business, if any, as may properly come before the Special
Meeting.
THE BOARD OF DIRECTORS OF DATA SWITCH HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT
ALL SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
Record Date; Voting Rights; Proxies
The Board of Directors of Data Switch has fixed the
close of business on September 18, 1995 as the Record Date for
the determination of stockholders entitled to notice of and to
vote at the Special Meeting. Only holders of record of Data
Switch Common Stock at the close of business on the Record Date
will be entitled to notice of and to vote at the Special
Meeting or any adjournment or postponement thereof. Each
shareholder is entitled to one vote per share held of record on
the Record Date. Data Switch stockholders are entitled to cast
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their votes at the Special Meeting in person or by properly
executed proxies. Data Switch Common Stock represented by
properly executed proxies received at or prior to the Special
Meeting will, unless such proxies have been previously revoked,
be voted in accordance with the instructions indicated in such
proxies. If no instructions are indicated, such shares will be
voted FOR approval of the Merger Agreement, and, at the
discretion of the proxy holder, as to any other matter which
may properly come before the Special Meeting. Abstentions and
broker non-votes will have the same effect as votes against
approval of the Merger Agreement. A shareholder who has given
a proxy may revoke it at any time prior to its exercise by
giving written notice thereof to the Secretary of Data Switch,
by signing and returning a later dated proxy, or by voting in
person at the Special Meeting; however, mere attendance at the
Special Meeting will not itself have the effect of revoking the
proxy.
Required Vote
As of June 30, 1995 there were 12,524,400 shares of
Data Switch Common Stock outstanding, held by approximately
2,300 holders of record. The DGCL requires the affirmative
vote of the holders of a majority of the outstanding Data
Switch Common Stock to approve the Merger Agreement. Each of
the directors and executive officers of Data Switch has advised
Data Switch that he or she intends to vote or direct the vote
of all shares of Data Switch Common Stock over which he or she
has voting control in favor of approval and adoption of the
Merger Agreement. As of June 30, 1995, such directors and
executive officers of Data Switch were entitled to vote or
direct the voting of an aggregate of 194,441, or approximately
1.6%, of the outstanding shares of Data Switch Common Stock.
In connection with the execution of the Merger
Agreement and to facilitate the consummation of the Merger,
General Signal entered into a letter agreement with Richard E.
Greene, pursuant to which Mr. Greene agreed to vote the
2,041,275 shares of Data Switch Common Stock which he holds,
beneficially or of record (representing approximately 16% of
Data Switch Common Stock outstanding as of June 30, 1995), and
any shares of Data Switch Common Stock he may acquire after May
8, 1995 in favor of approval of the Merger Agreement, the
Merger and the other transactions contemplated thereby. Mr.
Greene has also granted General Signal an irrevocable proxy,
which shall remain in effect until December 31, 1995, to vote
such shares and any
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shares of Data Switch Common Stock acquired after May 8, 1995,
as specified above.
Proxy Solicitation
Data Switch will pay for cost of solicitation of
proxies on behalf of the Board of Directors of Data Switch,
except that expenses incurred in printing, mailing and filing
this Prospectus/Proxy Statement will be shared equally by
General Signal and Data Switch. In addition to soliciting
proxies by mail, directors, officers and employees of Data
Switch may solicit proxies in person or by telephone, telecopy,
telegram or other means of communication. Arrangements will
also be made with brokerage firms and other custodians,
nominees and fiduciaries for the forwarding of proxy
solicitation material to beneficial owners of shares of Data
Switch Common Stock held of record by such persons, and Data
Switch may reimburse such custodians, nominees and fiduciaries
for reasonable expenses incurred in connection therewith. Data
Switch has retained a proxy solicitor at an estimated cost not
to exceed $5,000, plus reimbursement of expenses, to assist in
its solicitation of proxies from stockholders.
THE MERGER
Background of the Merger
The Data Switch Perspective. From its inception in
1977, Data Switch has designed, manufactured, marketed and
serviced switching systems for large scale, high-speed data
networks. From a base of products for data processing systems,
Data Switch expanded into communications networks, channel
access and protocol conversion systems and fiber optic cabling
systems.
IBM's introduction of fiber based (ESCON) technology
in September, 1990 opened new avenues of opportunity for Data
Switch, which has since expended a significant portion of its
research and development resources in exploring a broad array
of products which enable users to make the transition from
copper-based (Bus and Tag) to ESCON technology. As early as
late 1992, Data Switch recognized that these opportunities
would be significantly enhanced if the interests of Data Switch
could be combined with a strong partner. Since that time, Data
Switch has developed a number of strategic alliances with other
entities in the computer and communications industry, but
without any provision for a capital infusion. General Signal
was
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one of several companies with which Data Switch explored
possibilities for a strategic alliance in late spring and
ending in early summer of 1994. Thereafter, Data Switch
expected to fashion its business plans based on continuing as
an independent, stand-alone entity, although one with loose
ties to various other entities.
On or about March 17, 1995, General Signal initiated
discussions with Data Switch, and such discussions proceeded
through a series of intensive meetings in April of 1995 leading
up to the Merger Agreement of May 8, 1995. Throughout the
process Data Switch, represented by its financial advisor,
Needham, continued to weigh the benefits and risks of
alternative actions. The principal benefit of rejection of the
Merger Agreement discussed by the Board of Directors was the
opportunity for the Company to complete its development of
certain new products as an independent entity with a relatively
small capital base in order to retain the prospective value and
profits of such products for the existing shareholder base.
Management had also discussed alliances with other potential
suitors. No such suitor made any offer, bid or suggestion
concerning any merger transaction. The Board considered the
possibility that such a transaction might arise in the future.
The principal risks of rejecting the General Signal
merger proposal considered by the Board included potential
failure of and/or delivery delays with respect to the new
products, the adequacy of the Company's capital if new product
development was deferred, market share and competitive product
considerations and uncertainties with respect to prospective
management transitions.
At the time the Merger Agreement was presented to the
Data Switch Board for action on April 27, 1995 and May 5, 1995,
the basic proposal presented was the Merger with General
Signal, or continuation by Data Switch as an independent
entity, with a new President/Chief Executive Officer. The
Board determined that, on balance, the consideration to the
stockholders of the Merger and Merger Agreement was of greater
value than the benefits of remaining as an independent entity
faced with difficult challenges in a competitive marketplace.
See "Data Switch's Reasons for the Merger; Recommendation of
the Board of Directors of Data Switch."
The General Signal Perspective. In March, 1995, the
President of General Signal's Telenex unit and the Chief
Executive Officer of Data Switch began discussions in which
each
-32-
recognized that by merging Data Switch with the Telenex
unit, the combined entity would be able to compete more
effectively and to support extensive international sales
efforts. Both Telenex and Data Switch have focused on
providing products and services to support large data centers
serving banks, credit card operations, airline reservation
systems and similar operations. Telenex has specialized in
products and services employing the communications technology
required by such data centers, while Data Switch products and
services have been directed to the data processing functions of
data center operations. The combined entity will have a
complementary, wide range of products, service skills and
research and development capabilities, to meet all connectivity
and switching requirements of large data centers, domestically
and abroad. Overseas, Telenex has supported distributors in
various countries through direct support centers in Europe and
the Far East. Data Switch has direct sales forces in Germany,
the United Kingdom and Italy. These sales and support entities
can readily be combined with Telenex distribution channels to
accelerate sales growth overseas.
Subsequently, the President of the Telenex unit, the
Chief Executive Officer of Data Switch and the senior executive
officers of General Signal agreed to enter into serious
negotiations regarding such a merger and General Signal
commenced its due diligence review.
The negotiations culminated on May 5, 1995 when the
respective Boards of Directors of General Signal and Data
Switch met and approved the Merger. The Merger Agreement was
executed as of May 8, 1995.
Merger
Following the approval and adoption of the Merger by
the requisite vote of the stockholders of Data Switch and the
satisfaction or waiver of the other conditions to the Merger,
General Signal Acquisition Corporation ("Merger Sub") will be
merged with and into Data Switch, with Data Switch continuing
as the Surviving Corporation and as a wholly owned subsidiary
of General Signal. The Merger will become effective upon the
filing with the Secretary of State of the State of Delaware a
duly executed certificate of merger (the "Certificate of
Merger"), in the form required by and in accordance with the
DGCL, or at such time thereafter as is provided in the
Certificate of Merger.
-33-
Merger Terms; Average Market Value
As of the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof:
(i) each share of Data Switch Common Stock issued and
outstanding immediately prior to the Effective Time (except for
shares owned by Data Switch or any of its subsidiaries) shall
be converted into the right to receive the fraction of a share
(the "Exchange Ratio") of General Signal Common Stock
determined by dividing $4.55 by the Average Market Value (as
hereinafter defined); provided, however, that the Exchange
Ratio shall be calculated to five decimal places and shall in
no event be greater than 0.14677 of a share of General Signal
Common Stock or less than 0.10581 of a share of General Signal
Common Stock. Holders of Data Switch Common Stock shall also
have the right to receive together with each share of General
Signal Common Stock issued in the Merger, an associated common
stock purchase right ("General Signal Purchase Right") pursuant
to the Rights Agreement dated as of March 7, 1986, as amended,
between General Signal and the Rights Agent named therein. All
shares of Data Switch Common Stock shall automatically be
cancelled as a result of the consummation of the Merger at the
Effective Time. References herein to the Data Switch Common
Stock being converted in the Merger shall be deemed to include
the associated Data Switch Purchase Rights (as hereinafter
defined) and the General Signal Common Stock issuable in the
Merger shall be deemed to include the associated General Signal
Purchase Rights.
The shares of General Signal Common Stock and General
Signal Purchase Rights to be delivered by General Signal in
exchange for shares of Data Switch Common Stock are hereinafter
sometimes called the "Closing Consideration." "Average Market
Value" means the arithmetic average of the closing price per
share of General Signal Common Stock as reported on the New
York Stock Exchange (the "NYSE") composite tape for the thirty
(30) consecutive trading days ending with the last trading day
prior to the scheduled date of the Special Meeting specified in
this Prospectus/Proxy Statement. In the event of any change in
General Signal Common Stock or Data Switch Common Stock by
reason of any stock split, readjustment, stock dividend,
exchange of shares, reclassification, recapitalization or
otherwise, the Exchange Ratio shall be correspondingly
adjusted.
- 34-
Data Switch's Reasons for the Merger; Recommendation of the
Board of Directors of Data Switch
The Board of Directors of Data Switch unanimously
believes that the Merger and the Merger Agreement are fair to,
and in the best interests of, Data Switch and its stockholders,
and accordingly recommends a vote FOR approval of the Merger
and Merger Agreement.
In making its determination, prior to entering into
the Merger Agreement, the Board of Directors and Data Switch
considered (i) the historical financial results of Data Switch
and General Signal; (ii) the prospects for and the risks
involved in Data Switch's traditional products, including data
processing and communications switching systems, high
performance computer networking systems, and channel access
systems; (iii) the prospects for and risks involved in Data
Switch's recently introduced and potential products, including
ESCON (fiber based) directors, fiber management systems for the
data center, wide area channel extension for ESCON, and
switching solutions for developing technologies, including
Fiber Distributed Data Interface, Asynchronous Transfer Mode
and Synchronous Optical Network; (iv) trends in the industry to
form strategic alliances among joint development, service and
support and distribution partners; (v) recent developments in
the computer and communications networking markets resulting in
the elimination, by purchase or combination, of other small and
limited product offering entities; (vi) the benefits to Data
Switch of becoming a part of the General Signal organization
with its greater financial resources and potentially
synergistic operations; (vii) the operating benefits to be
gained by a combination of Data Switch operations with those of
the Telenex unit of General Signal; (viii) recent market prices
for the Common Stock of Data Switch and the Common Stock of
General Signal; (ix) the amount of consideration to be received
by Stockholders of Data Switch in the Merger; and (x) the
opinion of Data Switch's financial advisor that the
consideration to be received in the Merger is fair, from a
financial point of view, to the stockholders of Data Switch.
Each of the foregoing considerations supported the Board's
determination to recommend a vote FOR approval of the Merger.
The Board also considered the option of remaining
independent, and determined that the risks and challenges of
remaining independent outweighed the potential benefits of such
a course in the face of the opportunity to merge Data Switch
with General Signal. As an independent entity, Data Switch
-35-
would continue to confront alone the significant challenges in
the networking industry resulting from the fact that a large
number of its competitors have substantially greater financial
and manpower resources than Data Switch, increased
consolidations among and between other participants, declining
revenues from its mature products, and risks to the development
and acceptance of its newer products. The Data Switch Board
also considered potential impediments to the achievement of its
1995 operating plan, including the need to accelerate the
introduction of new products and to increase the proportion of
revenues and gross profits being derived from newer products.
The Company's products operate in the heart of data centers in
which the customer's capacity for down-time is near zero. Data
Switch also recognized that the increasing focus on the high-
growth LAN/WAN switching and ATM markets is likely to mandate
significant future investments in research and development.
During 1994, Data Switch's research and development
expenditures, as a fraction of revenues, was 11.6%. Finally,
when Mr. William J. Lifka undertook in early 1994 to serve as
interim Chairman and Chief Executive Officer, it was on the
express understanding that a fully qualified new President/CEO
would be promptly sought and hired by the Company. Data Switch
was on the verge of hiring an individual whom it believed to be
fully competent for the tasks. However, in considering the
General Signal merger proposal the Board determined that the
uncertainties involved in the transition to any new leader of a
complex enterprise were a risk factor to any decision to remain
independent under all of the circumstances presented.
Based on all of the foregoing factors, the Data
Switch Board unanimously recommends a vote FOR the Merger and
Merger Agreement.
Opinion of Data Switch's Financial Advisor
Pursuant to an engagement letter dated July 6, 1994,
Data Switch retained Needham to furnish financial advisory and
investment banking services with respect to a possible merger
and to render an opinion as to the fairness, from a financial
point of view, to the Data Switch stockholders, of the
consideration offered in any proposed merger. The amount of
consideration to be exchanged in the Merger was determined
through negotiations between Data Switch management and General
Signal management and not by Needham, although Needham did
assist Data Switch management in certain of these negotiations
by facilitating discussions between the parties directly and
indirectly; by initiating contacts with third parties to help
management
-36-
gauge the relative range of receptivity in the event
that the Company were made available for sale generally, and
not as part of a negotiated merger transaction; and by locating
and analyzing comparable transactions in the computer and
communications industries for the purpose of helping management
consider the value of the General Signal merger proposal.
At a meeting of the Board of Directors of Data Switch
on April 27, 1995, Needham delivered its oral opinion that, as
of such date and based upon the matters described therein, the
consideration to be received by the stockholders of Data Switch
in the Merger is fair to the stockholders of Data Switch from a
financial point of view. Needham has subsequently delivered
its written opinion, reaffirming its oral opinion, that as of
the date of this Prospectus/Proxy Statement and based upon the
matters described therein, the consideration to be received by
the stockholders of Data Switch in the Merger is fair to the
stockholders of Data Switch from a financial point of view.
Needham's opinion is directed only to the financial terms of
the Merger Agreement and does not constitute a recommendation
to any stockholder of Data Switch as to how such stockholder
should vote at the Data Switch Special Meeting.
Needham is not expressing any opinion as to what the
value of General Signal Common Stock will be when issued to the
stockholders of Data Switch pursuant to the Merger or the price
at which General Signal Common Stock will trade subsequent to
the Merger. The complete text of the September 5, 1995 opinion
(the "Needham Opinion") is attached to this Prospectus/Proxy
Statement as Annex B, and the summary of the Needham Opinion
set forth in this Prospectus/Proxy Statement is qualified in
its entirety by reference to the Needham Opinion. Data Switch
stockholders are urged to read the Needham Opinion carefully
and in its entirety for a description of the procedures
followed, the factors considered and the assumptions made by
Needham.
In arriving at its opinion, Needham reviewed and
analyzed, among other things, (i) the Merger Agreement; (ii)
certain other documents related to the Merger, including drafts
of the Prospectus/Proxy Statement; (iii) certain publicly
available information concerning Data Switch and General Signal
and certain other relevant financial and operating data of Data
Switch and General Signal made available from the internal
records of Data Switch and General Signal; (iv) the historical
stock prices and trading volumes of Data Switch's and General
Signal's Common Stock; (v) publicly available financial data of
-37-
public companies which it deemed generally comparable to Data
Switch; (vi) the financial terms of certain other business
combinations, which it deemed generally relevant; and
(vii) certain financial forecasts and projections prepared by
Data Switch's and General Signal's respective managements. In
addition, Needham held discussions with certain members of both
Data Switch's and General Signal's senior managements
concerning their current and future business prospects and
participated in the discussions and negotiations among
representatives of Data Switch and General Signal and their
legal advisors and independent auditors. Needham visited the
Data Switch facility in Shelton, Connecticut and performed such
other studies, analyses, inquiries and investigations as it
deemed appropriate. Needham assumed and relied upon, without
independent verification, the accuracy and completeness of the
information it reviewed for purposes of its opinion. With
respect to Data Switch's and General Signal's financial
forecasts provided to Needham by their respective managements,
Needham has assumed that such forecasts have been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of such managements, at the time of
preparation, of the future operating and financial performance
of Data Switch and General Signal. Needham did not make or
obtain any independent evaluation, appraisal or physical
inspection of the assets or liabilities of Data Switch or
General Signal. Needham's opinion stated that it is
necessarily based on economic, monetary and market conditions
existing as of the date of such opinion.
Based on this information, Needham performed a
variety of financial analyses of the Merger and the Merger
consideration. The following paragraphs summarize the
significant quantitative and qualitative analyses performed by
Needham in arriving at its opinion presented to the Data Switch
Board of Directors.
Comparable Company Analysis. Needham compared
---------------------------
selected historical and projected operating and stock market
data and operating and financial ratios for Data Switch to the
corresponding data and ratios of certain other publicly traded
mainframe-related connection companies, which it deemed
generally comparable to Data Switch. Such data and ratios
included total market capitalization to historical and
projected revenue, price per share to historical and projected
earnings per share and market value to historical book value.
Companies deemed to be generally comparable to Data
Switch included Apertus Technologies Incorporated, Computer
-38-
Network Technology Corporation, Dynatech Corporation and
General DataComm Industries. For these companies the multiples
of projected 1996 revenues ranged from 0.4 to 2.1 with a mean
of 1.0 and a median of 0.6, compared to a multiple of projected
1996 revenues for Data Switch of 0.6; the multiples of
projected 1996 net income ranged from 4.6 to 15.3 with a mean
of 10.5 and a median of 10.4, compared to a multiple of
projected 1996 net income for Data Switch of 7.8; and the
multiples of historical book value ranged from 1.6 to 5.8 with
a mean of 2.9 and a median of 1.8, compared to a multiple of
historical book value for Data Switch of 3.1.
Comparable Transaction Analysis. Needham also
-------------------------------
analyzed publicly available financial information for
twenty-six selected mergers and acquisitions of companies in
the computer technology industry. In examining these
transactions, Needham analyzed certain income statement and
balance sheet parameters of the acquired companies relative to
the consideration offered. Multiples analyzed included
consideration offered plus debt assumed to historical revenue,
consideration offered plus debt assumed to historical earnings
before interest and taxes, consideration offered to historical
net income and consideration offered to historical book value.
In certain cases, complete financial data was not publicly
available for these transactions and only partial information
was used in such instances.
Proposed and completed computer technology deals
analyzed by Needham included: Prime Computer, Inc./
Computervision Corporation; Tandem Computers Incorporated/
Ungermann-Bass, Inc.; Anacomp, Inc./Xidex Corporation;
Massachusetts Computer Corporation/Concurrent Computer
Corporation; Unisys Corporation/Convergent, Inc.; STC
PLC/Computer Consoles, Inc.; Olivetti USA, Inc./ISC Systems
Corporation; Novell, Inc./Excelan, Inc.; Hewlett-Packard
Company/Apollo Computer, Inc.; Archive Corporation/Cipher Data
Products, Inc.; HND Corporation/Dataproducts Corporation; Acer
America Corporation/Altos Computer Corporation; American
Telephone & Telegraph Company/NCR Corporation; NCR Corporation/
Teradata Corporation; Conner Peripherals, Inc./ Archive
Corporation; Network Systems Corporation/Bytex Corporation; DCA
Holdings, Inc./Digital Communications Associates; The
MacNeal-Schwendler Corporation/PDA Engineering; Cirrus Logic,
Inc./PicoPower Technology, Inc.; Storage Technology
Corporation/Network Systems Corporation; Raytheon Company/
Xyplex, Inc.; Arrow Electronics, Inc./Anthem Electronics, Inc.;
Avid Technology, Inc./ Digidesign, Inc.; Powersoft Corporation/
Sybase, Inc.; Thomson
-39-
Corporation/MEDSTAT Group, Inc.; and Siemens Nixdorf Information
AG/Pyramid Technology Corporation. For these transactions the multiples
of last twelve months' revenues ranged from 0.4 to 8.9 with a mean of
1.8 and a median of 1.0, compared to Data Switch's multiple of last
twelve months' revenues of 0.8. The multiples of last twelve months'
earnings before interest and taxes ranged from 6.5 to 61.4
with a mean of 19.3 and a median of 18.5, compared to Data
Switch's multiple of last twelve months' earnings before
interest and taxes of 11.9. The multiples of last twelve
months' net income ranged from 3.6 to 263.8 with a mean of 42.8
and a median of 29.7, compared to Data Switch's multiple of
last twelve months' net income of 27.5. The multiples of
historical book value ranged from 0.7 to 7.7 with a mean of 2.7
and a median of 2.4, compared to Data Switch's multiple of
historical book value of 3.1.
Premiums Paid in Mergers. Needham analyzed the
------------------------
premiums paid (for those transactions where premiums were
available) in the twenty-six merger transactions listed. Based
on stock prices four weeks prior to the announcement date,
16.0% of the transactions were for premiums less than or equal
to 40%, 44.0% of the transactions were for premiums greater
than 40% but not more than 60%, and 40.0% of the transactions
were for premiums greater than 60%.
Based on Data Switch's average closing stock price
four weeks prior to the announcement date of the Merger, the
premium for the Merger is 52%, which approximates to the median
for such transactions of 54%.
Stock Trading History. Needham examined the history
---------------------
of trading prices and volumes for Data Switch Common Stock and
General Signal Common Stock, both separately and in relation to
each other, and the relationship between movements of Data
Switch Common Stock and General Signal Common Stock and
movements in composite indices such as the Standard & Poor's
500, Nasdaq Composite and the Dow Jones Industrials.
Analysis of the Company's stock trading history
revealed that Data Switch Common Stock traded in a range of
$2.00 to $4.0625 over the previous year with an average stock
price of $2.67 over this period. The $4.55 per share
consideration to be paid to Data Switch stockholders in the
Merger represents a 70% premium to such average stock price.
Needham's analysis also indicated that, in general, the General
Signal Common Stock traded in line with the Standard & Poors'
500 composite index over the previous year. Needham further
noted
-40-
that the General Signal Common Stock traded at an average
daily volume of 136,066 over the previous year compared with
the average daily volume of the Data Switch Common Stock of
40,487, which implies that the General Signal Common Stock to
be received by Data Switch stockholders in the Merger should be
more liquid than the Data Switch Common Stock.
No company or transaction used in any comparable
analysis as a comparison is identical in the case of Data
Switch. Accordingly, these analyses are not mathematical;
rather they involve complex considerations and judgments
concerning differences in the financial and operating
characteristics of the comparable companies and other factors
that could affect the public trading and acquisition values of
the comparable companies and transactions to which they are
being compared.
The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant
quantitative and qualitative methods of financial analysis and
the application of those methods to the particular
circumstances and, therefore, such an opinion is not really
susceptible to summary description. Accordingly, Needham
believes that its analyses must be considered as a whole and
that considering any portions of such analyses and of the
factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the
process underlying its opinion. In its analyses, Needham made
numerous assumptions with respect to industry performance,
general business and economic and other matters, many of which
are beyond the control of either Data Switch or General Signal.
Any estimates contained in these analyses are not necessarily
indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable as
set forth therein. Additionally, analyses relating to the
values of business or assets do not purport to be appraisals or
necessarily reflect the prices at which businesses or assets
may actually be sold.
Pursuant to its engagement letter, Needham has been
paid a retainer fee of $50,000 and will receive an additional
$100,000 relating to Needham's advisory role; Needham will also
receive an additional transaction fee, due and payable upon the
closing of the Merger, of $350,000 plus an additional $2,000
for every $0.01 that the fair market value of the consideration
per share at the time of the Merger is greater than $3.75,
provided that the total transaction fee does not exceed
$550,000.
-41-
Based on the consideration to be paid in the Merger,
Needham will receive, on consummation of the Merger, a
transaction fee of $510,000. Data Switch has also agreed to
reimburse Needham for its reasonable out-of-pocket expenses and
to indemnify it against certain liabilities relating to or
arising out of services performed by Needham as financial
advisor to Data Switch.
Needham is a nationally recognized investment banking
firm. As part of its investment banking services Needham is
frequently engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of
securities, private placements and other purposes. During the
first five months of 1995, based upon information published by
AutEx, Needham was not a significant market maker for Data
Switch Common Stock. However, in the normal course of its
market-making activities Needham may, from time to time, have a
long or short position in, and buy or sell, Data Switch
securities, which positions, on occasion, may be material in
size relative to the volume of trading activity. Needham was
retained by the Data Switch Board of Directors to act as Data
Switch's financial advisor in connection with the Merger based
on Needham's experience as a financial advisor in mergers and
acquisitions as well as Needham's familiarity with the
mainframe-related connection industry. In the normal course of
its business, Needham may actively trade the equity securities
of General Signal for its own account or for the account of its
customers and, therefore, may at any time hold a long or short
position in such securities. In addition, Needham has
previously provided investment banking services to General
Signal on matters unrelated to the Merger, including acting as
a financial advisor to General Signal in the sale by General
Signal of its Ultratech Stepper subsidiary and as co-manager of
an initial public offering of 6,200,000 shares of common stock
and a subsequent public offering of 2,300,000 shares of common
stock of Electroglas, Inc., a former subsidiary of General
Signal.
Interest of Certain Persons in the Merger
Holdings of Data Switch's Officers and Directors.
-------------------------------------------------
In considering the Merger, stockholders should be aware that Data
Switch's directors and members of Data Switch's management have
interests in the Merger as described below.
Indemnification. Pursuant to the terms of the Merger
Agreement, General Signal shall cause the Surviving Corporation
to indemnify, defend and hold harmless the present and former
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officers and directors of Data Switch against all losses,
claims, damages, expenses or liabilities arising out of actions
or omissions or alleged actions or omissions occurring at or
prior to the Effective Time to the extent permitted or required
under applicable law and Data Switch's Restated Certificate of
Incorporation and By-laws in effect on May 8, 1995 (to the
extent consistent with applicable law).
The Merger Agreement further provides that for a
period of six years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect, subject to
certain limits, the current policies of directors' and
officers' liability insurance maintained by Data Switch
(provided that the Surviving Corporation may substitute
therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous)
with respect to claims arising from facts or events which
occurred before the Effective Time.
Employee Plans and Severance Arrangements. As of
-----------------------------------------
June 30, 1995, the executive officers and directors of Data
Switch (as a group) beneficially owned an aggregate of 194,441
shares of Data Switch Common Stock (excluding shares subject to
outstanding stock options). All such shares will be treated in
the Merger in the same manner as shares of Data Switch Common
Stock held by other stockholders of Data Switch.
As of June 30, 1995, the executive officers of Data
Switch (as a group) also held options to purchase an aggregate
of 348,672 shares of Data Switch Common Stock pursuant to Data
Switch's stock option plans. In addition, as of June 30, 1995,
the non-employee directors of Data Switch (as a group) held
options to purchase an aggregate of 127,500 shares of Data
Switch Common Stock. The treatment of such options is
described under "The Merger Agreement -- Effect on Company
Options." Assuming the Exchange Ratio is 0.12133, based on an
Average Market Value of $37.50 for General Signal Common Stock,
if all such options are exercised for the positive difference
(if any) between the Average Market Value and the exercise
price under the option (after conversion), the aggregate value
of the General Signal Common Stock so acquired by all executive
officers would be $1,586,414 and the aggregate value of the
General Signal Common Stock so acquired by all non-employee
directors would be $580,109.
Data Switch has entered into Executive Severance
Compensation Agreements with its executive officers pursuant to
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which such officers will be entitled to receive payments of six
months' salary, plus up to 50% of such officer's aggregate
total compensation during the five fiscal years preceding the
Merger, if the individual officer's employment with Data Switch
is involuntarily terminated (including a reduction in
compensation or demotion in title) for reasons other than cause
following the Merger, or during the six-month period preceding
the Merger. If all such officers' employment with Data Switch
were terminated, the aggregate payments to such officers under
the Executive Severance Compensation Agreements would
be $3,260,340.37.
Possible Effect of Merger Termination Fee on Other Bids
The Merger Agreement provides that General Signal
will receive a merger termination fee of $2.4 million under
certain circumstances. Specifically, Data Switch will promptly
pay the fee to General Signal if General Signal terminates the
Merger Agreement because Data Switch furnishes or discloses, or
publicly discloses its intention to furnish or disclose,
non-public information to a third party with respect to an
Acquisition Transaction (as defined under "The Merger Agreement
-- No Solicitation"). Further, if the Merger Agreement has not
otherwise been terminated (except by the mutual consent of
General Signal's and Data Switch's Boards of Directors) and if
a person has made a bona fide proposal concerning a Business
Transaction (as defined under "The Merger Agreement --
Termination Fees and Expenses") and Data Switch or any of its
subsidiaries has entered into an agreement to effect, or has
effected, such transaction by May 8, 1996, then Data Switch
will pay to General Signal such merger termination fee
immediately before entering into such agreement or effecting
such transaction. The Merger cancellation fee described above
could have the effect of discouraging a third party from
pursuing a takeover of, or other acquisition transaction
involving, Data Switch or any of its subsidiaries because the
cost of such takeover or other acquisition transaction, if
successful, would be increased by the amount of such fee.
Resales by Affiliates of Data Switch
None of the shares of General Signal Common Stock
received by Data Switch stockholders in connection with the
Merger will be subject to restrictions on transfer under the
Securities Act, except that shares of General Signal Common
Stock received by persons who are deemed to be "affiliates" (as
such term is defined in Rule 144 under the Securities Act) of
Data Switch prior to the Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145(d)
or, in the case of any such persons who become affiliates of
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General Signal, Rule 144 under the Securities Act, or as
otherwise permitted under the Securities Act.
