UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant
x
Filed by a Party other than the
Registrant
o
Check the appropriate box:
x
Preliminary
Proxy Statement.
o
Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)).
o
Definitive
Proxy Statement.
o
Definitive
Additional Materials.
o
Soliciting
material Pursuant to
§240.14a-12.
KEITHLEY INSTRUMENTS, INC.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the
appropriate box):
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o
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No fee required.
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x
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Fee computed on table below per
Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities
to which transaction applies:
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Common shares, without par value,
of Keithley Instruments, Inc. (the “Registrant”)
Class B common shares, without
par value, of the Registrant
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(2)
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Aggregate number of securities to
which transaction applies:
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As of October 7, 2010,
13,684,523 common shares, 2,150,502 Class B common shares,
options to purchase 2,343,551 Common shares having an
exercise price less than $21.60 per share, restricted share
units representing 216,675 Common shares and performance share
units representing 205,675 Common shares
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(3)
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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As of October 7, 2010, there
were (i) 13,684,523 common shares, (ii) 2,150,502
Class B common shares, (iii) options to purchase
2,343,551 common shares with an exercise price less than
$21.60 per common share outstanding, and (iii) 216,675
restricted share units and 205,675 common shares issuable under
performance award units granted under the Registrant’s
stock incentive plans. The filing fee was determined by adding
(x) the product of (I) the number of common shares and
Class B common shares that are proposed to be acquired in
the merger and (II) the merger consideration of $21.60 in
cash per common share and Class B common share, plus
(y) $18,479,820 expected to be paid to holders of options
to purchase common shares with an exercise price of less than
$21.60 per common share in exchange for the cancellation of such
options, plus (z) the product of (I) the aggregate
number of restricted share units and performance award units
granted under the Registrant’s stock incentive plans and
(II) the merger consideration of $21.60 in cash per common
share (x, y and z together, the “Total
Consideration”). The payment of the filing fee, calculated
in accordance with Exchange Rule 0-11(c)(1), was calculated by
multiplying the Total Consideration by 0.0000713.
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(4)
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Proposed maximum aggregate value of
transaction: $369,639,120
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(5)
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Total fee paid: $26,355.27
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o
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Fee paid previously with
preliminary materials.
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o
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Check box if any part of the fee is
offset as provided by Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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[ • ],
2010
Dear Shareholder:
You are cordially invited to attend a special meeting of
shareholders of Keithley Instruments, Inc. to be held on
[ • ],[ • ], 2010 at
[ • ] local time. The meeting will take place at
[ • ].
At the special meeting, we will ask the holders of our common
shares and Class B common shares to approve and adopt an
Agreement and Plan of Merger, dated as of September 29,
2010, among Danaher Corporation, Aegean Acquisition Corp. and
Keithley Instruments, Inc., and the transactions contemplated by
the merger agreement. If the transactions contemplated by the
merger agreement are completed, we will become an indirect,
wholly-owned subsidiary of Danaher Corporation, and you will be
entitled to receive $21.60 per share in cash, without interest
and less any required withholding taxes, for each common share
or Class B common share of Keithley Instruments, Inc. that
you own at the time of the merger.
After careful consideration, our board of directors, by the
unanimous vote of the directors voting on the matter, approved
the merger agreement, the merger and the other transactions
contemplated by the merger agreement and determined that the
merger agreement, the merger and the other transactions
contemplated by the merger agreement are advisable, fair to and
in the best interests of Keithley Instruments, Inc. and our
shareholders.
Our board of directors recommends that our
shareholders vote “FOR” approval and adoption of the
merger agreement and the transactions contemplated by the merger
agreement.
The merger agreement and the transactions
contemplated by the merger agreement must be approved and
adopted by the affirmative vote of holders of a majority of the
voting power of our outstanding common shares and Class B
common shares (voting together as one class) that are entitled
to vote at the special meeting.
The proxy statement accompanying this letter provides you with
information concerning the merger, the merger agreement and the
special meeting. A copy of the merger agreement is attached as
Annex A to the proxy statement. We encourage you to read
the entire proxy statement and its annexes carefully.
Your vote is very important, regardless of the number of
common shares or Class B common shares you
own.
Under Ohio law and our articles of
incorporation and code of regulations, the merger cannot be
completed unless holders of a majority of the voting power of
our outstanding common shares and Class B common shares
(voting together as one class) entitled to vote at the special
meeting vote for the approval and adoption of the merger
agreement and the transactions contemplated by the merger
agreement. You will have one vote for each common share that you
owned as of the record date, and you will have ten votes for
each Class B common share you owned as of the record date.
Pursuant to a voting agreement, a copy of which is attached to
the proxy statement as Annex B, Keithley Investment Co.
Limited Partnership, a partnership of which Joseph P. Keithley,
our chairman of the board of directors, president and chief
executive officer, is the general partner, agreed to vote a
number of its Class B common shares representing 19.99% of
the voting power of Keithley in favor of approval and adoption
of the merger agreement and the transactions contemplated by the
merger agreement.
If you do not vote, it will have the same
effect as a vote against approval and adoption of the merger
agreement and the transactions contemplated by the merger
agreement.
Whether or not you plan to attend the special meeting in person,
please complete, sign, date and return promptly the enclosed
proxy card or submit a proxy by telephone or on the Internet
using the instructions provided on the enclosed proxy card. If
you hold shares through a bank, brokerage firm or other nominee,
you should follow the procedures provided by your broker or
nominee. These actions will not limit your right to vote in
person if you wish to attend the special meeting and vote in
person.
Thank you in advance for your cooperation and continued support.
Sincerely,
Joseph P. Keithley,
Chairman of the Board, President and Chief Executive Officer
This proxy statement is dated [ • ], 2010 and is
first being mailed to our shareholders on or about
[ • ], 2010.
KEITHLEY
INSTRUMENTS, INC.
28775 AURORA ROAD
CLEVELAND, OHIO 44139
(440) 248-0400
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On [ • ], 2010
To our Shareholders:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of
Keithley Instruments, Inc. (“Keithley” or
“we,” “us,” or “our”) will be held
on [ • ], [ • ], 2010 at
[ • ] local time. The meeting will take place at
[ • ], for the purpose of acting upon the
following matters:
1. To consider and vote upon a proposal to approve and
adopt the Agreement and Plan of Merger, dated as of
September 29, 2010, among Danaher Corporation, a Delaware
corporation (“Danaher”), Aegean Acquisition Corp., an
Ohio corporation and an indirect wholly-owned subsidiary of
Danaher (“Merger Sub”), and Keithley, and the
transactions contemplated by the merger agreement, pursuant to
which Merger Sub will merge with and into Keithley and each of
our outstanding common shares and Class B common shares
(collectively, our “Common Shares”) (other than any
Common Share that is held by Danaher or any of its subsidiaries,
held in our treasury or by any of our subsidiaries, or held by
shareholders who perfect dissenters’ rights under Ohio law)
will be converted into the right to receive $21.60 per Common
Share in cash, without interest and less any required
withholding taxes.
2. To consider and act upon any other matters that may
properly be brought before the special meeting.
After careful consideration, our board of directors, by the
unanimous vote of the directors voting on the matter (with one
director absent), approved the merger agreement, the merger and
the other transactions contemplated by the merger agreement and
determined that the merger agreement, the merger and the other
transactions contemplated by the merger agreement are advisable,
fair to, and in the best interests of Keithley and our
shareholders. Our board of directors recommends that holders of
our Common Shares vote “FOR” approval and adoption of
the merger agreement and the transactions contemplated by the
merger agreement.
All holders of record of our Common Shares as of the close of
business on [ • ], 2010 are entitled to vote at
the special meeting.
Approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement requires the
affirmative vote of the holders of a majority of the voting
power of our outstanding Common Shares that are entitled to vote
at the special meeting. In connection with the execution of the
merger agreement, Keithley Investment Co. Limited Partnership, a
partnership of which Joseph P. Keithley, our chairman, president
and chief executive officer, is the general partner, entered
into a voting agreement pursuant to which it agreed to vote a
number of its Class B common shares representing 19.99% of
the voting power of our Common Shares in favor of approval and
adoption of the merger agreement and the transactions
contemplated by the merger agreement.
Regardless of the number of Common Shares you own, your vote
is important.
Even if you plan to attend the
meeting in person, we request that you cast your vote by
completing, signing, dating and promptly returning the enclosed
proxy card in the enclosed postage-paid envelope or by
submitting a proxy by telephone or on the Internet using the
instructions provided on the enclosed proxy card. If you sign,
date and return your proxy card without indicating how you want
to vote, your proxy will be voted in favor of approval and
adoption of the merger agreement and the transactions
contemplated by the merger agreement. If you fail to return your
proxy card, your Common Shares will not be counted for purposes
of determining whether a quorum is present at the special
meeting, and such failure will have the same effect as voting
against approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement.
Your proxy may be revoked at any time prior to its exercise by
your delivery of a properly executed, later-dated proxy card, by
your filing a written revocation of your proxy with our
secretary at our address set forth above, by submitting a later
proxy by telephone or on the Internet, or by revoking your proxy
in open meeting at the special meeting. Simply attending the
special meeting, however, will not revoke your proxy.
If you own Common Shares and you do not vote in favor of the
merger, you can demand to be paid the fair cash value of your
Common Shares. In order to do this, you must follow certain
procedures mandated by Ohio law, including filing certain
notices and not voting your shares in favor of approval and
adoption of the merger agreement and the transactions
contemplated by the merger agreement. The provisions of the Ohio
Revised Code relating to your dissenters’ rights are
attached to the accompanying proxy statement as Annex D.
We encourage you to read this proxy statement carefully in its
entirety. If you have any questions or need assistance voting
your Common Shares, please contact our proxy solicitor,
Georgeson Inc., at
(212) 440-9800
(banks and brokers) or
(866) 296-6841
(all others). In addition, you may obtain information about us
from certain documents that we have filed with the Securities
and Exchange Commission and from our website at www.keithley.com.
By Order of the Board of Directors,
John M. Gherlein
Secretary
[ • ], 2010
IMPORTANT: Whether or not you plan to attend the special
meeting, please promptly complete, sign, date and return the
enclosed proxy card. A self-addressed, postage-paid envelope is
enclosed for your convenience. Details are outlined in the
enclosed proxy card. If you hold your Common Shares through a
bank, brokerage firm or other nominee, you will need to submit
your proxy in accordance with the instructions your bank, broker
or other nominee provides. Returning a signed proxy will not
prevent you from attending the meeting and voting in person, if
you wish to do so. Please note that if you execute multiple
proxies, the last proxy you execute revokes all previous
proxies.
TABLE OF
CONTENTS
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iii
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ANNEXES
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A-1
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B-1
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C-1
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D-1
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ii
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers address briefly some
questions you may have regarding the merger, the merger
agreement and the special meeting. These questions and answers
may not address all questions that may be important to you as a
shareholder of Keithley Instruments, Inc. Please refer to the
more detailed information contained elsewhere in this proxy
statement, as well as the additional documents to which it
refers, including the merger agreement and the voting agreement,
copies of which are attached to this proxy statement as Annexes
A and B, respectively. In this proxy statement, we refer to
Keithley Instruments, Inc. as “we,” “us,”
“our” or “Keithley.” We refer to Danaher
Corporation as “Danaher” and Aegean Acquisition Corp.
as “Merger Sub.” In addition, we refer to the merger
of Keithley and Merger Sub as the “merger.” We refer
to the time the merger becomes effective under all applicable
laws as the “effective time,” we refer to our common
shares and our Class B common shares as “Common
Shares,” and we refer to holders of our Common Shares as
“shareholders.”
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Q:
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Why am I receiving this proxy statement?
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A:
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Our board of directors is furnishing this proxy statement in
connection with the solicitation of proxies to be voted at a
special meeting of shareholders.
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Q:
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What is the proposed transaction?
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A:
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The proposed transaction is the merger of Merger Sub with and
into Keithley pursuant to the merger agreement. If the merger
agreement and the transactions contemplated by the merger
agreement are approved and adopted by our shareholders and the
other closing conditions of the merger agreement are satisfied
or waived, Merger Sub will merge with and into Keithley.
Keithley will be the surviving corporation in the merger and
will become an indirect, wholly-owned subsidiary of Danaher.
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Q:
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What will I receive in the merger?
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A:
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Upon completion of the merger, you will receive $21.60 in cash,
without interest and less any required withholding taxes, for
each outstanding Common Share that you own. Each Class B
common share will receive the same per share amount as each
common share. For example, if you own 100 Common Shares, you
will receive $2,160.00 in cash for your Common Shares, less any
required withholding taxes. You will not own shares in the
surviving corporation.
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Q:
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When can I expect to receive the merger consideration for my
shares?
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A:
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Once the merger is completed, you will be sent a letter of
transmittal with instructions informing you how to send in your
share certificates to the paying agent in order to receive the
merger consideration. Once you have submitted your properly
completed letter of transmittal, share certificates and other
required documents to the paying agent, the paying agent will
send you the merger consideration payable with respect to your
Common Shares. You should not send your share certificates to us
or anyone else until you receive the letter of transmittal.
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Q:
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Where and when is the special meeting?
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A:
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The special meeting will take place at [ • ], on
[ • ], [ • ], 2010 at
[ • ] local time.
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Q:
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How does our board of directors recommend that I vote?
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A:
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Our board of directors has approved the merger agreement, the
merger and the transactions contemplated by the merger agreement
by the unanimous vote of the directors voting on the matter
(with one director absent) and has determined that the merger
agreement, the merger and the transactions contemplated by the
merger agreement are advisable, fair to and in the best
interests of Keithley and our shareholders.
Our board of
directors recommends that our shareholders vote “FOR”
approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement.
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Q:
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May I attend the special meeting?
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A:
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All shareholders of record at the close of business on
[ • ], 2010, the record date for the special
meeting, may attend the special meeting. You may be asked to
present photo identification and proof of ownership of Common
Shares for admittance.
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Q:
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Who can vote at the special meeting?
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A:
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Our shareholders of record at the close of business on the
record date are entitled to vote the Common Shares that they
held on the record date at the special meeting. The holders of
outstanding common shares on that date will be entitled to one
vote for each share held, and the holders of outstanding
Class B common shares on that date will be entitled to ten
votes for each share held. As of the record date, there were
outstanding [ • ] common shares and
[ • ] Class B common shares.
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Q:
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What vote is required to approve the merger proposal?
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A:
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Approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement requires the
affirmative vote of a majority of the voting power of our
outstanding Common Shares that are entitled to vote at the
special meeting. Because the required vote is based on the
voting power of our Common Shares outstanding rather than on the
number of votes cast, failing to vote your Common Shares
(including as the result of broker non-votes) or abstaining will
have the same effect as voting against approval and adoption of
the merger agreement and the transactions contemplated by the
merger agreement. In connection with the execution of the merger
agreement, Keithley Investment Co. Limited Partnership (the
“Keithley Partnership”), a partnership of which Joseph
P. Keithley, our chairman, president and chief executive officer
is the general partner, entered into a voting agreement (the
“Voting Agreement”) pursuant to which it agreed to
vote a number of its Class B common shares representing
19.99% of the voting power of our outstanding Common Shares in
favor of approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement.
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We urge you to complete, sign, date and return the enclosed
proxy card to assure the representation of your Common Shares at
the special meeting.
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Q:
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What rights do I have if I own shares and oppose the
merger?
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A:
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You can vote your Common Shares against approval and adoption of
the merger agreement and the transactions contemplated by the
merger agreement by indicating a vote against the proposal on
your proxy card or by voting against the merger in person at the
special meeting. Under the applicable provisions of Ohio law,
dissenters’ rights are available to our shareholders who do
not vote in favor of approval and adoption of the merger
agreement.
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Q:
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What happens if I sell my shares before the special
meeting?
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A:
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The record date for the special meeting, [ • ],
2010, is earlier than the date of the special meeting. If you
hold Common Shares on the record date but transfer them before
the special meeting without granting a proxy, you will retain
your right to vote at the special meeting but not the right to
receive the merger consideration for those Common Shares. The
right to receive the merger consideration will pass to the
person who owns your Common Shares when the merger is completed.
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Q:
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How do I vote my Common Shares?
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A:
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Complete, sign, date and return the enclosed proxy card in the
enclosed postage-paid envelope, submit a proxy by telephone or
Internet using the instructions provided on the enclosed proxy
card, or submit your proxy in accordance with the voting
instruction form received from any bank, brokerage firm or other
nominee that may hold your Common Shares on your behalf, as soon
as possible so that your Common Shares can be voted at the
special meeting.
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Q:
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What happens if I do not return a proxy card or vote at the
special meeting?
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A:
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If you fail to return your proxy by mail, telephone or Internet,
fail to vote in person at the special meeting, or if you mark
your proxy “abstain,” the effect will be the same as
voting against approval and adoption of the merger agreement and
the transactions contemplated by the merger agreement.
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Q:
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If my Common Shares are held for me by my broker, will my
broker vote my Common Shares for me?
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A:
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If you hold your Common Shares through a bank, brokerage firm or
other nominee (
i.e.
, in “street name”), in
order to vote your Common Shares you must provide voting
instructions on the voting instruction card that your
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bank, brokerage firm or other nominee provides to you. You
should instruct your bank, brokerage firm or other nominee as to
how to vote your Common Shares following the directions
contained in that voting instruction card. If you do not provide
instructions to your bank, brokerage firm or other nominee, your
Common Shares will not be voted, and this will have the same
effect as voting against approval and adoption of the merger
agreement and the transactions contemplated by the merger
agreement.
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Q:
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May I vote my Common Shares in person?
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A:
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Yes. You may vote in person at the special meeting, rather than
by submitting a proxy, if you own Common Shares in your own
name. If your shares are held in “street name” through
a bank, brokerage firm or other nominee, you may vote in person
at the special meeting by obtaining a legal proxy from your
bank, brokerage firm or other nominee and presenting it at the
special meeting.
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Q:
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May I change my vote after I have submitted my proxy?
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A:
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Yes. You may change your vote at any time before the Common
Shares reflected on your proxy are voted at the special meeting.
If you own Common Shares in your name, you can do this in one of
three ways. First, you can send a written notice of revocation
of your proxy to our secretary at our principal executive
offices. Second, you can complete, sign, date and return a new
proxy card with a later date than your previously submitted
proxy or submit a later proxy by telephone or Internet. Third,
you can attend the meeting and revoke your proxy in open
meeting. Simply attending the meeting, however, will not revoke
your proxy. If you have instructed a bank, brokerage firm or
other nominee to vote your Common Shares, you must follow the
directions received from the bank, brokerage firm or other
nominee to change your instructions.
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Q:
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What do I need to do now?
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A:
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This proxy statement contains important information regarding
the merger, the merger agreement and the special meeting, as
well as information about Keithley, Danaher and Merger Sub. It
also contains important information about some of the factors
our board of directors considered in approving the merger
agreement, the merger and the other transactions related to the
merger. We urge you to read this proxy statement carefully in
its entirety, including the annexes. You may also want to review
the documents referenced in the section captioned “Where
You Can Find Additional Information” beginning on
page 52.
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Q:
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Should I send my share certificates now?
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A:
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No. After the merger is completed, the paying agent will
send each shareholder a letter of transmittal describing how to
exchange share certificates for the merger consideration. At
that time, a shareholder must send share certificates with a
completed letter of transmittal to the paying agent in order to
receive the merger consideration.
You should not return your
share certificates with the enclosed proxy card, and you should
not forward your share certificates to the paying agent without
a letter of transmittal.
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Q:
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Where can I find more information about Keithley?
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A:
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We file certain information with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as
amended. We refer to the Securities and Exchange Commission as
the “SEC,” and we refer to the Securities Exchange Act
of 1934, as amended, as the “Exchange Act.” You may
read and copy this information at the SEC’s public
reference facilities. You may call the SEC at
1-800-SEC-0330
for information about these facilities. This information is also
available at the Internet site the SEC maintains at www.sec.gov
and on our website at www.keithley.com. Information contained on
our website is not part of, or incorporated into, this proxy
statement. You can also request copies of these documents from
us. See “Where You Can Find Additional Information”
beginning on page 52.
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Q:
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How will proxy holders vote my Common Shares?
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A:
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If you properly submit a proxy prior to the special meeting,
your Common Shares will be voted as you direct. If you submit a
proxy but no direction is otherwise made, your Common Shares
will be voted
“FOR”
approval and adoption of
the merger agreement and the transactions contemplated by the
merger agreement.
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Q:
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Whom can I call with questions?
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A:
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We have appointed Georgeson Inc. as our proxy solicitor, whom
you many contact as follows:
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Georgeson Inc.
199 Water Street,
26
th
Floor
New York, NY 10038
Banks and Brokers Call:
(212) 440-9800
All Others Call Toll-Free:
(866) 296-6841
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Q:
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Who will pay the cost of soliciting proxies?
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A:
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We will pay the costs of soliciting proxies for the special
meeting. Our officers, directors and employees may solicit
proxies by telephone, facsimile or mail, on the Internet or in
person. They will not be paid any additional amounts for
soliciting proxies. We will also request that banks, brokerage
firms and others holding Common Shares in their names, or in the
names of their nominees, that are beneficially owned by others,
send proxy materials to and obtain proxies from those beneficial
owners, and, upon request, will reimburse those holders for
their reasonable expenses in performing those services. We have
retained Georgeson Inc. to assist us in the solicitation of
proxies, and will pay it fees estimated to be approximately
$8,000 plus reimbursement of
out-of-pocket
expenses. In addition, our arrangement with Georgeson Inc.
includes provisions obligating us to indemnify it for certain
liabilities that could arise in connection with its solicitation
of proxies on our behalf.
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vi
This summary highlights selected information in this proxy
statement and may not contain all of the information that is
important to you. To understand the merger fully, and for a more
complete description of the legal terms of the merger and the
other transactions contemplated by the merger agreement, we
encourage you to carefully read this entire proxy statement, as
well as the additional documents to which it refers, including
the merger agreement and the voting agreement, copies of which
are attached to this proxy statement as Annexes A and B,
respectively. Each item in this summary includes a page
reference directing you to a more complete description of that
item. This proxy statement is first being mailed to our
shareholders on or about [ • ], 2010.
The
Parties to the Merger (page 10)
Keithley Instruments, Inc.
28775 Aurora Road
Cleveland, Ohio 44139
(440) 248-0400
Keithley Instruments, Inc. is an Ohio corporation that designs,
develops, manufactures and markets complex electronic
instruments and systems geared to the specialized needs of
electronics manufacturers for high-performance production
testing, process monitoring, product development and research.
Danaher Corporation
2099 Pennsylvania Avenue N.W.
12
th
Floor
Washington, D.C. 20006
(202) 828-0850
Danaher Corporation is a Delaware corporation that derives its
sales from the design, manufacture and marketing of
professional, medical, industrial, commercial and consumer
products, which are typically characterized by strong brand
names, proprietary technology and major market positions.
Aegean Acquisition Corp.
2099 Pennsylvania Avenue N.W.
12
th
Floor
Washington, D.C. 20006
(202) 828-0850
Aegean Acquisition Corp. is an Ohio corporation and an indirect
wholly-owned subsidiary of Danaher Corporation that was formed
exclusively for the purpose of effecting the merger.
The
Special Meeting (page 8)
Purpose
(page 8)
The special meeting will be held on [ • ],
[ • ], 2010 starting at [ • ]
local time at [ • ]. At the special meeting,
shareholders will be asked to consider and vote upon a proposal
to approve and adopt the merger agreement and the transactions
contemplated by the merger agreement. In connection with the
merger, each of our outstanding Common Shares (other than any
Common Share that is owned by Danaher or its subsidiaries, held
in our treasury or by any of our subsidiaries, or held by
shareholders who perfect dissenters’ rights under Ohio law)
will be converted into the right to receive $21.60 per share in
cash, without interest and less any required withholding taxes.
The persons named in the accompanying proxy will have
discretionary authority to vote upon other business that is
unknown by us a reasonable time prior to the solicitation of
proxies, if any, that properly comes before the special meeting.
1
Record
Date and Voting (page 8)
All shareholders of record at the close of business on the
record date, which was [ • ], are entitled to
receive notice of, to attend, and to vote at the special
meeting. You will have one vote for each common share that you
owned as of the record date, and you will have ten votes for
each Class B common share you owned as of the record date.
On the record date, there were outstanding [ • ]
common shares and [ • ] Class B common
shares.
The presence at the special meeting, either in person or by
proxy, of the holders of a majority of the voting power of
Common Shares that were outstanding on the record date will
constitute a quorum for purposes of the special meeting.
Abstentions and properly executed broker non-votes will be
counted as Common Shares present at the special meeting for
purposes of determining whether a quorum is present.
Required
Vote (page 8)
Completion of the merger requires approval and adoption of the
merger agreement and the transactions contemplated by the merger
agreement by the affirmative vote of the holders of a majority
of the voting power of our outstanding Common Shares entitled to
vote at the special meeting. Because the required vote is based
on the voting power of our Common Shares outstanding rather than
on the number of votes cast, failing to vote your Common Shares
(including as a result of broker non-votes) or abstaining will
have the same effect as voting against approval and adoption of
the merger agreement and the transactions contemplated by the
merger agreement.
As of the record date, Joseph P. Keithley, our chairman,
president and chief executive officer, together with his
affiliates hold Common Shares representing approximately
[ • ]% of our total voting power. The Keithley
Partnership has entered into the Voting Agreement pursuant to
which it agreed to vote a number of its Class B common
shares representing 19.99% of the voting power of our
outstanding Common Shares in favor of approval and adoption of
the merger agreement and the transactions contemplated by the
merger agreement. Mr. Keithley has indicated that as of the
date hereof he and his affiliates intend to vote in favor of
approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement.
Proxies;
Revocation (page 9)
Our shareholders of record entitled to vote at the special
meeting may vote by returning the enclosed proxy, submitting a
proxy by telephone or on the Internet, or by attending and
voting at the special meeting. If your Common Shares are held in
“street name” by a bank, brokerage firm or other
nominee, you should instruct your bank, brokerage firm or other
nominee on how to vote your Common Shares using the instructions
provided by that bank, brokerage firm or other nominee.
Any proxy may be revoked at any time prior to its exercise by
your filing a written revocation of your proxy with our
secretary, by your delivery of a properly executed, later-dated
proxy card or by submitting a later proxy by telephone or on the
Internet, or by your revoking your proxy in open meeting at the
special meeting. Simply attending the special meeting, however,
will not revoke your proxy.
The
Merger (page 34)
On the closing date, upon the terms and subject to the
conditions of the merger agreement, and in accordance with Ohio
law, Merger Sub will be merged with and into Keithley, with
Keithley surviving the merger as an indirect, wholly-owned
subsidiary of Danaher. The merger of Merger Sub and Keithley
will become effective under all applicable laws (1) at the
time a certificate of merger is accepted for filing by the
Secretary of State of the State of Ohio or (2) on such
later date agreed to by us, Danaher and Merger Sub and specified
in the certificate of merger.
Recommendation
of Our Board of Directors (page 16)
After careful consideration, our board of directors, by
unanimous vote of the directors voting on the matter (with one
director absent):
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approved the merger agreement, the merger and the other
transactions contemplated by the merger agreement;
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declared that the merger agreement, the merger and the other
transactions contemplated by the merger agreement are advisable,
fair to and in the best interests of Keithley and our
shareholders; and
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recommends that shareholders vote
“FOR”
approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement.
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Opinion
of Stifel, Nicolaus & Company, Incorporated
(page 17)
Stifel, Nicolaus & Company, Incorporated (“Stifel
Nicolaus Weisel”), as successor to the investment banking
business of Thomas Weisel Partners LLC, delivered its opinion to
our board of directors on September 28, 2010 that, as of
the date of such opinion and based upon and subject to the
factors and assumptions set forth in the opinion, the $21.60 in
cash merger consideration to be received by the holders of
Common Shares issued and outstanding immediately prior to the
effective time of the merger, other than dissenting shares under
applicable law and Common Shares held by Danaher or any
subsidiary of Danaher or held by Keithley or any subsidiary of
Keithley immediately prior to the effective time of the merger
(the “Shares”), in connection with the merger pursuant
to the merger agreement was fair to such holders of Shares, from
a financial point of view (the “Opinion”).
The full text of the written Opinion of Stifel Nicolaus Weisel,
dated September 28, 2010, which sets forth assumptions
made, procedures followed, matters considered and limitations on
the review undertaken in connection with the Opinion, is
attached as Annex C to this proxy statement. Shareholders
should read the Opinion in its entirety. Stifel Nicolaus Weisel
provided its Opinion for the information and assistance of our
board of directors in connection with its consideration of the
merger. Stifel Nicolaus Weisel’s Opinion is not a
recommendation as to how any shareholder should vote with
respect to the merger.
Financing
(page 24)
Danaher has represented in the merger agreement that it has and
will have at the effective time of the merger sufficient cash
and cash equivalents
and/or
available amounts under existing credit facilities to consummate
the merger upon the terms contemplated by the merger agreement
and to make all payments contemplated by the merger agreement.
Treatment
of Stock Options and Other Share-Based Awards
(page 35)
Each option to purchase Common Shares, whether vested or
unvested, that is outstanding immediately prior to the effective
time of the merger, will become fully vested and will entitle
the holder thereof to receive, without interest and less
applicable withholding taxes, an amount in cash equal to the
product of:
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the total number of Common Shares underlying that option
immediately prior to the effective time of the merger; and
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the excess, if any, of $21.60 over the exercise price per Common
Share subject to that option.
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In addition, each right of any kind to receive Common Shares or
benefits measured by the value of a number of Common Shares
granted under the Company’s stock incentive plans and
directors’ deferred stock plan (including restricted share
units, deferred share units and performance award units) (other
than stock options), whether vested or unvested, that is
outstanding immediately prior to the effective time of the
merger will become fully vested and cease to represent a right
or award with respect to Common Shares. Holders of restricted
share units and deferred share units will receive, without
interest and less applicable tax withholdings, an amount in cash
equal to the product of the merger consideration multiplied by
the number of restricted share units or deferred share units, as
applicable, held by such person. Except as modified by a Change
in Control Agreement or the Plush Employment Agreement, holders
of performance award units will be entitled to receive, without
interest and less applicable tax withholdings, an amount in cash
equal to the product of the merger consideration multiplied by
the number of Common Shares represented by the initial award
value under the agreement evidencing such performance award
units. For additional information concerning amounts receivable
as a result of a Change in Control Agreement or the Plush
Employment Agreement, see “Interests of Our Directors and
Executive Officers in the Merger — Change in Control
Agreements” and “Interests of Our Directors and
Executive Officers in the Merger — Employment
Agreement with Mark J. Plush.”
3
Interests
of Our Directors and Executive Officers in the Merger
(page 24)
Our directors and executive officers have interests in the
merger that may be different from, or in addition to, the
interests of our shareholders, including the following:
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each of our executive officers and certain other executives will
be entitled to receive severance and other benefits in the event
his or her employment with us terminates under certain
circumstances within a specified period after the merger;
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options to purchase Common Shares, restricted shares, restricted
share units, and performance award units held by the executive
officers and directors fully vest at the effective time of the
merger and the merger agreement provides for the holders of such
awards to receive the merger consideration or net cash payments
in respect of those awards;
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director fees deferred by certain of our directors under our
outside directors’ deferred stock plan as cash or into a
deemed investment in Common Shares will be paid out upon
termination of the plan at the effective time of the merger, and
the pay out of amounts deemed to be invested in Common Shares
will be based on an amount equal to the merger consideration;
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the merger triggers vesting and payout of cash compensation
deferred by our executive officers under our deferred
compensation plan and supplemental deferral plan;
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the merger agreement provides for indemnification and liability
insurance arrangements for each of our current and former
directors and officers for a period of six years after the
effective time of the merger, in each case for certain events
occurring at or before the effective time of the merger; and
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a partnership in which Mr. Keithley is the general partner
has agreed to vote a number of its Class B common shares
representing 19.99% of the voting power of Keithley in favor of
approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement;
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Our board of directors was aware of these interests and
considered them, among other matters, in making its
recommendation. See “The Merger Proposal —
Reasons for the Merger” beginning on page 14.
No
Solicitation of Transactions (page 41)
The merger agreement contains restrictions on our ability to
solicit or engage in discussions or negotiations with a third
party regarding specified transactions involving Keithley or our
subsidiaries. We may, however, engage in such discussions or
negotiations with a third party in response to an unsolicited
written acquisition proposal that our board of directors
determines in good faith (after consultation with outside
counsel and its financial advisor) constitutes or could
reasonably be expected to result in a superior proposal, subject
to certain requirements and limitations specified in the merger
agreement.
Conditions
to the Merger (page 45)
Completion of the merger is subject to the satisfaction or
waiver of a number of conditions, including, among others:
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approval and adoption by our shareholders of the merger
agreement and the transactions contemplated by the merger
agreement;
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expiration or termination of any applicable waiting period (and
any extension thereof) under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the
“Hart-Scott-Rodino
Act”) and receipt of any foreign approvals, consents and
clearances;
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the absence of any judgment, injunction, order or law of any
governmental entity preventing the consummation of the merger;
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the accuracy, in all material respects, of our representation
and warranty regarding capitalization and the accuracy of each
party’s other representations and warranties in the merger
agreement, except as would not reasonably be expected to have a
material adverse effect on the party making the
representations; and
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the performance in all material respects by each party of its
obligations required to be performed by it under the merger
agreement at or prior to the closing date of the merger.
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Termination
of the Merger Agreement (page 46)
The merger agreement may be terminated at any time prior to the
effective time of the merger, whether before or after
shareholder approval has been obtained, as follows (subject to
certain limitations set forth in the merger agreement):
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by the mutual written consent of Danaher, Merger Sub and us;
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by either Danaher or us if:
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the merger has not been consummated by March 31, 2011 or
such later date as we and Danaher agree to in writing, and the
party seeking to terminate has not breached in any material
respect its obligations under the merger agreement in any manner
that caused or resulted in the failure of the merger to be
consummated by such time;
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a final non-appealable injunction, order, judgment or decree
permanently restrains, enjoins or prohibits the merger;
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the special meeting (including any adjournment thereof) is
concluded and shareholder approval has not been obtained; or
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the non-terminating party breaches or fails to perform any of
its representations, warranties, covenants or agreements in the
merger agreement such that the closing conditions would not be
satisfied and such breach or failure is not cured within
30 days after receipt of written notice regarding such
breach or failure or cannot be cured prior to March 31,
2011;
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subject to certain limitations and the payment of a termination
fee, and provided we have not breached the non-solicitation
provisions set forth in the merger agreement (including the
obligation to negotiate in good faith with Danaher to make
adjustments to the terms and conditions of the merger agreement
for a period of three business days (or two business days after
an amendment to an acquisition proposal)), the board of
directors approves a superior proposal (after determining in
good faith (after consulting with outside counsel) that the
failure to do so would be inconsistent with its fiduciary duties
under applicable law and after taking into account any
amendments to the merger agreement that Danaher agreed to make)
and concurrently with such termination we enter into an
acquisition agreement regarding such superior proposal; or
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Danaher fails to consummate the merger within two business days
of the later of (1) the satisfaction of our conditions to
closing and (2) our providing written notice to Danaher of
the satisfaction of our closing conditions and our willingness
and ability to consummate the merger;
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by Danaher if our board of directors or any committee thereof
has (1) withdrawn, or qualified or modified in a manner
adverse to Danaher, its approval or recommendation of the
transactions contemplated by the merger agreement (or failed to
recommend against or taken a neutral or no position towards an
alternative acquisition proposal), (2) recommended an
alternative acquisition proposal or (3) failed to include
in this proxy statement its recommendation that our shareholders
vote to adopt the merger agreement; provided that Danaher’s
and Merger Sub’s right to terminate the merger agreement
for such reason expires ten business days after the last date of
such withdrawal or modification or failure to act.
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Termination
Fee (page 47)
Under certain circumstances, in connection with the termination
of the merger agreement, we will be required to pay to Danaher a
termination fee of $10 million.
5
Voting
Agreement with the Keithley Partnership (page 48)
In connection with the execution of the merger agreement, the
Keithley Partnership, of which Joseph P. Keithley, our chairman,
president and chief executive officer, is general partner,
entered into the Voting Agreement under which it agreed to vote
a number of its Class B common shares representing 19.99%
of the voting power of our outstanding Common Shares in favor of
approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement. In addition,
the Keithley Partnership agreed to vote such shares against any
proposal that would result in our breach of the merger
agreement, or any action or agreement that is intended to, or
would be reasonably likely to, impede, interfere with, delay,
postpone or attempt to discourage the merger. The Voting
Agreement will terminate if the merger agreement is terminated
in accordance with its terms and can be terminated by the
Keithley Partnership if there is any decrease in the price or
change in the form of consideration to be paid per Common Share
or the merger agreement is otherwise amended in a manner adverse
to our shareholders. As of October 1, 2010, the Keithley
Partnership, together with Mr. Keithley, owns Common Shares
representing approximately 61.5% of the total combined voting
power of the outstanding Common Shares. Pursuant to the Voting
Agreement, the Keithley Partnership also agreed not to transfer
or dispose of any of its Common Shares, enter into any other
voting arrangement or grant any proxies with respect to its
Common Shares, or convert its Class B common shares into
common shares.
Material
United States Federal Income Tax Consequences
(page 29)
For United States federal income tax purposes, the disposition
of our Common Shares pursuant to the merger generally will be
treated as a sale of our Common Shares for cash by each of our
shareholders. As a result, in general, each shareholder will
recognize gain or loss equal to the difference, if any, between
the amount of cash received in the merger and such
shareholder’s adjusted tax basis in the shares surrendered
in the merger.
We strongly recommend that shareholders
consult their own tax advisors as to the particular tax
consequences to them of the merger.
Dissenters’
Rights (page 32)
Under Ohio law, if the merger agreement is approved and adopted
by our shareholders, any shareholder that does not vote in favor
of approval and adoption of the merger agreement may be entitled
to seek relief as a dissenting shareholder under
Section 1701.85 of the Ohio Revised Code. To perfect
dissenters’ rights, a record holder must:
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not vote his or her Common Shares in favor of the proposal to
approve and adopt the merger agreement and the transactions
contemplated by the merger agreement at the special meeting;
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deliver a written demand to us for payment of the fair cash
value of his or her Common Shares on or before the tenth day
following the special meeting; and
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otherwise comply with Section 1701.85 of the Ohio Revised
Code.
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We will not notify shareholders of the expiration of this
ten-day
period. Common Shares held by any person who desires to dissent
but fails to perfect or who effectively withdraws or loses the
right to dissent under Section 1701.85 of the Ohio Revised
Code will be converted into, as of the effective time of the
merger, the right to receive the merger consideration, without
interest and less any required withholding taxes. A copy of
Section 1701.85 of the Ohio Revised Code is attached as
Annex D to this proxy statement. A shareholder’s
failure to follow exactly the procedures specified under
Section 1701.85 of the Ohio Revised Code will result in the
loss of dissenters’ rights.
Regulatory
Approvals (page 31)
The
Hart-Scott-Rodino
Act provides that transactions such as the merger may not be
completed until certain information has been submitted to the
Federal Trade Commission and the Antitrust Division of the
U.S. Department of Justice and certain waiting period
requirements have been satisfied. Except for the required
filings under the
Hart-Scott-Rodino
Act and receipt of any foreign approvals, consents and
clearances and the filing of a certificate of merger in Ohio at
or before the effective time of the merger, we are unaware of
any material federal, state or foreign regulatory requirements
or approvals required for the execution of the merger agreement
or completion of the merger.
6
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements included in this proxy statement, and in the
documents attached to this proxy statement, are forward-looking
statements that involve a number of risks and uncertainties and
which are based on management’s current beliefs,
assumptions and expectations. These statements appear in a
number of places in this proxy statement and include statements
regarding our intent, belief or current expectations or those of
our directors or officers regarding us and the proposed
transaction, including those statements regarding projected
financial information and the expected effects, timing and
completion of the proposed transaction, among others. These
forward-looking statements can be identified by the use of
predictive or future tense terms such as “anticipate,”
“estimate,” “expect,” “believe,”
“project,” “may,” “will” or
similar terms. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform
Act of 1995.
You are cautioned that any such forward-looking statement is not
a guarantee of future performance and involves risks and
uncertainties, and that our actual results may differ materially
from those stated, implied or anticipated in the forward-looking
statements as a result of various factors. The factors that
could cause actual results to differ materially from those
expressed in a forward-looking statement include, among other
factors, we may be unable to obtain the shareholder approval
required for the merger; conditions to the closing of the merger
may not be satisfied; the merger may involve unexpected costs or
unexpected liabilities; our businesses may suffer as a result of
uncertainty surrounding the merger; and we may be adversely
affected by other economic, business
and/or
competitive factors. Other factors that could cause our actual
results to differ from forward-looking statements regarding its
business and operations include, but are not limited to,
worldwide economic conditions; uncertainties in the credit and
capital markets including the ability of our customers to access
credit and our risk to cash and short-term investments that are
not backed by a government agency; business conditions in the
semiconductor, wireless, precision electronics and other
segments of the worldwide electronics industry, including the
potential for any recovery to stall or for the industries to
decline; the timing of large orders from customers or canceling
of orders in backlog; timing of recognizing shipments as
revenue; changes in product and sales mix, and the related
effects on gross margins; our ability to develop new products in
a timely fashion and gain market acceptance of those products to
remain competitive and gain market share; our ability to work
with third parties; competitive factors, including pricing
pressures, loss of key employees, technological developments and
new products offered by competitors; the impact of our fixed
costs in a period of fluctuating sales; our ability to adapt our
production capacities to rapidly changing market conditions; our
ability to implement and effectively manage IT system
enhancements without interruption to our business processes; our
ability to realize the benefits of planned cost savings without
adversely affecting our product development programs and
strategic initiatives; the availability of parts and supplies
from third-party suppliers on a timely basis and at reasonable
prices; changes in the fair value of our investments; the
potential volatility of earnings as a result of the accounting
for performance share awards; changes in effective tax rates due
to changes in tax law, tax planning strategies, the levels and
countries of pre-tax earnings, deferred tax assets or levels of
pre-tax
earnings; potential changes in pension plan assumptions; foreign
currency fluctuations which could affect worldwide operations;
costs and other effects of domestic and foreign legal,
regulatory and administrative proceedings; government actions
which impact worldwide trade; and matters arising out of or
related to our stock option grants and procedures and related
matters. For a further discussion of risk factors, investors
should refer to our periodic reports filed with the SEC.
With respect to any such forward-looking statement that includes
a statement of its underlying assumptions or bases, we caution
that, while we believe such assumptions or bases to be
reasonable and have formed them in good faith, assumed facts or
bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results
can be material depending on the circumstances. When, in any
forward-looking statement, we or our management express an
expectation or belief as to future results, that expectation or
belief is expressed in good faith and is believed to have a
reasonable basis, but there can be no assurance that the stated
expectation or belief will result or be achieved or
accomplished. Moreover, we assume no obligation to update
forward-looking statements or update the reasons actual results
could differ materially from those anticipated in
forward-looking statements, except as required by law.
7
THE
SPECIAL MEETING
Purpose
This proxy statement is being furnished to our shareholders in
connection with a special meeting to be held at
[ • ] on [ • ],
[ • ], 2010, at [ • ] local time
and in connection with the solicitation of proxies by our board
of directors for use at the special meeting. The purpose of the
special meeting is for shareholders to consider and vote upon a
proposal to approve and adopt the merger agreement and the
transactions contemplated by the merger agreement and to
transact any other business that may properly come before the
special meeting. Our shareholders must approve and adopt the
merger agreement and the transactions contemplated by the merger
agreement for the merger to occur. A copy of the merger
agreement is attached as Annex A to this proxy statement,
which you are encouraged to read carefully in its entirety.
Record
Date and Voting
Shareholders of record at the close of business on the record
date, [ • ], 2010, are entitled to receive notice
of, to attend, and to vote at the special meeting. Shareholders
will have one vote for each common share that they owned as of
the record date, and they will have ten votes for each
Class B common share they owned as of the record date. On
the record date, there were outstanding [ • ]
common shares and [ • ] Class B common
shares.
The holders of a majority of the voting power of Common Shares
that were outstanding on the record date, represented in person
or by proxy, will constitute a quorum for purposes of the
special meeting. A quorum is necessary to hold the special
meeting. Any Common Shares held by any of our subsidiaries are
not considered to be outstanding for purposes of determining a
quorum. Abstentions and properly executed broker non-votes will
be counted as Common Shares present at the special meeting for
the purposes of determining the presence of a quorum.
“Broker non-votes” result when the beneficial owners
of Common Shares do not provide specific voting instructions to
their brokers. Under the NYSE rules, brokers are precluded from
exercising their voting discretion with respect to the approval
of non-routine matters, such as approval and adoption of the
merger agreement and the transactions contemplated by the merger
agreement.
Required
Vote
Completion of the merger requires approval and adoption of the
merger agreement and the transactions contemplated by the merger
agreement by the affirmative vote of the holders of a majority
of the voting power of our outstanding Common Shares entitled to
vote at the special meeting. Shareholders will have one vote for
each common share that they owned as of the record date, and
they will have ten votes for each Class B common share they
owned as of the record date.
Because the required vote is
based on the voting power of Common Shares outstanding rather
than on the number of votes cast, failing to vote your Common
Shares (including as a result of a broker non-vote) or
abstaining will have the same effect as voting against approval
and adoption of the merger agreement and the transactions
contemplated by the merger agreement. Accordingly, in order for
your Common Shares to be included in the vote, if you are a
shareholder of record, you must have your Common Shares voted by
returning the enclosed proxy card by mail, submitting a proxy by
telephone or on the Internet using the instructions provided on
the enclosed proxy card, or by voting in person at the special
meeting.
Record holders may cause their Common Shares to be voted using
one of the following methods:
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completing, signing, dating and returning the enclosed proxy
card by mail;
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calling the toll free number
1-800-652-VOTE
(8683) within the U.S., U.S. territories or Canada and
following instructions provided by the recorded message,
including entering certain information that is set forth in on
the enclosed proxy card;
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logging on to the Internet and going to
www.investorvote.com/KEIT (for holders of our common shares) or
www.investorvote.com/KEITB (for holders of our Class B
common shares) and following the steps outlined on the secure
website, including entering certain information that is set
forth in the enclosed proxy card; or
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attending the special meeting and voting in person by ballot.
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Regardless of whether you plan to attend the special meeting, we
request that you complete and return a proxy for your Common
Shares as described above as promptly as possible.
If you hold your Common Shares through a bank, brokerage firm or
other nominee (
i.e.
, in “street name”), in
order to vote you must provide voting instructions on the voting
instruction card that your bank, brokerage firm or other nominee
provides to you. You should instruct your bank, brokerage firm
or other nominee as to how to vote your Common Shares following
the directions contained in such voting instruction card. If you
have not received such voting instructions or require further
information regarding such voting instructions, contact your
bank, brokerage firm or other nominee who can give you
directions on how to vote your Common Shares. If you do not
provide instructions to your bank, brokerage firm or other
nominee, your Common Shares will not be voted, and this will
have the same effect as voting against approval and adoption of
the merger agreement and the transactions contemplated by the
merger agreement.
In connection with the execution of the merger agreement, the
Keithley Partnership, a partnership of which Joseph P. Keithley,
our chairman, president and chief executive officer is the
general partner, entered into the Voting Agreement pursuant to
which it agreed to vote a number of its Class B common
shares representing 19.99% of the voting power of our
outstanding Common Shares in favor of approval and adoption the
merger agreement and the transactions contemplated by the merger
agreement.
As of [ • ], 2010, the record date for the
merger, our executive officers and directors beneficially owned
an aggregate of approximately [ • ] Common
Shares, entitling them to exercise approximately
[ • ]% of the voting power of our Common Shares.
We expect that our executive officers and directors will vote
their Common Shares in favor of approval and adoption of the
merger agreement and the transactions contemplated by the merger
agreement.
Proxies;
Revocation
If you submit a proxy, your Common Shares will be voted at the
special meeting as you indicate on your proxy. If no
instructions are indicated on your signed proxy card, your
Common Shares will be voted
“FOR”
approval and
adoption of the merger agreement and the transactions
contemplated by the merger agreement.
The persons named in the enclosed proxy card will have
discretionary authority to vote upon other business that is
unknown by us a reasonable time prior to the solicitation of
proxies, if any, that properly comes before the special meeting.
You may revoke your proxy at any time, but only before the proxy
is voted at the special meeting, in any of three ways:
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by delivering a written revocation of your proxy dated after the
date of the proxy that is being revoked to the secretary of
Keithley at 28775 Aurora Road, Cleveland, Ohio 44139;
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by delivering to the secretary of Keithley, at a later date, a
duly executed proxy relating to the same shares, or by
submitting a later proxy by telephone or the Internet relating
to the same shares; or
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by revoking your proxy in open meeting at the special meeting.
