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of the Securities Exchange Act of 1934
Filed by a Party other than the Registranto
þ | 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 |
o | No fee required. | |
þ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: | ||
Common Stock, par value $0.001 per share, of RAE Systems Inc. | |||
(2) | Aggregate number of securities to which transaction applies: | ||
46,119,207 shares of Common Stock outstanding and owned by stockholders other than treasury shares and other than shares owned by the parties identified on Exhibit D to the Merger Agreement attached as Annex A to this proxy statement, and further described in this proxy statement, and includes the anticipated issuance of 3,238,155 shares of Common Stock pursuant to options granted under RAE Systems’ 2007 Equity Incentive Plan, 2002 Stock Option Plan and 1993 Stock Plan prior to the closing of the transaction with exercise prices at or below $1.75 that are eligible to be cashed out in the merger. | |||
(3) | 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): | ||
The transaction value (the “Aggregate Consideration”) was determined by adding (A) the product of 46,119,207 shares of Common Stock that are proposed to be acquired in the merger multiplied by the merger consideration of $1.75 per share, plus (B) the product of 3,238,155 outstanding options to purchase shares of Common Stock multiplied by the difference between $1.75 and the exercise price of such outstanding options. The filing fee, calculated in accordance with Section 14(g) of Exchange Act, was determined by multiplying $0.0001161 by the Aggregate Consideration. | |||
(4) | Proposed maximum aggregate value of transaction: | ||
$82,800,590.25 | |||
(5) | Total fee paid: | ||
$9,613.15 | |||
o | Fee paid previously with preliminary materials. | |
þ | 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. | |
(1) | Amount Previously Paid: | ||
$5,378.14 | |||
(2) | Form, Schedule or Registration Statement No.: | ||
Preliminary Proxy Statement on Schedule 14A (file No. 001-31783) | |||
(3) | Filing Party: | ||
RAE Systems Inc. | |||
(4) | Date Filed: | ||
October 21, 2010 | |||
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San Jose, California 95134
(408) 952-8200
THE BOARD OF DIRECTORS RECOMMEND THAT YOU VOTE “FOR”
THE ADOPTION OF THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT.
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Sincerely yours, | Sincerely yours, | |
/s/ Robert I. Chen | /s/ Susan Wang | |
Robert I. Chen | Susan Wang | |
Chairman of the Board of Directors, | Chairperson of the Special Committee | |
President and Chief Executive Officer |
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San Jose, California 95134
(408) 952-8200
TO BE HELD ON , 2011
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THE ADOPTION OF THE MERGER AGREEMENT AND, IF NECESSARY, TO ADJOURN THE SPECIAL MEETING FOR THE PURPOSES OF OBTAINING ADDITIONAL PROXIES TO VOTE IN FAVOR OF ADOPTING THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT.
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Cash Merger | Realizable | Realizable | ||||||||||||||||||||
Consideration | Value of | Value | ||||||||||||||||||||
to be | Vested Options | of All | Compensation | |||||||||||||||||||
Name of Director | Received for | as a Result | Options at | of Members | ||||||||||||||||||
and/or Executive | RAE Systems | of the | the Closing | of Special | Total Cash | |||||||||||||||||
Officer | Position | Common Stock | Merger(1) | of Merger(1) | Committee | Consideration | ||||||||||||||||
Robert I. Chen(2) | President, Chief Executive Officer and Chairman of the Board | $ | 8,509,522 | $ | 56,000 | $ | 134,400 | $ | 8,643,922 | |||||||||||||
Randall K. Gausman(3) | Vice President and Chief Financial Officer | $ | 8,750 | $ | 83,125 | $ | 168,000 | $ | 176,750 | |||||||||||||
Peter C. Hsi(2) | Chief Technology Officer and Director | $ | 27,708 | $ | 56,000 | $ | 56,000 | |||||||||||||||
Ming-Ching Tang | Executive Vice President Operations | $ | 43,750 | $ | 94,500 | $ | 94,500 | |||||||||||||||
Christopher Hameister | Vice President Asia-Pacific, Europe and Middle East Business Operations | $ | 27,708 | $ | 56,000 | $ | 56,000 | |||||||||||||||
Fei-Zhou Shen | Vice President Corporate Development and Fushun Business Operations | $ | 41,504 | $ | 131,246 | $ | 159,538 | $ | 201,042 | |||||||||||||
Ryan Watson | Vice President Americas Sales | $ | 7,905 | $ | 39,374 | $ | 73,500 | $ | 81,405 | |||||||||||||
Dr. Keh-Shew Lu | Director | $ | 472,500 | $ | 32,083 | $ | 77,000 | $ | 7,500 | $ | 557,000 | |||||||||||
Susan Wang | Director | — | $ | 48,125 | $ | 115,500 | $ | 18,000 | $ | 133,500 | ||||||||||||
Dr. Lyle D. Feisel | Director | $ | 125,909 | $ | 93,500 | $ | 93,500 | $ | 219,409 | |||||||||||||
Sigrun Hjelmqvist | Director | $ | 35,000 | $ | 23,333 | $ | 35,000 | $ | 70,000 | |||||||||||||
James W. Power | Director | $ | 70,000 | $ | 17,783 | $ | 106,700 | $ | 8,000 | $ | 184,700 | |||||||||||
TOTAL | $ | 9,271,090 | $ | 623,735 | $ | 1,169,638 | $ | 33,500 | $ | 10,474,228 | ||||||||||||
(1) | This table excludes stock options with exercise prices greater than $1.75 per share as of January 20, 2011. All outstanding stock options will accelerate and vest in full as a result of the merger. | |
(2) | If the merger is completed, the 13,392,857 Rollover Shares registered under the name of Chen Revocable Trust DTD 5/8/2001 and Hsi Family Trust, which are beneficially owned by Robert I. Chen and Peter C. Hsi, respectively, will be valued at $1.75 per share and exchanged for a combination of preferred stock and common stock in Purchaser valued at approximately $23.4 million in the aggregate (“Value of Rollover Shares”). Total Cash Consideration does not include the Value of Rollover Shares. | |
(3) | In order to provide Randall K. Gausman, Vice President and Chief Financial Officer of the Company, with an incentive to continue his employment with the Company and to maximize the value of the Company upon a change of control of the Company for the benefit of stockholders of the Company (other than the Rollover Holders), the Company and Mr. Gausman entered into a Change of Control Severance Agreement, dated September 19, 2010, pursuant to which Mr. Gausman will receive a lump sum severance payment equal to 12 months of Mr. Gausman’s base salary and reimbursement of COBRA premiums for up to 12 months, upon his termination of employment without “cause,” or for “good reason,” following the merger. In addition, upon the consummation of the merger, Mr. Gausman will receive a bonus equal to $62,500 (three months of base salary). |
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• | our representations and warranties set forth in the Merger Agreement must be true and correct as of the closing of the merger, except for (1) those representations and warranties which address matters as of a particular date or (2) any failure to be so true and correct which has not had and would not have, individually or in the aggregate, a “material adverse effect” on us (except that certain representations and warranties must be true and correct in all respects, or in all respects that are material to us); | |
• | we must have performed in all material respects each of our covenants and obligations under the Merger Agreement; | |
• | we must not have suffered a “material adverse effect”; | |
• | no order or injunction preventing the consummation of the merger (or any transaction contemplated by the Merger Agreement) shall have been issued by any court or other government body and remain in effect, and there shall not be any legal requirement enacted or deemed applicable to the merger (or any transaction contemplated thereby) that makes consummation of the merger (or any transaction contemplated thereby) by Purchaser and Merger Sub illegal; | |
• | there shall not be pending, and there shall not have been threatened in writing, legal proceedings in which a governmental body is or has threatened to become a party: (a) challenging the consummation of the merger, (b) relating to the merger and seeking from Purchaser or RAE Systems damages or other relief that may be material, (c) seeking to prohibit in any material respect Purchaser’s ability to exercise ownership rights with respect to the stock of the surviving corporation, (d) that could materially and adversely affect the right of Purchaser or surviving corporation to own the assets or operate the business of the surviving corporation, or (e) seeking to compel any party to the merger to hold separate any material assets as a result of the merger; and | |
• | there must not be any other pending legal proceedings in which there is a reasonable possibility of an outcome that would have a “material adverse effect” on us or Purchaser. |
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105 Madison Avenue
New York, New York 10016
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• | we would be required to enter into a settlement agreement with the SEC and the Department of Justice regarding our FCPA investigation prior to entering into a definitive agreement with Bidder A; | |
• | Bidder A would need to meet with the SEC and the Department of Justice and obtain confirmation as to its ability to shield itself from liabilities for any past FCPA violations by RAE Systems; |
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• | it must be demonstrated to Bidder A that the transaction would not have any adverse impact on any current matters before the Department of Justice or the SEC involving Bidder A or any of its affiliates; | |
• | the proposed transaction would exclude any ownership interest or liabilities of RAE Fushun, and we would be required to complete a dissolution and liquidation process prior to closing, in a manner satisfactory to Bidder A, if we were unable to sell it to a third party; and | |
• | we would be required to acquire the minority interest in our RAE KLH joint venture in Beijing from our joint venture partner, obtain title documents for its Beijing facility, reorganize certain of its business operations and commence a liquidation of this joint venture. |
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• | the belief that, having engaged in a lengthy process during which 36 potential buyers were approached, including both strategic purchasers (including competitors) and private equity firms, we obtained the highest price per share that was reasonably available from any potential acquirer in a transaction that had reasonable certainty of being consummated with respect to the Battery Merger and Battery Merger Agreement, and the $1.75 merger consideration represents an increase of per share merger consideration of approximately 9.38% from the $1.60 per share merger consideration proposed in the Battery Merger Agreement; |
• | the fact that Battery Venture’s proposal for an increase in the merger consideration payable under the Battery Merger Agreement was conditioned on a requirement that the Rollover Holders reaffirm their obligations under the existing rollover agreement, which reaffirmation Mr. Chen had informed the Special Committee the Rollover Holders would not be willing to provide, as a result of which the Battery Ventures proposal did not represent a option that was available to us, and the view of the Special Committee and the disinterested members of our board of directors that even in the absence of such a condition, Battery Ventures’ proposal involved significant uncertainties regarding the status of the rollover agreement, and regarding the risk to our stockholders of such unenforceability, and in view of these uncertainties and risks, and Mr. Chen and Dr. Hsi’s stated intention to vote against the Battery proposal as stockholders, the Special Committee could not have confidence that the transaction set forth in the January 16, 2011 proposal by Battery Ventures could be consummated because of the resulting increased risk that the transaction might not obtain stockholder approval (since a very high percentage of our other stockholders would need to vote in favor of the merger, and since it might be expected that some portion of our stockholders would not vote or return proxies to vote their shares); |
• | the fact that the merger consideration is all cash, which provides certainty of value to our stockholders; |