Pursuant to letter agreements dated May 8, 1995, each
of the executive officers and directors of Data Switch
(12 persons), and Richard E. Greene, a founder of, and major
stockholder in, Data Switch, have agreed with General Signal
that they will not sell, transfer or otherwise dispose of any
General Signal Common Stock received by him in the Merger until
after such time as results covering at least 30 days of
combined operations of Data Switch and General Signal have been
published by General Signal, in the form of a quarterly
earnings report, a report to the SEC on Form 10-K, 10-Q or 8-K,
or any other public filing or announcement which includes such
combined results of operations.
Governmental Regulation
Antitrust. Certain acquisition transactions,
including the Merger, may not be consummated until certain
information has been furnished to the Justice Department and
the FTC pursuant to the HSR Act, and certain waiting period
requirements thereunder have been satisfied. General Signal
and Data Switch filed the required information and material
with the Justice Department and the FTC with respect to the
Merger Agreement on May 18, 1995 and the waiting period was
terminated on June 2, 1995. No additional filings are
applicable with respect to the Merger pursuant to the HSR Act
and the rules promulgated thereunder.
At any time before or after the Effective Time, the
Justice Department or the FTC or a private person or entity
could seek under the antitrust laws, among other things, to
enjoin the Merger or to cause the Surviving Corporation to
divest itself, in whole or in part, of businesses presently
conducted by General Signal or Data Switch. There can be no
assurance that a challenge to the Merger will not be made or
that, if such a challenge is made, General Signal and Data
Switch will prevail. The obligations of General Signal and
Data Switch to consummate the Merger are subject to the
condition that there be no preliminary or permanent injunction
or other order by any court or governmental or regulatory
authority of competent jurisdiction prohibiting consummation of
the Merger.
Environmental Matters. Connecticut has enacted
---------------------
environmental statutes governing the change of control of
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facilities located in this state. These statutes apply to the
sale or transfer of stock in a corporation resulting in a
merger. The Connecticut statute requires the owner or operator
of an establishment to submit a negative declaration to the
transferee and a copy of such declaration to the Commissioner
of the Connecticut Department of Environmental Protection (the
"Commissioner"). If the owner or operator is unable to submit
a negative declaration, the transferee or other party must
certify to the Commissioner prior to the transfer that, to the
extent necessary to minimize or mitigate a threat to human
health or the environment, such person shall contain, remove or
otherwise mitigate the effects of any discharge, spillage,
uncontrolled loss, seepage or filtration of hazardous waste
on-site in accordance with procedures and a time schedule
approved by the Commissioner. Approval by the Commissioner of
the procedures and time schedule may occur after the transfer.
Data Switch has agreed to comply with the foregoing
requirements under these transfer laws and to obtain any other
necessary environmental approvals. General Signal does not
anticipate that any environmental requirements will delay the
completion of the Merger.
Accounting Treatment
General Signal will account for the Merger by the
pooling-of-interests method of accounting under GAAP. See
"Unaudited Pro Forma Combined Condensed Financial Statements."
THE MERGER AGREEMENT
General
The following is a brief summary of certain
provisions, including all material terms, of the Merger
Agreement. This summary is qualified in its entirety by
reference to the Merger Agreement, which is attached as Annex A
to this Prospectus/Proxy Statement and is incorporated herein
by reference in its entirety.
The Merger Agreement provides that, following the
approval and adoption of the Merger by the requisite vote of
the stockholders of Data Switch and the satisfaction or waiver
of the other conditions to the Merger, Merger Sub will be
merged with and into Data Switch, with Data Switch continuing
as the Surviving Corporation and as a wholly owned subsidiary
of General Signal. The Merger will become effective upon
filing with the Secretary of State of the State of Delaware a
duly
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executed Certificate of Merger, in the form required by
and in accordance with the DGCL, or at such time thereafter as
is provided in the Certificate of Merger.
The Restated Certificate of Incorporation and By-laws
of Data Switch as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation and By-laws of
the Surviving Corporation until thereafter amended as provided
by law.
The directors of Merger Sub immediately prior to the
Effective Time will be the initial directors of the Surviving
Corporation, and the officers of Data Switch immediately prior
to the Effective Time will be the initial officers of the
Surviving Corporation, in each case until their successors are
elected and qualified.
Exchange of Common Stock. Promptly after the
------------------------
Effective Time, General Signal shall mail to each record
holder, as of the Effective Time, of an outstanding certificate
or certificates which immediately prior to the Effective Time
represented shares of Data Switch Common Stock (the
"Certificates"), a form letter of transmittal and instructions
for use in effecting the surrender of the Certificates for
exchange. Data Switch stockholders should not send in their
Certificates until they receive a transmittal form. Upon
surrender to General Signal of a Certificate, together with
such letter of transmittal duly executed together with any
other required documents, the holder of such Certificate shall
be entitled to receive from General Signal in exchange therefor
that number of shares of General Signal Common Stock which such
holder has the right to receive under the Merger Agreement, and
such Certificate shall forthwith be cancelled. Until
surrendered in accordance with the provisions of the Merger
Agreement, each Certificate shall represent, for all purposes,
the right to receive the Closing Consideration in respect of
the number of shares of Data Switch Common Stock evidenced by
such Certificate, without any interest thereon.
No Fractional General Signal Common Stock. Each
holder of shares of Data Switch Common Stock who upon surrender
of Certificates would be entitled to receive a fraction of a
share of General Signal Common Stock shall not be entitled to
receive dividends on or vote such fractional share and shall
receive, in lieu of such fractional share, cash in an amount
equal to such fraction multiplied by the Average Market Value.
The fractional share interests of each Data Switch stockholder
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will be aggregated, and no Data Switch stockholder will receive
cash in an amount equal to or greater than the value of one
full share of General Signal Common Stock. Except for the
discussions under "Summary -- The Merger -- Certain Federal
Income Tax Consequences" and "Certain Tax Consequences," all
references in this Prospectus/Proxy Statement to shares of
General Signal Common Stock to be issued as Closing
Consideration shall be deemed to include any cash in lieu of
fractional shares payable pursuant to the Merger Agreement.
Effect on Data Switch Options. As of the Effective
-----------------------------
Time, by virtue of the Merger and without any action on the
part of the holders thereof, each option to purchase shares of
Data Switch Common Stock that is outstanding under the Data
Switch Plans immediately prior to the Effective Time, whether
or not exercisable, shall be assumed by General Signal in such
manner that each such option shall be exercisable upon the same
terms and conditions as under the applicable Data Switch Plan
and the applicable option agreement issued thereunder, except
that (i) each such option shall be exercisable for that number
of shares of General Signal Common Stock (rounded up to the
nearest whole share) into which the number of shares of Data
Switch Common Stock subject to such option immediately prior to
the Effective Time would be converted as described above if
such option were exercised prior to the Effective Time, and
(ii) the option price per share of General Signal Common Stock
shall be an amount equal to the option price per share of Data
Switch Common Stock subject to such option in effect
immediately prior to the Effective Time divided by the Exchange
Ratio (rounded up to the nearest whole cent); provided,
however, that in the case of options intended to qualify as
"incentive stock options" pursuant to Section 422 of the Code,
any such adjustment shall be made in such a manner as not to
disqualify such options as "incentive stock options."
Prior to the Effective Time, Data Switch shall (i)
obtain any consents from holders of outstanding options to
purchase Data Switch Common Stock granted under the Data Switch
Plans and (ii) make any amendments to the terms of the Data
Switch Plans or any award granted thereunder that, in the case
of either (i) or (ii), are necessary to give effect to the
transactions contemplated by the first paragraph of "--Effect
on Data Switch Options" above; provided, however, that any such
consents and amendments shall not change the vesting of such
options in accordance with their current terms.
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Representations and Warranties
The Merger Agreement contains certain customary
representations and warranties by each of General Signal and
Data Switch (as to such party) concerning: the organization
and qualification of General Signal and Data Switch and their
respective subsidiaries; the capitalization of each of General
Signal and Data Switch; the authority of each of General Signal
and Data Switch relative to the execution and delivery of, and
performance of its respective obligations under, the Merger
Agreement and approval by the Board of Directors of each of
General Signal and Data Switch regarding certain related
matters; obtaining necessary approvals to consummate the
transactions contemplated by the Merger Agreement and the
absence of any conflict with, or violations of, the corporate
documents and certain binding instruments of each of General
Signal and Data Switch or their respective subsidiaries or with
or of any statute, rule, regulation, order or decree of courts
or governmental entities, subject to certain exceptions; the
accuracy of reports and documents filed by each of General
Signal and Data Switch with the Commission since January 1,
1993 and certain financial statements of each company; the
absence of undisclosed liabilities or obligations of Data
Switch and its subsidiaries; the absence of material changes
since December 31, 1994; the absence of material litigation
involving either General Signal or Data Switch or their
respective subsidiaries that would impair their respective
abilities to consummate the Merger; compliance by each of
General Signal and Data Switch and their respective
subsidiaries with applicable laws and agreements; the amendment
of the Data Switch Rights Agreement so that the Merger does not
trigger the Rights thereunder, and certain accounting matters.
In addition, the Merger Agreement contains
representations and warranties of Data Switch concerning: Data
Switch's title to, and the condition of, its properties;
leases; contracts, including union contracts or other
collective bargaining agreements and employment contracts;
intellectual property rights; taxes; ERISA; and certain
environmental matters.
Covenants
The Merger Agreement obligates Data Switch and its
subsidiaries each to conduct its business in the ordinary
course of business consistent with past practice including
specific covenants as to certain permissible activities.
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No Solicitation
Data Switch has agreed that, prior to the Effective
Time, it and its subsidiaries shall not, and shall not give
authorization or permission to any of its or its subsidiaries'
directors, officers, employees, agents or representatives to,
and shall use all commercially reasonable efforts to see that
such persons do not, directly or indirectly, solicit, initiate,
facilitate or encourage (including by way of furnishing or
disclosing information) any merger, consolidation, other
business combination involving Data Switch or its subsidiaries,
acquisition of all or any substantial portion of the assets or
capital stock of Data Switch and its subsidiaries taken as a
whole, or inquiries or proposals concerning or which may
reasonably be expected to lead to, any of the foregoing (an
"Acquisition Transaction") or negotiate, explore or otherwise
communicate in any way with any third party (other than General
Signal or its affiliates) with respect to any Acquisition
Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions expressly
contemplated by the Merger Agreement, or contemplated to be a
material part thereof; provided that in the event that there is
an unsolicited written proposal for an Acquisition Transaction
from a bona fide financially capable third party that contains
no financing contingency, Data Switch, in its discretion, shall
be permitted to furnish to and communicate with any such party
all publicly available information requested by such party. In
the event that such party requests information in addition to
that which is publicly available, Data Switch may furnish to
and communicate with such third party non-public information
only if (i) five business days' written notice shall have been
given to General Signal; and (ii)(A) Data Switch's Board of
Directors shall have been advised in writing by its investment
banker that such third party is financially capable, without
any financing contingency, of consummating an Acquisition
Transaction that would yield a higher value to Data Switch's
stockholders than will the Merger, (B) Data Switch's Board of
Directors shall have been advised, by the written opinion of
outside counsel to Data Switch, that any failure to provide
such non-public information to such party would constitute a
breach of the fiduciary responsibilities of the Board of
Directors to the stockholders of Data Switch and (C) the Board
of Directors, after weighing such advice, determines that
taking such action is more likely than not to lead to an
Acquisition Transaction with such third party that would yield
a higher value to Data Switch's stockholders than will the
Merger and that failing to
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furnish such information would constitute a breach of the Board's
fiduciary duties.
Data Switch has agreed immediately to advise General
Signal in writing of the receipt of any inquiries or proposals
relating to an Acquisition Transaction and any actions taken
pursuant to the preceding paragraph.
Conditions
The obligations of each party to effect the Merger
are subject to, among other things, the fulfillment or waiver
of the following conditions: the effectiveness of the
Prospectus/Proxy Statement in accordance with the provisions of
the Securities Act; the requisite vote of the stockholders of
Data Switch necessary to consummate the Merger and the
transactions contemplated thereby; the obtaining of all
necessary consents and approvals and the expiration or
termination of any waiting period applicable to the
consummation of the Merger under the HSR Act (which condition
has been satisfied by the termination of the waiting period on
June 2, 1995); and the receipt of an opinion of Cahill Gordon &
Reindel that the Merger constitutes a tax-free reorganization.
The obligations of each of General Signal and Data Switch to
consummate the Merger are further subject to the fulfillment or
waiver of, among other things, the following conditions: the
representations and warranties of the other party contained in
the Merger Agreement shall be true and correct in all material
respects; the other party to the Merger Agreement shall have
complied in all material respects with all of its agreements
required by the Merger Agreement; no writ, order, decree or
injunction of a court of competent jurisdiction or governmental
entity shall be in effect against either party, and no
proceedings therefor shall have been threatened or commenced by
any governmental entity, which seek to prohibit or restrict the
consummation of the Merger; and there shall not have occurred
since June 30, 1994 any material adverse change in the general
affairs, management, business, operations, assets, condition
(financial or otherwise) or prospects of Data Switch.
Termination
Mutual Consent or by Either Party. The Merger
---------------------------------
Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of
Data Switch: (a) by mutual consent of the Boards of Directors
of General Signal and Data Switch; (b) by either General Signal
or
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Data Switch if, without fault of such terminating party, the
Merger shall not have been consummated on or before December
31, 1995, which date may be extended by mutual consent of the
parties; (c) by either General Signal or Data Switch, if any
court of competent jurisdiction in the United States or other
governmental body in the United States shall have issued an
order (other than a temporary restraining order), decree or
ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger, and such order, decree,
ruling or other action shall have become final and
nonappealable; or (d) by either General Signal or Data Switch,
if the requisite stockholder approval of the stockholders of
Data Switch is not obtained at the meeting of stockholders duly
called and held therefor.
By General Signal Only. The Merger Agreement may be
----------------------
terminated and the Merger may be abandoned by action of the
Board of Directors of General Signal, at any time prior to the
Effective Time, before or after the approval by the
stockholders of Data Switch, if (a) Data Switch shall have
failed to comply in any material respect with any of the
covenants or agreements contained in certain articles of the
Merger Agreement to be complied with or performed by Data
Switch at or prior to such date of termination, (b) there
exists a breach or breaches of any representation or warranty
of Data Switch contained in the Merger Agreement such that the
closing conditions in favor of General Signal would not be
satisfied; provided, however, that if such failure, breach or
breaches are capable of being cured prior to the Effective
Time, such failure, breach or breaches shall not have been
cured within 15 days of delivery to Data Switch of written
notice of such failure, breach or breaches, or (c) Data Switch
shall furnish or disclose non-public information to a third
party with respect to any Acquisition Transaction, or shall
have resolved to do the foregoing and publicly disclosed such
resolution.
By Data Switch Only. The Merger Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time, before or after the approval by the
stockholders of Data Switch, by action of the Board of
Directors of Data Switch, if (a) General Signal or Merger Sub
shall have failed to comply in any material respect with any of
the covenants or agreements contained in certain articles of
the Merger Agreement to be complied with or performed by
General Signal or Merger Sub at or prior to such date of
termination or (b) there exists a breach or breaches of any
representation or warranty of General Signal or Merger Sub
contained in the Merger
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Agreement such that the closing conditions in favor of Data Switch
would not be satisfied; provided, however, that if such failure,
breach or breaches are capable of being cured prior to the
Effective Time, such failure, breach or breaches shall not have
been cured within 15 days of delivery to General Signal of written
notice of such failure, breach or breaches.
Termination Fees and Expenses
Except as set forth below, each of General Signal and
Data Switch shall bear their respective expenses incurred in
connection with the Merger except that expenses incurred in
printing, mailing and filing this Prospectus/Proxy Statement
shall be shared equally by General Signal and Data Switch.
If the Merger Agreement is terminated (i) pursuant to
the first paragraph of "-Termination" above (except clause (a))
and prior to such termination any person shall have made a bona
fide proposal concerning a Business Combination Transaction (as
defined below) to Data Switch or its stockholders by public
announcement or written communication that is or becomes
subject to public disclosure, or (ii) by General Signal
pursuant to the second paragraph of "-Termination" above, then,
Data Switch shall pay General Signal by wire transfer of
immediately available funds to an account specified by General
Signal up to $1.5 million to reimburse General Signal for its
documented fees and expenses (including the fees and expenses
of counsel, accountants, consultants and advisors) in
connection with the Merger Agreement and the transactions
contemplated thereby and if terminated pursuant to clause (c)
of the second paragraph of "-Termination" above, an additional
fee of $2.4 million, and if an additional fee has not already
become payable and within twelve months after the date of the
Merger Agreement, Data Switch or any of its subsidiaries enters
into a definitive agreement with a third party with respect to
a Business Combination Transaction or a Business Combination
Transaction is effected, then Data Switch, prior to entering
into any such definitive agreement or any such Business
Combination Transaction being effected, shall promptly pay
General Signal by wire transfer of immediately available funds
to an account specified by General Signal, an additional fee of
$2.4 million. As used herein, the term "Business Combination
Transaction" shall mean any of the following involving Data
Switch or any of its subsidiaries, that is material to the
business, results of operation, prospects or financial
condition of Data Switch and its subsidiaries taken as a whole:
(1) any merger, consolidation, share exchange, business
combination or other similar
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transaction (other than the Merger); (2) any sale, lease,
exchange, transfer or other disposition of 25% or more of the
assets of Data Switch and its subsidiaries, taken as a whole,
in a single transaction or series of transactions; or (3) the
acquisition by a person or entity, or any "group" (as such term
is defined under Section 13(d) of the Exchange Act and the rules
and regulations thereunder) of beneficial ownership of 33 1/3%
or more of the Data Switch Common Stock, whether by tender offer,
exchange offer or otherwise.
In the event of a termination of the Merger Agreement
by Data Switch pursuant to the third paragraph of
"-Termination" above, then General Signal shall promptly pay
Data Switch up to $1.5 million for all documented fees and
expenses incurred by Data Switch (including the fees and
expenses of counsel, accountants, consultants and advisors) in
connection with the Merger Agreement and the transactions
contemplated thereby.
Indemnification; Insurance
General Signal shall cause the Surviving Corporation
to indemnify, defend and hold harmless the present and former
officers and directors of Data Switch against all losses,
claims, damages, expenses or liabilities arising out of actions
or omissions or alleged actions or omissions occurring at or
prior to the Effective Time to the extent permitted or required
under applicable law and Data Switch's Restated Certificate of
Incorporation and By-Laws in effect at the date of the Merger
Agreement (to the extent consistent with applicable law).
For a period of six years after the Effective Time,
the Surviving Corporation shall cause to be maintained in
effect the current policies of directors' and officers'
liability insurance maintained by Data Switch (provided that
the Surviving Corporation may substitute therefor policies of
at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to
claims arising from facts or events which occurred before the
Effective Time; provided, however, that the Surviving
Corporation shall not be obligated to make annual premium
payments for such insurance to the extent such premiums exceed
an amount equal to 150% of the annual premiums paid as of the
date of the Merger Agreement by Data Switch for such insurance.
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Amendment
Subject to applicable law, the Merger Agreement may
be amended, modified or supplemented only by written agreement
of General Signal, Merger Sub and Data Switch at any time prior
to the Effective Time with respect to any of the terms
contained therein; provided, however, that, after the Merger
Agreement is adopted by the stockholders of Data Switch, no
such amendment or modification shall change the amount or form
of the consideration to be delivered in respect of shares of
Data Switch Common Stock.
Waivers; Consents
Any failure of General Signal or Merger Sub, on the
one hand, or Data Switch, on the other hand, to comply with any
obligation, covenant, agreement or condition contained in the
Merger Agreement may be waived by Data Switch or General Signal
or Merger Sub, respectively, only by a written instrument
signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other
failure. Whenever the Merger Agreement requires or permits
consent by or on behalf of any party to the Merger Agreement,
such consent shall be given in writing pursuant to the terms
thereof.
Appraisal Rights
In accordance with Section 262 of the DGCL, holders
of Data Switch Common Stock do not have statutory appraisal
rights.
CERTAIN RELATED MATTERS
Data Switch Rights Agreement Amendment
On May 5, 1995, the Board of Directors of Data Switch
adopted an amendment (the "Amendment") to the Data Switch
Rights Agreement (the "Rights Plan") dated as of June 21, 1988
between Data Switch and the rights agent named therein. The
Amendment provided that pursuant to the transactions
contemplated by the Merger Agreement, neither General Signal
nor Merger Sub is an "Acquiring Person" (as defined in the
Rights Plan) and that no "Triggering Event," "Distribution
Date" or "Unapproved Transaction" (each as defined in the
Rights Plan)
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has occurred or will occur as a result of the Merger Agreement
or the Merger.
-56-
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed
financial statements give effect to the merger of General
Signal and Data Switch as described more fully in the
accompanying notes to these financial statements. This pro
forma information has been prepared utilizing the historical
consolidated financial statements of General Signal and Data
Switch. This information should be read in conjunction with
the historical financial statements and notes thereto, which
are incorporated into this Prospectus/Proxy Statement. The pro
forma financial data are provided for comparative purposes only
and do not purport to be indicative of the results which would
have been obtained if the Merger had been effected during the
periods presented.
In addition to showing the effects of the merger
between General Signal and Data Switch, the following pro forma
information also includes the effects of General Signal's
acquisition of Best Power Technology, Incorporated ("Best")
which took effect June 13, 1995. Results of operations for
Best prior to the date of acquisition and all necessary
adjustments have been shown separately.
The pro forma financial information is based on the
pooling-of-interests method of accounting for the Merger. The
pro forma adjustments are described in the accompanying notes
to the unaudited pro forma combined condensed financial
statements.
-57-
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
-------------------------------------------------------
FOR THE SIX MONTHS ENDED
JUNE 30, 1995
(in millions, except per share data)
Pro Forma
Combined
General Signal
General Data and Best Power Pro Forma
Signal Switch Adjustments(1) Data Switch Technology Adjustments Combined
------- -------- ----------- -------------- ----------- ----------- -----------
Net Sales $832.4 $48.0 $880.4 $59.4 $938.8
------ ----- ------ ------ ----- ---- ------
Cost of Sales 590.7 27.0 617.7 36.4 654.1
Selling, General and Adminis-
trative Expenses 147.4 12.2 5.1 164.7 23.2 (1) 190.4
2.5 (7)
Acquisition of Businesses and
Special Items 7.4 7.4 7.4
Engineering and Development 4.9 (4.9) 0.0 0.0
Relocation Expense 0.4 (0.4) 0.0 0.0
Selling and Marketing 11.0 (11.0)(1) 0.0
Administrative 5.1 (5.1)(1) 0.0
Research and Development 3.6 (3.6)(1) 0.0
------ ----- ------ ------ ----- ---- ------
Total Operating Costs and
Expenses 745.5 44.5 (0.2) 789.8 56.1 6.0 851.9
------ ----- ------ ------ ----- ---- ------
Operating Earnings 86.9 3.5 0.2 90.6 3.3 (6.0) 87.9
Interest Income 0.3 (0.3)(1) 0.0
Interest Expense, Net (8.9) (0.9) (9.8) (0.3) 0.3 (1) (15.7)
(5.9)(6)
Foreign Exchange Gain/(Loss) 0.0 0.3 (0.3)(1) 0.0
Minority Interest 0.8 (0.8)(1) 0.0
Other, Net 0.2 (0.2) 0.0 (4.6) 4.6 (1) 0.0
------ ----- ------ ------ ----- ---- ------
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Earnings from Continuing Opera-
tions before Income Taxes 78.0 2.8 0.0 80.8 (0.2) (8.4) 72.2
Income Taxes 27.3 1.0 28.3 1.0 (2.4) 26.9
------ ----- ------ ------ ----- ---- ------
Earnings from Continuing
Operations $50.7 $1.8 0.0 $52.5 ($1.2) ($6.0) $45.3
====== ===== ====== ====== ===== ==== ======
Earnings per Share of Common
Stock from Continuing
Operations $1.07 $0.14 $1.07(5) $0.92(5)
====== ===== ====== ======
Weighted Average Common Stock
and Equivalent Common Stock 47.3 12.8 49.0(5) 49.0(5)
====== ===== ====== ======
____________________
See accompanying notes to pro forma combined condensed financial statements.
-59-
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED
DECEMBER 31, 1994
(in millions, except per share data)
Pro Forma
Combined
General Signal
General Data and Best Power Pro Forma
Signal Switch Adjustments(1) Data Switch Technology Adjustments Combined
------- -------- ----------- -------------- ----------- ----------- -----------
Net Sales $1,527.7 $90.6 $1,618.3 $149.4 $1,767.7
------- ----- ------ -------- ------ -------- --------
Cost of Sales 1,109.5 49.6 1,159.1 86.4 1,245.5
Selling, General and Adminis-
trative Expenses 292.3 24.8 10.3 327.4 45.3(1) 377.7
5.0(7)
Engineering and Development 10.5 (10.5) 0.0 0.0
Disposition of Businesses
and Special Charges (46.2) (46.2) (46.2)
Selling and Marketing 26.4 (26.4)(1) 0.0
Administrative 10.9 (10.9)(1) 0.0
Research and Development 8.6 (8.6)(1) 0.0
------- ----- ---- ------- ------ -------- -------
Total Operating Costs
and Expenses 1,355.6 84.9 (0.2) 1,440.3 45.9 4.4 1,490.6
------- ---- ---- ------- ------ ------- -------
Operating Earnings 172.1 5.7 0.2 178.0 17.1 (4.4) 190.7
Interest Income 0.7 (0.7)(1) 0.0
Interest Expense, Net (11.8) (2.0) (13.8) (0.2) (11.7)(6) (25.0)
(0.7)(1)
Foreign Exchange Gain/(Loss) 0.1 (0.1) 0.0 2.0 (0.2)(1) 1.8
Minority Interest 0.3 (0.3)(1) 0.0
Other, Net 0.1 (0.1) 0.0 0.1 (0.1)(1) 0.0
------- ---- ---- ------- ------ -------- -------
Earnings from Continuing Opera-
tions before Income Taxes 160.3 3.9 164.2 18.2 (16.7) 165.7
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Income Taxes 56.2 1.3 57.5 7.2 (4.7) 60.0
------- ----- ---- ------- ------ ------- -------
Earnings from Continuing
Operations $104.1 $2.6 $0.0 $106.7 $11.0 ($12.0) $105.7
======= ===== ==== ======= ====== ======= =======
Earnings per Share of Common
Stock from Continuing
Operations $2.20 $0.21 $2.18(5) $2.16(5)
======= ===== ======= =======
Weighted Average Common Stock
and Equivalent Common Stock 47.3 12.4 49.0(5) 49.0(5)
======= ===== ======= =======
____________________
See accompanying notes to pro forma combined condensed financial statements.
-61-
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED
JUNE 30, 1994
(in millions, except per share data)
Pro Forma
Combined
General Signal
General Data and Best Power Pro Forma
Signal Switch Adjustments(1) Data Switch Technology Adjustments Combined
------- -------- ----------- -------------- ----------- ----------- -----------
Net Sales $721.1 $43.4 $764.5 $70.8 $835.3
------- ----- ----- ------- ----- ------ ------
Cost of Sales 521.1 24.0 536.1 41.9 578.0
Selling, General and Adminis-
trative Expenses 131.4 12.1 5.5 149.0 20.9 (1) 172.4
2.5 (7)
Engineering and Development 5.6 (5.6) 0.0 0.0
Relocation Expense
Selling and Marketing 12.2 (12.2)(1) 0.0
Administrative 4.7 (4.7)(1) 0.0
Research and Development 4.3 (4.3)(1) 0.0
------- ----- ----- ------- ----- ------ ------
Total Operating Costs
and Expenses 643.5 41.7 (0.1) 685.1 63.1 2.2 750.4
------- ----- ----- ------- ----- ------ ------
Operating Earnings 77.6 1.7 0.1 79.4 7.7 (2.2) 84.9
Interest Income 0.3 (0.3)(1) 0.0
Interest Expense, Net (5.7) (1.0) (6.7) 0.0 0.3 (1) (12.3)
(5.9)(6) 0.0
Foreign Exchange Gain/(Loss) 0.1 (0.1) 0.0 0.3 (0.3)(1) 0.0
Minority Interest 0.0
Other, Net 0.0 0.0
------- ----- ----- ------- ----- ------ ------
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Earnings from Continuing Opera-
tions before Income Taxes 71.9 0.8 0.0 72.7 8.3 (8.4) 72.6
Income Taxes 24.4 0.2 24.6 3.0 (2.4) 25.2
------- ----- ----- ----- ----- ------ ------
Earnings from Continuing
Operations $47.5 $0.6 $0.0 $48.1 $5.3 $6.0) $47.4
====== ===== ===== ===== ===== ====== ======
Earnings per Share of Common
Stock from Continuing
Operations $1.00 $0.05 $0.98(5) $0.97(5)
======= ===== ===== =======
Weighted Average Common Stock
and Equivalent Common Stock 47.4 12.3 49.1(5) 49.1(5)
======= ===== ===== ======
____________________
See accompanying notes to pro forma combined condensed financial statements.
-63-
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED
DECEMBER 31, 1993
(in millions, except per share data)
General Data Pro Forma
Signal Switch Adjustments(1) Combined
------- ------ ----------- ---------
Net Sales $1,354.2 $95.1 $1,449.3
-------- ----- ----- --------
Cost of Sales 959.0 55.0 1,014.0
Selling, General and Adminis-
trative 259.3 25.2 14.9 299.4
Engineering and Development __ 13.0 (13.0) --
Restructuring Charge -- 1.8 (1.8) --
Transaction and Consolidation
Charges 13.2 -- 13.2
Disposition of Businesses
and Special Items (33.0) -- (33.0)
-------- ----- ------ --------
Total Operating Costs
and Expenses 1,198.5 95.0 0.1 1,293.6
-------- ----- ------ --------
Operating Earnings 155.7 0.1 (0.1) 155.7
Interest Expense, Net 16.6 2.1 18.7
Other, Net -- 0.1 (0.1) --
-------- ----- ------ --------
Earnings from Continuing
Operations before Income
Taxes 139.1 (2.1) -- 137.0
Income Taxes 41.0 (0.1) -- 40.9
----- ----- ------ --------
Earnings from Continuing
Operations $98.1 $(2.0) -- $96.1
===== ======= == =====
Earnings per Share of Common
Stock from Continuing
Operations $2.17 $(0.16) -- $2.05
===== ======= == =====
Weighted Average Common Stock
and Equivalent Common Stock 45.2 12.1 -- 46.9
==== ==== == ====
____________________
See accompanying notes to pro forma combined condensed financial statements.