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Attendance at the special meeting will not, in itself,
constitute revocation of a previously granted proxy. If you hold
your Common Shares in street name, you may revoke or change a
previously given proxy by following the instructions provided by
the bank, brokerage firm or other nominee that is the record
owner of the Common Shares.
We will pay the costs of soliciting proxies for the special
meeting. Our officers, directors and employees may solicit
proxies by telephone, facsimile or mail, on the Internet or in
person. They will not be paid any additional amounts for
soliciting proxies. We will also request that banks, brokerage
firms and others holding Common Shares in their names, or in the
names of their nominees, that are beneficially owned by others,
send proxy materials to and obtain proxies from those beneficial
owners, and, upon request, will reimburse those holders for
their reasonable expenses in performing those services. We have
retained Georgeson Inc. to assist us in the solicitation of
proxies, and will pay it fees of approximately $8,000 plus
reimbursement of
out-of-pocket
expenses. In addition, our
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arrangement with Georgeson Inc. includes provisions obligating
us to indemnify it for certain liabilities that could arise in
connection with its solicitation of proxies on our behalf.
THE
PARTIES TO THE MERGER
Keithley
Instruments, Inc.
Keithley Instruments, Inc. is an Ohio corporation that designs,
develops, manufactures and markets complex electronic
instruments and systems geared to the specialized needs of
electronics manufacturers for high-performance production
testing, process monitoring, product development and research.
Keithley’s customers are scientists and engineers in the
worldwide electronics industry involved with advanced materials
research, semiconductor device development and fabrication, and
the production of end products such as portable wireless
devices. Keithley Instrument’s headquarters are located at
28775 Aurora Road, Cleveland, Ohio 44139, and its telephone
number is
(440) 248-0400.
Danaher
Corporation
Danaher Corporation is a Delaware corporation that derives its
sales from the design, manufacture and marketing of
professional, medical, industrial, commercial and consumer
products, which are typically characterized by strong brand
names, proprietary technology and major market positions.
Danaher Corporation’s business consists of four segments:
Professional Instrumentation, Medical Technologies, Industrial
Technologies, and Tools & Components. The Professional
Instrumentation segment includes a test and measurement line of
business. Danaher Corporation’s principal executive offices
are located at 2099 Pennsylvania Ave. N.W., 12th Floor,
Washington, D.C., 20006 and its telephone number is
(202) 828-0850. Danaher Corporation’s common stock is
publicly traded on the New York Stock Exchange under the symbol
“DHR.”
Aegean
Acquisition Corp.
Aegean Acquisition Corp. is an Ohio corporation and an indirect
wholly-owned subsidiary of Danaher Corporation that was formed
exclusively for the purpose of effecting the merger. Aegean
Acquisition Corp. has not carried on any activities to date,
except for activities incidental to its formation and activities
undertaken in connection with the transactions contemplated by
the merger agreement. Upon consummation of the proposed merger,
Aegean Acquisition Corp. will merge with and into Keithley
Instruments, Inc. and will cease to exist. Aegean Acquisition
Corp.’s principal executive offices are located at 2099
Pennsylvania Ave. N.W., 12th Floor, Washington, D.C.,
20006 and its telephone number is (202) 828-0850.
THE
MERGER PROPOSAL
General
Description of the Merger
Under the terms of the merger agreement, Danaher will acquire us
through the merger of Merger Sub with and into Keithley.
Keithley will continue as the surviving corporation and as an
indirect, wholly-owned subsidiary of Danaher.
Background
of the Merger
As part of their ongoing activities, our board of directors and
senior management have regularly discussed our business
strategies and opportunities, including continued operations as
an independent public company and the possible expansion of our
business through significant product development initiatives or
mergers and acquisitions, each with a view toward maximizing
shareholder value. In particular, following our exit of the S600
parametric test product line in February 2009 and our sale of
the radio frequency product line in November 2009, our board of
directors again began to discuss our strategic alternatives in
light of our relatively small market capitalization and smaller
remaining business. Our directors also began to discuss
management succession, including the possibility
10
of Joseph P. Keithley, our chairman, president and chief
executive officer, who is age 61, becoming executive
chairman.
In light of substantially improved financial performance for the
second fiscal quarter ended March 31, 2010 and
management’s expectation of continued improvement during
the course of the year, at a special meeting of our board of
directors held on April 2, 2010, our board of directors
discontinued discussions concerning management succession and
resolved to interview financial advisors that could assist us in
our evaluation of strategic alternatives. The directors
interviewed five firms on May 6, 2010, and on May 25,
2010, we engaged Thomas Weisel Partners, which is now part of
Stifel Nicolaus Weisel, to assist us in the evaluation of our
strategic alternatives.
On June 21, 2010, representatives of Stifel Nicolaus Weisel
made a presentation to our board of directors regarding
strategic alternatives. Our chief operating officer, our chief
financial officer and a representative from Baker &
Hostetler LLP, or Baker Hostetler, our regular outside counsel,
also attended the meeting. The presentation analyzed the
following alternatives: (1) maintaining the status quo, or
remaining as an independent public company and growing
organically, (2) pursuing a strategy of growth through
acquisition, (3) selling Keithley, and
(4) implementing a significant dividend or share buyback.
At that meeting, there was also discussion of whether
maintaining the status quo, accompanied by a significant
increase in the regular dividend, should be considered.
Following Stifel Nicolaus Weisel’s presentation regarding
strategic alternatives and a discussion by the board of
directors, our board of directors resolved that, subject to
reviewing an analysis from Stifel Nicolaus Weisel regarding a
significant increase in the regular dividend, it was in the
shareholders’ best interest to authorize Stifel Nicolaus
Weisel to begin a process to explore a sale of Keithley. The
closing price of our common shares on June 21, 2010 was
$8.46 per share.
At a telephonic meeting on June 25, 2010, in which our
chief operating officer, our chief financial officer and a
representative from Baker Hostetler participated,
representatives of Stifel Nicolaus Weisel provided a
supplemental analysis regarding the status quo alternative,
coupled with a significant increase in the regular dividend to
shareholders. Our directors concluded that the dividend analysis
did not alter their earlier conclusion that it was in our
shareholders’ best interest to authorize Stifel Nicolaus
Weisel to solicit preliminary indications of interest from
parties that might be interested in acquiring Keithley. It was
also decided that our board of directors would have weekly
update calls with senior management and representatives of
Stifel Nicolaus Weisel and Baker Hostetler to keep the directors
apprised of the status of the process of exploring a sale of
Keithley.
At our board of directors’ direction, Stifel Nicolaus
Weisel contacted 11 financial buyers and 13 strategic buyers
(including Danaher) during July 2010, regarding the possibility
of entering into a transaction with us. These parties were
identified by Stifel Nicolaus Weisel based on a determination as
to which parties might be realistic candidates to complete a
possible strategic transaction with us and private equity buyers
for whom a transaction with Keithley fit their investment
objectives and transaction parameters. Of the 24 parties
contacted, seven strategic buyers and seven financial buyers
entered into confidentiality agreements and received non-public
information from us.
At our invitation, on July 29, 2010, six parties, including
three strategic buyers and three financial buyers, submitted
preliminary indications of interest to acquire Keithley, at
potential per share values ranging from $10.00 to $13.40. On
Sunday evening, August 1, 2010, Danaher submitted a seventh
preliminary indication of interest at a price of $12.00 to
$13.00 per share. At a weekly update call, our board of
directors, based on the recommendation of Stifel Nicolaus
Weisel, determined to continue to explore a possible transaction
with five of these parties, including two financial buyers, and
instructed Stifel Nicolaus Weisel to advise one additional
strategic buyer that it could continue in the process if it
committed to raise its preliminary indication of interest to
$12.00 per share. The strategic buyer subsequently confirmed an
increased valuation of $12.00 per share. The closing price of
our common shares on July 29, 2010 was $10.06 per share.
On August 13, 2010, we entered into change in control
agreements with our officers, other than Mr. Plush who had
an existing employment agreement with some protections in the
event of a change in control, providing for severance benefits
upon termination without cause or for good reason following a
change in control of Keithley.
From August 10, 2010 to August 20, 2010, each of the
potential buyers was invited to a management presentation
regarding our business and, beginning on August 19, 2010,
Stifel Nicolaus Weisel and Baker Hostetler
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arranged for the six potential buyers to have access to an
electronic data room containing significant non-public
information about our business.
On August 24, 2010, one of the financial buyers advised
Stifel Nicolaus Weisel that it was withdrawing from the process.
On August 25, 2010, at our direction, Stifel Nicolaus
Weisel circulated a process letter to the remaining bidders
asking them to provide a final bid, together with a
mark-up
of
the form of merger agreement, by 5:00 p.m. on
September 23, 2010.
On September 1, 2010, two forms of merger agreement
providing for an all-cash acquisition of Keithley were posted in
the data room, one for strategic buyers and one for buyers who
required third-party debt financing. Draft disclosure schedules
to the merger agreement were posted in the data room on
September 14, 2010.
From August 23, 2010 through September 23, 2010, the
bidders continued their business, financial and legal due
diligence review of Keithley. On September 10, 2010, the
strategic buyer that had originally submitted the lowest
preliminary indication of interest advised Stifel Nicolaus
Weisel that it was terminating its participation in the process,
and on September 16, 2010, the remaining financial buyer
advised Stifel Nicolaus Weisel that it was withdrawing from the
process.
During the evening of Thursday, September 23, 2010, each of
the three remaining parties submitted bids to Stifel Nicolaus
Weisel at prices ranging from $13.50 to $16.00 per share. The
closing price of our common shares on September 23, 2010
was $11.51 per share. Danaher’s bid was $15.50 per share.
The other bidders, referred to as Company A and Company B, made
bids of $16.00 per share and $13.50 per share, respectively.
Company B’s bid included a condition that required its
completion of a capital markets transaction unrelated to a
transaction with Keithley before it could enter into a
definitive transaction to acquire Keithley. Both Company A and
Danaher provided a
mark-up
of
the form of merger agreement with their bids, and Company A
provided a form of voting agreement to be entered into with the
Keithley Partnership to vote the shares held by it in favor of
the merger. Danaher’s proposal also called for a voting
agreement from the Keithley Partnership.
On September 24, 2010, Stifel Nicolaus Weisel told Danaher
that its bid was generally less attractive on both price and
contract terms relative to other parties.
Also on September 24, 2010, the human resources and
compensation committee of the board of directors met and
approved the terms of an amended employment agreement with
Mr. Plush, which amended the circumstances under which he
was entitled to severance payments following a change in control.
Late in the evening on Sunday, September 26, 2010, Danaher
submitted an improved
mark-up
of
the merger agreement and a proposed form of voting agreement to
be entered into by the Keithley Partnership to vote shares held
by it representing 19.99% of the voting power of our outstanding
Common Shares in favor of approval and adoption of the merger
agreement and the transactions contemplated by the merger
agreement and, early in the morning of September 27, 2010,
Danaher resubmitted a proposal at $17.00 per share.
At a telephonic meeting of our board of directors on the morning
of September 27, 2010, in which our chief operating
officer, our chief financial officer and representatives of
Stifel Nicolaus Weisel and Baker Hostetler participated, Stifel
Nicolaus Weisel reviewed the sale process to date and presented
its analysis of the three bids to our board of directors. In
addition, Baker Hostetler provided a comparison of the merger
agreement comments submitted by Company A and the revised merger
agreement comments submitted by Danaher. Also at the meeting,
Stifel Nicolaus Weisel updated its valuation analysis of the
Company and compared it to the current proposals of $13.50,
$16.00 and $17.00 per share. Stifel Nicolaus Weisel also advised
our directors that, based upon publicly available information
and statements made in their respective proposals, both Danaher
and Company A had adequate cash on hand and borrowing capacity
to complete a transaction at the prices of their respective
bids. At that meeting, our board of directors accepted Stifel
Nicolaus Weisel’s recommendation that Company B be dropped
from the process because of its price and the condition in its
proposal that could not be timely satisfied and instructed our
advisors that negotiations should continue with Danaher and
Company A.
Following the meeting, Stifel Nicolaus Weisel advised Company A
that its price was $1.00 per share lower than the other
remaining party in the process. Later that day, Company A was
provided with a revised merger
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agreement that reflected the terms from Company A’s
mark-up
and
Danaher’s
mark-up
that
the Company was willing to accept.
On the evening of September 27, 2010, Company A advised
Stifel Nicolaus Weisel that it was increasing its price to
$18.00 per share and would substantially accept the terms of the
latest draft of the merger agreement.
On a telephonic update conference call at 10:00 p.m. on the
evening of September 27, 2010, representatives of Stifel
Nicolaus Weisel and Baker Hostetler reviewed for our board of
directors the events that had transpired over the course of the
day, including Company A’s increased price. There was
discussion of the appropriate strategy to maximize the price
that could be obtained from the remaining bidders. Based on the
discussion, our board of directors instructed our advisors to
continue final negotiations on the merger agreement with Company
A and to notify Danaher of Company A’s revised price and
willingness to substantially accept the terms of the latest
draft of the merger agreement.
Following that meeting, Stifel Nicolaus Weisel informed Danaher
that Company A had increased its proposal to $18.00 and provided
Danaher with the same revised merger agreement that had been
provided to Company A earlier that evening.
On September 28, 2010, shortly before noon, Danaher advised
Stifel Nicolaus Weisel that it was increasing its price from
$17.00 to $19.00 per share and that we had until 5:00 p.m.
that day to accept its proposal. Stifel Nicolaus Weisel
subsequently advised Company A of the new increased offer from
the other remaining party and, later in the afternoon, Company A
advised Stifel Nicolaus Weisel that it was prepared to match the
$19.00 per share offer.
During the course of the day on September 28, 2010,
representatives from Baker Hostetler discussed the terms of the
two merger agreements with counsel for Company A and with
representatives from Skadden, Arps, Slate, Meagher &
Flom LLP, or Skadden Arps, counsel to Danaher. By early evening
on September 28, 2010, both contracts had been
substantially negotiated to a point where Baker Hostetler and
management believed they were forms that could be accepted by
our board of directors.
At approximately 5:00 p.m. on September 28, 2010,
Stifel Nicolaus Weisel advised both parties that a board of
directors meeting was scheduled for 10:00 p.m. that evening
and that they should deliver their best and final offer by
9:00 p.m. Stifel Nicolaus Weisel further advised the
parties that it expected our board of directors to accept a
winning bidder at that board of directors meeting without
further negotiations or bidding.
Shortly before the start of the 10:00 p.m. board of
directors meeting, Danaher advised Stifel Nicolaus Weisel that
its best and final price was $21.60 per share, and Company A
advised Stifel Nicolaus Weisel that its best and final price was
$19.50 per share.
At the board meeting, in which one director did not participate,
representatives of Stifel Nicolaus Weisel reviewed for the board
the process relating to the sale of Keithley that had been
undertaken since June 25 and summarized the terms of the two
proposals. Representatives of Stifel Nicolaus Weisel updated the
presentation they had provided on September 27, 2010 and
analyzed the fairness, from a financial point of view, to
holders of Shares of the merger consideration reflected in the
Danaher proposal of $21.60 per share. Stifel Nicolaus Weisel
also reminded our directors that Danaher’s substantial cash
position would permit it to fund the transaction without any
financing contingencies. Stifel Nicolaus Weisel then advised the
board that it was prepared to deliver its opinion that the
merger consideration of $21.60 per share was fair to holders of
Shares from a financial point of view.
Representatives of Baker Hostetler then reviewed with our board
of directors in detail the terms of the merger agreement that
had been negotiated with Danaher, including the terms on which
the board would have the ability to consider a superior proposal
if one were to emerge.
Stifel Nicolaus Weisel then delivered its oral opinion to our
board of directors, which was subsequently affirmed by delivery
of a written opinion, dated September 28, 2010 (which is
attached to this proxy statement as Annex C), to the effect
that, as of the date of the opinion and based upon and subject
to assumptions made, procedures followed, matters considered and
limitations of the review undertaken in the opinion, the merger
consideration to be received by the holders of Shares was fair
to such holders, from a financial point of view.
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Following additional discussion and deliberation, our board of
directors unanimously resolved (with one director absent) that
the merger agreement and the transactions contemplated thereby
are advisable and fair to and in the best interests of Keithley
and our shareholders, approved the merger agreement and the
transactions contemplated thereby, and recommended that our
shareholders vote to approve and adopt the merger agreement and
the transactions contemplated thereby. Our board also approved
the voting agreement between the Keithley Partnership and
Danaher, including approving the transaction by which Danaher
became an “interested shareholder” for purposes of
Chapter 1704 of the Ohio Revised Code.
We and Danaher executed the merger agreement at approximately
4:00 a.m. on September 29, 2010 and issued a press
release announcing the transaction before the market opened that
morning.
Reasons
for the Merger
In reaching its decision to approve the merger agreement, the
merger and the other transactions contemplated by the merger
agreement, authorize Keithley to enter into the merger agreement
and recommend that our shareholders vote to approve and adopt
the merger agreement and the transactions contemplated by the
merger agreement, our board of directors consulted with its
financial and legal advisors and our management. The board of
directors considered a number of potentially positive factors,
including the following material factors:
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The belief that the merger and the merger consideration of
$21.60 per share was more favorable to shareholders than the
alternative of remaining a stand-alone independent company and
continuing to execute its strategic plan, because of the
uncertain returns to shareholders if we remained independent and
based on various factors, including the directors’
knowledge and understanding of Keithley and our industry, our
competitive position, management’s projections and business
plan and various valuation methodologies and analyses prepared
and presented by Stifel Nicolaus Weisel (see
“— Opinion of Stifel, Nicolaus &
Company, Incorporated” beginning on page 17);
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The assessment as to the low likelihood that a third party would
offer a higher price than Danaher, especially in light of the
managed sale process we conducted, as more fully described in
“The Merger Proposal — Background of the
Merger” beginning on page 10;
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The business reputation of Danaher and its management and the
substantial financial resources of Danaher, which our board of
directors believed supported the conclusion that a transaction
with Danaher could be completed relatively quickly and in an
orderly manner;
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Certain financial analyses presented to the board of directors
by Stifel Nicolaus Weisel, as well as the opinion of Stifel
Nicolaus Weisel to the effect that, as of the date of the
opinion, and based upon and subject to the respective factors,
assumptions and limitations set forth in the opinion, the $21.60
per share cash merger consideration to be received by holders of
Shares in connection with the merger pursuant to the merger
agreement is fair to such holders of Shares, from a financial
point of view (see “— Opinion of Stifel,
Nicolaus & Company, Incorporated”);
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The fact that the merger consideration consists solely of cash,
which provides immediate liquidity and certainty of value to our
shareholders compared to a transaction in which shareholders
would receive stock;
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The fact that our board of directors, with the assistance of
Stifel Nicolaus Weisel, conducted a strategic alternatives
review and an extensive sale process over five months, which
included Stifel Nicolaus Weisel contacting 24 parties
(consisting of 13 strategic buyers and 11 financial buyers) that
might have been interested in acquiring Keithley to solicit
their interest in making an acquisition proposal, entering into
confidentiality agreements with 14 parties, receiving
initial indications of interest from seven parties, making a
management presentation to six parties and receiving three final
acquisition proposals;
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The current and historical market prices of our common shares
and the fact that the price of $21.60 per share represented a
premium of 74% over the market closing price of $12.39 on
September 28, 2010, the last trading day prior to the
announcement of the proposed transaction, a premium of
approximately 103% percent over the average market closing price
for the trailing one month, a premium of approximately 136%
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over the average market closing price for the trailing six
months, and a premium of approximately 200% over the average
market closing price for the trailing 12 months;
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The current and historical market prices of the Common Shares
relative to those of other industry participants and general
market indices;
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The belief that while improvements in our operating performance
could yield improved operating results, the achievement of such
improvements is uncertain and subject to significant execution
risk;
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The fact that we have encountered difficulties launching
significant new products other than products associated with our
core business;
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The fact that the strength and liquidity of the private equity
and debt financing markets have remained limited, which has made
the acquisition of Keithley more difficult for a buyer seeking
financing, and the fact that if current market conditions
persist or deteriorate further, such conditions could be even
less conducive to an acquisition in the future;
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General industry, economic and market conditions, both on a
historical and on a prospective basis;
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The financial and other terms and conditions of the merger
agreement, which were the product of arm’s length
negotiations with Danaher and its legal advisors, including that:
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The merger is not subject to any financing condition;
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We are permitted to furnish information to and conduct
negotiations with third parties that make an unsolicited
“acquisition proposal” (as defined in “The Merger
Agreement — No Solicitation of Transactions; Change of
Recommendation”) in certain circumstances;
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Subject to compliance with the terms and conditions of the
merger agreement, if a third party has proposed an alternative
transaction that is a “superior proposal,” our board
of directors is permitted, following a determination made by it
in good faith (after consulting with outside counsel) that the
failure to do so would be inconsistent with its fiduciary duties
under applicable law, prior to the adoption of the merger
agreement by our shareholders, to change its recommendation,
approve or recommend the superior proposal or, upon the payment
to Danaher of a $10 million termination fee, terminate the
merger agreement in order to enter into a definitive agreement
with respect to the superior proposal, as more fully described
below under “The Merger Agreement — No
Solicitation of Transactions; Change of
Recommendation;” and
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The merger agreement is subject to a limited number of
conditions, and the board of directors believe, after review
with its legal advisors, that the conditions to the merger have
a high likelihood of being satisfied (see “The Merger
Agreement — Conditions to the Merger”);
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Our board of directors’ belief, after consultation with its
legal and financial advisors, that the termination fee of
$10 million (or approximately 2.7% of the aggregate merger
consideration) that may become payable (and the circumstances
under which such fee is payable) is reasonable in light of the
facts and circumstances surrounding the merger, the benefits of
the merger, commercial practice and transactions of this size
and nature;
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The likelihood that the merger will be completed, in light of
our board of directors’ belief that there will not be any
significant antitrust risk in connection with the transaction
and the financial capabilities of Danaher; and
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The fact that holders of Common Shares will have an opportunity
to vote on the merger and have the right to dissent and seek a
judicial appraisal of their shares if such holders comply with
the requirements of Ohio law concerning dissenters’ rights.
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The board of directors also considered and balanced against the
potentially positive factors a number of potentially negative
factors concerning the merger, including the following material
factors:
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The risk that the merger may not be completed in a timely manner
or at all;
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That we will no longer exist as an independent public company
and our shareholders will forgo any future increase in the value
that might result from future earnings or possible growth as an
independent company or the benefits of synergies resulting from
the merger;
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That the receipt of cash by the shareholders in exchange for
Common Shares pursuant to the merger will generally be a taxable
transaction for U.S. federal income tax purposes;
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That certain of our directors and executive officers may have
conflicts of interest in connection with the merger, as they may
receive benefits that are different from, and in addition to,
those of the other shareholders, as described below under
“— Interests of Our Directors and Executive
Officers in the Merger;”
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That the restrictions on the conduct of business prior to the
consummation of the merger, which require us to conduct our
business in the ordinary course consistent with past practice,
subject to specific limitations, may delay or prevent us from
undertaking business opportunities that may arise pending
completion of the merger;
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The risks and costs to us if the merger does not close,
including the diversion of management and employee attention,
employee attrition and the effect on existing business
relationships;
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The impact of the merger on our employees;
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The fact that the merger agreement precludes us from actively
soliciting alternative acquisition proposals;
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The possibility that the termination fee of $10 million (or
approximately 2.7% of the aggregate merger consideration)
payable under specified circumstances may discourage a competing
proposal to acquire us; and
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The risk that entering into the merger agreement may result in
the loss of interest by other parties to make a definitive
proposal for our acquisition at a price that may be higher than
the $21.60 per share to be received by the shareholders.
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After taking into account all of the factors set forth above, as
well as others, our board of directors determined that the
potentially positive factors outweighed the potentially negative
factors. Furthermore, our board of directors determined that the
merger agreement, the merger and the other transactions
contemplated by the merger agreement are advisable, fair to and
in the best interests of Keithley and our shareholders. The
board of directors has approved the merger agreement, the merger
and the other transactions contemplated by the merger agreement
by a unanimous vote of the directors voting on the matter (with
one director absent) and recommends that our shareholders vote
to approve and adopt the merger agreement and the transactions
contemplated by the merger agreement at the special meeting.
Our board of directors did not assign relative weights to the
above factors or the other factors considered by it. In
addition, our board of directors did not reach any specific
conclusion on each factor considered, but conducted an overall
analysis of these factors. Individual members of the board of
directors may have given different weights to different factors.
Recommendation
of Our Board of Directors
On September 29, 2010, after evaluating a variety of
business, financial and market factors and consulting with our
legal and financial advisors, and after due discussion and due
consideration, our board of directors approved the merger
agreement, the merger and the other transactions contemplated by
the merger agreement and declared that the merger agreement, the
merger and the other transactions contemplated by the merger
agreement are advisable, fair to and in the best interests of
Keithley and our shareholders.
Accordingly, our board of
directors recommends that you vote “FOR” the approval
and adoption of the merger agreement and the transactions
contemplated by the merger agreement.
16
Opinion
of Stifel, Nicolaus & Company, Incorporated
On May 25, 2010, our board of directors retained Thomas
Weisel Partners LLC to act as its financial advisor and to
provide a fairness opinion in connection with the merger
contemplated by the merger agreement; Stifel Nicolaus Weisel
subsequently succeeded to the investment banking business of
Thomas Weisel Partners LLC. On September 28, 2010, Stifel
Nicolaus Weisel delivered its written Opinion, dated
September 28, 2010, to our board of directors that, as of
the date of the Opinion and based upon and subject to the
assumptions made, procedures followed, matters considered and
limitations of the review undertaken in such Opinion, the merger
consideration to be received by the holders of Shares in
connection with the merger pursuant to the merger agreement was
fair to such holders of Shares, from a financial point of view.
The full text of the written Opinion of Stifel Nicolaus
Weisel is attached as Annex C to this proxy statement and
is incorporated into this document by reference. The summary of
Stifel Nicolaus Weisel’s Opinion set forth in this proxy
statement is qualified in its entirety by reference to the full
text of the Opinion. Shareholders are urged to read the Opinion
carefully and in its entirety for a discussion of the procedures
followed, assumptions made, other matters considered and limits
of the review undertaken by Stifel Nicolaus Weisel in connection
with such Opinion.
It is understood that the Opinion is solely for the information
of, and directed to, our board of directors for its information
and assistance in connection with its evaluation of the
financial terms of the merger. The Opinion did not constitute a
recommendation to Keithley or our board of directors as to
whether we should enter into the merger agreement or effect the
merger or any other transaction contemplated by the merger
agreement, nor does the Opinion constitute a recommendation to
any shareholder as to how such shareholder should vote at any
shareholders’ meeting at which the merger is considered, or
as to whether or not such shareholder should enter into any
voting, support or shareholders’ agreement in connection
with the merger or exercise any dissenters’ or appraisal
rights that may be available to such shareholder. The opinion
does not compare the relative merits of the merger with those of
any other transaction or business strategy which may have been
available to or considered by our board or directors or Keithley
as alternatives to the merger and does not address the
underlying business decision of our board of directors or
Keithley to proceed with or effect the merger.
Stifel Nicolaus Weisel’s Opinion is limited to whether, as
of the date of the Opinion, the merger consideration was fair to
the holders of Shares, from a financial point of view. The
Opinion does not consider, address or include: (i) any
other strategic alternatives currently (or which have been or
may be) contemplated by Keithley or our board of directors;
(ii) the legal, tax or accounting consequences of the
merger on Keithley or our shareholders; (iii) the fairness
of the amount or nature of any compensation to any of our
officers, directors or employees, or class of such persons,
relative to the compensation to the public holders of our equity
securities; or (iv) the treatment of, or effect of the
merger on, stock options or other share-based awards.
In connection with its Opinion, Stifel Nicolaus Weisel, among
other things:
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made inquiries regarding and discussed the merger and a draft
copy of the merger agreement dated September 28, 2010, a
draft copy of the Voting Agreement and other matters related
thereto with our outside counsel;
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reviewed and analyzed the audited consolidated financial
statements of Keithley contained in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2009, and the
unaudited consolidated financial statements of Keithley
contained in our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010;
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held meetings and discussions with us concerning Keithley’s
past, current and expected future financial and operating data
and other business matters, including, without limitation, our
financial forecasts and related assumptions;
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reviewed and analyzed certain other relevant financial and
operating data relating to Keithley made available to Stifel
Nicolaus Weisel from published sources and from our internal
records, including, without limitation, our financial forecasts
and related assumptions;
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reviewed the reported prices and trading activity of the
publicly traded equity securities of Keithley;
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17
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reviewed and analyzed certain publicly available financial and
stock market data and pricing metrics for selected publicly
traded broadline test and measurement and semiconductor test and
metrology companies that Stifel Nicolaus Weisel considered may
have relevance to its analysis;
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reviewed the financial terms and valuation metrics, to the
extent publicly available, of certain test and measurement and
semiconductor test and metrology acquisitions that Stifel
Nicolaus Weisel considered may have relevance to its
analysis; and
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conducted such other financial studies, analyses and
investigations and considered such other information as Stifel
Nicolaus Wiesel deemed necessary or appropriate for purposes of
the Opinion.
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In connection with its review, Stifel Nicolaus Weisel relied
upon and assumed, without independent verification, the accuracy
and completeness of all financial, operational and other
information that was made available, supplied, or otherwise
communicated to Stifel Nicolaus Weisel by us or on our behalf,
or by our advisors, or that was otherwise reviewed by Stifel
Nicolaus Weisel, and did not assume any responsibility for
independently verifying any of such information.
With respect to any financial forecasts supplied to it by us,
Stifel Nicolaus Weisel assumed that the forecasts were
reasonably prepared on a basis reflecting the best currently
available estimates and judgments of our management as to the
future operating and financial performance of Keithley, and that
they provided a reasonable basis upon which Stifel Nicolaus
Weisel could form its Opinion. Such forecasts and projections
were not prepared with the expectation of public disclosure. All
such projected financial information is based on numerous
variables and assumptions that are inherently uncertain,
including, without limitation, factors related to general
economic, market and competitive conditions. Accordingly, actual
results could vary significantly from those set forth in such
projected financial information. Stifel Nicolaus Weisel relied
on this projected information without independent verification
or analyses and does not in any respect assume any
responsibility for the accuracy or completeness thereof. Stifel
Nicolaus Weisel further relied upon our assurances that we were
unaware of any facts that would make any information provided by
us or on our behalf incomplete or misleading. Stifel Nicolaus
Weisel assumed, with our consent, that any material liabilities
(contingent or otherwise, known or unknown), if any, relating to
Keithley and Danaher, respectively, had been disclosed to Stifel
Nicolaus Weisel.
Stifel Nicolaus Weisel’s Opinion is necessarily based upon
financial, economic, monetary, market and other conditions and
circumstances existing and disclosed to Stifel Nicolaus Weisel
by us or our advisors, as of the date of the Opinion. It is
understood that subsequent developments may affect the
conclusions reached in the Opinion, and that Stifel Nicolaus
Weisel does not have or assume any obligation to update, revise
or reaffirm the Opinion. Stifel Nicolaus Weisel also assumed
that the merger will be consummated on the terms and conditions
described in the draft merger agreement, without any further
amendment thereto and without waiver of material terms or
conditions by Keithley, Danaher, or any other party, and that
obtaining any necessary regulatory approvals or satisfying any
other conditions for consummation of the merger will not have an
adverse effect on Keithley or our equity securities.
Stifel Nicolaus Weisel assumed that the merger will be
consummated in a manner that complies in all respects with the
applicable provisions of the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, and all other
applicable federal and state statutes, rules and regulations.
Stifel Nicolaus Weisel was not requested to make, did not assume
responsibility for making, and did not make, an independent
evaluation, appraisal or physical inspection of any of the
assets or liabilities (contingent or otherwise) of Keithley or
Danaher, nor was Stifel Nicolaus Weisel furnished with any such
appraisals.
The summary set forth below does not purport to be a complete
description of the analyses performed by Stifel Nicolaus Weisel,
but describes, in summary form, the material elements of the
presentation that Stifel Nicolaus Weisel made to our board of
directors on September 28, 2010, in connection with Stifel
Nicolaus Weisel’s Opinion.
In accordance with customary investment banking practice, Stifel
Nicolaus Weisel employed generally accepted valuation methods
and financial analyses in reaching its Opinion. The following is
a summary of the material financial analyses performed by Stifel
Nicolaus Weisel in arriving at its Opinion. These summaries of
financial analyses alone do not constitute a description of all
the financial analyses Stifel Nicolaus Weisel employed in
reaching its conclusions. None of the analyses performed by
Stifel Nicolaus Weisel was assigned a greater significance by
Stifel Nicolaus Weisel than any other, nor does the order of
analyses described represent relative
18
importance or weight given to those analyses by Stifel Nicolaus
Weisel. The summary text describing the financial analyses does
not constitute a complete description of Stifel Nicolaus
Weisel’s financial analyses, including the methodologies
and assumptions underlying the analyses, and if viewed in
isolation could create a misleading or incomplete view of the
financial analyses performed by Stifel Nicolaus Weisel. The
summary text set forth below does not represent and should not
be viewed by anyone as constituting conclusions reached by
Stifel Nicolaus Weisel with respect to any of the analyses
performed by it in connection with its Opinion. Rather, Stifel
Nicolaus Weisel made its determination, as of the date of its
Opinion, as to the fairness to the holders of Shares of the
merger consideration to be received by the holders of Shares in
the merger pursuant to the merger agreement from a financial
point of view, on the basis of its experience and professional
judgment after considering the results of all of the analyses
performed.
Except as otherwise noted, the information utilized by Stifel
Nicolaus Weisel in its analyses, to the extent that it is based
on market data, is based on market data as it existed on or
before September 28, 2010 and is not necessarily indicative
of current market conditions. The analyses described below do
not purport to be indicative of actual future results, or to
reflect the prices at which any securities may trade in the
public markets, which may vary depending upon various factors,
including changes in interest rates, dividend rates, market
conditions, economic conditions and other factors that influence
the price of securities.
In conducting its analysis, Stifel Nicolaus Weisel used three
primary methodologies to assess the fairness of the merger
consideration. The three methodologies used included: selected
comparable public companies analysis, selected comparable
transactions analysis and discounted equity analysis. Each
individual methodology was not given a specific weight, nor can
any methodology be viewed individually. Additionally, no company
or transaction used in any analysis as a comparison is identical
to Keithley or to the merger, and they all differ in material
ways. Accordingly, an analysis of the results described below is
not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating
characteristics of the companies and other factors that could
affect the public trading value of the comparable companies or
transactions to which they are being compared. Stifel Nicolaus
Weisel used these analyses to determine the impact of various
operating metrics on the implied enterprise value and implied
equity value of Keithley. Each of these analyses yielded a range
of implied enterprise values and equity values, and therefore,
such implied enterprise value ranges and equity value ranges
developed from these analyses were viewed by Stifel Nicolaus
Weisel collectively and not individually.
Some of the summaries of financial analyses performed by Stifel
Nicolaus Weisel include information presented in tabular format.
In order to fully understand the financial analyses performed by
Stifel Nicolaus Weisel, shareholders should read the tables
together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses.
Considering the information set forth in the tables without
considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying
the analyses, could create a misleading or incomplete view of
the financial analyses performed by Stifel Nicolaus Weisel.
Selected Comparable Public Companies
Analysis.
Based on public and other available
information, Stifel Nicolaus Weisel calculated Keithley’s
implied enterprise value (which Stifel Nicolaus Weisel defined
as market capitalization, plus total debt, plus minority
interest, less cash, cash equivalents and marketable securities)
and Keithley’s implied equity value, in each case, using
multiples of projected calendar year (CY) 2010 and projected CY
2011 adjusted revenues, projected adjusted earnings before
interest, taxes, stock-based compensation, depreciation and
amortization, or EBITDA, and projected adjusted net income,
which multiples were implied by the estimated enterprise values
and equity values, projected revenues, EBITDA and net income of
the selected companies listed below. Projected CY 2010 and
projected CY 2011 information for Keithley was provided by our
management and in each case was adjusted in the manner described
in this proxy statement under “Projected Financial
Information” beginning on page 22. Projections for the
selected companies were based upon First Call Consensus
estimates and publicly available investment banking research.
Stifel Nicolaus Weisel believes that the 11 companies
listed below have operations similar to certain operations of
Keithley, but noted that none of these companies have identical
management, composition, size
and/or
combination of businesses as Keithley:
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Agilent Technologies, Inc.
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Cascade Microtech, Inc.
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FEI Company
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LeCroy Corporation
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LTX-Credence Corporation
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Nanometrics Incorporated
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National Instruments Corporation
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Rudolph Technologies, Inc.
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Spectris plc
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Teradyne, Inc.
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Verigy Ltd.
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The following table sets forth the multiples indicated by this
analysis:
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First Quartile
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Median
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Mean
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Third Quartile
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Enterprise Value to:
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CY 2010 revenue
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0.9x
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1.0x
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1.2x
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1.3x
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CY 2011 revenue
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0.8x
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1.0x
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1.1x
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1.3x
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CY 2010 EBITDA
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3.9x
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5.8x
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6.6x
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7.7x
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CY 2011 EBITDA
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3.6x
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5.3x
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5.7x
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6.6x
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Equity Value to:
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CY 2010 net income
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8.1x
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12.1x
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12.8x
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15.3x
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CY 2011 net income
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7.8x
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8.8x
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11.6x
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14.5x
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The multiples derived from the implied estimated enterprise
values and applicable projected revenues, EBITDA and net income
of the companies listed above were calculated using data that
excluded all extraordinary items and non-recurring charges, and
were pro forma for pending acquisitions.
The implied Keithley per share equity values below were each
calculated based on a range of multiples of first quartile to
third quartile. The quartiles were calculated using statistical
interpolation to divide the probability distribution into four
equal areas. In each case, Stifel Nicolaus Weisel multiplied the
ratios derived from its analysis by Keithley’s applicable
estimated adjusted revenues and adjusted EBITDA to calculate
enterprise value, and adding Keithley’s net cash position
to derive equity value. Using the Treasury Stock Method, Stifel
Nicolaus Weisel then derived Keithley’s implied per share
equity value. Stifel Nicolaus Weisel multiplied the ratios
derived from its analysis by Keithley’s applicable
estimated adjusted net income to calculate equity value. Using
the Treasury Stock Method, Stifel Nicolaus Weisel then derived
Keithley’s implied per share equity value.
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Low
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High
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Enterprise Value to:
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CY 2010 adjusted revenue
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$
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9.55
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$
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12.99
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CY 2011 adjusted revenue
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$
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8.88
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$
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12.55
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CY 2010 adjusted EBITDA
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$
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8.44
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$
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13.52
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CY 2011 adjusted EBITDA
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$
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8.23
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$
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12.34
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Equity Value to:
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CY 2010 adjusted net income
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$
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8.17
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$
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15.29
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CY 2011 adjusted net income
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$
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7.50
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$
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13.82
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Selected Comparable Transactions
Analysis.
Based on public and other available
information, Stifel Nicolaus Weisel calculated Keithley’s
implied enterprise value and implied equity value based on
multiples of last 12 months (LTM) and estimated next
12 months (NTM) adjusted revenues and adjusted EBITDA,
implied by 15 acquisitions of companies listed below in the
test and measurement and semiconductor test and
20
metrology sectors that had been announced since January 1,
2005. Estimated NTM information for Keithley was based on
projections provided by our management and in each case were
adjusted in the manner described in this proxy statement under
“Projected Financial Information” beginning on
page 22. The acquisitions reviewed in this analysis were
the following:
|
|
|
|
|
|
|
Announcement Date
|
|
Acquirer
|
|
Target
|
|
|
|
8/16/10
|
|
Bruker Corporation
|
|
Veeco Instruments, Inc.’s metrology business
|
|
10/1/08
|
|
Spectris plc
|
|
SPX Corporation’s LDS and T&M business
|
|
9/1/08
|
|
Teradyne, Inc.
|
|
Eagle Test Systems, Inc.
|
|
6/26/08
|
|
Orbotech Ltd.
|
|
Photon Dynamics, Inc.
|
|
6/22/08
|
|
LTX Corp.
|
|
Credence Systems Corporation
|
|
2/20/08(1)
|
|
KLA-Tencor Corporation
|
|
ICOS Vision Systems Corporation
|
|
12/18/07
|
|
Rudolph Technologies, Inc.
|
|
Applied Precision, LLC’s semiconductor business
|
|
12/12/07
|
|
Teradyne, Inc.
|
|
Nextest Systems Corporation
|
|
10/14/07
|
|
Danaher Corporation
|
|
Tektronix, Inc.
|
|
5/21/07
|
|
Investor Group led by Veritas Capital Management
|
|
Aeroflex Incorporated
|
|
1/8/07
|
|
KLA-Tencor Corporation
|
|
Therma-Wave, Inc.
|
|
10/3/06
|
|
LeCroy Corporation
|
|
Catalyst Enterprises, Inc.
|
|
2/23/06
|
|
KLA-Tencor Corporation
|
|
ADE Corporation
|
|
11/25/05
|
|
MKS Instruments, Inc.
|
|
Ion Systems, Inc.
|
|
6/28/05
|
|
Rudolph Technologies, Inc.
|
|
August Technology Corporation
|
|
|
|
|
|
(1)
|
|
Transaction value used in analysis reflects revised terms of the
transaction announced on May 26, 2008.
|
The following table sets forth the multiples indicated by this
analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quartile
|
|
Median
|
|
Mean
|
|
Third Quartile
|
|
|
|
Enterprise Value to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM revenue
|
|
|
1.9x
|
|
|
|
2.1x
|
|
|
|
2.3x
|
|
|
|
2.8x
|
|
|
NTM revenue
|
|
|
1.5x
|
|
|
|
1.8x
|
|
|
|
1.9x
|
|
|
|
2.7x
|
|
|
LTM EBITDA
|
|
|
7.8x
|
|
|
|
12.3x
|
|
|
|
10.3x
|
|
|
|
13.6x
|
|
|
NTM EBITDA
|
|
|
8.2x
|
|
|
|
9.4x
|
|
|
|
10.2x
|
|
|
|
11.6x
|
|
The implied Keithley per share equity values below were each
calculated based on a range of multiples of first quartile to
third quartile. The quartiles were calculated using statistical
interpolation to divide the probability distribution into four
equal areas. In each case, Stifel Nicolaus Weisel multiplied the
ratios derived from its analysis by Keithley’s applicable
estimated adjusted revenues and adjusted EBITDA to calculate
enterprise value, and adding Keithley’s net cash position
to derive equity value. Using the Treasury Stock Method, Stifel
Nicolaus Weisel then derived Keithley’s implied per share
equity value.
|
|
|
|
|
|
|
|
|
|
|
|
|
Low
|
|
High
|
|
|
|
Enterprise Value to:
|
|
|
|
|
|
|
|
|
|
LTM adjusted revenue
|
|
$
|
16.44
|
|
|
$
|
22.41
|
|
|
NTM adjusted revenue
|
|
$
|
13.76
|
|
|
$
|
22.00
|
|
|
LTM adjusted EBITDA
|
|
$
|
13.49
|
|
|
$
|
20.73
|
|
|
NTM adjusted EBITDA
|
|
$
|
14.08
|
|
|
$
|
18.43
|
|
Discounted Equity Analysis.
Stifel Nicolaus
Weisel used earnings per share projections prepared by our
management for CY 2011 and CY 2012 to calculate a range of
present equity values per share for Keithley. In conducting this
analysis, Stifel Nicolaus Weisel applied a range of CY 2010
price-to-earnings
multiples to Keithley’s projected CY 2011 and CY 2012
earnings per share and applied a discount rate of 12% to these
ranges,
21
which Stifel Nicolaus Weisel estimated to be Keithley’s
cost of equity. The estimated cost of Keithley’s equity was
determined based on an analysis using the Capital Asset Pricing
Model. This analysis indicated implied equity values per share
ranging from $8.93 to $12.50. Stifel Nicolaus Weisel noted that
the merger consideration to be received by shareholders is
$21.60.
Conclusion
Based upon the foregoing analyses and the assumptions and
limitations set forth in full in the text of Stifel Nicolaus
Weisel’s Opinion, Stifel Nicolaus Weisel was of the opinion
that, as of the date of Stifel Nicolaus Weisel’s Opinion,
the merger consideration to be received by the holders of Shares
in the merger pursuant to the merger agreement was fair to such
holders of Shares, from a financial point of view.
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to a partial analysis or summary
description. In arriving at its Opinion, Stifel Nicolaus Weisel
considered the results of all of its analyses as a whole and did
not attribute any particular weight to any analysis or factor
considered by it. Stifel Nicolaus Weisel believes that the
summary provided and the analyses described above must be
considered as a whole and that selecting portions of these
analyses, without considering all of them, would create an
incomplete view of the process underlying Stifel Nicolaus
Weisel’s analyses and Opinion; therefore, the range of
valuations resulting from any particular analysis described
above should not be taken to be Stifel Nicolaus Weisel’s
view of the actual value of Keithley.
Stifel Nicolaus Weisel acted as financial advisor to Keithley in
connection with the merger. We paid Stifel Nicolaus Weisel a
retainer fee of $100,000 in connection with its review of
strategic alternatives on our behalf and a fee of $500,000 upon
the delivery of its Opinion, neither of which is contingent upon
consummation of the merger. Stifel Nicolaus Weisel will receive
a transaction fee of $10.37 million upon consummation of
the merger, which amount will be reduced by the fees we
previously paid. The fee was based on a formula that provided
for an increased fee as the deal value increased. Stifel
Nicolaus Weisel will not receive any other significant payment
or compensation contingent upon the successful consummation of
the merger. In addition, we agreed to reimburse Stifel Nicolaus
Weisel for its reasonable
out-of-pocket
expenses, including fees and disbursements of counsel, and to
indemnify Stifel Nicolaus Weisel for certain liabilities arising
out of its engagement. There are no other material relationships
that existed during the two years prior to the date of Stifel
Nicolaus Weisel’s Opinion or that are mutually understood
to be contemplated in which any compensation was received or is
intended to be received as a result of the relationship between
Stifel Nicolaus Weisel and any party to the merger. Thomas
Weisel Partners LLC, an affiliate of Stifel Nicolaus Weisel,
provides investment advisory services to Mr. Joseph P.
Keithley, our chairman, president and chief executive officer,
and to certain trusts for which he serves as trustee, for which
it receives customary compensation. In addition, Thomas Weisel
Partners LLC provides investment advisory services to Keithley
with respect to our defined benefit plan, for which it receives
customary compensation. Stifel Nicolaus Weisel or its affiliates
may seek to provide investment banking services to Danaher or
its affiliates in the future, for which Stifel Nicolaus Weisel
would seek customary compensation. In the ordinary course of
business, Stifel Nicolaus Weisel and its affiliates and its and
their clients may transact in the equity securities of Keithley
and Danaher and may at any time hold a long or short position in
such securities. Stifel Nicolaus Weisel’s internal Fairness
Opinion Committee approved the issuance of its Opinion.
Projected
Financial Information
In the course of the process resulting in the merger agreement,
our management prepared and provided to Stifel Nicolaus Weisel,
Danaher, and the other parties that entered into confidentiality
agreements non-public, projected financial information, which
was based on our management’s estimate of our future
financial performance as of the date they were prepared. The
projected financial information covered the fiscal years 2010
through 2013. The information for fiscal year 2010 was based on
actual results for the first three fiscal quarters and projected
results for the fourth fiscal quarter of the year. In addition,
our management provided to Stifel Nicolaus Weisel, for purposes
of its financial analyses, adjusted projected financial
information for fiscal 2010 and 2011 that eliminated the revenue
and expense that our management determined was or would be
associated with sales of our S600 product line, which was
discontinued in February 2009, and sales of our radio frequency
product line, which was sold in November 2009. We made available
to Danaher and the other potential buyers all of the information
necessary to permit Danaher and the others to make the
adjustments we provided to Stifel Nicolaus Weisel. The projected
financial information provided to Stifel Nicolaus Weisel and the
potential buyers and the adjusted projected financial
information provided to Stifel Nicolaus Weisel (the
“Forecasts”) were also provided by our management to
our board of directors.
22
The Forecasts were not prepared with a view to public disclosure
and are included in this proxy statement only because Forecasts
were provided to our board of directors, Stifel Nicolaus Weisel
and the potential buyers. The Forecasts were not prepared with a
view to compliance with the published guidelines of the SEC or
the guidelines established by the American Institute of
Certified Public Accountants regarding projections. Our
Independent Registered Public Accounting Firm has not examined,
compiled or performed any procedures with respect to the
Forecasts and accordingly does not provide any form of assurance
with respect to the Forecasts. Neither we nor any of our
representatives (including Stifel Nicolaus Weisel) has made or
makes any representations to any person regarding the ultimate
performance of Keithley compared to the information contained in
the Forecasts, and neither we nor any of our affiliates intend
to provide any update or revision thereof, except as required by
law.