• | the likelihood that the merger would be consummated, the absence of any financing condition to Vector Capital’s obligation to complete the merger, the guarantee by Vector Capital and the Special Committee’s belief, based on information provided by Vector Capital (including financial information provided by Vector Capital to UBS setting forth its available committed capital) which confirmed that Vector Capital has sufficient financial resources to complete the merger without the need to obtain any debt financing; |
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• | the business, market and execution risks associated with remaining independent and successfully implementing a stand-alone strategy given the highly competitive nature of our industry and our relatively small size and resources as compared to our competitors; | |
• | the costs and expenses of remaining a public company, and their effect on our profitability in view of the size of our business; | |
• | Our projected financial results, as described under “Important Information Concerning RAE Systems — Certain Projections”, the risks to our ability to achieve these projected results and the valuations of RAE Systems that would be implied by such projections, as set forth in the financial analyses presented by UBS; | |
• | the $1.75 per share merger consideration represents a premium of approximately (i) 68% to the $1.04 per share closing price of our common stock on September 17, 2010, the last full trading day prior to the public announcement of the proposed Battery Merger, (ii) 9.38% to the $1.60 per share merger consideration proposed in the Battery Merger, (iii) 5% to the $1.66 per share closing price of our common stock on January 14, 2011, the last full trading day prior to the public announcement of the Merger and (iv) % to the $ per share closing price of our common stock on , 2011, the last full trading day prior to the date of this proxy statement. | |
• | the fact that the Special Committee of our board of directors, in the exercise of its fiduciary duties in accordance with Delaware law and the Merger Agreement, can authorize our management to provide information to, and can engage in negotiations with a third party following receipt of an unsolicited proposal or offer that our board of directors (or the Special Committee thereof) believes in good faith is reasonably likely to lead to a superior offer in the manner provided in the Merger Agreement, subject to specified conditions; | |
• | the fact that our board of directors or Special Committee, in the exercise of its fiduciary duties in accordance with Delaware law and the Merger Agreement, can terminate the Merger Agreement following receipt of a bona fide written superior offer in the manner provided in the Merger Agreement, subject to specified conditions, including the payment of a $3,710,000 termination fee; | |
• | the fact that the merger would be subject to the approval of our stockholders and the availability of appraisal rights to our stockholders; and |
• | the financial presentation of UBS and its opinion dated September 19, 2010, to the Special Committee as to the fairness, from a financial point of view and as of that date, of the $1.60 per share consideration to be received by the holders of RAE Systems common stock (other than the Rollover Holders) in the Battery Merger, as more fully described below under “— Opinion of the Financial Advisor to RAE Systems’ Special Committee” beginning on page 31 and in the written opinion of UBS attached as Annex B to this proxy statement; and the fact that the $1.75 per share merger consideration represents a premium of approximately 9.38% to the $1.60 per share merger consideration proposed in the Battery Merger. In view of this premium, the Special Committee did not obtain an updated opinion from UBS with respect to the fairness of the consideration. In January 2011, the Special Committee was deciding between two alternative transactions, one at $1.60 per share and one at $1.75 per share, and was not deciding between the alternatives of remaining an independent company and entering into an agreement to be acquired, as it was in September 2010. Therefore, the Special Committee did not believe that an updated opinion was necessary in order to conclude that the $1.75 per share transaction was superior to the $1.60 per share transaction. |
• | the consideration and negotiation of the transaction (and the entire strategic process) was conducted entirely under the oversight of the members of the Special Committee, and no limitations were placed on the authority of the Special Committee; |
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• | the Special Committee was free to reject the proposed merger and explore, as it did, transactions with other bidders; | |
• | the Special Committee had exclusive authority to review, evaluate and negotiate the terms of the transaction and the Special Committee was thus able to adequately represent our stockholders (other than the Rollover Holders), particularly as none of the members of the Special Committee has any financial interest in the merger that is different from our stockholders generally (other than the Rollover Holders), although the Merger Agreement does include customary provisions for indemnification and the continuation of liability insurance for our officers and directors; | |
• | the Special Committee was advised by legal counsel and an internationally recognized financial advisor selected by them (neither of which firms had any prior material relationship with RAE Systems or with the Rollover Holders); and | |
• | that although the merger was not conditioned on the approval of a majority of our disinterested stockholders, the Voting Parties holding 31% of the outstanding shares of RAE Systems common stock as of January 20, 2011, had agreed to vote those shares in favor of the adoption of the merger agreement, and that Vector Capital, holding 4.9% of RAE Systems common stock as of January 20, 2011, intends to vote those shares in favor of the merger, the adoption of the merger agreement would still require the approval of a significant number of our disinterested stockholders, representing approximately 65.1% of our outstanding shares of common stock as of January 20, 2011(assuming Vector Capital votes their shares in favor of the merger); |
• | that we will no longer exist as an independent company and our stockholders (other than the Rollover Holders) will no longer participate in our growth or from any future increase in the value of RAE Systems; | |
• | that, under the terms of the Merger Agreement, we cannot solicit other acquisition proposals and we must pay or cause to be paid to Vector Capital a termination fee of $3,710,000 in cash or reimburse Vector Capital for its expenses in connection with the Merger Agreement, up to a maximum of $900,000 (which amount will reduce the amount of the termination fee paid to Vector Capital), if the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement, including if we exercise our right to terminate the Merger Agreement, which payments may deter others from proposing an alternative transaction that may be more advantageous to our stockholders; | |
• | that the merger was not conditioned on the approval of a majority of our disinterested stockholders, the Voting Parties holding approximately 31% of the outstanding shares of RAE Systems common stock as of January 20, 2011, had agreed to vote those shares in favor of the adoption of the merger agreement and that Vector Capital, holding 4.9% of RAE Systems common stock as of January 20, 2011, intends to vote those shares in favor of the merger; | |
• | the fact that any gains from an all-cash transaction would be taxable to our stockholders for U.S. federal income tax purposes; | |
• | that, under the terms of the Merger Agreement, we agreed that we will carry on our business in the ordinary course of business consistent with past practice and, subject to specified exceptions, that we will not take a number of actions related to the conduct of our business without the prior consent of Purchaser (which cannot be unreasonably withheld or delayed in certain circumstances specified in the Merger Agreement); | |
• | that if the merger does not close, our officers and other employees will have expended extensive efforts attempting to complete the transaction and will have experienced significant distractions from their work during the pendency of the transaction and we will have incurred substantial transaction costs in connection with the transaction and such costs will harm our operating results; and | |
• | that when we signed the Battery Merger Agreement, we were in final discussions with the SEC and the Department of Justice regarding a settlement of their FCPA investigation, which we expected would not |
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impose any liability that was inconsistent with our publicly-announced accrual, and that the announcement of such a settlement might have a positive effect on our stock price, and might be viewed favorably by prospective acquirors (this investigation was settled on December 10, 2010 for approximately $2.9 million, which was approximately $550,000 less than our publicly-announced accrual of $3.5 million and on terms otherwise were consistent with our expectations). |
• | the need to recruit additional qualified engineering personnel, and the challenges to doing so that are presented by our history of operating losses; | |
• | the significant engineering and marketing resources that would be needed for the development and introduction of new products, which would require that we make significant investments before we can determine the commercial viability of the new products; | |
• | the concern that our status as a public company could make it more difficult to take these measures, as they could negatively affect our earnings per share in the short term (depressing our stock price and making it even more difficult to obtain equity financing); and | |
• | the concern that we may face greater difficulty reducing our manufacturing costs than our larger competitors, as our smaller revenue base and focus on specialized, lower volume products limit our ability to scale up our production volume and obtain increased volume efficiencies. |
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• | reviewed certain publicly available business and financial information relating to RAE Systems; | |
• | reviewed certain internal financial information and other data relating to the business and financial prospects of RAE Systems that were not publicly available, including financial forecasts and estimates prepared by the management of RAE Systems that the Special Committee directed UBS to utilize for purposes of its analysis, consisting of the revised 2010 projections together with the 2012 recovery case projections for 2011 through 2014; | |
• | conducted discussions with members of the senior management of RAE Systems concerning the business and financial prospects of RAE Systems; |
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• | reviewed publicly available financial and stock market data with respect to certain other companies UBS believed to be generally relevant; | |
• | compared the financial terms of the Battery Merger with the publicly available financial terms of certain other transactions UBS believed to be generally relevant; | |
• | reviewed current and historical market prices of RAE Systems common stock; | |
• | reviewed a draft of the Battery Merger Agreement dated September 19, 2010; and | |
• | conducted such other financial studies, analyses and investigations, and considered such other information, as UBS deemed necessary or appropriate. |
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Enterprise | Enterprise | Stock | ||||||||||||||||||
Value to | Value to | Price to | ||||||||||||||||||
Equity | Enterprise | Estimated | Estimated | Estimated | ||||||||||||||||
Value | Value | 2010 | 2011 | 2011 | ||||||||||||||||
Company | (millions) | (millions) | EBITDA | EBITDA | EPS | |||||||||||||||
Spectris plc | $ | 1,851 | $ | 2,021 | 9.9x | 9.0x | 12.7x | |||||||||||||
Halma p.l.c | 1,851 | 1,837 | 10.3x | 9.7x | 15.3x | |||||||||||||||