-64-
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED
DECEMBER 31, 1992
(in millions, except per share data)
General Data Pro Forma
Signal Switch Adjustments(1) Combined
------- ------ ----------- ---------
Net Sales $1,477.8 $84.0 $1,561.8
-------- ----- ----- --------
Cost of Sales 1,070.2 42.7 1,112.9
Selling, General and Adminis-
trative 287.7 26.9 13.0 327.6
Transaction and Consolidation
Charges -- --
Engineering and Development -- 12.7 (12.7) --
Disposition of Businesses
and Special Items 85.6 85.6
-------- ----- ----- --------
Total Operating Costs
and Expenses 1,443.5 82.3 0.3 1,526.1
-------- ----- ----- --------
Operating Earnings 34.3 1.7 (0.3) 35.7
Interest Expense, Net (24.8) (2.6) (27.4)
Foreign Exchange Gain/(Loss) -- (0.2) 0.2 --
Other, Net -- (0.1) 0.1 --
-------- ----- ----- --------
Earnings from Continuing
Operations before Income
Taxes 9.5 (1.2) -- 8.3
Income Taxes 3.2 (0.2) 3.0
-------- ----- ----- --------
Earnings from Continuing
Operations $6.3 ($1.0) -- $5.3
==== ==== == =====
Earnings per Share of Common
Stock from Continuing
Operations $0.15 ($0.08) -- $0.12
===== ======= == =====
Weighted Average Common Stock
and Equivalent Common Stock 41.8 12.0 -- 43.5
===== ===== == ====
____________________
See accompanying notes to pro forma combined condensed financial statements.
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PRO FORMA COMBINED CONDENSED BALANCE SHEET
as of June 30, 1995
(in millions)
General Data Adjust- Pro Forma
Signal Switch ments Combined
------- ------ ------- --------
Assets
Cash and Cash Equivalents $2.6 $13.0 $0.5 (2) $16.1
Accounts Receivable 284.4 19.4 (0.5)(4) 303.3
Inventories 232.4 13.7 (2.2)(4) 243.9
Prepaid Expenses and Other
Current Assets 38.7 0.9 39.6
Assets Held for Sale at
Estimated Realizable Value 105.1 105.1
Deferred Income Taxes 80.8 80.8
-------- ----- ----- --------
Total Current Assets 744.0 47.0 (2.2) 788.8
-------- ----- ----- --------
Property, Plant and Equipment 298.8 9.0 (0.9)(4) 306.9
Intangibles 339.6 339.6
Other Assets 148.7 5.1 153.8
Deferred Income Taxes 16.7 16.7
-------- ----- ----- --------
Total Assets $1,547.8 $61.1 ($3.1) $1,605.8
======== ===== ===== ========
Liabilities and
Shareholders' Equity
Short-term Borrowings and Current
Maturities of Long-term Debt $5.6 $1.8 $7.4
Accounts Payable 137.6 11.0 1.8(4) 151.0
0.6(8)
Accrued Expenses 172.0 0.7(1) 178.6
5.9(9)
Income Taxes 40.8 1.2 42.0
Other Taxes Payable 0.7 (0.7)(1) 0.0
-------- ----- ----- --------
Total Current Liabilities 356.0 14.7 8.3 379.0
-------- ----- ----- --------
Long-term Debt, less Current
Maturities 487.2 21.7 508.9
Accrued Postretirement
and Post Employment Benefits 153.1 153.1
Other Liabilities 17.9 17.9
-------- ----- ----- --------
Total Long-term Debt 658.2 21.7 0.0 679.9
-------- ----- ----- --------
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Shareholders' Equity:
---------------------
Common Stock
(General Signal pro forma
-- authorized 150.0 shares,
issued 64.2 shares) 77.8 0.1 (0.1)(3) 77.8
Additional Paid-in-Capital 293.4 51.1 43.5(3) 301.0
Retained Earnings/
(Accumulated Deficit) 598.9 (25.8) (11.9) 561.2
Cumulative Translation Adjustment (10.7) (10.7)
Note Receivable from Shareholder (0.5) 0.5(2) --
Common Stock in Treasury, at cost
(15.0 pro forma shares
of General Signal) (425.8) (0.2) 43.6(3) (382.4)
-------- ----- ----- --------
Total Shareholders' Equity 533.6 24.7 (11.4) 546.9
-------- ----- ----- --------
Total Liabilities and
Shareholders' Equity $1,547.8 $61.1 ($3.1) $1,605.8
======== ===== ===== ========
__________________________
See accompanying notes to pro forma combined condensed financial statements.
-67-
Notes to Pro Forma Combined Condensed Financial
Statements (Unaudited)
(1) Certain reclassifications have been made to conform
presentations of items in the balance sheet and statements
of earnings.
(2) Data Switch's note receivable from Richard E. Greene will
be collected upon completion of the Merger.
(3) The pro forma combined condensed financial data reflect
the issuance of approximately 1.7 million shares of
General Signal Common Stock for an aggregate of 13.9
million shares of Data Switch Common Stock in connection
with the Merger based on an exchange ratio of 0.12133
shares of General Signal Common Stock, based on a purchase
price of $56.875 million and an average share price of
General Signal Common Stock of $37.50. In the thirty
trading days ended September __, 1995, the price of
General Signal Common Stock ranged from ________ to
________. The actual number of shares of General Signal
Common Stock to be issued will be determined at the
Effective Time of the Merger based on the actual number of
shares of Data Switch Common Stock then outstanding and
issuable upon exercise of warrants and options to purchase
Data Switch Common Stock. The entry reflects the
elimination of Data Switch Common Stock acquired in the
Merger and the issuance of General Signal Common Stock at
par value from shares held in treasury.
(4) Adjustments have been made to properly value the assets
and liabilities of Data Switch to conform with General
Signal accounting policies and reflect changes in
estimates.
(5) The exchange ratio of General Signal Common Stock issued
for each share of Data Switch Common Stock has been fixed
from a low of .10581 to a high of .14677 based on the
average market price of General Signal Common Stock for
the thirty trading days prior to the effective date.
While this has no effect on the purchase price, the number
of shares of General Signal Common Stock to be issued will
range from 1.5 million shares to 2.0 million shares.
(6) Interest expense was recognized as if the $195 million of
debt issued to acquire Best had been outstanding from the
-68-
beginning of the period. The debt is assumed to carry a
financing rate of 6 percent per year.
(7) Goodwill and other identified intangibles are expected to
range from $150 to $160 million. The pro forma statement
of earnings reflects amortization of $150 million of
goodwill and intangibles over 30 years since the
preliminary valuation is subject to final determination of
fair values and related lives. The amortization is
reflected in the pro forma statement of earnings as if the
goodwill were amortized from the beginning of the period.
(8) Transaction costs incurred by General Signal and Data
Switch. These costs include investment banker and
professional fees.
(9) Combination and integration costs -- primarily severance
costs at Data Switch.
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CERTAIN TAX CONSEQUENCES
General
The following discussion of certain federal income
tax consequences of the Merger is included for general
information only and is not intended to be a complete
discussion of all potential tax effects that might be relevant
to a decision on whether to vote in favor of the Merger. The
tax treatment of a stockholder may vary depending upon such
stockholder's particular situation, and certain stockholders
(including insurance companies, tax-exempt organizations,
financial institutions or broker-dealers, persons who are not
citizens or residents of the United States or who are foreign
corporations, foreign partnerships or foreign estates or trusts
as to the United States and employees with respect to options
received in connection with their employment) may be subject to
special rules not discussed below. The effects of any
applicable state, local, foreign or other tax laws are not
addressed herein. This summary is based on the Internal
Revenue Code of 1986, as amended, and regulations, rulings and
judicial decisions in effect at the date of this
Prospectus/Proxy Statement; however, legislative, judicial or
administrative changes or interpretations may be forthcoming.
Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences described
herein. No rulings have been nor will be requested from the
Internal Revenue Service ("IRS") with respect to any of the
matters discussed herein.
Federal Income Tax Consequences of the Merger
In the opinion of Cahill Gordon & Reindel, counsel to
General Signal, for federal income tax purposes the Merger will
be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and both General Signal and Data Switch will be a
"party" to such reorganization within the meaning of Section
368(b) of the Code, and accordingly: (i) no gain or loss will
be recognized by the stockholders of Data Switch on the
exchange of their Data Switch Common Stock for General Signal
Common Stock; (ii) the tax basis of the General Signal Common
Stock received by a stockholder of Data Switch in the exchange
(including any fractional share interest to which such
stockholder may be entitled) will be the same as the tax basis
of the Data Switch Common Stock surrendered in exchange
therefor; (iii) the holding period of the General Signal Common
Stock received by a stockholder of Data Switch in the exchange
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(including any fractional share interest to which it may be
entitled) will include the holding period of the Data Switch
Common Stock to be surrendered in exchange therefor, provided
the shares of Data Switch Common Stock are held as capital
assets in the hands of the stockholder of Data Switch at the
Effective Time; and (iv) a Data Switch stockholder who receives
cash in lieu of a fractional share of General Signal Common
Stock will be treated as if the fractional share were
distributed as part of the exchange and then redeemed by
General Signal with the cash being received in full payment for
the fractional share, resulting in the recognition of gain or
loss for federal income tax purposes measured by the difference
between the cash received and the portion of the tax basis of
the Data Switch Common Stock surrendered in the exchange
allocable to such fractional share, provided that such
redemption is not essentially equivalent to a dividend (such
gain or loss will be a capital gain or loss if the shares of
Data Switch Common Stock were held as capital assets in the
hands of the Data Switch stockholder at the Effective Time).
If for any reason the Merger were not treated for
federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, each Data Switch
stockholder would recognize gain or loss equal to the
difference between the fair market value at the Effective Time
of the General Signal Common Stock received by such Data Switch
stockholder and the tax basis of the Data Switch Common Stock
surrendered by such Data Switch stockholder. Such gain or loss
would be long-term capital gain or loss to the Data Switch
stockholder if the shares of Data Switch Common Stock were held
by the Data Switch stockholder for more than one year and were
capital assets in the hands of such Data Switch stockholder at
the Effective Time.
THIS SUMMARY DOES NOT DISCUSS ALL ASPECTS THAT MAY BE
RELEVANT TO DATA SWITCH STOCKHOLDERS IN LIGHT OF THEIR
PARTICULAR INDIVIDUAL CIRCUMSTANCES. DATA SWITCH STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER, THE
OWNERSHIP AND DISPOSITION OF GENERAL SIGNAL COMMON STOCK AND
THE APPLICABILITY AND INAPPLICABILITY OF FEDERAL, STATE, LOCAL,
FOREIGN OR OTHER TAX LAWS.
-71-
DESCRIPTION OF GENERAL SIGNAL CAPITAL STOCK
The authorized capital stock of General Signal
consists of 150,000,000 shares of Common Stock, par value $1.00
per share, and 10,000,000 shares of Preferred Stock, par value
$1.00 per share (the "Preferred Stock"). The Board of
Directors of General Signal is empowered to cause shares of
Preferred Stock to be issued in one or more series, with the
number of shares in each series and the rights, preferences and
limitations of each series determined by it. As of the date of
this Prospectus/Proxy Statement, no shares of the Preferred
Stock were outstanding.
Common Stock. Subject to any limitations prescribed
------------
in connection with the issuance of any outstanding shares of
Preferred Stock, dividends, as determined by the Board of
Directors of General Signal, may be declared and paid on
General Signal Common Stock from time to time out of any funds
legally available therefor. The holders of General Signal
Common Stock are entitled to one vote per share and do not have
cumulative voting rights or preemptive rights. The General
Signal Common Stock is not subject to further calls and all of
the outstanding shares of General Signal Common Stock are fully
paid and non-assessable. Under Section 630 of the NYBCL, the
ten largest stockholders of General Signal, as determined by
the fair value of their respective beneficial interests, may
under certain circumstances be held personally liable for
certain debts of General Signal.
Rights Plan. On March 7, 1986, the Board of
-----------
Directors of General Signal declared a dividend distribution of
one common stock purchase right (a "General Signal Purchase
Right") for each share of General Signal Common Stock
outstanding on March 21, 1986. General Signal Common Stock
issued subsequent to March 21, 1986 automatically receives
these General Signal Purchase Rights. A more detailed
description of the terms of the General Signal Rights is
contained in three of General Signal's Current Reports on Form
8-K dated March 7, 1986, June 21, 1990 and June 17, 1993,
respectively, each of which is incorporated herein by
reference.
The Board of Directors of General Signal is divided
into three classes having staggered three-year terms, so that
the terms of approximately one-third of the Directors will
expire each year. General Signal's Certificate of
Incorporation requires the affirmative vote of two-thirds of
all outstanding shares entitled to vote to (1) remove
Directors, (2)
-72-
adopt, amend or repeal any By-law, or any provision of the Certificate
of Incorporation, relating to (i) the number, classification and terms
of office of Directors, (ii) the quorum of Directors required for the
transaction of business, (iii) the filling of newly created directorships
and vacancies occurring in the Board of Directors, (iv) the removal
of Directors, or (v) the power of the Board of Directors to
adopt, amend or repeal By-laws of General Signal or the vote of
the Board of Directors required for any such adoption,
amendment or repeal or (3) amend or repeal the section of its
Certificate of Incorporation requiring such action.
The Transfer Agent and Registrar for General Signal
Common Stock is The Bank of New York.
-73-
COMPARATIVE RIGHTS OF STOCKHOLDERS
The following is a summary of certain of the material
differences between the rights of holders of General Signal
Common Stock and the rights of holders of Data Switch Common
Stock. As General Signal is organized under the laws of New
York and Data Switch is organized under the laws of Delaware,
some of these differences arise from differences between
various provisions of the corporate laws of those states.
Others arise from differences in the provisions of the
respective certificates of incorporation and by-laws of General
Signal and Data Switch. As of June 30, 1995, there were
47,460,612 shares of General Signal Common Stock outstanding.
Assuming an Exchange Ratio of 0.12133 (based on an Average
Market Value of General Signal Common Stock of $37.50 per
share), if the Merger were consummated on June 30, 1995
approximately 1,519,585 shares of General Signal Common Stock
would be issued for 12,524,400 shares of Data Switch Common
Stock outstanding, comprising approximately 3.1% of the total
number of shares of General Signal Common Stock outstanding.
Amendments to Certificate of Incorporation
Under New York law, except for certain specified
matters, an amendment or change to the General Signal
Certificate of Incorporation must be authorized by vote of the
General Signal Board of Directors, followed by a vote of the
holders of a majority of all outstanding shares entitled to
vote thereon at a meeting of stockholders.
Under Delaware Law, amendments to the Data Switch
Restated Certificate of Incorporation require the approval of
stockholders holding a majority of the outstanding shares
entitled to vote on such amendment and a majority of the
outstanding stock of each class entitled to vote on such
amendment as a class, unless a greater proportion is specified
in the certificate of incorporation or by the provisions of the
DGCL.
Amendments to By-Laws
Under New York law, by-laws may be adopted, amended
or repealed by a majority vote of all stockholders entitled to
vote in the election of directors. When provided by the
certificate of incorporation or a bylaw adopted by the
stockholders, as is the case with General Signal, the board of
directors may also adopt, amend or repeal by-laws. Any bylaw
adopted by
-74-
the board of directors without stockholder approval,
may be amended or repealed by a majority of votes cast at a
meeting of stockholders.
Delaware law provides that after a corporation has
received any payment for its stock, the power to adopt, amend
or repeal by-laws resides with the stockholders entitled to
vote. A corporation may, however, grant to its board of
directors in its certificate of incorporation concurrent power
to adopt, amend or repeal by-laws. The Data Switch Restated
Certificate of Incorporation expressly authorizes the Data
Switch Board of Directors to make, alter or repeal the Data
Switch By-Laws.
Directors
Under New York law, a corporation's board of
directors must consist of at least three directors, unless the
shares of the corporation are beneficially owned by less than
three stockholders, in which case the number of directors may
be less than three but shall not be less than the number of
stockholders. Under the General Signal By-Laws, the number of
directors constituting the General Signal Board of Directors
shall be determined by the General Signal Board of Directors,
but, under the current By-laws, shall not be less than 9 or
more than 15 (which number shall be increased to 18 at the
Effective Time). The General Signal Board of Directors is
classified into three classes of directors. Each class has a
three-year term expiring on the date of the third annual
meeting of stockholders succeeding their election.
Under Delaware law, a corporation's board of
directors must consist of one or more members, with the number
fixed by the corporation's by-laws or the certificate of
incorporation. Under the Data Switch By-Laws, the Board of
Directors shall have a minimum of 3 and a maximum of 9 members.
Under New York law, directors, when taking action,
including action which may relate to a change in control of the
corporation, are entitled to consider both the long-term and
the short-term interests of the corporation and its
stockholders and the effects that any such actions may have on
the short-term or the long-term or the corporation's prospects,
current employees, customers and creditors. Delaware has no
comparable statutory provision.
-75-
Removal of Directors
Under New York law, any or all directors may be
removed for cause by vote of the stockholders. A director may
be removed without cause by stockholder vote only if the
certificate of incorporation or the by-laws so provide. The
General Signal Certificate of Incorporation provides that
directors may be removed for cause only by the affirmative vote
of two-thirds of all outstanding shares entitled to vote. The
General Signal Certificate of Incorporation and the General
Signal By-Laws do not provide for the removal of directors
without cause by a stockholder vote.
Delaware law allows any director or the entire board
of directors to be removed, with or without cause, by the vote
of the holders of a majority of the shares entitled to vote.
Newly Created Directorships and Vacancies
Under New York law, newly created directorships
resulting from an increase in the number of directors and
vacancies occurring for any reason, other than the removal of a
director without cause, may be filled by vote of the board of
directors. If the number of directors then in office is less
than a quorum, any vacancies may be filled by vote of a
majority of the directors then in office. Unless a provision
of the certificate of incorporation or a bylaw adopted by the
stockholders provides otherwise, vacancies occurring in the
board of directors through removal of directors without cause
must be filled by a vote of stockholders. The General Signal
By-Laws provide that newly created directorships or vacancies
resulting from any cause may be filled only by the General
Signal Board of Directors. If a quorum of directors is not
then in office, a majority of the directors then in office, or
a sole remaining director, may fill any vacancy. Pursuant to
New York law, any director elected by the vote of the General
Signal Board of Directors is not assigned to a particular class
and will serve only until the next annual meeting of
stockholders.
Delaware law provides that unless otherwise provided
in the certificate of incorporation or by-laws, vacancies,
including those due to removal without cause, and newly created
directorships may be filled by majority vote of the directors
then in office, even if the number of directors then in office
is less than a quorum, or by a sole remaining director. In
addition, if, at the time of filling any vacancy or newly
created directorship the directors then in office constitute
less
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than a majority of the whole board, the Delaware Court of
Chancery may, upon application of stockholders holding at least
10% of the shares outstanding at the time and entitled to vote,
summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office. Such
elections are to be conducted in accordance with the procedures
provided by Delaware law for holding stockholder meetings.
Vote Required for Certain Transactions
New York law generally requires the authorization of
a corporation's board of directors and the affirmative vote of
two-thirds of a corporation's outstanding shares entitled to
vote in order to effect a merger, a consolidation, a share
exchange or the sale, lease, or other disposition of all or
substantially all of a corporation's assets. Delaware law
requires approval of the board of directors and the affirmative
vote of a majority of the outstanding stock entitled to vote
thereon to authorize any such action, except that, unless
required by its certificate of incorporation, no stockholder
vote is required of a corporation surviving a merger if (i)
such corporation's certificate of incorporation is not amended
by the merger, (ii) each share of stock of such corporation
will be an identical share of the surviving corporation after
the merger and (iii) either no shares are to be issued by the
surviving corporation or the number of shares to be issued in
the merger does not exceed 20% of such corporation's
outstanding common stock immediately prior to the effective
date of the merger. Both New York and Delaware law contain
provisions allowing mergers and consolidations of domestic with
foreign corporations, so long as the other jurisdiction allows
such a combination and the domestic corporation follows the
procedures applicable to it.
Under New York law, a vote of a majority of the
stockholders is required for a corporation to redeem more than
10% of its stock from stockholders at a price above the market
price. Delaware does not have a comparable statutory
provision.
Business Combinations
New York law regulates tender offers for the equity
securities of New York corporations having principal offices or
significant business operations within New York. The Security
Takeover Disclosure Act (the "Takeover Act") applies to offers
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with respect to which, after acquisition of the shares, the
offeror would be the owner of more than five percent of any
class of the target company's issued equity securities. In
such cases, no tender offer may be made unless the offeror
files with the New York attorney general at his New York City
office a registration statement containing information required
by certain sections of the Takeover Act. The Takeover Act also
regulates tender offers not subject to the requirements of
Section 14(d) of the Exchange Act and sets forth, among other
things, the period of time within which shares may be deposited
and withdrawn pursuant to a takeover bid, the requirement that
shares be purchased on a pro rata basis and the requirement
that when an offeror increases the consideration offered in a
takeover bid, the offeror must pay such increased consideration
with respect to all shares accepted. Delaware law does not
contain any comparable provision.
New York law also provides that a "resident domestic
corporation" may not engage in any business combination with
any "interested stockholder" (defined as the beneficial owner
of 20% or more of a corporation's voting stock) for a five-year
period after the interested stockholder attains such status
unless the board of directors had approved either the business
combination or the transaction resulting in interested
stockholder status prior to the date on which the interested
stockholder became a 20% holder. Resident domestic
corporations are those organized under New York law that meet
various criteria regarding the loci of offices, employees, or
share ownership. After five years, no resident domestic
corporation may engage in a business combination with an
interested stockholder other than (i) a business combination or
transaction that had been approved by the board prior to the
date the person became an interested stockholder, (ii) a
business combination approved by the affirmative vote of the
holders of a majority of the voting stock not beneficially
owned by that interested stockholder at a meeting called for
such purpose or (iii) the aggregate amount of cash and the
market value, as of the consummation date, of consideration to
be received per share by holders of outstanding shares of
common stock in the business combination is at least equal to a
certain "fair price" as determined by various criteria set
forth in the statute, subject to certain exceptions. These
provisions do not apply at all to certain corporations or
transactions. Among such exceptions is one for corporations
who elect in their certificates of incorporation not to be
governed by these provisions. General Signal has not presently
made such an election. An amendment to the General Signal
Certificate of Incorporation would not be effective
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until eighteen months following its adoption by majority vote of the
shares of non-interested stockholders and would not apply to
those who were already interested stockholders.
Delaware law prevents an "interested stockholder"
(defined as a holder who acquires 15% or more of a target
company's stock) from entering into a business combination
within three years after the date it acquires such stock.
However, a business combination is permitted (i) if prior to
the date the stockholder became an interested stockholder, the
board of directors of the target company approved either the
business combination or such acquisition of stock, (ii) if at
the time the interested stockholder acquired such 15% interest,
it acquired 85% or more of the outstanding stock of the
corporation, excluding shares held by directors who are also
officers and shares held under certain employee stock plans or
(iii) if the business combination is approved by the target
company's board of directors and two-thirds of the outstanding
shares voting at an annual or special meeting of stockholders,
excluding shares held by the interested stockholder. This
provision applies automatically to Delaware corporations except
those corporations with 2,000 or fewer stockholders of record
and whose voting stock is not listed on a national securities
exchange or authorized for quotation on an interdealer
quotation system of a registered national securities
association. Additional exceptions allow corporations, in
certain instances, to adopt certificates of incorporation or
by-laws that elect not to be governed by these provisions.
Data Switch has not so elected; any amendment to effect such an
election would not be effective for 12 months and would not
apply to those who were already interested stockholders.
Appraisal Rights
Under New York and Delaware law, holders of shares
have the right, in certain circumstances, to dissent from
certain corporate reorganizations by demanding payment in cash
for their shares equal to the fair value (excluding any
appreciation or depreciation as a consequence or in expectation
of the transaction) of such shares, as determined by agreement
with the corporation or by an independent appraiser appointed
by a court in an action timely brought by the corporation or
the dissenters.
New York law affords dissenters' rights of appraisal
upon certain mergers, consolidations, sales and other
dispositions of assets requiring stockholder approval and share
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exchanges. Delaware law grants dissenters' appraisal rights
only in the case of certain mergers and not in the case of a
sale or transfer of assets or a purchase of assets for stock
regardless of the number of shares being issued. Delaware law
does not grant appraisal rights in a merger in respect of
shares of any class of stock (i) listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record
by more than 2,000 stockholders, unless the plan of merger
converts such shares into anything other than stock of the
surviving corporation or stock of another corporation which is
either listed on a national securities exchange or designated
as a national market system security on an interdealer
quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 stockholders
(or cash in lieu of fractional shares or some combination of
the above). New York has no exceptions to such rights
comparable to those afforded by Delaware law.
Limitation on Directors' Liability
Under New York law, a corporation's certificate of
incorporation may contain a provision limiting or eliminating
the personal liability of directors to the corporation or its
stockholders for damages for breaches of duty in such capacity.
No such provision may eliminate or limit liability if a
judgment or other final adjudication establishes that the
director's acts or omissions (i) were in bad faith,
(ii) involved intentional misconduct or a knowing violation of
law, (iii) involved financial profit or some other advantage to
which the director was not legally entitled or (iv) resulted in
violation of a statute prohibiting certain dividend
declarations, certain payments to stockholders after
dissolution, and particular types of loans. In addition, no
such provision may eliminate or limit the liability of a
director for acts occurring prior to adoption of the limitation
of liability. The General Signal Certificate of Incorporation
contains a provision limiting the liability of the directors
except to the extent that such exemption from liability is not
permitted under New York law.
Delaware law allows a corporation to limit or
eliminate the personal liability of directors to the
corporation and its stockholders for monetary damages for
breaches of a director's fiduciary duty as a director.
However, such a limitation does not affect the liability of a
director (i) for any breach
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of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) for intentional or negligent payment of unlawful
dividends or stock redemptions or (iv) for any transaction
from which the director derived an improper personal benefit.
Additionally, the corporation may not limit or eliminate
liability for acts or omissions occurring prior to the
effective date of such a provision in the corporate certificate
of incorporation.
Indemnification
Both New York and Delaware law contain provisions
setting forth conditions under which a corporation may
indemnify its directors and officers. These provisions are
generally referred to as "statutory indemnification"
provisions. Both also permit corporations to adopt by-laws
that provide for additional indemnification of directors and
officers. These non-exclusive provisions are generally
referred to as "non-statutory indemnification" provisions.
Non-statutory indemnification provisions are generally adopted
to expand the circumstances and liberalize the conditions under
which indemnification will occur. New York law contains
specific restrictions on the kind of matters for which
non-statutory indemnification will be permitted; Delaware law
does not contain any specific restrictions.
The General Signal By-Laws require it to indemnify to
the maximum extent permissible under New York law its officers
and directors for liability arising out of their actions in
such capacity. No indemnification is provided to a director or
officer who is finally adjudicated (i) to have committed acts
in bad faith or resulting from active and deliberate
dishonesty, that, in either case, were material to the cause of
action adjudicated or (ii) to have personally gained a
financial profit or other advantage to which such director was
not legally entitled. Directors and officers are indemnified
for acts occurring prior to adoption of the General Signal
By-Laws.
The Data Switch Restated Certificate of Incorporation
requires it to indemnify to the maximum extent permissible
under Delaware law its officers and directors for liability
arising out of their actions in such capacity.
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Loans to Directors and Officers
Under New York law, a corporation may make a loan to
a director only after authorization by the affirmative vote of
a majority of shares other than those of the director-borrower.
Under Delaware law, a corporation may make loans to, guarantee
the obligations of, or otherwise assist, its officers or other
employees and those of its subsidiaries, including any officer
or employee who is a director of a corporation or any of its
subsidiaries, when such action, in the judgment of the
corporation's directors, may reasonably be expected to benefit
the corporation.
Special Meetings
Under New York and Delaware law, special meetings of
stockholders may be called by the board of directors and by
such other person or persons authorized to do so by the
corporation's certificate of incorporation or by-laws. In
addition, New York law provides that if, for a period of one
month after the date fixed by or under the by-laws for the
annual meeting of stockholders, or if no date has been fixed
for a period of 13 months after the last annual meeting, there
is a failure to elect a sufficient number of directors to
conduct the business of the corporation, the board of directors
shall call a special meeting for the election of directors. If
the board fails to call such meeting within 14 days of
expiration of that period of time, or if it is so called but
there is a failure to elect such directors for a period of two
months after the expiration of such period, holders of 10% of
the shares entitled to vote in an election of directors may
demand the call of a special meeting for the election of
directors. Under Delaware law, if an annual meeting is not
held within 30 days of the date designated for such a meeting,
or is not held for a period of 13 months after the last annual
meeting, the Delaware Court of Chancery may summarily order a
meeting to be held upon the application of any stockholder or
director. In both New York and Delaware, the number of shares
represented at such meeting constitutes a quorum without regard
to other provisions of law.
The General Signal By-Laws provide that a special
meeting of stockholders may be called only by the Board of
Directors or the Chairman of the Board, and shall be called by
the Secretary upon the written request of stockholders owning
at least two-thirds of the outstanding shares of stock entitled
to vote.
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The Data Switch By-Laws provide that special meetings
of stockholders may be called at any time by the President or
Secretary, the Board of Directors or by the holders of 20% or
more of outstanding convertible preferred stock.
Stockholder Action
Under New York and Delaware law, unless the
certificate of incorporation provides otherwise, stockholder
action is generally by majority vote, except under New York
law, directors are elected by a plurality vote. General
Signal's Certificate of Incorporation requires the affirmative
vote of two-thirds of all outstanding shares entitled to vote
to (1) remove directors, (2) adopt, amend or repeal any By-Law,
or any provision of the Certificate of Incorporation, relating
to (i) the number, classification and term of office of
directors, (ii) the quorum of directors required for the
transaction of business, (iii) the filling of newly created
directorships and vacancies occurring in the Board of
Directors, (iv) the removal of directors, or (v) the power of
the Board of Directors to adopt, amend or repeal By-Laws of
General Signal or the vote of the Board of Directors required
for any such adoption, amendment or repeal or (3) amend or
repeal the section of its Certificate of Incorporation
requiring such action. Data Switch's Certificate of
Incorporation permits the Board of Directors of Data Switch to
vote without the assent or vote of the stockholders. Data
Switch's By-Laws provide for the election of directors by a
plurality vote.