Furthermore, the Forecasts:
|
|
|
|
|
|
•
|
while presented with numerical specificity, necessarily make
numerous assumptions, many of which are beyond our control,
including with respect to industry performance, general
business, economic, regulatory, market and financial conditions,
as well as matters specific to our business, and may not prove
to have been, or may no longer be, accurate;
|
|
|
|
|
•
|
do not necessarily reflect revised prospects for our business,
changes in general business, economic, regulatory, market and
financial conditions, or any other transaction or event that has
occurred or that may occur and that was not anticipated at the
time the Forecasts were prepared;
|
|
|
|
|
•
|
are not necessarily indicative of current values or future
performance, which may be significantly more favorable or less
favorable than as set forth below; and
|
|
|
|
|
•
|
should not be regarded as a representation that the Forecasts
will be achieved and readers of this proxy statement are
cautioned not to place undue reliance on the projections.
|
In light of the foregoing factors and the uncertainties
inherent in the Forecasts, shareholders are cautioned not to
place undue, if any, reliance on the Forecasts.
The Forecasts are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending,
|
|
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
|
|
(In millions, except per share amounts)
|
|
|
|
Revenue
|
|
$
|
124.9
|
|
|
$
|
122.1
|
|
|
$
|
130.2
|
|
|
$
|
141.4
|
|
|
Adjusted revenue(1)
|
|
$
|
118.6
|
|
|
$
|
121.3
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
80.9
|
|
|
$
|
78.8
|
|
|
$
|
84.3
|
|
|
$
|
92.0
|
|
|
Adjusted gross profit(1)
|
|
$
|
76.8
|
|
|
$
|
78.4
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
20.7
|
|
|
$
|
18.6
|
|
|
$
|
20.6
|
|
|
$
|
24.5
|
|
|
Adjusted operating income(1)
|
|
$
|
17.8
|
|
|
$
|
18.1
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
25.0
|
|
|
$
|
22.6
|
|
|
$
|
26.0
|
|
|
$
|
30.8
|
|
|
Adjusted EBITDA(1)
|
|
$
|
22.1
|
|
|
$
|
22.2
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
19.2
|
|
|
$
|
15.9
|
|
|
$
|
17.7
|
|
|
$
|
20.6
|
|
|
Adjusted net income(1)
|
|
$
|
16.3
|
|
|
$
|
15.4
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
1.19
|
|
|
$
|
0.97
|
|
|
$
|
1.09
|
|
|
$
|
1.26
|
|
|
Adjusted diluted EPS(1)
|
|
$
|
1.01
|
|
|
$
|
0.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
All of the adjusted measures in the table above exclude revenues
and costs associated with recently discontinued or divested
product lines.
|
Neither EBITDA nor any of the adjusted measures in the foregoing
table are measures of performance under U.S. generally
accepted accounting principles. EBITDA represents earnings
before interest, taxes, stock-based compensation, depreciation
and amortization and should not be considered as an alternative
to net income as a measure of operating performance or cash
flows or as a measure of liquidity.
23
Cautionary
Statement Regarding the Forecasts
The Forecasts are subjective in many respects and thus
susceptible to various interpretations based on actual
experience and business developments. The Forecasts were based
on a number of assumptions that may not be realized and are
subject to significant uncertainties and contingencies, many of
which are beyond our control. Since the Forecasts cover multiple
years, such information by its nature becomes less reliable with
each successive year. The Forecasts are considered
“forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995 and are subject
to the risks and uncertainties described under “Cautionary
Statement Concerning Forward-Looking Information” beginning
on page 7 and the risk factors referred to therein.
Accordingly, there can be no assurance that the assumptions made
in preparing the Forecasts will prove accurate, and actual
results may be materially different than those contained in the
Forecasts. We do not intend to make publicly available any
update or other revisions to the Forecasts to reflect
circumstances existing after the date of the Forecasts, except
as required by law. Neither we nor our independent auditors nor
any of our representatives (including Stifel Nicolaus Weisel)
assumes any responsibility for the validity, reasonableness,
accuracy or completeness of the projected financial information,
and we have made no representations to Danaher and make no
representations to shareholders regarding such information. The
inclusion of the Forecasts in this proxy statement should not be
regarded as an indication that Danaher considered the Forecasts
provided to it predictive of actual future events or that the
Forecasts should be relied on for that purpose. In light of the
uncertainties inherent in any projected data, our shareholders
are cautioned not to rely on the Forecasts.
Financing
Danaher represents in the merger agreement that it has and will
have at the effective time of the merger sufficient cash and
cash equivalents
and/or
available amounts under existing credit facilities to consummate
the merger upon the terms contemplated by the merger agreement
and to make all payments contemplated by the merger agreement,
including (1) the merger consideration and all of
Danaher’s obligations under the merger agreement, including
required payments with respect to stock option, restricted share
units and performance award units, (2) all fees and
expenses relating to the foregoing and (3) to fund the
ongoing operations of Keithley and our subsidiaries.
Interests
of Our Directors and Executive Officers in the Merger
General
In addition to their interests in the merger as shareholders,
certain of our directors and executive officers have interests
in the merger that differ from, or are in addition to, your
interests as a shareholder. In considering the recommendation of
our board of directors to vote
“FOR”
the
approval and adoption of the merger agreement, you should be
aware of these interests. Our board of directors was aware of,
and considered the interests of, our directors and executive
officers in approving the merger agreement, the merger and the
transactions contemplated by the merger agreement. Except as
described below, such persons have, to our knowledge, no
material interest in the merger that differs from your interests
generally.
Interests
in Common Shares, Stock Options, Restricted Shares, Restricted
Share Units, Performance Award Units and Deferred Share
Units
As October 1, 2010, our executive officers and directors
owned an aggregate of 2,618,821 outstanding Common Shares,
entitling them to exercise approximately 62.0% of the voting
power of the Common Shares entitled to vote at the special
meeting, and stock options for approximately 1,502,679 Common
Shares, restricted share units representing approximately 36,200
Common Shares and performance share units representing
approximately 130,500 Common Shares based on initial award
amounts for unvested awards and expected payout for vested
awards (see “Security Ownership of Certain Beneficial
Owners and Management”).
The stock options, restricted share units and performance award
units were granted to our current executive officers and
directors under our 1997 Directors’ Stock Option Plan,
as amended, and our 2002 Stock Incentive Plan, as amended
(together, the “Award Plans”). The Award Plans and the
award agreements thereunder provide for full vesting of all
awards, including restricted shares, granted under the Award
Plans at the effective time of the merger.
24
Stock Options.
Under the terms of the merger
agreement, each option to purchase Common Shares that is
outstanding immediately prior to the effective time of the
merger will be canceled in exchange for a cash payment, without
interest and less applicable withholding taxes, from Danaher
equal to the product of:
|
|
|
|
|
|
•
|
the total number of Common Shares underlying that option
immediately prior to the effective time of the merger, and
|
|
|
|
|
•
|
the excess, if any, of $21.60 over the exercise price per Common
Share subject to that option.
|
Restricted Share Units.
Under the merger
agreement, at the effective time of the merger, all restricted
share units granted under the Award Plans and held immediately
prior to the effective time will vest and will entitle the
holder thereof to receive an amount in cash equal to the product
of the $21.60 per share merger consideration multiplied by the
number of restricted share units held, without interest and less
applicable withholding taxes.
Performance Award Units.
Under the merger
agreement, at the effective time of the merger, all performance
award units granted under the Award Plans and held immediately
prior to the effective time will vest and will entitle the
holder thereof to receive an amount in cash equal to the product
of the $21.60 per share merger consideration multiplied by the
number of Common Shares represented by the initial award amount
under the award agreement, except as modified by any Change in
Control Agreement or the Plush Employment Agreement, without
interest and less applicable withholding taxes. As described in
“— Change in Control Agreements” and
“— Employment Agreement with Mark J. Plush”
below, the number of performance award units that our executive
officers will be entitled to receive following termination of
their employment under certain circumstances is the greater of
(1) the initial award amount specified in his or her award
agreement, or (2) the award amount that would be paid out
under the award agreement if our performance as of the effective
time of the merger was deemed to have occurred on
September 30, 2012, but such award cannot be more than 1.5
times the initial award amount.
Directors’ Deferred Compensation.
Certain
of our current and former directors have deferred, pursuant to
the 1996 Outside Directors’ Deferred Stock Plan, the
payment of all or a portion of the directors’ fees they
earned. The plan will be terminated in connection with the
merger and, at the effective time of the merger, all amounts
deferred as cash will be paid out and all deferred share units
held by (or on behalf of) directors or former directors under
such plan immediately prior to the effective time will be
canceled and each holder thereof will become entitled to receive
an amount in cash equal to the merger consideration in respect
of each deferred share unit held, without interest and less
applicable withholding taxes.
25
The following table summarizes, as of October 1, 2010, the
options to purchase Common Shares with exercise prices of $21.60
or less, unvested restricted shares, restricted share units and
performance award units held by our executive officers and
directors, and the number of deferred share units held under the
directors’ deferred stock plan by each of our directors and
the consideration that each of them will receive under the
merger agreement in connection with the vesting and cancellation
of their restricted shares, units and options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with an
|
|
Weighted
|
|
|
|
|
|
|
|
Total Cash
|
|
|
|
|
|
|
|
Exercise
|
|
Average
|
|
|
|
Number of
|
|
Number of
|
|
Consideration
|
|
Number of
|
|
|
|
|
|
Price of
|
|
Exercise
|
|
Number of
|
|
Restricted
|
|
Performance
|
|
for
|
|
Deferred
|
|
|
|
|
|
$21.60 or
|
|
Price of
|
|
Restricted
|
|
Share
|
|
Award
|
|
Equity-Based
|
|
Compensation
|
|
|
|
|
|
Less
|
|
Options(1)
|
|
Shares
|
|
Units
|
|
Units(2)
|
|
Awards
|
|
Units
|
|
Total
|
|
|
|
Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph P. Keithley
|
|
|
463,300
|
|
|
$
|
15.797
|
|
|
|
1,308
|
|
|
|
—
|
|
|
|
24,125
|
|
|
$
|
3,238,087
|
|
|
|
—
|
|
|
$
|
3,238,087
|
|
|
Daniel A. Faia
|
|
|
88,850
|
|
|
|
3.393
|
|
|
|
—
|
|
|
|
6,300
|
|
|
|
9,450
|
|
|
|
1,957,859
|
|
|
|
—
|
|
|
|
1,957,859
|
|
|
Mark A. Hoersten
|
|
|
164,700
|
|
|
|
13.690
|
|
|
|
—
|
|
|
|
9,900
|
|
|
|
12,300
|
|
|
|
1,782,332
|
|
|
|
—
|
|
|
|
1,782,332
|
|
|
Larry L. Pendergrass
|
|
|
102,300
|
|
|
|
11.419
|
|
|
|
—
|
|
|
|
10,200
|
|
|
|
12,900
|
|
|
|
1,540,496
|
|
|
|
—
|
|
|
|
1,540,496
|
|
|
Mark J. Plush
|
|
|
196,879
|
|
|
|
12.954
|
|
|
|
952
|
|
|
|
4,600
|
|
|
|
34,250
|
|
|
|
2,562,017
|
|
|
|
—
|
|
|
|
2,562,017
|
|
|
Linda C. Rae
|
|
|
271,650
|
|
|
|
13.071
|
|
|
|
—
|
|
|
|
5,200
|
|
|
|
37,475
|
|
|
|
3,238,673
|
|
|
|
—
|
|
|
|
3,238,673
|
|
|
Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian R. Bachman
|
|
|
30,000
|
|
|
|
15.533
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
182,000
|
|
|
|
—
|
|
|
|
182,000
|
|
|
James B. Griswold
|
|
|
20,000
|
|
|
|
17.950
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73,000
|
|
|
|
59,045
|
|
|
|
1,348,372
|
|
|
Leon J. Hendrix, Jr.
|
|
|
30,000
|
|
|
|
15.533
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
182,000
|
|
|
|
55,064
|
|
|
|
1,371,382
|
|
|
Brian J. Jackman
|
|
|
10,000
|
|
|
|
13.520
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80,800
|
|
|
|
25,808
|
|
|
|
638,253
|
|
|
Dr. N. Mohan Reddy
|
|
|
35,000
|
|
|
|
15.238
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
222,675
|
|
|
|
32,061
|
|
|
|
915,193
|
|
|
Thomas A. Saponas
|
|
|
0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,580
|
|
|
|
552,528
|
|
|
Barbara V. Scherer
|
|
|
20,000
|
|
|
|
16.675
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
98,500
|
|
|
|
—
|
|
|
|
98,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
15,158,439
|
|
|
|
|
|
|
$
|
19,425,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The weighted average exercise prices have been rounded to the
nearest one-thousandth.
|
|
|
|
(2)
|
|
The performance award units awarded for the fiscal year 2008
through fiscal year 2010 performance period are included above
at the expected pay out of 1.25 times the initial award amount
for Mr. Keithley, Mr. Plush and Ms. Rae and 1.0
times the initial award amount for Mr. Pendergrass and
Mr. Hoersten. The performance award units awarded for the
fiscal year 2010 through fiscal year 2012 performance period are
included at the initial award amount, but could pay out at up to
1.5 times the initial award amounts following termination of
employment under certain circumstances under the terms of the
Change in Control Agreements and the Plush Employment Agreement
described below, resulting in a potential incremental payment
(the “Incremental Performance Award Payout”) equal to
$0 for Mr. Keithley, $102,060 for Mr. Faia, $71,280
for Mr. Hoersten, $71,280 for Mr. Pendergrass,
$240,300 for Mr. Plush and $273,780 for Ms. Rae.
|
These amounts will be reduced by applicable tax withholdings.
Change
in Control Agreements
We have entered into a change in control agreement (a
“Change in Control Agreement”) with each of Joseph P.
Keithley, Daniel A. Faia, Mark A. Hoersten, Larry L. Pendergrass
and Linda C. Rae, all of whom are executive officers of
Keithley. Under the Change in Control Agreements, if the merger
occurs and before September 28, 2012, the executive’s
employment is terminated without cause or the executive resigns
for good reason (a “Triggering Event”), the executive
will be entitled to a lump sum payment consisting of:
|
|
|
|
|
|
•
|
1.0 or, with respect to Mr. Keithley and Ms. Rae, 1.5
times the higher of the executive’s annual salary on
September 29, 2010 or at the time of the Triggering Event;
|
|
|
|
|
•
|
1.0 or, with respect to Mr. Keithley and Ms. Rae, 1.5
times the higher of (1) the executive’s current target
bonus, or (2) the average of the executive’s actual
target bonus received for the three fiscal years preceding
|
26
|
|
|
|
|
|
|
September 29, 2010 (or the number of fiscal years that the
executive has been with Keithley, if less than three); and
|
|
|
|
|
|
|
•
|
a portion of his or her then current year target bonus prorated
for the number of days in the fiscal quarter in which the
Triggering Event occurred, less any amount of such bonus that
has already been paid to the executive.
|
The executive will also receive continued medical, welfare and
other benefit coverage until the earlier of the date on which he
or she is eligible to receive comparable benefits from another
employer or the one-year or, in the case of Mr. Keithley
and Ms. Rae, the
18-month
anniversary of the Triggering Event. We will also provide
outplacement services up to a cost of $25,000.
Equity awards held by the executives as of September 29,
2010 will be treated in accordance with the provisions set forth
in the applicable equity award plans and agreements and
discussed above under “— Interests in Common
Shares, Stock Options, Restricted Share Units, Performance Award
Units and Deferred Share Units”, except that in the case of
performance award units, the executives will be entitled to a
payout equal to the greater of (1) the initial award amount
specified in his or her agreement, or (2) the award amount
that would be paid out under the agreement if our financial
performance as of the vesting date for the award was our actual
financial performance as of the effective time of the merger,
but such payout cannot be more than 1.5 times the initial award
amount.
In the event payments to the executive result in the executive
becoming liable for the payment of excise taxes pursuant to
Section 4999 of the Internal Revenue Code, the payments to
be made to the executive as a result of the merger will be
reduced to the extent necessary to prevent the payments from
being subject to the excise tax, but only if by reason of the
reduction, the after-tax benefit of the reduced payments to the
executive exceeds the after-tax benefit if such reduction were
not made.
In addition, payments to the executive are conditioned upon the
executive’s execution and delivery of a release in favor of
Keithley in the form described in the Change in Control
Agreements. The Change in Control Agreements also provide that,
for a period of one year from the date of termination of the
executive’s employment that results in a severance payment
under the Change in Control Agreements, the executive will not
(1) solicit the employment of any employee who has been
employed by us at any time during the prior six months or
(2) solicit customers, business, patronage or orders for,
or sell, any products and services in competition with, or for
any business, wherever located, that, as of the date of the
executive’s termination of employment, competes with, our
business.
If the merger had been completed on October 1, 2010 and a
Triggering Event occurred under the Change in Control Agreements
immediately thereafter (1) the estimated total of the cash
severance pay, pro rated target bonus, continued medical,
welfare and other benefit coverage and outplacement services for
each executive officer would be as follows:
Mr. Keithley — $1,205,985;
Mr. Faia — $451,722;
Mr. Hoersten — $347,994;
Mr. Pendergrass — $355,790; and
Ms. Rae — $708,453, and (2) the executive
officers would receive the Incremental Performance Award Payout
for their performance award units equal to $0 for
Mr. Keithley, $102,600 for Mr. Faia, $71,280 for
Mr. Pendergrass and $273,780 for Ms. Rae. These
amounts also assume that there is no reduction in the payments
made under the Change in Control Agreements to prevent the
payments from being subject to the excise tax under
Section 4999 of the Internal Revenue Code.
Employment
Agreement with Mark J. Plush
We have entered into an Amended and Restated Employment
Agreement (the “Plush Employment Agreement”) with Mark
J. Plush, our senior vice president and chief financial officer.
The Plush Employment Agreement provides that, if within
36 months following the effective time of the merger,
Mr. Plush’s employment is terminated other than for
cause (as defined in the Plush Employment Agreement) or he
resigns for good reason (as defined in the Plush Employment
Agreement) (each, a “Triggering Event”),
Mr. Plush will be entitled to the following benefits:
|
|
|
|
|
|
•
|
1.5 times the higher of his annual salary at the effective time
of the merger or the Triggering Event, paid in monthly
installments over a
24-month
period;
|
|
|
|
|
•
|
full participation in the annual bonus plan if termination of
employment is subsequent to June 30 of the respective fiscal
year; and
|
27
|
|
|
|
|
|
•
|
a supplemental retirement benefit reflecting the difference
between the benefits that would be payable to Mr. Plush
under our pension plan if he were fully vested and his
compensation, as defined in the pension plan, was equal to the
highest amount of annual compensation he earned in the final
three years prior to termination, and his actual benefits
payable under the pension plan.
|
Mr. Plush will also receive continued medical, welfare and
other benefit coverage until the earlier of the date on which he
is eligible to receive comparable benefits from another employer
and the
24-month
anniversary of the Triggering Event, as well as continued fringe
perquisites to which Mr. Plush was entitled immediately
prior to termination for a period of 18 months following
the Triggering Event. We will also provide reimbursement for
certain outplacement services up to a cost of $10,000.
Equity awards held by Mr. Plush as of the effective time of
the merger will be treated in accordance with the provisions set
forth in the applicable equity award plans and agreements and
discussed above under “— Interests in Common
Shares, Stock Options, Restricted Share Units, Performance Award
Units and Deferred Share Units,” except that in the case of
performance award units, he will be entitled to a payout equal
to the greater of (1) the initial award amount specified in
his agreement, or (2) the award amount that would be paid
out under the agreement if our financial performance as of the
vesting date for the award was our actual financial performance
as of the effective time of the merger, but such payout cannot
be more than 1.5 times the initial award amount.
In addition, payments to Mr. Plush are conditioned upon his
covenant not to (1) accept employment directly or
indirectly with any of our competitors, (2) allow use of
his name by or in any competitive business, (3) employ the
services of any of our employees without our written permission,
or (4) be unreasonably unavailable for consultation by our
officers and directors until such time as Mr. Plush turns
65.
If the merger had been completed on October 1, 2010 and a
Triggering Event occurred under the Plush Employment Agreement
immediately thereafter (1) the estimated total of the cash
severance pay, continued medical, welfare and other benefit
coverage, continued fringe perquisites and outplacement services
for Mr. Plush would be $465,303 (this amount assumes fringe
perquisites are provided at the maximum permitted cost, that
there is no payment of a current year bonus (due to the assumed
termination date of October 1, which is the first day of
our fiscal year) and that no matching contributions are made to
Mr. Plush’s 401(k) plan account beyond the base match,
since the additional matching amount is based upon our fiscal
year financial results that have not yet been determined (the
maximum additional amount is $3,834)), (2) the estimated
value of Mr. Plush’s supplemental retirement benefit
is approximately $867,519 to $1,351,723, which was calculated as
a range based on known compensation for fiscal year 2010 and the
potential range of Mr. Plush’s bonus for fiscal year
2010, and (3) Mr. Plush would receive the Incremental
Performance Award Payout for his performance award units equal
to $240,300.
Deferred
Compensation Plans
In accordance with the terms of our Deferred Compensation Plan
and Supplemental Deferral Plan, the merger triggers full vesting
and payment of all amounts deferred under the plans, including
by our executive officers participating in the plans, at the
effective time of the merger (or six months and one day
thereafter to the extent required under Section 409A of the
Internal Revenue Code).
Indemnification
of Directors and Officers
The merger agreement provides that Danaher and the surviving
corporation must honor all of our obligations to indemnify our
and our subsidiaries’ current and former directors,
officers and employees for acts or omissions by such parties
occurring at or prior to the effective time of the merger,
whether pursuant to our or our subsidiaries’ respective
governing documents or individual indemnity agreements disclosed
to Danaher in connection with the merger agreement or filed as
an exhibit to certain documents filed with the SEC, and such
obligations will survive the merger and will continue in full
force and effect in accordance with their terms, without
amendment or modification adverse to the indemnified individual,
for a period of six years from the effective time of the merger.
For a period of six years from the effective time of the merger,
Danaher and the surviving corporation must maintain a
directors’ and officers’ liability insurance policy
for those persons currently covered by our directors’
28
and officers’ liability insurance policy and with coverage
and in amounts no less favorable than those of such current
insurance policy. Notwithstanding this requirement, in no event
will Danaher be required to pay an annual premium for such
insurance in excess of 300% of the last annual premium paid by
us prior to the date of the merger agreement. In lieu of the
foregoing, at Danaher’s option and expense, we may purchase
prior to the effective time of the merger six-year
“tail” insurance coverage that provides coverage
identical in all material respects to the coverage described
above.
Danaher is required to pay all reasonable expenses, including
reasonable attorneys’ fees and fees and disbursements of
experts and witnesses, that may be incurred by an indemnified
party in enforcing the foregoing indemnity and other obligations.
The obligations described above regarding directors’ and
officers’ indemnification and insurance must be assumed by
any successor entity to the surviving corporation as a result of
any consolidation, merger or transfer of all or substantially
all of its properties and assets.
Voting
Agreement with the Keithley Partnership
In connection with the execution of the merger agreement, the
Keithley Partnership, of which Mr. Keithley, our chairman,
president and chief executive officer, is general partner,
entered into the Voting Agreement pursuant to which it agreed to
vote a number of its Class B common shares representing
19.99% of the voting power of our outstanding Common Shares in
favor of approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement. In addition,
the Keithley Partnership agreed to vote such shares against any
proposal that would result in our breach of the merger
agreement, or any action or agreement that is intended to, or
would be reasonably likely to, impede, interfere with, delay,
postpone or attempt to discourage the merger. The Voting
Agreement will terminate if the merger agreement is terminated
in accordance with its terms and can be terminated by the
Keithley Partnership if there is any decrease in the price or
change in the form of consideration to be paid per Common Share
or if the merger agreement is otherwise amended in a manner
adverse to our shareholders. As of October 1, 2010, the
Keithley Partnership, together with Mr. Keithley, owned
Common Shares representing approximately 61.5% of the total
combined voting power of the outstanding Common Shares. Pursuant
to the Voting Agreement, the Keithley Partnership also agreed
not to transfer or dispose of any of its Common Shares, enter
into any other voting arrangement or grant any proxies with
respect to its Common Shares, or convert its Class B common
shares into common shares. See “Voting Agreement”
beginning on page 48.
Material
United States Federal Income Tax Consequences
The following is a discussion of the material United States
federal income tax consequences of the merger to
U.S. holders (as defined below) whose Common Shares are
converted into the right to receive cash in the merger. The
discussion is based upon the Internal Revenue Code of 1986, as
amended (the “Code”), Treasury regulations, published
rulings of the Internal Revenue Service (the “IRS”)
and judicial and administrative decisions in effect as of the
date of this proxy statement, all of which are subject to change
(possibly with retroactive effect) and to differing
interpretations. The following discussion does not purport to
consider all aspects of United States federal income taxation
that might be relevant to our shareholders. This discussion
applies only to shareholders who, at the effective time of the
merger, hold our Common Shares as a capital asset within the
meaning of Section 1221 of the Code. The following
discussion does not address taxpayers subject to special
treatment under United States federal income tax laws,
including, without limitation, banks, insurance companies,
financial institutions, dealers in securities or currencies,
traders of securities that elect the
mark-to-market
method of accounting for their securities holdings, persons that
have a functional currency other than the United States dollar,
tax-exempt organizations, cooperatives, mutual funds, real
estate investment trusts, S corporations or other
pass-through entities (or investors in an S corporation or
other pass-through entity) and persons liable for the
alternative minimum tax. In addition, the following discussion
does not apply to shareholders who acquired their Common Shares
upon the exercise of employee stock options or otherwise as
compensation for services or through a tax-qualified retirement
plan or who hold their shares as part of a hedge, straddle,
conversion transaction or other integrated transaction, and does
not apply to shareholders who exercise dissenters rights under
applicable law. If our Common Shares are held through a
partnership, the United States federal income tax treatment of a
partner in the partnership will generally depend upon the status
of the partner and the activities of the partnership.
Partnerships that are holders of our common stock
29
and partners in such partnerships are urged to consult their own
tax advisors regarding the tax consequences to them of the
merger.
The following discussion also does not address any foreign,
state or local tax consequences of the merger, and does not
address any United States federal tax consequences other than
income tax consequences. We intend this discussion to provide
only a general summary of the material U.S. federal income
tax consequences of the merger to holders of our Common Shares.
We do not intend it to be a complete analysis or description of
all potential U.S. federal income tax consequences of the
merger. The U.S. federal income tax laws are complex and
subject to varying interpretation. Accordingly, the IRS may not
agree with the tax consequences described in this proxy
statement. All shareholders should consult their own tax
advisors regarding the U.S. federal income tax
consequences, as well as the foreign, state and local tax
consequences, of the disposition of their shares in the merger.
For purposes of this summary, a “U.S. holder” is
a beneficial owner of our Common Shares who or that is or is
treated for U.S. federal income tax purposes as:
|
|
|
|
|
|
•
|
an individual who is a citizen or resident of the United States;
|
|
|
|
|
•
|
a corporation (or other entity taxable as a corporation) created
or organized in or under the laws of the United States or any
state thereof (including the District of Columbia);
|
|
|
|
|
•
|
an estate, the income of which is subject to United States
federal income tax regardless of its source; or
|
|
|
|
|
•
|
a trust, if (1) a United States court is able to exercise
primary supervision over the trust’s administration and one
or more United States persons are authorized to control all
substantial decisions of the trust, or (2) the trust was in
existence on August 20, 1996 and has a valid election in
place to be treated as a domestic trust for United States
federal income tax purposes.
|
A
“non-U.S. holder”
is a beneficial owner (other than a partnership or other entity
classified as a partnership for U.S. federal income tax
purposes) of our Common Shares that is not a U.S. holder.
U.S.
Holders
Exchange of Common Shares for Cash.
Generally,
the merger will be taxable to U.S. holders of our Common
Shares for U.S. federal income tax purposes. A
U.S. Holder of our Common Shares receiving cash in the
merger generally will recognize gain or loss for
U.S. federal income tax purposes in an amount equal to the
difference between the amount of cash received and the
U.S. holder’s adjusted tax basis in our Common Shares
surrendered. Any such gain or loss generally will be capital
gain or loss if our Common Shares are held as a capital asset at
the effective time of the merger. Any capital gain or loss will
be taxed as long-term capital gain or loss if the
U.S. holder has held our Common Shares for more than one
year prior to the effective time of the merger. If the
U.S. Holder has held our Common Shares for one year or less
prior to the effective time of the merger, any capital gain or
loss will be taxed as short-term capital gain or loss.
Currently, most long-term capital gains for non-corporate
taxpayers are taxed at a maximum federal tax rate of 15%. Absent
Congressional intervention, the applicable provisions of the
United States federal income tax laws relating to the 15% tax
rate are scheduled to “sunset,” or revert to the
provisions of prior law, effective for taxable years beginning
after December 31, 2010, at which time the capital gains
tax rate will be increased to 20%. The deductibility of capital
losses is subject to certain limitations. If a U.S. Holder
acquired different blocks of our Common Shares at different
times and different prices, such holder must determine the
adjusted tax basis and holding period separately with respect to
each such block of our Common Shares.
Information Reporting and Backup
Withholding.
Cash payments made pursuant to the
merger will be reported to our shareholders and the Internal
Revenue Service to the extent required by the Internal Revenue
Code and applicable Treasury regulations. Backup withholding tax
is currently at a rate of 28% and is scheduled to go up to 31%
for tax years beginning after December 31, 2010. Backup
withholding may apply to such payments if the U.S. holder
fails to: furnish his, her or its taxpayer identification number
(social security or employer identification number); certify
that his, her, or its number is correct; certify that he, she,
or it is not subject to backup withholding; and otherwise comply
with the applicable requirements of the backup withholding
rules. Certain of our shareholders will be asked to provide
additional tax information in the letter of transmittal for the
Common Shares.
30
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules will be allowed as a
credit against such U.S. holder’s United States
federal income tax liability and may entitle the holder to a
refund of any excess amounts withheld under the backup
withholding rules, provided the required information is timely
furnished to the Internal Revenue Service.
Non-U.S.
Holders
Any gain recognized on the receipt of cash pursuant to the
merger by a
non-U.S. holder
generally will not be subject to U.S. federal income tax
unless:
|
|
|
|
|
|
•
|
the gain is effectively connected with a U.S. trade or
business of such
non-U.S. holder
(and, if required by an applicable income tax treaty, is also
attributable to a permanent establishment or a fixed base in the
United States maintained by such
non-U.S. holder),
in which case the
non-U.S. holder
generally will be subject to tax on such gain in the same manner
as a U.S. holder and, if the
non-U.S. holder
is a foreign corporation, such corporation may be subject to
branch profits tax at the rate of 30% (or such lower rate as may
be specified by an applicable income tax treaty);
|
|
|
|
|
•
|
the
non-U.S. holder
is a nonresident alien individual who is present in the United
States for 183 days or more in the taxable year of the
merger and certain other conditions are met, in which case the
non-U.S. holder
generally will be subject to a 30% tax on the
non-U.S. holder’s
net gain realized in the merger, which may be offset by
U.S. source capital losses of the
non-U.S. holder,
if any; or
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the
non-U.S. holder
owned (directly, indirectly or constructively) more than 5% of
our outstanding Common Shares at any time during the five years
preceding the merger, and we are or have been a “United
States real property holding corporation” for
U.S. federal income tax purposes during such period. We do
not believe that we are or have been a “United States real
property holding corporation” for U.S. federal income
tax purposes.
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A
non-U.S. holder
will be subject to information reporting and, in certain
circumstances, backup withholding (currently, at a rate of 28%,
and scheduled to go up to 31% for tax years beginning after
December 31, 2010) will apply with respect to the cash
received by such holder pursuant to the merger, unless such
non-U.S. holder
certifies under penalties of perjury that it is a
non-U.S. holder
(and the payor does not have actual knowledge or reason to know
that the holder is a United States person as defined under the
Code) or such holder otherwise establishes an exemption from
backup withholding. Backup withholding is not an additional tax.
Any amounts withheld under the backup withholding rules may be
credited against a
non-U.S. holder’s
U.S. federal income tax liability, if any, and any excess
amounts withheld under the backup withholding rules may be
refunded, provided that the required information is timely
furnished to the IRS.
The foregoing discussion of material United States federal
income tax consequences is not intended to be, and should not be
construed as, legal or tax advice to any holder of our Common
Shares. We urge you to consult your tax advisor to determine the
particular tax consequences to you (including the application
and effect of any state, local or foreign income and other tax
laws) of the receipt of cash in exchange for Common Shares
pursuant to the merger.
Regulatory
Approvals
Under the merger agreement, we and the other parties to the
merger agreement have agreed to use our commercially reasonable
efforts to complete the transactions contemplated by the merger
agreement as soon as reasonably practicable, including obtaining
all necessary governmental approvals. The
Hart-Scott-Rodino
Act provides that transactions such as the merger may not be
completed until certain information has been submitted to the
Federal Trade Commission and the Antitrust Division of the
U.S. Department of Justice and certain waiting period
requirements have been satisfied.
Except as noted above with respect to the required filings under
the
Hart-Scott-Rodino
Act and receipt of any foreign approvals, consents and
clearances and the filing of a certificate of merger in Ohio at
or before the effective time of the merger, we are unaware of
any material federal, state or foreign regulatory requirements
or approvals required for the execution of the merger agreement
or completion of the merger.
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Dissenters’
Rights
If the merger agreement is approved and adopted, each
shareholder who does not favor the merger agreement may be
entitled to seek relief as a dissenting shareholder under
Section 1701.85 of the Ohio Revised Code. The following is
a summary of the principal steps a shareholder must take to
perfect his or her dissenters’ rights under the Ohio
Revised Code. This summary is qualified in its entirety by
reference to Section 1701.85 of the Ohio Revised Code, a
copy of which is attached as Annex C to this proxy
statement and incorporated by reference herein. Any dissenting
shareholder contemplating exercise of his or her
dissenters’ rights is urged to carefully review the
provisions of Section 1701.85 and to consult an attorney,
since failure to follow fully and precisely the procedural
requirements of the statute will result in termination or waiver
of these rights.
To perfect dissenters’ rights, a dissenting shareholder
must satisfy each of the following conditions and must otherwise
comply with Section 1701.85 of the Ohio Revised Code:
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A dissenting shareholder must be a record holder of the Common
Shares as to which such shareholder seeks to exercise
dissenters’ rights on the record date for determining
entitlement to notice of the special meeting at which the
proposal to approve and adopt the merger agreement is to be
submitted. Because only shareholders of record on the record
date may exercise dissenters’ rights, any person who
beneficially owns shares that are held of record by a bank,
brokerage firm, nominee or other holder and who desires to
exercise dissenters’ rights must, in all cases, instruct
the record holder of the Common Shares to satisfy all of the
requirements of Section 1701.85;
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A dissenting shareholder must not vote the Common Shares as to
which dissenters’ rights are being exercised in favor of
the proposal to approve and adopt the merger agreement at the
special meeting. Failing to vote or abstaining from voting does
not waive a dissenting shareholder’s rights. However, a
proxy returned to us signed but not marked to specify voting
instructions will be voted in favor of the proposal to approve
and adopt the merger agreement and will be deemed a waiver of
dissenters’ rights. A dissenting shareholder may revoke his
or her proxy at any time before its exercise by filing with us
an instrument revoking it, delivering a duly executed proxy
bearing a later date or by revoking his or her proxy in open
meeting at the special meeting;
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A dissenting shareholder must deliver a written demand for
payment of the fair cash value of his or her Common Shares to us
on or before the tenth day following the date on which the vote
on the proposal was taken at the special meeting. Any written
demand must specify the shareholder’s name and address, the
number and class of Common Shares held by him or her on the
record date as to which he or she seeks dissenters’ rights,
and the amount claimed as the “fair cash value” of the
Common Shares. A vote against the proposal to approve and adopt
the merger agreement will not satisfy notice requirements under
Ohio law concerning dissenters’ rights. We will not notify
shareholders of the expiration of this
ten-day
period; and
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If we send a request to the dissenting shareholder at the
address specified in his or her written demand, a dissenting
shareholder must submit his or her share certificates to us
within 15 days of the date such request was sent by us for
endorsement on the share certificates by us that demand for
appraisal has been made. Such a request is not an admission by
us that a dissenting shareholder is entitled to relief. We will
promptly return the share certificates to the dissenting
shareholder. At our option, a dissenting shareholder who fails
to deliver his or her certificates upon our request may have his
or her dissenters’ rights terminated, unless a court for
good cause shown otherwise directs.
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We and a dissenting shareholder may come to an agreement as to
the fair cash value of the dissenting shareholder’s Common
Shares. If we and any dissenting shareholder cannot agree upon
the fair cash value of the dissenting shareholder’s Common
Shares, then either we or the dissenting shareholder may, within
three months after service of the demand by the dissenting
shareholder, file a complaint in the Court of Common Pleas of
Cuyahoga County, Ohio, for a determination that the shareholder
is entitled to exercise dissenters’ rights and to determine
the fair cash value of the Common Shares. The court may appoint
one or more appraisers to recommend a fair cash value. The fair
cash value is to be determined as of the day prior to the date
of the special meeting. The fair cash value is the amount that a
willing seller, under no compulsion to sell, would be willing to
accept, and that a willing buyer, under no compulsion to
purchase, would be willing to pay, but in no event may the fair
cash value
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exceed the amount specified in the dissenting shareholder’s
demand. In determining this value, any appreciation or
depreciation in the market value of the Common Shares resulting
from the merger is excluded. The Ohio Supreme Court, in
Armstrong v. Marathon Oil Company
, 32 Ohio St. 3d 397
(1987), has held that fair cash value for publicly-traded shares
of a company with significant trading activity may be the market
price for such shares as of the day prior to the date that the
transaction is submitted to the shareholders or directors for
final approval, as adjusted to exclude the impact of the
transaction giving rise to the dissenters’ rights. The fair
cash value may ultimately be more or less than the per share
merger consideration. Interest on the fair cash value and costs
of the proceedings, including reasonable compensation to any
appraisers, are to be assessed or apportioned as the court
considers equitable. Shareholders should also be aware that
investment banking opinions as to the fairness from a financial
point of view of the consideration payable in a merger are not
opinions as to fair cash value under Section 1701.85 of the
Ohio Revised Code.
Payment of the fair cash value must be made within 30 days
after the later of the final determination of such value or the
closing date of the merger. Such payment shall be made only upon
simultaneous surrender to us of the share certificates for which
such payment is made.
A dissenting shareholder’s rights to receive the fair cash
value of his or her Common Shares will terminate if:
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the dissenting shareholder has not complied with
Section 1701.85;
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the merger is abandoned or is finally enjoined or prevented from
being carried out or the shareholders rescind their approval and
adoption of the merger agreement;
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the dissenting shareholder withdraws his or her demand with our
consent by our board of directors; or
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the dissenting shareholder and our board of directors have not
agreed on the fair cash value per share, and neither has filed a
timely complaint in the Court of Common Pleas of Cuyahoga
County, Ohio.
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All rights accruing from Common Shares, including voting and
dividend and distribution rights, are suspended from the time a
dissenting shareholder makes the demand with respect to such
Common Shares until the termination or satisfaction of the
rights and obligations of the dissenting shareholder and
Keithley arising from the demand. During this period of
suspension, any dividend or distribution paid on the Common
Shares will be paid to the record owner as a credit upon the
fair cash value of such Common Shares. If a shareholder’s
dissenters’ rights are terminated other than by purchase by
us of the dissenting shareholder’s Common Shares, then at
the time of termination all rights will be restored and all
distributions that would have been made, but for suspension,
will be made.
Litigation
Relating to the Merger
We are aware of one purported class action and derivative
lawsuit related to the merger. The case,
Donald
Freidlander v. Danaher Corporation, Brian R. Bachman, James
B. Griswold, Leon J. Hendrix, Jr., Brian J. Jackman, Joseph
P. Keithley, N. Mohan Reddy, Thomas A. Saponas, Barbara V.
Scherer and Keithley Instruments, Inc.
, was filed on
October 4, 2010 in the Court of Common Pleas of Cuyahoga
County, Ohio (Case No. CV 10 738257). The complaint
alleges, among other things, that Keithley’s directors
breached their fiduciary duties in connection with the merger
and that Danaher has aided and abetted Keithley’s directors
in their alleged breaches of fiduciary duties. The relief sought
by the plaintiff includes a declaration that the action is
properly maintainable as a derivative and class action, a
declaration that the merger is unlawful and unenforceable, an
injunction barring the merger, rescinding (to the extent already
implemented) the merger or any of the terms thereof and the
payment of costs and disbursements of the action, including
attorneys’ and experts’ fees. Based on the facts known
to date, the defendants believe that the claims asserted are
without merit and intend to defend the suit vigorously.
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THE
MERGER AGREEMENT
The summary of the material terms of the merger agreement
below and elsewhere in this proxy statement is qualified in its
entirety by reference to the merger agreement, a copy of which
is attached to this proxy statement as Annex A. This
summary may not contain all of the information about the merger
agreement that is important to you. The merger agreement has
been included to provide you with information regarding its
terms, and we recommend that you read carefully the merger
agreement in its entirety. Except for its status as a
contractual document that establishes and governs the legal
relations among the parties thereto with respect to the merger,
we do not intend for its text to be a source of factual,
business or operational information about Keithley, Danaher or
Merger Sub. The merger agreement contains representations,
warranties and covenants that are qualified and limited,
including by information in the disclosure letter referenced in
the merger agreement that Keithley delivered in connection with
the execution of the merger agreement. Representations and
warranties may be used as a tool to allocate risks between the
respective parties to the merger agreement, including where the
parties do not have complete knowledge of all facts, instead of
establishing such matters as facts. Furthermore, the
representations and warranties may be subject to different
standards of materiality applicable to the contracting parties,
which may differ from what may be viewed as material to
shareholders or under the federal securities laws. These
representations may or may not have been accurate as of any
specific date and do not purport to be accurate as of the date
of this proxy statement. Moreover, information concerning the
subject matter of the representations and warranties may have
changed since the date of the merger agreement and subsequent
developments or new information qualifying a representation or
warranty may have been included in this proxy statement.
Effective
Time
The effective time of the merger will occur at the time that we
file a certificate of merger with the Secretary of State of the
State of Ohio on the closing date of the merger (or such later
date provided in such certificate, as agreed upon by us, Danaher
and Merger Sub). The closing date will occur no later than the
second business day after all of the conditions to the merger
set forth in the merger agreement have been satisfied or waived
(other than conditions that by their nature are to be satisfied
on the closing date, but subject to satisfaction or waiver of
such conditions) or on such other date as we and Danaher may
agree to in writing.
Structure
Subject to the terms and conditions of the merger agreement and
in accordance with Ohio law, at the effective time of the
merger, Merger Sub will merge with and into Keithley. The
separate corporate existence of Merger Sub will cease, and
Keithley will continue as the surviving corporation and a
wholly-owned subsidiary of Danaher. Following the completion of
the merger, our common shares will be delisted from the New York
Stock Exchange and deregistered under the Exchange Act and will
no longer be publicly traded.
Articles
of Incorporation and Code of Regulations
The articles of incorporation and code of regulations of the
surviving corporation will be the articles of incorporation and
code of regulations of Merger Sub as in effect immediately
before the effective time of the merger, except that the name of
the surviving corporation will be provided by Danaher prior to
the effective time.
Directors
and Officers of the Surviving Corporation
The directors of Merger Sub immediately prior to the effective
time of the merger and the individuals specified by Danaher
prior to the effective time will become the directors and
officers, respectively, of the surviving corporation following
the merger.
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Treatment
of Common Shares, Stock Options and Other Share-Based
Awards
Common
Shares
At the effective time of the merger, each Common Share issued
and outstanding immediately prior to the effective time will be
converted into the right to receive $21.60 in cash, without
interest and less applicable withholding taxes. However, Common
Shares that are:
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held in our treasury or by any of our subsidiaries immediately
prior to the effective time of the merger will be canceled
without consideration;
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owned by Danaher or Merger Sub, or any other direct or indirect
wholly-owned subsidiary of Danaher, immediately prior to the
effective time of the merger, will be canceled without
consideration; and
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held by shareholders who have properly exercised
dissenters’ rights under Section 1701.85 of the Ohio
Revised Code will not be converted, unless and until the
shareholder loses its rights as a dissenting shareholder.
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All Common Shares converted into the right to receive the merger
consideration will be automatically canceled and cease to exist
and the holder of a certificate for Common Shares will have only
the right to receive the merger consideration of $21.60 in cash
per share, without any interest and less applicable withholding
taxes.
Stock
Options and Other Share-Based Awards
Each option to purchase Common Shares, whether vested or
unvested, that is outstanding immediately prior to the effective
time of the merger, will become fully vested and cease to
represent a right or award with respect to Common Shares and
will entitle the holder thereof to receive, without interest and
less applicable withholding taxes, an amount in cash equal to
the product of:
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the total number of Common Shares underlying that option
immediately prior to the effective time of the merger; and
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the excess, if any, of $21.60 over the exercise price per Common
Share subject to that option.
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In addition, each right of any kind, contingent or accrued, to
receive Common Shares or benefits measured in whole or in part
by the value of a number of Common Shares granted under the
Company’s stock incentive plans and directors’
deferred stock plan (including restricted share units, deferred
share units and performance award units) (other than stock
options), whether vested or unvested, that is outstanding
immediately prior to the effective time of the merger will
become fully vested and cease to represent a right or award with
respect to Common Shares. Holders of restricted share units and
deferred share units will receive, without interest and less
applicable tax withholdings, an amount in cash equal to the
product of the merger consideration multiplied by the number of
restricted share units or deferred share units, as applicable,
held by such person. Except as modified by a Change in Control
Agreement or the Plush Employment Agreement, holders of
performance award units will be entitled to receive, without
interest and less applicable tax withholdings, an amount in cash
equal to the product of the merger consideration multiplied by
the number of Common Shares represented by the initial award
value under the agreement evidencing such performance award
units. For additional information concerning amounts receivable
as a result of a Change in Control Agreement or the Plush
Employment Agreement, see “Interests of Our Directors and
Executive Officers in the Merger — Change in Control
Agreements” and “Interests of Our Directors and
Executive Officers in the Merger — Employment
Agreement with Mark J. Plush.”
As soon as reasonably practicable after the effective time of
the merger, the surviving corporation will mail to each holder
of a stock option, restricted share unit, deferred share unit or
performance award unit a check in the amount payable to such
holder pursuant to the terms of the merger agreement.
Danaher and Keithley have agreed that at the effective time of
the merger each outstanding stock option (whether vested or
unvested) with an exercise price equal to or in excess of the
merger consideration will be cancelled by virtue of the merger
without any conversion thereof or payment therefor. Prior to the
effective time of the merger, Keithley will use commercially
reasonable efforts to cause this to occur, including, if
necessary, using commercially reasonable efforts to enter into
option termination or cancellation agreements with the holders
of
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stock options, without paying any consideration or incurring any
debts or obligations on behalf of Keithley or the surviving
corporation.
In addition, prior to the effective time of the merger, Keithley
must take all necessary steps to cause dispositions of Common
Shares pursuant to the transactions contemplated by the merger
agreement by each individual who is a director or officer of
Keithley to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
Exchange
and Payment Procedures
Immediately prior to the effective time of the merger, Danaher
will deposit, or will cause to be deposited, with a
U.S. bank or trust company appointed to act as paying agent
and approved by us, cash in an amount sufficient to pay the
aggregate merger consideration in exchange for all of the
Company Shares outstanding immediately prior to the effective
time of the merger. As soon as reasonably practicable after the
effective time of the merger, the paying agent will mail a
letter of transmittal and instructions to each shareholder. The
letter of transmittal and instructions will tell you how to
surrender your share certificates or book-entry shares in
exchange for the merger consideration.
You will not be entitled to receive the merger consideration
until you surrender your share certificate or certificates to
the paying agent, together with a duly completed and validly
executed letter of transmittal and any other documents as may
reasonably be required by the paying agent. The merger
consideration may be paid to a person other than the person in
whose name the corresponding certificate is registered if the
certificate or book entry shares formerly representing such
Common Shares is presented to the paying agent accompanied by
all documents required to evidence and effect such transfer and
to evidence that any applicable share transfer taxes have been
paid or are not payable.
No interest will be paid or will accrue on the cash payable upon
surrender of the certificates or book-entry shares. The paying
agent and surviving corporation will be entitled to deduct and
withhold, and pay to the appropriate taxing authorities, any
applicable taxes from the merger consideration. Any sum which is
withheld and paid to a taxing authority by the paying agent or
the surviving corporation will be deemed to have been paid to
the person from whom it is withheld.
At the effective time of the merger, our share transfer books
will be closed, and there will be no further registration of
transfers of outstanding Common Shares. If, after the effective
time of the merger, certificates or book-entry shares are
presented to the surviving corporation for transfer, they will
be canceled and exchanged for the merger consideration.