Drägerwerk AG & Co. KGaA | 1,259 | 1,724 | 5.7x | 5.2x | 10.4x | |||||||||||||||
II-VI Incorporated | 1,129 | 1,024 | 11.8x | 9.5x | 19.2x | |||||||||||||||
Mine Safety Appliances Company | 937 | 1,020 | 9.7x | 7.9x | 16.1x | |||||||||||||||
FARO Technologies, Inc. | 298 | 191 | 7.9x | 5.5x | 15.5x | |||||||||||||||
Measurement Specialties, Inc. | 252 | 301 | 7.7x | 5.8x | 10.4x |
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Enterprise Value as a Multiple of: | ||||||||
Estimated 2010 | Estimated 2011 | |||||||
EBITDA | EBITDA | |||||||
Multiples for Selected Companies | ||||||||
High | 11.8 | x | 9.7 | x | ||||
Mean | 9.0 | x | 7.5 | x | ||||
Median | 9.7 | x | 7.9 | x | ||||
Low | 5.7 | x | 5.2 | x | ||||
Multiples for RAE Systems | ||||||||
Closing Price on September 17, 2010 of $1.04 | 14.3 | x | 12.1 | x | ||||
Per Share Consideration of $1.60 in the Battery Merger | 23.6 | x | 20.1 | x |
Closing Stock Price as a Multiple of | ||||
Estimated 2011 EPS | ||||
Multiples for Selected Companies | ||||
High | 19.2 | x | ||
Mean | 14.2 | x | ||
Median | 15.3 | x | ||
Low | 10.4 | x | ||
Multiples for RAE Systems | ||||
Closing Price on September 17, 2010 of $1.04 | 20.8 | x | ||
Per Share Consideration of $1.60 in the Battery Merger | 32.0 | x |
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Enterprise | Enterprise | |||||||||||
Value | Value to | |||||||||||
Date Announced | Target | Acquiror | (millions) | LTM EBITDA | ||||||||
September 2010 | General Monitors, Inc. | Mine Safety Appliances Company | $ | 260 | 10.4x | |||||||
August 2010 | ICx Technologies, Inc. | Flir Systems, Inc. | 231 | nm | ||||||||
May 2010 | Sperian Protection | Honeywell International Inc. | 1,385 | 13.8x | ||||||||
January 2010 | Ahura Scientific, Inc. | Thermo Fisher Scientific Inc. | 145 | na | ||||||||
October 2008 | LDS Test & Measurement Ltd | Spectris plc | 86 | na | ||||||||
July 2008 | Xantrex Programmable Power | Ametek, Inc. | 120 | na | ||||||||
October 2007 | Extech Instruments Corporation | Flir Systems Inc. | 40 | na | ||||||||
August 2007 | Cameca SAS | Ametek, Inc. | 112 | na | ||||||||
February 2007 | Mikron Infrared Inc. | LumaSense Technologies Inc. | 62 | 10.1x | ||||||||
January 2006 | SwissQual Holding AG | Spirent Communications plc | 72 | 16.5x | ||||||||
December 2005 | First Technology plc | Honeywell International Inc. | 743 | 13.4x | ||||||||
August 2006 | Solartron Group | Ametek, Inc. | 75 | na | ||||||||
May 2005 | UbiNetics Holdings Limited - SPG Test and Measurement | Aeroflex Inc. | 84 | 9.6x | ||||||||
April 2005 | Zellweger Analytics | Honeywell International Inc. | na | na | ||||||||
June 2004 | Inet Technologies, Inc. | Tektronix, Inc. | 325 | 15.1x | ||||||||
June 2004 | synOdys Group SA | American Capital Strategies Ltd. | 72 | na | ||||||||
May 2004 | Imaging and Sensing Technology Corporation | American Capital Strategies Ltd. | 45 | na | ||||||||
October 2003 | ICN Worldwide Dosimetry Services Inc. | American Capital Strategies Ltd. | 49 | na |
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Enterprise Value as a Multiple | ||||
of Latest Twelve Months EBITDA | ||||
Multiples for Selected Transactions | ||||
High | 16.5 | x | ||
Mean | 12.7 | x | ||
Median | 13.4 | x | ||
Low | 9.6 | x | ||
Multiples for RAE Systems | ||||
Per Share Consideration of $1.60 in the Battery Merger | 24.4 | x |
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• | the Special Committee, which is comprised of three independent directors who are not affiliated with Purchaser or Merger Sub, unanimously concluded that the merger is fair to and in the best interests of the unaffiliated stockholders of RAE Systems, approved the Merger Agreement and the merger and recommended to the board of directors that the board of directors approve the merger agreement and that the Merger Agreement be submitted to the stockholders of RAE Systems for adoption; | |
• | the Special Committee was advised by outside legal counsel and an independent financial advisor in relation to the merger (neither of which firms had any prior material relationship with RAE Systems or with the Rollover Holders); | |
• | the fact that the Special Committee acted on behalf of the unaffiliated stockholders of RAE Systems and effectively led and managed the negotiations and discussions with Battery Ventures and Vector Capital, as evidenced by, among other things, the Special Committee’s refusal to conduct only a post-signing market check by means of a “go-shop,” its decision to conduct a pre-signing market check with over 36 potential |
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bidders, the scope of the Special Committee’s market check, and the duration of the Special Committee’s market check (extending over a period of five months), the fact that more than four months elapsed between the execution of the Battery Merger Agreement and the Merger Agreement, and more than three months elapsed between the submission of Vector Capital’s first bid and the execution of the Merger Agreement; |
• | the board of directors unanimously (with two abstentions, by Mr. Chen and Dr. Hsi) approved the Merger Agreement and recommended that the Merger Agreement be submitted to the stockholders of RAE Systems for adoption and this approval included a majority of RAE Systems’ directors who are not employees of RAE Systems; | |
• | the fact that, although the Purchaser Group is not entitled to rely on it, the Special Committee received an opinion from the Special Committee’s independent financial advisor, UBS, to the effect that, as of the date of the opinion and subject to various assumptions, qualifications, limitations and other matters set forth therein, the $1.60 per share merger consideration to be received by the stockholders (other than the Rollover Holders) in the proposed merger pursuant to the Battery Merger Agreement was fair to such stockholders from a financial point of view; and the fact that the $1.75 per share merger consideration represents a premium of approximately 9% to the $1.60 per share merger consideration proposed in the Battery Merger; | |
• | the fact that the merger would be subject to the approval of RAE Systems’ stockholders and the availability of appraisal rights to RAE Systems’ stockholders; | |
• | the fact that, although the Voting Parties have entered into voting agreements, the Merger Agreement and the merger could be approved without the affirmative votes of the Voting Parties and further, that the voting agreements terminate if the Merger Agreement is terminated in accordance with its terms (including termination by RAE Systems in connection with a Superior Offer); | |
• | the Special Committee had the authority to reject any transaction proposed by the Purchaser Group; | |
• | the fact that the $1.75 per share merger consideration represents a premium of approximately (i) 68% to the $1.04 per share closing price of RAE Systems’ common stock on September 17, 2010, the last full trading day prior to the public announcement of the proposed Battery Merger, (ii) 9.38% to the $1.60 per share merger consideration proposed in the Battery Merger, (iii) 5% to the $1.66 per share closing price of RAE Systems’ common stock on January 14, 2011, the last full trading day prior to the public announcement of the Merger and (iv) % to the $ per share closing price of RAE Systems’ common stock on , 2011, the last full trading day prior to the date of this proxy statement. | |
• | the terms of the Merger Agreement do not contain a financing contingency, which the Purchaser Group believes is favorable to RAE Systems stockholders given the current market conditions; | |
• | the fact that the Special Committee, in the exercise of its fiduciary duties in accordance with the Merger Agreement, can authorize RAE Systems’ management to provide information to and can engage in negotiations with a third party following receipt of a proposal or offer that RAE Systems’ board of directors (or the Special Committee thereof) believes in good faith is reasonably likely to lead to a superior offer in the manner provided in the Merger Agreement, subject to specified conditions; | |
• | the fact that RAE Systems’ board of directors or the Special Committee, in the exercise of its fiduciary duties in accordance with the Merger Agreement, can terminate the Merger Agreement following receipt of a bona fide written superior offer in the manner provided in the Merger Agreement, subject to specified conditions, including the payment of a $3,710,000 termination fee; and | |
• | the other factors referred to above as having been taken into account by the Special Committee and the board of directors, which the Purchaser Group adopts as its own, as described above under “Special Factors — Reasons for the Merger of RAE Systems and Recommendation of the Board of Directors” starting at page 26). |
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• | the engagement by RAE Systems and its financial advisors in a lengthy process during which 36 potential buyers were approached and, the fact that more than four months elapsed between the execution of the Battery Merger Agreement and the Merger Agreement, and more than three months elapsed between the submission of Vector Capital’s first bid and the execution of the Merger Agreement; | |
• | the Special Committee and outside legal counsel negotiated all financial and other terms and conditions of the Merger Agreement on an arm’s-length basis with certain members of the Purchaser Group and its counsel, with the Special Committee benefiting from the advice of its independent financial advisor. The Purchaser Group did not participate in the deliberations of the Special Committee or the board of directors; | |
• | the Special Committee unanimously concluded that the merger is fair to and in the best interests of the unaffiliated stockholders of RAE Systems, approved the Merger Agreement and the merger and recommended to the board of directors that the board of directors approve the Merger Agreement and that the Merger Agreement be submitted to the stockholders of RAE Systems for adoption; | |
• | the Special Committee had the authority to reject the transaction proposed by the Purchaser Group; | |
• | the fact that the Special Committee, in the exercise of its fiduciary duties in accordance with the Merger Agreement, can authorize RAE Systems’ management to provide information to and can engage in negotiations with a third party following receipt of a proposal or offer that RAE Systems’ board of directors (or the Special Committee thereof) believes in good faith is reasonably likely to lead to a superior offer in the manner provided in the Merger Agreement, subject to specified conditions; | |
• | the fact that RAE Systems’ board of directors or the Special Committee, in the exercise of its fiduciary duties in accordance with the Merger Agreement, can terminate the Merger Agreement following receipt of a bona fide written superior offer in the manner provided in the Merger Agreement, subject to specified conditions, including the payment of a $3,710,000 termination fee; and | |
• | stockholders who do not vote in favor of the Merger Agreement and who comply with certain procedural requirements will be entitled, upon completion of the merger, to exercise statutory appraisal rights under Delaware law, which allows stockholders to have the fair value of their shares determined by the Delaware Court of Chancery and paid to them in cash. |
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• | the Special Committee, which is comprised of three independent directors who are not affiliated with Purchaser or Merger Sub, unanimously concluded that the merger is fair to and in the best interests of the unaffiliated stockholders of RAE Systems, approved the Merger Agreement and the merger and recommended to the board of directors that the board of directors approve the merger agreement and that the Merger Agreement be submitted to the stockholders of RAE Systems for adoption; | |
• | the Special Committee was advised by outside legal counsel and an independent financial advisor in relation to the merger (neither of which firms had any prior material relationship with RAE Systems or with the Rollover Holders); | |