Stockholder Action by Written Consent
Under New York law, any stockholder action required
or permitted to be taken by stockholder vote may be taken with
the unanimous written consent of stockholders. The certificate
of incorporation may provide, to the extent it is not
inconsistent with New York law, that such stockholder action
may be taken upon the written consent of less than all
outstanding shares. The General Signal Certificate of
Incorporation does not provide for written consent by less than
all of the stockholders.
Unless a certificate of incorporation provides
otherwise, Delaware law allows any action required to be taken,
or which may be taken, at an annual or special meeting of
stockholders to be taken without a meeting without prior notice
and without a vote so long as the written consent of not less
than the minimum number of votes that would be necessary to
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authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted is delivered to
the corporation.
Payment of Dividends
Under both New York and Delaware law, a corporation
may generally pay dividends out of surplus. New York requires
a board of directors to make certain disclosures when paying
dividends out of any account other than earned surplus.
Delaware law also permits a corporation to pay dividends, if
there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal
year. Dividends out of net profits may not be paid when the
capital of the corporation amounts to less than the aggregate
amount of capital represented by the issued and outstanding
stock of all classes having a preference upon the distribution
of assets.
Rights or Options
New York law requires that a plan to issue, or the
issuance of any rights or options to directors, officers and
employees as an incentive to service or continued service with
the corporation, a subsidiary or affiliate be approved by the
vote of the holders of a majority of the outstanding shares
entitled to vote thereon. Such approval is not required for
the issuance of any rights or options of a corporation in
substitution for rights or options issued by another
corporation, in connection with such other corporation's merger
or consolidation with, or the acquisition of its shares or all
or part of its assets by, the corporation or its subsidiary.
Under Delaware law, rights or options to purchase shares of any
class of stock may be authorized by a corporation's board of
directors.
In addition, under both New York and Delaware law, a
corporation may create and issue rights or options entitling
the holders thereof to purchase from the corporation any shares
of its capital stock on terms and conditions set by its board
of directors. New York law specifically permits a "resident
domestic corporation" to restrict the exercise, or transfer of
any rights or options by an interested stockholder (defined as
a beneficial owner of 20% or more of its outstanding voting
stock). Delaware does not have a comparable statutory
provision but Delaware courts have upheld rights or options
which contain similar limitations.
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Preemptive Rights
Under New York law, unless a certificate of
incorporation provides otherwise, stockholders have certain
preemptive rights. In general, these rights allow stockholders
whose unlimited dividend rights or voting rights would be
adversely affected by the issuance of new stock to purchase, on
terms and conditions set by the board of directors, that
proportion of the new issue that would preserve the relative
dividend or voting rights of such stockholders. However, the
General Signal Certificate of Incorporation provides that its
stockholders do not possess such preemptive rights. Instead,
the General Signal Board may dispose of new issues to any
persons, on such lawful terms, as it shall determine.
Delaware law states that, absent a provision in a
corporation's certificate of incorporation, a stockholder does
not possess preemptive rights unless such rights arose prior to
July 3, 1967 and were not terminated subsequently by
appropriate action. Under Data Switch's Restated Certificate
of Incorporation no holder of capital stock of Data Switch
shall have any preemptive rights to subscribe to an additional
issue of such class of capital stock, or to any security
convertible into such class of capital stock or any other class
of capital stock.
The foregoing summary does not purport to be a
complete statement of the rights of holders of Common Stock and
Data Switch Common Stock under, and is qualified in its
entirety by reference to, New York law and Delaware law,
respectively, and the General Signal and Data Switch
Certificates of Incorporation and By-Laws.
LEGAL MATTERS
Certain legal matters in connection with the Common
Stock being offered hereby will be passed upon for General
Signal by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York.
EXPERTS
The consolidated financial statements and schedules
of General Signal Corporation at December 31, 1994 and 1993 and
for each of the three years in the period ended December 31,
1994, appearing or incorporated by reference in General Signal
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Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon
included or incorporated by reference therein and incorporated
herein by reference. Such financial statements are
incorporated herein in reliance upon such reports given upon
the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements, including
financial statement schedules, of Data Switch and consolidated
subsidiaries incorporated herein by reference to the Annual
Report on Form 10-K of Data Switch for the year ended December
31, 1994, have been so incorporated in reliance on the reports
of Coopers & Lybrand L.L.P., independent accountants, given
upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Best Power
Technology, Inc. at December 31, 1994 and 1993 and for each of
the three years in the period ended December 31, 1994, included
in General Signal Corporation's current report on Form 8-K
dated June 26, 1995 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such
financial statements are incorporated herein in reliance upon
such report given upon the authority of such firm as experts in
accounting and auditing.
STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1996
Annual Meeting of Stockholders to be eligible for inclusion in
General Signals's proxy statement, they must be received by
General Signal at its principal office no later than November
22, 1995.
Annex A
AGREEMENT AND PLAN
OF MERGER
BY AND AMONG
GENERAL SIGNAL CORPORATION,
GENERAL SIGNAL ACQUISITION CORPORATION
AND
DATA SWITCH CORPORATION
DATED AS OF MAY 8, 1995
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
Section 1.01. The Merger ........................................ 2
Section 1.02. Effective Time .................................... 2
Section 1.03. Certificate of Incorporation and
By-Laws of Surviving Corporation ................ 2
Section 1.04. Directors and Officers of Surviving
Corporation ..................................... 2
Section 1.05. Stockholders' Meeting ............................. 3
Section 1.06. Filing of Certificate of Merger ................... 3
Section 1.07. Further Assurances ................................ 3
ARTICLE II
CONVERSION OF SHARES
Section 2.01. Shares ............................................ 3
Section 2.02. Newco Common Stock ................................ 5
Section 2.03. Exchange of Shares ................................ 5
Section 2.04. Effect on Company Options ......................... 6
Section 2.05. Fractional Shares ................................. 7
Section 2.06. No Appraisal Rights ............................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Section 3.01. Organization ...................................... 7
Section 3.02. Capitalization .................................... 8
Section 3.03. Authority Relative to This Agree-
ment ............................................ 8
Section 3.04. No Violations, Etc. ............................... 9
Section 3.05. Registration Statement; Proxy
Statement ....................................... 10
Section 3.06. SEC Filings ....................................... 11
Section 3.07. Financial Statements .............................. 12
Section 3.08. Absence of Material Adverse Change ................ 12
Section 3.09. Litigation ........................................ 12
Section 3.10. Compliance with Law ............................... 13
Section 3.11. Disclosure ........................................ 13
Section 3.12 Finders or Brokers................................. 13
Section 3.13 Accounting Matters................................. 13
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.01. Organization and Qualification .................... 13
Section 4.02. Authority Relative to This Agreement .............. 14
Section 4.03. No Violations, Etc. ............................... 15
Section 4.04. Board Recommendation .............................. 16
Section 4.05. Accounting Matters ................................ 16
Section 4.06. State Antitakeover Statutes ....................... 16
Section 4.07. Fairness Opinion .................................. 16
Section 4.08. Rights Agreement .................................. 16
Section 4.09. Affiliates ........................................ 17
Section 4.10. Stockholder Letter Agreement ...................... 17
Section 4.11. Registration Statement; Proxy Statement ........... 17
Section 4.12. Finders or Brokers ................................ 18
Section 4.13. SEC Filings ....................................... 18
Section 4.14. Financial Statements .............................. 19
Section 4.15. Absence of Undisclosed Liabilities ................ 19
Section 4.16. Absence of Changes or Events ...................... 19
Section 4.17. Capitalization .................................... 21
Section 4.18. Capital Stock of Subsidiaries ..................... 22
Section 4.19. Litigation ........................................ 22
Section 4.20. Insurance ......................................... 22
Section 4.21. Title to and Condition of Properties .............. 23
Section 4.22. Leases; Contracts ................................. 23
Section 4.23. Contracts and Commitments ......................... 24
Section 4.24. Labor Matters ..................................... 25
Section 4.25. Compliance with Law ............................... 26
Section 4.26. Employment and Labor Contracts .................... 26
Section 4.27. Intellectual Property Rights ...................... 26
Section 4.28. Taxes ............................................. 27
Section 4.29. Employee Benefit Plans; ERISA ..................... 29
Section 4.30. Environmental Matters ............................. 33
Section 4.31. Directors, Officers and Compensation
of Employees .................................... 37
Section 4.32. Disclosure ........................................ 37
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business of the Company ................ 38
Section 5.02. No Solicitation ................................... 41
Section 5.03. Access to Information ............................. 42
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Section 5.04. Registration Statement and Proxy
Statement ....................................... 43
Section 5.05. Commercially Reasonable Efforts;
Other Actions ................................... 44
Section 5.06. Public Announcements .............................. 44
Section 5.07. Notification of Certain Matters ................... 45
Section 5.08. Indemnification ................................... 45
Section 5.09. Expenses .......................................... 46
Section 5.10. Affiliates ........................................ 46
Section 5.11. Stock Exchange Listings ........................... 46
Section 5.12. Company and Subsidiary Actions .................... 46
Section 5.13. Environmental Matters ............................. 47
Section 5.14. Resignation of Directors .......................... 47
Section 5.15. Stock Purchase Plan ............................... 47
Section 5.16. Company Rights Agreement .......................... 47
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS
OF PARENT, NEWCO AND THE COMPANY
Section 6.01. Registration Statement ............................ 48
Section 6.02. Stockholder Approval .............................. 48
Section 6.03. Listings .......................................... 48
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PARENT AND NEWCO
Section 7.01. Representations and Warranties True ............... 48
Section 7.02. Performance ....................................... 49
Section 7.03. Certificates ...................................... 49
Section 7.04. Certain Proceedings ............................... 49
Section 7.05. Consents and Approvals ............................ 49
Section 7.06. Material Adverse Change ........................... 49
Section 7.07. Opinion of Counsel ................................ 50
Section 7.08. Tax Matters ....................................... 50
Section 7.09. Environmental Matters ............................. 50
Section 7.10. Average Market Value .............................. 50
Section 7.11. Other Matters ..................................... 50
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
Section 8.01. Representations and Warranties True ............... 51
Section 8.02. Performance ....................................... 51
Section 8.03. Certificates ...................................... 51
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Section 8.04. Certain Proceedings ............................... 52
Section 8.05. Opinion of Counsel ................................ 52
ARTICLE IX
CLOSING
Section 9.01. Time and Place .................................... 52
Section 9.02. Filings at the Closing ............................ 52
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.01. Termination ....................................... 52
Section 10.02. Termination by Parent ............................. 53
Section 10.03. Termination by the Company ........................ 54
Section 10.04. Procedure for Termination ......................... 54
Section 10.05. Effect of Termination and
Abandonment ..................................... 54
ARTICLE XI
DEFINITIONS
Section 11.01. Terms Defined in This Agreement ................... 56
ARTICLE XII
MISCELLANEOUS
Section 12.01. Amendment and Modification ........................ 57
Section 12.02. Waiver of Compliance; Consents .................... 57
Section 12.03. Survivability; Investigations ..................... 58
Section 12.04. Notices ........................................... 58
Section 12.05. Assignment ........................................ 59
Section 12.06. Governing Law ..................................... 60
Section 12.07. Counterparts ...................................... 60
Section 12.08. Severability ...................................... 60
Section 12.09. Interpretation .................................... 60
Section 12.10. Entire Agreement .................................. 61
Signatures .......................................................... S-1
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EXHIBITS
Exhibit A Amendment No. 1 to Rights Agreement
Exhibit B Form of Affiliate Letter
Exhibit C Form of Stockholder Letter
Agreement
Exhibit D-1 Form of Opinion of Parker Duryee
Rosoff & Haft
Exhibit D-2 Form of Opinion of Shawn A. Smith,
Esq.
Exhibit D-3 Form of Opinion of D. David Cohen,
Esq.
Exhibit E Form of Tax Opinion of Cahill
Gordon & Reindel
Exhibit F Form of Opinion of Cahill Gordon &
Reindel
Exhibit G Form of Company Officer's
Certificate
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AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of May 8, 1995
(the "Agreement"), by and among General Signal Corporation, a
New York corporation ("Parent"), General Signal Acquisition
Corporation, a Delaware corporation ("Newco"), which is a
direct wholly owned Subsidiary of Parent, and Data Switch
Corporation, a Delaware corporation (the "Company"). Newco and
the Company are hereinafter sometimes collectively referred to
as the "Constituent Corporations."
RECITALS
WHEREAS, Newco desires to merge with the Company and
the Company desires to merge with Newco, all upon the terms and
subject to the conditions of this Agreement;
WHEREAS, Parent and the Company desire that the
merger of Newco and the Company and the other transactions
contemplated by this Agreement result in a strategic alliance
of the products, markets, people, business and assets of the
Company with products, markets, people, business, assets and
capital strengths of Parent and believe that the combined
opportunities and prospects, in which their respective
stockholders will participate, will be greater than the
opportunities and prospects of the Company and the Parent
separately;
WHEREAS, it is intended that the merger of Newco and
the Company be recorded for accounting purposes as a pooling of
interests, and for Federal income tax purposes as a tax-free
reorganization described in Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code") in which the
shareholders of the Company will receive voting shares of
Parent in exchange for their voting shares of the Company and
thereby continue to participate in the equity and appreciation
of the combined enterprise; and
WHEREAS, Parent, Newco and the Company desire to make
certain representations, warranties, covenants and agreements
in connection with the merger of Newco and the Company.
NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties, covenants, agreements
and conditions contained herein, the parties hereto agree as
follows:
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ARTICLE I
THE MERGER
Section 1.01 The Merger. (a) In accordance with
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the provisions of this Agreement and the General Corporation
Law of the State of Delaware (the "Delaware Act"), at the
Effective Time (as hereinafter defined), Newco shall be merged
(the "Merger") with and into the Company, and the Company shall
be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") and shall continue its corporate
existence under the laws of the State of Delaware. At the
election of Parent, any direct wholly owned subsidiary of
Parent incorporated under the laws of the State of Delaware may
be substituted for Newco as a Constituent Corporation in the
Merger. The name of the Surviving Corporation shall be "Data
Switch Corporation". At the Effective Time the separate
existence of Newco shall cease.
(b) The Merger shall have the effects on Newco and
the Company as constituent corporations of the Merger as
provided under the Delaware Act.
Section 1.02 Effective Time. The Merger shall
--------------
become effective at the time of filing of, or at such later
time specified in, a certificate of merger, in the form
required by and executed in accordance with the Delaware Act,
with the Secretary of State of the State of Delaware in
accordance with the provisions of Sec. 251 of the Delaware Act
(the "Certificate of Merger"). The date and time when the
Merger shall become effective is herein referred to as the
"Effective Time."
Section 1.03 Certificate of Incorporation and
--------------------------------
By-Laws of Surviving Corporation. The Restated Certificate of
--------------------------------
Incorporation and By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall be the
Certificate of Incorporation and By-Laws of the Surviving
Corporation until thereafter amended as provided by law.
Section 1.04 Directors and Officers of Surviving
-----------------------------------
Corporation. The directors of Newco immediately prior to the
-----------
Effective Time will be the initial directors of the Surviving
Corporation, and the officers of the Company immediately prior
to the Effective Time will be the initial officers of the
Surviving Corporation, in each case until their successors are
elected and qualified.
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Section 1.05 Stockholders' Meeting. The Company
---------------------
will take all action necessary in accordance with applicable
law and its Restated Certificate of Incorporation and By-Laws
to convene a special meeting of its stockholders (the "Special
Meeting") as soon as practicable to consider and vote upon the
approval of this Agreement. The Company, through its Board of
Directors, shall recommend to its stockholders approval of this
Agreement (which recommendation shall be contained in the Proxy
Statement (as hereinafter defined)) and shall use all
commercially reasonable efforts to solicit from its
stockholders proxies in favor of approval and adoption of this
Agreement.
Section 1.06 Filing of Certificate of Merger. At
-------------------------------
the Closing (as hereinafter defined), Parent, Newco and the
Company shall cause a Certificate of Merger to be executed and
filed with the Secretary of State of the State of Delaware as
provided in Sec. 251 of the Delaware Act, and shall take any and
all other lawful actions and do any and all other lawful things
to cause the Merger to become effective.
Section 1.07 Further Assurances. If, at any time
------------------
after the Effective Time, the Surviving Corporation shall
consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or
assets of either of the Constituent Corporations acquired or to
be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or
otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of
each of the Constituent Corporations or otherwise, all such
other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
CONVERSION OF SHARES
Section 2.01 Shares. (a) At the Effective Time,
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each share of common stock, par value $.01 per share, of the
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Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (except for shares
owned by the Company as treasury stock or owned by any
Subsidiary of the Company) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be
converted into the right to receive the fraction of a share
(the "Exchange Ratio") of common stock, par value $1.00 per
share, of Parent ("Parent Common Stock") determined by dividing
$4.55 by the Average Market Value (as hereinafter defined);
provided, however, that the Exchange Ratio shall be calculated
to five decimal places and shall in no event be greater than
0.14677 of a share of Parent Common Stock or less than 0.10581
of a share of Parent Common Stock. Holders of Company Common
Stock shall also have the right to receive together with each
share of Parent Common Stock issued in the Merger pursuant to
this Section 2.01(a), an associated common stock purchase right
("Parent Purchase Right") pursuant to the Rights Agreement
dated as of March 7, 1986, as amended, between Parent and the
Rights Agent named therein. References herein to the Company
Common Stock being converted in the Merger shall be deemed to
include the associated Company Purchase Rights (as hereinafter
defined) and to the Parent Common Stock issuable in the Merger
shall be deemed to include the associated Parent Purchase
Rights.
The shares of Parent Common Stock and Parent Purchase
Rights to be delivered by Parent in exchange for shares of
Company Common Stock pursuant to this Section 2.01(a) are
hereinafter sometimes called the "Closing Consideration."
"Average Market Value" shall mean the arithmetic average of the
closing price per share of Parent Common Stock as reported on
the New York Stock Exchange (the "NYSE") composite tape for the
thirty (30) consecutive trading days ending with the last
trading day prior to the scheduled date of the Special Meeting
specified in the Proxy Statement. In the event of any change
in Parent Common Stock or Company Common Stock by reason of any
stock split, readjustment, stock dividend, exchange of shares,
reclassification, recapitalization or otherwise, the Exchange
Ratio shall be correspondingly adjusted.
(b) At the Effective Time, all shares of Company
Common Stock, by virtue of the Merger and without any action on
the part of the holders thereof, shall no longer be outstanding
and shall be cancelled and retired and shall cease to exist,
and each holder of a certificate representing any such shares
of Company Common Stock shall thereafter cease to have any
rights with respect to such shares of Company Common Stock,
except the right to receive the Closing Consideration for such
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shares of Company Common Stock specified in the foregoing
clause (a) upon the surrender of such certificate in accordance
with Section 2.03.
Section 2.02 Newco Common Stock. All shares of
------------------
common stock, par value $.01 per share, of Newco issued and
outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the
holder thereof, be converted at the Effective Time into such
number of newly issued shares of common stock of the Surviving
Corporation as shall equal the sum of (x) the number of shares
of Company Common Stock outstanding immediately prior to the
Effective Time and (y) the number of shares of Company Common
Stock underlying options to purchase Company Common Stock
assumed by Parent pursuant to Section 2.04.
Section 2.03 Exchange of Shares. (a) Promptly
------------------
after the Effective Time, Parent shall mail to each record
holder, as of the Effective Time, of an outstanding certificate
or certificates which immediately prior to the Effective Time
represented shares of Company Common Stock (the "Certificates")
a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the
Certificates to Parent or Parent's designated agent) and
instructions for use in effecting the surrender of the
Certificates for exchange. Upon surrender to Parent of a
Certificate, together with such letter of transmittal duly
executed together with any other required documents, the holder
of such Certificate shall be entitled to receive from Parent in
exchange therefor that number of shares of Parent Common Stock
which such holder has the right to receive under this Article
II, and such Certificate shall forthwith be cancelled. If any
shares of Parent Common Stock are to be issued to a person
other than the person in whose name the Certificate surrendered
is registered, it shall be a condition of exchange that the
Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person
requesting such exchange shall pay any transfer or other taxes
required by reason of the exchange to a person other than the
registered holder of the Certificate surrendered or such person
shall establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this
Section 2.03, each Certificate shall represent, for all
purposes, the right to receive the Closing Consideration in
respect of the number of shares of
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Company Common Stock evidenced by such Certificate, without any interest
thereon.
(b) From and after the Effective Time there shall be
no transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged as provided
in this Article II.
(c) Neither Parent nor the Surviving Corporation
shall be liable to any holder of shares of Company Common Stock
delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 2.04 Effect on Company Options. (a) As of
-------------------------
the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, each option to
purchase shares of Company Common Stock that is outstanding
under the Company Plans (as hereinafter defined) immediately
prior to the Effective Time, whether or not exercisable, shall
be assumed by Parent in such manner that each such option shall
be exercisable upon the same terms and conditions as under the
applicable Company Plan and the applicable option agreement
issued thereunder, except that (i) each such option shall be
exercisable for that number of shares of Parent Common Stock
(rounded up to the nearest whole share) into which the number
of shares of Company Common Stock subject to such option
immediately prior to the Effective Time would be converted
under Section 2.01 if such option were exercised prior to the
Effective Time, and (ii) the option price per share of Parent
Common Stock shall be an amount equal to the option price per
share of Company Common Stock subject to such option in effect
immediately prior to the Effective Time divided by the Exchange
Ratio (rounded up to the nearest whole cent); provided,
--------
however, that in the case of options intended to qualify as
-------
"incentive stock options" pursuant to Section 422 of the Code,
any such adjustment shall be made in such a manner as not to
disqualify such options as "incentive stock options."
(b) Prior to the Effective Time, the Company shall
(i) obtain any consents from holders of outstanding options to
purchase Company Common Stock granted under the Company Plans
and (ii) make any amendments to the terms of the Company Plans
or any award granted thereunder that, in the case of either (i)
or (ii), are necessary to give effect to the transactions
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contemplated by this Section 2.04; provided, however, that any
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such consents and amendments shall not change the vesting of
such options in accordance with their current terms.
Section 2.05 Fractional Shares. Notwithstanding any
-----------------
other provision of this Agreement, each holder of shares of
Company Common Stock who upon surrender of Certificates would
be entitled to receive a fraction of a share of Parent Common
Stock shall not be entitled to receive dividends on or vote
such fractional share and shall receive, in lieu of such
fractional share, cash in an amount equal to such fraction
multiplied by the Average Market Value. The fractional share
interests of each Company stockholder will be aggregated, and
no Company stockholder will receive cash in an amount equal to
or greater than the value of one full share of Parent Common
Stock. The parties hereto agree that the total cash
consideration that will be paid to the Company stockholders in
the Merger instead of issuing fractional shares of Parent
Common Stock will not exceed one percent of the total
consideration that will be issued in the Merger to the Company
stockholders in exchange for their shares of Company Common
Stock. All references in this Agreement to shares of Parent
Common Stock to be issued as Closing Consideration shall be
deemed to include any cash in lieu of fractional shares payable
pursuant to this Section 2.05.
Section 2.06 No Appraisal Rights. This Agreement
-------------------
provides that the stockholders of the Company shall be entitled
to notice of the Special Meeting. The Company Common Stock is
designated as a national market system security on NASDAQ and
the Parent Common Stock is listed on the NYSE and is
contemplated to be so designated and listed at the record date
for the Special Meeting. Therefore, in accordance with
Sec. 262(b) of the Delaware Act, no holder of shares of Company
Common Stock shall be entitled to appraisal rights.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND NEWCO
Each of Parent and Newco jointly and severally
represents and warrants to the Company as follows:
Section 3.01 Organization. Parent is a corporation
------------
duly organized, validly existing and in good standing under the
laws of the state of New York. Newco is a corporation duly
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organized, validly existing and in good standing under the laws
of the state of Delaware. Newco has not engaged in any
business since it was incorporated other than in connection
with the transactions contemplated by this Agreement. Parent
owns directly all of the outstanding capital stock of Newco.
Section 3.02 Capitalization. The authorized capital
--------------
stock of Parent consists of 150,000,000 shares of Parent Common
Stock and 10,000,000 shares of preferred stock, par value $1.00
per share ("Parent Preferred Stock"). As of April 30, 1995,
there are 47,256,691 shares of Parent Common Stock issued and
outstanding (excluding treasury shares), 16,680,568 shares of
Parent Common Stock held in Parent's treasury, and no shares of
Parent Preferred Stock outstanding. As of April 30, 1995 there
were 2,891,245 shares of Parent Common Stock reserved for
issuance upon the exercise of outstanding options and options
or restricted stock which may be granted under the stock
incentive plans of Parent (the "Parent Plans"), 2,532,000
shares of Parent Common Stock reserved for issuance upon the
conversion of the outstanding $100,000,000 aggregate principal
amount of 5 3/4% Convertible Subordinated Notes due 2002 of
Parent (the "Convertible Notes"), 118,675 shares of Parent
Common Stock reserved for issuance upon the exercise of the
outstanding warrants with an exercise price of $96.54 per share
and an expiration date of June 2, 1995 (the "1995 Warrants"),
and 442,542.812 shares of Parent Common Stock reserved for
issuance upon the exercise of the outstanding warrants with an
exercise price of $65.9406 per share and an expiration date of
April 23, 2002 (the "2002 Warrants"). Each share of Parent
Common Stock is, and each share of Parent Common Stock to be
issued at the Effective Time will be, when issued, accompanied
by one Parent Purchase Right. Except for the Parent Purchase
Rights, the Convertible Notes, the 1995 Warrants, the 2003
Warrants and the options granted under the Parent Plans, there
are not as of the date hereof any existing options, warrants,
calls, subscriptions, or other rights or other agreements or
commitments obligating Parent to issue, transfer or sell any
shares of its capital stock or any other securities convertible
into or evidencing the right to subscribe for any such shares.
All issued and outstanding shares of Parent Common Stock are,
and all shares of Parent Common Stock to be issued at the
Effective Time shall be, when issued, duly authorized and
validly issued, fully paid, non-assessable and free of
preemptive rights with respect thereto.
Section 3.03 Authority Relative to This Agreement.
------------------------------------
Each of Parent and Newco has full corporate power and authority
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to execute and deliver this Agreement and to consummate the
Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby
have been duly and validly authorized by the Board of Directors
of each of Parent and Newco and by Parent as the sole
stockholder of Newco and no other corporate proceedings on the
part of Parent or Newco are necessary to authorize this
Agreement or to consummate the Merger or the other transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Newco and,
assuming the due authorization and delivery hereof by the
Company, constitutes a valid and binding agreement of each of
Parent and Newco, enforceable against each of them in
accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors' rights generally or by general
equitable or fiduciary principles.
Section 3.04 No Violations, Etc. (a) Assuming that
------------------
all filings, permits, authorizations, consents and approvals
have been duly made or obtained as contemplated by this Section
3.04, the execution and delivery of this Agreement and the
consummation by Parent and Newco of the Merger and the other
transactions contemplated hereby will not (i) violate any
provision of the Certificate of Incorporation or By-Laws of
either Parent or Newco, (ii) violate any statute, rule,
regulation, order or decree of any public body or authority by
which Parent, Newco or any of their properties is bound, or
(iii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default
under, any license, franchise, permit, indenture, agreement or
other instrument to which Parent or Newco is a party, or by
which Parent, Newco or any of their properties is bound,
excluding from the foregoing clauses (ii) and (iii) violations,
breaches and defaults (x) which, either individually or in the
aggregate, would not either materially impair or preclude the
ability of Parent or Newco to consummate the Merger or the
other transactions contemplated hereby or have a material
adverse effect on the business, operations, assets, condition
(financial or otherwise) or results of operations of Parent and
its Subsidiaries taken as a whole ("Parent Material Adverse
Effect") or (y) for which Parent or Newco prior to the Merger
shall have received appropriate consents or waivers.
(b) No filing or registration with, or
authorization, consent or approval of, or notification to, any
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governmental entity is required by Parent or Newco in
connection with the execution and delivery of this Agreement or
the consummation by Parent and Newco of the Merger and the
other transactions contemplated hereby, except (i) in
connection with the applicable requirements of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) in connection, or in compliance, with the
provisions of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "Securities
Act"), (iii) the filing of appropriate merger documents as
required by Sec. 251 of the Delaware Act, (iv) such filings and
consents as may be required under any Environmental Law (as
hereinafter defined) pertaining to any notification, disclosure
or required approval triggered by the Merger or other
transactions contemplated hereby, (v) filings with, and
approval of, the NYSE and the Pacific Stock Exchange ("PSE") in
connection with obligations of Parent under Section 5.11,
(vi) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required
under the corporation, takeover or blue sky laws of various
states and (vii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to
be obtained or made, either individually or in the aggregate,
would not either materially impair or preclude the ability of
Parent or Newco to consummate the Merger and the other
transactions contemplated hereby or have a Parent Material
Adverse Effect.
Section 3.05 Registration Statement; Proxy
-----------------------------
Statement. None of the information supplied by either Parent
---------
or Newco for inclusion or incorporation by reference in (i) the
registration statement registering under the Securities Act the
Parent Common Stock to be issued at the Effective Time (such
registration statement as amended by any amendments thereto
being referred to herein as the "Registration Statement") or
(ii) the proxy statement/prospectus to be sent to the
stockholders of the Company in connection with the Special
Meeting, including all amendments and supplements thereto (the
"Proxy Statement") shall, in the case of the Registration
Statement, at (i) the time the Registration Statement becomes
effective and (ii) the Effective Time, and in the case of the
Proxy Statement, on the date the Proxy Statement is first
mailed to stockholders, at the time of the Special Meeting and
at the Effective Time, contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective
Time any event with respect to Parent or Newco shall occur
which is required
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to be described in the Registration Statement or Proxy Statement,
such event shall be so described, and an amendment or supplement
shall be promptly filed with the Securities and Exchange
Commission (the "SEC") and, as required by law, disseminated to
the stockholders of the Company. The Registration Statement and
Proxy Statement will (with respect to Parent and Newco) comply
as to form in all material respects with the applicable provisions
of the Securities Act and the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder
(the "Exchange Act"), as the case may be.