Any portion of the merger consideration deposited with the
paying agent that remains undistributed to the former holders of
Common Shares on the first anniversary of the effective time of
the merger will be delivered, upon demand, to the surviving
corporation. Holders of certificates who have not surrendered
their certificates prior to the delivery of such funds to the
surviving corporation may only look to the surviving corporation
for the payment of the merger consideration. None of Keithley,
Danaher, the surviving corporation, the paying agent or any
other person will be liable to any former holder of Common
Shares for any amount properly delivered to a public official
pursuant to any applicable abandoned property, escheat or
similar law.
If you have lost a certificate, or if it has been stolen or
destroyed, then before you will be entitled to receive the
merger consideration, you will have to make an affidavit of that
fact and, if required by the paying agent or reasonably
requested by the surviving corporation, post a bond in a
customary amount or provide an indemnity against any claim that
may be made against it with respect to that certificate.
Representations
and Warranties
We make various representations and warranties in the merger
agreement that are subject, in some cases, to specified
exceptions and qualifications contained in the merger agreement
or in the disclosure letter delivered in connection therewith.
These representations and warranties relate to, among other
things:
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our organization, good standing, corporate power and authority
and qualification to do business;
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our capitalization, including in particular the number of Common
Shares, options to purchase Common Shares and other share-based
awards;
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our corporate power and authority to enter into the merger
agreement and to consummate the transactions contemplated by the
merger agreement, and the execution, delivery and enforceability
of the merger agreement;
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the absence of violations of or conflicts with our articles of
incorporation or code of regulations, certain of our material
contracts or applicable laws or orders, and the absence of the
creation of any lien on any of our or our subsidiaries’
properties or assets, in each case as a result of entering into
the merger agreement and consummating the merger, and in the
case of conflicts with material contracts or applicable laws or
orders, or the creation of liens, except as would not reasonably
be expected to have a material adverse effect on Keithley;
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the required consents and approvals of governmental entities in
connection with the transactions contemplated by the merger
agreement;
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the approval and recommendation by our board of directors of the
merger agreement and the transactions contemplated by the merger
agreement;
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SEC filings since September 30, 2009, including the
financial statements contained therein;
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our internal disclosure controls and procedures and the absence
of any material complaint or claim regarding our or our
subsidiaries’ accounting and auditing practice or our
respective internal accounting controls since September 30,
2009;
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the absence of undisclosed liabilities;
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our subsidiaries;
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the absence of certain changes or events since June 30,
2010;
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our and our subsidiaries’ compliance with laws since
September 30, 2009;
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the absence of certain payments, bribes, political contributions
or influence payments and violations under anti-corruption or
anti-bribery laws;
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possession of permits necessary to conduct our business;
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the absence of actions, investigations, proceedings, orders or
injunctions against us or our subsidiaries by or before any
governmental entity;
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our employee benefit plans;
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taxes;
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environmental matters;
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real property owned or leased by Keithley;
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intellectual property;
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labor agreements and other employee issues;
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certain material contracts to which we are a party;
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insurance policies;
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the absence of interested party transactions;
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the required vote of our shareholders in connection with the
approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement;
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the accuracy of this proxy statement;
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actions we have taken to ensure that anti-takeover statutes are
not applicable to the merger or the transactions contemplated by
the merger agreement or the Voting Agreement;
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the receipt by our board of directors of a fairness opinion from
Stifel, Nicolaus & Company, Incorporated; and
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the absence of undisclosed broker’s fees.
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Many of our representations and warranties are qualified by the
absence of a material adverse effect on Keithley, which means,
for purposes of the merger agreement, any event, change,
circumstance or effect that (i) prevents or materially
delays or materially impairs our ability to perform our
obligations under the merger agreement and to consummate the
merger and the other transactions contemplated by the merger
agreement or (ii) is materially adverse to our and our
subsidiaries’ business, financial condition or results of
operations, taken as a whole, provided that in the case of
clause (ii) only, events, changes, circumstances or effects
will not constitute or be considered in determining a material
adverse effect to the extent:
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generally affecting the electronic test and measurement industry
in the United States or elsewhere or the economy or the
financial or securities markets in the United States or
elsewhere, including regulatory, social or political conditions
or developments (including any outbreak or escalation of
hostilities or acts of war, whether or not pursuant to the
declaration of a national emergency or war, or acts of
terrorism) or changes in interest rates (unless such events,
changes, circumstances or effects disproportionately affect
Keithley and our subsidiaries, taken as a whole, as compared to
other persons engaged in the electronic test and measurement
industry); or
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directly or indirectly resulting from:
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the announcement or the existence of, or taking actions required
by, the merger agreement or the announcement of the transactions
contemplated by the merger agreement, except for breaches of our
representation and warranty regarding the absence of violations
of or conflicts with our articles of incorporation or code of
regulations, certain of our material contracts or applicable
law, and the absence of the creation of any lien on any of our
or our subsidiaries’ properties or assets;
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changes in applicable law or generally accepted accounting
principles or accounting standards;
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changes in the market price or trading volume of the Common
Shares (provided that any of the underlying causes of such
change are not excluded);
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changes in any analyst recommendations, any financial strength
rating or any other similar recommendations or ratings as to
Keithley or our subsidiaries, including, in and of itself, any
failure to meet analyst projections (provided that any of the
underlying causes of such changes or failure are not excluded);
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our loss or the loss by any of our subsidiaries of any of our
respective customers, suppliers or employees as a result of the
announcement of the transactions contemplated by the merger
agreement; or
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our failure, in and of itself, to meet any expected or projected
financial or operating performance target, whether internal or
published, for any period ending on or after the date of the
merger agreement as well as any change, in and of itself, by us
in any expected or projected financial or operating performance
target as compared with any target prior to the date of the
merger agreement (provided that any of the underlying causes of
such failure or change are not excluded).
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Danaher and Merger Sub make various representations and
warranties in the merger agreement with respect to Danaher and
Merger Sub. These include representations and warranties
regarding:
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Danaher’s and Merger Sub’s organization, good standing
and corporate power and authority to do business;
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Danaher’s and Merger Sub’s corporate power and
authority to enter into the merger agreement and to consummate
the transactions contemplated by the merger agreement, and the
execution, delivery and enforceability of the merger agreement;
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the absence of any violation of or conflict with their governing
documents, certain agreements to which they are party or
applicable law, and the absence of the creation of any lien on
any of their respective properties or assets, in each case as a
result of entering into the merger agreement and consummating
the merger; and in the case of conflicts with material contracts
or applicable laws, or the creation of liens, except as would
not reasonably be expected to have a material adverse effect on
Danaher;
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the absence of actions, investigations, proceedings, orders or
injunctions against Danaher or Merger Sub by or before any
governmental entity;
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the accuracy of information supplied by Danaher or its
subsidiaries for inclusion in this proxy statement;
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financing;
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capitalization of Merger Sub;
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the absence of the requirement of a vote of Danaher’s
stockholders or the holder of any other securities of Danaher in
order for Danaher and Merger Sub to consummate the transactions
contemplated by the merger agreement;
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the absence of undisclosed broker’s fees;
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lack of ownership of Common Shares; and
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Danaher’s acknowledgement of adequate access to the books,
records, facilities, equipment, contracts and other assets of
Keithley and our subsidiaries and the full opportunity to meet
with our senior management.
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Certain of the representations and warranties of Danaher and
Merger Sub are qualified by the absence of a material adverse
effect on Danaher, which means, for purposes of the merger
agreement, any event, circumstance, change, occurrence or state
of facts that prevents or materially delays or materially
impairs the ability of Danaher or Merger Sub to consummate the
merger and the other transactions contemplated by the merger
agreement.
The representations and warranties of each of the parties to the
merger agreement will expire upon the effective time of the
merger. You should be aware that these representations and
warranties made by Keithley to Danaher and Merger Sub and by
Danaher and Merger Sub to Keithley, as the case may be, may be
subject to important limitations and qualifications agreed to by
the parties to the merger agreement, may or may not be accurate
as of the date they were made and do not purport to be accurate
as of the date of this proxy statement.
Conduct
of Our Business Pending the Merger
Under the merger agreement, we have agreed that, subject to
certain exceptions including for transactions between us and our
wholly-owned subsidiaries, unless required by applicable law or
the merger agreement or if Danaher gives its written consent,
between the date of the merger agreement and the effective time
of the merger, we and our subsidiaries will:
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carry on our respective businesses in all material respects in
the ordinary course consistent with past practice and in
compliance in all material respects with applicable
laws; and
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to the extent consistent therewith, use commercially reasonable
efforts to preserve our respective current business
organizations, keep available the services of our officers and
key employees, preserve our material intellectual property
rights, current rights and goodwill and preserve business
relationships with significant customers, suppliers,
distributors and others having business dealings with us.
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We have also agreed that during the same time period, subject to
certain exceptions including for transactions between us and our
wholly-owned subsidiaries, unless required by applicable law or
the merger agreement or if Danaher gives its written consent, we
will not and will not permit any of our subsidiaries to:
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except for regular quarterly cash dividends consistent with past
practice (not to exceed $0.0375 per share) or dividends already
declared as of September 29, 2010, declare, set aside, make
or pay any dividends on, or make any other distributions in
respect of, any of the Common Shares, our or our
subsidiaries’ capital stock, or any equivalent thereof;
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adjust, recapitalize, purchase, split, combine or reclassify any
of the Common Shares or any of our or our subsidiaries’
capital stock;
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except pursuant to agreements in effect as of the close of
business on September 29, 2010 and previously disclosed to
Danaher, directly or indirectly, purchase, redeem or otherwise
acquire any Common Shares or any shares of capital stock or
other securities of our subsidiaries or any rights, warrants or
options to acquire any such shares or other securities (without
restricting cashless exercises or similar transactions with
respect to awards issued and outstanding under our share plans);
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issue or authorize the issuance of, grant, sell, pledge, amend,
or encumber, any Common Shares, other shares of our or our
subsidiaries’ capital stock (or any other securities in
respect of, in lieu of, or in substitution for, Common Shares or
other shares of our or our subsidiaries’ capital stock),
any other voting securities or any securities convertible into
or exchangeable or exercisable for, or any rights, warrants or
options to acquire, any such shares, voting securities or
convertible securities, or make any changes in our or our
subsidiaries’ capital structure, subject to certain
exceptions;
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amend our articles of incorporation or code of regulations and
our subsidiaries’ organizational documents;
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sell, lease, license, transfer, grant, exchange or encumber, or
subject to any lien or otherwise dispose of any of our or our
subsidiaries’ properties or assets, the capital stock of
our subsidiaries, with a value in excess of $250,000
individually or $1,000,000 in the aggregate other than sales of
products and services in the ordinary course of business
consistent with past practice and except (i) pursuant to
existing agreements in effect prior to September 29, 2010
and disclosed to Danaher in connection with the merger
agreement, or (ii) as may be required by applicable law;
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disclose, other than to representatives of Danaher, any material
trade secret unless a written non-disclosure agreement is
executed by the recipient of such information;
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incur any capital expenditures or enter into any commitments for
capital expenditures, capital additions or capital improvements
involving more than an aggregate amount of $300,000 per fiscal
quarter, except in accordance with the capital expenditure
budget and prior fiscal year carryover amounts disclosed to
Danaher in connection with the merger agreement, or pay, incur
or otherwise make any commitment to pay or incur in excess of
$750,000 in the aggregate for any information enterprise
resource management systems or take any further action other
than as required under an existing contract;
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incur any net increase in indebtedness from that existing on
September 29, 2010 other than (i) up to $1,000,000 in
the aggregate of additional indebtedness, (ii) indebtedness
incurred in the ordinary course of business under lines of
credit existing on September 29, 2010, (iii) letters
of credit, surety bonds, guarantees of indebtedness for borrowed
money and security time deposits in the ordinary course of
business consistent with past practice and
(iv) indebtedness relating to the reborrowing of amounts
repaid;
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grant any increase in the compensation or benefits payable or to
become payable by us or any of our subsidiaries to any current
or former director, officer, employee or consultant of Keithley
or any Keithley subsidiary, except to the extent required by the
terms of a plan in effect as of the date of the merger agreement;
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adopt, enter into, amend or otherwise increase, reprice or
accelerate the payment or vesting of the amounts, benefits or
rights payable or accrued or to become payable or accrued under
any of our employee benefit plans;
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enter into or amend any employment, bonus, severance, change in
control, retention or any similar agreement or any collective
bargaining agreement, or grant any severance, bonus,
termination, or retention pay to any officer, director,
consultant or employee of Keithley or any of our subsidiaries
(other than as required by the terms of our employee benefit
plans) or terminate any such plan;
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pay or award any pension, retirement allowance or other
non-equity based incentive awards, or other employee or director
benefit or perquisite not required by our employee benefit
plans, all except as may otherwise be required to comply with
applicable laws or specified in the merger agreement;
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materially change any tax or financial accounting policies or
procedures or any of our or our subsidiaries’ methods
affecting our respective assets, liabilities or business, in
each case, in effect on September 29, 2010, except as
required by generally accepted accounting principles or
applicable law;
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acquire by merging or consolidating with, by purchasing any
equity interest in or a portion of the assets of, or by any
other manner, in one transaction or a series of related
transactions, any corporation, partnership, association or other
business organization or any interest therein, or division or
business thereof, or otherwise acquire any material amount of
operating assets of any other person (other than the purchase of
assets from suppliers or vendors in the ordinary course of
business consistent with past practice); merge or consolidate
with any other person; or liquidate, dissolve, restructure,
wind-up
or
reorganize our or our subsidiaries’ respective business or
organize any new subsidiary or affiliate;
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except in the ordinary course of business and consistent with
past practice or to the extent required by applicable law, make,
change or rescind any material express or deemed election with
respect to taxes, settle or compromise any material claim or
action relating to taxes, file or amend any tax return or change
any of our or our subsidiaries’ methods of accounting for
or of reporting income or deductions for tax purposes in any
material respect;
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make any loans, advances or capital contributions to, or
investments in, any other person, except (i) de minimis
advances for employees, contractors and consultants in the
ordinary course of business consistent with past practice,
(ii) trade credit issued in the ordinary course of business
consistent with past practice, (iii) investments of excess
cash and cash equivalents in the ordinary course of business
consistent with past practice and (iv) as required by
existing contracts;
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except in the ordinary course of business consistent with past
practice (subject to certain exceptions), (i) enter into,
modify or amend in any material respect or terminate any
material contract, (ii) waive, release, relinquish or
assign any material contract (or any of our or our
subsidiaries’ rights thereunder) or any right or claim that
is material to us and our subsidiaries, taken as a whole or
(iii) cancel or forgive any indebtedness owed to us or any
of our subsidiaries;
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waive, release, assign, initiate, pay, discharge, settle or
compromise any pending or threatened claim, action, litigation,
arbitration or proceeding other than in the ordinary course of
business consistent with past practice, or solely for money
damages not in excess of $200,000 individually or $500,000 in
the aggregate; or
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authorize, commit or agree to take any of the foregoing actions.
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No
Solicitation of Transactions; Change of Recommendation
We have agreed that we will, and we will cause our subsidiaries
and our respective representatives to, cease immediately and
cause to be terminated all discussions and negotiations with
respect to or that reasonably could be expected to lead to an
acquisition proposal. For purposes of the merger agreement,
“acquisition proposal” means, other than transactions
contemplated by the merger agreement, any inquiry, proposal or
offer from any person relating to any:
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direct or indirect acquisition or purchase of assets or a
business that constitutes 15% or more of the net revenues, net
income or the assets of Keithley and our subsidiaries, taken as
a whole;
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direct or indirect acquisition or purchase of 15% or more of any
class of equity securities (by vote or value) of Keithley or any
of our subsidiaries;
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tender offer or exchange offer that if consummated would result
in any person beneficially owning 15% or more of the equity
securities (by vote or value) of Keithley; or
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merger, consolidation, business combination, asset purchase,
recapitalization or similar transaction involving Keithley.
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We have agreed that until the earlier of the effective time of
the merger and the date of termination of the merger agreement,
and subject to specified exceptions described below, we will
not, nor will we permit any of our
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subsidiaries or their officers, directors or employees to, and
we will use our commercially reasonable efforts to cause our
other representatives to not, directly or indirectly:
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solicit, initiate or knowingly encourage (including by way of
furnishing nonpublic information), or take any other action
designed to facilitate, any inquiries or offers or the making of
any proposal that constitutes, or could reasonably be expected
to lead to, an acquisition proposal;
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enter into any letter of intent, acquisition agreement or other
similar agreement, arrangement or understanding relating to an
acquisition proposal or enter into any other agreement,
arrangement or understanding requiring us to abandon, terminate
or fail to consummate the merger or any other transaction
contemplated by the merger agreement; or
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enter into, continue or otherwise engage or participate in any
way in any discussions or negotiations regarding, or furnish or
disclose to any person any nonpublic information with respect
to, or take any other action to knowingly facilitate or further
any inquiries or offers or the making of any proposal that
constitutes, or could reasonably be expected to lead to, any
acquisition proposal.
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Notwithstanding the foregoing, at any time prior to the approval
and adoption of the merger agreement by our shareholders, in
response to an unsolicited, written acquisition proposal that
did not result from a breach of the non-solicitation provisions
of the merger agreement that our board of directors has
determined, in good faith, after consultation with outside
counsel and its financial advisor, constitutes, or could
reasonably be expected to result in, a superior proposal, we may:
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furnish information about Keithley and our subsidiaries to the
person making the acquisition proposal pursuant to a
confidentiality agreement (including a standstill provision) not
less restrictive of the other party than the confidentiality
agreement between us and a subsidiary of Danaher; provided that
all information furnished has been provided or is provided to
Danaher prior to or substantially concurrent with the time it is
provided to such person; and
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participate in discussions or negotiations with such person
regarding the acquisition proposal; provided that all
information furnished has been provided or is provided to
Danaher prior to or substantially concurrent with the time it is
provided to such person.
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We may not release any third party from, or waive any provision
of, any confidentiality or standstill agreement to which we were
a party as of September 29, 2010, unless our board of
directors determines in good faith (after consultation with
outside counsel) that the failure to do so would be inconsistent
with its fiduciary duties under applicable law.
We must notify Danaher and Merger Sub within 24 hours of
our receipt, directly or indirectly, of any proposals, offers,
inquiries, information requests, discussions or negotiations
regarding an alternative acquisition. Such notice must be made
orally and confirmed in writing, and must identify the person or
group making the acquisition proposal or request and the
material terms and conditions thereof. In addition, we must keep
Danaher reasonably informed of the status of such acquisition
proposal and any material changes to the acquisition
proposal’s terms.
We have also agreed that, subject to the exceptions summarized
below, our board of directors will not:
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withdraw or modify its recommendation in a manner adverse to
Danaher (or publicly propose to do so);
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recommend, adopt or approve any acquisition proposal (or
publicly propose to do so);
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fail to include its recommendation in this proxy
statement; or
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approve or recommend (or publicly propose to approve or
recommend), or allow us or any of our subsidiaries to execute or
enter into, any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement,
option agreement, joint venture agreement, partnership agreement
or other similar agreement constituting or related to, or that
is intended to or could reasonably be expected to result in, an
acquisition proposal.
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Notwithstanding the foregoing or anything in the merger
agreement to the contrary, if, prior to our obtaining
shareholder approval of the merger agreement, our board of
directors determines in good faith (after consulting with
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outside counsel) that the failure to do so would be inconsistent
with its fiduciary duties under applicable law , our board of
directors may:
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cause us to terminate the merger agreement pursuant to its terms
and cause Keithley to enter into an acquisition agreement with
respect to a superior proposal; or
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make a change in its recommendation to the shareholders to
approve and adopt the merger agreement and the transactions
contemplated by the merger agreement.
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The board may only take the foregoing actions if:
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we are not in breach in any material respect of the
non-solicitation provisions of the merger agreement;
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we provide written notice to Danaher advising Danaher that our
board of directors intends to take such action and specifying
the reasons, including, if applicable, the terms and conditions
of any superior proposal, the identity of the party making the
superior proposal and copies of any written proposal and
correspondence that is the basis for such actions;
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for a period of three business days (or two business days after
an amendment to an acquisition proposal), we negotiate in good
faith with Danaher to make such adjustments to the terms and
conditions of the merger agreement in a manner to allow our
board of directors to proceed with its recommendation of the
merger agreement; and
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after such negotiation period our board of directors continues
to believe in good faith that the acquisition proposal
constitutes a superior proposal (taking into account any
amendments to the merger agreement agreed to be made by Danaher
during such period).
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For purposes of the merger agreement, a “superior
proposal” means a bona fide, unsolicited, written
acquisition proposal (except the references therein to
“15%” shall be replaced by “50%” and the
references to “vote or value” shall be replaced by
“vote and value”) that our board of directors
determines in its good faith judgment (after consulting with
outside counsel and its financial advisor), taking into account
the financial, regulatory and legal aspects of the proposal and
the timing and likelihood of consummation of such proposal, is
more favorable to our shareholders (in their capacities as
shareholders) than the transactions contemplated by the merger
agreement (including any adjustment to the terms and conditions
proposed by Danaher in response to such acquisition proposal).
Employee
Benefits
Danaher has agreed that it will honor all of our employee
benefit plans and compensation arrangements in accordance with
their terms and in the forms as disclosed to Danaher in
connection with the merger agreement. Until December 31,
2011, Danaher must provide to each of our employees who remains
an employee of the surviving corporation base pay, annual
incentive opportunities for participants in the management
incentive plans and employee benefits (excluding equity-based
compensation) that are substantially comparable, in the
aggregate, to the base pay, annual management incentive
opportunities and employee benefits (excluding equity-based
compensation) provided to our employees immediately before the
effective time of the merger. In addition, Danaher has agreed
that any employee whose employment is terminated involuntarily
other than for cause on or after the effective time of the
merger but on or prior to December 31, 2011, is entitled to
severance benefits comparable to the severance benefits provided
to our or our subsidiaries’ employees immediately prior to
the effective time of the merger.
If an employee participates in a Danaher employee benefit plan
after the effective time of the merger, he or she will be
credited with his or her hours of service credit with us and our
subsidiaries to the same extent as such employee was entitled,
before the effective time of the merger, to credit for such
service under our employee benefit plans. Such credit for
service will not apply to the extent that such credit would
result in any duplication of benefits or is prohibited under
applicable law or the terms of the applicable Danaher benefit
plan.
In addition, Danaher and the surviving corporation will ensure
that all waiting periods, preexisting condition exclusions,
active-at-work
requirements or underwriting requirements of each Danaher
employee benefit plan
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providing group accident and sickness, dental, vision or similar
group health benefits to any employee of the surviving
corporation are not enforced against such employee and his or
her covered dependents. Danaher and the surviving corporation
also must cause any eligible expenses incurred by an employee
and his or her covered dependents during the portion of the plan
year of our employee benefit plan before the effective time of
the merger to be taken into account under a Danaher employee
benefit plan for purposes of satisfying all deductible or
coinsurance obligations under such plan. Notwithstanding the
preceding sentences, Danaher and the surviving corporation will
not have such obligations in respect of a new plan year.
We are permitted to pay any amounts earned under our annual
management incentive plans for the fiscal year ending
September 30, 2010 and if such amounts are not paid prior
to the effective time of the merger, the surviving corporation
will make all payments earned thereunder in a manner consistent
with past practice. In addition, Danaher and Merger Sub agreed
that the surviving corporation will honor Keithley’s annual
management incentive plans for fiscal year 2011 for the period
prior to the effective time of the merger. All payments earned
under the 2011 management incentive plans, including any pro
rata portion for the fiscal quarter in which the closing occurs,
will be paid promptly after the effective time of the merger in
accordance with our past practice.
Under the terms of the merger agreement, we have agreed to take
all action necessary to terminate our employee stock purchase
plan and our supplemental executive retirement plan no later
than the effective time of the merger.
Indemnification
of Directors and Officers; Insurance
Danaher and the surviving corporation must honor all of our
obligations to indemnify our and our subsidiaries’ current
and former directors, officers and employees for acts or
omissions by such parties occurring at or prior to the effective
time of the merger, whether pursuant to our or our
subsidiaries’ respective governing documents or individual
indemnity agreements disclosed to Danaher in connection with the
merger agreement or filed as an exhibit to certain documents
filed with the SEC, and such obligations will survive the merger
and will continue in full force and effect in accordance with
their terms, without amendment or modification adverse to the
indemnified individual for a period of six years from the
effective time of the merger.
For a period of six years from the effective time of the merger,
Danaher and the surviving corporation must maintain a
directors’ and officers’ liability insurance policy
for those persons currently covered by our directors’ and
officers’ liability insurance policy and with coverage and
in amounts no less favorable than those of such current
insurance policy. Notwithstanding this requirement, in no event
will Danaher be required to pay an annual premium for such
insurance in excess of 300% of the last annual premium paid by
us prior to the date of the merger agreement. In lieu of the
foregoing, at Danaher’s option and expense, we may purchase
prior to the effective time of the merger six-year
“tail” insurance coverage that provides coverage
identical in all material respects to the coverage described
above.
Danaher is required to pay all reasonable expenses, including
reasonable attorneys’ fees and fees and disbursements of
experts and witnesses, that may be incurred by an indemnified
party in enforcing the foregoing indemnity and other obligations.
The obligations described above regarding directors’ and
officers’ indemnification and insurance must be assumed by
any successor entity to the surviving corporation as a result of
any consolidation, merger or transfer of all or substantially
all of its properties and assets.
Additional
Agreements
Shareholders
Meeting
The merger agreement requires us to duly call, give notice of
and hold a meeting of our shareholders to approve and adopt the
merger agreement and the transactions contemplated by the merger
agreement as promptly as reasonably practicable after the
mailing of this proxy statement but in any event within
30 days of mailing this proxy statement. Subject to limited
circumstances contemplated by the merger agreement and described
above in “— No Solicitation of Transaction;
Change of Recommendation,” our board of directors is
required to recommend that our shareholders vote in favor of
approval and adoption of the merger agreement and the
transactions contemplated by
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the merger agreement and to use commercially reasonable efforts
to solicit proxies in favor of such approval and adoption.
Access
to Information
We have agreed to grant Danaher and Danaher’s
representatives reasonable access to our and our
subsidiaries’ properties, books, contracts, commitments,
personnel and records and all other information concerning our
and our subsidiaries’ business, properties and personnel as
Danaher reasonably requests. Danaher has agreed to hold any
nonpublic information regarding Keithley or our subsidiaries in
accordance with the terms of a confidentiality agreement.
Commercially
Reasonable Efforts
Subject to the terms and conditions of the merger agreement,
each of the parties has agreed to use its commercially
reasonable efforts to complete the merger, including obtaining
all necessary approvals and consents from governmental entities
or third parties, defending any lawsuit challenging the merger,
delivering any additional instrument reasonably necessary to
carry out the purposes of the merger agreement and taking all
other actions or cause to be done all other things necessary,
proper or advisable to consummate the transactions contemplated
by the merger agreement.
Additionally, subject to the terms and conditions of the merger
agreement, we and Danaher must each make their respective
filings under the
Hart-Scott-Rodino
Act within 15 business days of the date of the merger agreement.
Cancellation
of Stock Options
Danaher and Keithley have agreed that at the effective time of
the merger each outstanding stock option (whether vested or
unvested) with an exercise price equal to or in excess of the
merger consideration will be cancelled by virtue of the merger
without any conversion thereof or payment therefor. Prior to the
effective time of the merger, Keithley will use commercially
reasonable efforts to cause this to occur, including, if
necessary, using commercially reasonable efforts to enter into
option termination or cancellation agreements with the holders
of stock options, without paying any consideration or incurring
any debts or obligations on behalf of Keithley or the surviving
corporation.
Conditions
to the Merger
The respective obligations of the parties to effect the merger
are subject to the satisfaction (or waiver by all parties) at or
prior to the effective time of the merger of the following
conditions:
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the approval and adoption of the merger agreement and the
transactions contemplated by the merger agreement by our
shareholders;
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the making or securing of required governmental approvals and
filings;
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expiration or termination of any applicable waiting period (and
any extension thereof) under the
Hart-Scott-Rodino
Act and receipt of any foreign approvals, consents and
clearances; and
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the absence of any judgment, injunction, order or law of any
governmental entity preventing the consummation of the merger.
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Our obligation to effect the merger is further subject to
satisfaction or waiver of the following conditions:
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•
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the representations and warranties of Danaher and Merger Sub set
forth in the merger agreement must be true and correct (without
giving effect to any materiality or material adverse effect
qualifications contained therein) as of the date of the merger
agreement and as of the closing date (except to the extent
expressly made as of an earlier date, in which case as of such
date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to
any materiality or material adverse effect qualifications
contained therein) would not reasonably be expected to have,
individually or in the aggregate,
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45
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a material adverse effect on Danaher’s or Merger Sub’s
ability to consummate the merger and the other transactions
contemplated by the merger agreement;
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•
|
each of Danaher and Merger Sub must have performed in all
material respects all obligations required to be performed by it
under the merger agreement at or prior to the closing
date; and
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•
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each of Danaher and Merger Sub must have delivered to us a
certificate to the effect that the conditions summarized in the
foregoing two bullet points have been satisfied.
|
The obligation of Danaher and Merger Sub to effect the merger is
further subject to satisfaction or waiver of the following
conditions:
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•
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our representations and warranties regarding our capitalization
must be true and correct in all material respects as of the date
of the merger agreement and as of the closing date and all of
our other representations and warranties must be true and
correct (without giving effect to any materiality or material
adverse effect qualifications contained therein) as of the date
of the merger agreement and as of the closing date (except to
the extent expressly made as of an earlier date, in which case
as of such date), except where the failure of such
representations and warranties to be so true and correct
(without giving effect to any materiality or material adverse
effect qualifications contained therein) would not reasonably be
expected to have, individually or in the aggregate, a material
adverse effect on Keithley;
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•
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we must have performed in all material respects all obligations
required to be performed by us under the merger agreement at or
prior to the closing date; and
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•
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we must have delivered to Danaher a certificate to the effect
that the conditions summarized in the foregoing two bullet
points have been satisfied.
|
No party may rely on the failure of any of the foregoing
conditions to be satisfied as grounds for exercising its
termination rights under the merger agreement if such failure
was caused by such party’s failure to comply with any of
the terms of the merger agreement.
Termination
The merger agreement may be terminated at any time prior to the
effective time of the merger, whether before or after
shareholder approval has been obtained, as follows (subject to
certain limitations set forth in the merger agreement):
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•
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by the mutual written consent of Danaher, Merger Sub and us
(with any termination by Danaher also being an effective
termination by Merger Sub);
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•
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by either Danaher or us if:
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•
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the merger has not been consummated by March 31, 2011 or
such later date as we and Danaher agree to in writing; provided
that the party seeking to terminate must not have breached in
any material respect any provision of the merger agreement in
any manner that caused or resulted in the failure of the merger
to be consummated by such time;
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•
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a governmental entity has issued or entered a final and
unappealable order, injunction, decree, ruling or other law
permanently restraining, enjoining or otherwise prohibiting the
consummation of the merger, provided that the party seeking to
terminate must have used its commercially reasonable efforts to
have such injunction lifted; or
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•
|
the special meeting (including any adjournments thereof) is
concluded and shareholder approval was not obtained;
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•
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we breach or fail to perform any of our covenants, agreements,
representations or warranties contained in the merger agreement,
which breach or failure to perform would result in a failure of
a condition to closing of the merger and which breach or failure
either is not cured within 30 days after receipt of written
notice
|
46
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regarding such breach or failure or cannot be cured by
March 31, 2011 (or such later date as we and Danaher may
agree to in writing);
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•
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our board of directors or any committee thereof has
(i) withdrawn, or qualified or modified in a manner adverse
to Danaher, its approval or recommendation of the transactions
contemplated by the merger agreement (or failed to recommend
against or taken a neutral or no position towards an alternative
acquisition proposal), (ii) recommended an alternative
acquisition proposal or (iii) failed to include in this
proxy statement its recommendation that our shareholders vote to
adopt the merger agreement; provided that Danaher’s and
Merger Sub’s right to terminate the merger agreement for
such reason expires ten business days after the last date of
such withdrawal or modification or failure to act.
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•
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Danaher or Merger Sub breaches or fails to perform any of its
covenants, agreements, representations or warranties contained
in the merger agreement, which breach or failure to perform
would result in a failure of a condition to closing of the
merger and which breach or failure either is not cured within
30 days after receipt of written notice regarding such
breach or failure or cannot be cured by March 31, 2011 (or
such later date as we and Danaher may agree to in writing);
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•
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if our board of directors has approved (after determining in
good faith, following consultation with outside counsel, that
the failure to do so would be inconsistent with its fiduciary
duties under applicable law), and we concurrently with such
termination enter into an acquisition agreement with respect to,
a superior proposal in accordance with the terms of the merger
agreement; provided we have not breached our covenants with
respect to non-solicitation of alternative transactions in any
material respect (including the obligation to provide Danaher
three business days’ notice (or two business days’
notice after an amendment to an acquisition proposal) and
negotiate in good faith with Danaher to make adjustments to the
terms and conditions of the merger agreement) or breached (other
than immaterially) our covenants regarding preparation of a
proxy statement and holding a meeting of our shareholders and we
pay a termination fee; or
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•
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if our conditions to closing the merger are satisfied (or, upon
an immediate closing, would be satisfied), we have notified
Danaher in writing of the satisfaction of such conditions and
that we are willing and able to consummate the merger, and
Danaher fails to consummate the merger within two business days
of the later of either the satisfaction of our conditions to
closing or our notice to Danaher.
|
In the event of termination of the merger agreement based on the
foregoing provisions, the merger agreement will terminate
(except for the confidentiality agreement, the provisions
concerning payment of termination fees and certain miscellaneous
provisions), and there will be no other liability on the part of
Keithley or Danaher to the other, except liability arising out
of material and intentional breach of the merger agreement or as
provided for in the confidentiality agreement, in which case the
aggrieved party will be permitted to recover damages incurred or
suffered as a result of such breach.
Termination
Fee
The merger agreement requires us to pay to Danaher a termination
fee equal to $10 million in the event (i) any person
makes an acquisition proposal, (ii) the merger agreement is
terminated (x) by either Danaher or us because the merger
has not occurred on or before March 31, 2011 or because
shareholder approval is not obtained, or (y) by Danaher
based on a breach of the merger agreement by us, and
(iii) within 12 months of the date of such termination
we enter into an agreement providing for, or consummate, an
acquisition proposal (substituting “50%” for all
references to “15%” in the definition of
“acquisition proposal” discussed above).
The merger agreement also requires us to pay to Danaher the
termination fee if (i) we terminate the merger agreement in
order to enter into an acquisition agreement with respect to a
superior proposal as discussed above or (ii) Danaher
terminates the merger agreement because our board of directors
or any committee thereof has withdrawn or modified its
recommendation in a manner adverse to Danaher.
47
The termination fee payable by us pursuant to the paragraph
above is the exclusive remedy to Danaher and Merger Sub in
connection with any event or circumstance with respect to which
such fee is paid, other than for specific performance and
liability arising out of material and intentional breach. If we
fail to pay the termination fee when due, and Danaher commences
a legal proceeding that results in a final, non-appealable
judgment against us for the termination fee, then we must pay
the
out-of-pocket
costs and expenses (including reasonable legal fees and expenses
of outside counsel) incurred by Danaher in connection with such
proceeding, plus interest on all such unpaid amounts at the
prevailing prime lending rate.
Amendment
and Waiver
The merger agreement may be amended at any time, whether before
or after the approval and adoption of the merger agreement by
our shareholders, if such amendment or waiver is in writing and
signed by us, Danaher and Merger Sub. However, after the merger
agreement has been adopted by our shareholders, no amendment
that by law would require the further approval of our
shareholders may be made without obtaining such approval.
Specific
Performance
The parties to the merger agreement are entitled to an
injunction or injunctions to prevent breaches of the merger
agreement and to enforce specifically the terms and provisions
of the merger agreement.
VOTING
AGREEMENT
In connection with the execution of the merger agreement, on
September 29, 2010, Keithley Investment Co. Limited
Partnership, or the Keithley Partnership, of which Joseph P.
Keithley, Keithley’s chairman, president and chief
executive officer, is general partner, entered into the Voting
Agreement with Danaher and Merger Sub pursuant to which it
agreed to vote a number of its Class B common shares
representing 19.99% of the voting power of our outstanding
Common Shares in favor of approval and adoption of the merger
agreement and the transactions contemplated by the merger
agreement. As of October 1, 2010, the Keithley Partnership,
together with Mr. Keithley, owns Common Shares representing
approximately 61.5% of the total combined voting power of the
outstanding Common Shares. In addition, the Keithley Partnership
agreed to vote (or cause to be voted) such shares against
(1) any proposal that would result in a breach by us of the
merger agreement, or (2) any action or agreement that is
intended to, or would be reasonably likely to, impede, interfere
with, delay, postpone or attempt to discourage the merger,
including, but not limited to: (A) the adoption or approval
by us of any acquisition proposal; (B) any amendment of our
articles of incorporation or code of regulations; (C) any
material change in the present capitalization or dividend policy
of Keithley; or (D) any other material change in our
corporate structure or business.
The Voting Agreement will terminate upon the earliest to occur
of (1) the effective time of the merger, (2) the
termination of the merger agreement in accordance with its
terms, and (3) at the option of the Keithley Partnership,
upon the execution or granting of any amendment, modification,
change or waiver with respect to the merger agreement subsequent
to the date of the Voting Agreement that results in any decrease
in the price to be paid per share for the common shares
and/or
Class B common shares or any change in the form of
consideration to be received by the holders of such shares in
the merger or is otherwise adverse to our shareholders. Pursuant
to the Voting Agreement, the Keithley Partnership also has
agreed not to transfer or dispose of any of its Common Shares,
enter into any other voting arrangement or grant any proxies
with respect to its Common Shares or convert its Class B
common shares into common shares.
The foregoing summary of the terms of the Voting Agreement does
not purport to be complete and is qualified in its entirety by
reference to the full text of the Voting Agreement, which is
filed as Annex B to this proxy statement.
48
MARKET
PRICE DATA
Our common shares trade on the New York Stock Exchange under the
trading symbol “KEI.” There is no established trading
market for the Class B common shares; however, they are
readily convertible on a
one-for-one
basis into common shares. The following table sets forth the
high and low sales prices for our common shares as reported on
the NYSE and the amount of dividends declared on our common
shares and Class B common shares during each of the
quarterly periods presented:
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Cash Dividends
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Cash Dividends
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per Class B
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High
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Low
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per Common Share
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Common Share
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Fiscal 2011 (ending September 30, 2011)
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First Quarter through October 7, 2010
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$
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21.60
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$
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21.50
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Fiscal 2010 (ended September 30, 2010)
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Fourth Quarter
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$
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21.51
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$
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8.26
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$
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.0375
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$
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.030
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Third Quarter
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$
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10.67
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$
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6.40
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$
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.0375
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$
|
.030
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Second Quarter
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$
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7.70
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$
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4.60
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$
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.0125
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$
|
.010
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First Quarter
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|
$
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5.17
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$
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3.20
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|
$
|
.0125
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|
$
|
.010
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|
Fiscal 2009 (ended September 30, 2009)
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Fourth Quarter
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$
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6.45
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$
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3.47
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$
|
.0125
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|
$
|
.010
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Third Quarter
|
|
$
|
4.59
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$
|
2.76
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$
|
.0125
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$
|
.010
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Second Quarter
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$
|
3.91
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$
|
1.86
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$
|
.0375
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|
$
|
.030
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First Quarter
|
|
$
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8.64
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$
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2.02
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$
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.0375
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$
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.030
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The approximate number of shareholders of record of common
shares and Class B common shares, including those
shareholders participating in the Dividend Reinvestment Plan, as
of October 6, 2010 was 1,805 and 4, respectively.
Under the merger agreement, we have agreed only to declare or
pay the regular quarterly cash dividends on our Common Shares
consistent with past practices (not to exceed $0.0375 per Common
Share) before the completion of the merger. After the completion
of the merger, Keithley will be a privately-held subsidiary of
Danaher.
The closing sale price of our common shares on
September 28, 2010, which was the last trading day before
the announcement of the execution of the merger agreement, was
$12.39 per share. On October 7, 2010, the closing sale
price of our common shares was $21.51 per share. Shareholders
should obtain a current market quotation for our common shares
before making any decision with respect to the merger.
49
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The beneficial ownership of our Common Shares as of
October 1, 2010 by (1) each person known to us to be
the beneficial owner of more than 5% of our voting securities,
(2) each of our directors, our principal executive officer,
principal financial officer and our four most highly-compensated
executive officers based on compensation for our fiscal year
ended September 30, 2009, and (3) all of our current
executive officers and directors as a group, is set forth in the
table below. Except as set forth below, the address for each
listed person is care of, or c/o, Keithley Instruments, Inc.,
28775 Aurora Road, Solon, Ohio 44139.
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Common Shares
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Class B Common
Shares
(1)
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Number of Shares
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Number of Shares
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Percentage of
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Beneficially
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Percent
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Beneficially
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Percent
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Total Voting
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Name of Beneficial Owner
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Owned
(2)
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of Class
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Owned
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of Class
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Power
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Renaissance Technologies LLC
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810,500
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(3)
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5.96
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%
|
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—
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|
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—
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2.3
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%
|
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Joseph P. Keithley
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610,846
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(4)
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4.3
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%
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2,130,878
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(5)
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99.1
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%
|
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61.5
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%
|
|
Brian R. Bachman
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83,307
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*
|
|
|
|
—
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—
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*
|
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James B. Griswold
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155,552
|
|
|
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1.1
|
|
|
|
—
|
|
|
|
—
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|
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*
|
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Leon J. Hendrix, Jr.
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160,571
|
(6)
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|
1.2
|
|
|
|
—
|
|
|
|
—
|
|
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*
|
|
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Brian J. Jackman
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71,315
|
|
|
|
*
|
|
|
|
—
|
|
|
|
—
|
|
|
|
*
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|
|
Dr. N. Mohan Reddy
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|
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112,568
|
|
|
|
*
|
|
|
|
—
|
|
|
|
—
|
|
|
|
*
|
|
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Thomas A. Saponas
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65,295
|
|
|
|
*
|
|
|
|
—
|
|
|
|
—
|
|
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|
*
|
|
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Barbara V. Scherer
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55,507
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|
|
|
*
|
|
|
|
—
|
|
|
|
—
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|
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|
*
|
|
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Daniel A. Faia
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|
|
—
|
|
|
|
—
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|
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|
—
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—
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—
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Larry L. Pendergrass
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75,771
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|
|
|
*
|
|
|
|
—
|
|
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—
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*
|
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Mark J. Plush
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202,637
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(7)
|
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1.5
|
|
|
|
—
|
|
|
|
—
|
|
|
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*
|
|
|
Linda C. Rae
|
|
|
224,554
|
|
|
|
1.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
*
|
|
|
All executive officers and directors as a group (13 persons)
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1,960,905
|
|
|
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13.1
|
|
|
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2,130,878
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|
|
|
99.1
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%
|
|
|
63.9
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%
|
|
|
|
|
|
*
|
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Less than 1%
|
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(1)
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Pursuant to the Company’s Amended Articles of
Incorporation, all holders of Class B common shares are
entitled to convert any or all of their Class B common
shares into common shares at any time, on a
share-for-share
basis.
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(2)
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|
Includes common shares represented by options exercisable on or
before November 30, 2010 by Brian R. Bachman
(50,000 shares), James B. Griswold (40,000 shares),
Leon J. Hendrix, Jr. (50,000 shares), Brian J. Jackman
(10,000 shares), Joseph P. Keithley (453,725 shares),
Dr. N. Mohan Reddy (45,000 shares), Barbara V. Scherer
(20,000 shares), Daniel A. Faia (0 shares), Mark J.
Plush (143,954 shares), Larry L. Pendergrass
(67,225 shares), Linda C. Rae (204,225 shares) and all
executive officers and directors as a group (an additional
131,025 shares). Includes common shares earned, but not yet
issued, with respect to performance award units for the
three-year performance period that ended on September 30,
2010, based on an expected payout at 125% of target held by
Mr. Keithley (24,125 shares), Ms. Rae
(12,125 shares) and Mr. Plush (12,000 shares) and
at 100% of target for Mr. Pendergrass (6,300 shares)
and for all executive officer and directors as a group (an
additional 5,700 shares). Such shares are deemed to be
outstanding for the purpose of computing the percentage of
shares outstanding owned by each of the individuals and all
executive officers and directors as a group and their percentage
of total voting power of our capital stock, respectively, but
are not deemed outstanding for the purpose of computing the
percentage of shares held by or total voting power of any other
person. Includes restricted shares held by Mr. Keithley
(1,308 shares) and Mr. Plush (952 shares).
Includes shares held under our 1996 Outside Directors Deferred
Stock Plan for the benefit of Mr. Griswold
(59,045 shares), Mr. Hendrix (55,064 shares),
Mr. Jackman (25,808 shares), Dr. Reddy
(32,061 shares) and Mr. Saponas (25,580 shares),
as to which such persons do not have current voting rights.
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|
(3)
|
|
Information is as of December 31, 2008 and has been derived
from information contained in a Schedule 13G dated
February 13, 2009. Renaissance Technologies LLC reports
sole voting power with respect to
|
50
|
|
|
|
|
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|
898,600 shares, sole dispositive power with respect to
1,013,600 shares and shared dispositive power with respect
to 4,900 shares. Dr. James H. Simons reports
beneficial ownership of such shares due to his position as
control person of Renaissance Technologies LLC. The address of
Renaissance Technologies LLC and Dr. Simons is 800 Third
Avenue, New York, New York 10022.
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|
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(4)
|
|
Includes 2,448 shares owned by Mr. Keithley’s
wife. Mr. Keithley disclaims beneficial ownership with
respect to the shares owned by his wife.
|
|
|
|
(5)
|
|
Includes (a) 1,954,816 Class B common shares owned by
the Keithley Partnership, (b) 46,062 Class B common
shares owned by the Joseph F. Keithley 1988 Family Trust, an
Ohio trust of which Joseph P. Keithley is trustee, and
(c) 130,000 Class B common shares. Mr. Keithley
serves as the general partner of the Keithley Partnership and as
the co-trustee of the trust. In connection with the execution of
the merger agreement, on September 29, 2010, the Keithley
Partnership entered into the Voting Agreement with Danaher and
Merger Sub pursuant to which it agreed to vote a number of its
Class B common shares representing 19.99% of the voting
power of our outstanding Common Shares in favor of approval and
adoption of the merger agreement. (See “Voting
Agreement”). According to the Schedule 13D filed on
October 7, 2010 by Danaher and Merger Sub, as a result of
entering into the Voting Agreement, Danaher and Merger Sub may
be deemed to beneficially own a number of our common shares (on
an as-converted basis) representing 19.99% of the total voting
power of Keithley. Danaher and Merger Sub disclaim beneficial
ownership of such common shares.
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|
|
(6)
|
|
Includes 55,507 common shares held in the Bill Hendrix 2010
Grantor Retained Annuity Trust dated September 24, 2010.
|
|
|
|
(7)
|
|
Includes 1,350 shares owned by Mr. Plush’s son
and 16,251 common shares represented by options exercisable on
or before November 30, 2010 for Mr. Plush’s
former wife. Mr. Plush may exercise the options solely upon
the direction of his former wife who is entitled to the shares
issued upon exercise. Mr. Plush disclaims beneficial
ownership with respect to the options held for the benefit of
his former wife.
|
FUTURE
SHAREHOLDER PROPOSALS
If the merger is completed, there will be no public shareholders
of Keithley and no public participation in any future meetings
of our shareholders. However, if the merger is not completed,
our shareholders will continue to be entitled to attend and
participate in meetings of shareholders. Accordingly, we intend
to hold an annual meeting in 2011 only if the merger is not
completed.
In order to be eligible for inclusion in our proxy materials for
our 2011 annual meeting, if such a meeting is held, written
notice of any shareholder proposal must have been received by us
not later August 31, 2010. If a shareholder intends to
present a proposal at our 2011 annual meeting without the
inclusion of the proposal in our proxy materials, written notice
of the proposal must be given to the secretary of Keithley at
its principal executive offices no later than November 15,
2010 and no earlier than October 16, 2010. If the meeting
date is changed by more than 30 days from the date of the
2010 annual meeting date, the notice is due not less than
90 days prior nor more than 120 days prior to the 2011
annual meeting date and no later than the tenth day following
the earlier of (a) the date on which notice of the meeting
was mailed and (b) the date on which public disclosure of
the annual meeting date was made.
OTHER
MATTERS
We are not aware of any business or matter that may be properly
presented for consideration at the special meeting other than as
indicated above. However, if any other matter properly comes
before the special meeting, the persons named in the enclosed
proxy card will vote on those matters in accordance with their
discretion and best judgment.
51
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and current reports and proxy
statements with the SEC. You may read and copy any reports,
proxy statements or other information that we file with the SEC
at the following location of the SEC:
Public Reference Room
100 F Street, N.E., Room 1580
Washington, D.C. 20549
Please call the SEC at
1-800-SEC-0330
for further information on the public reference rooms. You may
also obtain copies of this information by mail from the Public
Reference Section of the SEC, 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549, at prescribed
rates. Our public filings are also available to the public from
document retrieval services and the Internet website maintained
by the SEC at www.sec.gov and on our website
at www.keithley.com.