• | the fact that the Special Committee acted on behalf of the unaffiliated stockholders of RAE Systems and effectively led and managed the negotiations and discussions with Battery Ventures and Vector Capital, as evidenced by, among other things, the Special Committee’s refusal to conduct only a post-signing market check by means of a “go-shop,” its decision to conduct a pre-signing market check with over 36 potential bidders, the scope of the Special Committee’s market check, and the duration of the Special Committee’s market check (extending over a period of five months), the fact that more than four months elapsed between the execution of the Battery Merger Agreement and the Merger Agreement, and more than three months elapsed between the submission of Vector Capital’s first bid and the execution of the Merger Agreement; | |
• | the board of directors unanimously (with two abstentions, by Mr. Chen and Dr. Hsi) approved the Merger Agreement and recommended that the Merger Agreement be submitted to the stockholders of RAE Systems for adoption and this approval included a majority of RAE Systems’ directors who are not employees of RAE Systems; | |
• | the fact that, although the Purchaser Group is not entitled to rely on it, the Special Committee received an opinion from the Special Committee’s independent financial advisor, UBS, to the effect that, as of the date of the opinion and subject to various assumptions, qualifications, limitations and other matters set forth therein, the $1.60 per share merger consideration to be received by the stockholders (other than the Rollover Holders) in the proposed merger pursuant to the Battery Merger Agreement was fair to such stockholders from a financial point of view; |
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and the fact that the $1.75 per share merger consideration represents a premium of approximately 9.38% to the $1.60 per share merger consideration proposed in the Battery Merger; |
• | the fact that the merger would be subject to the approval of RAE Systems’ stockholders and the availability of appraisal rights to RAE Systems’ stockholders; | |
• | the fact that, although the Voting Parties have entered into voting agreements, the Merger Agreement and the merger could be approved without the affirmative votes of the Voting Parties and Vector Capital and further, that the voting agreements terminate if the Merger Agreement is amended to decrease the per share consideration, or Merger Agreement is terminated in accordance with its terms (including termination by RAE Systems in connection with a Superior Offer); | |
• | the Special Committee had the authority to reject any transaction proposed by the Purchaser Group; |
• | the fact that Battery Venture’s proposal for an increase in the merger consideration payable under the Battery Merger Agreement was conditioned on a requirement that the Rollover Holders reaffirm their obligations under the existing rollover agreement, which reaffirmation Mr. Chen had informed the Special Committee the Rollover Holders would not be willing to provide, based on Mr. Chen’s assessment that Vector Capital was better positioned to develop and execute a strategic plan for RAE Systems following the merger and his belief that the investment by an affiliate of CITIC Capital might provide RAE Systems (through entities with CITIC Capital in indirectly related) with financial resources and relationships in China, as a result of which the Battery Ventures proposal did not represent an option that was available to RAE Systems, and the view of the Special Committee and the disinterested members of RAE Systems’ board of directors that even in the absence of such a condition, Battery Ventures’ proposal involved significant uncertainties regarding the status of the rollover agreement, and regarding the risk to RAE Systems’ stockholders of such unenforceability, and in view of these uncertainties and risks, and Mr. Chen’s stated intention to vote against the Battery proposal as stockholders, the Special Committee could not have confidence that the transaction set forth in the January 16, 2011 proposal by Battery Ventures could be consummated; |
• | the fact that the $1.75 per share merger consideration represents a premium of approximately (i) 68% to the $1.04 per share closing price of RAE Systems’ common stock on September 17, 2010, the last full trading day prior to the public announcement of the proposed Battery Merger, (ii) 9.38% to the $1.60 per share merger consideration proposed in the Battery Merger, (iii) 5% to the $1.66 per share closing price of RAE Systems’ common stock on January 14, 2011, the last full trading day prior to the public announcement of the Merger and (iv) % to the $ per share closing price of RAE Systems’ common stock on , 2011, the last full trading day prior to the date of this proxy statement. | |
• | the terms of the Merger Agreement do not contain a financing contingency, which the Purchaser Group believes is favorable to RAE Systems stockholders given the current market conditions; | |
• | the fact that the Special Committee, in the exercise of its fiduciary duties in accordance with the Merger Agreement, can authorize RAE Systems’ management to provide information to and can engage in negotiations with a third party following receipt of a proposal or offer that RAE Systems’ board of directors (or the Special Committee thereof) believes in good faith is reasonably likely to lead to a superior offer in the manner provided in the Merger Agreement, subject to specified conditions; | |
• | the fact that RAE Systems’ board of directors or the Special Committee, in the exercise of its fiduciary duties in accordance with the Merger Agreement, can terminate the Merger Agreement following receipt of a bona fide written superior offer in the manner provided in the Merger Agreement, subject to specified conditions, including the payment of a $3,710,000 termination fee; and | |
• | the other factors referred to above as having been taken into account by the Special Committee and the board of directors, which the Purchaser Group adopts as its own, as described above under “Special Factors — Reasons for the Merger of RAE Systems and Recommendation of the Board of Directors” starting at page 26). |
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• | the engagement by RAE Systems and its financial advisors in a lengthy process during which 36 potential buyers were approached; | |
• | the Special Committee and outside legal counsel negotiated all financial and other terms and conditions of the Merger Agreement on an arm’s-length basis with certain members of the Purchaser Group and its counsel, with the Special Committee benefiting from the advice of its independent financial advisor. The Rollover Holders did not participate in the deliberations of the Special Committee or the board of directors; | |
• | the Special Committee unanimously concluded that the merger is fair to and in the best interests of the unaffiliated stockholders of RAE Systems, approved the Merger Agreement and the merger and recommended to the board of directors that the board of directors approve the Merger Agreement and that the Merger Agreement be submitted to the stockholders of RAE Systems for adoption; | |
• | the Special Committee had the authority to reject the transaction proposed by the Purchaser Group; | |
• | the fact that the Special Committee, in the exercise of its fiduciary duties in accordance with the Merger Agreement, can authorize RAE Systems’ management to provide information to, and can engage in negotiations with a third party following receipt of a proposal or offer that RAE Systems’ board of directors (or the Special Committee thereof) believes in good faith is reasonably likely to lead to a superior offer in the manner provided in the Merger Agreement, subject to specified conditions; | |
• | the fact that RAE Systems’ board of directors or the Special Committee, in the exercise of its fiduciary duties in accordance with the Merger Agreement, can terminate the Merger Agreement following receipt of a bona fide written superior offer in the manner provided in the Merger Agreement, subject to specified conditions, including the payment of a $3,710,000 termination fee; and | |
• | stockholders who do not vote in favor of the Merger Agreement and who comply with certain procedural requirements will be entitled, upon completion of the merger, to exercise statutory appraisal rights under Delaware law, which allows stockholders to have the fair value of their shares determined by the Delaware Court of Chancery and paid to them in cash. |
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Legal | $ | |||||||
Financial Advisors | ||||||||
Printing | ||||||||
SEC Filing Fees | ||||||||
Accounting | ||||||||
Proxy Solicitation | ||||||||
Special Committee Fees | ||||||||
Miscellaneous | ||||||||
Mailing | ||||||||
Total | $ | |||||||
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Cash Merger | Realizable | Realizable | ||||||||||||||||||||
Consideration | Value of | Value | ||||||||||||||||||||
to be | Vested Options | of All | Compensation | |||||||||||||||||||
Name of Director | Received for | as a Result | Options at | of Members | ||||||||||||||||||
and/or Executive | RAE Systems | of the | the Closing | of Special | Total Cash | |||||||||||||||||
Officer | Position | Common Stock | Merger(1) | of Merger(1) | Committee | Consideration | ||||||||||||||||
Robert I. Chen(2) | President, Chief Executive Officer and Chairman of the Board | $ | 8,509,522 | $ | 56,000 | $ | 134,400 | $ | 8,643,922 | |||||||||||||
Randall K. Gausman(3) | Vice President and Chief Financial Officer | $ | 8,750 | $ | 83,125 | $ | 168,000 | $ | 176,750 | |||||||||||||
Peter C. Hsi(2) | Chief Technology Officer and Director | $ | 27,708 | $ | 56,000 | $ | 56,000 | |||||||||||||||
Ming-Ching Tang | Executive Vice President Operations | $ | 43,750 | $ | 94,500 | $ | 94,500 | |||||||||||||||
Christopher Hameister | Vice President Asia-Pacific, Europe and Middle East Business Operations | $ | 27,708 | $ | 56,000 | $ | 56,000 | |||||||||||||||
Fei-Zhou Shen | Vice President Corporate Development and Fushun Business Operations | $ | 41,504 | $ | 131,246 | $ | 159,538 | $ | 201,042 | |||||||||||||
Ryan Watson | Vice President Americas Sales | $ | 7,905 | $ | 39,374 | $ | 73,500 | $ | 81,405 | |||||||||||||
Dr. Keh-Shew Lu | Director | $ | 472,500 | $ | 32,083 | $ | 77,000 | $ | 7,500 | $ | 557,000 | |||||||||||
Susan Wang | Director | — | $ | 48,125 | $ | 115,500 | $ | 18,000 | $ | 133,500 | ||||||||||||
Dr. Lyle D. Feisel | Director | $ | 125,909 | $ | 93,500 | $ | 93,500 | $ | 219,409 | |||||||||||||
Sigrun Hjelmqvist | Director | $ | 35,000 | $ | 23,333 | $ | 35,000 | $ | 70,000 | |||||||||||||
James W. Power | Director | $ | 70,000 | $ | 17,783 | $ | 106,700 | $ | 8,000 | $ | 184,700 | |||||||||||
TOTAL | $ | 9,271,090 | $ | 623,735 | $ | 1,169,638 | $ | 33,500 | $ | 10,474,228 | ||||||||||||
(1) | This table excludes stock options with exercise prices greater than $1.75 per share as of January 20, 2011. All outstanding stock options will accelerate and vest in full as a result of the merger. | |
(2) | If the merger is completed, the 13,392,857 Rollover Shares registered under the name of Chen Revocable Trust DTD 5/8/2001 and Hsi Family Trust, which are beneficially owned by Robert I. Chen and Peter C. Hsi, respectively, will be valued at $1.75 per share and exchanged for a combination of preferred stock and common stock in Purchaser valued at approximately $23.4 million in the aggregate (“Value of Rollover Shares”). Total Cash Consideration does not include the Value of Rollover Shares. | |
(3) | See the description of the severance agreement and bonus described below in “Special Factors — Interests of Our Directors and Executive Offices in the Merger — Severance Agreement.” |
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Cash Merger | ||||||||||||
Consideration | Realizable | |||||||||||
to be | Value of All | |||||||||||
Received for | Options at | |||||||||||
RAE Systems | the Closing of | Total Cash | ||||||||||
Name of Rollover Holders | Common Stock | Merger | Consideration | |||||||||
Chen Revocable Trust DTD 5/8/2001 | $ | 8,509,522 | $ | 8,509,522 | ||||||||
Robert I. Chen | — | $ | 134,400 | $ | 134,400 | |||||||
Hsi Family Trust | — | — | — | |||||||||
Peter C. Hsi | — | $ | 56,000 | $ | 56,000 | |||||||
Lien Q. Chen | — | — | — | |||||||||