Section 3.06 SEC Filings. (a) Parent has filed
-----------
with the SEC all required forms, reports and documents required
to be filed by it with the SEC since January 1, 1993
(collectively, the "Parent SEC Reports"), all of which complied
as to form when filed in all material respects with the
applicable provisions of the Securities Act and the Exchange
Act, as the case may be. As of their respective dates the
Parent SEC Reports (including all exhibits and schedules
thereto and documents incorporated by reference therein) did
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 therein, in light of the
circumstances under which they were made, not misleading.
(b) Parent will deliver to the Company as soon as
they become available true and complete copies of any report or
statement mailed by it to its securityholders generally or
filed by it with the SEC, in each case subsequent to the date
hereof and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information
therein provided by the Company, as to which Parent and Newco
make no representation) 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 therein,
in light of the circumstances under which they are made, not
misleading and will comply in all material respects with all
applicable requirements of law. The audited consolidated
financial statements and unaudited consolidated interim
financial statements of Parent to be included or incorporated
by reference in such reports and statements will be prepared in
accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved
and will fairly present the consolidated financial position of
Parent as of the dates thereof and the consolidated results of
operations and consolidated cash flow for the periods then
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ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments and to the extent
they may not include footnotes or may be condensed or summary
statements).
Section 3.07 Financial Statements. The audited
--------------------
consolidated financial statements and unaudited consolidated
interim financial statements of Parent and its Subsidiaries
included or incorporated by reference in Parent's forms,
reports and documents filed with the SEC since January 1, 1993
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto), and fairly present the consolidated financial
position of Parent and its Subsidiaries as of the dates thereof
and the consolidated results of operations and consolidated
cash flows for the periods then ended (subject, in the case of
any unaudited interim financial statements, to normal year-end
adjustments and to the extent they may not include footnotes or
may be condensed or summary statements) and such audited
consolidated financial statements have been certified as such
(without exception) by Parent's independent accountants.
Section 3.08 Absence of Material Adverse Change.
----------------------------------
Since December 31, 1994, except as set forth in the Parent SEC
Reports furnished to the Company prior to the delivery of this
Agreement, there has been no change, or any development
involving a prospective change, in the business, operations,
assets, financial condition or results of operations of Parent
and its Subsidiaries taken as a whole that would have a Parent
Material Adverse Effect.
Section 3.09 Litigation. There is no (a) claim,
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action, suit or proceeding pending or, to the best knowledge of
Parent, threatened against or relating to Parent or any of its
subsidiaries before any court or governmental or regulatory
authority or body or arbitration tribunal, or (b) outstanding
judgment, order, writ, injunction or decree, or application,
request or motion therefor, of any court, governmental agency
or arbitration tribunal in a proceeding to which Parent, any
subsidiary of Parent or any of their respective assets was or
is a party except, in the case of clauses (a) and (b) above,
such as would not, individually or in the aggregate, either
materially impair or preclude Parent's ability to consummate
the Merger or the other transactions contemplated hereby or
have a Parent Material Adverse Effect.
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Section 3.10 Compliance with Law. Neither Parent
-------------------
nor any of its subsidiaries has violated or failed to comply
with any statute, law, ordinance, regulation, rule or order of
any foreign, federal, state or local government or any other
governmental department or agency, or any judgment, decree or
order of any court, applicable to its business or operations,
except where any such violation or failure to comply would not,
individually or in the aggregate, have a Parent Material
Adverse Effect. Parent and its Subsidiaries have all permits,
licenses and franchises from governmental agencies required to
conduct their businesses as now being conducted, except for
such permits, licenses and franchises the absence of which
would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
Section 3.11 Disclosure. No representation or
----------
warranty by Parent and no statement or information relating to
Parent or any of its Subsidiaries contained herein, or in any
certificate furnished by or on behalf of Parent or Newco to the
Company in connection herewith, contains or will contain any
untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which
they were made, not misleading.
Section 3.12 Finders or Brokers. Except for
------------------
Donaldson, Lufkin & Jenrette Securities Corporation, neither
Parent nor Newco has employed any investment banker, broker,
finder or intermediary in connection with the transactions
contemplated hereby who might be entitled to a fee or any
commission the receipt of which is conditioned upon
consummation of the Merger.
Section 3.13 Accounting Matters. Parent has not
------------------
taken or agreed to take any action that would prevent Parent
from accounting for the business combination to be effected by
the Merger as a "pooling of interests."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and
Newco that:
Section 4.01 Organization and Qualification. Each
------------------------------
of the Company and its Subsidiaries is a corporation duly
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organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business, and is in good standing, in
each jurisdiction (as listed in Section 4.01 of the disclosure
statement being delivered confidentially to Parent by the
Company to Parent concurrently with the execution and delivery
of this Agreement (the "Disclosure Statement")) where the
character of its properties owned or leased or the nature of
its activities makes such qualification necessary, except for
failures to be so qualified or in good standing which would
not, individually or in the aggregate, have a material adverse
effect on the business, operations, assets, condition
(financial or otherwise) or prospects of the Company and its
Subsidiaries taken as a whole (a "Company Material Adverse
Effect"); provided, however, the matters described in Section
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4.01 of the Disclosure Statement shall not constitute, of
themselves individually or in the aggregate, a Company Material
Adverse Effect. Neither the Company nor any of its
Subsidiaries is in violation of any of the provisions of its
Restated Certificate of Incorporation (or other applicable
charter document) or By-laws. Set forth in Section 4.01 of the
Disclosure Statement are accurate and complete copies of the
Restated Certificate of Incorporation (or other applicable
charter document) and By-laws, as currently in effect, of each
of the Company and its Subsidiaries.
Section 4.02 Authority Relative to This Agreement.
------------------------------------
The Company has full corporate power and authority to execute
and deliver this Agreement and to consummate the Merger and the
other transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of the Company
and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the
Merger and the other transactions contemplated hereby (other
than, with respect to the Merger, the approval of a majority of
the outstanding shares of Company Common Stock at the Special
Meeting or any adjournment thereof as required by the Delaware
Act). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization,
execution and delivery hereof by Parent and Newco, constitutes
a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the
-15-
extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors' rights generally
or by general equitable or fiduciary principles.
Section 4.03 No Violations, Etc. Except for the
------------------
filings of the Certificate of Merger and the Proxy Statement,
the filing and effectiveness of the Registration Statement and
the filings required under and in compliance with the HSR Act
and as set forth in Section 4.03 of the Disclosure Statement,
no filing with, notification to and no permit, authorization,
consent or approval of, any governmental entity is necessary
for the consummation by the Company of the Merger or the other
transactions contemplated hereby, excluding from the foregoing,
permits, authorizations, consents, approvals and notices which
if not obtained, made or given, either individually or in the
aggregate, would not either (a) materially impair or preclude
the Company's ability to consummate the Merger or the other
transactions contemplated hereby, (b) otherwise materially
restrict Parent's or the Surviving Corporation's exercise of
full rights to own and operate the business of the Company or
(c) have a Company Material Adverse Effect. Neither the
execution and delivery of this Agreement nor the consummation
of the Merger or the other transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof
will (i) subject to obtaining the approval of a majority of the
outstanding shares of Company Common Stock at the Special
Meeting or any adjournment thereof as required by the Delaware
Act, conflict with or result in any breach of any provision of
the Restated Certificate of Incorporation (or other comparable
charter documents) or By-Laws of the Company or any of its
Subsidiaries, (ii) other than as set forth in Section 4.03 of
the Disclosure Statement, result in a violation or breach of,
or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination,
cancellation, acceleration, redemption or repurchase) under,
any of the terms, conditions or provisions of any (x) note,
bond, mortgage, indenture, or deed of trust or (y) license,
lease, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any
of them or any of their properties or assets may be bound or
(iii) violate any order, writ, injunction or decree applicable
to the Company, any of its Subsidiaries or any of their
properties or assets, excluding from the foregoing clauses
(ii)(y) and (iii) violations, breaches or defaults which,
either individually or in the aggregate, would not either
materially impair or preclude the Company's ability to
consummate the Merger or the
-16-
other transactions contemplated hereby or have a Company Material
Adverse Effect.
Section 4.04 Board Recommendation. The Board of
--------------------
Directors of the Company has, by a unanimous vote at a meeting
of such Board duly held on, or by unanimous written consent of
such Board dated, May 5, 1995, approved and adopted this
Agreement, the Merger and the other transactions contemplated
hereby, determined that the consideration to be received by the
holders of shares of Company Common Stock pursuant to the
Merger is fair to the holders of such shares and recommended
that the holders of such shares approve and adopt this
Agreement, the Merger and the other transactions contemplated
hereby.
Section 4.05 Accounting Matters. The Company has
------------------
not taken or agreed to take any action that would prevent
Parent from accounting for the business combination to be
effected by the Merger as a "pooling of interests."
Section 4.06 State Antitakeover Statutes. The
---------------------------
Company has granted all approvals and taken all other steps
necessary to exempt the Merger and the other transactions
contemplated hereby (including, without limitation, the
execution and delivery to Parent of the Stockholder Letter
Agreements (as hereinafter defined)) from the requirements and
provisions of Sec. 203 of the Delaware Act and any other
applicable state antitakeover statute or regulation such that
none of the provisions of such Sec. 203 or any other "business
combination," "moratorium," "control share" or other state
antitakeover statute or regulation (x) prohibits or restricts
the Company's ability to perform its obligations under this
Agreement or its ability to consummate the Merger and the other
transactions contemplated hereby, (y) would have the effect of
invalidating or voiding this Agreement, any provision hereof or
any Stockholder Letter Agreement, or (z) would subject Parent
or Newco to any material impediment or condition in connection
with the exercise of any of their respective rights under this
Agreement.
Section 4.07 Fairness Opinion. The Company has
----------------
received the opinion of Needham & Company to the effect that as
of the date hereof the financial terms of the Merger are fair
to the Company's stockholders from a financial point of view.
Section 4.08 Rights Agreement. The Rights Agreement
----------------
dated as of June 21, 1988 between the Company and Manufacturers
Hanover Trust Company (now Chemical Bank), as Rights Agent (the
-17-
"Company Rights Agreement"), has been amended in the manner
provided in Exhibit A hereto to provide that none of Parent,
Newco or any of their affiliates will become an "Acquiring
Person" and that no "Triggering Event,", "Distribution Date" or
"Unapproved Transaction" (as such terms are defined in the
Company Rights Agreement) will occur as a result of the
approval, execution or delivery of this Agreement or the
consummation of the Merger or the other transactions
contemplated hereby, including without limitation the execution
and delivery to Parent of the Stockholder Letter Agreements.
Section 4.09 Affiliates. Section 4.09 of the
----------
Disclosure Statement identifies all persons who, as of the date
hereof, may be deemed to be "affiliates" of the Company for
purposes of Rule 145 under the Securities Act ("Affiliates")
and the Company has delivered to Parent the written agreement
of each such person, substantially in the form of Exhibit B
hereto.
Section 4.10 Stockholder Letter Agreement. On or
----------------------------
prior to the date hereof, Richard E. Greene has delivered to
Parent a letter substantially in the form of Exhibit C hereto
(such letter a "Stockholder Letter Agreement").
Section 4.11 Registration Statement; Proxy
-----------------------------
Statement. None of the information supplied by the Company for
---------
inclusion or incorporation by reference in the Registration
Statement or Proxy Statement shall, in the case of the
Registration Statement, at the time the Registration Statement
becomes effective and the Effective Time, and in the case of
the Proxy Statement, at the date the Proxy Statement is first
mailed to stockholders, at the time of the Special Meeting and
at the Effective Time, 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. If at any time prior to the Effective
Time any event with respect to the Company or any of its
Subsidiaries shall occur which is required to be described in
the Registration Statement or Proxy Statement, such event shall
be so described, and an amendment or supplement shall be
promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The
Registration Statement and Proxy Statement will (with respect
to the Company and its Subsidiaries) comply as to form in all
material respects with the applicable provisions of the
Securities Act and Exchange Act, as the case may be.
-18-
Section 4.12 Finders or Brokers. Except for Needham
------------------
& Company, neither the Company nor any Subsidiary of the
Company has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated
hereby who might be entitled to a fee or any commission the
receipt of which is conditioned upon consummation of the
Merger.
Section 4.13 SEC Filings. (a) The Company has
-----------
filed with the SEC all required forms, reports and documents
required to be filed by it with the SEC since January 1, 1993
(collectively, the "Company SEC Reports"), all of which
complied as to form when filed in all material respects with
the applicable provisions of the Securities Act or the Exchange
Act, as the case may be. As of their respective dates the
Company SEC Reports (including all exhibits and schedules
thereto and documents incorporated by reference therein) did
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 therein, in light of the
circumstances under which they were made, not misleading.
(b) The Company will deliver to Parent as soon as
they become available true and complete copies of any report or
statement mailed by it to its securityholders generally or
filed by it with the SEC, in each case subsequent to the date
hereof and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information
therein provided by Parent or Newco, as to which the Company
makes no representation) 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 therein,
in light of the circumstances under which they are made, not
misleading and will comply in all material respects with all
applicable requirements of law. The audited consolidated
financial statements and unaudited consolidated interim
financial statements of the Company and its Subsidiaries to be
included or incorporated by reference in such reports and
statements will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved and will fairly present the
consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and the consolidated
results of operations and consolidated cash flow for the
periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year-end adjustments
and to the extent
-19-
they may not include footnotes or may be condensed or summary
statements).
Section 4.14 Financial Statements. The audited
--------------------
consolidated financial statements and unaudited consolidated
interim financial statements of the Company and its
Subsidiaries included or incorporated by reference in the
Company's forms, reports and documents filed with the SEC since
December 31, 1990 have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis during the periods involved, and fairly
present the consolidated financial position of the Company and
its Subsidiaries as of the dates thereof and the consolidated
results of operations and consolidated cash flows for the
periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year-end adjustments
and to the extent they may not include footnotes or may be
condensed or summary statements) and such audited financial
statements have been certified as such (without exception) by
the Company's independent accountants.
Section 4.15 Absence of Undisclosed Liabilities.
----------------------------------
Neither the Company nor its Subsidiaries has any liabilities or
obligations of any nature, whether absolute, accrued,
unmatured, contingent or otherwise, or any unsatisfied
judgments or any leases of personalty or realty or unusual or
extraordinary commitments, except (a) the liabilities recorded
on the Balance Sheet (as hereinafter defined) and the notes
thereto, and (b) the liabilities or obligations incurred since
December 31, 1994 in the ordinary course of business and
consistent with past practice that would not, individually or
in the aggregate, have a Company Material Adverse Effect.
Section 4.16 Absence of Changes or Events. Since
----------------------------
December 31, 1994 (except with respect to the matters specified
in clause (a) which shall be since December 31, 1992):
(a) except as set forth in Section 4.16(a) of the
Disclosure Schedule, there has not been any direct or
indirect redemption, purchase or other acquisition of any
shares of capital stock of the Company or any of its
Subsidiaries, or any declaration, setting aside or payment
of any dividend or other distribution by the Company or
any of its Subsidiaries in respect of their capital stock
(other than dividends or other distributions payable
solely to the Company or a wholly owned Subsidiary of the
Company);
-20-
(b) except as set forth in Section 4.16(b) of the
Disclosure Schedule or except in the ordinary course of
business and consistent with past practice, neither the
Company nor any of its Subsidiaries has incurred any
indebtedness for borrowed money, or assumed, guaranteed,
endorsed or otherwise as an accommodation become
responsible for the obligations of any other individual,
firm or corporation, made any loans or advances to any
other individual, firm or corporation or entered into any
commitment or transaction material to the Company and its
Subsidiaries taken as a whole;
(c) there has not been any change in accounting
methods, principles or practices of the Company;
(d) except in the ordinary course of business and
consistent with past practice and in amounts that are
immaterial, there has not been any revaluation by the
Company or any of its Subsidiaries of any of their
respective assets, including without limitation, writing
down the value of inventory or writing off notes or
accounts receivables;
(e) there has not been any damage, destruction or
loss, whether covered by insurance or not, except for such
as would not, individually or in the aggregate, have a
Company Material Adverse Effect;
(f) there has been no change, or any development
involving a prospective change, in the general affairs,
business, operations, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries, except
for changes or prospective changes that would not,
individually or in the aggregate, have a Company Material
Adverse Effect; and
(g) there has not been any agreement by the Company
or any of its Subsidiaries to (i) do any of the things
described in the preceding clauses (a) through (f) other
than as expressly contemplated or provided for in this
Agreement or (ii) take, whether in writing or otherwise,
any action which, if taken prior to the date of this
Agreement, would have made any representation or warranty
in this Article IV untrue or incorrect in any material
respect.
-21-
As of the date hereof (i) Richard E. Greene has unconditionally
committed to repay in full in cash all outstanding loans owed
by him to the Company, in an aggregate principal amount of
approximately $593,000, and thereupon the Company will have no
security interest in, option to purchase or right of first
refusal or other right or interest with respect to, any shares
of Company Common Stock owned by Mr. Greene and (ii) all
options to purchase shares of Company Common Stock issued by
the Company in November, 1994 to directors of the Company have
been cancelled and are of no further force or effect.
Section 4.17 Capitalization. The authorized capital
--------------
stock of the Company consists of 20,000,000 shares of Company
Common Stock and 100,000 shares of Convertible Preferred Stock,
par value $10.00 per share (the "Company Preferred Stock"). As
of the date hereof, there are 12,485,929 shares of Company
Common Stock and no shares of Company Preferred Stock
outstanding and 48,429 shares of Company Common Stock held in
the Company's treasury. As of the date hereof (i) 1,577,546
shares of Company Common Stock were reserved for issuance upon
the exercise of outstanding options, and 340,454 shares of
Company Common Stock were reserved for issuance upon the
exercise of options which may be granted under the stock option
plans of the Company listed in Section 4.29 of the Disclosure
Statement (the "Company Plans"), (ii) 110,112 shares of Company
Common Stock were reserved for issuance upon the exercise of
outstanding warrants to purchase Company Common Stock and
(iii) 2,682,948 shares of Company Common Stock were reserved
for issuance upon the conversion of the Company's outstanding
9% Convertible Subordinated Debentures due 1996 and 8 1/4%
Convertible Subordinated Debentures due 2002, all of which
options, plans, warrants and convertible debt securities are
listed and described in Section 4.17 of the Disclosure
Statement (the "Company Common Stock Equivalents"). Each share
of Company Common Stock is accompanied by one Purchase Right
(the "Company Purchase Rights") pursuant to the Company Rights
Agreement. Except for the Company Purchase Rights and the
Company Common Stock Equivalents there are not any existing
options, warrants, calls, subscriptions, or other rights or
other agreements or commitments obligating the Company to
issue, transfer or sell any shares of capital stock of the
Company or any of its Subsidiaries or any other securities
convertible into or evidencing the right to subscribe for any
such shares. There are no outstanding stock appreciation
rights with respect to the capital stock of the Company or any
of its Subsidiaries. All issued and outstanding shares of
Company Common Stock are duly authorized and
-22-
validly issued, fully paid, non-assessable and free of preemptive
rights with respect thereto.
Section 4.18 Capital Stock of Subsidiaries. The
-----------------------------
only direct or indirect subsidiaries of the Company are those
listed in Section 4.18 of the Disclosure Statement
("Subsidiaries"). The Company is directly or indirectly the
record (except for directors' qualifying shares as reflected in
Section 4.18 of the Disclosure Statement) and beneficial owner
(including all such qualifying shares) of all of the
outstanding shares of capital stock of each of its
Subsidiaries, there are no proxies with respect to such shares,
and there are not any existing options, warrants, calls,
subscriptions, or other rights or other agreements or
commitments obligating any of such Subsidiaries to issue,
transfer or sell any shares of capital stock of such Subsidiary
or any other securities convertible into or evidencing the
right to subscribe for any such shares. Other than as set
forth in Section 4.18 of the Disclosure Statement, all of such
shares so owned by the Company are duly authorized and validly
issued, fully paid, nonassessable and free of preemptive rights
with respect thereto and are owned by the Company free and
clear of any claim, lien or encumbrance of any kind with
respect thereto. Except as disclosed in Section 4.18 of the
Disclosure Statement, the Company does not directly or
indirectly own any interest in any corporation, partnership,
joint venture or other business association or entity.
Section 4.19 Litigation. There is no (i) claim,
----------
action, suit or proceeding pending or, to the best knowledge of
the Company, threatened against or relating to the Company or
any of its Subsidiaries before any court or governmental or
regulatory authority or body or arbitration tribunal, or
(ii) outstanding judgment, order, writ, injunction or decree,
or application, request or motion therefor, of any court,
governmental agency or arbitration tribunal in a proceeding to
which the Company, any Subsidiary of the Company or any of
their respective assets was or is a party except, in the case
of clauses (i) and (ii) above, such as would not, individually
or in the aggregate, either materially impair or preclude the
Company's ability to consummate the Merger or the other
transactions contemplated hereby or have a Company Material
Adverse Effect.
Section 4.20 Insurance. Section 4.20 of the
---------
Disclosure Statement lists all material insurance policies in
force on the date hereof covering the businesses, properties
and
-23-
assets of the Company and its Subsidiaries and all
outstanding claims against such policies. All such policies
are currently in effect and true and complete copies of all
such policies have been delivered to Parent. Except as set
forth in Section 4.20 of the Disclosure Statement, the Company
has not received notice of the cancellation of any of such
insurance in effect on the date of this Agreement.
Section 4.21 Title to and Condition of Properties.
------------------------------------
Except as set forth in Section 4.21 of the Disclosure
Statement, the Company and its Subsidiaries have good title to
all of the real property and own outright all of the personal
property which is reflected on the Company's and its
Subsidiaries' December 31, 1994 audited consolidated balance
sheet contained in the Company's Form 10-K for the fiscal year
ended December 31, 1994 filed with the SEC (the "Balance
Sheet") except for property since sold or otherwise disposed of
in the ordinary course of business and consistent with past
practice. Except as set forth in Section 4.21 of the
Disclosure Statement, no such real or personal property is
subject to claims, liens or encumbrances, whether by mortgage,
pledge, lien, conditional sale agreement, charge or otherwise,
except for those which would not, individually or in the
aggregate, either materially impair or preclude the Company's
ability to consummate the Merger and the other transactions
contemplated hereby or have a Company Material Adverse Effect.
Section 4.22 Leases; Contracts. (a) There have
-----------------
been delivered to Parent true and complete copies of each lease
requiring the payment of rentals aggregating at least $100,000
per annum pursuant to which either (i) real or personal
property is held under lease by the Company or any of its
Subsidiaries or (ii) the Company or any of its Subsidiaries
leases real or personal property to others. A true and
complete list of all such leases is set forth in Section 4.22
(a) of the Disclosure Statement. All of the leases so listed
are valid and subsisting and in full force and effect with
respect to the Company and its Subsidiaries, as the case may
be, and, to the Company's knowledge, with respect to any other
party thereto, and the leased real property is in good and
satisfactory condition.
(b) Except as set forth in Section 4.22(b) of the
Disclosure Statement, the Company has not breached any material
term of, or any applicable regulations with respect to, any
contract with, or any contract constituting a subcontract with
-24-
respect to, the General Services Administration or any other
governmental agency or authority.
Section 4.23 Contracts and Commitments. Except as
-------------------------
are listed in Section 4.23 of the Disclosure Statement, the
Company is not a party to any existing contract, obligation or
commitment of any type (other than those referred to in Section
4.22, 4.24, 4.26 or 4.27 of the Disclosure Statement) in any of
the following categories:
(a) any sales contract, including any open bid or
quotation, which is of an open-end or blanket nature or
contains warranties in excess of those consistent with
industry practice, or contains unusual penalty provisions
for late performance, or was incurred other than in the
ordinary course of business and consistent with past
practice;
(b) contracts for the purchase of materials,
supplies or equipment which have not been entered into in
the ordinary course of business and consistent with past
practice or which provide for purchase prices
substantially greater than those presently prevailing for
such materials, supplies or equipment, or contracts for
capital expenditures in excess of $100,000;
(c) contracts with distributors, manufacturers'
representatives or sales agents, except those which are
terminable at the option of the Company or its assignees
on 60 days' notice or less without incurring any liability
thereby;
(d) contracts under which the Company has, except by
way of endorsement of negotiable instruments for
collection in the ordinary course of business and
consistent with past practice, become absolutely or
contingently or otherwise liable for (i) the performance
of any other person, firm or corporation under a contract,
or (ii) the whole or any part of the indebtedness or
liabilities of any other person, firm or corporation;
(e) powers of attorney outstanding from the Company
other than as issued in the ordinary course of business
and consistent with past practice with respect to customs,
insurance, patent, trademark or tax matters, or to agents
for service of process;
-25-
(f) contracts under which any amount payable by the
Company is dependent upon the revenues or profits of the
Company;
(g) contracts with any director, officer or employee
of the Company other than in such person's capacity as a
director, officer or employee of the Company;
(h) contracts which limit or restrict where the
Company or any of its Subsidiaries may conduct its or
their business or the type or line of business which the
Company or any of its Subsidiaries may engage in;
(i) material contracts containing any provisions
with respect to any change of control;
(j) contracts with any party for the loan of money
or availability of credit to or from the Company or any of
its Subsidiaries (except credit extended by the Company or
any of its Subsidiaries to its or their customers in the
ordinary course of business and consistent with past
practice); or
(k) any hedging, option, derivative or other similar
transaction.
True and complete copies of all contracts, obligations and
commitments listed in Section 4.23 of the Disclosure Statement
have been delivered to Parent.
Section 4.24 Labor Matters. None of the Company or
-------------
any of its Subsidiaries is a party to any union contract or
other collective bargaining agreement, other than those set
forth in Section 4.24 of the Disclosure Statement, true and
complete copies of which contracts have been delivered to
Parent. Each of the Company and its Subsidiaries is in
compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and
conditions of employment and wages and hours, and neither the
Company nor any of its Subsidiaries is engaged in any unfair
labor practice. There is no labor strike, slowdown or stoppage
pending (or, to the best knowledge of the Company, any labor
strike or stoppage threatened) against or affecting the Company
or any of its Subsidiaries. No petition for certification has
been filed and is pending before the National Labor Relations
Board with respect to any employees of the Company or any of
its Subsidiaries who are not currently organized.
-26-
Section 4.25 Compliance with Law. Neither the
-------------------
Company nor any of its Subsidiaries has violated or failed to
comply with any statute, law, ordinance, regulation, rule or
order of any foreign, federal, state or local government or any
other governmental department or agency, or any judgment,
decree or order of any court, applicable to its business or
operations, except where any such violation or failure to
comply would not, individually or in the aggregate, have a
Company Material Adverse Effect. The Company and its
Subsidiaries have all permits, licenses and franchises from
governmental agencies required to conduct their businesses as
now being conducted, except for such permits, licenses and
franchises the absence of which would not, individually or in
the aggregate, have a Company Material Adverse Effect.
Section 4.26 Employment and Labor Contracts.
------------------------------
Neither the Company nor any of its Subsidiaries is a party to
any employment, management services, consultation or other
contract or agreement with any past or present officer,
director or employee or, to the best of the Company's
knowledge, any entity affiliated with any past or present
officer, director or employee other than those set forth in
Section 4.26 of the Disclosure Statement, in each case true and
complete copies of which contracts have been delivered to
Parent, and other than the agreements executed by employees
generally, the forms of which have been provided to Parent.
Section 4.27 Intellectual Property Rights. The
----------------------------
Company or its Subsidiaries own or have the right to use all
Intellectual Property Rights (as defined below in this Section
4.27) necessary to the conduct of their respective businesses.
Section 4.27 of the Disclosure Statement contains a worldwide
list of all patents, trade names, registered and unregistered
copyrights, trademarks and service marks, mask works and
applications for the foregoing owned by the Company or its
Subsidiaries. The Company and/or its Subsidiaries have clear
and unencumbered title to the Intellectual Property Rights set
forth in Section 4.27 of the Disclosure Statement which are
listed as owned by the Company and/or its Subsidiaries and such
title has not been challenged (pending or, to the knowledge of
the Company, threatened) by others except for the encumbrances
listed in Section 4.27 of the Disclosure Statement. No rights
or licenses to use Intellectual Property Rights have been
granted or acquired by the Company or its Subsidiaries except
those listed in Section 4.27 of the Disclosure Statement.
Except as listed in Section 4.27 of the Disclosure Statement,
to the knowledge of the Company, there have been (a) no claims
-27-
or assertions made by others that the Company has infringed any
Intellectual Property Rights of others by the sale of products
or any other activity in the preceding six year period and
(b) no infringements by the Company during this period. Except
as listed in Section 4.27 of the Disclosure Statement, the
Company has no knowledge of any infringement of Intellectual
Property Rights of the Company by others. All such patents,
registered trademarks, service marks, and copyrights owned by
the Company or its Subsidiaries are in good standing, and are
recorded on the public record in the name of the Company or its
Subsidiaries except for those failures to be in good standing
and so recorded that would not, individually or in the
aggregate, have a Company Material Adverse Effect. True and
complete copies of all material listed in Section 4.27 of the
Disclosure Statement have been delivered to Parent.
"Intellectual Property Rights" shall mean and include
rights relating to patents, trademarks, service marks, trade
names, copyrights, mask works, inventions, processes, trade
secrets, know-how, confidentiality agreements, consulting
agreements, software and any documentation relating to the
manufacture, marketing and maintenance of products.