We have supplied all information in this proxy statement
relating to us and our subsidiaries, and Danaher has supplied
all such information relating to Danaher and its affiliates.
Any person, including any beneficial owner, to whom this proxy
statement is delivered may request copies of reports, proxy
statements or other information concerning us, without charge,
by written or telephonic request directed to us at Investor
Relations, Keithley Instruments, Inc., 28775 Aurora Road,
Cleveland, Ohio 44139, phone number
(440) 248-0400.
If you would like to request documents, please do so by
[ • ], 2010 in order to receive them before the
special meeting.
You should only rely on the information contained in this proxy
statement. We have not authorized anyone to provide you with any
information that is different from that contained in this proxy
statement. This proxy statement is dated [ • ],
2010. You should not assume that the information contained in
this proxy statement is accurate as of any date other than that
date, and neither the mailing of this proxy statement to
shareholders nor the payment of cash in the merger shall create
any implication to the contrary.
You are urged to sign and return your proxy promptly in order to
make certain your shares will be voted at the special meeting.
For your convenience, a return envelope is enclosed requiring no
additional postage if mailed in the United States.
52
Annex A
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
DANAHER CORPORATION,
AEGEAN ACQUISITION CORP.
AND
KEITHLEY INSTRUMENTS, INC.
Dated as of September 29, 2010
TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER
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A-1
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Section 1.1.
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The Merger
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A-1
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Section 1.2.
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Closing
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A-1
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Section 1.3.
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Effective Time
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A-1
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Section 1.4.
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Effects of the Merger
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A-2
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Section 1.5.
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Articles of Incorporation and Code of Regulations
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A-2
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Section
1.6.
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Directors and Officers of the Surviving Corporation
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A-2
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ARTICLE II CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES AND
PAYMENT
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A-2
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Section 2.1.
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Effect on Company Shares
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A-2
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Section 2.2.
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Exchange of Certificates
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A-4
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ARTICLE III REPRESENTATIONS AND WARRANTIES
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A-6
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Section 3.1.
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Representations and Warranties of the Company
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A-6
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Section 3.2.
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Representations and Warranties of Parent and Merger Sub
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A-16
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ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS
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A-18
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Section 4.1.
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Conduct of Business
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A-18
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Section 4.2.
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No Solicitation by the Company
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A-21
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ARTICLE V ADDITIONAL AGREEMENTS
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A-23
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Section 5.1.
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Preparation of Proxy Statement; Company Meeting
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A-23
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Section 5.2.
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Access to Information; Confidentiality
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A-24
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Section 5.3.
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Commercially Reasonable Efforts; Cooperation
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A-24
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Section 5.4.
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Indemnification
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A-26
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Section 5.5.
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Public Announcements
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A-27
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Section 5.6.
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Shareholder Litigation
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A-27
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Section 5.7.
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Section 16(b)
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A-27
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Section 5.8.
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Employee Benefit Matters
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A-27
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Section 5.9.
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Parent Actions
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A-29
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Section 5.10.
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Control of Operations
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A-29
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ARTICLE VI CONDITIONS PRECEDENT
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A-29
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Section 6.1.
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Conditions to Each Party’s Obligation to Effect the Merger
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A-29
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Section 6.2.
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Conditions to Obligations of Parent and Merger Sub
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A-29
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Section 6.3.
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Conditions to Obligations of the Company
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A-30
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Section 6.4.
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Frustration of Closing Conditions
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A-30
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ARTICLE VII TERMINATION
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A-30
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Section 7.1.
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Termination
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A-30
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Section 7.2.
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Effect of Termination
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A-31
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Section 7.3.
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Fees and Expenses
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A-32
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ARTICLE VIII GENERAL PROVISIONS
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A-32
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Section 8.1.
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Nonsurvival of Representations and Warranties; Scope of
Representations and Warranties
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A-32
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Section 8.2.
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Notices
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A-33
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Section 8.3.
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Interpretation and Definitions
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A-34
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Section 8.4.
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Counterparts
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A-38
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Section 8.5.
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Entire Agreement; No Third-Party Beneficiaries
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A-38
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Section 8.6.
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Governing Law
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A-38
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Section 8.7.
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Assignment
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A-38
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Section 8.8.
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Consent to Jurisdiction; Waiver of Jury Trial
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A-38
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Section 8.9.
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Amendment
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A-39
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Section 8.10.
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Extension; Waiver
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A-39
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Section 8.11.
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Severability
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A-39
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A-i
INDEX OF
DEFINED TERMS
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Term
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Page
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2010 Management Incentive Plans
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A-28
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2011 Management Incentive Plans
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A-28
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Acquisition Agreement
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A-22
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Additional Financial Information
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A-33
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affiliate
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A-34
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Agreement
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A-1
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Antitrust Law
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A-34
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Board of Directors
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A-1
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Book-Entry Shares
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A-4
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Business Day
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A-34
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Cancelled Shares
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A-2
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Certificate of Merger
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A-1
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Certificates
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A-4
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Class B Common Shares
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A-2
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Closing
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A-1
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Closing Date
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A-1
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Code
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A-3
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Common Shares
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A-2
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Company
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A-1
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Company Adverse Recommendation Change
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A-22
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Company Articles
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A-6
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Company Code of Regulations
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A-6
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Company Disclosure Letter
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A-6
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Company ESPP
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A-20
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Company Executive Compensation Agreement
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A-11
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Company Inbound Agreements
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A-14
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Company Incentive Compensation Plan
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A-11
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Company IP
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A-34
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Company Leased Real Property
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A-13
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Company Leases
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A-13
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Company Material Adverse Effect
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A-34
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Company Material Contract
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A-15
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Company Meeting
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A-24
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Company Outbound Agreements
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A-14
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Company Owned Real Property
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A-13
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Company Pension Plan
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A-10
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Company Recommendation
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A-8
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Company Representatives
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A-21
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Company SERP
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A-20
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Company Share Plans
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A-35
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Company Share-Based Award
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A-3
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Company Shareholder Approval
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A-15
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Company Shares
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A-2
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A-ii
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Term
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Page
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Company Shares Option
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A-3
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Company Software Products
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A-35
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Company Subsidiary
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A-9
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Company Takeover Proposal
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A-22
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Company Welfare Plan
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A-11
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Confidentiality Agreement
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A-24
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Dissenting Shares
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A-3
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Effective Time
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A-1
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Environment
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A-35
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Environmental Condition
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A-35
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Environmental Permit
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A-35
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Environmental, Health and Safety Claim
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A-35
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Environmental, Health and Safety Laws
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A-35
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ERISA
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A-10
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ERISA Affiliate
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A-35
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Exchange Act
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A-7
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Exchange Fund
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A-4
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Filed SEC Documents
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A-35
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GAAP
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A-8
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Governmental Entity
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A-7
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Hazardous Substance
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A-36
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HSR Act
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A-7
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Indebtedness
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A-36
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Intellectual Property Rights
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A-36
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knowledge
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A-36
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Law
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A-36
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Liens
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A-36
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Maximum Premium
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A-26
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Merger
|
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A-1
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Merger Consideration
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A-2
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Merger Sub
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A-1
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|
|
Notice of Adverse Recommendation
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A-22
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NYSE
|
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A-8
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OGCL
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A-1
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|
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Ohio Secretary of State
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A-1
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Option Consideration
|
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A-3
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Outside Date
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A-30
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Parent
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A-1
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|
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Parent Disclosure Letter
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A-16
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Parent Material Adverse Effect
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A-36
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Parent Plan
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A-28
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Paying Agent
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A-4
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PCBs
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A-36
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Permits
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A-10
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A-iii
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Term
|
|
Page
|
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Permitted Liens
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A-36
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person
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A-37
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Plans
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|
A-37
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Prior Plan
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A-28
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Proxy Statement
|
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A-16
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Registered IP
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A-37
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Release
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A-37
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Retained Employee
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A-28
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Santa Rosa Property
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A-37
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SEC
|
|
|
A-7
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SEC Documents
|
|
|
A-8
|
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|
Securities Act
|
|
|
A-8
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|
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Share
|
|
|
A-2
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Software
|
|
|
A-37
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subsidiary
|
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A-37
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Successor Welfare Plan
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|
A-28
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Superior Proposal
|
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A-22
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|
|
Surviving Corporation
|
|
|
A-1
|
|
|
Tax Return
|
|
|
A-38
|
|
|
Taxes
|
|
|
A-37
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Termination Fee
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A-32
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Voting Agreement
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A-1
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A-iv
AGREEMENT
AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this
“Agreement”
), dated as of
September 29, 2010, is by and among Danaher Corporation, a
Delaware corporation
(“Parent”),
Aegean
Acquisition Corp., an indirect wholly-owned subsidiary of Parent
and an Ohio corporation
(“Merger Sub”
),
and Keithley Instruments, Inc., an Ohio corporation (the
“Company”
).
RECITALS
WHEREAS, the Board of Directors of the Company (the
“Board of Directors”
) has determined
that this Agreement and the transactions contemplated hereby,
including the Merger (as defined below), are fair and in the
best interests of the Company and its shareholders, and declared
it advisable, to enter into this Agreement, and the Board of
Directors has, as of the date of this Agreement, approved this
Agreement and recommended its adoption by the shareholders of
the Company;
WHEREAS, the Boards of Directors of Parent and Merger Sub have
approved this Agreement, and Parent, as the sole shareholder of
Merger Sub, has adopted this Agreement;
WHEREAS, Parent, Merger Sub and the Company desire to make the
representations, warranties and agreements specified in this
Agreement in connection with the transactions contemplated
hereby; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, as a condition and inducement to Parent’s and
Merger Sub’s willingness to enter into this Agreement,
Parent and Merger Sub are entering into a Voting Agreement with
Keithley Investment Co. Limited Partnership (the
“Voting Agreement”
).
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and
upon the terms and subject to the conditions set forth herein,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section
1.1.
The
Merger
.
On the terms and subject to the
conditions set forth herein, and in accordance with the Ohio
General Corporation Law
(
“OGCL”
), Merger
Sub will be merged with and into the Company (the
“Merger”
) at the Effective Time, and the
separate corporate existence of Merger Sub will thereupon cease.
Following the Effective Time, the Company will be the surviving
corporation of the Merger (the
“Surviving
Corporation”
).
Section
1.2.
Closing
.
The
closing of the Merger (the
“Closing”
)
will take place at the offices of Baker & Hostetler
LLP, PNC Center, 1900 East Ninth Street, Suite 3200,
Cleveland, Ohio 44114 at 9:00 a.m., local time, on a date
to be specified by the parties (the
“Closing
Date”
), which shall be no later than the second
Business Day after the satisfaction or waiver (to the extent
waiver is permitted by applicable Law) of the last to be
satisfied or waived of the conditions set forth in
Article VI
(other than those conditions that by
their nature are to be satisfied at the Closing, but subject to
the satisfaction or waiver (to the extent waiver is permitted by
applicable Law) of those conditions) or at such other place,
date and time as the Company and Parent may agree in writing.
Section
1.3.
Effective
Time
.
On the terms and subject to the
conditions set forth in this Agreement, on the Closing Date,
immediately after the Closing, the parties will (i) cause
the Merger to be consummated by delivering to the Secretary of
State of the State of Ohio (the
“Ohio Secretary of
State”
) a certificate of merger (the
“Certificate of Merger”
) in such form as
is required by and executed in accordance with
Section 1701.81 of the OGCL and (ii) make all other
filings or recordings required under the OGCL in connection with
the Merger. The Merger will become effective when the
Certificate of Merger is filed with the Ohio Secretary of State
or at such later date as the Company, Parent and Merger Sub
agree and specify in the Certificate of Merger (the date and
time the Merger becomes effective is referred to as the
“Effective Time”
).
A-1
Section
1.4.
Effects
of the Merger
.
The Merger will have the
effects set forth in this Agreement and in the applicable
provisions of the OGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the
assets and property of every description, and every interest in
the assets and property, wherever located, and the rights,
privileges, immunities, powers, franchises and authority of the
Company and Merger Sub will vest in the Surviving Corporation,
and all obligations of the Company and Merger Sub will become
the obligations of the Surviving Corporation, all as provided in
the OGCL and other applicable Laws.
Section
1.5.
Articles
of Incorporation and Code of Regulations
.
The
Certificate of Merger will provide that, at the Effective Time,
(a) the Articles of Incorporation of Merger Sub, as in
effect immediately before the Effective Time, will be the
Articles of Incorporation of the Surviving Corporation as of the
Effective Time (except that the name of the Surviving
Corporation shall be provided in writing by Parent prior to the
Effective Time) and (b) the Code of Regulations of Merger
Sub, as in effect immediately before the Effective Time, will be
the Code of Regulations of the Surviving Corporation as of the
Effective Time, in each case, until changed or amended as
provided therein and in accordance with the OGCL.
Section
1.6.
Directors
and Officers of the Surviving
Corporation
.
The directors of Merger Sub
immediately prior to the Effective Time and the individuals
specified by Parent prior to the Effective Time will be the
directors and officers, respectively, of the Surviving
Corporation until the earlier of their death, resignation or
removal or until their respective successors are duly elected
and qualified, as the case may be.
ARTICLE II
CONVERSION
OF SHARES;
EXCHANGE OF
CERTIFICATES AND PAYMENT
Section
2.1.
Effect
on Company Shares
.
At the Effective Time, by
virtue of the Merger and without any action on the part of the
Company, Merger Sub, Parent or the holders of any securities of
the Company:
(a)
Conversion of Company
Shares
.
Subject to
Section 2.1(b)
,
Section 2.1(d),
Section 2.1(e)
and
Section 2.1(f)
, each
common share, without par value, of the Company (the
“Common Shares”
) and each Class B
Common Share, without par value, of the Company (the
“Class B Common Shares”
), in each
case issued and outstanding immediately prior to the Effective
Time (collectively, the
“Company Shares”
and each, a
“Share”
), other than
(i) any Cancelled Shares (as defined, and to the extent
provided, in
Section 2.1(b)
) and (ii) any
Dissenting Shares (as defined, and to the extent provided, in
Section 2.1(e)
) shall thereupon be converted
automatically into and shall thereafter represent the right to
receive $21.60 in cash, without interest (the
“Merger
Consideration”
). All Company Shares that have been
converted into the right to receive the Merger Consideration as
provided in this
Section 2.1
shall be automatically
cancelled and shall cease to exist, and the holders of
certificates that immediately prior to the Effective Time
represented Company Shares and of Book-Entry Shares shall cease
to have any rights with respect to Company Shares other than the
right to receive the Merger Consideration upon surrender of
Certificates (as defined below) or Book-Entry Shares (as defined
below) in the manner provided in
Section 2.2.
(b)
Parent-Owned and Treasury
Shares
.
Each Share that is owned, directly or
indirectly, by Parent or any direct or indirect wholly-owned
subsidiary of Parent immediately prior to the Effective Time or
held by the Company or any Company Subsidiary (as hereinafter
defined) immediately prior to the Effective Time (the
“Cancelled Shares”
) shall, by virtue of
the Merger and without any action on the part of the holder
thereof, be cancelled and retired and shall cease to exist, and
no consideration shall be delivered in exchange for such
cancellation and retirement.
(c)
Conversion of Merger Sub Common
Shares
.
Each common share, no par value per
share, of Merger Sub issued and outstanding immediately prior to
the Effective Time will remain outstanding as a common share of
the Surviving Corporation.
(d)
Adjustments
.
If at any time
between the date of this Agreement and the Effective Time, any
change in the outstanding shares of capital stock of the Company
shall occur as a result of any reclassification,
recapitalization, share split (including a reverse share split)
or combination, exchange or readjustment of
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shares, or any share dividend or share distribution with a
record date during that period, or any similar transaction or
any transaction having the effect of any of the foregoing, the
Merger Consideration will be equitably adjusted to reflect that
change.
(e)
Dissenting Shareholder
Rights
.
Notwithstanding anything in this
Agreement to the contrary, to the extent required by the OGCL,
Company Shares that are issued and outstanding immediately prior
to the Effective Time and that are held by any shareholder who
was a record holder of the Company Shares as to which such
shareholder seeks relief as of the date fixed for determination
of shareholders entitled to notice of the Company Meeting (as
hereinafter defined) and who shall not have voted in favor of
adoption of the Agreement at the Company Meeting and who files
with the Company within ten (10) days after such vote at
the Company Meeting a written demand to be paid the fair cash
value for such Company Shares in accordance with
Section 1701.85 of the OGCL
(“Dissenting
Shares”)
will not be converted into the right to
receive the Merger Consideration as provided in
Section 2.1(a)
, unless and until such shareholder
fails to demand payment properly or otherwise loses such
shareholder’s rights as a dissenting shareholder, if any,
under the OGCL. If any such shareholder fails to perfect or
loses any such rights as a dissenting shareholder, that
shareholder’s Company Shares shall thereupon be deemed to
have been converted as of the Effective Time into only the right
to receive at the Effective Time the Merger Consideration,
without interest. From and after the Effective Time, each
shareholder who has asserted rights as a dissenting shareholder
as provided in Section 1701.85 of the OGCL shall be
entitled only to such rights as are granted under that section
of the OGCL. The Company shall promptly (but within three
(3) Business Days after the Company’s receipt of
notice) notify Parent of each shareholder who asserts rights as
a dissenting shareholder, and Parent shall have the right to
participate in and reasonably direct all negotiations and
proceedings (subject to the Company’s right to object to
any actions or positions taken by Parent that it deems, in its
sole discretion, unreasonable) with respect thereto. Prior to
the Effective Time, the Company shall not, except with the prior
written consent of Parent (which shall not be unreasonably
withheld, conditioned or delayed), make any payment with respect
to, or settle or offer to settle, any rights of a dissenting
shareholder asserted under Section 1701.85 of the OGCL, or
agree to do or commit to do any of the foregoing.
(f)
Share Options and Other Share-Based
Shares Awards
.
(i) Each option to purchase Company Shares (each, a
“Company Shares Option”
) granted
under the Company Share Plans, whether vested or unvested, that
is outstanding immediately prior to the Effective Time shall, as
of the Effective Time, become fully vested, cease to represent a
right or award with respect to Company Shares and entitle the
holder thereof to receive from the Surviving Corporation (and
Parent shall cause the Surviving Corporation to pay) at the
Effective Time without interest an amount in cash equal to the
product of (x) the total number of Company Shares subject
to such Company Shares Option and (y) the excess, if
any, of the amount of the Merger Consideration over the exercise
price per Share subject to such Company Shares Option, with
the aggregate amount of such payment rounded to the nearest cent
(the aggregate amount of such cash amounts hereinafter referred
to as the
“Option Consideration”
), less
such amounts as are required to be withheld or deducted under
the United States Internal Revenue Code of 1986, as amended (the
“Code”
), or any provision of
U.S. state or local or foreign Law relating to Taxes with
respect to the making of such payment.
(ii) At the Effective Time, each right of any kind,
contingent or accrued, to receive Company Shares or benefits
measured in whole or in part by the value of a number of Company
Shares granted under the Company Share Plans or Plans (including
restricted share units, deferred share units and performance
shares) (other than Company Shares Options) (each, a
“Company Share-Based Award”
), whether
vested or unvested, which is outstanding immediately prior to
the Effective Time shall cease to represent a right or award
with respect to Company Shares, shall become fully vested and
shall entitle the holder thereof to receive from the Surviving
Corporation (and Parent shall cause the Surviving Corporation to
pay), at the Effective Time, without interest, (A) with
respect to restricted share units and deferred share units, an
amount in cash equal to the product of the Merger Consideration
multiplied by the number of restricted share units or deferred
share units, as applicable, held by such person and
(B) with respect to performance award units, except as
provided in a
change-in-control
agreement or employment agreement listed in
Section
3.1(l)
of the Company Disclosure Letter, an amount in cash
equal to the product of the Merger Consideration multiplied by
the number of Common Shares
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represented by the initial award value under the agreement
evidencing such performance award units, in each case, less such
amounts as are required to be withheld or deducted under the
Code or any provision of U.S. state or local or foreign Law
relating to Taxes with respect to the making of such payment.
(iii) The parties agree (A) that, following the
Effective Time, no holder of a Company Shares Option or a
Company Share-Based Award or any participant in any Company
Share Plan shall have any right hereunder to acquire any shares
of capital stock or other equity interest (including stock
appreciation rights, restricted share units, performance shares,
phantom units, deferred share units and dividend equivalents) in
the Company, any Company Subsidiary or the Surviving
Corporation, and (B) at the Effective Time, each Company
Shares Option (whether vested or unvested) with an exercise
price equal to or in excess of the Merger Consideration, in each
case that is issued and outstanding immediately prior to the
Effective Time, by virtue of the Merger and without the need for
any further action on the part of the holder thereof, shall be
cancelled and extinguished without any conversion thereof or
payment therefor and in full satisfaction and discharge of all
rights of the holder held in such Company Shares Option.
Prior to the Effective Time, the Company shall use commercially
reasonable efforts to effectuate the actions contemplated by
this
Section 2.1(f)
, including, if necessary, using
commercially reasonable efforts to enter into option termination
or cancellation agreements with the holders of Company
Shares Options, without paying any consideration or
incurring any debts or obligations on behalf of the Company or
the Surviving Corporation other than the payments provided in
this
Section 2.1(f)
.
Section
2.2.
Exchange
of Certificates
.
(a)
Paying Agent
.
Immediately
prior to the Effective Time, Parent shall deposit, or shall
cause to be deposited, with a U.S. bank or trust company
that shall be appointed to act as a paying agent hereunder and
approved in advance by the Company (such approval not to be
unreasonably withheld, delayed or conditioned) (and pursuant to
an agreement in form and substance reasonably acceptable to
Parent and the Company) (the
“Paying
Agent”
), for the benefit of holders of the Company
Shares, cash in U.S. dollars sufficient to pay the
aggregate Merger Consideration in exchange for all of the
Company Shares outstanding immediately prior to the Effective
Time (other than the Cancelled Shares and the Dissenting
Shares), payable upon due surrender of the certificates that
immediately prior to the Effective Time represented Company
Shares
(
“Certificates”
) (or effective
affidavits of loss in lieu thereof) or non-certificated Company
Shares represented by book-entry
(
“Book-Entry
Shares”
) pursuant to this
Article II
.
Any cash deposited with the Paying Agent above shall hereinafter
be referred to as the
“Exchange Fund.”
(b)
Exchange Procedures
.
(i) As soon as reasonably practicable after the Effective
Time, (A) the Paying Agent shall mail to each holder of
record of Company Shares whose Company Shares were converted
into the Merger Consideration pursuant to
Section 2.1(a)
, (x) a letter of transmittal
(which shall specify that delivery shall be effected, and risk
of loss and title to Certificates shall pass, only upon delivery
of Certificates (or effective affidavits of loss in lieu
thereof) or Book-Entry Shares to the Paying Agent and shall be
in such form and have such other provisions as Parent and the
Company may mutually agree), and (y) instructions for use
in effecting the surrender of Certificates (or effective
affidavits of loss in lieu thereof) or Book-Entry Shares in
exchange for the Merger Consideration and (B) the Surviving
Corporation shall mail to each holder of a Company
Shares Option or Company Share-Based Award, a check in the
amount payable to such holder pursuant to
Section 2.1(f)
of this Agreement in respect of such
Company Shares Option or Company Share-Based Award.
(ii) Upon surrender of Certificates (or effective
affidavits of loss in lieu thereof) or Book-Entry Shares to the
Paying Agent together with such letter of transmittal, duly
completed and validly executed in accordance with the
instructions thereto (if required by the Paying Agent), and such
other documents as may customarily be required by the Paying
Agent, the holder of such Certificates (or effective affidavits
of loss in lieu thereof) or Book-Entry Shares shall be entitled
to receive in exchange for such properly surrendered
Certificates (or effective affidavits of loss in lieu thereof)
or such Book-Entry Shares an amount in cash equal to the Merger
Consideration that such holder has the right to receive pursuant
to this
Article II
, and the Certificates and Book-Entry
Shares so surrendered shall forthwith be cancelled. No interest
will be paid or accrued on any amount payable upon due surrender
of Certificates (or effective affidavits in lieu thereof) or
Book-Entry Shares or to a holder of a Company Shares Option
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or a Company Share-Based Award. In the event of a transfer of
ownership of Company Shares that is not registered in the
transfer records of the Company, the relevant Merger
Consideration to be paid upon due surrender of the Certificate
or Book-Entry Shares may be paid to the transferee thereof if
the Certificate or Book-Entry Shares formerly representing such
Company Shares is presented to the Paying Agent, accompanied by
all documents required to evidence and effect such transfer and
to evidence that any applicable share transfer Taxes have been
paid or are not payable. Until surrendered as contemplated by
this
Section 2.2(b)
, each Certificate and Book-Entry
Share shall be deemed at any time after the Effective Time to
represent only the right to receive upon surrender the Merger
Consideration (without interest) as contemplated by this
Article II
.
(iii) The Paying Agent and the Surviving Corporation are
entitled to deduct and withhold from the consideration otherwise
payable under this Agreement to any holder of Company Shares or
holder of Company Shares Options or Company Share-Based
Awards such amounts as are required to be withheld or deducted
under the Code or any provision of U.S. state or local or
foreign Tax Law with respect to the making of such payment.
Amounts so withheld or deducted and paid over to the applicable
Governmental Entity (as hereinafter defined) will be treated for
all purposes of this Agreement as having been paid to the person
in respect of which such deduction and withholding were made.
(c)
Closing of Transfer Books
.
At
the Effective Time, the share transfer books of the Company will
be closed, and there will be no further registration of
transfers on the share transfer books of the Company or the
Surviving Corporation of the Company Shares that were
outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates or Book-Entry Shares are
presented to the Surviving Corporation for transfer, they will
be cancelled and exchanged for the relevant Merger Consideration
pursuant to this
Article II
.
(d)
Termination of Exchange
Fund
.
Any portion of the Exchange Fund
(including the proceeds of any investments thereof) that remains
undistributed to the former holders of Company Shares on the
first anniversary of the Effective Time will be delivered to the
Surviving Corporation upon demand, and any former holders of
Company Shares who have not surrendered their Shares in
accordance with this
Section 2.2
will thereafter
look only to the Surviving Corporation for payment of their
claim for the Merger Consideration, without interest thereon,
upon due surrender of their Company Shares.
(e)
No Liability
.
Notwithstanding
anything in this Agreement to the contrary, none of the Company,
Parent, the Surviving Corporation, the Paying Agent or any other
person will be liable to any former holder of Company Shares for
any amount properly delivered to a public official pursuant to
any applicable abandoned property, escheat or similar Law.
(f)
Investment of Exchange
Fund
.
The Paying Agent shall invest all cash
included in the Exchange Fund as reasonably directed by Parent;
provided
,
however
, that any investment of such
cash must be limited to obligations of, or obligations fully
guaranteed as to principal and interest by, the
U.S. federal government or an agency or instrumentality
thereof, commercial paper obligations rated A1 or P1 or better
by Moody’s Investors Service, Inc. or Standard &
Poor’s Corporation, respectively, or certificates of
deposit, bank repurchase agreements or banker’s acceptances
of commercial banks with capital exceeding $5.0 billion
(based on the most recent financial statements of such bank that
are then publicly available). Any interest and other income
resulting from such investments will be paid to the Surviving
Corporation pursuant to
Section 2.2(d)
.
(g)
Lost Certificates
.
If any
Certificate has been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by
the Paying Agent or reasonably requested by the Surviving
Corporation, the posting by such person of a bond in a customary
amount as indemnity
and/or
the
providing of an indemnity, for the benefit of or to, as
applicable, the Surviving Corporation in a manner reasonably
satisfactory to the Surviving Corporation against any claim that
may be made against it with respect to such Certificate (and
such affidavit of loss shall not be deemed effective without the
posting of such bond
and/or
other
indemnity if required hereunder), the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate a check
in the amount of the number of Company Shares represented by
such lost, stolen or destroyed Certificate multiplied by the
Merger Consideration.
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ARTICLE III
REPRESENTATIONS
AND WARRANTIES
Section
3.1.
Representations
and Warranties of the Company
.
Except as set
forth in the Filed SEC Documents (excluding disclosures in any
such SEC Documents under the heading “Risk Factors” or
any disclaimers made in such SEC Documents as to the use of
forward-looking or predictive statements pursuant to the safe
harbor provisions of the Private Securities Litigation Reform
Act of 1995) or in the applicable section or subsection of
the disclosure letter delivered by the Company to Parent prior
to the execution of this Agreement (the
“Company
Disclosure Letter”
) (provided that a matter
disclosed in the Company Disclosure Letter with respect to one
representation or warranty shall also be deemed to be disclosed
with respect to each other representation or warranty to the
extent that it is reasonably apparent from the text of such
disclosure that such disclosure applies to or qualifies such
other representation or warranty), the Company hereby represents
and warrants to Parent and Merger Sub as follows:
(a)
Organization and Standing
.
The
Company is a corporation validly existing and in good standing
under the Laws of the State of Ohio and has the requisite
corporate authority to carry on its business as now being
conducted. The Company is duly qualified or licensed to do
business in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary,
except for those jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, would
not reasonably be expected to have a Company Material Adverse
Effect. The Company has made available to Parent prior to the
execution of this Agreement complete and correct copies of the
Restated Articles of Incorporation of the Company (the
“Company Articles”
) and the Code of
Regulations of the Company, as amended to date (the
“Company Code of Regulations”
).
(b)
Capital Structure
.
The
authorized capital shares of the Company consist entirely of
(i) 80,000,000 Common Shares and (ii) 9,000,000
Class B Common Shares. At the close of business on
September 28, 2010: (i) 15,021,920 Common Shares and
2,150,502 Class B Common Shares were issued and
outstanding; (ii) 1,380,297 Common Shares and no
Class B Common Shares were held by the Company in its
treasury; (iii) 2,529,276 Common Shares were subject to
issued and outstanding options to purchase Common Shares granted
under the Company Shares Plans, (iv) Company
Share-Based Awards equivalent to 467,238 Common Shares have been
granted (including restricted share units equivalent to 217,775
Common Shares and performance award units with aggregate initial
award values equivalent to 249,463 Common Shares), and
(v) no Common Shares were held by any Company Subsidiary.
Since such date, no additional Common Shares have been issued
except for exercises of Company Shares Options and stock
issuances pursuant to Company Share-Based Awards, in each case,
in accordance with their terms and as specifically described in
Section 3.1(b)
of the Company Disclosure Letter. All
outstanding Company Shares are, and all Company Shares that may
be issued after the date hereof will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any preemptive rights or
other similar rights and were not (or in the case of Common
Shares that have not yet been issued, will not be) issued in
violation of the Company Articles and the Company Code of
Regulations. Except as otherwise provided in this
Section 3.1(b)
and except for Common Shares issuable
upon the conversion of Class B Common Shares, there are not
as of the date hereof issued, reserved for issuance or
outstanding (i) any capital shares or other voting
securities of the Company, (ii) any securities convertible
into or exchangeable or exercisable for capital shares or voting
securities of the Company or any Company Subsidiary,
(iii) any warrants, calls, options or other rights to
acquire from the Company or any Company Subsidiary any capital
shares, voting securities or securities convertible into or
exchangeable or exercisable for capital shares or voting
securities of the Company or any Company Subsidiary or
(iv) restricted shares, restricted share units, stock
appreciation rights, performance shares, contingent value
rights, “phantom” stock or similar securities or
rights that are derivative of, or provide economic benefits
based, directly or indirectly, on the value or price of, any
capital stock of, or other equity interests in, the Company or
any Company Subsidiary. Except as otherwise provided in this
Section 3.1(b)
and except for Common Shares issuable
upon the conversion of Class B Common Shares, Common Shares
issuable pursuant to the Company’s 1996 Outside Directors
Deferred Stock Plan, the Common Shares issuable pursuant to
Company Share Plans set forth in
Section 3.1(b)
of
the Company Disclosure Letter and obligations to repurchase
securities pursuant to agreements entered into with respect to
the Company Share Plans, there are
A-6
no outstanding obligations of the Company or any Company
Subsidiary to (i) issue, deliver or sell, or cause to be
issued, delivered or sold, any capital shares, voting securities
or securities convertible into or exchangeable or exercisable
for capital shares or voting securities of the Company or any
Company Subsidiary, or (ii) repurchase, redeem or otherwise
acquire any such securities. Except for the Voting Agreement,
neither the Company nor any Company Subsidiary is a party to
(i) any voting agreement or trust with respect to the
voting of any such securities, or (ii) any other agreements
or understandings with respect to the voting of the capital
stock of the Company.
Section 3.1(b)
of the Company
Disclosure Letter sets forth (i) the number of Company
Shares subject to each Company Shares Option and Company
Share-Based Award, (ii) the expiration date of each such
Company Shares Option and Company Share-Based Award, and
(iii) the price at which each such Company
Shares Option may be exercised. There are no bonds,
debentures, notes or other Indebtedness having voting rights (or
convertible into securities having such rights) of the Company
or any Company Subsidiary, whether issued by the Company or any
Company Subsidiary, issued and outstanding.
(c)
Authority
.
The Company has all
requisite corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and, subject to
receipt of the Company Shareholder Approval, to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Company, the performance of
its obligations hereunder and the consummation by the Company of
the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company and
no other corporate proceedings on the part of the Company or any
Company Subsidiary are necessary to authorize the adoption,
execution or performance of this Agreement or to consummate the
transactions contemplated hereby, subject, in the case of the
Merger, to receipt of the Company Shareholder Approval. This
Agreement has been duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery
hereof by Parent and Merger Sub, constitutes the valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the rights
of creditors generally and subject to general equity principles.
(d)
Non-Contravention
.
The
execution and delivery of this Agreement by the Company, the
performance by the Company of its covenants and obligations
hereunder and the consummation of the Merger do not and will not
(i) violate or conflict with any provision of the Company
Articles or the Company Code of Regulations, (ii) conflict
with, or result in the breach of or constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination
or acceleration under, any Company Material Contract,
(iii) subject to obtaining or making the authorizations,
consents or approvals referred to in
Section 3.1(e)
and, in the case of the consummation of the Merger, subject to
obtaining the Company Shareholder Approval, violate or conflict
with any Law or order applicable to the Company or any of the
Company Subsidiaries or by which any of their respective
properties or assets are bound, or (iv) result in the
creation of any Lien upon any of the properties or assets of the
Company or any of the Company Subsidiaries, except in the case
of each of clauses (ii), (iii) and (iv) above, for
such violations, conflicts, defaults, terminations,
accelerations or Liens which would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect.
(e)
Required Government
Approvals
.
No consent, approval or
authorization of, or filing with, any federal, state or local or
foreign government, any court, administrative, regulatory or
other governmental agency, commission or authority or any
non-governmental United States or foreign self-regulatory
agency, commission or authority (each, a
“Governmental Entity”
) is required by
the Company in connection with the execution and delivery of
this Agreement by the Company, the performance by the Company of
its obligations hereunder or the consummation by the Company of
the transactions contemplated hereby, except for: (i) the
filing with the Securities and Exchange Commission (the
“SEC”
) of (A) the Proxy Statement
(as hereinafter defined) and (B) such reports under
Section 13(a), 13(d), 15(d) or 16(a) or such other
applicable sections of the Securities Exchange Act of 1934 (the
“Exchange Act”
), as may be required in
connection with this Agreement and the transactions contemplated
hereby, (ii) the filing with the Ohio Secretary of State of
the Certificate of Merger, (iii) the filing of a premerger
notification and report form by the Company under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the
“HSR
Act”
) and any applicable foreign antitrust
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filings, (iv) notifications to the New York Stock Exchange
(the
“NYSE”
), and (v) such
consents, approvals or authorizations or filings the failure of
which to be made or obtained would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect.
(f)
Company Recommendation
.
As of
the date hereof, at a meeting duly called and held, the Board of
Directors of the Company has unanimously (i) determined and
declared that this Agreement and the Merger are advisable and in
the best interests of the Company’s shareholders,
(ii) approved the Merger in accordance with the OGCL,
(iii) approved this Agreement and the transactions
contemplated hereby, and (iv) resolved (subject to
Section 4.2
) to recommend that the Company’s
shareholders vote to adopt this Agreement (the
“Company Recommendation”
).
(g)
SEC Documents and Financial Statements
.
(i) The Company has filed or furnished (as applicable) all
forms, documents, reports, statements and certifications,
together with any amendments required to be made with respect
thereto, required to be filed or furnished by it with the SEC
since September 30, 2009 (as amended through the date
hereof, the
“SEC Documents”
). As of
their respective dates, or, if amended prior to the date hereof,
as of the date of the last such amendment prior to the date
hereof, the SEC Documents complied in all material respects with
the requirements of the Securities Act of 1933 (the
“Securities Act”
) and the Exchange Act,
as the case may be, and the applicable rules and regulations
promulgated thereunder, and none of the SEC Documents contained
any untrue statement of a material fact or omitted to state any
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. As of the date of this
Agreement, there are no outstanding or unresolved comments in
comment letters received from the staff of the SEC.
(ii) The consolidated financial statements (including all
related notes and schedules thereto) of the Company included in
the SEC Documents (i) fairly present in all material
respects the consolidated financial position of the Company and
the Company Subsidiaries, as of the respective dates thereof,
and the consolidated results of their operations and their
consolidated cash flows and their consolidated changes in
shareholders’ equity for the respective periods indicated
(subject, in the case of the unaudited statements, to normal and
recurring non-material year-end audit adjustments and to any
other adjustments described therein, including the notes
thereto) and (ii) have been prepared in accordance with
United States generally accepted accounting principles
(
“GAAP”
) (except, in the case of the
unaudited statements, as permitted by the SEC) applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto). Since September 30, 2009,
there has been no material change in the Company’s
accounting methods or principles that would be required to be
disclosed in the Company’s financial statements in
accordance with GAAP, except as described in the notes to such
financial statements. The Company (i) has implemented and
maintains disclosure controls and procedures (as defined in
Rule 13a-15(e)
of the Exchange Act) to ensure that material information
relating to the Company, including the Company Subsidiaries, is
made known to the chief executive officer and the chief
financial officer of the Company by others within those entities
and (ii) has established and maintains internal controls
over financial reporting (as defined in Rule
13a-15(f)
of
the Exchange Act) to ensure the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with GAAP, including without
limitation such policies and procedures specified in
Rule 14a-15(f)(1)-(3)
of the Exchange Act. As of the date hereof, the Company has not
identified any existing material weaknesses in the design or
operation of the internal control over financial reporting.
(iii) Since September 30, 2009, neither the Company
nor, to the knowledge of the Company, any Company Subsidiary or
director, officer or auditor of the Company has received or
otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures,
methodologies or methods of the Company or any Company
Subsidiary or their respective internal accounting controls,
including any complaint, allegation, assertion or claim that the
Company or any Company Subsidiary has engaged in questionable
accounting or auditing practices.
(h)
No Undisclosed
Liabilities
.
The Company and the Company
Subsidiaries have no liabilities that would be required by GAAP
to be reflected on a consolidated balance sheet (or in the notes
thereto) of the
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Company and the Company Subsidiaries, other than
(a) liabilities reflected or otherwise reserved against in
the consolidated financial statements of the Company and the
Company Subsidiaries included in the SEC Documents,
(b) liabilities arising under this Agreement or incurred in
connection with the transactions contemplated by this Agreement,
(c) liabilities incurred since the date of the consolidated
financial statements of the Company and the Company Subsidiaries
included in the SEC Documents in the ordinary course of business
consistent with past practice and (d) liabilities that
would not have, individually or in the aggregate, a Company
Material Adverse Effect.
(i)
Subsidiaries
.
(i)
Section 3.1(i)
of the Company Disclosure
Letter contains a complete and accurate list of the name,
jurisdiction of organization and schedule of shareholders of
each subsidiary of the Company, whether consolidated or
unconsolidated (each a
“Company Subsidiary,”
and collectively, the
“Company
Subsidiaries”
). Each Company Subsidiary is validly
existing and in good standing (to the extent the concept of
“good standing” is applicable) under the Laws of the
jurisdiction of its organization. Each Company Subsidiary has
the requisite corporate, limited liability company, partnership
or other similar power and authority to carry on its business as
now being conducted. Each Company Subsidiary is duly qualified
or licensed to do business in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of
its properties makes such qualification or licensing necessary,
except for those jurisdictions where the failure to be so
qualified or licensed would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect. None of the Company Subsidiaries is in violation of its
charter, bylaws or other constituent documents except to the
extent that such violation would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect.
(ii) All of the outstanding capital stock of, or other
equity interests in, each Company Subsidiary (i) have been
duly authorized, validly issued and are fully paid and
nonassessable and not subject to or issued in violation of
preemptive rights or other similar rights, (ii) are owned,
directly or indirectly, by the Company, free and clear of all
Liens, and (iii) are free of any other restriction
(including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership
interests) that would restrict or limit the operation by the
Surviving Corporation of such Company Subsidiary’s business
as currently conducted.
(iii) Except for the capital stock and other equity
interests of the Company Subsidiaries set forth on
Section 3.1(i)
of the Company Disclosure Letter, the
Company does not own, directly or indirectly, more than five
percent (5%) of any capital stock or other equity securities or
interests in any person, or any securities convertible into or
exchangeable or exercisable for capital shares or voting
securities of any person.
(j)
Absence of Certain Changes or
Events
.
Except for liabilities incurred in
connection with this Agreement and the transactions contemplated
hereby, since June 30, 2010, (i) the Company and the
Company Subsidiaries have conducted their operations in all
material respects only in the ordinary course consistent with
past practice, (ii) there has not been any event,
circumstance, change, occurrence or state of facts that would
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect and
(iii) there has not been any action taken by the Company or
Company Subsidiaries during the period from June 30, 2010
through the date of this Agreement that, if taken on or after
the date of this Agreement without Parent’s consent, would
violate the provisions of
Section 4.1(a)
(ix),
(xi) and (xiv).
(k)
Compliance with Applicable Laws;
Litigation
.
(i) The Company and the Company Subsidiaries have been,
since September 30, 2009, and are in compliance with all
Laws applicable to the Company and the Company Subsidiaries and
have not received any written notice of non-compliance with
respect to any Law, except to the extent that any non-compliance
would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Since
September 30, 2009, neither the Company nor any Company
Subsidiary has conducted any internal investigation with respect
to any actual, potential or alleged material violation of any
Law or Company or Company Subsidiary policy by any director,
officer or employee. To the knowledge of the Company, neither
the Company nor any Company Subsidiary (nor any of their
respective directors, officers, employees, agents,
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representatives or distributors with respect to the Company or a
Company Subsidiary) has been since September 30, 2009 or is
the subject of any material investigation by any Governmental
Entity.
(ii) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, none of the Company, any Company Subsidiary or any of
their respective predecessors, nor any director, officer, agent
or employee of the Company or any Company Subsidiary, nor, to
the knowledge of the Company, consultants, agents,
representatives or any other person associated with or acting on
their behalf, have directly or indirectly, (A) made,
promised, offered, or authorized (1) any unlawful
contributions, gifts, entertainment or other unlawful expenses
related to political activity, directly or indirectly, to any
government official, employee or agent, political party or any
official of such party, or political candidate, or (2) any
unlawful bribe, rebate, influence payment, kickback or similar
unlawful payment, or (B) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or any rules
or regulations thereunder or any similar anti-corruption or
anti-bribery Laws applicable to the Company or any of the
Company Subsidiaries in any jurisdiction outside the United
States.
(iii) The Company and the Company Subsidiaries hold all
licenses, permits, variances, consents, authorizations, waivers,
grants, franchises, concessions, exemptions, orders,
registrations and approvals of Governmental Entities
(“Permits”)
necessary for the conduct of
their businesses as currently conducted, except for any failure
to hold such Permits that would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect. To the knowledge of the Company, neither the
Company nor any Company Subsidiary has received written notice
that any Permit will be terminated or modified or cannot be
renewed in the ordinary course of business, except for any
terminations, modifications or nonrenewals that would not
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The execution,
delivery and performance of this Agreement and the consummation
of the Merger do not and will not violate any Permit, or result
in any termination, modification or nonrenewal thereof, except
for such violations, terminations, modifications or nonrenewals
thereof that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect.
(iv) As of the date of this Agreement, there is no suit,
action or proceeding by or before any Governmental Entity
pending or, to the knowledge of the Company, threatened against
the Company challenging or seeking to prohibit the execution,
delivery or performance of this Agreement or any of the
transactions contemplated hereby. As of the date of this
Agreement, there is no other suit, action, arbitration,
alternative dispute resolution action, proceeding or, to the
Company’s knowledge, investigation by a Governmental Entity
(whether civil, criminal or administrative), involving an amount
in excess of $250,000 or which is otherwise material to the
Company, pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary or any of their
properties or assets (or to the Company’s knowledge, any
director or officer of the Company or any of the Company
Subsidiaries in such capacity as director or officer). Neither
the Company nor any of the Company Subsidiaries nor any of their
respective properties or assets is subject to any outstanding
orders, writs, injunctions or decrees that would reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
Notwithstanding anything to the contrary in this
Section 3.1(k)
, no representation or warranty is
made in this
Section 3.1(k)
in respect of the
matters referenced in
Section 3.1(g)
or in respect
of environmental, Tax, employee benefits or employee relations
matters.
(l)
Employee Benefit Plans
.
(i)
Section 3.1
(l) of the Company
Disclosure Letter sets forth a true and complete list that
identifies (A) each material stock bonus, pension,
profit-sharing, stock ownership, stock purchase, retirement
income, or similar employee pension benefit plan (within the
meaning of section 3(2) of the Employee Retirement Income
Security Act
(
“ERISA”
)), which the
Company or an ERISA Affiliate sponsors or maintains for the
benefit of current or former employees or to which the Company
or such ERISA Affiliate has a funding obligation (each, a
“Company Pension Plan”
and collectively,
the
“Company Pension Plans”
);
(B) each material disability income, death benefit,
hospitalization, medical insurance, life insurance, vacation,
severance, or similar welfare plan, fund, policy or program
(within the meaning of section 3(1) of ERISA), which the
Company or an ERISA Affiliate sponsors or maintains for the
benefit of current or former employees, or to which the
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Company or such ERISA Affiliate has a funding obligation (each,
a
“Company Welfare Plan”
and
collectively, the
“Company Welfare
Plans”
); (C) each material deferred
compensation, incentive compensation, stock option, equity
compensation, or similar plan, program or policy which the
Company or an ERISA Affiliate maintains for the benefit of any
current or former employee or director of the Company or any
ERISA Affiliate, under which the Company or such ERISA Affiliate
has a financial obligation (each, a
“Company
Incentive Compensation Plan”
and collectively, the
“Company Incentive Compensation Plans”
);
and (D) each change in control agreement, employment
agreement, or separation agreement in effect as of the date of
this Agreement with any current or former employee or director
of the Company or any ERISA Affiliate to which the Company or
such ERISA Affiliate is a party or to which the Company or such
ERISA Affiliate is bound (each, a
“Company Executive
Compensation Agreement
”
and collectively, the
“Company Executive Compensation
Agreements”).
(ii) Except as would not have, individually or in the
aggregate, a Company Material Adverse Effect, neither the
Company nor any ERISA Affiliate has any liability (including any
contingent liability) with respect to any Company Pension Plan,
Company Welfare Plan, Company Incentive Compensation Plan or
Company Executive Compensation Agreement that is not reflected
or otherwise reserved against in the consolidated financial
statements of the Company and the Company Subsidiaries included
in the SEC Documents.
(iii) (A) Except as would not reasonably be expected
to have, individually or in the aggregate, a Company Material
Adverse Effect, each of the Company Pension Plans and Company
Welfare Plans which is subject to ERISA and is currently in
effect is being operated and administered in compliance with
ERISA, the Code, and all other applicable Laws (including those
related to governmental reporting and disclosure); (B) each
of the Company Pension Plans intended to be
“tax-qualified” within the meaning of
Section 401(a) of the Code is so qualified, and, to the
knowledge of the Company, there are no existing circumstances or
events that reasonably could be expected to adversely affect the
tax-qualified status of such Plan, other than non-material
administrative errors capable of being resolved under the
Employee Plans Compliance Resolution System maintained by the
Internal Revenue Service; (C) to the knowledge of the
Company, neither the Company nor any ERISA Affiliate has any
direct or indirect civil or other material liability to any
Company Pension Plan or Company Welfare Plan capable of being
pursued or recovered under Section 409 of ERISA;
(D) to the knowledge of the Company, neither the Company
nor any ERISA Affiliate has directly or indirectly engaged in,
or has been party to, any transaction which could reasonably
subject the Company or such ERISA Affiliate to either a material
civil penalty capable of assessment under Sections 502(i)
or 502(l) of ERISA or a material Tax imposed under
Section 4975 or 4976 of the Code; and (E) there are no
pending or, to the knowledge of the Company, threatened claims
(other than routine claims for benefits or payments, including
claims made in respect of a complete or partial denial of
benefits or payments) involving any Company Pension Plan, any
Company Welfare Plan, any Company Incentive Compensation Plan,
or any Company Executive Compensation Agreement, which could
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(iv) Neither the execution and delivery of this Agreement
nor the consummation of the transaction(s) contemplated hereby
(either alone or in conjunction with any other events) will
(A) materially increase any benefits otherwise payable
under any Company Pension Plan or Company Welfare Plan or result
in any acceleration of the time of payment or vesting of any
material amount of benefits under any such plan (except as
specifically contemplated herein), or (B) require the
pre-funding of any material benefits or other payments (other
than in the normal course) under any Company Pension Plan,
Company Welfare Plan, Company Incentive Compensation Plan, or
Company Executive Compensation Agreement.