Total | $ | 8,509,522 | $ | 190,400 | $ | 8,699,922 | ||||||
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• | Stockholders electing to exercise appraisal rights must not vote “for” the adoption of the Merger Agreement. Also, because a submitted proxy not marked “against” or “abstain” will be voted “for” the proposal to adopt the Merger Agreement, the submission of a proxy not marked “against” or “abstain” will result in the waiver of appraisal rights. | |
• | A written demand for appraisal of shares must be filed with us before the taking of the vote on the Merger Agreement at the Special Meeting on , 2011. The written demand for appraisal should specify the stockholder’s name and mailing address, and that the stockholder is thereby demanding appraisal of his or her RAE Systems common stock. The written demand for appraisal of shares is in addition to and separate from a vote against adoption of the Merger Agreement or an abstention from such vote. | |
• | A demand for appraisal should be executed by or for the stockholder of record, fully and correctly, as such stockholder’s name appears on the share certificate. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, this demand must be executed by or for the fiduciary. If the shares are owned by or for more than one person, as in a joint tenancy or tenancy in common, such demand should be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record. However, the agent must identify the record owner and expressly disclose the fact that, in exercising the demand, he is acting as agent for the record owner. A person having a beneficial interest in RAE Systems common stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below in a timely manner to perfect whatever appraisal rights the beneficial owners may have. | |
• | A stockholder who elects to exercise appraisal rights should mail or deliver his, her or its written demand to RAE Systems at 3775 North First Street, San Jose, California 95134, Attention: Corporate Secretary. |
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• | stockholders that are insurance companies; | |
• | stockholders that are tax-exempt organizations; | |
• | stockholders that are financial institutions, regulated investment companies, or brokers or dealers in securities; | |
• | stockholders who hold their common stock as part of a hedge, straddle or conversion transaction; | |
• | stockholders that hold common stock which constitutes qualified small business stock for purposes of Section 1202 of the Code or “section 1244 stock” for purposes of Section 1244 of the Code; | |
• | stockholders who are liable for the federal alternative minimum tax; | |
• | stockholders who are partnerships or other entity classified as a partnership for United States federal income tax purposes; | |
• | stockholders who acquired their common stock pursuant to the exercise of a stock option or otherwise as compensation; | |
• | stockholders whose functional currency for United States federal income tax purposes is not the U.S. dollar; and | |
• | stockholders who are not citizens or residents of the United States or that are foreign corporations, foreign partnerships or foreign estates or trusts with respect to the United States. |
• | an individual citizen or resident of the United States; | |
• | a corporation or other entity treated as a corporation for U.S. federal income tax purposes that is, in each case, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; | |
• | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or | |
• | a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons or (2) has validly elected to be treated as a U.S. person for U.S. federal income tax purposes. |
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• | the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; | |
• | the outcome of any legal proceedings that have been or may be instituted against RAE Systems and others relating to the Merger Agreement; | |
• | the inability to complete the merger due to the failure to obtain stockholder approval or the failure to satisfy other conditions to consummate the merger; | |
• | the failure of the merger to close for any other reason; | |
• | the risk that the proposed merger disrupts current plans and operations and the potential difficulties in employee retention as a result of the proposed merger; | |
• | the effect of the announcement of the merger on our customer relationships, operating results and business generally; | |
• | the amount of the costs, fees, expenses and charges related to the merger; and | |
• | other risks detailed in our Annual Report onForm 10-K for the year ended December 31, 2009 filed with the SEC on March 12, 2010 and our Quarterly Reports onForm 10-Q for the quarter ended March 31, 2010 filed with the SEC on May 7, 2010, for the quarter ended June 30, 2010 filed with the SEC on August 6, 2010 and for the quarter ended September 30, 2010 filed with the SEC on November 5, 2010 and incorporated herein by reference. See “Other Matters — Where You Can Find More Information” beginning on page 86. |
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• | the diversion of management and employee attention and the unavoidable disruption to our relationships with customers and vendors may detract from our ability to grow revenues and minimize costs; | |
• | we have and will continue to incur significant expenses related to the merger prior to its closing; and | |
• | we may be unable to respond effectively to competitive pressures, industry developments and future opportunities. |
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• | filing with our corporate secretary a properly executed and dated revocation of proxy; | |
• | submitting a properly completed, executed and dated proxy card to our corporate secretary bearing a later date; | |
• | submitting a subsequent vote over the Internet or by telephone; or | |
• | appearing at the Special Meeting and voting in person. |
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•�� | you make an affidavit claiming such certificate has been lost, stolen or destroyed; and | |
• | if required by Purchaser, you post a bond in such reasonable amount as Purchaser may direct as indemnity against any claim that may be made with respect to that certificate against Purchaser. |
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• | our organization, good standing and corporate power; | |
• | our capitalization; | |
• | our SEC documents and undisclosed liabilities; | |
• | certain changes or events since September 30, 2010; | |
• | ownership of our assets and real property; | |
• | intellectual property; | |
• | our material contracts; | |
• | compliance with legal requirements; | |
• | compliance with laws and permits; | |
• | the information supplied in this proxy statement; | |
• | tax matters; | |
• | employee benefits and labor matters; | |
• | environmental matters; | |
• | insurance; | |
• | transactions with affiliates; | |
• | legal proceedings and orders; | |
• | authorization, execution, delivery, performance and enforceability of, and required consents, approvals, orders and authorizations of our stockholders, third parties and governmental authorities relating to, the Merger Agreement; | |
• | the vote required to approve the merger; |
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• | our Shanghai construction project; | |
• | opinion of financial advisor; and | |
• | brokers and other advisors. |
• | organization, good standing and corporate power; | |
• | authorization, execution, delivery, performance and enforceability of, and required consents, approvals, orders and authorizations of third parties and governmental authorities relating to, the Merger Agreement; | |
• | the information supplied in this proxy statement; | |
• | availability of funds; | |
• | the solvency of the surviving corporation after the merger; and | |
• | no ownership of RAE Systems stock. |
• | declare, accrue, set aside or pay any dividend or make any other distribution in respect of any shares of our capital stock, or repurchase, redeem or otherwise reacquire any shares of capital stock or other securities; | |
• | sell, issue, grant or authorize the sale, issuance or grant of: any capital stock or other security; any option, call, warrant or right to acquire any capital stock or other security; or any instrument convertible into or exchangeable for any capital stock or other security, except that we may issue shares of common stock upon the valid exercise of options outstanding as of January 18, 2011; | |
• | amend or waive any of our rights under any provision of: any of our stock option plans; any option or any agreement evidencing or relating to any outstanding stock option; | |
• | amend our certificate of incorporation or bylaws or become a party to any merger, consolidation, share exchange, business combination, amalgamation, recapitalization, reclassification of shares, stock split, reverse stock split, division or subdivision of shares, consolidation of shares or similar transaction; | |
• | form any subsidiary or acquire any interest in any other entity; | |
• | make any capital expenditure, except in the ordinary course of business and consistent with past practices not exceeding $100,000 individually or $250,000 in the aggregate, except for certain specified expenses; |
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• | other than in the ordinary course of business consistent with past practices, enter into any material contract, or amend or terminate, or waive or exercise any material right or remedy under any material contract; | |
• | surrender any owned or leased real property; | |
• | acquire, lease or license any right or asset, except in the ordinary course of business and consistent with past practices, or expressly waive, or relinquish any material right; | |
• | other than in the ordinary course of business consistent with past practices, write off as uncollectible, or establish any extraordinary reserve with respect to, any receivable or indebtedness; | |
• | make any pledge of our assets except immaterial assets made in the ordinary course of business consistent with past practices; | |
• | lend money to any person (excluding advancement of reasonable expenses to employees in the ordinary course of business consistent with past practice), or incur or guarantee any indebtedness; | |
• | establish, adopt, or amend any benefit plan; pay any bonus or make any profit-sharing or similar payment, except customary bonus and commission payments consistent with past practices or in connection with the hiring of new employees in the ordinary course of business; or increase the amount of the wages, salary, commissions, fringe benefits or other compensation payable to officers, directors and employees; | |
• | hire any employee at the level of manager or above or with an annual base salary in excess of $155,000, promote any employee except in order to fill a position vacated after January 18, 2011, or terminate any employee with an annual base salary in excess of $155,000, except in the ordinary course of business or for cause; | |
• | change any of our accounting practices; | |
• | make any tax election; | |
• | commence or settle any legal proceeding; | |
• | enter into any material transaction or take any other material action outside the ordinary course of business; | |
• | pay UBS more than the fixed fee provided in its engagement letter, or any discretionary fee; or | |
• | agree or commit to take any of the forgoing actions. |
• | solicit, initiate, encourage, induce or facilitate the communication, making, submission or announcement of any Acquisition Proposal or Acquisition Inquiry (both as defined below); | |
• | furnish information to any third party in connection with or in response to an Acquisition Proposal or Acquisition Inquiry; | |
• | engage in discussions or negotiations with any third party with respect to any Acquisition Proposal or Acquisition Inquiry; | |
• | approve, endorse or recommend any Acquisition Proposal; or | |
• | execute or enter into any letter of intent with respect to any Acquisition Proposal or any other Acquisition Agreement. |