Section 4.28 Taxes. Except as disclosed in Section
-----
4.28 of the Disclosure Statement: (i) the Company and its
Subsidiaries have prepared and timely filed or will timely file
with the appropriate governmental agencies all material
franchise, income and all other material Tax (as hereinafter
defined) returns and reports (Tax returns and reports are
hereinafter collectively referred to as "Tax Returns") required
to be filed for any period on or before the Effective Time,
taking into account any extension of time to file granted to or
obtained on behalf of the Company and/or its Subsidiaries
(copies of which for the past three fiscal years have been
delivered to Parent); (ii) all material Taxes of the Company
and its Subsidiaries (whether or not reported) in respect of
the pre-Merger period have been paid in full to the proper
authorities or fully accrued for with respect to fiscal periods
for which there are publicly available financial statements in
such statements and otherwise on the books at the Company,
other than such Taxes as are being contested in good faith by
appropriate proceedings and are adequately reserved for in
accordance with generally accepted accounting principles;
(iii) all deficiencies resulting from Tax examinations of
federal, state and foreign income, sales and franchise and all
other material Tax Returns filed by the Company and its
Subsidiaries have either been paid or adequately reserved for
in accordance with
-28-
generally accepted accounting principles; (iv) to the Company's
knowledge, no deficiency has been asserted or assessed against
the Company or any of its Subsidiaries and is pending, and no
examination of the Company or any of its Subsidiaries is pending
or threatened for any material amount of Tax by any taxing
authority (with respect to any such action, Section 4.28 of the
Disclosure Statement sets forth the periods at issue and the
category of Tax, and the examining authority's and any corresponding
revenue agents' reports relating to the issue have been delivered to Parent);
(v) no extension of the period for assessment or collection of
any material Tax is currently in effect and no extension of
time within which to file any material Tax Return has been
requested, which Tax Return has not since been filed; (vi) no
material Tax liens have been filed with respect to any Taxes;
(vii) the Company and each of its Subsidiaries have not agreed
to make any adjustment by reason of a change in their
accounting methods that would affect the taxable income or
deductions of the Company or any of its Subsidiaries for any
period ending after the Effective Time; (viii) the Company and
its Subsidiaries have made timely payments of the Taxes
required to be deducted and withheld from the wages paid to
their employees; (ix) there are no Tax sharing agreements or
arrangements under which the Company or any Subsidiary will
have any obligation or liability on or after the Effective
Time; (x) the Company and its Subsidiaries have the net
operating loss carryforwards set forth in Section 4.28 of the
Disclosure Statement; (xi) the Company and its Subsidiaries
have no overall foreign losses as defined in Section 904(f)(2)
of the Code; (xii) neither the Company nor any of its
Subsidiaries has unused foreign tax credits; (xiii) to the
Company's knowledge, all payments, other than payments of
dividends (including any payments deemed to be the equivalent
of a dividend) or Taxes, made or incurred by the Company or any
of its Subsidiaries since December 31, 1993 will be deductible
or capitalizable for Tax purposes including any payments made
by the Company or any of its Subsidiaries pursuant to any
transaction contemplated by this Agreement, except for any
payments the failure of which to be deductible or capitalizable
would not, individually or in the aggregate, have a Company
Material Adverse Effect; (xiv) to the Company's knowledge, no
income under any arrangement or understanding to which the
Company or any of its Subsidiaries is a party will be
attributed to the Company or any of its Subsidiaries which is
not represented by income to which the Company or the
Subsidiary is legally entitled; (xv) to the Company's
knowledge, there are no transfer pricing agreements made with
any taxation authority; (xvi) no assets of the Company or any
of its
-29-
Subsidiaries is held in an arrangement for which partnership Tax
Returns are being filed and neither the Company nor any of its
Subsidiaries is a partner in any partnership; (xvii) neither
the Company nor any of its Subsidiaries owns any interest in
any "controlled foreign corporation" (within the meaning of
Section 957 of the Code), "passive foreign investment company"
(within the meaning of Section 1296 of the Code) or other entity
the income of which is required to be included in the income of
the Company or such Subsidiary, whether or not distributed;
(xviii) neither the Company nor any of its Subsidiaries has made
an election under Section 341(f) of the Code; and (xix) the Company
is not obligated to make any payments that would constitute excess
parachute payments within the meaning of Section 280G of the Code.
"Tax" or "Taxes" shall mean all federal, state, local
and foreign taxes, duties, levies, charges and assessments of
any nature, including social security payments and deductibles
relating to wages, salaries and benefits and payments to
subcontractors (to the extent required under applicable Tax
law), and also including all interest, penalties and additions
imposed with respect to such amounts.
Section 4.29 Employee Benefit Plans; ERISA. (a)
-----------------------------
Except as set forth in Section 4.29 of the Disclosure
Statement, there are no "employee pension benefit plans" as
defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), covering employees
(or former employees) employed in the United States, maintained
or contributed to by the Company or any of its Subsidiaries or
any of their ERISA Affiliates (as hereinafter defined), or to
which the Company or any of its Subsidiaries or any of their
ERISA Affiliates contributes or is obligated to make payments
thereunder or otherwise may have any liability ("Pension
Benefits Plans"). For purposes of this Agreement, "ERISA
Affiliate" shall mean any person (as defined in Section 3(9) of
ERISA) that is a member of any group of persons described in
Section 414(b), (c), (m) or (o) of the Code of which the
Company or a Subsidiary is a member.
(b) The Company has delivered to Parent true and
complete copies of all "welfare benefit plans" (as defined in
Section 3(1) of ERISA) covering employees (or former employees)
employed in the United States, maintained or contributed to by
the Company or any of its Subsidiaries ("Welfare Plans"), all
multiemployer plans (as defined in Section 3(37) of ERISA)
covering employees (or former employees) employed in the United
-30-
States to which the Company or any of its Subsidiaries or any
of their ERISA Affiliates is required to make contributions or
otherwise may have any liability, and, to the extent covering
employees (or former employees) employed in the United States,
all stock bonus, stock option, restricted stock, stock
appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance and vacation plans maintained or
contributed to by the Company or a Subsidiary of the Company.
(c) Except as otherwise set forth in Section 4.29 of
the Disclosure Statement, the Company and each of its
Subsidiaries, and each of the Pension Benefit Plans and Welfare
Plans, are in compliance with the applicable provisions of
ERISA and other applicable laws except where the failure to
comply would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(d) All contributions to, and payments from, the
Pension Benefit Plans which are required to have been made in
accordance with the Pension Benefit Plans and, when applicable,
Section 302 of ERISA or Section 412 of the Code have been
timely made except where the failure to make such contributions
or payments on a timely basis would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(e) The Pension Benefit Plans intended to qualify
under Section 401 of the Code have been determined by the
Internal Revenue Service ("IRS") to be so qualified and, to the
Company's knowledge, nothing has occurred with respect to the
operation of such Pension Benefit Plans which would cause the
loss of such qualification or exemption or the imposition of
any material liability, penalty or tax under ERISA or the Code.
Such plans have been or will be amended on a timely basis to
comply with changes to the Code made by the Tax Reform Act of
1986 and other applicable legislative, regulatory or
administrative requirements.
(f) There are (i) no investigations pending, to the
best knowledge of the Company, by any governmental entity
involving the Pension Benefit Plans or Welfare Plans, (ii) no
termination proceedings involving the Pension Benefit Plans and
(iii) no pending or, to the best of the Company's knowledge,
threatened claims (other than routine claims for benefits),
suits or proceedings against any Pension Benefit or Welfare
Plan, against the assets of any of the trusts under any Pension
Benefit or Welfare Plan or against any fiduciary of any Pension
Benefit or Welfare Plan with respect to the operation of such
-31-
plan or asserting any rights or claims to benefits under any
Pension Benefit Plan or against the assets of any trust under
such plan, except for those which would not, individually or in
the aggregate, give rise to any liability which would have a
Company Material Adverse Effect, nor, to the best of the
Company's knowledge, are there any facts which would give rise
to any liability except for those which would not, individually
or in the aggregate, have a Company Material Adverse Effect in
the event of any such investigation, claim, suit or proceeding.
(g) To the Company's knowledge, none of the Company,
any of its Subsidiaries or any employee of the foregoing, nor
any trustee, administrator, other fiduciary or any other "party
in interest" or "disqualified person" with respect to the
Pension Benefit Plans or Welfare Plans, has engaged in a
"prohibited transaction" (as such term is defined in
Section 4975 of the Code or Section 406 of ERISA) which would
be reasonably likely to result in a tax or penalty on the
Company or any of its Subsidiaries under Section 4975 of the
Code or Section 502(i) of ERISA, except any such event which
would not, individually or in the aggregate, have a Company
Material Adverse Effect.
(h) Neither the Pension Benefit Plans subject to
Title IV of ERISA nor any trust created thereunder has been
terminated nor have there been any "reportable events" (as
defined in Section 4043 of ERISA and the regulations
thereunder) with respect to either thereof, except any such
event which would not, individually or in the aggregate, have a
Company Material Adverse Effect nor has there been any event
with respect to any Pension Benefit Plan requiring disclosure
under Section 4063(a) of ERISA or any event with respect to any
Pension Benefit Plan requiring disclosure under
Section 4041(c)(3)(C) of ERISA, except any such event which
would not, individually or in the aggregate, have a Company
Material Adverse Effect.
(i) Neither the Company nor any Subsidiary of the
Company nor any ERISA Affiliate has incurred any currently
outstanding liability to the Pension Benefit Guaranty
Corporation (the "PBGC") or to a trustee appointed under
Section 4042(b) or (c) of ERISA other than for the payment of
premiums, all of which have been paid when due. No Pension
Benefit Plan has applied for, or received, a waiver of the
minimum funding standards imposed by Section 412 of the Code.
The information supplied to the actuary by the Company or any
of its Subsidiaries for use in preparing the most recent
actuarial report for
-32-
Pension Benefit Plans is complete and accurate in all material
respects.
(j) Neither the Company, any of its Subsidiaries nor
any of their ERISA Affiliates has any liability (including any
contingent liability under Section 4204 of ERISA) with respect
to any multiemployer plan, within the meaning of Section 3(37)
of ERISA, covering employees (or former employees) employed in
the United States.
(k) Except as disclosed in Section 4.29 of the
Disclosure Statement, with respect to each of the Pension
Benefit and Welfare Plans, true, correct and complete copies of
the following documents have been delivered to Parent: (i) the
current plans and related trust documents, including amendments
thereto, (ii) any current summary plan descriptions, (iii) the
most recent Forms 5500, financial statements and actuarial
reports, if applicable, and (iv) the most recent IRS
determination letter, if applicable.
(l) Neither the Company, any of its Subsidiaries,
any organization to which the Company is a successor or parent
corporation, within the meaning of Section 4069(b) of ERISA,
nor any of their ERISA Affiliates has engaged in any
transaction, within the meaning of Section 4069(a) of ERISA,
except where the liability for which would not, individually or
in the aggregate, have a Company Material Adverse Effect.
(m) Except as disclosed in Section 4.29 of the
Disclosure Statement, none of the Welfare Plans maintained by
the Company or any of its Subsidiaries are retiree life or
retiree health insurance plans which provide for continuing
benefits or coverage for any participant or any beneficiary of
a participant following termination of employment, except as
may be required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), or except at
the expense of the participant or the participant's
beneficiary. The Company and each of its Subsidiaries which
maintain a "group health plan" within the meaning of Section
5000(b)(1) of the Code have complied with the notice and
continuation requirements of Section 4980B of the Code, COBRA,
Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder except where the failure to comply would not,
individually or in the aggregate, have a Company Material
Adverse Effect.
(n) No liability under any Pension Benefit or
Welfare Plan has been funded nor has any such obligation been
-33-
satisfied with the purchase of a contract from an insurance
company as to which the Company or any of its Subsidiaries has
received notice that such insurance company is in
rehabilitation.
(o) Except pursuant to the agreements listed in
Section 4.29 of the Disclosure Statement, the consummation of
the transactions contemplated by this Agreement will not result
in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or
compensation payable to or in respect of any employee of the
Company or any of its Subsidiaries.
(p) The Company has disclosed to Parent in Section
4.29 of the Disclosure Statement each material Foreign Plan (as
hereinafter defined) to the extent the benefits provided
thereunder are not mandated by the laws of the applicable
foreign jurisdiction. To the Company's knowledge, the Company
and each of its Subsidiaries and each of the Foreign Plans are
in compliance with applicable laws and all required
contributions have been made to the Foreign Plans, except where
the failure to comply or make contributions would not,
individually or in the aggregate, have a Company Material
Adverse Effect. For purposes hereof, the term "Foreign Plan"
shall mean any plan, program, policy, arrangement or agreement
maintained or contributed to by, or entered into with, the
Company or any Subsidiary with respect to employees (or former
employees) employed outside the United States.
Section 4.30 Environmental Matters. (a) The
---------------------
Company and its Subsidiaries and the properties and assets used
in their respective businesses (including the Real Properties
(as hereinafter defined)) are in substantial compliance with
all applicable Environmental Laws (as hereinafter defined),
which compliance includes, without limitation, the possession
of all licenses, permits, registrations and other governmental
authorizations (collectively, "Environmental Authorizations")
required under applicable Environmental Laws, and compliance
with the terms and conditions thereof. Since December 31,
1989, neither the Company nor any of its Subsidiaries has
received any communication, whether from a Governmental
Authority (as hereinafter defined), citizen group, employee or
otherwise, that alleges that the Company or any of its
Subsidiaries or any of the properties or assets used in their
respective businesses (including the Real Properties) is not in
full compliance with Environmental Laws. All Environmental
Authorizations currently held by the Company and its
Subsidiaries
-34-
pursuant to Environmental Laws are identified in Section 4.30 of
the Disclosure Statement and represent all Environmental
Authorizations necessary for the conduct of the businesses of
the Company and its Subsidiaries at the Closing Date. Neither
the Company nor any of its Subsidiaries has been notified by
any Governmental Authority since December 31, 1989 or has,
to the Company's knowledge, any basis to believe, that
any such Environmental Authorizations will be modified,
suspended or revoked or cannot be renewed or otherwise
maintained in the ordinary course of business, and no
Environmental Authorization will be modified, suspended or
revoked, or denied renewal in the ordinary course of business.
(b) There is no Environmental Notice (as hereinafter
defined) that (i) is pending or, to the best knowledge of the
Company, threatened against the Company or any of its
Subsidiaries, (ii) is pending or, to the best knowledge of the
Company, threatened against any person or entity whose
liability for such Environmental Notice may have been retained
or assumed contractually or otherwise by the Company or its
Subsidiaries, or to the Company's knowledge, (iii) could
subject Parent or Newco to any material risk of loss or
damages.
(c) Except as set forth in Section 4.30 of the
Disclosure Statement, and to the Company's knowledge, there are
no past or present actions, activities, circumstances,
conditions, events or incidents arising out of, based upon,
resulting from or relating to the operation, ownership or use
of any properties or assets (including the Real Properties)
currently or formerly owned, operated, leased or used by the
Company or any of its Subsidiaries (or any of their respective
predecessors in interest), including, without limitation, the
emission, discharge, disposal or other release of any Hazardous
Material (as hereinafter defined) in or into the Environment
(as hereinafter defined), that (i) could reasonably be expected
to result in the incurrence of costs under Environmental Laws,
(ii) could reasonably be expected to form the basis of any
Environmental Notice against or with respect to the Company or
any of its Subsidiaries, or against any person or entity whose
liability for any Environmental Notice may have been retained
or assumed by or could be imputed or attributed by law or
contract to the Company or any of its Subsidiaries or
(iii) could subject Parent or Newco to any material risk of
loss or damages.
(d) Without in any way limiting the generality of
the foregoing, to the Company's knowledge, and except as set
forth in Section 4.30 of the Disclosure Statement, (1) there
-35-
are and have been no underground or above ground storage tanks
or other storage receptacles, or related piping, located on, at
or under property (including the Real Properties) owned,
operated, leased or used by the Company or any of its
Subsidiaries (or any of their respective predecessors in
interest), (2) there are and have been no polychlorinated
biphenyls used or stored by the Company or any of its
Subsidiaries, (3) there are and have been no properties
(including the Real Properties) currently or formerly owned,
operated, managed, leased or used by the Company or any of its
Subsidiaries (or any of their respective predecessors in
interest) at which Hazardous Materials generated, used, owned,
managed, stored or controlled by the Company or any of its
Subsidiaries (or any of their respective predecessors in
interest) may have been disposed of or otherwise released into
the Environment and (4) there is no asbestos contained in or
forming part of any building, building component, structure or
office space owned, operated, leased or used by the Company or
any of its Subsidiaries.
(e) No lien has been recorded under Environmental
Laws with respect to any properties, assets or facilities
(including the Real Properties) owned, operated, managed,
leased or used by the Company or any of its Subsidiaries.
(f) Prior to the Closing, the Company shall have
made all environmental notifications, registrations and filings
as required by all applicable state and local real property
disclosure requirements, including those requirements pursuant
to Section 22a-134a of the Connecticut General Statutes (the
"Connecticut Transfer Act") and the regulations promulgated
thereunder.
(g) In accordance with Section 5.03, the Company has
given Parent, Newco and their authorized representatives access
to all records and files in its possession or otherwise
available to the Company and its Subsidiaries relating to
actual or potential compliance or liability issues of the
Company and its Subsidiaries under Environmental Laws,
including, without limitation, all reports, studies, analyses,
tests or monitoring results pertaining to the existence of
Hazardous Material or any other environmental concern relating
to properties, assets or facilities (including the Real
Properties) currently or formerly owned, operated, managed,
leased, used or controlled by the Company or any of its
Subsidiaries, or otherwise concerning compliance with or
liability under Environmental Laws.
-36-
(h) To the Company's knowledge, there has been no
disposal, release, discharge, spillage, uncontrolled loss,
seepage or filtration of Hazardous Material on-site at any
properties, assets or facilities (including the Real
Properties) located in the State of Connecticut at which
business operations of the Company or any of its Subsidiaries
are or have been conducted (the "Properties") and except as set
forth in Section 4.30 of the Disclosure Statement, any
Hazardous Material which remains on-site is being managed in
accordance with state and Federal law and the regulations
adopted thereunder.
(i) Except as set forth in Section 4.30 of the
Disclosure Statement, neither the Company nor any of its
Subsidiaries has filed any forms pursuant to the Connecticut
Transfer Act with respect to the Properties or with respect to
any prior transfer thereof by the Company or any of its
Subsidiaries or their respective predecessors in interest.
(j) For purposes of this Agreement:
(i) "Environment" shall mean any surface water,
-----------
ground water, or drinking water supply, land surface or
subsurface strata, or ambient air and includes, without
limitation, any indoor location.
(ii) "Environmental Laws" shall mean all federal,
------------------
state, local and foreign laws, codes, regulations, ordinances,
requirements, directives, orders, common law, and
administrative or judicial interpretations thereof that may be
enforced by any Governmental Authority or court, relating to
pollution, the protection of human health, the protection of
the Environment, or the emission, discharge, disposal or other
release or threatened release of Hazardous Materials in or into
the Environment.
(iii) "Environmental Notice" shall mean any notice or
--------------------
claim by any Governmental Authority or other third party
alleging liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental
costs, compliance costs or harm, injuries or damages to any
person, property, natural resources, or any fines or penalties)
arising out of, based upon, resulting from or relating to any
Environmental Law.
(iv) "Governmental Authority" shall mean any
----------------------
government or political subdivision or any agency, authority,
bureau,
-37-
central bank, commission, department or instrumentality
of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
(v) "Hazardous Materials" shall mean all pollutants,
-------------------
contaminants, or chemical, industrial, hazardous or toxic
materials, substances, constituents or wastes, including,
without limitation, asbestos or asbestos-containing materials,
polychlorinated biphenyls and petroleum, oil, or petroleum or
oil products, derivatives or constituents, including, without
limitation, crude oil or any fraction thereof.
(vi) "Real Property" shall mean all right, title and
-------------
interest of the Company or any of its Subsidiaries (including
any leasehold estate) in and to a parcel of real property owned
or operated by the Company or any of its Subsidiaries together
with, in each case, all improvements and appurtenant fixtures,
equipment, personal property, easements and other property and
rights incidental to the ownership, lease or operation thereof.
Section 4.31 Directors, Officers and Compensation of
---------------------------------------
Employees. There is set forth in Section 4.31 of the
---------
Disclosure Statement a true and complete list showing (a) the
names and addresses of all directors and officers of the
Company and its Subsidiaries; (b) the names of all salaried
persons (other than salespersons) whose aggregate compensation
for purposes of tax reporting from the Company and its
Subsidiaries in the fiscal year ended December 31, 1994 was, or
in the fiscal year ending December 31, 1995 is expected to be,
$100,000 or more per year, together with a statement of the
full amount expected to be paid to each such person for
services in all capacities to be rendered in the fiscal year
ending December 31, 1995, and the basis thereof, separately
including the amounts paid or payable, or expected to be paid
or payable, under bonus or incentive arrangements, if any; and
(c) the names and titles of all salespersons whose aggregate
compensation for purposes of tax reporting from the Company and
its Subsidiaries in the fiscal year ended December 31, 1994
was, or in the fiscal year ending December 31, 1995 is expected
to be, $100,000 or more per year, together with a statement of
the base salary, the commission and any amount or amounts under
bonus or other incentive arrangements, expected to be paid to
each such person in the fiscal year ending December 31, 1995.
Section 4.32 Disclosure. No representation or
----------
warranty by the Company and no statement or information
relating to the Company or any of its Subsidiaries contained
herein, or
-38-
in any certificate furnished by or on behalf of the
Company to Parent or Newco in connection herewith contains or
will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to
make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE V
COVENANTS
Section 5.01 Conduct of Business of the Company.
----------------------------------
Except as expressly contemplated by this Agreement or as
expressly agreed to in writing by Parent, during the period
from the date of this Agreement to the Effective Time, the
Company and its Subsidiaries each will conduct its operations
according to its ordinary course of business and consistent
with past practice, and will use all commercially reasonable
efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to
maintain satisfactory relationships with suppliers,
distributors, customers and others having business
relationships with it and will take no action which would
materially impair or preclude its ability to consummate the
Merger or the other transactions contemplated hereby. Without
limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the
Effective Time, neither the Company nor any of its Subsidiaries
will, without the prior written consent of Parent:
(a) amend its Restated Certificate of Incorporation
(or other applicable charter document) or By-Laws;
(b) authorize for issuance, issue, sell, deliver,
grant any options for, or otherwise agree or commit to
issue, sell or deliver any shares of any class of capital
stock of the Company or its Subsidiaries (except for
options to employees who are not executive officers not to
exceed 60,000 shares in the aggregate for all such
employees) or any securities convertible into or
exchangeable or exercisable for shares of any class of
capital stock of the Company or its Subsidiaries, other
than pursuant to and in accordance with the terms of the
Company Common Stock Equivalents listed in Section 4.17 of
the Disclosure Statement;
-39-
(c) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or
any combination thereof) in respect of its capital stock
or purchase, redeem or otherwise acquire any shares of its
own capital stock or that of any of its Subsidiaries;
(d) except in the ordinary course of business and
consistent with past practice (i) create, incur, assume,
maintain or permit to exist any long-term debt or any
short-term debt for borrowed money other than under
(x) existing loans or replacements thereof on terms no
less favorable than, and in amounts not exceeding,
existing loans or (y) existing lines of credit or
replacements thereof on terms no less favorable than
existing lines of credit, provided that in no event shall
borrowings under such replacement line of credit, whether
or not in the ordinary course, exceed $8 million;
(ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or
otherwise) for the obligations of any person (other than
wholly owned Subsidiaries of the Company) in the ordinary
course of business and consistent with past practices,
except for endorsements of negotiable instruments for
deposit in the ordinary course of business and consistent
with past practice; or (iii) make any loans, advances or
capital contributions to, or investments in, any other
person;
(e) (i) (x) except pursuant to written agreements
existing on the date of execution of this Agreement,
increase in any manner the compensation of any of its
directors or officers, or (y) except in the ordinary
course of business and consistent with past practice any
of its other employees; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit
not required, or enter into or agree to enter into any
agreement or arrangement with any of its past or present
employees relating to any such pension, retirement
allowance or other employee benefit, except as required
under currently existing agreements, plans or arrangements
set forth in Section 4.29 of the Disclosure Statement;
(iii) grant any severance or termination pay (other than
as required under currently existing agreements, plans or
arrangements set forth in Section 4.29 of the Disclosure
Statement) to, or enter into any employment or severance
agreement with, any of its past or present employees;
(iv) except to the extent permitted by the foregoing
-40-
clause (i), enter into any contract, agreement or
understanding with any of its past or present directors or
officers; or (v) except in the ordinary course of business
and consistent with past practice or as may be required to
comply with applicable law, become obligated (other than
pursuant to any new or renewed collective bargaining
agreement) under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, benefit
arrangement, or similar plan or arrangement which was not
in existence on the date hereof, including any bonus,
incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance,
severance pay, retirement or other benefit plan, agreement
or arrangement, or employment or consulting agreement with
or for the benefit of any person, or amend any of such
plans or any of such agreements in existence on the date
hereof;
(f) except in the ordinary course of business and
consistent with past practice or as otherwise expressly
contemplated hereby, sell, transfer, lease, license,
pledge, mortgage, or otherwise dispose of, or encumber, or
agree to sell, transfer, lease, license, pledge, mortgage
or otherwise dispose of or encumber, any material
properties, real, personal or mixed;
(g) except as otherwise expressly contemplated
hereby, enter into any other agreements, commitments or
contracts, except agreements, commitments or contracts for
the purchase, sale or lease of goods or services in the
ordinary course of business and consistent with past
practice and having a term of no more than one year;
(h) authorize, recommend, propose or announce an
intention to authorize, recommend or propose, or enter
into any agreement in principle or an agreement with
respect to, any plan of liquidation or dissolution, any
acquisition of a material amount of assets or securities,
any disposition of a material amount of assets or
securities or any material change in its capitalization,
or any entry into a material contract or any amendment or
modification of any material contract or any release or
relinquishment of any material contract rights not in the
ordinary course of business and consistent with past
practice except as expressly contemplated by this
Agreement;
(i) except as previously approved by the Board of
Directors of the Company prior to the date hereof and as
-41-
identified to Parent prior to the date hereof, authorize
or commit to make capital expenditures in excess of
$100,000;
(j) knowingly undertake any act, or suffer to exist
any condition, causing any insurance policy naming it as a
beneficiary or a loss payee to be cancelled or terminated,
except in the ordinary course of business and consistent
with past practice and following written notice to Parent;
(k) maintain its books and records in a manner not
in the ordinary course of business and consistent with
past practice;
(l) enter into any hedging, option, derivative or
other similar transaction;
(m) change any assumption underlying, or method of
calculating, any bad debt, contingency, provision or other
reserve;
(n) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, contingent
or otherwise), other than the payment, discharge or
satisfaction of liabilities (including accounts payable)
in the ordinary course of business and consistent with
past practice, or collect, or accelerate the collection
of, any amounts owed (including accounts receivable) other
than the collection in the ordinary course of business; or
(o) agree to do any of the foregoing.
Section 5.02 No Solicitation. (a) The Company
---------------
agrees that, prior to the Effective Time, it and its
Subsidiaries shall not, and shall not give authorization or
permission to any of its or its Subsidiaries' directors,
officers, employees, agents or representatives to, and shall
use all commercially reasonable efforts to see that such
persons do not, directly or indirectly, solicit, initiate,
facilitate or encourage (including by way of furnishing or
disclosing information) any merger, consolidation, other
business combination involving the Company or its Subsidiaries,
acquisition of all or any substantial portion of the assets or
capital stock of the Company and its Subsidiaries taken as a
whole, or inquiries or proposals concerning or which may
reasonably be expected to lead to, any of the foregoing (an
"Acquisition Transaction") or negotiate, explore or otherwise
communicate in any way with any
-42-
third party (other than Parent or its affiliates) with respect
to any Acquisition Transaction or enter into any agreement,
arrangement or understanding
requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions expressly contemplated by this
Agreement, or contemplated to be a material part thereof. The
Company shall immediately advise Parent in writing of any
inquiries or proposals relating to an Acquisition Transaction.
(b) Notwithstanding the foregoing, in the event that
there is an unsolicited written proposal for an Acquisition
Transaction from a bona fide financially capable third party
---- ----
that contains no financing contingency, the Company, in its
discretion, shall be permitted to furnish to and communicate
with any such party all publicly available information
requested by such party. In the event that such party requests
information in addition to that which is publicly available,
the Company may furnish to and communicate with such third
party non-public information only if (i) five business days'
written notice shall have been given to Parent; and (ii)(A) the
Company's Board of Directors shall have been advised in writing
by its investment banker that such third party is financially
capable, without any financing contingency, of consummating an
Acquisition Transaction that would yield a higher value to the
Company's stockholders than will the Merger, (B) the Company's
Board of Directors shall have been advised, by the written
opinion of outside counsel to the Company, that any failure to
provide such non-public information to such party would
constitute a breach of the fiduciary responsibilities of the
Board of Directors to the stockholders of the Company and
(C) the Board of Directors, after weighing such advice,
determines that taking such action is more likely than not to
lead to an Acquisition Transaction with such third party that
would yield a higher value to the Company's stockholders than
will the Merger and that failing to furnish such information
would constitute a breach of the Board's fiduciary duties.
Section 5.03 Access to Information. (a) From the
---------------------
date of this Agreement until the Effective Time, the Company
will give Parent and Newco and their authorized representatives
(including counsel, environmental and other consultants,
accountants, auditors, and intellectual property counsel and
agents) full access during normal business hours to all
facilities, personnel and operations and to all books and
records of the Company and its Subsidiaries, will permit Parent
and Newco to make such inspections as they may reasonably
require (including without limitation any air, water or soil
testing or
-43-
sampling deemed necessary by them) and will cause its officers
and those of its Subsidiaries to furnish Parent with such
financial and operating data and other information with respect
to the businesses and properties of the Company and its
Subsidiaries as Parent may from time to time reasonably
request.
(b) Parent will permit the Company and its agents,
including its counsel, auditors, investment bankers and
consultants to have full access to Parent's books and records
and personnel (including senior executives) for the purpose of
conducting customary due diligence regarding the accuracy and
completeness of the Parent SEC Reports and the Registration
Statement and other information with respect to the business of
Parent as the Company may from time to time reasonably request.
(c) Each of Parent and Newco will hold and will
cause their respective authorized representatives, including
consultants and advisors, to hold in strict confidence pursuant
to the Confidentiality Agreement dated April 19, 1995 between
Parent and the Company (the "Confidentiality Agreement") all
documents and information concerning the Company and its
Subsidiaries furnished to Parent or Newco in connection with
the transactions contemplated by this Agreement. The Company
will hold and will cause its authorized representatives,
including consultants and advisors, to hold in strict
confidence pursuant to the Confidentiality Agreement all
documents and information (whether oral or written) concerning
Parent and its subsidiaries furnished to the Company in
connection with the transactions contemplated by this
Agreement. Notwithstanding any provision of Article X hereof,
nothing herein shall relieve any party of liabilities for any
and all damages to the other party by reason of any breach of
this Section 5.03(c).