(v) No representation or warranty is made by the Company in
respect of any Company- or ERISA Affiliate-related employee
benefit plan matters, or any executive compensation matters, in
any Section of this Agreement other than this
Section 3.1(l)
.
(m)
Taxes
.
(i) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, (a) the Company and the Company Subsidiaries have
filed all Tax Returns required to be filed, and all such returns
are correct and complete; (b) the Company and the Company
Subsidiaries have
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paid all Taxes shown due on any Tax Return; (c) there are
no pending or, to the knowledge of the Company, threatened in
writing audits, examinations, or other proceedings in respect of
Taxes relating to the Company or any Company Subsidiary; and
(d) neither the Company nor any Company Subsidiary has any
liability for Taxes of any person (other than the Company and
the Company Subsidiaries) under Treasury
Regulation Section 1.1502-6
(or any comparable provision of Law), as a transferee or
successor, by contract, or otherwise.
(ii) Neither the Company nor any Company Subsidiary is a
party to any agreement or arrangement relating to the
allocation, sharing or indemnification of Taxes.
(iii) Neither the Company nor any Company Subsidiary has
waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or
deficiency.
(iv) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, the Company and each Company Subsidiary have withheld
and remitted to the appropriate taxing authority all Taxes
required to have been withheld and remitted in connection with
any amounts paid or owing to any employee, independent
contractor, creditor, shareholder, or other third party.
(v) Neither the Company nor any Company Subsidiary has
distributed the stock of another person or has had its stock
distributed by another person, in a transaction that was
purported or intended to be governed in whole or in part by
Section 355 of the Code.
(vi) Neither the Company nor any Company Subsidiary has
participated in any “reportable transaction” as
defined in Section 6707A(c)(i) and Reg. §1.6011-4(b).
(vii) Neither the Company nor any Company Subsidiary has
been a United States real property holding corporation within
the meaning of Code §897(c)(2) during the applicable period
specified in Code §897(c)(1)(A)(ii).
(viii) No representation or warranty is made by the Company
in respect of Tax matters in any Section of this Agreement other
than this
Section 3.1(m)
.
(n)
Environmental Matters
.
(i) Except to the extent that noncompliance would not
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, the Company and
the Company Subsidiaries are and have been for the three years
ending on the date hereof in compliance with all applicable
Environmental, Health and Safety Laws and Environmental Permits.
(ii) Neither the Company nor any Company Subsidiary has
received in the last three years any written material
Environmental, Health and Safety Claims and, to the knowledge of
the Company, there are no material Environmental, Health and
Safety Claims threatened, against the Company or any Company
Subsidiary.
(iii) No Hazardous Substance has been generated, treated,
stored, disposed of, used, handled or manufactured at currently
or previously owned, leased or operated properties in violation
of applicable Environmental, Health and Safety Laws or
Environmental Permits as a result of any activity of the Company
or any Company Subsidiary during the time such properties were
owned, leased or operated by the Company or any Company
Subsidiary that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect.
(iv) There have been no Releases of any Hazardous Substance
by the Company or any Company Subsidiary in, on, under, from or
affecting any currently or previously owned, leased or operated
properties in violation of applicable Environmental, Health and
Safety Laws that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect.
(v) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, neither the Company nor any Company Subsidiary has
received from any Governmental Entity any written notice that it
may be a potentially responsible party in respect of, or may
otherwise bear liability for, any actual or threatened Release
of any Hazardous Substance at any site or facility that is
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listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information
System, the National Corrective Action Priority System or any
similar or analogous federal, state or local list.
(vi) No representation or warranty is made by the Company
in respect of environmental matters in any Section of this
Agreement other than this
Section 3.1(n)
.
(o)
Real Property
.
(i) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, the Company or a Company Subsidiary has good and
marketable title to each parcel of, or interest in, real
property owned by the Company or a Company Subsidiary (the
“Company Owned Real Property”).
(ii) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, the Company Owned Real Property and all real property
leased by the Company and the Company Subsidiaries (the
“Company Leased Real Property”
), a
complete and accurate list of which has been disclosed in
Section 3.1(o)
of the Company Disclosure Letter,
constitute all of the real property occupied or used by the
Company and the Company Subsidiaries in connection with the
operation of their respective businesses as currently conducted.
Except as would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect, the
Company or a Company Subsidiary has a valid leasehold interest
in all Company Leased Real Property other than the Santa Rosa
Property. Each of the Company and the Company Subsidiaries has
complied in all material respects with the terms of all material
leases of the Company Leased Real Property (the
“Company Leases”
) to which it is a party
and under which it is in occupancy, and all such Company Leases
are in full force and effect;
provided, however
, that no
representation or warranty is made with respect to the lease for
the Santa Rosa Property. To the knowledge of the Company, the
lessors under the Company Leases have complied in all material
respects with the terms of the Company Leases. Each of the
Company and the Company Entities enjoys peaceful and undisturbed
possession under all such Company Leases (other than the lease
for the Santa Rosa Property), except to the extent that a
failure to do so would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect.
(p)
Intellectual Property
.
(i) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, there are no legal disputes, claims, actions or
proceedings, pending or, to the knowledge of the Company,
threatened (i) alleging infringement of any Intellectual
Property Rights of any third party by the Company or any of the
Company Subsidiaries, or (ii) challenging the ownership or
use of the Company IP. To the knowledge of the Company, none of
the Company IP infringes any Intellectual Property Rights of any
person, except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect. To the knowledge of the Company, no third parties are
infringing any Company IP, except as would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect, neither the Company nor any of the
Company Subsidiaries has made any claims alleging that any third
party is infringing any Company IP.
(ii) To the knowledge of the Company, the Company or one of
the Company Subsidiaries owns the right, title and interest in
and to, free and clear of any Liens, or has the right or license
to use, all Intellectual Property Rights used in or necessary
for the conduct of the business of the Company and the Company
Subsidiaries as currently conducted, except as would not
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Except pursuant to
the first sale doctrine or a license agreement, reseller
agreement or distributor agreement entered into in the ordinary
course of business with a third party, no person, other than the
Company and the Company Subsidiaries, possesses any current or
contingent rights to license, sell or otherwise distribute the
Company Software Products to any third party.
(iii)
Section 3.1(p)
of the Company Disclosure
Letter contains a true and complete list of all Registered IP.
Except as would not reasonably be expected to have, individually
or in the aggregate, a Company Material
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Adverse Effect, all fees that are or have become due with
respect to such Registered IP on or before the Closing have been
or will be timely paid prior to Closing. The Company and the
Company Subsidiaries have taken all actions reasonably necessary
to maintain the applications and registrations of Registered IP,
including payment of applicable maintenance fees, filing of
applicable statements of use, timely response to office actions
and disclosure of any required information, and all assignments
(and licenses where required) of the Registered IP have been
duly recorded with the appropriate Governmental Entities. None
of the Registered IP has been adjudged invalid or unenforceable
in whole or part.
(iv)
Section 3.1(p)
of the Company Disclosure
Letter contains a true and complete list of all material
licenses and other agreements pursuant to which (i) the
Company or any Company Subsidiary is granted rights in any
third-party Intellectual Property Rights (excluding any
generally available,
off-the-shelf,
click wrap, shrink wrap, non-custom or open source software
programs licensed by the Company or any of the Company
Subsidiaries) that are (A) sold, bundled or distributed
with, or embedded, integrated or incorporated into, the Company
Software Products, (B) used in the development of any
Company Software Product, or (C) used or held for use by
the Company or any of the Company Subsidiaries for any other
purpose, including for the internal operations of the
Company’s or any of the Subsidiaries’ respective
businesses (collectively, all licenses and agreements listed in
Section 3.1(p)(iv)(i)
of the Company Disclosure
Letter, the
“Company Inbound
Agreements”
), or (ii) the Company or any of
the Company Subsidiaries has granted to any person (A) any
licenses or rights under any Company IP (other than licenses
granted in the ordinary course of business to customers),
(B) any rights to resell or otherwise distribute the
Company Software Products (collectively, all licenses and
agreements listed in
Section 3.1(p)(iv)(ii)
of the
Company Disclosure Letter, the
“Company Outbound
Agreements”
).
(v) Neither the Company nor any of the Company Subsidiaries
has disclosed, delivered or otherwise provided the source code
of any Company Software Product or any material part thereof to
a third party pursuant to an escrow arrangement or otherwise.
The Company or one of the Company Subsidiaries, as applicable,
is in the possession of the source code and object code for all
of the Company Software Products.
(vi) The Company and the Company Subsidiaries have taken
commercially reasonable steps to protect and preserve their
rights in and the confidentiality of the Company IP and to
protect and preserve any material information provided to them
by any other person under obligation of confidentiality. To the
knowledge of the Company, the Company and the Company
Subsidiaries have not made any of their material trade secrets
or other material confidential information available to any
other person except pursuant to written agreements, and in the
case of the source code to Company Software Products solely
pursuant to a written agreement set forth in
Section 3.1(p)
of the Company Disclosure Letter, or
other legally binding obligations, requiring such person to
maintain the confidentiality of such information or materials.
(vii) Neither the Company nor any of the Company
Subsidiaries has granted any currently effective exclusive
license with respect to, any Company IP, including any Company
Software Products, to any other person.
(q)
Labor Agreements and Employee Issues
.
(i) Neither the Company nor any Company Subsidiary is a
party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with, or is
represented by, a labor union or labor organization. Neither the
Company nor any Company Subsidiary (a) is or has been
within the last two years subject to a dispute, slowdown,
lockout, strike or work stoppage, and to the knowledge of the
Company no such dispute, slowdown, lockout, strike or work
stoppage has been threatened or (b) has committed any
unfair labor practice as defined in the National Labor Relations
Act or other applicable Laws (including any other comparable
foreign or domestic authority or workers’ council), except
as would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect. To the
knowledge of the Company, there are no organizational efforts
(including, without limitation, demands for recognition or
certification) with respect to the formation of a collective
bargaining unit presently being made or threatened involving
employees of the Company or any Company Subsidiary. Neither the
Company nor any Company Subsidiary has received notice of
(a) any unfair labor practice charge or complaint pending
or threatened before the National Labor Relations Board or any
other Governmental Entity against it, or (b) any charge or
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complaint with respect to or relating to it pending before the
Equal Employment Opportunity Commission or any other
Governmental Entity responsible for the prevention of unlawful
employment practices, except as would not reasonably be expected
to have, individually or in the aggregate, a Company Material
Adverse Effect.
(r)
Certain
Contracts
.
Section 3.1(r)
of the
Company Disclosure Letter sets forth a true and correct list of
each contract, arrangement, lease, license, commitment or
understanding to which the Company or a Company Subsidiary is a
party to or is bound (i) that is a “material
contract” (as such term is defined in Item 601(b)(10)
of
Regulation S-K
of the SEC); (ii) that contains covenants that limit or
restrict the ability of the Company or any Company Subsidiary
(or which, following the consummation of the Merger, could
restrict the ability of the Surviving Corporation or any of its
affiliates) to (A) engage in any type of business,
(B) compete in any business or with any person or in any
geographic area or distribution or sales channel, or
(C) solicit customers or sell, supply or distribute any
service or product; (iii) that would prohibit or materially
delay the consummation of the Merger or any of the transactions
contemplated by this Agreement; (iv) that relates to the
incurring of indebtedness for borrowed money by the Company or
any of the Company Subsidiaries in excess of $1,000,000;
(v) that provides for any payments that are conditioned, in
whole or in part, on a change of control of the Company or any
Company Subsidiary; (vi) that is material to the Company or
any of the Company Subsidiaries, taken as a whole, pertaining to
Intellectual Property Rights (excluding any generally available,
off-the-shelf,
click wrap, shrink wrap, non-custom or open source software
programs licensed by the Company or any of the Company
Subsidiaries); (vii) entered into since September 30,
2008 with respect to the acquisition or divestiture of all or
any portion of a business or (viii) that was not entered
into in the ordinary course of business and involves or would
reasonably be expected to involve payments by or to the Company
or any of the Company Subsidiaries in excess of $250,000
annually or $500,000 in the aggregate over the term of the
contract and that is not terminable within thirty (30) days
of the Effective Time without payment by the Company or the
Company Subsidiaries (the agreements, contracts and obligations
set forth in the exhibit index of the Company’s Annual
Report on
Form 10-K
for the fiscal year ended September 30, 2009 and the
agreements, contracts and obligations listed in clauses (i)
through (viii) being referred to herein as
“Company Material Contract”
). Each
Company Material Contract is valid and binding on the Company
and any Company Subsidiary that is a party thereto and, to the
knowledge of the Company, each other party thereto and is in
full force and effect. There is no default under any Company
Material Contract by the Company or any Company Subsidiary or,
to the knowledge of the Company, by any other party, and no
event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder by the
Company or any Company Subsidiary, or, to the knowledge of the
Company, by any other party, in each case except as would not
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. True, correct and
complete copies of each Company Material Contract have been made
available to Parent.
(s)
Insurance
.
Each of the Company
and the Company Subsidiaries maintains insurance policies in
such forms and amounts and against such losses and risks as are
consistent with industry practice in the industry within which
they operate and that are believed to be adequate to protect the
properties and businesses of the Company and the Company
Subsidiaries. Renewals of insurance policies to be effective
October 1, 2010 include terms and conditions that are no
less favorable to the Company in the aggregate than in effect as
of such date.
(t)
Interested Party
Transactions
.
No event, transaction,
agreement, arrangement or understanding has occurred or been
entered into since September 30, 2009 that would be
required to be reported by the Company pursuant to
Item 404(a) of
Regulation S-K
promulgated by the SEC under the Securities Act.
(u)
Voting Requirement
.
The
affirmative vote at the Company Meeting of at least a majority
of the votes entitled to be cast by the holders of outstanding
Company Shares to approve this Agreement is the only vote of the
holders of any class or series of the Company’s capital
shares necessary to adopt and approve this Agreement and the
Merger and the transactions contemplated hereby (collectively,
the
“Company Shareholder Approval”).
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(v)
Proxy Statement; Other
Information
.
None of the information provided
by or on behalf of the Company specifically for inclusion in the
Proxy Statement or any other document to be filed with the SEC
or any other Governmental Entity in connection with the
transactions contemplated by this Agreement will (i) at the
time of the mailing of the Proxy Statement or any amendment or
supplement thereto, (ii) at the time of the Company Meeting
or (iii) 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. The Proxy Statement, as to
information supplied by the Company, will comply as to form in
all material respects with the provisions of the Exchange Act
and the rules and regulations thereunder. The letter to
shareholders, notice of meeting, proxy statement (as amended or
supplemented from time to time) and forms of proxy to be filed
with the SEC and distributed to shareholders in connection with
the Merger are collectively referred to herein as the
“Proxy Statement
.”
Notwithstanding the
foregoing, the Company makes no representation or warranty with
respect to the information supplied by Parent or Merger Sub or
any of their respective representatives in writing specifically
for inclusion in the Proxy Statement.
(w)
Takeover Statutes
.
The Company
has taken all appropriate actions to ensure that no “fair
price,” “business combination,”
“moratorium,” “control share acquisition” or
other anti-takeover statute or similar statute or regulation
enacted by any state applies to the Merger or the other
transactions contemplated by this Agreement or the Voting
Agreement.
(x)
Opinion of Financial
Advisor
.
Stifel, Nicolaus &
Company, Incorporated has delivered to the Company’s Board
of Directors its written opinion, dated the date hereof, to the
effect that, as of the date hereof and based upon and subject to
the matters set forth therein, the Merger Consideration to be
received by holders of Company Shares in connection with the
Merger pursuant to the Merger Agreement is fair to such holders
of Company Shares, from a financial point of view. An executed
copy of the opinion has been or will be promptly made available
to Parent.
(y)
Brokers
.
Except for Stifel,
Nicolaus & Company, Incorporated, no broker,
investment banker, financial advisor or other person is entitled
to any broker’s, finder’s, financial advisor’s or
other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company
has previously provided to Parent a copy of the engagement
letter with Stifel, Nicolaus & Company, Incorporated,
as amended or modified, and any related agreements.
Section
3.2.
Representations
and Warranties of Parent and Merger
Sub
.
Except as set forth in the disclosure
letter delivered by the Parent to the Company prior to the
execution of this Agreement (the
“Parent Disclosure
Letter”
) (and provided that a matter disclosed in
the Parent Disclosure Letter with respect to one representation
or warranty shall also be deemed to be disclosed with respect to
each other representation or warranty to the extent that it is
reasonably apparent from the text of such disclosure that such
disclosure applies to or qualifies such other representation or
warranty), Parent and Merger Sub hereby, jointly and severally,
represent and warrant to the Company as follows:
(a)
Organization and
Standing
.
Each of Parent and Merger Sub is a
legal entity validly existing and in good standing under the
Laws of its jurisdiction of organization and has the requisite
corporate or similar power and authority to carry on its
business as now being conducted. Parent has made available to
the Company prior to the execution of this Agreement a complete
and correct copy of the certificate of incorporation and bylaws
or other equivalent organizational documents of Merger Sub, each
as amended through the date hereof.
(b)
Corporate Authority Relative to this Agreement;
No Violation; Non-Contravention
.
(i) Each of Parent and Merger Sub has all requisite
corporate, limited liability company, partnership or similar
power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated by this Agreement. The execution and delivery of
this Agreement, the performance of its obligations hereunder and
the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate,
limited liability
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company, partnership or similar action by Parent and Merger Sub
and by Parent, as the sole stockholder of Merger Sub and no
other corporate, limited liability company, partnership or
similar proceedings on the part of Parent or Merger Sub are
necessary to authorize the adoption, execution or performance of
this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by
Parent and Merger Sub and, assuming the due authorization,
execution and delivery hereof by the Company, constitutes the
valid and binding obligation of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its
terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting the rights of creditors generally and
subject to general equity principles.
(ii) No consent, approval or authorization of, or filing
with, any Governmental Entity is required by Parent or Merger
Sub in connection with the execution and delivery of this
Agreement by Parent and Merger Sub, the performance by Parent
and Merger Sub of their obligations hereunder or the
consummation by Parent and Merger Sub of the transactions
contemplated hereby, except for: (i) such reports under
Section 13(a), 13(d), 15(d) or 16(a) or such other
applicable sections of the Exchange Act, as may be required in
connection with this Agreement and the transactions contemplated
hereby, (ii) the filing with the Ohio Secretary of State of
the Certificate of Merger, (iii) the filing of a premerger
notification and report form by Parent and Merger Sub under the
HSR Act and any applicable foreign antitrust filings,
(iv) notifications to the NYSE, and (v) such consents,
approvals or authorizations the failure of which to be made or
obtained would not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect.
(iii) The execution and delivery of this Agreement by
Parent and Merger Sub, the performance by Parent and Merger Sub
of their covenants and obligations hereunder and the
consummation of the transactions contemplated hereby do not and
will not (i) violate or conflict with any provision of the
certificate of incorporation or bylaws or other equivalent
organizational document, in each case as amended, of Parent or
Merger Sub, (ii) conflict with, or result in the breach of
or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or result in the
termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, any
loan, guarantee of indebtedness or credit agreement, note, bond,
mortgage, indenture, lease, agreement, contract, instrument,
permit, concession, franchise, right or license binding upon
Parent or Merger Sub, (iii) assuming compliance with the
matters referred to in
Section 3.2(b)(ii)
, violate
or conflict with any Law or order applicable to Parent or Merger
Sub or by which any of their respective properties or assets are
bound, or (iv) result in the creation of any Lien upon any
of the properties or assets of Parent or Merger Sub, except in
the case of each of clauses (ii), (iii) and
(iv) above, for such violations, conflicts, defaults,
terminations, accelerations or Liens which would not reasonably
be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(c)
Litigation
.
As of the date of
this Agreement, there is no suit, action or proceeding by or
before any Governmental Entity pending or, to the knowledge of
Parent, threatened, against Parent or Merger Sub challenging or
seeking to prohibit the execution, delivery or performance of
this Agreement or any of the transactions contemplated hereby.
As of the date of this Agreement, there is no other suit, action
or proceeding by or before any Governmental Entity pending or,
to the knowledge of Parent, threatened, to which Parent or any
of its subsidiaries is a party or against any of their
properties or assets that would reasonably be expected to have a
Parent Material Adverse Effect.
(d)
Proxy Statement; Other
Information
.
None of the information provided
by Parent or its subsidiaries to be included in the Proxy
Statement will, at the time of the mailing of the Proxy
Statement or any amendment or supplement thereto, or at the time
of the Company Meeting, 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. Notwithstanding the foregoing, Parent and
Merger Sub make no representation or warranty with respect to
the information supplied by the Company or any of the Company
Representatives that is contained or incorporated by reference
in the Proxy Statement.
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(e)
Financial Condition
.
Parent
and Merger Sub collectively have and will have at the Effective
Time cash and cash equivalents
and/or
available amounts under existing credit facilities, that are
sufficient to enable Parent and Merger Sub to consummate the
Merger upon the terms contemplated by this Agreement, and to
make all payments contemplated by this Agreement in connection
with the Merger including (a) the Merger Consideration, the
consideration payable pursuant to
Section 2.1(f)
and
all of Parent’s obligations under this Agreement,
(b) all fees and expenses related to the foregoing, and
(c) to fund the ongoing operations of the Company and the
Company Subsidiaries.
(f)
Capitalization of Merger
Sub
.
As of the date of this Agreement, the
authorized capital stock of Merger Sub consists of 1,000 common
shares, no par value per share, all of which are validly issued
and outstanding. All of the issued and outstanding capital
shares of Merger Sub are, and at the Effective Time will be,
indirectly owned by Parent. Merger Sub has outstanding no
option, warrant, right, or any other agreement pursuant to which
any person other than Parent may acquire any equity security of
Merger Sub. Merger Sub has not conducted any business prior to
the date hereof and has, and prior to the Effective Time will
have, no assets, liabilities or obligations of any nature other
than those incident to its formation and pursuant to this
Agreement and the Merger and the other transactions contemplated
by this Agreement, except as would not reasonably be expected to
have a material adverse effect on the ability of the Merger Sub
to timely consummate the transactions contemplated by this
Agreement.
(g)
No Vote of Parent
Stockholders
.
No vote of the stockholders of
Parent or the holders of any other securities of Parent (equity
or otherwise) is required by any applicable Law, the certificate
of incorporation or bylaws or other equivalent organizational
documents of Parent, in order for Parent and Merger Sub to
consummate the transactions contemplated by this Agreement.
(h)
Finders or Brokers
.
Neither
Parent nor any of its affiliates has employed any investment
banker, broker or finder in connection with the transactions
contemplated by this Agreement who might be entitled to any fee
or any commission in connection with or upon consummation of the
Merger.
(i)
Lack of Ownership of Company
Shares
.
Other than the Voting Agreement,
(a) neither Parent, any affiliate of Parent, nor any of
Parent’s subsidiaries beneficially owns, directly or
indirectly, any Company Shares or other securities convertible
into, exchangeable for or exercisable for Company Shares;
(b) there are no voting trusts or other agreements,
arrangements or understandings to which Parent, any affiliate of
Parent or any of Parent’s subsidiaries is a party with
respect to the voting of Company Shares or other equity
interests of the Company or any of the Company Subsidiaries, nor
are there any agreements, arrangements or understandings to
which Parent, any affiliate of Parent or any of Parent’s
subsidiaries is a party with respect to the acquisition,
divestiture, retention, purchase, sale or tendering of the
capital stock or other equity interest of the Company or any of
the Company Subsidiaries; and (c) neither Parent nor Merger
Sub has beneficially owned during the three years ending on the
date hereof a number of Company Shares that would make it an
“interested shareholder” (as that term is defined
Section 1704.01(C)(8) of the OGCL) of the Company.
(j)
Access
.
Parent acknowledges
that as of the date hereof it and its representatives have
received access to such books and records, facilities,
equipment, contracts and other assets of the Company and the
Company Subsidiaries which it and its representatives have
desired or requested to review, and that as of the date hereof
it and its representatives have had full opportunity to meet
with the senior management of the Company and to discuss the
business and assets of the Company and the Company Subsidiaries.
ARTICLE IV
COVENANTS
RELATING TO CONDUCT OF BUSINESS
Section
4.1.
Conduct
of Business
.
(a)
Conduct of Business by the
Company
.
Except (i) as set forth in
Section 4.1(a)
of the Company Disclosure Letter,
(ii) as required by applicable Law, (iii) as
contemplated by this Agreement, (iv) as consented to in
writing by Parent (such consent not to be unreasonably withheld,
delayed or conditioned), and (v) for transactions solely
between or among the Company and the wholly-owned Company
Subsidiaries, during the period from the date of
A-18
this Agreement to the Effective Time, the Company shall, and
shall cause the Company Subsidiaries to, carry on their
respective businesses in all material respects in the ordinary
course consistent with past practice and in compliance in all
material respects with all applicable Laws and, to the extent
consistent therewith, use commercially reasonable efforts to
preserve intact their current business organizations, keep
available the services of their present officers and key
employees and preserve their material Intellectual Property
Rights, current rights and goodwill and preserve business
relationships with significant customers, suppliers,
distributors and other persons having business dealings with
them;
provided
,
however
, that no action by the
Company or any Company Subsidiary with respect to matters
specifically permitted by any other provision of this
Section 4.1
shall be deemed a breach of this
sentence unless such action would constitute a breach of such
other provision. Without limiting the generality of the
foregoing, except (i) as set forth in
Section 4.1(a)
of the Company Disclosure Letter,
(ii) as required by applicable Law, (iii) as
contemplated by this Agreement, (iv) as consented to in
writing by Parent (such consent not to be unreasonably withheld,
delayed or conditioned) and (v) for transactions solely
between or among the Company and the wholly-owned Company
Subsidiaries, during the period from the date of this Agreement
to the Effective Time, the Company shall not and shall not
permit any Company Subsidiary to, directly or indirectly:
(i) (A) except for regular quarterly cash dividends on
the Company Shares consistent with past practices (not to exceed
$0.0375 per share) and dividends declared as of the date hereof
and not yet paid, declare, set aside, make or pay any dividends
on, or make any other distributions in respect of, any of the
Company Shares, its capital stock, or any equivalent thereof,
(B) adjust, recapitalize, purchase, split, combine or
reclassify any of the Company Shares or any of its capital stock
or (C) except pursuant to agreements entered into with
respect to the Company Share Plans that are in effect as of the
close of business on the date of this Agreement and previously
disclosed to Parent, directly or indirectly, purchase, redeem or
otherwise acquire any Company Shares or any shares of capital
stock of the Company Subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such
shares or other securities (which obligation shall not restrict
any cashless exercises or similar transactions pursuant to an
exercise of any Company Shares Option or other awards
issued and outstanding under the Company Share Plans);
(ii) issue or authorize the issuance of, grant, deliver,
sell, pledge, amend, dispose of or encumber, any Company Shares,
other shares of its capital stock (or any other securities in
respect of, in lieu of, or in substitution for, Company Shares
or other shares of its capital stock), any other voting
securities or any securities convertible into or exchangeable or
exercisable for, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible securities,
including, without limitation, stock appreciation rights,
phantom stock or similar instruments, or make any changes (by
combination, merger, consolidation, reorganization, liquidation
or otherwise) in the capital structure of the Company or any
Company Subsidiary, other than (1) the issuance and
delivery of Company Shares upon the exercise of Company
Shares Options under the Company Share Plans, (2) in
connection with Company Share-Based Awards under the Company
Share Plans, or (3) the issuance and delivery of Company
Shares pursuant to the Company’s 1996 Outside Directors
Deferred Stock Plan, in each case of (1), (2) and
(3) as are outstanding as of the date of this Agreement and
in accordance with their present terms or as contemplated by
this Agreement;
(iii) amend its articles of incorporation or code of
regulations (or other comparable organizational documents);
(iv) sell, lease, license, transfer, grant, exchange or
swap, mortgage or otherwise encumber, or subject to any Lien
(other than Permitted Liens) or otherwise dispose of any of its
or any Company Subsidiary’s properties or assets, the
capital stock of the Company Subsidiaries, with a value in
excess of $250,000 individually or $1,000,000 in the aggregate
other than sales of products and services in the ordinary course
of business consistent with past practice and except
(A) pursuant to existing agreements in effect prior to the
execution of this Agreement and listed on
Section 4.1(a)(iv)
of the Company Disclosure Letter,
or (B) as may be required by applicable Law;
(v) disclose, other than to representatives of Parent, any
material trade secret unless a written non-disclosure agreement
is executed by the recipient of such information;
(vi) incur any capital expenditures or enter into any
commitments for capital expenditures, capital additions or
capital improvements involving more than an aggregate amount of
$300,000 per fiscal quarter,
A-19
except in accordance with the capital expenditure budget and
prior fiscal year carryover amounts set forth in
Section 4.1(a)
of the Company Disclosure Letter, or
pay, incur or otherwise make any commitment to pay or incur in
excess of $750,000 in the aggregate for any information
enterprise resource management systems (including, without
limitation, the Company’s planned Oracle update) or take
any further action other than as required under an existing
contract;
(vii) incur any net increase in Indebtedness from that
existing on the date hereof other than (A) up to $1,000,000
in the aggregate of additional Indebtedness,
(B) Indebtedness incurred in the ordinary course of
business under lines of credit existing on the date of hereof,
(C) letters of credit, surety bonds, guarantees of
indebtedness for borrowed money and security time deposits in
the ordinary course of business consistent with past practice
and (D) indebtedness relating to the reborrowing of amounts
repaid;
(viii) (A) grant any increase in the compensation or
benefits payable or to become payable by the Company or any
Company Subsidiary to any current or former director, officer,
employee or consultant of the Company or any Company Subsidiary,
except to the extent required by the terms of a Plan in effect
as of the date of this Agreement, (B) adopt, enter into,
amend or otherwise increase, reprice or accelerate the payment
or vesting of the amounts, benefits or rights payable or accrued
or to become payable or accrued under any Plans, (C) enter
into or amend any employment, bonus, severance, change in
control, retention or any similar agreement or any collective
bargaining agreement, or grant any severance, bonus,
termination, or retention pay to any officer, director,
consultant or employee of the Company or any Company Subsidiary
(other than as required by the terms of a Plan in effect as of
the date of this Agreement) or terminate any Plan, or
(D) pay or award any pension, retirement allowance or other
non-equity based incentive awards, or other employee or director
benefit or perquisite not required by a Plan in effect as of the
date of this Agreement, all except as may otherwise be required
to comply with applicable Laws; provided, however, that the
Company may terminate, and take any actions required in
connection with termination of, the Company’s 1996 Outside
Directors Deferred Stock Plan, and,
provided
,
further
,
however
, that the Company shall terminate
the Company’s 2005 Employee Stock Purchase and Dividend
Company Reinvestment Plan (the
“Company
ESPP”
) and the Company’s Supplemental
Executive Retirement Plan (the
“Company
SERP”
) as provided for under
Section 5.8(f)
, and,
provided
,
further
,
however
, that nothing in this
clause (viii) shall prohibit the Company or any Company
Subsidiary from taking any action relating to the hiring,
termination or promotion of employees in the ordinary course of
business consistent with past practice or from filling a
position included in the capital expenditure budget set forth in
Section 4.1(a)
of the Company Disclosure Letter;
(ix) materially change any Tax or financial accounting
policies or procedures or any of its methods affecting its
assets, liabilities or business, in each case, in effect on the
date hereof, except as required by GAAP or applicable Law;
(x) (A) acquire by merging or consolidating with, by
purchasing any equity interest in or a portion of the assets of,
or by any other manner, in one transaction or a series of
related transactions, any corporation, partnership, association
or other business organization or any interest therein, or
division or business thereof, or otherwise acquire any material
amount of operating assets of any other person (other than the
purchase of assets from suppliers or vendors in the ordinary
course of business consistent with past practice);
(B) merge or consolidate with any other person; or
(C) liquidate, dissolve, restructure,
wind-up
or
reorganize its business or organize any new subsidiary or
affiliate;
(xi) except in the ordinary course of business and
consistent with past practice or to the extent required by
applicable Law, make, change or rescind any material express or
deemed election with respect to Taxes, settle or compromise any
material claim or action relating to Taxes, file or amend any
Tax Return or change any of its methods of accounting for or of
reporting income or deductions for Tax purposes in any material
respect;
(xii) make any loans, advances or capital contributions to,
or investments in, any other person, except (A) de minimis
advances for employees, contractors and consultants in the
ordinary course of business consistent with past practice,
(B) trade credit issued in the ordinary course of business
consistent with past practice, (C) investments of excess
cash and cash equivalents in the ordinary course of business
consistent with past practice and (D) as required by
existing contracts;
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(xiii) except in the ordinary course of business consistent
with past practice (other than with respect to any agreement of
the type described in clause (ii) of Section 3.1(r)),
(A) enter into, modify or amend in any material respect or
terminate any Company Material Contract, (B) waive,
release, relinquish or assign any Company Material Contract (or
any of the Company’s or any Company Subsidiary’s
rights thereunder) or any right or claim that is material to the
Company and the Company Subsidiaries, taken as a whole or
(C) cancel or forgive any Indebtedness owed to the Company
or any Company Subsidiary;
(xiv) waive, release, assign, initiate, pay, discharge,
settle or compromise any pending or threatened claim, action,
litigation, arbitration or proceeding other than (A) in the
ordinary course of business consistent with past practice, or
(B) solely for money damages not in excess of $200,000
individually or $500,000 in the aggregate; or
(xv) authorize, commit or agree to take any of the
foregoing actions.
(b)
Conduct of Business by Parent and Merger
Sub
.
Parent covenants and agrees with the
Company, on behalf of itself and its subsidiaries that, between
the date hereof and the Effective Time, Parent shall not, and
shall not permit any of its subsidiaries to, take or agree to
take any action (including entering into agreements with respect
to acquisitions, mergers and consolidations or business
combinations) that would reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse
Effect. During the period from the date of this Agreement to the
Effective Time, Merger Sub shall not engage in any activities of
any nature except as provided in or contemplated by this
Agreement.
(c)
Advice of Changes
.
Each of the
Company, Parent and Merger Sub shall promptly advise the other
parties to this Agreement orally and in writing to the extent it
has knowledge of (i) any breach of representation or
warranty, covenant or condition by such party that would cause
any of the conditions to Closing to fail to be satisfied or
(ii) any change or event having, or which, insofar as can
reasonably be foreseen would reasonably be expected to have,
with respect to the Company, a Company Material Adverse Effect,
or with respect to Parent and Merger Sub, a Parent Material
Adverse Effect, or on the satisfaction of the conditions set
forth in
Article VI
before the Outside Date;
provided
,
however
, that no such notification will
affect the representations, warranties, covenants or agreements
of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this
Agreement and no failure to comply with this
Section 4.1(b)
shall be taken into account for
purposes of determining whether the conditions to Closing have
been satisfied.
Section
4.2.
No
Solicitation by the Company
.
(a)
Company Takeover Proposal
.
The
Company shall, and shall cause the Company Subsidiaries and its
and their respective officers, directors, employees, financial
advisors, attorneys, accountants, investment bankers,
representatives and agents and other advisors (collectively, the
“Company Representatives”
) to,
immediately cease and cause to be terminated all existing
discussions and negotiations with any persons conducted
heretofore with respect to, or that could reasonably be expected
to lead to, any Company Takeover Proposal, and the Company shall
request all other potential purchasers to promptly return or
destroy all copies of all nonpublic information that the
Company, the Company Subsidiaries and the Company
Representatives have distributed on or prior to the date of this
Agreement. From the date of this Agreement until the earlier of
the Effective Time and the date of termination of this
Agreement, the Company shall not, nor shall it permit any of the
Company Subsidiaries or its and their respective officers,
directors and employees to, and shall use commercially
reasonable efforts to cause any of the other Company
Representatives to not, directly or indirectly,
(i) solicit, initiate or knowingly encourage (including by
way of furnishing nonpublic information), or take any other
action designed to facilitate, any inquiries or offers or the
making of any proposal that constitutes, or could reasonably be
expected to lead to, a Company Takeover Proposal,
(ii) enter into any Acquisition Agreement or enter into any
agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other
transaction contemplated by this Agreement, or (iii) enter
into, continue or otherwise engage or participate in any way in
any discussions or negotiations regarding, or furnish or
disclose to any person (other than a party hereto or its
representatives) any nonpublic information with respect to, or
take any other action to knowingly facilitate or further any
inquiries or offers or the making of any proposal that
constitutes, or could reasonably be expected to lead to, any
Company Takeover Proposal (other than in response to an
unsolicited inquiry from a person and, in such case, solely to
notify such person of the existence of the provisions of this
Section 4.2
);
provided
,
however
, that,
at any time prior to
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obtaining the Company Shareholder Approval, in response to an
unsolicited, written Company Takeover Proposal that (x) did
not result from a breach of this
Section 4.2
and
(y) the Board of Directors of the Company determines in
good faith (after consultation with outside counsel and its
financial advisor) that such Company Takeover Proposal
constitutes or could reasonably be expected to result in a
Superior Proposal, the Company may, subject to compliance with
Section 4.2(c)
, (A) furnish information with
respect to the Company and the Company Subsidiaries to the
person making such Company Takeover Proposal (and its
representatives) pursuant to a customary confidentiality
agreement (including a standstill provision) not less
restrictive of such person than the Confidentiality Agreement;
provided
,
however
, that the substance of all such
information has previously been provided or made available to
Parent or is provided to Parent prior to or substantially
concurrent with the time it is provided to such person and
(B) participate in discussions or negotiations with the
person making such Company Takeover Proposal (and its
representatives) regarding such Company Takeover Proposal. The
Company shall not release any third party from, or waive any
provision of, any confidentiality or standstill agreement to
which it is a party as of the date hereof, unless the Board of
Directors determines in good faith (after consultation with
outside counsel) that the failure to do so would be inconsistent
with its fiduciary duties under applicable Law.
(b)
Definitions
.
As used herein,
(i)
“Company Takeover Proposal”
means any inquiry, proposal or offer from any person
relating to any (A) direct or indirect acquisition or
purchase of assets or a business that constitutes 15% or more of
the net revenues, net income or the assets of the Company and
the Company Subsidiaries, taken as a whole, (B) direct or
indirect acquisition or purchase of 15% or more of any class of
equity securities (by vote or value) of the Company or any of
the Company Subsidiaries, (C) tender offer or exchange
offer that if consummated would result in any person
beneficially owning 15% or more of the equity securities (by
vote or value) of the Company, or (D) merger,
consolidation, business combination, asset purchase,
recapitalization or similar transaction involving the Company,
in each case, other than the transactions contemplated by this
Agreement, and (ii)
“Superior Proposal”
means a bona fide, unsolicited, written Company Takeover
Proposal (except the references therein to “15%” shall
be replaced by “50%” and the references to “vote
or value” shall be replaced by “vote and value”)
that the Board of Directors determines in its good faith
judgment (after consulting with outside counsel and its
financial advisor), taking into account the financial,
regulatory and legal aspects of the proposal and the timing and
likelihood of consummation of such proposal, is more favorable
to the Company’s shareholders (in their capacities as
shareholders) than the transactions contemplated by this
Agreement (including any adjustment to the terms and conditions
proposed by Parent in response to such Company Takeover
Proposal).
(c)
Actions by the
Company
.
Neither the Board of Directors nor
any committee thereof shall (i) (A) withdraw (or qualify or
modify in a manner adverse to Parent), or publicly propose to
withdraw (or qualify or modify in a manner adverse to Parent),
the approval, recommendation or declaration of advisability by
the Board of Directors or any such committee thereof of this
Agreement or the transactions contemplated by this Agreement (it
being understood and agreed that failing to recommend against or
taking a neutral position or no position with respect to
acceptance of a tender offer or exchange offer, or a publicly
disclosed merger or other business combination proposal,
constituting a Company Takeover Proposal within ten
(10) Business Days after commencement of such offer, or
receipt of such proposal, shall be considered an adverse
modification), (B) recommend, adopt or approve, or propose
publicly to recommend, adopt or approve, any Company Takeover
Proposal or (C) fail to include the Company Recommendation
in the Proxy Statement (any action described in this
clause (i) being referred to as a
“Company
Adverse Recommendation Change”
) or
(ii) approve or recommend, or propose publicly to approve
or recommend, or allow the Company or any of the Company
Subsidiaries to execute or enter into, any letter of intent,
memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement, option agreement, joint
venture agreement, partnership agreement or other similar
agreement constituting or related to, or that is intended to or
could reasonably be expected to result in, any Company Takeover
Proposal (other than a confidentiality agreement referred to in
Section 4.2(a))
(an
“Acquisition
Agreement”
). Notwithstanding anything in this
Agreement to the contrary, if, prior to obtaining the Company
Shareholder Approval, the Board of Directors determines in good
faith (after consulting with outside counsel) that the failure
to do so would be inconsistent with its fiduciary duties under
applicable Law, it may, prior to obtaining the Company
Shareholder Approval, (A) cause the Company to terminate
this Agreement pursuant to
Section 7.1(d)(ii)
and
cause the Company to enter into an Acquisition Agreement with
respect to a Superior Proposal or (B) make a Company
Adverse Recommendation Change, but in the case of (A) or
(B) only if: (i) the Company is not in breach in any
material respect of its obligations pursuant to this
Section 4.2
, (ii) the Company provides written
notice to Parent (a
“Notice of Adverse
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Recommendation”
) advising Parent that the
Board of Directors intends to take such action and specifying
the reasons therefor, including, if applicable, the terms and
conditions of any Superior Proposal, the identity of the party
making the Superior Proposal and copies of any written proposal
and all correspondence received from the third party relating to
such Superior Proposal that are the basis of the proposed action
by the Board of Directors; (ii) for a period of three
(3) Business Days following Parent’s receipt of a
Notice of Adverse Recommendation (or two (2) Business Days
after receipt of a new Notice of Adverse Recommendation; it
being understood and agreed that any amendment to the financial
terms or other material terms of such Superior Proposal shall be
considered a new Notice of Adverse Recommendation), the Company
negotiates with Parent in good faith to make such adjustments to
the terms and conditions of this Agreement as would enable the
Company to proceed with its recommendation of this Agreement and
the Merger and not make such Company Adverse Recommendation
Change (it being understood that such negotiation need not be
exclusive); and (iii) if applicable, at the end of such
three (3) Business Day (or two (2) Business Day)
period, the Board of Directors continues to believe in good
faith that the Company Takeover Proposal constitutes a Superior
Proposal (taking into account any amendments to this Agreement
that Parent shall have agreed to make prior to the end of such
period).
(d)
Notice of Company Takeover
Proposal
.
The Company shall promptly (but in
any event within 24 hours) notify Parent and Merger Sub of
(i) the receipt, directly or indirectly, of a Company
Takeover Proposal or any request for discussions or negotiations
relating to a possible Company Takeover Proposal or
(ii) any request for
non-public
information relating to the Company or any of the Company
Subsidiaries other than requests for information in the ordinary
course of business and unrelated to a Company Takeover Proposal.
Such notice shall be made orally and confirmed in writing, and
shall indicate the identity of the person or group making such
Company Takeover Proposal or request and the material terms and
conditions thereof (including, if applicable, copies of any
written requests, proposals or offers, including proposed
agreements) and thereafter the Company shall keep Parent
reasonably informed of the status of such Company Takeover
Proposal and any material changes to the terms thereof.
(e)
Rule 14e-2(a),
Rule 14d-9
and Other Applicable Law
.
Nothing contained
in this
Section 4.2
shall prohibit the Company or
its Board of Directors from (i) taking and disclosing to
its shareholders a position contemplated by
Rule 14e-2(a)
or
Rule 14d-9
promulgated under the Exchange Act, including any
“stop-look-and-listen” communication to the
Company’s shareholders pursuant to
Rule 14d-9(f)
under the Exchange Act or (ii) making any disclosure to the
shareholders of the Company if, in the good faith judgment of
the Board of Directors (after consultation with outside
counsel), the failure to make such disclosure would be
inconsistent with its obligations under applicable Law;
provided
,
however
, that clause (ii) shall not
be deemed to permit the Board of Directors to make a Company
Adverse Recommendation Change or take any of the actions
referred to in 4.2(c) except to the extent permitted by
Section 4.2(c)
.
ARTICLE V
ADDITIONAL
AGREEMENTS
Section
5.1.
Preparation
of Proxy Statement; Company Meeting
.
(a) The Company shall, as soon as reasonably practicable
following the date hereof (but in any event within fifteen
(15) days after the date hereof), prepare and file with the
SEC in preliminary form as required by the Exchange Act and the
rules and regulations promulgated thereunder the Proxy
Statement, which shall, subject to
Section 4.2
,
include the Company Recommendation, and shall respond to any
comments by the SEC staff in respect of the Proxy Statement as
promptly as reasonably practicable. Parent and Merger Sub shall
provide to the Company such information as the Company may
reasonably request for inclusion in the Proxy Statement. The
Company shall notify Parent promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy
Statement or for additional information and shall supply Parent
with copies of all correspondence between the Company or any of
the Company Representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement.
The Company shall use commercially reasonable efforts to cause
the Proxy Statement to be mailed to the Company’s
shareholders as promptly as reasonably practicable after filing
with the SEC. The Company shall afford Parent reasonable
opportunity to comment on the Proxy Statement. If at any time
prior to receipt of the Company Shareholder
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Approval there shall occur any event or any information should
be known that should, upon the advice of the Company’s
outside counsel, be set forth in an amendment or supplement to
the Proxy Statement so that the Proxy Statement shall not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading, the
Company shall promptly prepare, file with the SEC and mail to
its shareholders such an amendment or supplement.
Notwithstanding anything to the contrary herein, prior to filing
or mailing the Proxy Statement or any other SEC filing required
in connection with the transactions contemplated hereby (or, in
each case, any amendment or supplement thereto) or responding to
any comments of the SEC with respect thereto, the Company shall
provide Parent a reasonable opportunity to review and comment on
such document or response and shall consider in good faith
comments reasonably proposed by Parent. Notwithstanding the
foregoing, following a Company Adverse Recommendation Change
effected in accordance with
Section 4.2
, the Company
shall have no obligation to notify Parent of any matters to the
extent that the Board of Directors determines in good faith,
after consultation with the Company’s outside counsel, that
to do so would be reasonably likely to be inconsistent with the
directors’ exercise of their fiduciary obligations to the
Company’s shareholders under applicable Law.
(b) Subject to the other provisions of this Agreement, as
promptly as reasonably practicable after the date hereof, the
Company, acting through its Board of Directors, shall take all
action necessary in accordance with applicable Law and the
Company Articles and the Code of Regulations to duly call, give
notice of, convene and hold a meeting of its shareholders as
promptly as reasonably practicable following the mailing of the
Proxy Statement (but in any event within thirty (30) days
of mailing the Proxy Statement) for the purpose of obtaining the
Company Shareholder Approval (the
“Company
Meeting”
). Subject to making a Company Adverse
Recommendation Change pursuant to
Section 4.2(c)
,
(i) the Board of Directors shall recommend to its
shareholders the adoption of this Agreement and the approval of
the Merger and the transactions contemplated hereby and shall
include such recommendation in the Proxy Statement and
(ii) use commercially reasonable efforts to solicit from
its shareholders proxies in favor of the adoption of this
Agreement and approval of the Merger and the transactions
contemplated by this Agreement.
Section
5.2.
Access
to Information; Confidentiality
.
To the
extent permitted by applicable Law and subject to the
confidentiality agreement, dated July 7, 2010, between the
Company and Tektronix, Inc. (the
“Confidentiality
Agreement”
), the Company shall, and shall cause the
Company Subsidiaries to, afford to Parent and Parent’s
representatives reasonable access, during normal business hours
during the period prior to the earlier of the Effective Time and
the date of termination of this Agreement, to all of the
Company’s and each Company Subsidiary’s properties,
books, contracts, commitments, personnel and records and all
other information concerning their business, properties and
personnel as Parent may reasonably request. Parent shall hold,
and shall cause its affiliates and Parent’s representatives
to hold, any nonpublic information in accordance with the terms
of the Confidentiality Agreement. Notwithstanding the foregoing,
neither the Company nor any Company Subsidiary shall be
obligated to provide any such access or information to the
extent that doing so (i) would be reasonably likely to
cause a waiver of an attorney-client privilege or loss of
attorney work product protection (unless Parent enters into a
joint defense agreement that protects such privilege),
(ii) would constitute a violation of any applicable Law or
(iii) would violate any agreement with a third-party to
which the Company or any Company Subsidiary is a party. Neither
Parent nor any of its representatives shall be permitted to
perform any onsite procedure (including any onsite environmental
study) with respect to any property of the Company or any of the
Company Subsidiaries.