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• | We may furnish nonpublic information to, or enter into discussions with, any third party in response to a Superior Offer (as defined below) or an Acquisition Proposal or Acquisition Inquiry that the board of directors or the Special Committee believes in good faith is reasonably likely to result in a Superior Offer that is submitted to us and not withdrawn if: (1) the board of directors or the Special Committee concludes in good faith, after having taken into account the advice of its outside legal counsel, that such action is required in order for the board of directors to comply with its fiduciary obligations to our stockholders under applicable law; (2) at least one business day prior to furnishing any such nonpublic information to, or entering into discussions with, such third party, we give Purchaser written notice of the identity of such third party and of our intention to furnish nonpublic information to, or enter into discussions with, such third party; (3) we received from such third party an executed confidentiality agreement containing provisions (including nondisclosure provisions, use restrictions, non-solicitation provisions, no hire provisions and “standstill” provisions) at least as favorable to us as those contained in the Mutual Nondisclosure Agreement between RAE Systems and Vector Capital, dated September 24, 2010, as amended from time to time (the “Confidentiality Agreement”); and (4) prior to furnishing any such nonpublic information to such third party, we furnish such nonpublic information to Purchaser (to the extent such nonpublic information has not been previously furnished by us to Purchaser). | |
• | Our board of directors or any committee of our board of directors may withdraw or modify its recommendation that our stockholders adopt the Merger Agreement, if (i) (1) we have provided Purchaser with at least two business days prior notice of any meeting of our board of directors or the Special Committee to consider a Superior Offer; (2) during suchtwo-day period, if requested by Purchaser, we will engage in good faith negotiations with Purchaser to make such adjustments in the terms and conditions of the Merger Agreement in such a manner that obviates the need for our board of directors or the Special Committee withdraw or modify its recommendation that our stockholders adopt the Merger Agreement; (3) our board of directors or the Special Committee determines in good faith (after consulting with its independent financial advisor of nationally recognized reputation and taking into account any changes to the terms of the Merger Agreement proposed by Purchaser) that the offer of the third party constitutes a Superior Offer; (4) our board of directors or the Special Committee determines in good faith, after consulting with its outside legal counsel, that, the withdrawal or modification of its recommendations is required in order for the board of directors to comply with its fiduciary obligations to our stockholders; and (5) our board of directors recommendation is not withdrawn or modified in a manner adverse to Purchaser at any time prior to the time at which Purchaser receives written notice from us confirming that our board of directors has determined that an offer is a Superior Offer; or (ii) (1) in response to a material development or change in material circumstances occurring or arising after the date of the Merger Agreement, the existence of which was not known by our board of directors at or prior to date of the Merger Agreement (and not relating to any acquisition proposal) (such material development or change in circumstances, an “Intervening Event”), if our board of directors or the Special Committee determines in good faith, after consultation with its financial advisor and outside legal counsel, that, in light of such Intervening Event, that the withdrawal or modification of its recommendation that our stockholders adopt the Merger Agreement is required in order for the board of directors to comply with its fiduciary obligations to our stockholders; (2) if we have provided Purchaser with at least three days prior notice (unless the Intervening Event arises fewer than three days prior to the Stockholders’ Meeting in which case such notice shall be given as promptly as practicable) advising Parent that the board of directors or Special Committee intends to take such action and specifying the reasons therefor in reasonable detail; and (3) during such three day period, if requested by Parent, we will engages in good faith negotiations with Parent to make such adjustments in the terms and conditions of the Merger Agreement in such a manner that obviates the need for our board of directors or the Special Committee to withdraw or modify its recommendation that our stockholders adopt the Merger Agreement as a result of the Intervening Event. |
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• | We may terminate the Merger Agreement in order to enter into an acquisition agreement with respect to a Superior Offer, however, in the event of such a termination, RAE Systems would be required to pay a $3,710,000 termination fee (reduced by any expense reimbursement paid or payable under the Merger Agreement) to Purchaser as described below under “Fees and Expenses.” |
• | any merger, consolidation, amalgamation, share exchange, business combination, issuance of securities, acquisition of securities, reorganization recapitalization, tender offer, exchange offer or other similar transaction: (1) in which RAE Systems or any of our subsidiaries is a constituent corporation; (2) in which a third party or “group” of such third party directly or indirectly acquires beneficial or record ownership of securities representing more than 15% of the outstanding securities of any class of voting securities of RAE Systems or any of our subsidiaries; or (3) in which RAE Systems or any of our subsidiaries issues securities representing more than 15% of the outstanding securities of any class of voting securities of such issuing entity; | |
• | any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets that constitute or account for: (1) 15% or more of our consolidated net revenues, consolidated net income or consolidated book value of the assets; or (2) 15% or more of the fair market value of our assets; or | |
• | any liquidation or dissolution of RAE Systems of any of our subsidiaries. |
• | preparation of this proxy statement and holding of the Special Meeting; | |
• | recommendation by our board of directors that our stockholders adopt the Merger Agreement; | |
• | use of reasonable best efforts to consummate the merger, including obtaining regulatory clearance; | |
• | employee benefits; | |
• | indemnification and insurance; | |
• | access to information; | |
• | fees and expenses; |
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• | notification by us to Purchaser of breaches of representations and warranties, breaches of covenants and certain other matters; | |
• | stockholder litigation; and | |
• | export control |
• | our representations and warranties set forth in the Merger Agreement regarding certain aspects of our capitalization, the corporate power and authority to enter into the Merger Agreement and the binding nature of the Merger Agreement, the inapplicability of certain anti-takeover statutes, the required stockholder vote, and the fairness opinion are true and correct in all respects, and our representations and warranties set forth in the Merger Agreement regarding the authorization of, issuance of our outstanding shares are true and correct in all respects that are material to us, in each case as of the date of the Merger Agreement and as of the closing of the merger; | |
• | our representations and warranties set forth in the Merger Agreement that are qualified as to “material adverse effect” on us are true and correct on and as of the closing of the merger with the same force and effect as if made on and as of such date, except for those representations and warranties that are qualified as to “material adverse effect” on us that address matters only as of a particular date, which representations and warranties shall have been true and correct as of such particular date; | |
• | all of our other representations and warranties set forth in the Merger Agreement are true and correct on and as of the closing of the merger with the same force and effect as if made on and as of such date, except for any failure to be so true and correct which has not had and would not have, individually or in the aggregate, a “material adverse effect” on us, and for those representations and warranties that address matters only as of a particular date, which representations and warranties shall have been true and correct as of such particular date, except for any failure to be so true and correct as of such particular date which has not had and would not have, individually or in the aggregate, a “material adverse effect” on us; | |
• | we must have performed in all material respects each of our covenants and obligations under the Merger Agreement at or prior to the closing of the merger; | |
• | we must not have suffered a “material adverse effect;” | |
• | no temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the merger (or any transaction contemplated thereby) shall have been issued by any court of competent jurisdiction or other government body and remain in effect, and there shall not be any foreign, U.S. federal or state legal requirement enacted or deemed applicable to the merger (or any transaction contemplated thereby) that makes consummation of the merger (or any transaction contemplated thereby) by Purchaser and Merger Sub illegal; | |
• | there shall not be pending, and there shall not have been threatened in writing, any legal proceeding in which a governmental body is or has threatened to become a party: (1) challenging or seeking to restrain or prohibit the consummation of the merger (or any transaction contemplated thereby); (2) related to the merger or any of the transactions contemplated thereby, seeking to obtain any damages or other relief that may be material to Purchaser or us; (3) seeking to prohibit or limit in any material respect Purchaser’s ability to vote, transfer, receive dividends with respect to or otherwise exercise ownership rights with respect to the stock of the surviving corporation; (4) that could materially and adversely affect the right or ability of Purchaser or us to own the assets or operate the business of RAE Systems; or (5) seeking to compel us, Purchaser or any subsidiary of Purchaser to dispose of or hold separate any material assets as a result of the merger (or any transaction contemplated thereby); and |
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• | there must not be any other pending legal proceedings in which there is a reasonable possibility of an outcome that would have a “material adverse effect” on us or Purchaser. |
• | the representations and warranties of Purchaser and Merger Sub in the Merger Agreement must be true and correct on and as of the date of the closing of the merger with the same force and effect as if made on and as of such date, except (1) for any failure to be so true and correct that would not, individually or in the aggregate, prevent or materially delay the consummation of the contemplated transaction or the ability of Purchaser and Merger Sub to fully perform their respective covenants and obligations under the Merger Agreement, (2) for changes contemplated by the Merger Agreement, and (3) for those representations and warranties that address matters only as of a particular date, which representations shall have been true and correct as of such particular date, except for any failure to be so true and correct as of such particular date that would not, individually or in the aggregate, prevent the merger or prevent or materially delay the consummation of the transactions contemplated under the Merger Agreement or the ability of Purchaser and Merger Sub to fully perform their respective covenants and obligations under the Merger Agreement; | |
• | all of the covenants and obligations in the Merger Agreement that Purchaser and Merger Sub are required to comply with or to perform at or prior to the closing of the merger shall have been complied with and performed in all material respects; and | |