Section 5.04 Registration Statement and Proxy
--------------------------------
Statement. The Company shall file with the SEC as soon as is
---------
reasonably practicable after the date hereof the Proxy
Statement and Parent shall file the Registration Statement in
which the Proxy Statement shall be included. Parent and the
Company shall use all commercially reasonable efforts to have
the Registration Statement declared effective by the SEC and
the Proxy Statement cleared by the staff of the SEC as promptly
as practicable. Parent shall also take any action required to
be taken under applicable state blue sky or securities laws in
connection with shares of Parent Common Stock to be issued as
Closing Consideration. Parent and the Company shall promptly
furnish to each other all information, and take such other
actions (including without limitation using all commercially
-44-
reasonable efforts to provide any required consents of their
respective independent auditors), as may reasonably be
requested in connection with any action by any of them in
connection with the preceding sentences of this Section
5.04(a).
Section 5.05 Commercially Reasonable Efforts; Other
--------------------------------------
Actions. (a) Subject to the terms and conditions herein
-------
provided, Parent, Newco and the Company shall use all
commercially reasonable efforts to take, or cause to be taken,
all other actions and do, or cause to be done, all other things
necessary, proper or appropriate under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation,
(i) the filing of Notification and Report Forms under the HSR
Act with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust
Division") and using all commercially reasonable efforts to
respond as promptly as practicable to all inquiries received
from the FTC or the Antitrust Division for additional
information or documentation, (ii) the taking of any actions
required to qualify the Merger for pooling-of-interests
accounting treatment and as a tax-free reorganization within
the meaning of Section 368(a) of the Code, (iii) the obtaining
of all necessary consents, approvals or waivers, and (iv) the
lifting of any legal bar to the Merger. Parent shall cause
Newco to perform all of its obligations under this Agreement
and provide Newco the resources necessary to perform Newco's
obligations under this Agreement and shall not take any action
which would cause the Company to fail to perform its
obligations hereunder. The Company shall not take any action
which would cause Parent or Newco to fail to perform its
obligations hereunder.
(b) Prior to the Effective Time, the Company shall
cooperate with Parent in taking such actions as are reasonably
appropriate or necessary in connection with any redemption,
prepayment, modification, satisfaction or elimination of any
outstanding indebtedness of the Company or any of its
Subsidiaries with respect to which a consent is required to be
obtained to effectuate the Merger or other transactions
contemplated hereby and has not been so obtained; provided that
--------
any such restructuring shall become effective at the Effective
Time.
Section 5.06 Public Announcements. Before issuing
--------------------
any press release or otherwise making any public statement with
respect to the Merger or any of the other transactions
contemplated hereby, Parent, Newco and the Company will consult
with,
-45-
and obtain the consent of, each other as to its form and
substance and shall not issue any such press release or make
any such public statement prior to obtaining such consent,
except as may be required by law.
Section 5.07 Notification of Certain Matters. The
-------------------------------
Company shall give prompt notice to Parent of any notice of, or
other communication asserting, a default or event which, with
notice or lapse of time or both, would become a default,
received by the Company or any of its Subsidiaries subsequent
to the date of this Agreement and prior to the Effective Time,
under any contract material to the general affairs, business,
operations, assets, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole
to which the Company or any of its Subsidiaries is a party or
is subject. Each of the Company and Parent shall give prompt
notice to the other party of (a) any notice or other
communication from any third party alleging that the consent of
such third party is or may be required in connection with the
Merger or other transactions contemplated hereby, (b) any
material adverse change in their respective general affairs,
business, operations, assets, condition (financial or
otherwise) or prospects or the occurrence of any event which,
so far as reasonably can be foreseen at the time of its
occurrence, is reasonably likely to result in any such change
or (c) the occurrence or existence of any event which would, or
could with the passage of time or otherwise, make any
representation or warranty contained herein untrue in any
material respect.
Section 5.08 Indemnification. (a) Parent shall
---------------
cause the Surviving Corporation to indemnify, defend and hold
harmless the present and former directors and officers of the
Company against all losses, claims, damages, expenses or
liabilities arising out of actions or omissions or alleged
actions or omissions occurring at or prior to the Effective
Time to the extent permitted or required under applicable law
and the Company's Restated Certificate of Incorporation and
By-Laws in effect at the date hereof (to the extent consistent
with applicable law).
(b) For a period of six years after the Effective
Time, the Surviving Corporation shall cause to be maintained in
effect the current policies of directors' and officers'
liability insurance maintained by the Company (provided that
the Surviving Corporation may substitute therefor policies of
at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to
claims
-46-
arising from facts or events which occurred before the
Effective Time; provided, however, that the Surviving
-------- -------
Corporation shall not be obligated to make annual premium
payments for such insurance to the extent such premiums exceed
an amount equal to 150% of the annual premiums paid as of the
date hereof by the Company for such insurance, in which case
the Surviving Corporation shall purchase policies in such
amounts and with such coverage as reasonably can be purchased
for such amounts.
(c) The provisions of this Section 5.08 are intended
to be for the benefit of, and shall be enforceable by, each
person indemnified pursuant to this Section 5.08, his or her
heirs and his or her representatives.
Section 5.09 Expenses. Except as set forth in
--------
Section 10.05, Parent and Newco, on the one hand, and the
Company, on the other hand, shall bear their respective
expenses incurred in connection with the Merger, including,
without limitation, the preparation, execution and performance
of this Agreement and the transactions contemplated hereby and
all fees and expenses of investment bankers, finders, brokers,
agents, representatives, counsel and accountants, except that
expenses incurred in printing, mailing and filing (including
without limitation, SEC filing fees and stock exchange listing
application fees) the Proxy Statement shall be shared equally
by the Company and Parent.
Section 5.10 Affiliates. The Company shall advise
----------
Parent in writing of any person who becomes an Affiliate after
the date hereof and prior to the Effective Time and shall use
all commercially reasonable efforts to have each such person
deliver to Parent, no later than the date such person becomes
an Affiliate, a written agreement substantially in the form of
Exhibit B hereto.
Section 5.11 Stock Exchange Listings. Parent shall
-----------------------
use all commercially reasonable efforts to list on the NYSE and
the PSE, upon official notice of issuance, any newly-issued
Parent Common Stock (and the accompanying Parent Purchase
Rights) to be issued in connection with the Merger.
Section 5.12 Company and Subsidiary Actions. The
------------------------------
Company shall not take or omit to take, and shall not cause or
permit any of its Subsidiaries to take or omit to take, any
action which would cause a breach of any representation or
warranty of the Company contained in this Agreement such that
the
-47-
Closing condition set forth in Section 7.01 would not be
satisfied.
Section 5.13 Environmental Matters. The Company
---------------------
shall make all filings and use all commercially reasonable
efforts to take all actions necessary to comply with the
provisions and requirements of all Environmental Laws
(including, without limitation, the Connecticut Transfer Act)
applicable to the Merger and other transactions contemplated
hereby, including without limitation, any assets or property of
the Company or any of its Subsidiaries located in the State of
Connecticut. The Company shall keep Parent informed of all
actions taken in connection with the foregoing and all such
actions shall be on terms and conditions satisfactory to
Parent.
Section 5.14 Resignation of Directors. Prior to the
------------------------
Effective Time, the Company shall take all commercially
reasonable efforts to enable the Company to deliver to Parent
at the Closing at no cost the resignation of such directors of
the Company and, to the extent the Company has the power to
remove directors, its Subsidiaries as Parent shall specify,
effective at the Effective Time. In connection with any such
resignation, the directors shall simultaneously reconvey their
directors' qualifying shares, if any, to the applicable
Subsidiary or such other persons as Parent shall specify at no
additional expense to Parent, Newco or any such Subsidiary
other than customary expenses directly relating to the transfer
and issuance of directors' qualifying shares, if any.
Section 5.15 Stock Purchase Plan. The Company
-------------------
shall, on or before the Effective Time, terminate its 1991
Employee Stock Purchase Plan and distribute to the participants
thereunder the entire balance in shares of Company Common Stock
and monies of any outstanding stock purchase accounts. Such
shares shall be entitled to be exchanged pursuant to this
Agreement.
Section 5.16 Company Rights Agreement. The Company
------------------------
shall not redeem, amend or otherwise modify the rights issued
under the Company Rights Agreement (other than to delay any
"distribution date" thereon or to render the rights
inapplicable to the Merger or any action permitted under this
Agreement) or terminate the Company Rights Agreement prior to
the earlier of (i) a vote by the holders of Company Common
Stock at the Special Meeting (including any adjournments
thereof) which shall not have been sufficient to satisfy the
requirements of Section 6.02, (ii) the termination of this
Agreement in
-48-
accordance with its terms or (iii) the Effective Time, unless
required to do so by a court of competent jurisdiction.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF PARENT, NEWCO AND THE COMPANY
The respective obligations of each party to effect
the Merger shall be subject to the fulfillment at or prior to
the Closing of each of the following conditions:
Section 6.01 Registration Statement. The
----------------------
Registration Statement shall have become effective in
accordance with the provisions of the Securities Act. No stop
order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and remain in
effect. All necessary state securities or blue sky
authorizations shall have been received.
Section 6.02 Stockholder Approval. The approval of
--------------------
a majority of the outstanding shares of Company Common Stock
cast at the Special Meeting or any adjournment thereof shall
have been obtained.
Section 6.03 Listings. The Parent Shares (and the
--------
accompanying Parent Purchase Rights) issuable in the Merger
shall have been authorized for listing on the NYSE and the PSE
subject to official notice of issuance.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PARENT AND NEWCO
The obligation of Parent and Newco to effect the
Merger and to perform their other obligations to be performed
at or subsequent to the Closing shall be subject to the
fulfillment at or prior to the Closing of the following
additional conditions, any one or more of which may be waived
by Parent or Newco:
Section 7.01 Representations and Warranties True.
-----------------------------------
The representations and warranties of the Company contained
herein (without regard to any materiality exceptions or
provisos therein) shall be true and correct in all respects on
the date of this Agreement and the Closing Date as though such
representations and warranties were made at and on such date,
except (i) for those untruths or inaccuracies which
individually or in the aggregate would not either materially
impair or
-49-
preclude the Company's ability to consummate the Merger and
the other transactions contemplated hereby or have a Company
Material Adverse Effect and (ii) for changes expressly
permitted or contemplated by this Agreement.
Section 7.02 Performance. The Company shall have
-----------
performed and complied in all material respects with all
agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to
the Closing Date except for those failures to so perform or
comply which individually or in the aggregate would not either
materially impair or preclude the Company's ability to
consummate the Merger and the other transactions contemplated
hereby or have a Company Material Adverse Effect.
Section 7.03 Certificates. The Company shall
------------
furnish such certificates of its officers to evidence
compliance with the conditions set forth in Sections 7.01 and
7.02 as may be reasonably requested by Parent or Newco.
Section 7.04 Certain Proceedings. No writ, order,
-------------------
decree or injunction of a court of competent jurisdiction or
governmental entity shall have been entered against Parent,
Newco or the Company which, and no proceedings therefor shall
have been threatened or commenced by any governmental entity
which seek to, prohibit or restrict the consummation of the
Merger or would otherwise restrict Parent's or the Surviving
Corporation's exercise of full rights to own and operate the
business of the Company.
Section 7.05 Consents and Approvals. All necessary
----------------------
consents and approvals of any United States or any other
governmental authority or any other third party required for
the consummation of the Merger and the other transactions
contemplated hereby (including without limitation any such
consents and approvals required under any Environmental Law)
shall have been obtained, and any waiting period applicable to
the consummation of the Merger under the HSR Act shall have
expired or been terminated.
Section 7.06 Material Adverse Change. There shall
-----------------------
not have occurred since December 31, 1994 any material adverse
change in the general affairs, management, business,
operations, assets, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole.
-50-
Section 7.07 Opinion of Counsel. (a) Parent shall
------------------
have received the opinions of Parker Duryee Rosoff & Haft,
counsel to the Company, with respect to Delaware, New York and
U.S. federal law, Shawn A. Smith, Esq., counsel to the Company
with respect to Connecticut and U.S federal law and D. David
Cohen, Esq., counsel to the Company, each substantially in the
form of Exhibits D-1, D-2 and D-3, respectively.
(b) Parent shall have received the opinions of U.K.,
Canadian and German counsel, each reasonably acceptable to
Parent, respectively, with respect to the corporate existence
and share ownership of the Company's Subsidiaries formed in the
U.K., Canada and Germany substantially in the form of
paragraphs (a) and (b) of Exhibit D-1.
(c) Parent shall have received the opinion of Pepe &
Hazard, Connecticut counsel to the Company with respect to the
Connecticut Transfer Act and the matters referred to in
Section 7.09.
Section 7.08 Tax Matters. Parent shall have
-----------
received from the Company an Officer's Certificate dated the
Closing Date in the form of Exhibit G.
Section 7.09 Environmental Matters. The Company,
---------------------
after consultation with Parent, shall have delivered to Parent
in accordance with the requirements of the Connecticut Transfer
Act (i) a fully executed Form I Negative Declaration, or (ii) a
fully executed Form II Negative Declaration, or (iii) a fully
executed Form III Declaration, which Form III shall provide
that the Company shall be responsible for such ongoing
environmental requirements as are set forth in such Form III.
If the Company delivers to Parent a Form I or Form II Negative
Declaration, Company shall also have delivered to Parent such
affidavits and other documentation as are reasonably sufficient
to support the Company's conclusion to provide such Form I or
Form II.
Section 7.10 Average Market Value. The Average
--------------------
Market Value of Parent Common Stock shall be equal to or
greater than $31 per share.
Section 7.11 Other Matters. At least 30 days prior
-------------
to the scheduled date of the Special Meeting, Richard E. Greene
shall have repaid in full in cash, all outstanding loans to him
by the Company, in an aggregate principal amount of
approximately $593,000, and the Company shall have, directly
and
-51-
indirectly, no security interest in, option to purchase, or
other right or interest with respect to, any shares of Company
Common Stock owned by Mr. Greene; or Parent shall have received
a letter from its independent auditors, Ernst & Young LLP,
stating the failure to so repay all such loans and/or the
Company continuing to have such an interest would not prevent
Parent from accounting for the Merger as a "pooling of
interests."
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement
to effect the Merger shall be subject to the fulfillment on or
before the Closing Date of each of the following additional
conditions, any one or more of which may be waived by the
Company:
Section 8.01 Representations and Warranties True.
-----------------------------------
The representations and warranties of Parent and Newco
contained herein (without regard to any materiality exceptions
or provisos therein) shall be true and correct in all material
respects on the date of this Agreement and the Closing Date as
though such representations and warranties were made at and on
such date, except (i) for those untruths or inaccuracies which
individually or in the aggregate would not either materially
impair or preclude the ability of Parent or Newco to consummate
the Merger and the other transactions contemplated hereby or
have a Parent Material Adverse Effect and (ii) for changes
permitted or contemplated by this Agreement.
Section 8.02 Performance. Parent and Newco shall
-----------
have performed and complied in all material respects with all
agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior
to the Closing Date except for those failures to so perform or
comply which individually or in the aggregate would not either
materially impair or preclude the ability of Parent or Newco to
consummate the Merger and the other transactions contemplated
hereby or have a Parent Material Adverse Effect.
Section 8.03 Certificates. Parent and Newco shall
------------
furnish such certificates of their respective officers to
evidence compliance with the conditions set forth in Sections
8.01 and 8.02 as may be reasonably requested by the Company.
-52-
Section 8.04 Certain Proceedings. No writ, order,
-------------------
decree or injunction of a court of competent jurisdiction or
governmental entity shall have been entered against Parent,
Newco or the Company which prohibits the consummation of the
Merger, and any waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been
terminated.
Section 8.05 Opinion of Counsel. The Company shall
------------------
have received the opinions of Cahill Gordon & Reindel, counsel
to Parent, substantially in the forms of Exhibits E and F
hereto.
ARTICLE IX
CLOSING
Section 9.01 Time And Place. Subject to the
--------------
provisions of Articles VI, VII, VIII and X, the closing of the
Merger (the "Closing") shall take place at the offices of
Cahill Gordon & Reindel, as soon as practicable but in no event
later than 9:30 A.M., local time, on the first business day
after the date on which each of the conditions set forth in
Articles VI, VII and VIII have been satisfied or waived by the
party or parties entitled to the benefit of such conditions; or
at such other place, at such other time, or on such other date
as Parent, Newco and the Company may mutually agree. The date
on which the Closing actually occurs is herein referred to as
the "Closing Date."
Section 9.02 Filings at the Closing. Subject to the
----------------------
provisions of Articles VI, VII, VIII and X hereof, the Company,
Parent and Newco shall cause to be executed and filed at the
Closing the Certificate of Merger and shall cause the
Certificate of Merger to be recorded in accordance with the
applicable provisions of the Delaware Act and shall take any
and all other lawful actions and do any and all other lawful
things necessary to cause the Merger to become effective.
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.01 Termination. In connection with the
-----------
structure of the transactions as described in the recitals to
this Agreement, the parties have agreed that this Agreement
shall not be terminated, nor the Merger abandoned, except in
-53-
accordance with the provisions of this Article X, all strictly
construed against the party seeking such termination. This
Agreement may be terminated and the Merger may be abandoned any
time prior to the Effective Time, whether before or after
approval by the stockholders of the Company:
(a) by mutual consent of the Boards of Directors of
Parent and the Company;
(b) by either Parent or the Company if, without
fault of such terminating party, the Merger shall not have
been consummated on or before December 31, 1995, which
date may be extended by mutual consent of the parties
hereto;
(c) by either Parent or the Company, if any court of
competent jurisdiction in the United States or other
governmental body in the United States shall have issued
an order (other than a temporary restraining order),
decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger, and such
order, decree, ruling or other action shall have become
final and nonappealable; or
(d) by either Parent or the Company, if the approval
of a majority of the outstanding shares of Company Common
Stock cast at the Special Meeting (including any
adjournment thereof) is not obtained.
Section 10.02 Termination by Parent. This Agreement
---------------------
may be terminated and the Merger may be abandoned by action of
the Board of Directors of Parent, at any time prior to the
Effective Time, before or after the approval by the
stockholders of the Company, if (a) the Company shall have
failed to comply in any material respect with any of the
covenants or agreements contained in Articles I and V of this
Agreement to be complied with or performed by the Company at or
prior to such date of termination, (b) there exists a breach or
breaches of any representation or warranty of the Company
contained in this Agreement such that the Closing condition set
forth in Section 7.01 would not be satisfied; provided,
--------
however, that if such failure, breach or breaches are capable
-------
of being cured prior to the Effective Time, such failure,
breach or breaches shall not have been cured within 15 days of
delivery to the Company of written notice of such failure,
breach or breaches, or (c) the Company shall furnish or
disclose non-public information to a third party with respect
to any Acquisition
-54-
Transaction, or shall have resolved to do the foregoing and
publicly disclosed such resolution.
Section 10.03 Termination by the Company. This
--------------------------
Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the
approval by the stockholders of the Company, by action of the
Board of the Directors of the Company, if (a) Parent or Newco
shall have failed to comply in any material respect with any of
the covenants or agreements contained in Articles I and V of
this Agreement to be complied with or performed by Parent or
Newco at or prior to such date of termination or (b) there
exists a breach or breaches of any representation or warranty
of Parent or Newco contained in this Agreement such that the
Closing condition set forth in Section 8.01 would not be
satisfied; provided, however, that if such failure, breach or
-------- -------
breaches are capable of being cured prior to the Effective
Time, such failure, breach or breaches shall not be cured
within 15 days of delivery to Parent of written notice of such
failure, breach or breaches.
Section 10.04 Procedure for Termination. In the
-------------------------
event of termination and abandonment of the Merger by Parent or
the Company pursuant to this Article X, written notice thereof
shall forthwith be given to the other.
Section 10.05 Effect of Termination and Abandonment.
-------------------------------------
(a) In the event of termination of this Agreement and
abandonment of the Merger pursuant to this Article X, no party
hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this
Agreement, except as provided in Section 5.03(c) and this
Section 10.05 and except that nothing herein shall relieve any
party from liability for any breach of this Agreement.
(b) In the event of (i) a termination of this
Agreement pursuant to Section 10.01(b), (c) or (d) and if prior
to any such termination any person shall have made a bona fide
proposal concerning a Business Combination Transaction (as
defined hereinafter) to the Company or its stockholders or
(ii) any termination of this Agreement by Parent pursuant to
Section 10.02, then the Company shall promptly pay Parent by
wire transfer of immediately available funds to an account
specified by Parent up to $1.5 million for all documented fees
and expenses incurred by Parent (including the fees and
expenses of counsel, accountants, consultants and advisors) in
connection with this Agreement and the transactions
-55-
contemplated hereby. In the event of a termination of this
Agreement pursuant to Section 10.02(c), the Company shall
promptly pay Parent by wire transfer of immediately available
funds to an account specified by Parent an additional fee of
$2.4 million. If an additional fee has not already become
payable and if prior to any termination pursuant to
Section 10.01(b), (c) or (d) or 10.02(a) or (b), any person
shall have made a bona fide proposal concerning a Business
Combination Transaction and within twelve months after the
execution of this Agreement the Company or any of its
Subsidiaries enters into a definitive agreement with a third
party with respect to a Business Combination Transaction or a
Business Combination Transaction is effected, then the Company,
prior to entering into any such definitive agreement or any
such Business Combination Transaction being effected, shall
promptly pay Parent by wire transfer of immediately available
funds to an account specified by Parent an additional fee of
$2.4 million. As used in this Section 10.05, the term
"Business Combination Transaction" shall mean any of the
following involving the Company or any Subsidiary, that is
material to the business, results of operation, prospects or
financial condition of the Company and its Subsidiaries taken
as whole: (1) any merger, consolidation, share exchange,
business combination or other similar transaction (other than
the Merger); (2) any sale, lease, exchange, transfer or other
disposition of 25% or more of the assets of the Company and its
Subsidiaries, taken as a whole, in a single transaction or
series of transactions; or (3) the acquisition by a person or
entity, or any "group" (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of beneficial ownership of 33 1/3% or more of the
Company Common Stock, whether by tender offer, exchange offer
or otherwise.
(c) In the event of a termination of this Agreement
by the Company pursuant to Section 10.03, then Parent shall
promptly pay the Company by wire transfer of immediately
available funds to an account specified by the Company up to
$1.5 million for all documented fees and expenses incurred by
the Company (including the fees and expenses of counsel,
accountants, consultants and advisors) in connection with this
Agreement and the transactions contemplated hereby.
-56-
ARTICLE XI
DEFINITIONS
Section 11.01 Terms Defined in This Agreement. The
-------------------------------
following capitalized terms used herein shall have the meanings
ascribed in the indicated sections.
Acquisition Transaction......................... 5.02
Affiliates...................................... 4.09
Agreement....................................... First Paragraph
Antitrust Division.............................. 5.05
Average Market Value............................ 2.01
Balance Sheet................................... 4.21
Business Combination Transaction................ 10.05(b)
Certificates.................................... 2.03
Certificate of Merger........................... 1.02
Closing......................................... 9.01
Closing Consideration........................... 2.01
Closing Date.................................... 9.01
COBRA........................................... 4.29
Code............................................ Recitals
Company......................................... First Paragraph
Company Common Stock............................ 2.01
Company Common Stock Equivalents................ 4.17
Company Material Adverse Effect................. 4.01
Company Plans................................... 4.17
Company Preferred Stock......................... 4.17
Company Purchase Rights......................... 4.17
Company Rights Agreement........................ 4.08
Company SEC Reports............................. 4.13
Confidentiality Agreement....................... 5.03
Connecticut Transfer Act........................ 4.30
Constituent Corporations........................ First Paragraph
Convertible Notes............................... 3.02
Delaware Act.................................... 1.01
Disclosure Statement............................ 4.01
Effective Time.................................. 1.02
Environment..................................... 4.30
Environmental Authorizations.................... 4.30
Environmental Laws.............................. 4.30
Environmental Notice............................ 4.30
ERISA........................................... 4.29
ERISA Affiliate................................. 4.29
Exchange Act.................................... 3.05
Exchange Ratio.................................. 2.01
Foreign Plan.................................... 4.29
-57-
FTC............................................. 5.05
Governmental Authority.......................... 4.30
Hazardous Materials............................. 4.30
HSR Act......................................... 3.04
IRS............................................. 4.29
Intellectual Property Rights.................... 4.27
Merger.......................................... 1.01
Newco........................................... First Paragraph
NYSE............................................ 2.01
Parent.......................................... First Paragraph
Parent Common Stock............................. 2.01
Parent Material Adverse Effect.................. 3.04
Parent Plans.................................... 3.02
Parent Preferred Stock.......................... 3.02
Parent Purchase Right........................... 2.01
Parent SEC Reports.............................. 3.06
PBGC............................................ 4.29
Pension Benefit Plans........................... 4.29
Proxy Statement................................. 3.05
PSE............................................. 3.04
Real Property................................... 4.30
Registration Statement.......................... 3.05
SEC............................................. 3.05
Securities Act.................................. 3.04
Special Meeting................................. 1.05
Stockholder Letter Agreement.................... 4.10
Subsidiaries.................................... 4.18
Surviving Corporation........................... 1.01
Tax Returns..................................... 4.28
Taxes........................................... 4.28
Welfare Plans................................... 4.29
ARTICLE XII
MISCELLANEOUS
Section 12.01 Amendment and Modification. Subject
--------------------------
to applicable law, this Agreement may be amended, modified or
supplemented only by written agreement of Parent, Newco and the
Company at any time prior to the Effective Time with respect to
any of the terms contained herein; provided, however, that
-------- -------
after this Agreement is adopted by the stockholders of the
Company, no such amendment or modification shall change the
amount or form of the Closing Consideration.
Section 12.02 Waiver of Compliance; Consents. Any
------------------------------
failure of Parent or Newco, on the one hand, or the Company, on
-58-
the other hand, to comply with any obligation, covenant,
agreement or condition herein may be waived by the Company or
Parent or Newco, respectively, only by a written instrument
signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be
given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 12.02.
Section 12.03 Survivability; Investigations. The
-----------------------------
respective representations and warranties of Parent, Newco and
the Company contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be
deemed waived or otherwise affected by any investigation made
by any party hereto and shall not survive the Closing.
Representations and warranties to a party's knowledge shall
mean such party shall have made due inquiry and investigation,
except with respect to the Former Locations for which the
parties acknowledge that no such inquiry or investigation has
been undertaken by the Company. For purposes of this section,
Former Locations shall mean all locations owned, leased, or
subleased by the Company and where the Company operated or had
a principal place of business, but excluding its present
locations, specifically One Enterprise Drive, Shelton,
Connecticut 06484, 12 Cascade Boulevard, Orange, Connecticut
06477, One Waterview Drive, Shelton, Connecticut 06484, and 540
New Haven Avenue, Milford, Connecticut 06460.
Section 12.04 Notices. All notices and other
-------
communications hereunder shall be in writing and shall be
delivered personally, by next-day courier or mailed by
registered or certified mail (return receipt requested), first
class postage prepaid, or telecopied with written confirmation
of receipt, to the parties at the addresses specified below (or
at such other address for a party as shall be specified by like
notice; provided, that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be
effective upon receipt, if personally delivered or telecopied,
one day after delivery to a courier for next-day delivery, or
three days after mailing, if deposited in the U.S. mail, first
class postage prepaid.
-59-
(a) if to the Company, to
Data Switch Corporation
One Enterprise Drive
Shelton, Connecticut 06484
Telecopy: (203) 926-9879
Attention: Shawn A. Smith, Esq.
Secretary and Corporate Counsel
with copies to
D. David Cohen, Esq.
Expressway Plaza Two
Suite 200
Roslyn Heights, New York 11577
Telecopy: (516) 621-3516
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Telecopy: (212) 972-9487
Attention: Ira Roxland, Esq.
(b) if to Parent, or Newco, to
General Signal Corporation
One High Ridge Park
Stamford, Connecticut 06904
Telecopy: (203) 329-4396
Attention: Signe S. Gates, Esq.
Assistant General Counsel
with a copy to
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy: (212) 269-5420
Attention: W. Leslie Duffy, Esq.
Section 12.05 Assignment. This Agreement and all of
----------
the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors
-60-
and permitted assigns (including, without limitation, any
wholly owned subsidiary of Parent incorporated under the laws
of Delaware and substituted for Newco as provided in
Section 1.01), but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of
the other parties, nor is this Agreement intended to confer any
rights or remedies hereunder upon any other person except the
parties hereto and, with respect to Section 5.08, the officers
and directors of the Company.
Section 12.06 Governing Law. Except as the laws of
-------------
the State of Delaware are by their terms applicable, this
Agreement shall be governed by the laws of the State of New
York (regardless of the laws that might otherwise govern under
applicable New York principles of conflicts of law) as to all
matters, including but not limited to matters of validity,
construction, effect, performance and remedies.
Section 12.07 Counterparts. This Agreement may be
------------
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
Section 12.08 Severability. In case any one or more
------------
of the provisions contained in this Agreement should be
invalid, illegal or unenforceable in any respect against a
party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby and such invalidity, illegality or
unenforceability shall only apply as to such party in the
specific jurisdiction where such judgment shall be made.
Section 12.09 Interpretation. The article and
--------------
section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement,
(i) the term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unin-
corporated organization and a government or any department or
agency thereof; and (ii) the term "Subsidiary" of any specified
corporation shall mean any corporation of which a majority of
the outstanding securities having ordinary voting power to
elect a majority of the board of directors is directly or
indirectly owned by such specified corporation or any other
person
-61-
of which a majority of the equity interests therein is,
directly or indirectly, owned by such specified corporation.
Section 12.10 Entire Agreement. This Agreement,
----------------
including the exhibits hereto and the documents and instruments
referred to herein (including the Confidentiality Agreement,
the Non-Solicitation Agreement, dated May 5, 1995, and
Disclosure Statement), embodies the entire agreement and
understanding of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements and
understandings between the parties with respect to such subject
matter. There are no representations, promises, warranties,
covenants, or undertakings, other than those expressly set
forth or referred to herein and therein.