Section
5.3.
Commercially
Reasonable Efforts; Cooperation
.
(a)
Commercially Reasonable
Efforts
.
Upon the terms and subject to the
conditions set forth in this Agreement, including
Section 5.3(c)
, each of the parties agrees to use
commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, as soon as
reasonably practicable, the Merger and the other transactions
contemplated by this Agreement and to obtain satisfaction of the
conditions precedent to the Merger, including (i) obtaining
all necessary actions or nonactions, waivers, clearances,
consents and approvals from Governmental Entities and making all
necessary registrations and filings and taking all steps
necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity,
(ii) obtaining all necessary consents, approvals or waivers
from third parties;
provided
,
however
, that
neither the Company nor any of the Company Subsidiaries shall
make any material payment or
A-24
commitment to a third party in connection with obtaining such
consents, approval or waivers without the prior written consent
of Parent (not to be unreasonably conditioned, withheld or
delayed), (iii) defending any lawsuits or other legal
proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the Merger and the other
transactions contemplated by this Agreement, and (iv) the
execution and delivery of any additional instruments reasonably
necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.
(b)
No Takeover Statutes Apply
.
In
connection with and without limiting the foregoing, the Company,
Parent and Merger Sub shall (i) take all action reasonably
necessary to ensure that no Takeover Statute or similar Law is
or becomes applicable to the Merger, this Agreement or any of
the other transactions contemplated hereby and (ii) if any
Takeover Statute or similar Law becomes applicable to the
Merger, this Agreement or any of the other transactions
contemplated hereby, take all action necessary and within their
power to ensure that the Merger and the other transactions
contemplated hereby may be consummated as promptly as
practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such Law on the Merger and
the other transactions contemplated by this Agreement.
(c)
Other Government
Matters
.
Subject to the terms and conditions
herein provided and without limiting the foregoing, the Company
and Parent shall (i) promptly, but in no event later than
fifteen (15) Business Days after the date of this
Agreement, make or cause their respective ultimate parent
entities (as that term is defined in the HSR Act rules) to make
their respective filings and thereafter make any other required
submissions under the HSR Act; (ii) use commercially
reasonable efforts to cooperate with each other in
(x) determining whether any filings are required to be made
with, or consents, permits, authorizations, waivers or approvals
are required to be obtained from, any third parties or other
Governmental Entities in connection with the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby and (y) timely making all
such filings and timely seeking all such consents, permits,
authorizations or approvals; (iii) use 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 advisable to consummate and make effective the
transactions contemplated hereby, including taking all such
further action as reasonably may be necessary to resolve such
objections, if any, as the United States Federal Trade
Commission, the Antitrust Division of the United States
Department of Justice, state antitrust enforcement authorities
or competition authorities of any other nation or other
jurisdiction or any other person may assert under Antitrust Law
with respect to the transactions contemplated hereby, and to
take commercially reasonable steps to avoid or eliminate each
and every impediment under any Law that may be asserted by any
Governmental Entity with respect to the Merger so as to enable
the Closing to occur as soon as reasonably possible (and in any
event no later than the Outside Date),
provided
,
however
, that notwithstanding any other provision of this
Agreement, Parent shall not be required to, and the Company
shall not, without Parent’s prior written consent,
(x) agree to the sale, divestiture or disposition of any
assets or businesses of Parent or its subsidiaries or affiliates
or of the Company or the Company Subsidiaries or
(y) otherwise take or commit to take actions that after the
Closing Date would limit the freedom of Parent or its
subsidiaries’ (including the Surviving Corporation’s)
or affiliates’ freedom of action with respect to, or its
ability to retain, one or more of its or its subsidiaries’
(including the Surviving Corporation’s) businesses, product
lines or assets; and (iv) subject to applicable legal
limitations and the instructions of any Governmental Entity,
keep each other apprised of the status of matters relating to
the completion of the transactions contemplated thereby,
including promptly furnishing the other with copies of notices
or other communications received by the Company or Parent, as
the case may be, or any of their respective subsidiaries, from
any third party or Governmental Entity with respect to such
transactions. The Company and Parent shall permit counsel for
the other party reasonable opportunity to review in advance, and
consider in good faith the views of the other party in
connection with any proposed written communication to any third
person or Governmental Entity with respect thereto. Each of the
Company and Parent agrees not to participate in any substantive
meeting or discussion, either in person or by telephone, with
any Governmental Entity in connection with the proposed
transactions unless it consults with the other party in advance
and, to the extent not prohibited by such Governmental Entity,
gives the other party the opportunity to attend and participate.
Any competitively sensitive information that is disclosed
pursuant to this
Section 5.3(c)
will be limited to
each of Parent’s and the Company’s respective counsel
pursuant to a separate customary confidentiality agreement.
Neither the Company nor Parent shall, and they shall cause their
respective subsidiaries not to, acquire or agree to acquire any
assets, business, securities, person or subdivision thereof, if
the entering into of a definitive agreement relating to or the
A-25
consummation of such acquisition would reasonably be expected to
materially delay or materially increase the risk of not
obtaining the applicable action, nonaction, waiver, clearance,
consent or approval with respect to the transactions
contemplated by this Agreement under any Antitrust Laws.
(d) In furtherance and not in limitation of the agreements
of the parties contained in this
Section 5.3
, if any
administrative or judicial action or proceeding, including any
proceeding by a private party, is instituted (or threatened to
be instituted) challenging any transaction contemplated by this
Agreement as violative of any Antitrust Law, each of the Company
and Parent shall cooperate in all respects with each other and
shall use their respective commercially reasonable efforts to
contest and resist any such action or proceeding and to have
vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated by this
Agreement;
provided
,
however
, that,
notwithstanding any other provision of this Agreement, such
result does not require the sale, divestiture or disposition of
any assets or businesses of Parent or its subsidiaries or
affiliates or of the Company or the Company Subsidiaries or
otherwise require Parent to take or commit to take actions that
after the Effective Time would limit the freedom of Parent or
its subsidiaries’ (including the Surviving
Corporation’s) or affiliates’ freedom of action with
respect to, or its ability to retain, one or more of its or its
subsidiaries’ (including the Surviving Corporation’s)
businesses, product lines or assets. Notwithstanding the
foregoing or any other provision of this Agreement, nothing in
this
Section 5.3
shall limit a party’s right to
terminate this Agreement pursuant to
Section 7.1(b)
so long as such party has, prior to such termination, complied
with its obligations under this
Section 5.3
.
Section
5.4.
Indemnification
.
(a)
Obligations Assumed by Surviving
Corporation
.
Merger Sub and the Surviving
Corporation shall, and Parent shall cause the Surviving
Corporation to, honor all obligations of indemnification and
exculpation from liabilities for acts or omissions occurring at
or prior to the Effective Time (including any matters arising in
connection with the transactions contemplated by this Agreement)
in favor of the current or former directors, officers or
employees of the Company and the Company Subsidiaries as
provided in their respective articles of incorporation, code of
regulations (or comparable organizational documents) or in any
agreement set forth in the Company Disclosure Letter or filed as
an exhibit to the SEC Documents between the Company or any
Company Subsidiary, on the one hand, and any current or former
director, officer or employee of the Company or any Company
Subsidiary, on the other hand, immediately prior to the
Effective Time, and all such obligations will survive the Merger
and will continue in full force and effect in accordance with
their terms and such rights will not be amended or otherwise
modified for a period of six (6) years after the Effective
Time in any manner that would adversely affect the rights of
individuals who on or prior to the Effective Time were
directors, officers, employees or agents of the Company or any
Company Subsidiary, unless such modification is required by Law.
If any claim for indemnification is asserted or made prior to
the Effective Time or within such six (6) year period, all
rights to indemnification in respect of such claim shall
continue until the final disposition of such claim.
(b)
Successors and Assigns of Surviving
Corporation
.
If the Surviving Corporation or
any of its successors or assigns (i) consolidates with or
merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger
or (ii) transfers or conveys all or substantially all of
its properties and assets to any person, then, and in each such
case, Parent and the Surviving Corporation shall make proper
provision so that the successors and assigns of the Surviving
Corporation will assume fully the obligations set forth in this
Section 5.4
.
(c)
Continuing Coverage
.
From the
Effective Time and for a period of six (6) years
thereafter, Parent and the Surviving Corporation shall maintain
in effect directors’ and officers’ liability insurance
covering acts or omissions occurring at or prior to the
Effective Time with respect to those persons who are currently
covered by the Company’s directors’ and officers’
liability insurance policy (a copy of which has been made
available or delivered to Parent) on terms with respect to such
coverage and amount no less favorable than those of such current
insurance coverage;
provided
,
however
, that in no
event will Parent or the Surviving Corporation be required to
expend in any one year an amount in excess of 300% of the annual
premiums currently paid by the Company for such insurance (the
“Maximum Premium”
); and
provided
,
further
, that, if the annual premiums for such insurance
coverage exceed the Maximum Premium, Parent and the Surviving
Corporation will be obligated to obtain a policy with the
greatest
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coverage available for a cost not exceeding such amount; and
provided
,
further
,
however
, that at
Parent’s option (and at Parent’s expense) in lieu of
the foregoing insurance coverage, the Company shall purchase
prior to the Effective Time six (6) year “tail”
insurance coverage that provides coverage identical in all
material respects to the coverage described above.
Notwithstanding anything herein to the contrary, if five
(5) Business Days prior to the Effective Time, Parent has
not completed the actions contemplated by the last proviso of
the immediately preceding sentence, the Company may, with prior
notice to Parent, purchase six (6) year “tail”
insurance coverage that provides coverage identical in all
material respects to the coverage described above, provided that
the Company does not pay in excess of the Maximum Premium.
(d)
Intended Beneficiaries
.
The
provisions of this
Section 5.4
are (i) intended
to be for the benefit of, and will be enforceable by, each
person referred to therein and his or her heirs and his or her
representatives and (ii) in addition to, and not in
substitution for, any other rights to indemnification or
contribution that any such person may have by contract or
otherwise. The provisions of this
Section 5.4
shall
survive the consummation of the Merger and expressly are
intended to benefit each such person. Parent shall pay all
reasonable expenses, including reasonable attorneys’ fees
and fees and disbursements of experts and witnesses, that may be
incurred by any indemnified party in enforcing the indemnity and
other obligations provided in this
Section 5.4
.
(e)
Survival
.
The provisions of
this
Section 5.4
shall survive the consummation of
the Merger.
Section
5.5.
Public
Announcements
.
Parent and the Company shall
consult with each other before holding any press conferences,
analyst calls or other meetings or discussions and before
issuing any press release or other public announcement or
statement with respect to the transactions contemplated by this
Agreement, including the Merger. The parties will provide each
other the opportunity to review and comment upon any press
release or other public announcement or statement with respect
to the transactions contemplated by this Agreement, including
the Merger, and shall not issue any such press release or other
public announcement or statement prior to such consultation,
except as may be required by applicable Law, court process or by
obligations pursuant to any listing agreement with any national
securities exchange, including the NYSE. The parties agree that
the initial press release or releases to be issued with respect
to the transactions contemplated by this Agreement shall be
mutually agreed upon prior to the issuance thereof.
Section
5.6.
Shareholder
Litigation
.
The parties to this Agreement
shall cooperate and consult with one another, to the fullest
extent possible, subject to entering into a customary joint
defense agreement, in connection with any shareholder litigation
against any of them or any of their respective directors or
officers with respect to the transactions contemplated by this
Agreement. In furtherance of and without in any way limiting the
foregoing, each of the parties shall upon the terms and subject
to the conditions contained in this Agreement use its respective
commercially reasonable efforts to prevail in such litigation so
as to permit the consummation of the transactions contemplated
by this Agreement in the manner contemplated by this Agreement;
provided
that the Company shall not, and shall not permit
any of the Company Subsidiaries nor any of the Company
Representatives to, compromise, settle, come to a settlement
arrangement regarding any such action or proceeding or consent
thereto unless Parent shall otherwise consent in writing (such
consent not to be unreasonably conditioned, withheld or
delayed). Without limiting the foregoing, the Company shall give
consideration to Parent’s advice with respect to such
litigation.
Section
5.7.
Section 16(b)
.
The
Company shall take all steps reasonably necessary to cause the
transactions contemplated hereby and any other dispositions of
equity securities of the Company (including derivative
securities) in connection with the transactions contemplated by
this Agreement by each individual who is a director or officer
of the Company to be exempt under
Rule 16b-3
under the Exchange Act.
Section
5.8.
Employee
Benefit Matters
.
(a)
Compensation and Benefits;
Severance
.
From and after the Effective Time,
the Surviving Corporation shall honor and shall cause each
Company Subsidiary to honor all of the obligations of the
Company and any Company Subsidiary arising under or in
connection with each of the Company Pension Plans, Company
Welfare Plans, Company Incentive Compensation Plans and Company
Executive Compensation Agreements, in accordance with their
terms and as in effect immediately before the Effective Time and
as disclosed in
Section 3.1(l)
of the Company
Disclosure Letter (without giving effect to any amendments
thereto which are executed, adopted or made effective after the
Effective Time, except where consented to in writing by the
affected party). For the period
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commencing at the Effective Time and ending on December 31,
2011, Parent shall cause the Surviving Corporation and each
Company Subsidiary to provide to those individuals employed by
the Surviving Corporation or by one or more of the Company
Subsidiaries as of the Effective Time (each, a
“Retained Employee”
and collectively,
the
“Retained Employees”
) base pay,
annual incentive opportunity for participants in the management
incentive plans described in
Section 5.8(d)
and
employee benefits (but excluding equity-based compensation)
which are substantially comparable in the aggregate to the base
pay, annual management incentive plan opportunities (but
excluding equity-based compensation) and employee benefits being
provided by the Company and the Company Subsidiaries, as
applicable, immediately prior to the Effective Time. Any
Retained Employee whose employment is terminated involuntarily
other than for cause on or after the Effective Time but on or
prior to December 31, 2011 shall be entitled to severance
benefits comparable to the severance benefits such Retained
Employee would have received from the Company or any Company
Subsidiary (as applicable) immediately prior to the Effective
Time.
(b)
Service Credit
.
In the event
any Retained Employee becomes covered by, or otherwise commences
participation in any employee benefit plan (within the meaning
of Section 3(3) of ERISA) sponsored or maintained by Parent
or any subsidiary of Parent (each, a
“Parent
Plan”
) following the Effective Time, Parent and the
Surviving Corporation shall ensure that such Retained Employee
receives hours of service credit for any and all employment
service credited to such Retained Employee by the Company and
any applicable Company Subsidiary prior to the Effective Time
under any Company Pension Plan or Company Welfare Plan in which
such Retained Employee was a participant, for both eligibility
and vesting purposes under such Parent Plan, subject to the
following exceptions: (i) such recognition of service
credit shall not cause or result in any duplication of any of
the benefits payable to such Retained Employee with respect to
the same period of service or (ii) such recognition of
service credit is prohibited under applicable Law or the terms
of the applicable insured Parent Plan.
(c)
Welfare Benefits
.
In the event
a Retained Employee or such Retained Employee’s eligible
dependent(s) becomes covered by any group accident and sickness,
dental, vision or similar group health plan sponsored or
maintained by Parent or any of its affiliates (a
“Successor Welfare Plan”
) other than the
Company Welfare Plans in which such Retained Employee or such
dependents participated (or from which they benefited)
immediately prior to the Effective Time (a
“Prior
Plan”
), Parent and the Surviving Corporation shall
ensure that (i) any such Successor Welfare Plan either
shall not have, or shall not enforce against such Retained
Employee or such dependents, any waiting periods, any
pre-existing condition limitations or exclusions, or any
underwriting requirements (whether imposed individually, or as a
group), or any
active-at-work
requirements or conditions; and (ii) any expenses incurred
by such Retained Employee or such dependents prior to the
Effective Time, which were recognized as satisfying (in whole or
in part) any deductible or co-insurance obligations such
Retained Employee or dependent had under the terms of such Prior
Plan prior to the Effective Time, shall be taken into account
under such Successor Welfare Plan for purposes of satisfying
such Retained Employee’s or such dependent’s
deductible or co-insurance obligations under such Successor
Welfare Plan;
provided
, that the foregoing shall not
apply with respect to the commencement of a new plan year with
respect to either the Successor Welfare Plan or Prior Plan.
(d)
Annual Management Incentive
Plans
.
The Company shall be permitted to pay
any amounts earned under the Company’s annual management
incentive plans for fiscal year 2010 (
i.e
., the fiscal
year ending September 30, 2010) (the
“2010
Management Incentive Plans”
). Parent and Merger Sub
agree that, if such amounts have not been paid prior to the
Effective Time, the Surviving Corporation shall honor the 2010
Management Incentive Plans, and that all payments earned under
the 2010 Management Incentive Plans shall be made in a manner
consistent with the Company’s past practice. In addition,
Parent and Merger Sub agree that Surviving Corporation shall
honor the Company’s annual management incentive plans for
fiscal year 2011 (
i.e
., the fiscal year ending
September 30, 2011) (the
“2011 Management
Incentive Plans”
) for the period prior to the
Effective Time, including by paying the pro rata portion (based
on the number of days elapsed in such fiscal quarter prior to
the Closing) of any payment earned with respect to the fiscal
quarter in which the Closing occurs, and that all payments
earned under the 2011 Management Incentive Plans for such period
will be paid promptly after the Effective Time in accordance
with the Company’s past practice.
(e)
No Third-Party
Beneficiaries
.
Nothing in this
Section 5.8
shall (i) confer any rights upon
any individual, including any current or former employee or
director of the Company or any Company Subsidiary, other than
the signatories hereto and their respective successors and
permitted assigns; (ii) constitute or create an employment
A-28
agreement or otherwise contravene any
employment-at-will
relationship; (iii) constitute or be treated as an
amendment, modification or adoption of any Plan,
(iv) prevent the amendment or termination of any Plan or
interfere with the right or obligation of Parent or its
affiliates to make such changes to the foregoing as are
necessary to conform with applicable Law, or (v) limit the right
of Parent, the Surviving Corporation, the Company or any of
their respective affiliates to terminate the employment of any
employee at any time.
(f)
Employee Stock Purchase Plan and
SERP
.
The Company shall take all action to
terminate the Company ESPP and the Company SERP no later than
the Effective Time.
Section
5.9.
Parent
Actions
.
Parent agrees to take all action
necessary to cause Merger Sub to perform all of Merger
Sub’s, and the Surviving Corporation to perform all of the
Surviving Corporation’s, agreements, covenants and
obligations under this Agreement and to consummate the Merger on
the terms and subject to the conditions set forth in this
Agreement. Parent shall be liable for any breach of any
representation, warranty, covenant or agreement of Merger Sub in
this Agreement.
Section
5.10.
Control
of Operations
.
Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right
to control or direct the Company’s operations prior to the
Effective Time. Prior to the Effective Time, the Company shall
exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its operations.
Notwithstanding the foregoing, Parent shall be provided a
reasonable opportunity to review, if practicable, all material
communications with the Company’s and the Company
Subsidiaries’ employees relating to the Merger and the
other transactions contemplated hereby prior to the Effective
Time.
ARTICLE VI
CONDITIONS
PRECEDENT
Section
6.1.
Conditions
to Each Party’s Obligation to Effect the
Merger
.
The obligation of each party to
effect the Merger is subject to the satisfaction or waiver at or
prior to the Closing Date of the following conditions:
(a)
Shareholder Approval
.
The
Company Shareholder Approval shall have been obtained.
(b)
Governmental and Regulatory
Approvals
.
All consents, approvals and
actions of, filings with and notices to any Governmental Entity
required to consummate the Merger and the other transactions
contemplated hereby, the failure of which to be made or obtained
would be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect, shall have been
made or obtained.
(c)
No Injunctions or
Restraints
.
No judgment, order, preliminary
or permanent injunction, decree or Law entered, enacted,
promulgated, enforced or issued by any court or other
Governmental Entity of competent jurisdiction shall be in effect
preventing or prohibiting the consummation of the Merger or
having the effect of making consummation of the Merger illegal.
(d)
Antitrust
.
The waiting period
(including any extension thereof) applicable to the consummation
of the Merger under the HSR Act shall have expired or been
terminated and any foreign approvals, consents and clearances
shall have been received.
Section
6.2.
Conditions
to Obligations of Parent and Merger Sub
.
The
obligation of Parent and Merger Sub to effect the Merger is
further subject to satisfaction or waiver of the following
conditions:
(a)
Representations and
Warranties
.
(i) The representations and
warranties of the Company contained in
Section 3.1(b)
shall be true and correct in all
material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, and
(ii) all other representations and warranties of the
Company set forth herein shall be true and correct in all
respects (without giving effect to any materiality or Company
Material Adverse Effect qualifications contained therein) as of
the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent
expressly made as of an earlier date, in which case as of such
date), except where the failure of such other representations
and warranties to be so true and correct (without giving effect
to any materiality or Company Material Adverse Effect
qualifications contained therein) would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
A-29
(b)
Performance of Obligations of the
Company
.
The Company shall have performed in
all material respects all of its obligations required to be
performed by it under this Agreement at or prior to the Closing
Date.
(c)
Officer’s
Certificate
.
The Company shall have furnished
Parent with a certificate dated the Closing Date and signed on
its behalf by an executive officer to the effect that the
conditions set forth in
Section 6.2(a)
and
Section 6.2(b)
have been satisfied.
Section
6.3.
Conditions
to Obligations of the Company
.
The obligation
of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a)
Representations and
Warranties
.
The representations and
warranties of Parent and Merger Sub set forth herein shall be
true and correct in all respects (without giving effect to any
materiality or Parent Material Adverse Effect qualifications
contained therein) as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date
(except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such
other representations and warranties to be so true and correct
(without giving effect to any materiality or Parent Material
Adverse Effect qualifications contained therein) would not
reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
(b)
Performance of Obligations of Parent and Merger
Sub
.
Each of Parent and Merger Sub shall have
performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the
Closing Date.
(c)
Officer’s
Certificate
.
Each of Parent and Merger Sub
shall have furnished the Company with a certificate dated the
Closing Date signed on its behalf by an executive officer to the
effect that the conditions set forth in
Section 6.3(a)
and
Section 6.3(b)
have
been satisfied.
Section
6.4.
Frustration
of Closing Conditions
.
None of Parent, Merger
Sub or the Company may rely on the failure of any condition set
forth in
Section 6.1
,
Section 6.2
or
Section 6.3
, as the case may be, to be satisfied as
a grounds for termination under
Article VII
if such
failure was caused by such party’s failure to comply with
any of terms of this Agreement.
ARTICLE VII
TERMINATION
Section
7.1.
Termination
.
(a)
Termination by Mutual
Consent
.
This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any
time prior to the Effective Time, whether before or after the
Company Shareholder Approval, by mutual written consent of
Parent, Merger Sub and the Company (with any termination by
Parent also being an effective termination by Merger Sub).
(b)
Termination by Parent or the
Company
.
This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any
time prior to the Effective Time, whether before or after the
Company Shareholder Approval, by either Parent or the
Company (with any termination by Parent also being an effective
termination by Merger Sub):
(i) if the Merger has not been consummated by
March 31, 2011, or such later date, if any, as Parent and
the Company agree upon in writing (the
“Outside
Date”
);
provided
,
however
, that the
right to terminate this Agreement pursuant to this
Section
7.1(b)(i)
is not available to any party whose breach in any
material respect of any provision of this Agreement has been the
cause of, or resulted in, the failure of the Merger to be
consummated by such time;
(ii) if any Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any order, injunction, decree,
ruling or other Law having the effect of permanently
restraining, enjoining or otherwise prohibiting the consummation
of the Merger, which order, injunction, decree, ruling or other
Law shall have become final and non-appealable;
provided
,
however
, that the party seeking to terminate this
Agreement
A-30
pursuant to this
Section 7.1(b)(ii)
shall have used its
commercially reasonable efforts (subject to
Section 5.3(c)
) to have such injunction
lifted; or
(iii) if the Company Meeting (including any adjournment or
postponement thereof) has concluded, the Company’s
shareholders have voted, and the Company Shareholder Approval
was not obtained.
(c)
Termination by Parent
.
This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Effective Time,
whether before or after the Company Shareholder Approval, by
written notice of Parent:
(i) (A) if the Company has breached or failed to
perform any of its covenants or other agreements contained in
this Agreement to be complied with by the Company such that the
closing condition set forth in
Section 6.2(b)
would
not be satisfied or (B) there exists a breach of any
representation or warranty of the Company contained in this
Agreement such that the closing condition set forth in
Section 6.2(a)
would not be satisfied and, in the
case of either (A) or (B), such breach or failure to
perform (1) is not cured within thirty (30) days after
receipt of written notice thereof or (2) is incapable of
being cured by the Company by the Outside Date; or
(ii) if the Board of Directors or any committee thereof has
made a Company Adverse Recommendation Change;
provided
,
however
, that Parent’s and Merger Sub’s right
to terminate this Agreement pursuant to this
Section 7.1(c)(ii)
in respect of a Company Adverse
Recommendation Change will expire ten (10) Business Days
after the last date upon which such Company Adverse
Recommendation Change is made.
(d)
Termination by the
Company
.
This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any
time prior to the Effective Time, whether before or after the
Company Shareholder Approval, by written notice of the Company:
(i) (A) if either Parent or Merger Sub has breached or
failed to perform any of its covenants or other agreements
contained in this Agreement to be complied with by Parent or
Merger Sub such that the closing condition set forth in
Section 6.3(b)
would not be satisfied, or
(B) there exists a breach of any representation or warranty
of Parent or Merger Sub contained in this Agreement such that
the closing condition set forth in
Section 6.3(a)
would not be satisfied and, in the case of either (A) or
(B), such breach or failure to perform (1) is not cured
within thirty (30) days after receipt of written notice
thereof or (2) is incapable of being cured by Parent by the
Outside Date;
(ii) if the Board of Directors shall have approved, and the
Company shall concurrently with such termination enter into an
Acquisition Agreement providing for the implementation of the
transactions contemplated by, a Superior Proposal in accordance
with
Section 4.2(c)
;
provided
,
however
, that the Company has not breached
Section 4.2
in any material respect or breached the
provisions of
Section 5.1(b)
(other than immaterial
breaches thereof);
provided
,
further
,
however
, that such termination shall not be effective
until such time as payment of the Termination Fee required by
Section 7.3(b)
shall have been paid; or
(iii) if (A) the conditions set forth in
Section 6.1
and
Section 6.2
are
satisfied (or, upon an immediate Closing, would be satisfied as
of such Closing), (B) the Company shall have notified the
Parent in writing of the satisfaction of such conditions and
that it stands ready, willing and able to consummate the Merger
at such time and (C) Parent shall have failed to consummate
such Merger within two Business Days of the later of (A) or
(B).
Section
7.2.
Effect
of Termination
.
In the event of any
termination of this Agreement pursuant to
Section 7.1
, this Agreement shall terminate (except
for the Confidentiality Agreement and the provisions of this
Section 7.2
,
Section 7.3
and
Section 8.2
through
Section 8.11
, each
of which shall survive the termination of this Agreement and
remain in full force and effect), and there shall be no other
liability on the part of the Company or Parent to the other
except as provided in the Confidentiality Agreement.
Notwithstanding the foregoing, to the extent that any
termination of this Agreement results from the material and
intentional breach by a party of any representation or warranty
set forth in this Agreement or from the material and intentional
breach by a party of any covenant set forth in this Agreement,
then such party shall be liable for any damages incurred or
suffered by the other party as a result of such breach.
A-31
Section
7.3.
Fees
and Expenses
.
(a)
Division of Fees and
Expenses
.
Except as otherwise expressly
provided in this Agreement, all fees and expenses incurred in
connection with the Merger, this Agreement and the transactions
contemplated hereby will be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated.
Notwithstanding the foregoing, the Company will bear and pay all
of the costs and expenses incurred in connection with the
printing and mailing of the Proxy Statement, all of the SEC
filing fees in respect of the Proxy Statement and all of the
fees of the proxy solicitor (which shall be retained by the
Company in consultation with Parent) in connection with the
solicitation of proxies from the Company’s shareholders.
(b)
Termination Fee
.
If
(i) any person makes a Company Takeover Proposal after the
date of this Agreement, this Agreement is terminated pursuant to
Section 7.1(b)(i)
,
Section 7.1(b)(iii)
or
Section 7.1(c)(i)
and within twelve
(12) months of the date of such termination the Company
enters into an agreement providing for, or consummates, any
Company Takeover Proposal with such person, (ii) this
Agreement is terminated by the Company pursuant to
Section 7.1(d)(ii)
or (iii) this Agreement is
terminated pursuant to
Section 7.1(c)(ii)
, then the
Company shall pay to Parent a fee of $10,000,000 (the
“Termination Fee”
), which amount shall
be payable by wire transfer of same day funds, in the case of
the foregoing clause (i), on the date of entering into or the
consummation of, as applicable, such Company Takeover Proposal,
and in the case of clause (ii), on the date of termination of
this Agreement, and in the case of clause (iii) within two
(2) Business Days of such termination. For purposes of this
Section 7.3(b)
, the term “Company Takeover
Proposal” shall have the meaning assigned to such term in
Section 4.2(b)
, except that all references to 15%
therein shall be deemed to be references to 50%.
(c)
Exclusivity
.
Except as
provided in
Section 7.2
or for specific performance
as provided in
Section 8.8(a)
, the Termination Fee
payable by the Company pursuant to
Section 7.3(b)
constitutes Parent and Merger Sub’s exclusive remedy for or
in connection with any event or circumstance with respect to
which such fee is so paid, and none of Parent, Merger Sub or any
of their affiliates may seek (and Parent and Merger Sub will
cause their affiliates not to seek) to obtain any recovery,
judgment, or damages of any kind, including consequential,
indirect, or punitive damages, against the Company or any of the
Company Subsidiaries or any of the Company Representatives in
connection with this Agreement or the transactions contemplated
hereby. The parties confirm that each event or circumstance
giving rise to Parent and Merger Sub’s right to a fee under
Section 7.3(b)
would cause significant damage to
Parent and Merger Sub that would be inherently difficult to
quantify and prove, and that the Termination Fee provided for
hereunder is intended to provide fair compensation in response
to that damage, is not intended to be punitive, and is
reasonable in amount in relation to the circumstances under
which it would become payable. Notwithstanding any provision in
this Agreement to the contrary, in no event shall the Company be
required to pay the Termination Fee on more than one occasion.
Any payment made pursuant to this
Section 7.3
shall
be net of any amounts that may be required to be deducted or
withheld therefrom under the Code or under any provision of
state, local or foreign Tax Law. If the Company fails to pay in
a timely manner the Termination Fee due to Parent pursuant to
this
Section 7.3
and, in order to obtain such
payment, Parent commences a legal proceeding that results in a
final, non-appealable judgment against the Company for the
Termination Fee, the Company shall pay the
out-of-pocket
costs and expenses (including reasonable legal fees and expenses
of outside counsel) incurred by Parent in connection with such
proceeding, together with interest on all such unpaid amounts at
the prime lending rate prevailing during such period as
published in The Wall Street Journal, calculated on a daily
basis from the date such amounts were required to be paid until
the date of actual payment.
ARTICLE VIII
GENERAL
PROVISIONS
Section
8.1.
Nonsurvival
of Representations and Warranties; Scope of Representations and
Warranties
.
(a) None of the representations, warranties, covenants and
agreements in this Agreement or in any instrument delivered
pursuant to this Agreement will survive the Effective Time,
except each of the covenants and agreements contained in this
Agreement that by its terms contemplates performance, in whole
or in part, after the Effective Time, including
Article II
and
Article VIII
and
Section 5.4
, will survive the Merger.
A-32
(b) Except as and to the extent expressly set forth in
Section 3.1
, the Company makes no, and disclaims
any, representations or warranties whatsoever, whether express
or implied, and Parent and Merger Sub confirm, acknowledge and
agree that they are not relying upon any such representation or
warranty not expressly set forth in this Agreement. The Company
disclaims and shall have no liability or responsibility for any
other statement or information made or communicated (orally or
in writing) to Merger Sub, Parent, any of their affiliates or
any stockholder, officer, director, employee, representative,
consultant, attorney, agent, lender or other advisor of Merger
Sub, Parent or their affiliates (including any opinion, any
implied warranty or any representation as to the accuracy or
completeness of any information regarding the Company,
information or advice which may have been provided to any such
person by any Company Representative or any other person or
contained in the files or records of the Company), wherever and
however made, including any documents, projections, forecasts or
other material made available to Parent in certain “data
rooms” or management presentations in expectation of the
transactions contemplated by this Agreement. As part of its
investigation of the Company, Parent has been given financial
information, cost estimates, forecasts, projections and other
oral or written information and materials with respect to the
Company (the
“Additional Financial
Information”
) by the Company or a Company
Representative. None of the Company or any of its officers,
directors, employees, affiliates, representatives or agents
makes any representations or warranties with respect to the
Additional Financial Information, except for any specific
representations and warranties set forth in
Section 3.1
of this Agreement.
Section
8.2.
Notices
.
Except
for notices that are specifically required by the terms of this
Agreement to be delivered orally, all notices, requests, claims,
demands and other communications under this Agreement must be in
writing and will be deemed given (a) when delivered, if
delivered personally, (b) when sent, if sent by facsimile
(which is promptly confirmed by telephone or electronic mail)
during normal business hours, or (c) one (1) Business
Day after sending, if sent by a nationally recognized overnight
courier service (providing proof of delivery) to the parties at
the following addresses (or at such other address for a party as
is specified by like notice):
if to Parent or Merger Sub, to:
Danaher Corporation
2099 Pennsylvania Avenue, 12th Floor
Washington DC
20006-1813
Facsimile No.:
(202) 828-0860
Attention: Chief Counsel, Mergers & Acquisitions
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Facsimile No.:
(212) 735-2000
|
|
|
|
|
|
Attention:
|
Joseph A. Coco, Esq.
|
Thomas W. Greenberg, Esq.
if to the Company, to:
Keithley Instruments, Inc.
28775 Aurora Road
Solon, OH 44139
Facsimile No.:
(440) 542-8007
Attention: Chairman of the Board, President and Chief Executive
Officer
with a copy (which shall not constitute notice) to:
Baker & Hostetler LLP
PNC Center
1900 East 9th Street, Suite 3200
Cleveland, OH
44114-3482
Facsimile No.:
(216) 696-0740
Attention: John M. Gherlein, Esq.
A-33
Section
8.3.
Interpretation
and Definitions
.
When a reference is made in
this Agreement to an Article or Section, such reference is to an
Article or Section of this Agreement unless otherwise indicated.
The table of contents, table of defined terms and headings
contained in this Agreement are for reference purposes only and
do not affect in any way the meaning or interpretation of this
Agreement. Except as otherwise provided herein, all references
to “dollars” or “$” shall be deemed
references to the lawful money of the United States of America.
Whenever the words “include,” “includes” or
“including” are used in this Agreement, they will be
deemed to be followed by the words “without
limitation.” The words “hereof,”
“herein” and “hereunder” and words of
similar import when used in this Agreement will refer to this
Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement will have the
defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Any statute defined or referred to herein
means such statute as from time to time amended, modified or
supplemented, including by succession of comparable successor
statutes. References to “this Agreement” include any
schedules, exhibits or other attachments hereto. The parties
hereto have participated jointly in the negotiating and drafting
of this Agreement and, if an ambiguity or question of intent
arises, this Agreement shall be construed as jointly drafted by
the parties hereto and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement. For purposes of
this Agreement:
(a)
“affiliate”
of any person means
another person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such first person, with “control”
meaning the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by
contract or otherwise;
(b)
“Antitrust Law”
means the Sherman Act,
the Clayton Act, the HSR Act, the Federal Trade Commission Act,
and all other Laws (domestic or foreign) that are designed or
intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition;
(c)
“Business Day”
means any day other
than Saturday, Sunday or any day on which banking and savings
and loan institutions in the State of Ohio are authorized or
required by Law to be closed;
(d)
“Company IP”
means all Intellectual
Property Rights owned by the Company or any of the Company
Subsidiaries;
(e)
“Company Material Adverse Effect”
means any event, change, circumstance or effect that
(i) is materially adverse to the business, financial
condition or results of operations of the Company and the
Company Subsidiaries, taken as a whole, or (ii) prevents or
materially delays or materially impairs the ability of the
Company to perform its obligations hereunder and to consummate
the Merger and the other transactions contemplated by this
Agreement;
provided
,
however
, that in the case of
clause (i) only, events, changes, circumstances or effects
shall not constitute or be considered in determining a Company
Material Adverse Effect to the extent: (A) generally
affecting the electronic test and measurement industry in the
United States or elsewhere or the economy or the financial or
securities markets in the United States or elsewhere, including
regulatory, social or political conditions or developments
(including any outbreak or escalation of hostilities or acts of
war, whether or not pursuant to the declaration of a national
emergency or war, or acts of terrorism) or changes in interest
rates, (B) directly or indirectly resulting from
(1) except for breaches of Section 3.1(d), the
announcement or the existence of, or taking actions required by,
this Agreement or the announcement of the transactions
contemplated by this Agreement, (2) changes in applicable
Law or GAAP or accounting standards, (3) changes in the
market price or trading volume of the Company Shares,
(4) changes in any analyst recommendations, any financial
strength rating or any other similar recommendations or ratings
as to the Company or the Company Subsidiaries (including, in and
of itself, any failure to meet analyst projections),
(5) the loss by the Company or any of the Company
Subsidiaries of any of its customers, suppliers or employees as
a result of the announcement of the transactions contemplated by
this Agreement, or (6) the failure, in and of itself, of
the Company to meet any expected or projected financial or
operating performance target, whether internal or published, for
any period ending on or after the date of this Agreement as well
as any
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change, in and of itself, by the Company in any expected or
projected financial or operating performance target as compared
with any target prior to the date of this Agreement;
provided
that any of the underlying causes of such change
or failure in subclauses (3), (4) or (6) above shall
not be excluded from the determination of a Company Material
Adverse Effect by virtue of this clause; and
further
provided
that, notwithstanding the foregoing, any matter
described in clause (A) above shall not be excluded from
the determination of a Company Material Adverse Effect to the
extent that such matter disproportionately affects the Company
and the Company Subsidiaries, taken as a whole, as compared to
other persons engaged in the electronic test and measurement
industry.
(f)
“Company Share Plans”
means the 1992
Stock Option Plan, 2002 Stock Incentive Plan, as amended, 2009
Stock Incentive Plan, 1996 Outside Directors Deferred Stock Plan
and the 1997 Directors’ Stock Option Plan;
(g)
“Company Software Products”
means all
material Software products developed and owned by the Company or
any Company Subsidiary that are (i) offered for license by
the Company or any of the Company Subsidiaries or (ii) used
in the conduct of their respective businesses;
(h)
“Environment”
means soil, surface
waters, ground water, land, stream sediment, surface and
subsurface strata, ambient air, indoor air or indoor air
quality, including any material or substance used in the
physical structure of any building or improvement;
(i)
“Environmental Condition”
means any
contamination, damage, injury or other condition related to
Hazardous Substances and includes any present or former
Hazardous Substance treatment, storage, disposal or recycling
units, underground storage tanks, wastewater treatment or
management systems, wetlands, sumps, lagoons, impoundments,
landfills, ponds, incinerators, wells, asbestos-containing
materials, or PCB-containing articles;
(j)
“Environmental, Health and Safety Claim”
means any written claim, demand, suit, action, proceeding,
order, investigation or any other written notice to the Company
or any Company Subsidiary by any person alleging any potential
liability (including potential liability for investigatory
costs, risk assessment costs, cleanup costs, removal costs,
remedial costs, operation and maintenance costs, governmental
response costs, natural resource damages, or penalties) arising
out of, based on, or resulting from (i) alleged
noncompliance with any Environmental, Health and Safety Law or
Environmental Permit, (ii) alleged injury or damage arising
from exposure to Hazardous Substances, or (iii) the
presence, Release or threatened Release into the Environment of
any Hazardous Substance at or from any location, whether or not
owned, leased, operated or otherwise used by the Company or any
Company Subsidiary;
(k)
“Environmental, Health and Safety Laws”
means all Laws relating to (i) pollution or protection
of the Environment, (ii) emissions, discharges, Releases or
threatened Releases of Hazardous Substances, (iii) threats
to human health or ecological resources arising from exposure to
Hazardous Substances or (iv) the manufacture, generation,
processing, distribution, use, sale, treatment, receipt,
storage, disposal, transport or handling of Hazardous
Substances, and includes the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource
Conversation and Recovery Act, the Clean Air Act, the Clean
Water Act, the Water Pollution Control Act, the Toxic Substances
Control Act and any similar foreign, state or local Laws;
(l)
“Environmental Permit”
means all
Permits and timely-submitted applications for Permits required
under applicable Environmental, Health and Safety Laws;
(m)
“ERISA Affiliate”
means those Company
Subsidiaries which are members of a “controlled group”
which includes the Company (within the meaning of
Section 414(b) of the Code and related regulations) or
which are “under common control” in a group of
corporate and non-corporate enterprises which includes the
Company (within the meaning of Section 414(c) of the Code
and related regulations);
(n)
“Filed SEC Documents”
means the
Company’s Annual Report on
Form 10-K
for the fiscal year ended September 30, 2008, the
Company’s Annual Report on
Form 10-K
for the fiscal year ended September 30, 2009, the
Company’s Quarterly Report on
Form 10-Q
for the quarterly period ended December 31, 2009, the
Company’s Quarterly Report on
Form 10-Q
for the quarterly period ended March 31,
A-35
2010, the Company’s Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, the
Company’s Current Reports on
Form 8-K
filed on November 19, 2009, November 20, 2009,
December 9, 2009, December 14, 2009,
February 19, 2010 and August 13, 2010, the
Company’s Definitive Notice and Proxy Statement for the
Company’s Annual Meeting held in 2009 and the
Company’s Definitive Notice and Proxy Statement for the
Company’s Annual Meeting held in 2010.
(o)
“Hazardous Substance”
means
(i) chemicals, pollutants, contaminants, hazardous wastes,
toxic substances, toxic mold, radiation and radioactive
materials, (ii) any substance that is or contains asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls
(“PCBs”
), petroleum or petroleum-derived
substances or wastes, leaded paints, radon gas or related
materials, (iii) any substance that requires removal or
remediation under any applicable Environmental, Health and
Safety Law, or is defined, listed or identified as a
“hazardous waste” or “hazardous substance”
thereunder, or (iv) any substance that is regulated under
any applicable Environmental, Health and Safety Law;
(p)
“Indebtedness”
means, with respect to
any person, all obligations (including all obligations in
respect of principal, accrued interest, penalties, prepayment
penalties, fees and premiums) of such person (i) for
borrowed money (including overdraft facilities),
(ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) in respect of letters of credit and
bankers’ acceptances, (iv) under interest rate or
currency swap or other derivative or hedging instruments and
transactions (valued at the termination value thereof),
(v) all obligations of such person under any sale and lease
back transaction, agreement to repurchase securities sold or
other similar financing transaction and (vi) in the nature
of guarantees of the obligations described in clauses (i)
through (v) above of any other person.
(q)
“Intellectual Property Rights”
means
all worldwide (i) inventions, whether or not patentable;
(ii) patents and patent applications;
(iii) trademarks, service marks, trademark and service mark
registrations and applications, trade dress, logos, slogans and
trade names, whether or not registered, and all goodwill
associated therewith; (iv) copyrights, copyrightable works,
copyright registrations and applications, rights in databases
and related rights, whether or not registered; (v) mask
works; (vi) Software; (vii) Internet domain names and
Internet websites and the content thereof, (viii) trade
secrets, confidential, technical and business information, and
know-how; (ix) all rights to any of the foregoing provided
by bilateral or international treaties or conventions;
(x) all other intellectual property or proprietary rights;
and (xii) all rights to sue or recover and retain damages
and costs and attorneys’ fees for past, present and future
infringement or misappropriation of any of the foregoing;
(r)
“knowledge”
means (i) with
respect to the Company, the actual knowledge, after reasonable
inquiry, of the Chairman, President and Chief Executive Officer,
the Executive Vice President and Chief Operating Officer and the
Vice President and Chief Financial Officer of the Company and
(ii) with respect to Parent and Merger Sub, the actual
knowledge, after reasonable inquiry, of the executive officers
of Parent;
(s)
“Law”
means any foreign, federal,
state or local law, statute, code, ordinance, regulation, rule,
principle of common law or other legally enforceable obligation
imposed by a court or other Governmental Entity;
(t)
“Liens”
means any and all pledges,
claims, liens, options, charges, easements, restrictions,
covenants, conditions, encroachments, encumbrances and security
interests;
(u)
“Parent Material Adverse Effect”
means
any event, circumstance, change, occurrence or state of facts
that prevents or materially delays or materially impairs the
ability of Parent or Merger Sub to consummate the Merger and the
other transactions contemplated by this Agreement;
(v)
“Permitted Liens”
means
(i) statutory Liens securing payments not yet due and
payable, (ii) such imperfections or irregularities of
title, claims, liens, charges, security interests, easements,
covenants and other restrictions or encumbrances as would not
reasonably be expected to materially impair property or assets
to which they relate, (iii) mortgages, or deeds of trust,
security interests or other encumbrances on title related to
indebtedness reflected on the consolidated financial statements
of the Company set forth in
Section 8.3(v)
of the
Company Disclosure Letter, (iv) Liens for Taxes not yet due
and payable or that are being contested in good faith by
appropriate proceedings, (v) mechanics’,
materialmen’s or other Liens arising by operation of law,
A-36
related to an underlying obligation that is not overdue or that
secure a liquidated amount that is being contested in good faith
and by appropriate proceedings and for which adequate reserves
have been maintained in accordance with GAAP, (vi) pledges
or deposits to secure obligations under workers’
compensation Laws or similar legislation or to secure public or
statutory obligations, and (vii) pledges and deposits to
secure the performance of bids, trade contracts, leases, surety
and appeal bonds, performance bonds and other obligations of a
similar nature, in each case in the ordinary course of business;
(w)
“person”
means an individual,
corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization or
other legal entity (including its permitted successors and
assigns);
(x)
“Plans”
means the Company Pension
Plans, the Company Welfare Plans, the Company Incentive
Compensation Plans and the Company Executive Compensation
Agreements.
(y)
“Registered IP”
means all material
U.S., international and foreign (i) patents and patent
applications (including provisional applications and design
patents and applications) and all reexaminations, reissues,
divisions, divisionals, renewals, extensions, counterparts,
continuations and
continuations-in-part
thereof, and all patents, applications, documents and filings
claiming priority thereto or serving as a basis for priority
thereof; (ii) registered trademarks, service marks,
intent-to-use
applications, or other registrations or applications related to
trademarks or service marks; (iii) registered copyrights
and applications for copyright registration; and
(iv) domain name registrations. Notwithstanding the
foregoing, Registered IP does not mean any patent, patent
application, trademark, or trademark application that was
intentionally abandoned by the Company or any of the Company
Subsidiaries in the reasonable business judgment of the Company
or such Company Subsidiary;
(z)
“Release”
means any releasing,
disposing, discharging, injecting, spilling, leaking, pumping,
dumping, emitting, escaping, emptying, migration, placing or the
like, or otherwise entering into the Environment;
(aa)
“Santa Rosa Property”
means the real
property leased pursuant to the Lease, dated
January 9, 2004, as amended, between the Company and
CA-Oak Valley Business Center Limited Partnership, as assigned
to Agilent Technologies, Inc.;
(bb)
“Software”
shall mean any and all
(i) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether
in source code or object code, (ii) databases and
compilations, including any and all data and collections of
data, whether machine readable or otherwise,
(iii) descriptions, schematics, flow-charts and other work
product used to design, plan, organize and develop any of the
foregoing and (iv) all documentation, including user
documentation, user manuals, specifications and training
materials, relating to any of the foregoing;
(cc)
“subsidiary”
of any person means
(i) a corporation more than fifty percent (50%) of the
combined voting power of the outstanding voting stock of which
is owned, directly or indirectly, by such person or by one of
more other subsidiaries of such person or by such person and one
or more other subsidiaries thereof, (ii) a partnership of
which such person, or one or more other subsidiaries of such
person or such person and one or more other subsidiaries
thereof, directly or indirectly, is the general partner and has
the power to direct the policies, management and affairs of such
partnership, (iii) a limited liability company of which
such person or one or more other subsidiaries of such person or
such person and one or more other subsidiaries thereof, directly
or indirectly, is the managing member and has the power to
direct the policies, management and affairs of such company or
(iv) any other person (other than a corporation,
partnership or limited liability company) in which such person,
or one or more other subsidiaries of such person or such person
and one or more other subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to
direct the policies, management and affairs thereof;
(dd)
“Taxes”
includes all federal, state,
local or foreign net and gross income, alternative or add-on
minimum, environmental, gross receipts,
ad
valorem
, value added, goods and services, capital stock,
profits, license, single business, employment, severance, stamp,
unemployment, customs, property, sales, excise, use, occupation,
service, transfer, payroll, franchise, withholding and other
taxes or similar governmental duties,
A-37
charges, fees, levies or other assessments, including any
interest, penalties or additions with respect thereto; and
(ee)
“Tax Return”
means any return,
report, statement or information required to be filed with any
Governmental Entity with respect to Taxes, including any
supplement thereto or amendment thereof.