• | no temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the merger by us shall have been issued by any U.S. court of competent jurisdiction and remain in effect, and there shall not be any U.S. federal or state legal requirement enacted or deemed applicable to the merger that makes consummation of the merger by us illegal. |
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• | the merger is not completed by July 31, 2011; provided that a party may not so terminate the Merger Agreement if the failure of the merger to be completed was attributed to the failure of such party to perform any of its obligations under the Merger Agreement; | |
• | a court of competent jurisdiction or other governmental body shall have issued a final and nonappealable order, decree or ruling, or shall have taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the merger; | |
• | the required vote of our stockholders is not obtained to adopt the Merger Agreement at a meeting of our stockholders duly convened therefore or at any adjournment thereof, subject to certain limitations; |
• | if the board of directors (or the Special Committee, if applicable) fails to unanimously (with two abstentions) recommend that our stockholders vote to adopt and approve the Merger Agreement or withdraw or modify such recommendation in a manner adverse to Purchaser; | |
• | if we fail to include in the proxy statement the board recommendation or a statement to the effect that the board of directors (or the Special Committee, if applicable) has unanimously (with two abstentions) determined and believes that the merger is advisable and fair to and in the best interests of our stockholders; | |
• | if our board of directors (or the Special Committee, if applicable) fails to reaffirm publicly the its recommendation, or fails to reaffirm its determination that the merger is advisable and fair to and in the best interests of our stockholders, within five business days after Purchaser requests in writing that such recommendation or determination be reaffirmed publicly; | |
• | if our board of directors or the Special Committee shall have approved, endorsed or recommended any Acquisition Proposal; | |
• | if we shall have executed any letter of intent, memorandum of understanding or similar document or any contract relating to any Acquisition Proposal (with certain limitations); | |
• | if a tender or exchange offer relating to securities of the Company shall have been commenced and we have not sent to our stockholders, within ten business days after the commencement of such tender or exchange offer, a statement disclosing that we (or our board of directors or the Special Committee) recommends rejection of such tender or exchange offer; | |
• | if any of our representations and warranties contained in the Merger Agreement are inaccurate as of the date of the Merger Agreement, or become inaccurate as of a date subsequent to the date of the Merger Agreement (as if made on and as of such subsequent date), or any of our covenants or obligations contained in the Merger Agreement are breached; provided, however, that Purchaser may not terminate the Merger Agreement on account of such inaccuracy or breach prior to the end of the15-day period commencing on the date on which we receive notice of such inaccuracy or breach, or after such15-day period if such inaccuracy or breach shall have been fully cured during such15-day period in a manner that does not result in a continuing breach of any covenant or obligation us; |
• | if any of Purchaser’s representations and warranties contained in the Merger Agreement are inaccurate as of the date of the Merger Agreement, or shall have become inaccurate as of a date subsequent to the date of the Merger Agreement (as if made on and as of such subsequent date), or any of Purchaser’s covenants or obligations contained in the Merger Agreement are breached; provided, however, that we may not terminate the Merger Agreement on account of such inaccuracy or breach prior to the end of the15-day period commencing on the date on which Purchaser receives notice of such inaccuracy or breach; or after such15-day period if such inaccuracy or breach shall have been fully cured during such15-day period in a manner that does not result in a continuing breach of any covenant or obligation of Purchaser; or |
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• | in order to enter into an acquisition agreement with respect to a Superior Offer but only if the Board has first complied with the procedures as set forth in the Merger Agreement with respect to a Superior Offer. However, in the event of such termination, we would be required to pay a $3,390,000 termination fee (reduced by any expense reimbursement also paid or payable under the Merger Agreement) as described below under “Fees and Expenses.” |
• | We terminate the Merger Agreement pursuant to the provision allowing for termination by us after receipt of a Superior Offer (as defined above); | |
• | Purchaser terminates the Merger Agreement pursuant to the provision allowing for termination following: |
• | Our board of directors’ or the Special Committee’s withdrawal of their recommendation to our stockholders to adopt the Merger Agreement or a modification of such recommendation in a manner adverse to Purchaser; | |
• | Our board of directors’ or the Special Committee’s failure to reaffirm their determination that the merger is advisable and fair to and in the best interest of our stockholders within five business days after Purchaser’s requests in writing that such reaffirmation be publicly made; | |
• | Our breach, in any material respect, of our covenants not to solicit any Acquisition Proposal; | |
• | our board of directors’ or the Special Committee’s approval, endorsement or recommendation of any Acquisition Proposal; | |
• | our execution of any letter of intent, memorandum of understanding or similar document or any contract relating to any Acquisition Proposal; or | |
• | the commencement of a tender or exchange offer relating to our securities and we have not sent to our stockholders, within ten business days after the commencement of such tender or exchange offer, a statement disclosing that we or our board of directors or the Special Committee recommends rejection of such tender or exchange offer; |
• | we or Purchaser terminate the Merger Agreement pursuant to the provision allowing for termination for failure to obtain our stockholders’ approval or the merger fails to be consummated by March 31, 2011 and the following conditions are satisfied: (1) an Acquisition Proposal had been publicly announced, commenced, submitted or made and not publicly withdrawn; and (2) we either consummate an Acquisition Transaction or enter into an acquisition agreement with any third party within 12 months following such termination. |
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Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||||||
Net sales | $ | 60,293 | $ | 67,721 | $ | 90,836 | $ | 95,383 | $ | 83,172 | $ | 58,929 | $ | 67,043 | ||||||||||||||
Gross profit | $ | 35,603 | $ | 35,523 | $ | 46,408 | $ | 48,215 | $ | 40,979 | $ | 29,471 | $ | 38,556 | ||||||||||||||
Operating income (loss) from continuing operations | $ | (1,588 | ) | $ | (2,871 | ) | $ | (4,171 | ) | $ | (6,089 | ) | $ | (7,323 | ) | $ | (7,031 | ) | $ | 1,237 | ||||||||
Income (loss) from continuing operations | $ | (821 | ) | $ | (1,418 | ) | $ | (10,536 | ) | $ | (7,383 | ) | $ | (6,714 | ) | $ | (6,727 | ) | $ | 132 | ||||||||
Basic income (loss) per share from continuing operations | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.18 | ) | $ | (0.12 | ) | $ | (0.10 | ) | $ | (0.11 | ) | $ | — | ||||||||
Diluted income (loss) per share from continuing operations | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.18 | ) | $ | (0.12 | ) | $ | (0.10 | ) | $ | (0.11 | ) | $ | — | ||||||||
Basic outstanding shares | 67,688 | 58,425 | 58,852 | 59,204 | 59,367 | 59,359 | 59,415 | |||||||||||||||||||||
Diluted outstanding shares | 67,688 | 58,425 | 58,852 | 59,204 | 59,367 | 59,359 | 59,636 |
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Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Working capital | $ | 41,366 | $ | 36,641 | $ | 40,850 | $ | 37,146 | $ | 31,676 | $ | 31,676 | $ | 31,895 | ||||||||||||||
Total assets | $ | 76,264 | $ | 89,753 | $ | 85,343 | $ | 81,175 | $ | 78,874 | $ | 78,874 | $ | 79,981 | ||||||||||||||
Long-term liabilities | $ | 2,962 | $ | 5,441 | $ | 10,442 | $ | 8,358 | $ | 7,822 | $ | 35,319 | $ | 35,452 | ||||||||||||||
Total Shareholders’ equity | $ | 54,573 | $ | 56,179 | $ | 46,356 | $ | 43,216 | $ | 39,029 | $ | 43,555 | $ | 44,529 |
• | necessarily makes numerous assumptions, many of which are beyond our control and may not prove to have been, or may no longer be, accurate; | |
• | does not necessarily reflect revised prospects for our business, changes in general business or economic conditions or any other transaction or event that has occurred or that may occur; | |
• | is 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 estimates will be achieved. |
• | we remain a public company; | |
• | we achieve organic business growth, as opposed to business expansions involving mergers and acquisitions or alternative business models; | |
• | we significantly reduce our general and administrative expenses by, among other things, completion of the FCPA investigation and consolidation of administrative functions for our Beijing and Shanghai operations; | |
• | we sell our Beijing facility in 2011 for proceeds of $5.7 million; | |
• | we consolidate the manufacturing operations of RAE KLH and our joint venture in Shanghai beginning in 2010; | |
• | our pending FCPA investigation is settled for an amount equal to the $3.5 million that we accrued in 2009; |
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• | credit markets in the U.S. and China remain tight through 2011 (which can adversely affect demand for our products from certain customers); and | |
• | macroeconomic conditions experience slow and uncertain growth through 2011, and worldwide economic growth resumes in 2012. |
Actual | Projected Year Ending December 31, | |||||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||||||
(in millions, unless noted) | ||||||||||||||||||||||||
Revenue | $ | 83.2 | 85.7 | 92.1 | 100.8 | 110.3 | 120.9 | |||||||||||||||||
Gross profit | 41.0 | 43.7 | 46.1 | 50.4 | 55.0 | 60.1 | ||||||||||||||||||
Sales and marketing expense | (18.8 | ) | (20.8 | ) | (22.1 | ) | (23.5 | ) | (24.3 | ) | (25.6 | ) | ||||||||||||
Research and development expense | (6.4 | ) | (7.7 | ) | (7.8 | ) | (8.0 | ) | (8.1 | ) | (8.5 | ) | ||||||||||||
General and administrative expense | (23.1 | ) | (15.2 | ) | (15.0 | ) | (14.9 | ) | (14.9 | ) | (15.3 | ) | ||||||||||||
Total operating expenses | $ | (48.3 | ) | (43.8 | ) | (44.9 | ) | (46.3 | ) | (47.4 | ) | (49.5 | ) | |||||||||||
Operating income (loss) | (7.3 | ) | (0.1 | ) | 1.2 | 4.1 | 7.6 | 10.7 | ||||||||||||||||
Net income(loss) | $ | (5.8 | ) | (0.5 | ) | 2.7 | 2.7 | 5.3 | 7.5 | |||||||||||||||
Capital expenditures(1) | (4.1 | ) | (6.0 | ) | (1.4 | ) | (1.4 | ) | (1.6 | ) | (1.9 | ) | ||||||||||||
Cash and cash equivalents (end of period) | $ | 20.7 | 15.8 | 21.3 | 24.5 | 26.8 | 34.2 | |||||||||||||||||
(1) | Includes capital for new building in Shanghai of $5.1 million, $0.1 million, and $0.1 million in 2010, 2011, and 2012, respectively. |
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9 Months | 9 Months | |||||||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 9/30/2009 | 9/30/2010 | ||||||||||||||||||||||
FIXED CHARGES: | ||||||||||||||||||||||||||||
Interest expense | $ | 180 | $ | 249 | $ | 705 | $ | 397 | $ | 402 | $ | 314 | $ | 149 | ||||||||||||||
Capitalized interest | — | — | — | — | — | — | 155 | |||||||||||||||||||||
Deemed interest on operating leases | 183 | 148 | 290 | 688 | 637 | 478 | 410 | |||||||||||||||||||||
Total fixed Charges | $ | 363 | $ | 397 | $ | 995 | $ | 1,085 | $ | 1,039 | $ | 792 | $ | 714 | ||||||||||||||
EARNINGS: | ||||||||||||||||||||||||||||
Add: | ||||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | $ | (1,102 | ) | $ | (2,106 | ) | $ | (4,656 | ) | $ | (6,888 | ) | $ | (7,489 | ) | $ | (7,175 | ) | $ | 1,044 | ||||||||
Fixed charges | 363 | 397 | 995 | 1,085 | 1,039 | 792 | 714 | |||||||||||||||||||||
Deduct: | ||||||||||||||||||||||||||||