S-1
IN WITNESS WHEREOF, Parent, Newco and the Company
have caused this Agreement to be signed by their respective
duly authorized officers as of the date first above written.
GENERAL SIGNAL CORPORATION
By: /s/ Philip A. Goodrich
-----------------------------------
Name: Philip A. Goodrich
Title: Vice President - Corporate
Development
GENERAL SIGNAL ACQUISITION
CORPORATION
By: /s/ Michael D. Lockhart
-----------------------------------
Name: Michael D. Lockhart
Title: President
DATA SWITCH CORPORATION
By: /s/ William J. Lifka
-----------------------------------
Name: William J. Lifka
Title: Chairman of the Board and
Chief Executive Officer
Annex B
Needham & Company, Inc.
400 Park Avenue
New York, NY 10022-4406
(212) 371-8300
September 5, 1995
Board of Directors
Data Switch Corporation
One Enterprise Drive
Shelton, CT 06484
Gentlemen:
We understand that Data Switch Corporation ("Data Switch"), General
Signal Corporation ("General Signal") and Data Switch Acquisition, Inc., a
wholly owned subsidiary of General Signal ("Merger Sub"), have entered into
an Agreement and Plan of Merger, dated as of May 8, 1995 (the "Merger
Agreement"), pursuant to which Merger Sub will be merged with and into Data
Switch and Data Switch, as the surviving corporation, will become a wholly
owned subsidiary of General Signal (the "Merger"). The terms of the Merger
are set forth more fully in the Merger Agreement.
Pursuant to the Merger Agreement, we understand that at the Effective
Time (as defined in the Merger Agreement), each share of common stock, par
value $.01 per share, of Data Switch ("Data Switch Common Stock") issued
and outstanding immediately prior to the Effective Time (except for shares
owned by Data Switch as treasury stock or owned by any subsidiary of Data
Switch) will be converted into the right to receive a fraction of a share
(the "Exchange Ratio") of common stock, par value $1.00 per share, of
General Signal ("General Signal Common Stock") determined by dividing $4.55
by the Average Market Value (as defined in the Merger Agreement); provided,
however that the Exchange Ratio will be calculated to five decimal places
and will in no event be greater than 0.14677 of a share of General Signal
Common Stock or less than 0.10581 of a share of General Signal Common
Stock.
You have asked us to advise you as to the fairness, from a financial
point of view, of the Exchange Ratio to the stockholders of Data Switch.
Needham & Company, Inc. as part of its investment banking business is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
secondary distributions of securities, private placements and other
purposes. We have acted as financial advisor to Data Switch in connection
with the Merger and will receive a fee for our services that is contingent
on the consummation of the Merger. In addition, Data Switch has agreed to
indemnify us for certain liabilities arising out of the rendering of this
opinion.
----------------------------------------------------------------------------
Data Switch Corporation
September 5, 1995
Page 2
-----------------------------------------------------------------------------
Needham & Company, Inc.
For purposes of this opinion we have, among other things: (i) reviewed the
Merger Agreement; (ii) reviewed certain other documents related to the Merger,
including drafts of the Proxy Statement/Prospectus; (iii) reviewed certain
publicly available information concerning Data Switch and General Signal and
certain other relevant financial and operating data of Data Switch and General
Signal made available from the internal records of Data Switch and General
Signal; (iv) visited Data Switch's facilities and held discussions with members
of senior management of Data Switch and General Signal concerning their current
and future business prospects; (v) reviewed certain financial forecasts and
projections prepared by Data Switch's and General Signal's respective
managements; (vi) reviewed the historical stock prices and trading volumes of
the Data Switch Common Stock and General Signal Common Stock; (vii) compared
publicly available financial data of public companies, which we deemed generally
comparable to Data Switch, to similar data for Data Switch; (viii) reviewed the
financial terms of certain other business combinations that we deemed generally
relevant; and (ix) performed and/or considered such other studies, analyses,
inquiries and investigations as we deemed appropriate.
In connection with our review and in arriving at our opinion, we have not
assumed any responsibility to independently verify any of the foregoing
information, have relied on such information, and have assumed that all such
information is complete and accurate in all material respects. With respect to
Data Switch's and General Signal's financial forecasts provided to us by their
respective managements, we have assumed for purposes of our opinion that such
forecasts have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of such managements, at the time of
preparation, of the future operating and financial performance of Data Switch
and General Signal. We have not assumed any responsibility for or made or
obtained an independent evaluation, appraisal or physical inspection of the
assets or liabilities of Data Switch or General Signal. Further, our opinion is
based on economic, monetary and market conditions existing as of the date
hereof, and in rendering this opinion, we have relied without independent
verification on the accuracy, completeness and fairness of all historical
financial and other information which was either publicly available or furnished
to us by Data Switch and General Signal. Our opinion as expressed herein is
limited to the fairness, from a financial point of view, of the Exchange Ratio
to the stockholders of Data Switch and does not address Data Switch's underlying
business decision to sell Data Switch.
In the ordinary course of our business, we may actively trade the equity
securities of Data Switch and General Signal for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
----------------------------------------------------------------------------
Data Switch Corporation
September 5, 1995
Page 3
------------------------------------------------------------------------------
Needham & Company, Inc.
This letter and the opinion expressed herein are solely for the benefit of
the Board of Directors of Data Switch and may not be quoted or referred to or
used for any other purpose without prior written consent, except that this
letter may be disclosed in connection with any registration statement or proxy
statement used in connection with the Merger so long as this letter is quoted in
full in such registration statement or proxy statement. In addition, we hereby
consent to the references to Needham & Company in the Registration Statement in
connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio pursuant to the Merger Agreement is fair to the
stockholders of Data Switch from a financial point of view.
Very truly yours,
By: /s/ John C. Michaelson
-----------------------------
John C. Michaelson
for, and on behalf of
NEEDHAM & COMPANY, INC.
JCM:ce
Annex C
CONFIDENTIAL, FOR USE OF
THE COMMISSION ONLY
DATA SWITCH CORPORATION
One Waterview Drive
Shelton, Connecticut 06484
This Proxy is Solicited on behalf of the Board of Directors
The undersigned shareholder of Data Switch Corporation
(herein the "Company") hereby appoints William J. Lifka, W. James
Whittle and Shawn A. Smith the proxy of the undersigned (with
power of substitution) to vote at the Special Meeting of the
Shareholders of the Company to be held on October __, 1995 and
at any adjournment thereof, all the present, or the following
proposals more fully described in the Proxy Statement for the
Meeting in the manner specified and on any other business that
may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
(Continued on reverse side)
THE DIRECTORS RECOMMEND A VOTE FOR THE PROPOSAL SET FORTH BELOW
1. Approval of Merger of General Signal Acquisition Corporation
with and into Data Switch Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
If no instructions are indicated, your shares will be voted FOR
approval of the Merger and, at the discretion of the proxy
holder, as to any other matter which may properly come before the
Special Meeting.
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
________________________________
Signature
________________________________
Signature if held jointly
Dated:__________________________
Please sign exactly as name appears to the left. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article V, Section 1, Paragraph 1 of the By-Laws of
General Signal reads as follows:
"SECTION 1: Except to the extent expressly
prohibited by the New York Business Corporation
Law, the Corporation shall indemnify each person
made or threatened to be made a party to any
action or proceeding, whether civil or criminal,
and whether by or in the right of the Corporation
or otherwise, by reason of the fact that such
person or such person's testator or intestate is
or was a director or officer of the Corporation,
or serves or served at the request of the
Corporation or any other corporation, partnership,
joint venture, trust, employee benefit plan or
other enterprise in any capacity while he or she
was such a director or officer (hereinafter
referred to as 'Indemnified Person'), against
judgments, fines, penalties, amounts paid in
settlement and reasonable expenses, including
attorneys' fees, incurred in connection with such
action or proceeding, or any appeal therein,
provided that no such indemnification shall be
made if a judgment or other final adjudication
adverse to such Indemnified Person establishes
that either (a) his or her acts were committed in
bad faith, or were the result of active and
deliberate dishonesty, and were material to the
cause of action so adjudicated, or (b) that he or
she personally gained in fact a financial profit
or other advantage to which he or she was not
legally entitled."
General Signal also has entered into individual
contracts with its directors, Chief Financial Officer and
General Counsel providing for indemnification similar to the
indemnification provisions in General Signal's By-Laws. A copy
of General Signal's By-Laws has been filed with the Securities
and Exchange Commission as an exhibit to General Signal's
Quarterly Report on Form 10-Q/A for the three months ended
March 31, 1994.
Sections 721 through 726 of the New York Business
Corporation Law ("BCL") contain provisions for indemnification
by General Signal, under certain circumstances, of officers and
II-1
directors of General Signal for certain liabilities which may
be incurred by them in their capacities as such.
General Signal has purchased insurance to indemnify
General Signal and all of its directors, officers and certain
other employees who hold management positions in General Signal
and its operating divisions and subsidiaries for those
liabilities in respect of which such indemnification insurance
is permitted under the laws of the State of New York.
Limitation on Directors' Liability. General Signal's
Certificate of Incorporation includes a provision eliminating
directors' liability to General Signal and stockholders of
General Signal in certain circumstances authorized by New York
law. This provision, which is authorized by Section 402(b) of
the BCL, provides that a director shall not be personally
liable to General Signal or its stockholders for monetary
damages for breach of duty as a director unless the director's
acts or omissions (a) were in bad faith, (b) involved
intentional misconduct or a knowing violation of law, (c)
resulted in the director deriving an improper personal benefit,
or (d) resulted in the paying of a dividend, the approval of a
stock repurchase, the distribution of corporate assets upon
dissolution, or the making of a loan to a director in violation
of Section 714 of the BCL.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Exhibit No. Description
2 - Agreement and Plan of Merger, dated as
of May 8, 1995, among General Signal,
General Signal Acquisition Corporation
and Data Switch Corporation (attached
as Annex A to the Prospectus and Proxy
Statement included in this Registration
Statement).
3.1 - Restated Certificate of Incorporation
of General Signal, as amended through
April 21, 1994, previously filed as
Exhibit 3.1 to the Registrant's Form
10-Q/A for the three months ended March
31, 1994 filed June 10, 1994.
3.2 - By-Laws of General Signal, as amended
through March 16, 1995, previously
filed as Exhibit 3.2 to the
Registrant's 1994 Form 10-K.
II-2
4.1 - Copies of the instruments with respect
to the Registrant's long-term debt are
available from the Securities and
Exchange Commission upon request.
4.2 - Copies of the Credit Agreements among
the Registrant and various Commercial
Banking Institutions, as amended
through December 31, 1994, as described
in the Notes to the General Signal
Financial Statements herein, are
available from the Securities and
Exchange Commission upon request.
5* - Opinion of Cahill Gordon & Reindel
regarding the legality of the
securities being registered.
8* - Form of Opinion of Cahill Gordon &
Reindel regarding certain federal
income tax consequences.
10.1* - Form of Affiliate Letter.
10.2* - Form of Stockholder Letter.
12 - Calculation of Ratios of Earnings to
Fixed Charges. Previously filed as
Exhibit 12.0 to the Registrant's Form
10-Q for the three months ended March
31, 1995.
23.1* - Consents of Ernst & Young LLP.
23.2* - Consent of Coopers & Lybrand L.L.P.
23.4* - Consent of Cahill Gordon & Reindel
(included in Exhibit 5).
23.5* - Consent of Needham & Co. (included in
Annex B to the Prospectus/Proxy
Statement included in this Registration
Statement)
24 - Powers of Attorney (see signature
page).
99.1* - Form of Proxy Card (attached as Annex C
to the Prospectus and Proxy Statement
included in this Registration
Statement).
(b) - Financial Statement schedules and
reports of independent auditors.
II-3
Not applicable.
(c) - Reports, Opinions or Appraisals
1.1 - Form of Opinion of Needham & Co.
(attached as Annex B to the Prospectus
and Proxy Statement included in this
Registration Statement).
* Filed herewith.
II-4
Item 22. Undertakings.
------------
(a) The undersigned Registrant hereby undertakes
that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a
part of this Registration Statement, by any person or party who
is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable
registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information
called for by the other Items of the applicable form.
(c) The Registrant undertakes that every prospectus:
(i) that is filed pursuant to paragraph (b) above, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the
Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a
part of an amendment to the Registration Statement and will not
be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(d) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being
II-5
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(e) The undersigned Registrant hereby undertakes to
respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Items 4, 10(b), 11 or
13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date
of the Registration Statement through the date of responding to
the request.
(f) The undersigned Registrant hereby undertakes to
supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on
Form S-4 and has duly caused this Registration Statement or
amendment thereto to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Stamford, State of
Connecticut, on the 6th day of September, 1995.
GENERAL SIGNAL CORPORATION
BY: /s/ Edgar J. Smith, Jr.
--------------------------
Edgar J. Smith, Jr.
Vice President, General
Counsel and Secretary
Powers of Attorney
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Each person whose signature appears below hereby constitutes
Terence D. Martin and Edgar J. Smith, Jr. and each of them
singly, such person's true and lawful attorneys, each with full
power of substitution to sign for such person and in such
person's name and capacity indicated below, any and all
amendments to this Registration Statement, and to file the same
with the Securities and Exchange Commission, hereby ratifying
and confirming such person's signature as it may be signed by
said attorneys to any and all amendments.
SIGNATURE TITLE DATE
--------- ----- ----
*
--------------------
(Edmund M. Carpenter) Chairman and Chief September 6, 1995
Executive Officer
and Director
(Principal Executive
Officer)
*
____________________
(Michael D. Lockhart) President and September 6, 1995
Chief Operating
Officer and
Director
II-7
*
---------------------
(Terence D. Martin) Executive Vice September 6, 1995
President and Chief
Financial Officer
(Principal Financial
Officer)
*
--------------------
(Terry J. Mortimer) Vice President and September 6, 1995
Controller (Principal
Accounting Officer)
*
--------------------
(Ralph E. Bailey) Director September 6, 1995
*
--------------------
(Van C. Campbell) Director September 6, 1995
*
--------------------
(Ursula F. Fairbairn) Director September 6, 1995
*
--------------------
(Ronald E. Ferguson) Director September 6, 1995
*
--------------------
(John P. Horgan) Director September 6, 1995
*
--------------------
(C. Robert Kidder) Director September 6, 1995
*
--------------------
(Richard J. Kogan) Director September 6, 1995
*
--------------------
(Roland W. Schmitt) Director September 6, 1995
II-8
*
--------------------
(John R. Selby) Director September 6, 1995
*By: /s/ Edgar J. Smith, Jr.
---------------------------------
Edgar J. Smith, Jr.
Attorney-in-Fact
II-9
EX-5
2
Exhibit 5
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
September 7, 1995
(212) 701-3000
General Signal Corporation
One High Ridge Park
Stamford, Connecticut 06904
Dear Sirs:
We have acted as special counsel to General Signal
Corporation, a New York corporation (the "Company"), in connection
with the filing of a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as
amended (the "Act") relating to 2,055,310 shares of the Company's
Common Stock, par value $1.00 per share, and the common stock
purchase rights associated therewith (the "Shares") to be issued
in connection with the merger of General Signal Acquisition
Corporation ("Merger Sub") with and into Data Switch Corporation
("Data Switch") pursuant to an Agreement and Plan of Merger by and
among the Company, Merger Sub and Data Switch, dated as of May 8,
1995 (the "Merger Agreement").
We advise you that, in our opinion, the Shares to be
issued by the Company, when issued in accordance with the terms of
the Merger Agreement and in the manner described in the
-2-
Registration Statement, will be duly and validly issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion as an
Exhibit to the Registration Statement and to the reference to our
firm under the caption "Legal Matters" in the Registration
Statement and related Prospectus. Our consent to such reference
does not constitute a consent under Section 7 of the Act, as in
consenting to such reference we have not certified any part of the
Registration Statement and do not otherwise come within the
categories of persons whose consent is required under said Section
7 or under the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
Cahill Gordon & Reindel
EX-8
3
EXHIBIT 8
[Form of Tax Opinion of Cahill Gordon & Reindel]
We have acted as counsel to General Signal Corporation, a New York
corporation ("Parent"), in connection with the planned merger (the "Merger") of
General Signal Acquisition Corporation, a Delaware corporation ("Newco"), with
and into Data Switch Corporation, a Delaware corporation (the "Company"),
pursuant to the Agreement and Plan of Merger by and among Parent, Newco and the
Company dated as of May 8, 1995 (the "Merger Agreement"). Any capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in the
Merger Agreement or, if not defined therein, in the Joint Proxy
Statement/Prospectus (the "Proxy Statement") that is included in the
Registration Statement on Form S-4 (the "Registration Statement", Registration
No. 33- ) covering the registration of Parent Common Stock under the
Securities Act of 1933, as amended (the "Act"), as filed by Parent with the
Securities and Exchange Commission (the "SEC") on [ ], 1995.
For purposes of this opinion we have relied, with your consent, upon the
accuracy and completeness of the statements and representations contained in (i)
the Officer's Certificate of each of Parent and the Company, (ii) the Merger
Agreement, and (iii) the Proxy Statement, which statements and representations
we have not verified. We have also assumed that the Merger will be consummated
in accordance with the Merger Agreement and as described in the Proxy Statement.
Based upon and subject to the foregoing we are of the opinion that, for
federal income tax purposes:
1. The Merger will be treated as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Each of Parent, Newco and the Company will be a party to such
reorganization within the meaning of Section 368(b) of the Code.
3. No gain or loss will be recognized by the stockholders of the
Company on the exchange of their shares of Company Common Stock for shares
of Parent Common Stock.
4. The basis of the shares of Parent Common Stock to be received by
the stockholders of the
-2-
Company (including any fractional share interest to which they may be
entitled) will be the same as the basis of the shares of Company Common
Stock surrendered in exchange therefor.
5. The holding period of the shares of Parent Common Stock to be
received by the stockholders of the Company in the exchange (including any
fractional share interest to which they may be entitled) will include the
holding period of the shares of Company Common Stock to be surrendered in
exchange therefor, provided the shares of Company Common Stock are held as
capital assets in the hands of the stockholders of the Company at the
Effective Time.
6. A stockholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will be treated as if the
fractional share were distributed as part of the exchange and then redeemed
by Parent, with the cash being received in full payment for the fractional
share.
This opinion letter is intended only for the use of Parent and the Company
in connection with the transactions contemplated in the Merger Agreement. This
opinion may not be relied upon by Parent or the Company for any other purpose
and it may not be relied on by any other person for any purpose, in each case
without our prior written consent.
We hereby consent to the filing of this opinion with the SEC as an exhibit
to the Registration Statement. In giving the foregoing consent, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations thereunder.
Very truly yours,
EX-10.1
4
EXHIBIT 10.1
Form of Company Affiliate Letter
--------------------------------
General Signal Corporation
One High Ridge Park
Stamford, CT 06904
Gentlemen:
The undersigned, a holder of shares of common stock, par value $.01 per
share ("Company Common Stock"), of Data Switch Corporation, a Delaware
corporation (the "Company"), is entitled to receive in connection with the
merger (the "Merger") between the Company and a direct wholly owned Subsidiary
of General Signal Corporation ("Parent") shares of common stock, par value $1.00
per share ("Parent Common Stock"), of Parent. The undersigned acknowledges that
the undersigned may be deemed an "affiliate" of the Company within the meaning
of Rule 145 ("Rule 145") promulgated under the Securities Act of 1933, as
amended (the "Act"), although nothing contained herein should be construed as an
admission that the undersigned is an affiliate.
The undersigned further acknowledges that the undersigned has been informed
that any Parent Common Stock received by persons who are affiliates upon
conversion of any shares of Company Common Stock pursuant to the Merger may be
restricted under the Act unless such transaction is registered under the Act or
an exemption from such registration is available. The undersigned understands
that such exemptions are limited and the undersigned has obtained advice of
counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale of such securities of
Rules 144 and Rule 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign or. transfer any of the Parent Common Stock
received by the undersigned upon conversion of shares of Company Common Stock
pursuant to the Merger except (i) pursuant to an effective registration
statement under the Act, (ii) in conformity with the limitations specified by
Rules 144 and Rule 145(d) or (iii) in a transaction which, in the opinion of
counsel reasonably satisfactory to Parent or as described in a "no-action" or
interpretive letter from the Staff of the Securities and Exchange Commission
(the "SEC"), is not required to be registered under the Act.
-2-
It is understood that I have no present intention to sell the Parent Common
Stock acquired by me pursuant to the Merger. I agree that I will not sell,
transfer or otherwise dispose of any Company Common Stock for 30 days prior to
the effective date of the Merger or any Parent Common Stock received by me in
the Merger until after such time as results covering at least 30 days of
combined operations of the Company and Parent have been published by Parent, in
the form of a quarterly earnings report, a report to the SEC on Form 10-K, 10-Q
or 8-K, or any other public filing or announcement which includes such combined
results of operations.
In the event of a sale or other disposition by the undersigned of Parent
Common Stock pursuant to Rule 145, the undersigned will supply Parent with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any Parent Common Stock disposed of
by the undersigned, but that upon receipt of such evidence of compliance the
transfer agent shall effectuate the transfer of the Parent Common Stock sold as
indicated in the letter.
The undersigned acknowledges and agrees that appropriate legends will be
placed on certificates representing Parent Common Stock received by the
undersigned in the Merger or held by a transferee thereof, which legends will be
removed by delivery of substitute certificates upon receipt of an opinion in
form and substance reasonably satisfactory to Parent from counsel reasonably
satisfactory to Parent to the effect that such legends are no longer required
for the purposes of the Act or the fourth paragraph of this letter.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of Parent Common
Stock and (ii) the receipt by Parent of this letter is an inducement to Parent's
obligations to execute the Agreement and Plan of Merger and to consummate the
Merger.
Very truly yours,
ANNEX I
TO EXHIBIT 10.1
[Name] [Date]
On the undersigned sold shares of common
------------------ ----------------
stock, par value $1.00 per share (the "Parent Common Stock"), of General Signal
Corporation (the "Parent"). The Parent Common Stock was received by the
undersigned in connection with the merger of a direct wholly owned Subsidiary of
the Parent with and into Data Switch Corporation.
Based upon the most recent report or statement filed by the Parent with the
Securities and Exchange Commission, the Parent Common Stock sold by the
undersigned was within the prescribed limitations set forth in paragraph (e) of
Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the Parent Common Stock was sold in
"brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Parent Common Stock, and that the undersigned
has not made any payment in connection with the offer or sale of the Parent
Common Stock to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
EX-10.2
5
EXHIBIT 10.2
May 8, 1995
General Signal Corporation
One High Ridge Park
Stamford, CT 06904
Gentlemen:
This letter is being delivered to you in connection with,
and to induce you to enter into, the Agreement and Plan of Merger
by and among General Signal Corporation ("Parent"), General
Signal Acquisition Corporation and Data Switch Corporation dated
as of May 8, 1995 (the "Merger Agreement"), a copy of which is
attached hereto as Annex 1.
You and the undersigned prior to the date hereof had no
agreement, arrangement or understanding to acquire the Shares (as
defined hereinafter) or for the purpose of acquiring, holding,
voting or disposing of the Shares. Prior to the date hereof, the
Board of Directors of Data Switch Corporation, a Delaware
corporation (the "Company"), has approved you and the undersigned
entering into this letter agreement and the transactions
contemplated by this letter agreement, as well as the execution
and delivery by the Company of the Merger Agreement providing for
the merger of the Company with a direct wholly-owned subsidiary
of yours (the "Merger") and the conversion of each outstanding
share of common stock, par value $.01 per share, of the Company
(the "Company Common Stock"), other than shares of Common Stock
owned by the Company or any subsidiary of the Company, into the
right to receive common stock, par value $1.00 per share, of
Parent ("Parent Common Stock").
The undersigned hereby represents and warrants to, and
covenants and agrees with, Parent as follows:
(a) Your and the undersigned's obligations hereunder shall
be subject to the condition that the Merger and this letter
agreement shall have been approved by the Board of Directors of
the Company with the effect that Parent will not be subject to
the restrictions of Section 203 of the Delaware General
Corporation Law.
(b) The undersigned is the beneficial and/or record holder
of approximately _________ shares of Company Common Stock (the
"Shares"), including _______ shares held in a trust
-2-
for the benefit of ____________ and ______________________ and
______ shares held by ________ (as to which the undersigned
disclaims beneficial ownership), and has the right to acquire
certain additional shares of Company Common Stock (the "Rights").
_______ of the Shares (the "Pledged Shares") have been pledged to
the Company as collateral security for a loan in the principal
amount of approximately $_______ (the "Loan").
(c) The undersigned will not assign, sell, transfer or
otherwise dispose of, including by way of pledge, hypothecation
or grant of any security interest, of any of the Shares, the
Rights, or any Future Shares (as hereinafter defined), or enter
into any direct or indirect agreement or arrangement to effect
any of the foregoing, on or before December 31, 1995; provided,
--------
that the undersigned may pledge Pledged Shares to a broker or
commercial bank for the purpose of securing a loan to repay the
Loan and another loan by the Company to the undersigned in the
principal amount of approximately $______.
(d) In the event that any proposal or offer (other than a
proposal or offer by Parent or its affiliates) for a tender or
exchange offer, merger, consolidation or other business
combination involving the Company or any Subsidiary of the
Company or any proposal to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets of,
the Company or any of it subsidiaries or a liquidation of
dissolution of the Company (an "Acquisition Proposal") is the
subject to approval or ratification by the shareholders of the
Company on or before December 31, 1995, the undersigned agrees to
vote the Shares and any Future Shares for the Merger Agreement
and against approval or ratification of, and to refuse to give
any written consent for, any such Acquisition Proposal and not
otherwise to take any action that would or could have the effect
of increasing the likelihood that such Acquisition Proposal would
be approved or ratified by the shareholders of the Company or
otherwise entered into by the Company. If prior to the
termination of the Merger Agreement pursuant to Section 10.01(b),
(c) or (d) or 10.2 thereof any person shall have made a bona fide
proposal concerning a Business Combination Transaction (as defined
in the Merger Agreement) to the Company or its stockholders and
within twelve months after any such termination of the Company or
any of its Subsidiaries effects a Business Combination Transaction
which the undersigned has consented to or voted the Share or the
Future Shares to approve or ratify or in respect of which the
undersigned has taken any action that would or could have the
effect of increasing the likelihood that such Business
Combination Transaction is effected,
-3-
then the undersigned shall pay to Parent cash, by wire transfer
of immediately available funds, in an amount equal to the excess
of the amount realized by the undersigned in connection with such
Business Combination Transaction and $4.55 per Share.
(e) The undersigned hereby delivers to you his duly
executed and irrevocable proxy attached hereto with respect to
the Shares and any shares of Company Common Stock acquired after
the date hereof, including without limitation upon exercise of
any Rights (the "Future Shares").
(f) The undersigned agrees that, prior to the earlier of
the Effective Time (as defined in the Merger Agreement) and
December 31, 1995, the undersigned shall not, directly or
indirectly, solicit, initiate or encourage (including by way of
furnishing information) inquiries or proposals concerning any
Acquisition Proposal or negotiate, explore or otherwise
communicate with any third party (other than Parent or its
affiliates) regarding any Acquisition Proposal.
(g) The undersigned hereby agrees, from and after the date
hereof, to use all reasonable efforts to assist in the Merger (as
defined in the Merger Agreement) becoming effective and being
treated as contemplated by the Merger Agreement; provided,
--------
however, that this provision shall not obligate the undersigned
-------
to incur any costs, expenses or liability or take any actions to
its economic detriment. The undersigned further agrees to
execute and deliver or cause to be delivered to Parent such
additional powers and instruments as Parent may reasonably
require or deem advisable to carry into effect the purposes of
this letter agreement or the Merger Agreement.
-4-
This letter agreement shall be governed by the laws of the
State of New York applicable to contracts made and performed
wholly in such state.
Very truly yours,
Agreed to:
General Signal Corporation
By:____________________________
Name:
Title:
Approved:
Data Switch Corporation
By:____________________________
Name:
Title:
Irrevocable Proxy
-----------------
The undersigned hereby revokes any previous proxies and
appoints , and , and
each of them, as attorney and proxy of the undersigned to attend
any and all meetings of the shareholders of Data Switch
Corporation, a Delaware corporation (the "Company"), to vote all
shares of common stock, $.01 par value, of the Company owned by
the undersigned on the date hereof or hereafter acquired
(including, without limitation, any such shares acquired upon
exercise of any Rights (as defined in the attached letter
agreement)) and to represent and otherwise to act for the
undersigned in the same manner and with the same effect as if
done by the undersigned where any Acquisition Proposal (as
defined in the attached letter agreement), including without
limitation the Merger (as defined in the attached letter
agreement), including without limitation the Merger (as defined
in the Agreement and Plan of Merger by and among General Signal
Corporation, General Signal Acquisition Corporation and the
Company dated as of May 8, 1995), is submitted to shareholders of
the Company for approval.
This proxy shall be deemed to be a proxy coupled with an
interest and is irrevocable and shall remain in effect until
December 31, 1995.
The undersigned authorizes such attorney and proxy to
substitute any other person to act hereunder, to revoke any
substitution and to file this proxy and any substitution or
revocation with the Secretary of the Company.
___________________________
Name:
Dated: May 8, 1995
EX-23.1
6
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement on Form S-4 and related Prospectus of General Signal
Corporation for the registration of 2.1 million shares of its common stock and
to the incorporation by reference therein of our report dated January 27, 1995,
with respect to the consolidated financial statements, and March 17, 1995, with
respect to the financial statement schedule of General Signal Corporation
included or incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1994, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Stamford, Connecticut
September 6, 1995
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement on Form S-4 and related Prospectus of General Signal
Corporation for the registration of 2.1 million shares of its common stock and
to the incorporation by reference therein of our report dated February 3, 1995,
with respect to the consolidated financial statements of Best Power Technology,
Inc. included in the current report on Form 8-K dated June 26, 1995, filed with
the Securities and Exchange Commission by General Signal Corporation.
Ernst & Young LLP
Milwaukee, Wisconsin
September 6, 1995
EX-23.2
7
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
General Signal Corporation on Form S-4 of our report dated January 31, 1995, on
our audits of the consolidated financial statements and financial statement
schedule of Data Switch Corporation as of December 31, 1994 and 1993, and for
each of the three years in the period ended December 31, 1994. We also consent
to the reference to our Firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Stamford, Connecticut
September 6, 1995