Section
8.4.
Counterparts
.
This
Agreement may be executed in one or more counterparts, all of
which will be considered one and the same agreement and will
become effective when one or more counterparts have been signed
by each of the parties and delivered (by telecopy, email or
otherwise) to the other parties.
Section
8.5.
Entire
Agreement; No Third-Party Beneficiaries
.
This
Agreement, including the Company Disclosure Letter and the
Parent Disclosure Letter, and the Confidentiality Agreement,
(a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this
Agreement and the Confidentiality Agreement and (b) except
for the provisions of
Section 5.4
, are not intended
to confer upon any person other than the parties hereto any
rights or remedies, other than the right of the Company
shareholders to receive the Merger Consideration after the
Closing (a claim with respect to which may not be made unless
and until the Effective Time shall have occurred).
Section
8.6.
Governing
Law
.
This Agreement and any disputes or
controversies arising out of or relating to this Agreement or
the transactions contemplated hereby (whether in contract, tort
or otherwise) shall be governed by, and construed in accordance
with, the Laws of the State of Ohio, regardless of the Laws that
might otherwise govern under applicable principles of conflict
of laws thereof.
Section
8.7.
Assignment
.
Neither
this Agreement nor any of the rights, interests or obligations
under this Agreement may be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties hereto
without the prior written consent of the other parties, except
that Parent
and/or
Merger Sub may assign its rights hereunder to a direct or
indirect wholly owned subsidiary of Parent (provided that no
such assignment shall relieve Parent or Merger Sub from any
obligation or liability under this Agreement). Any assignment in
violation of this
Section 8.7
will be void and of no
effect. Subject to the preceding two sentences, this Agreement
is binding upon, inures to the benefit of, and is enforceable
by, the parties and their respective successors and permitted
assigns.
Section
8.8.
Consent
to Jurisdiction; Waiver of Jury Trial
.
(a) The parties agree that irreparable damage would occur
if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions
of this Agreement exclusively in the Court of Common Pleas in
Cuyahoga County, Ohio, or if (but only if) that court does not
have subject matter jurisdiction over such action or proceeding,
in the United States District Court for the Northern District of
Ohio. In addition, each of the parties hereto irrevocably agrees
that any legal action or proceeding with respect to this
Agreement and the rights and obligations arising hereunder, or
for recognition and enforcement of any judgment in respect of
this Agreement and the rights and obligations arising hereunder
brought by the other party hereto or its successors or assigns,
shall be brought and determined exclusively in the Court of
Common Pleas in Cuyahoga County, Ohio, or if (but only if) that
court does not have subject matter jurisdiction over such action
or proceeding, in the United States District Court for the
Northern District of Ohio. Each of the parties hereto hereby
irrevocably submits with regard to any such action or proceeding
for itself and in respect of its property, generally and
unconditionally, to the personal jurisdiction of the aforesaid
courts and agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated by this
Agreement in any court other than the aforesaid courts. Each of
the parties hereto hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this
Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason
other than the failure to serve in accordance with this
Section 8.8
, (b) any claim that it or its
property is exempt or immune from jurisdiction of any such court
or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of
judgment or otherwise) and (c) to the fullest extent
permitted by the applicable law, any claim that (i) the
suit, action or proceeding in such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper or (iii) this Agreement, or the
subject matter of this Agreement, may
A-38
not be enforced in or by such courts. Each of the parties, to
the fullest extent permitted by Law, consents to service of
process being made through the notice procedures set forth in
Section 8.2
.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, RELATING TO OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE AGREEMENTS DELIVERED IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section
8.9.
Amendment
.
This
Agreement may be amended by the parties at any time before or
after the Company Shareholder Approval;
provided
,
however
, that, after such approval, no amendment that by
Law requires further approval by the Company shareholders may be
made without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of
each of the parties.
Section
8.10.
Extension;
Waiver
.
At any time prior to the Effective
Time, the Company, on one hand, and Parent and Merger Sub, on
the other hand, may (a) extend the time for the performance
of any of the obligations or other acts of the other party,
(b) waive any inaccuracies in the representations and
warranties of the other party contained in this Agreement or in
any document delivered pursuant to this Agreement or
(c) subject to the proviso of
Section 8.9
,
waive compliance by the other parties with any of the agreements
or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver will be valid
only if set forth in an instrument in writing signed on behalf
of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise will
not constitute a waiver of such rights, nor shall any single or
partial exercise by any party to this Agreement of any of its
rights under this Agreement preclude any other or further
exercise of such rights or any other rights under this Agreement.
Section
8.11.
Severability
.
If
any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of Law or
public policy, all other conditions and provisions of this
Agreement will nevertheless remain in full force and effect.
Upon any determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable Law.
(Signatures
are on the following page.)
A-39
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto
duly authorized, all as of the date first written above.
DANAHER CORPORATION
Name: Daniel A. Raskas
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Title:
|
Senior Vice President —
|
Corporate Development
AEGEAN ACQUISITION CORP.
Name: Daniel A. Raskas
KEITHLEY INSTRUMENTS, INC.
|
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By:
|
/s/ Joseph
P. Keithley
|
Name: Joseph P. Keithley
|
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Title:
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Chairman, President and
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Chief Executive Officer
A-40
Annex B
VOTING
AGREEMENT
This VOTING AGREEMENT (this “
Agreement
”), dated
as of September 29, 2010, is by and among Danaher
Corporation, a Delaware corporation (the
“
Parent
”), Aegean Acquisition Corp., an Ohio
corporation and an indirect wholly-owned subsidiary of the
Parent (the “
Merger Sub
”), and Keithley
Investment Co. Limited Partnership, an Ohio limited partnership
(the ‘‘
Stockholder
”).
WHEREAS, the Parent, the Merger Sub and Keithley Instruments,
Inc. (the “
Company
”) propose to enter into an
Agreement and Plan of Merger dated as of the date hereof (as the
same may be amended or supplemented pursuant to the terms
thereof, the “
Merger Agreement
”) providing for
the merger of the Company with and into Merger Sub (the
“
Merger
”), upon the terms and subject to the
conditions set forth in the Merger Agreement;
WHEREAS, as of the date hereof, the Stockholder beneficially
owns the number of Class B Common Shares set forth opposite
the name of the Stockholder on
Schedule A
hereto
(together with any Common Shares, Class B Common Shares and
any other voting securities of the Company that the Stockholder
acquires beneficial ownership of after the date hereof, the
“
Owned Shares
”);
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, the Parent has required that the Stockholder
agree, and the Stockholder has agreed, to enter into this
Agreement;
WHEREAS, the Stockholder and the Parent desire to set forth
their agreement with respect to the voting of certain
Class B Common Shares upon the terms and subject to the
conditions set forth herein; and
WHEREAS, capitalized terms used but not defined herein shall
have the meanings set forth in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth below, the parties agree as follows:
1.
Voting; Proxies; Etc
.
(a)
Agreement to Vote
.
The
Stockholder hereby agrees that, from and after the date hereof
and until this Agreement shall have been terminated in
accordance with Section 6:
(i) At any meeting of the stockholders of the Company
called for purposes that include approval of the Merger and
adoption of the Merger Agreement, however called, or at any
adjournment or postponement thereof, or in connection with any
written consent of the stockholders of the Company or in any
other circumstances in which the stockholders of the Company are
entitled to vote, consent or give any other approval with
respect to the Merger and adoption of the Merger Agreement, the
Stockholder shall (a) appear at such meeting or otherwise
cause its Covered Shares (as defined below) to be counted as
present thereat for purposes of calculating a quorum, and
respond to each request by the Company for written consent, if
any, and (b) vote or cause to be voted (including by
written consent, if applicable) such number of Owned Shares
beneficially owned as of the relevant time that shall equal
19.99% of the voting power (as such term is used in
Chapter 1701 of the Ohio Revised Code) of the Company (the
“
Covered Shares
”), in each case to the extent
such Covered Shares are entitled to be voted and are not so
voted pursuant to the proxy granted in Section 1(b), in
favor of adoption of the Merger Agreement and the approval of
the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement. It is understood and
agreed that in no event shall Parent or Merger Sub acquire,
directly or indirectly, voting power (as such term is used in
Chapter 1701 of the Ohio Revised Code) of the
Company’s Common Shares and Class B Common Shares
that, in aggregate, will entitle Parent and Merger Sub,
collectively, to exercise or direct the exercise of the voting
power of the Company in the election of the directors equaling
more than 19.99% of such voting power. Nothing herein shall
restrict the right of the Stockholder to vote, consent or give
any other approval for any Owned Shares that are not Covered
Shares with respect to any matter in which the Stockholder is
entitled to vote.
(ii) At any meeting of the stockholders of the Company,
however called, or at any adjournment or postponement thereof,
or in connection with any written consent of the stockholders of
the Company, or in any
B-1
other circumstances in which the Stockholder is entitled to
vote, consent or give any other approval, the Stockholder shall
vote or cause to be voted (including by written consent, if
applicable) the Covered Shares against the following actions:
(1) any proposal that would result in a breach by the
Company of the Merger Agreement or by the Stockholder
hereunder; or
(2) any action or agreement that is intended to, or would
be reasonably likely to, impede, interfere with, delay, postpone
or attempt to discourage the Merger, including, but not limited
to: (A) the adoption or approval by the Company of any
Company Takeover Proposal; (B) any amendment of the
Company’s articles of incorporation or code of regulations;
(C) any material change in the present capitalization or
dividend policy of the Company; or (D) any other material
change in the Company’s corporate structure or business.
(b)
Proxies
.
As security for the
agreements of the Stockholder provided for herein, the
Stockholder hereby grants, in accordance with
Section 1701.48 of the Ohio Revised Code, to the Merger Sub
a proxy for the term of this Agreement to vote the Covered
Shares as indicated in Section 1(a) above. The Stockholder
agrees that this proxy shall be irrevocable during the term of
this Agreement and coupled with an interest and each of the
Stockholder and the Merger Sub will take such further action or
execute such other instruments as may be necessary to effectuate
the intent of this proxy and the Stockholder hereby revokes any
proxy previously granted by the Stockholder with respect to the
Covered Shares. The irrevocable proxy granted hereunder shall
automatically terminate upon the termination of this Agreement.
(c)
Transfer Restrictions
.
The
Stockholder agrees not to directly or indirectly (i) sell,
transfer, grant, pledge, encumber, assign or otherwise dispose
of or hypothecate (including by gift or by contribution or
distribution to any trust or similar instrument (collectively,
‘‘
Transfer
”)), or enter into any contract,
option or other arrangement or understanding (including any
profit sharing arrangement) with respect to the Transfer of, any
of the Owned Shares other than pursuant to the terms hereof and
the Merger Agreement, (ii) enter into any voting
arrangement or understanding with respect to the Owned Shares
(other than this Agreement), whether by proxy, voting agreement
or otherwise, (iii) convert the Stockholder’s
Class B Common Shares into Common Shares or (iv) take
any action that would reasonably be expected to make any of its
representations or warranties contained herein untrue or
incorrect in any material respect or would have the effect of
preventing or disabling the Stockholder from performing any of
its obligations hereunder. Any action attempted to be taken in
violation of the preceding sentence will be null and void.
(d)
Appraisal Rights
.
The
Stockholder hereby irrevocably waives any and all rights which
he or she may have as to appraisal, dissent or any similar or
related matter with respect to the Merger.
(e)
No Solicitation
.
The
Stockholder acknowledges and agrees that it will be deemed a
Company Representative for purposes of Section 4.2(a) of
the Merger Agreement and agrees to be bound by and to comply
with the provisions of Section 4.2(a) of the Merger
Agreement as if the Stockholder was a party to the Merger
Agreement. Nothing in this Agreement shall restrict the
activities of Joseph P. Keithley in his capacity as a director
of the Company.
(f)
Recommendation Change
.
The
Stockholder acknowledges and agrees that, during the term of
this Agreement, the obligations of the Stockholder specified in
this Section 1 shall not be affected by any withdrawal,
qualification or modification of the recommendation by the
Company or its board of directors relating to the Merger.
2.
Representations and Warranties of the
Stockholder
.
The Stockholder hereby
represents and warrants to the Parent and the Merger Sub as of
the date hereof as follows:
(a)
Authorization; Validity of Agreement; Necessary
Action
.
The Stockholder has all necessary
power and authority to execute and deliver this Agreement, to
perform the Stockholder’s obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the
Stockholder, and constitutes the legal, valid and binding
obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except as the
enforcement thereof may be
B-2
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar Laws affecting the rights of creditors
generally and subject to general equity principles.
(b)
No Violations; Consents and Approvals
.
(i) Except for filings, permits, authorizations, consents
and approvals as may be required under, and other applicable
requirements of, any applicable Antitrust Laws and
Sections 13(d) and 16 of the Exchange Act, neither the
execution, delivery or performance of this Agreement by the
Stockholder nor the consummation by the Stockholder of the
transactions contemplated hereby nor compliance by the
Stockholder with any of the provisions hereof will directly or
indirectly (with or without notice or lapse of time or both):
(A) contravene, conflict with, or result in a violation of,
or give any Governmental Entity or other Person the right to
exercise any remedy or obtain any relief under, any governmental
regulation or any order, injunction, writ or decree to which the
Stockholder, or any of the Stockholder’s assets, may be
subject, or (B) require a consent, approval, ratification,
permission, order or authorization from any Person; except, in
the case of clauses (A) and (B), for any such conflicts,
violations, breaches, defaults or other occurrences that would
not prevent or impair the ability of the Stockholder from
consummating the transactions contemplated hereby in any
material respect, or otherwise prevent the Parent or the Merger
Sub from exercising their respective rights under this Agreement
in any material respect.
(ii) The execution and delivery of this Agreement by the
Stockholder does not, and the performance of this Agreement and
the consummation of the transactions contemplated hereby will
not, require any consent, approval, license, permit, order,
declaration or authorization of, or registration or filing with
or notification to, any Governmental Entity, except (A) for
the pre-merger notification requirements of applicable Antitrust
Laws and applicable filings under Sections 13(d) and 16 of
the Exchange Act, and (B) where failure to obtain such
consent, approval, license, permit, order, declaration,
authorization or registration, or to make such filings or
notifications, would not prevent or impair the ability of the
Stockholder from consummating the transactions contemplated
hereby in any material respect, or otherwise prevent the Parent
or the Merger Sub from exercising their respective rights under
this Agreement in any material respect.
(c)
Shares
.
The Owned Shares are
owned of record by the Stockholder. Except as set forth on
Schedule A
, the Stockholder does not own, of record
or beneficially, any warrants, options or other rights to
acquire any other voting securities of the Company. The
Stockholder has and will continue to have during the term
hereof, sole voting power, sole power of disposition, sole power
to issue instructions with respect to the matters set forth in
Section 1 hereof, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case with respect
to all of the Owned Shares with no limitations, qualifications
or restrictions on such rights, subject to applicable federal
securities laws and the terms of this Agreement. The Stockholder
has good and valid title to the Owned Shares and at all times
during the term hereof and on the Closing Date will have good
and valid title to the Covered Shares, free and clear of all
liens, claims, security interests or other charges or
encumbrances.
(d)
No Broker’s Fees
.
Except
as disclosed in the Merger Agreement, no broker, finder,
investment banker or other Person is entitled to any
broker’s, finder’s or other fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Stockholder.
(e)
Reliance
.
The Stockholder
acknowledges and agrees that each of the Parent and the Merger
Sub are entering into the Merger Agreement and the transactions
contemplated therein in reliance upon the Stockholder’s
execution and delivery of this Agreement.
3.
Representations and Warranties of Parent and
Merger Sub
.
The Parent and the Merger Sub,
jointly and severally, hereby represent and warrant to the
Stockholder as of the date hereof as follows:
(a)
Organization
.
Each of the
Parent and the Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b)
Corporate Authorization; Validity of Agreement;
Necessary Action
.
Each of the Parent and the
Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated
hereby. The execution, delivery
B-3
and performance by each of the Parent and the Merger Sub of this
Agreement and the consummation by them of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on
the part of the Parent or the Merger Sub are necessary to
authorize the execution and delivery by them of this Agreement
and the consummation by them of the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by the Parent and the Merger Sub, and constitutes the
legal, valid and binding obligation of the Parent and Merger
Sub, enforceable against each of them in accordance with its
terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting the rights of creditors generally and
subject to general equity principles.
(c)
No Violations; Consents and Approvals
.
(i) Except for filings, permits, authorizations, consents
and approvals as may be required under, and other applicable
requirements of, any applicable Antitrust Laws, neither the
execution, delivery or performance of this Agreement by the
Parent or the Merger Sub nor the consummation by them of the
transactions contemplated hereby nor compliance by them with any
of the provisions hereof will directly or indirectly (with or
without notice or lapse of time or both): (i) contravene,
conflict with or result in a violation of (A) any provision
of the charter, by-laws or other organizational document of the
Parent or the Merger Sub, or (B) any resolution adopted by
the board of directors or the stockholders of the Parent or the
Merger Sub; (ii) contravene, conflict with, or result in a
violation of, or give any Governmental Entity or other Person
the right to exercise any remedy or obtain any relief under, any
governmental regulation or any order, injunction, writ or decree
to which the Parent or the Merger Sub, or any of the respective
assets owned or used by each of them, may be subject, or
(iii) require a consent, approval, ratification,
permission, order or authorization from any Person; except, in
the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences that would
not prevent or impair the ability of the Parent or the Merger
Sub from consummating the transactions contemplated hereby in
any material respect, or otherwise prevent the Parent or the
Merger Sub from exercising their respective rights under this
Agreement in any material respect.
(ii) The execution and delivery of this Agreement by the
Parent and the Merger Sub does not, and the performance of this
Agreement and the consummation of the transactions contemplated
hereby will not, require any consent, approval, license, permit,
order, declaration or authorization of, or registration or
filing with or notification to, any Governmental Entity, except
(i) for the pre-merger notification requirements of
applicable Antitrust Laws, and (ii) where failure to obtain
such consent, approval, license, permit, order, declaration,
authorization or registration, or to make such filings or
notifications, would not prevent or impair the ability of the
Parent or the Merger Sub from consummating the transactions
contemplated hereby in any material respect, or otherwise
prevent the Parent or the Merger Sub from exercising their
respective rights under this Agreement in any material respect.
4.
Further Agreement of the
Stockholders
.
The Stockholder hereby
authorizes and requests the Company’s counsel to notify the
Company’s transfer agent that there is a stop transfer
order with respect to all of the Covered Shares (and that this
Agreement places limits on the voting of the Covered Shares).
The Stockholder agrees with, and covenants to, the Parent that
the Stockholder shall not request that the Company register the
transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Covered Shares,
unless such transfer is made in compliance with this Agreement.
In the event of a stock dividend or distribution, or any change
in any of the Covered Shares by reason of any stock dividend or
distribution, or any change in any of the Covered Shares by
reason of any stock dividend,
split-up,
recapitalization, combination, exchange of shares or the like,
the term “Covered Shares” shall be deemed to refer to
and include the Covered Shares as well as all such stock
dividends and distributions and any shares into which or for
which any or all of the Covered Shares may be changed or
exchanged; provided, however, that in no event shall the Covered
Shares, as adjusted by reason of any stock dividend,
distribution,
split-up,
recapitalization, combination, exchange of shares or the like,
exceed 19.99% of the voting power (as such term is used in
Chapter 1701 of the Ohio Revised Code) of the Company.
5.
Further Assurances
.
From time
to time prior to the Closing, at any other party’s request
and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such
further lawful action as may be necessary or desirable to
consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
Without limiting the generality of the
B-4
foregoing, each party hereto shall cooperate with the other
parties hereto in preparing and filing any notifications
required under any applicable Antitrust Laws in connection with
the transactions contemplated hereby.
6.
Termination
.
The obligations of
the parties under this Agreement shall terminate upon the
earliest to occur of (a) the Effective Time, (b) the
termination of the Merger Agreement in accordance with its terms
and (c) at the option of the Stockholder, the execution or
granting of any amendment, modification, change or waiver with
respect to the Merger Agreement subsequent to the date of this
Agreement that results in any decrease in the price to be paid
per share for the Common Shares
and/or
Class B Common Shares or any changes in the form of
consideration to be received by the holders of such shares in
the Merger or is otherwise adverse to the stockholders of the
Company. Nothing in this Section 6 shall relieve any party
of liability for failure to perform its covenants under this
Agreement.
7.
Costs and Expenses
.
All costs
and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be
paid by the party incurring such expenses.
8.
Amendment and
Modification
.
This Agreement may be amended,
modified and supplemented in any and all respects only by
written agreement of the parties hereto.
9.
Notices
.
All notices and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed)
or sent by an overnight courier service (providing proof of
delivery) to the parties at the following addresses (or at such
other address for a party as it may specify by like notice):
(i) if to the Parent or the Merger Sub, to:
Danaher Corporation
2099 Pennsylvania Avenue,
12
th
Floor
Washington, DC
20006-1813
Attention: Chief Counsel, Mergers & Acquisitions
Facsimile:
(202) 828-0860
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Attn: Joseph A. Coco, Esq.
Thomas W. Greenberg, Esq.
Facsimile:
(212) 735-2000
(ii) if to the Stockholder, to the address(es) set forth on
Schedule A hereto.
10.
Interpretation
.
When a
reference is made in this Agreement to Sections, such reference
shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words “include,”
“includes” or “including” are used in this
Agreement they shall be deemed to be followed by the words
“without limitation.” The phrases “the date of
this Agreement,” “the date hereof,” and terms of
similar import, unless the context otherwise requires, shall be
deemed to refer to September 29, 2010.
11.
Counterparts
.
This Agreement
may be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become
effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
12.
Entire Agreement; No Third Party
Beneficiaries
.
This Agreement constitutes the
entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof, and is not intended to
confer upon any person other than the parties hereto any rights
or remedies hereunder.
B-5
13.
Severability
.
If any term or
other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party.
All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such
party.
14.
Governing Law
.
This Agreement
shall be governed and construed in accordance with the laws of
the State of Ohio without giving effect to the principles of
conflicts of law thereof.
15.
Assignment
.
Neither this
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the Parent and
the Merger Sub may assign, in the Parent’s sole discretion,
any or all of their respective rights, interests and obligations
hereunder to any direct or indirect wholly owned Subsidiary of
the Parent; provided, however, that no such assignment shall
relieve the Parent from any of its obligations hereunder.
Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the
parties and their respective successors (including the Company
as successor to the Merger Sub pursuant to the Merger), heirs,
agents, representatives, trust beneficiaries, attorneys,
affiliates and associates and all of their respective
predecessors, successors, permitted assigns, heirs, executors
and administrators.
16.
Consent to Jurisdiction; Waiver of Jury Trial;
Specific Performance
.
(a) In any action or proceeding between any of the parties
arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement, each of the
parties: (a) irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of the federal
or state courts located in Cleveland, Ohio, and (b) agrees
that all claims in respect of such action or proceeding may be
heard and determined exclusively in such courts.
(b)
EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING IN RELATION TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.
(c) The parties acknowledge and agree that the Parent, the
Merger Sub and the Stockholder would be irreparably damaged if
any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this
Agreement could not be adequately compensated in all cases by
monetary damages alone. Accordingly, in addition to any other
right or remedy to which the Parent, the Merger Sub or the
Stockholder may be entitled, at law or in equity, it shall be
entitled to enforce any provision of this Agreement by a decree
of specific performance and temporary, preliminary and permanent
injunctive relief to prevent breaches or threatened breaches of
any of the provisions of this Agreement, without posting any
bond or other undertaking.
[Remainder
of Page Intentionally Left Blank]
B-6
IN WITNESS WHEREOF, the Parent, the Merger Sub and the
Stockholder have caused this Agreement to be signed by their
respective officers or other authorized person thereunto duly
authorized as of the date first written above.
KEITHLEY INVESTMENT CO. LIMITED PARTNERSHIP
|
|
|
|
|
|
By:
|
/s/
Joseph
P. Keithley
|
Name: Joseph P. Keithley
DANAHER CORPORATION
Name: Daniel A. Raskas
|
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Title:
|
Senior Vice President — Corporate Development
|
AEGEAN ACQUISITION CORP.
Name: Daniel A. Raskas
B-7
Schedule A
Number of Owned Shares: 0 Common Shares; 1,954,816 Class B
Common Shares.
Description of any warrants, options or other rights to purchase
voting securities of the Company:
None
Address(es) for notices and other communications pursuant to
Section 9 of the Agreement
Keithley Investment Co. Limited Partnership
28775 Aurora Road
Solon, OH 44139
Attention: Joseph P. Keithley, General Partner
Facsimile:
(440) 542-8007
with a copy to:
Jones Day
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: James P. Dougherty
Facsimile:
216-579-0212
B-8
Annex C
STIFEL
NICOLAUS
WEISEL
September 28, 2010
Board of Directors
Keithley Instruments Inc.
28775 Aurora Road
Solon, OH 44139
Ladies and Gentlemen:
Stifel, Nicolaus & Company, Incorporated (“Stifel
Nicolaus” or “we”) has been advised that Keithley
Instruments Inc. (the “Company”) is contemplating
entering into an Agreement and Plan of Merger (the “Merger
Agreement”) with Danaher Corporation (the
“Buyer”) and Aegean Acquisition Corporation, a
wholly-owned subsidiary of Buyer (“Merger Sub”)
pursuant to which Merger Sub will be merged with and into the
Company, with the Company as the surviving entity (the
“Merger”). Pursuant to the Merger, as more fully
described in the Merger Agreement, we understand that each
common share, without par value, of the Company and each
Class B Common Share, without par value, of the Company, in
each case issued and outstanding immediately prior to the
effective time of the Merger, other than (i) dissenting
shares under applicable law and (ii) shares of the Company
held by the Buyer or any subsidiary of the Buyer or held by the
Company or any subsidiary of the Company immediately prior to
the effective time of the Merger (collectively “the Company
Shares”), will be converted automatically into the right to
receive $21.60 in cash, without interest (the “Merger
Consideration”). The terms and conditions of the Merger are
set forth in more detail in the Merger Agreement.
You have requested Stifel Nicolaus’ opinion as to the
fairness, from a financial point of view, as of the date hereof,
to the holders of Company Shares of the Merger Consideration to
be received by such holders pursuant to the Merger Agreement in
connection with the Merger.
In connection with our opinion, we have, among other things:
(i) made inquiries regarding and discussed the Merger and a
draft copy of the Merger Agreement dated September 28,
2010, a draft copy of the Voting Agreement dated
September 28, 2010 and other matters related thereto with
the Company’s counsel;
(ii) reviewed and analyzed the audited consolidated
financial statements of the Company contained in its Annual
Report on
Form 10-K
for the fiscal year ended September 30, 2009, and the
unaudited consolidated financial statements of the Company
contained in its Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010;
(iii) held meetings and discussions with the Company
concerning the Company’s past, current and expected future
financial and operating data and other business matters,
including, without limitation, financial forecasts and related
assumptions of the Company;
(iv) reviewed and analyzed certain other relevant financial
and operating data relating to the Company made available to us
from published sources and from the internal records of the
Company, including, without limitation, financial forecasts and
related assumptions of the Company;
(v) reviewed the reported prices and trading activity of
the publicly traded equity securities of the Company;
(vi) reviewed and analyzed certain publicly available
financial and stock market data and pricing metrics for selected
publicly traded broadline test and measurement and semiconductor
test and metrology companies that we considered may have
relevance to our analysis;
C-1
The Board of
Directors
Keithley Instruments Inc.
September 28, 2010
(vii) reviewed the financial terms and valuation metrics,
to the extent publicly available, of certain test and
measurement and semiconductor test and metrology acquisitions
that we considered may have relevance to our analysis; and
(ix) conducted such other financial studies, analyses and
investigations and considered such other information as we
deemed necessary or appropriate for purposes of our opinion.
In connection with our review, we relied upon and assumed,
without independent verification, the accuracy and completeness
of all financial, operational and other information that was
made available, supplied, or otherwise communicated to Stifel
Nicolaus by or on behalf of the Company, or their respective
advisors, or that was otherwise reviewed by Stifel Nicolaus, and
have not assumed any responsibility for independently verifying
any of such information. With respect to any financial forecasts
supplied to us by the Company, we have assumed that the
forecasts were reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the
management of the Company as to the future operating and
financial performance of the Company, and that they provided a
reasonable basis upon which we could form our opinion. Such
forecasts and projections were not prepared with the expectation
of public disclosure. All such projected financial information
is based on numerous variables and assumptions that are
inherently uncertain, including, without limitation, factors
related to general economic, market and competitive conditions.
Accordingly, actual results could vary significantly from those
set forth in such projected financial information. Stifel
Nicolaus has relied on this projected information without
independent verification or analyses and does not in any respect
assume any responsibility for the accuracy or completeness
thereof. We have further relied upon the assurances by the
Company it is unaware of any facts that would make any
information provided by or on behalf of it incomplete or
misleading. Stifel Nicolaus assumed, with the consent of the
Company, that any material liabilities (contingent or otherwise,
known or unknown), if any, relating to the Company and the
Buyer, respectively, have been disclosed to Stifel Nicolaus.
We assumed that there were no material changes in the assets,
liabilities, financial condition, results of operations,
business or prospects of the Company since the date of the
financial statements contained in the Company’s Quarterly
Report on
Form 10-Q
for the period ended June 30, 2010. We have relied on
advice of counsel and independent accountants to the Company as
to all legal, financial reporting, tax, accounting and
regulatory matters with respect to the Company, the Merger and
the Merger Agreement, including, without limitation, the legal
status and financial reporting of litigation involving the
Company.
Our opinion is limited to whether the Merger Consideration is
fair to the holders of Company Shares, from a financial point of
view. Our opinion does not consider, address or include:
(i) any other strategic alternatives currently (or which
have been or may be) contemplated by the Company or the
Company’s Board of Directors (the “Board”);
(ii) the legal, tax or accounting consequences of the
Merger on the Company or the holders of the Company’s
equity securities; (iii) the fairness of the amount or
nature of any compensation to any of the Company’s
officers, directors or employees, or class of such persons,
relative to the compensation to the public holders of the
Company’s equity securities; or (iv) the treatment of,
or effect of the Merger on, the Company Shares Options or
the Company Share-Based Awards (each as defined in the Merger
Agreement).
Our opinion is necessarily based upon financial, economic,
monetary, market and other conditions and circumstances existing
and disclosed to us by the Company, or their advisors as of the
date hereof. It is understood that subsequent developments may
affect the conclusions reached in this opinion, and that Stifel
Nicolaus does not have or assume any obligation to update,
revise or reaffirm this opinion. We have also assumed that the
Merger will be consummated on the terms and conditions described
in the draft Merger Agreement, without any further amendment
thereto and without waiver of material terms or conditions by
the Company, the Buyer, or any other party, and that obtaining
any necessary regulatory approvals or satisfying any other
conditions for consummation of the Merger will not have an
adverse effect on the Company or its equity securities. We have
assumed that the Merger will be consummated in a manner that
complies in all respects with the applicable provisions of the
Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, and all other applicable federal and state
C-2
The Board of
Directors
Keithley Instruments Inc.
September 28, 2010
statutes, rules and regulations. We have not been requested to
make, have not assumed responsibility for making, and have not
made, an independent evaluation, appraisal or physical
inspection of any of the assets or liabilities (contingent or
otherwise) of the Company or the Buyer, nor have we been
furnished with any such appraisals.
We have acted as financial advisor to the Company in connection
with the Merger and will receive a fee for our services,
including rendering this opinion, a significant portion of which
is contingent upon the consummation of the Merger. In addition,
the Company has agreed to indemnify us for certain liabilities
arising out of our engagement. There are no other material
relationships that existed during the two years prior to the
date of this opinion or that are mutually understood to be
contemplated in which any compensation was received or is
intended to be received as a result of the relationship between
Stifel Nicolaus and any party to the Merger. Thomas Weisel
Partners LLC, an affiliate of Stifel Nicolaus, provides
investment advisory services to Mr. Joseph P. Keithley,
Chief Executive Officer and Chairman of the Board of the
Company, and to certain trusts for which he serves as trustee,
for which it receives customary compensation. In addition,
Thomas Weisel Partners LLC provides investment advisory services
to the Company with respect to its defined benefit plan, for
which it receives customary compensation. Stifel Nicolaus may
seek to provide investment banking services to the Buyer or its
affiliates in the future, for which we would seek customary
compensation. In the ordinary course of business, Stifel
Nicolaus and its clients may transact in the equity securities
of the Company and the Buyer and may at any time hold a long or
short position in such securities.
It is understood that this letter is solely for the information
of, and directed to, the Board for its information and
assistance in connection with its evaluation of the financial
terms of the Merger. Our opinion does not constitute a
recommendation to the Company or the Board as to whether the
Company should enter into the Merger Agreement or effect the
Merger or any other transaction contemplated by the Merger
Agreement, or to any holder of the Company’s equity
securities as to how such holder should vote at any
shareholders’ meeting at which the Merger is considered, or
whether or not such shareholder should enter into any voting,
support or shareholders’ agreement in connection with the
Merger or exercise any dissenters’ or appraisal rights that
may be available to such shareholder. Our opinion does not
compare the relative merits of the Merger with those of any
other transaction or business strategy which may have been
available to or considered by the Board or the Company as
alternatives to the Merger and does not address the underlying
business decision of the Board or the Company to proceed with or
effect the Merger.
Stifel Nicolaus’ Fairness Opinion Committee has approved
the issuance of this opinion. This letter is not to be quoted or
referred to, in whole or in part, nor shall this letter be used
for any other purposes, without the prior written consent of
Stifel Nicolaus, which consent is hereby given to the inclusion
of this opinion in any proxy statement filed with the Securities
and Exchange Commission in connection with the Merger, provided
that the opinion is reproduced in full and any description of or
reference to us or our opinion or any summary of our opinion or
presentation is in form and substance reasonably acceptable to
us and our legal counsel.
Based upon and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Merger Consideration to be
received by the holders of Company Shares in connection with the
Merger pursuant to the Merger Agreement is fair to such holders
of Company Shares, from a financial point of view.
Very truly yours,
/s/ STIFEL, NICOLAUS & COMPANY, INCORPORATED
STIFEL, NICOLAUS & COMPANY, INCORPORATED
C-3
Annex D
OHIO
REVISED CODE SECTION 1701.85
Section 1701.85.
Dissenting shareholder’s demand for fair cash value of
shares
(A) (1) A shareholder of a domestic corporation is
entitled to relief as a dissenting shareholder in respect of the
proposals described in sections 1701.74, 1701.76, and
1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders
of the corporation involved, the dissenting shareholder shall be
a record holder of the shares of the corporation as to which the
dissenting shareholder seeks relief as of the date fixed for the
determination of shareholders entitled to notice of a meeting of
the shareholders at which the proposal is to be submitted, and
such shares shall not have been voted in favor of the proposal.
Not later than ten days after the date on which the vote on the
proposal was taken at the meeting of the shareholders, the
dissenting shareholder shall deliver to the corporation a
written demand for payment to the dissenting shareholder of the
fair cash value of the shares as to which the dissenting
shareholder seeks relief, which demand shall state the
dissenting shareholder’s address, the number and class of
such shares, and the amount claimed by the dissenting
shareholder as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under
division (C) of section 1701.84 of the Revised Code in
the case of a merger pursuant to section 1701.80 of the
Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised
Code in the case of a merger pursuant to section 1701.801
[1701.80.1] of the Revised Code shall be a record holder of the
shares of the corporation as to which the dissenting shareholder
seeks relief as of the date on which the agreement of merger was
adopted by the directors of that corporation. Within twenty days
after the dissenting shareholder has been sent the notice
provided in section 1701.80 or 1701.801 [1701.80.1] of the
Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same
information as that provided for in division (A)(2) of this
section.
(4) In the case of a merger or consolidation, a demand
served on the constituent corporation involved constitutes
service on the surviving or the new entity, whether the demand
is served before, on, or after the effective date of the merger
or consolidation. In the case of a conversion, a demand served
on the converting corporation constitutes service on the
converted entity, whether the demand is served before, on, or
after the effective date of the conversion.
(5) If the corporation sends to the dissenting shareholder,
at the address specified in the dissenting shareholder’s
demand, a request for the certificates representing the shares
as to which the dissenting shareholder seeks relief, the
dissenting shareholder, within fifteen days from the date of the
sending of such request, shall deliver to the corporation the
certificates requested so that the corporation may endorse on
them a legend to the effect that demand for the fair cash value
of such shares has been made. The corporation promptly shall
return the endorsed certificates to the dissenting shareholder.
A dissenting shareholder’s failure to deliver the
certificates terminates the dissenting shareholder’s rights
as a dissenting shareholder, at the option of the corporation,
exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the
fifteen-day
period, unless a court for good cause shown otherwise directs.
If shares represented by a certificate on which such a legend
has been endorsed are transferred, each new certificate issued
for them shall bear a similar legend, together with the name of
the original dissenting holder of the shares. Upon receiving a
demand for payment from a dissenting shareholder who is the
record holder of uncertificated securities, the corporation
shall make an appropriate notation of the demand for payment in
its shareholder records. If uncertificated shares for which
payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend required
for certificated securities as provided in this paragraph. A
transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only the
rights in the corporation as the original dissenting holder of
such shares had immediately after the service of a demand for
payment of the fair cash value of the shares. A request under
this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under
this section.
D-1
(B) Unless the corporation and the dissenting shareholder
have come to an agreement on the fair cash value per share of
the shares as to which the dissenting shareholder seeks relief,
the dissenting shareholder or the corporation, which in case of
a merger or consolidation may be the surviving or new entity, or
in the case of a conversion may be the converted entity, within
three months after the service of the demand by the dissenting
shareholder, may file a complaint in the court of common pleas
of the county in which the principal office of the corporation
that issued the shares is located or was located when the
proposal was adopted by the shareholders of the corporation, or,
if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting
shareholders, within that three-month period, may join as
plaintiffs or may be joined as defendants in any such
proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of
the facts, including the vote and the facts entitling the
dissenting shareholder to the relief demanded. No answer to a
complaint is required. Upon the filing of a complaint, the
court, on motion of the petitioner, shall enter an order fixing
a date for a hearing on the complaint and requiring that a copy
of the complaint and a notice of the filing and of the date for
hearing be given to the respondent or defendant in the manner in
which summons is required to be served or substituted service is
required to be made in other cases. On the day fixed for the
hearing on the complaint or any adjournment of it, the court
shall determine from the complaint and from evidence submitted
by either party whether the dissenting shareholder is entitled
to be paid the fair cash value of any shares and, if so, the
number and class of such shares. If the court finds that the
dissenting shareholder is so entitled, the court may appoint one
or more persons as appraisers to receive evidence and to
recommend a decision on the amount of the fair cash value. The
appraisers have power and authority specified in the order of
their appointment. The court thereupon shall make a finding as
to the fair cash value of a share and shall render judgment
against the corporation for the payment of it, with interest at
a rate and from a date as the court considers equitable. The
costs of the proceeding, including reasonable compensation to
the appraisers to be fixed by the court, shall be assessed or
apportioned as the court considers equitable. The proceeding is
a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of
Appellate Procedure and, to the extent not in conflict with
those rules, Chapter 2505. of the Revised Code. If, during
the pendency of any proceeding instituted under this section, a
suit or proceeding is or has been instituted to enjoin or
otherwise to prevent the carrying out of the action as to which
the shareholder has dissented, the proceeding instituted under
this section shall be stayed until the final determination of
the other suit or proceeding. Unless any provision in division
(D) of this section is applicable, the fair cash value of
the shares that is agreed upon by the parties or fixed under
this section shall be paid within thirty days after the date of
final determination of such value under this division, the
effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs
last. Upon the occurrence of the last such event, payment shall
be made immediately to a holder of uncertificated securities
entitled to payment. In the case of holders of shares
represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the
certificates representing the shares for which the payment is
made.
(C) If the proposal was required to be submitted to the
shareholders of the corporation, fair cash value as to those
shareholders shall be determined as of the day prior to the day
on which the vote by the shareholders was taken and, in the case
of a merger pursuant to section 1701.80 or 1701.801
[1701.80.1] of the Revised Code, fair cash value as to
shareholders of a constituent subsidiary corporation shall be
determined as of the day before the adoption of the agreement of
merger by the directors of the particular subsidiary
corporation. The fair cash value of a share for the purposes of
this section is the amount that a willing seller who is under no
compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to
pay, but in no event shall the fair cash value of a share exceed
the amount specified in the demand of the particular
shareholder. In computing fair cash value, any appreciation or
depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be
excluded.
(D) (1) The right and obligation of a dissenting
shareholder to receive fair cash value and to sell such shares
as to which the dissenting shareholder seeks relief, and the
right and obligation of the corporation to purchase such shares
and to pay the fair cash value of them terminates if any of the
following applies:
(a) The dissenting shareholder has not complied with this
section, unless the corporation by its directors waives such
failure;
D-2
(b) The corporation abandons the action involved or is
finally enjoined or prevented from carrying it out, or the
shareholders rescind their adoption of the action involved;
(c) The dissenting shareholder withdraws the dissenting
shareholder’s demand, with the consent of the corporation
by its directors;
(d) The corporation and the dissenting shareholder have not
come to an agreement as to the fair cash value per share, and
neither the shareholder nor the corporation has filed or joined
in a complaint under division (B) of this section within
the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the
merger, consolidation, or conversion has become effective and
the surviving, new, or converted entity is not a corporation,
action required to be taken by the directors of the corporation
shall be taken by the partners of a surviving, new, or converted
partnership or the comparable representatives of any other
surviving, new, or converted entity.
(E) From the time of the dissenting shareholder’s
giving of the demand until either the termination of the rights
and obligations arising from it or the purchase of the shares by
the corporation, all other rights accruing from such shares,
including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or
distribution is paid in money upon shares of such class or any
dividend, distribution, or interest is paid in money upon any
securities issued in extinguishment of or in substitution for
such shares, an amount equal to the dividend, distribution, or
interest which, except for the suspension, would have been
payable upon such shares or securities, shall be paid to the
holder of record as a credit upon the fair cash value of the
shares. If the right to receive fair cash value is terminated
other than by the purchase of the shares by the corporation, all
rights of the holder shall be restored and all distributions
which, except for the suspension, would have been made shall be
made to the holder of record of the shares at the time of
termination.
D-3
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Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a
week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.
VALIDATION
DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
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Proxies submitted by the Internet or telephone must be
received by
8:00 am., Eastern Time, on
[ _______ ], 2010.
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Vote by
Internet
·
Log on to the Internet and go to
www.investorvote.com/KEIT
·
Follow the steps outlined on the secured website.
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Vote by telephone
·
Call toll free 1-800-652-VOTE (8683) within the USA,
US territories & Canada any time on a touch tone
telephone. There is
NO CHARGE
to you for the call.
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Using a
black ink
pen, mark your votes with an
X
as shown in this example. Please do not write outside the designated areas.
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x
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·
Follow the instructions
provided by the recorded message.
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Special Meeting Proxy Card
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C0123456789
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12345
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▼
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE,
FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
▼
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A
Proposals — The Board of Directors recommends a vote
FOR
Item 1.
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For
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Against
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Abstain
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1.
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Approval and adoption of the Agreement and Plan of Merger, dated as of September 29, 2010,
among Danaher Corporation, Aegean Acquisition Corp. and Keithley
Instruments, Inc. and
the transactions contemplated thereby.
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o
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o
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o
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2.
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To vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof.
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B
Non-Voting
Items
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Change of Address —
Please print new address below.
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C
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Authorized
Signatures —
This section must be completed for your vote to be counted. —
Date and Sign Below
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The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof. NOTE: Please sign name(s) exactly as printed hereon.
Joint owners should each sign. Persons signing as executors, administrators, trustees or in similar capacities should so indicate.
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Date (mm/dd/yyyy)
— Please print date below.
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Signature 1 — Please keep signature within the box.
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Signature 2 — Please keep signature within the box.
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/ /
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+
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Special Meeting of Shareholders
[
], 2010
[
]
▼
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD
ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
▼
Proxy — KEITHLEY INSTRUMENTS, INC.
COMMON
SHARES
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [
], [
], 2010.
The undersigned hereby appoints JOSEPH P. KEITHLEY, MARK J. PLUSH and JOHN M. GHERLEIN and
each of them, as proxies and attorneys, with full power of substitution, to appear and vote all the Common Shares of Keithley Instruments, Inc. which the undersigned shall be entitled to
vote at the Special Meeting of Shareholders of the Company to be held [
], 2010, and at any postponements or adjournments thereof, and directs said proxies to vote as specified herein
on the matters set forth in the notice of the meeting, and to transact such other business as may properly come before the Special Meeting or any adjournment thereof, hereby revoking any and all
proxies heretofore given.
You are encouraged to specify your choices by marking the appropriate boxes
but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’
recommendations. The named proxies cannot vote your shares unless you sign and return this card.
This proxy when properly executed will be voted in the manner directed herein by the shareholder.
If no direction is made, this Proxy will be voted FOR Item 1 and with discretionary authority on all other matters that may properly come before
the meeting or any adjournment or postponement thereof.
SIGN AND RETURN THIS PROXY CARD AS SOON AS POSSIBLE.
(Continued on the other side)
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Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a
week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.
VALIDATION
DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
|
|
|
|
|
|
Proxies submitted by the Internet or telephone must be
received by
8:00 am., Eastern Time, on
[
], 2010.
|
|
|
|
|
|
|
|
|
|
Vote by
Internet
·
Log
on to the Internet and go
to
www.investorvote.com/KEITB
·
Follow the steps outlined on the secured website.
|
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|
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|
|
|
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|
|
|
Vote by telephone
·
Call toll free 1-800-652-VOTE (8683) within the USA,
US territories & Canada any time on a touch tone
telephone. There is
NO CHARGE
to you for the call.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Using a
black ink
pen, mark your votes with an
X
as shown in
this example. Please do not write outside the designated areas.
|
|
x
|
|
|
|
|
|
·
Follow the instructions
provided by the recorded message.
|
|
|
|
|
|
|
Special Meeting Proxy Card
|
|
C0123456789
|
12345
|
|
|
▼
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
▼
|
|
|
|
A
Proposals — The Board of Directors recommends a vote
FOR
Item 1.
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For
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Against
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Abstain
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1.
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Approval and adoption of the Agreement and plan of Merger, dated as of September 29, 2010, among Danaher Corporation,
Aegean Acquisition Corp. and Keithley Instruments, Inc. and the
transactions contemplated thereby.
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o
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o
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o
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2.
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To vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof.
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B
Non-Voting
Items
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Change of Address —
Please print new address below.
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C
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Authorized
Signatures —
This section must be completed for your vote to be counted. —
Date and Sign Below
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The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof. NOTE: Please sign name(s) exactly as printed hereon. Joint owners should each sign. Persons signing as executors, administrators, trustees or in similar capacities should so indicate.
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Date (mm/dd/yyyy) — Please print date below.
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Signature 1 — Please keep signature within the box.
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Signature 2 — Please keep signature within the box.
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/ /
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+
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Special Meeting of Shareholders
[
], 2010
[
]
▼
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD
ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
▼
Proxy — KEITHLEY INSTRUMENTS, INC.
CLASS
B COMMON
SHARES
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [
], [
], 2010.
The undersigned hereby appoints JOSEPH P. KEITHLEY, MARK J. PLUSH and JOHN M. GHERLEIN and
each of them, as proxies and attorneys, with full power of
substitution, to appear and vote all the Class B Common Shares of Keithley Instruments, Inc. which the undersigned shall be entitled to
vote at the Special Meeting of Shareholders of the Company to be held [
], 2010, and at any postponements or adjournments thereof, and directs said proxies to vote as specified herein
on the matters set forth in the notice of the meeting, and to transact such other business as may properly come before the Special Meeting or any adjournment thereof, hereby revoking any and all
proxies heretofore given.
You are encouraged to specify your choices by marking the appropriate boxes
but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’
recommendations. The named proxies cannot vote your shares unless you sign and return this card.
This proxy when properly executed will be voted in the manner directed herein by the shareholder.
If no direction is made, this Proxy will be voted FOR Item 1 and with discretionary authority on all other matters that may properly come before
the meeting or any adjournment or postponement thereof.
SIGN AND RETURN THIS PROXY CARD AS SOON AS POSSIBLE.
(Continued on the other side)
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