Capitalized Interest | — | — | — | — | — | — | (155 | ) | ||||||||||||||||||||
Net loss (income) attributable to the noncontrolling interest | 62 | 49 | (6 | ) | 220 | 955 | 773 | 622 | ||||||||||||||||||||
Total earnings | $ | (677 | ) | $ | (1,660 | ) | $ | (3,667 | ) | $ | (5,583 | ) | $ | (5,495 | ) | $ | (5,610 | ) | $ | 2,225 | ||||||||
Ratio of Earnings to Fixed Charges | (1.9 | ) | (4.2 | ) | (3.7 | ) | (5.1 | ) | (5.3 | ) | (7.1 | ) | 3.1 | |||||||||||||||
Deficiency | $ | 1,040 | $ | 2,057 | $ | 4,662 | $ | 6,668 | $ | 6,534 | $ | 6,402 | $ | — |
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||||
High | Low | High | Low | High | Low | High | Low | High | Low | |||||||||||||||||||||||||||||||
First Quarter | $ | 3.93 | $ | 3.26 | $ | 3.75 | $ | 2.52 | $ | 2.81 | $ | 1.07 | $ | 1.00 | $ | .028 | $ | 1.17 | $ | 0.77 | ||||||||||||||||||||
Second Quarter | $ | 4.54 | $ | 3.27 | $ | 2.95 | $ | 2.23 | $ | 1.92 | $ | 1.30 | $ | 1.70 | $ | 0.42 | $ | 0.89 | $ | 0.67 | ||||||||||||||||||||
Third Quarter | $ | 4.14 | $ | 2.40 | $ | 3.35 | $ | 1.90 | $ | 2.18 | $ | 1.03 | $ | 2.23 | $ | 1.00 | $ | 1.59 | $ | 0.65 | ||||||||||||||||||||
Fourth Quarter | $ | 4.05 | $ | 2.81 | $ | 3.68 | $ | 2.40 | $ | 1.72 | $ | 0.38 | $ | 1.48 | $ | 0.65 | 1.61 | 1.58 |
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Name of Director | ||||||
and/or Executive | ||||||
Officer | Position | Age | ||||
Robert I. Chen | President, Chief Executive Officer and Chairman of the Board | 63 | ||||
Randall K. Gausman | Vice President and Chief Financial Officer | 61 | ||||
Peter C. Hsi | Chief Technology Officer and director | 61 | ||||
Ming-Ching Tang | Executive Vice President Operations | 59 | ||||
Christopher Hameister | Vice President Asia-Pacific, Europe and Middle East Business Operations | 56 | ||||
Fei-Zhou Shen | Vice President Corporate Development and Fushun Business Operations | 48 | ||||
Ryan Watson | Vice President Americas Sales | 38 | ||||
Dr. Keh-Shew Lu | Director | 64 | ||||
Susan Wang | Director | 59 | ||||
Dr. Lyle D. Feisel | Director | 75 | ||||
Sigrun Hjelmqvist | Director | 54 | ||||
James W. Power | Director | 81 |
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Number of Shares | ||||||||
Beneficial Owner | Beneficially Owned(1) | Percent | ||||||
5% Holders: | ||||||||
Kopp Investment Advisors, LLC(2) | 7,904,777 | 13.3 | % | |||||
Vector Capital(3) | 21,451,772 | 36.0 | % | |||||
Executive Officers | ||||||||
Robert I. Chen(4) | 15,801,608 | 26.6 | % | |||||
Randall K. Gausman(5) | 477,916 | * | ||||||
Peter C. Hsi(6) | 2,750,164 | 4.6 | % | |||||
Ming-Ching Tang(7) | 218,749 | * | ||||||
Christopher Hameister(8) | 257,290 | * | ||||||
Fei-Zhou Shen(9) | 368,683 | * | ||||||
Ryan Watson(10) | 118,891 | * | ||||||
Directors | ||||||||
Dr. Keh-Shew Lu(11) | 315,833 | * | ||||||
Susan Wang(12) | 68,750 | * | ||||||
Dr. Lyle D. Feisel(13) | 319,448 | * | ||||||
Sigrun Hjelmqvist(14) | 190,833 | * | ||||||
James W. Power(15) | 172,916 | * | ||||||
Directors and executive officers as a group (13 persons)(16) | 21,061,081 | 35.4 | % |
* | Less than 1% | |
(1) | Calculated on the basis of 59,512,064 shares of common stock outstanding as of January 20, 2011, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days after |
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January 20, 2011, are deemed to be outstanding for the purpose of calculating that stockholder’s percentage beneficial ownership. All shares of our common stock subject to currently exercisable options or options exercisable within 60 days after January 20, 2011, are deemed to be outstanding and to be beneficially owned by the person holding such options for the purpose of computing the number of shares beneficially owned and the percentage of ownership of such person, but are not deemed to be outstanding and to be beneficially owned for the purpose of computing the percentage of ownership of any other person. Except as indicated in the footnotes to the table and subject to applicable community property laws, based on information provided by the persons named in the table, such persons have sole voting and investment power with respect to all shares of our common stock as beneficially owned by them. | ||
(2) | Based solely upon a Schedule 13D filed with the SEC by Kopp Investment Advisors, LLC on October 8, 2010. Consists of shares owned by clients and held in discretionary accounts managed by Kopp Investment Advisors, LLC (“KIA”). Kopp Holding Company, LLC (“KHCLLC”) is the parent entity of KIA and indirect beneficial owner of the shares beneficially owned by KIA and LeRoy C. Kopp, by virtue of his position as the control person of KHCLLC, may be deemed indirect beneficial owner of the shares. The business address of each of the KIA, KHCLLC and LeRoy C. Kopp is 8400 Normandale Lake Boulevard, Suite 1450, Bloomington, Minnesota 55437. |
(3) | Based solely on a Schedule 13D filed with the SEC by Ray Holding Corporation, Ray Merger Sub Corporation, Vector Capital III, L.P., Vector Entrepreneur Fund III, L.P., Vector Capital IV, L.P., Vector Capital Partners III, L.P., Vector Capital Partners IV, L.P., Vector Capital, L.L.C., and Alex Slusky on January 28, 2011. Consists of 1,432,600 shares of common stock held by Vector Capital III, L.P., 34,800 shares of common stock held by Vector Entrepreneur Fund III, L.P. and 1,432,600 shares of common stock held by Vector Capital IV, L.P., and shares of common stock beneficially owned by the Voting Parties, and reported as beneficially owned by Ray Holding Corporation and Ray Merger Sub Corporation, affiliates of Vector Capital, because of the rights of Ray Holding Corporation and Ray Merger Sub Corporation under the Voting Agreements. The principal address of each of Ray Holding Corporation, Ray Merger Sub Corporation and Vector Capital is One Market Street, Steuart Tower, 23rd Floor, San Francisco, CA 94105. |
(4) | Represents 15,382,849 shares of common stock held by Chen Revocable Trust DTD 5/8/2001, Robert I. Chen and Lien Q. Chen, as trustees; 181,260 shares of common stock held by the Chen Family Foundation; and 237,499 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(5) | Represents 5,000 shares owned by Mr. Gausman and 472,916 shares subject to options that may be exercised within 60 days after January 20, 2011. |
(6) | Represents 2,691,332 shares owned by the Hsi Family Trust, Peter C. Hsi and Sandy Hsi, as trustees and 58,832 shares subject to options that may be exercised within 60 days after January 20, 2011. |
(7) | Represents 218,749 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(8) | Represents 57,290 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(9) | Represents 23,717 shares owned by Mr. Shen and 344,966 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(10) | Represents 4,517 shares owned by Mr. Watson and 114,374 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(11) | Represents 270,000 shares owned by Dr. Lu and 45,833 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(12) | Represents 68,750 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(13) | Represents 71,948 shares owned by Dr. Feisel and 247,500 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(14) | Represents 20,000 shares owned by Ms. Hjelmqvist and 170,833 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(15) | Represents 40,000 shares owned by Mr. Power and 132,916 shares subject to options that may be exercised within 60 days after January 20, 2011. | |
(16) | Includes 2,369,958 shares subject to options that may be exercised within 60 days after January 20, 2011. |
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• | Annual Report onForm 10-K, for the year ended December 31, 2009. | |
• | Quarterly Report onForm 10-Q for the quarter ended March 31, 2010. | |
• | Quarterly Report onForm 10-Q for the quarter ended June 30, 2010. | |
• | Quarterly Report onForm 10-Q for the quarter ended September 30, 2010. | |
• | Current Report onForm 8-K filed with the SEC on June 14, 2010. | |
• | Current Report onForm 8-K filed with the SEC on August 12, 2010. | |
• | Current Report onForm 8-K filed with the SEC on September 20, 2010. | |
• | Current Report onForm 8-K filed with the SEC on November 3, 2010. | |
• | Current Report onForm 8-K filed with the SEC on January 6, 2011. | |
• | Current Report onForm 8-K filed with the SEC on January 19, 2011. |
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Ray Merger Sub Corporation
c/o Vector Capital Corporation
One Market Street
Steuart Tower, 23rd Floor
San Francisco, CA 94105
Attention: Chief Operating Officer
Facsimile:(415) 293-5100
525 Market Street, Suite 1500
San Francisco, CA 94105
Attention: Steve L. Camahort
Facsimile:(415) 616-1199
3775 North First St.
San Jose, CA 95134
Attention: Chief Financial Officer
Facsimile:408-952-8480
801 California Street
Mountain View, CA 94041
Attention: David Michaels and Dennis DeBroeck
Facsimile:650-988-8500
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By: | /s/ David Baylor |
Title: | President |
By: | /s/ David Baylor |
Title: | President |
By: | /s/ Randall K. Gausman |
Title: | Chief Financial Officer |
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CERTIFICATE OF INCORPORATION
OF
RAE SYSTEMS INC.
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Vector Capital III, L.P.
One Market Street
Steuart Tower, 23rd Floor
San Francisco, CA 94105
Attention: Chief Operating Officer
Facsimile:(415) 293-5100
525 Market Street, Suite 1500
San Francisco, CA 94105
Attention: Steve L. Camahort
Facsimile:(415) 616-1199
3775 North First St.
San Jose, CA 95134
Attention: Chief Financial Officer
Facsimile:(408) 952-8480
801 California Street
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Attention: David Michaels and Dennis DeBroeck
Facsimile:650-988-8500
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By: | Vector Capital Partners IV, L.P., |
By: | Vector Capital, L.L.C., its general partner | |
By: | /s/ Alexander R. Slusky |
Title: | Managing Member |
By: | Vector Capital Partners III, L.P., its general partner | |
By: | Vector Capital, L.L.C., |
By: | /s/ Alexander R. Slusky |
Title: | Managing Member |
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By: | /s/ Randall K. Gausman |
Title: | CFO |
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Investor | Pro Rata Portion | |||
Vector Capital IV, L.P. | 100 | % | ||
Vector Capital III, L.P. | 50 | % |
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Rollover | Cash-Out | |||||||||||
Shares | Shares | Shares | ||||||||||
Chen Revocable Trust DTD 5/8/2001 | 15,382,849 | 10,701,525 | 4,681,324 | |||||||||
Hsi Family Trust | 2,691,332 | 2,691,332 | 0 | |||||||||
13,392,857 | 4,681,324 | |||||||||||
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RAE Systems Inc.
3775 North First Street
San Jose, CA 95134
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September 19, 2010
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PRELIMINARY COPY SUBJECT TO COMPLETION , 2011 FORM OF PROXY CARD-RAE SYSTEMS INC. SPECIAL MEETING OF STOCKHOLDERS | VOTE BY INTERNET — www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on , 2011. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | |
Interwest Transfer Company Attention: Julie Felix 1981 Murray Holliday Road Suite 100 Salt Lake City, Utah 84117 | If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE —1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on , 2011. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing,c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | KEEP THIS PORTION FOR YOUR RECORDS |
The Board of Directors recommends you | ||||||
vote FOR proposals 1 and 2: | For | Against | Abstain | |||
1. Approval of adoption of the Agreement and Plan of Merger, dated January 18, 2011, by and among RAE Systems, Ray Holding Corporation, and Ray Merger Sub Corporation, as may be amended from time to time (“Merger Agreement”) | 0 | 0 | 0 | |||
2. Approval to adjourn the Special Meeting, if necessary, to permit further solicitation of proxies to vote in favor of adoption of the Merger Agreement | 0 | 0 | 0 |
For address change/comments, mark here. (see reverse for instructions) | 0 |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
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PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
, 2011