Photon Dynamics Inc - Additional Proxy Soliciting Materials (definitive) (DEFA14A)
29 8월 2008 - 1:39AM
Edgar (US Regulatory)
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only
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Definitive Proxy Statement
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(as permitted by Rule 14a-6(e)(2))
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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Photon Dynamics, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the date of its filing.
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(1)
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Amount previously paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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PHOTON DYNAMICS, INC.
5970 OPTICAL COURT
SAN JOSE, CALIFORNIA 95138
SUPPLEMENT TO PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 5, 2008
This is a supplement to the proxy statement dated August 4, 2008 (the proxy statement) of
Photon Dynamics, Inc. (Photon Dynamics or the Company) that was mailed to you in connection
with the solicitation of proxies for use at the special meeting of stockholders to be held at the
offices of Photon Dynamics, 5970 Optical Court, San Jose, California 95138, on September 5, 2008 at
9:00 a.m., local time. The purpose of the special meeting is to consider and vote on the proposal
to approve the Agreement and Plan of Merger and Reorganization (the merger agreement) dated as of
June 26, 2008, by and among Orbotech Ltd. (Orbotech), PDI Acquisition, Inc., an indirect
wholly-owned subsidiary of Orbotech, and Photon Dynamics, and the principal terms of the proposed
merger in which the Company will be acquired by Orbotech for $15.60 per share in cash (the
merger).
The Companys Board of Directors believes that the merger and the merger agreement are
advisable and in the best interests of the Company and its shareholders. Accordingly, the Companys
Board of Directors has unanimously approved the merger and the merger agreement and unanimously
recommends that the Companys shareholders vote FOR the proposal to approve the merger agreement
and the principal terms of the merger. If you have not already submitted a proxy for use at the
special meeting, you are urged to do so promptly.
Litigation Relating to the Merger
As more fully described in the proxy statement, on July 25, 2008, a purported shareholder
class action lawsuit was filed in California Superior Court, Santa Clara County against the
Company, each of the Companys directors and Orbotech. The lawsuit,
Capital Partners v. Dr. Malcolm
J. Thompson, et al.
(Case No. 1-08-CV-118315), alleges, among other things, that the Companys
directors breached their fiduciary duties in connection with the merger, that the proxy statement
omits material information and that Orbotech has aided and abetted the Companys directors in their
alleged breaches of fiduciary duties.
On August 26, 2008, counsel for the parties in the lawsuit entered into a memorandum of
understanding in which they agreed upon the terms of a settlement of the litigation, which would
include the dismissal with prejudice of all claims against all of the defendants, including the
Company and its directors. The proposed settlement is conditional upon, among other things, the
execution of an appropriate stipulation of settlement, consummation of the merger and final
approval of the proposed settlement by the court. The proposed settlement contemplates that,
subject to final approval by the court, the Company or its successors will pay plaintiffs
counsel the lower of (a) the amount of attorneys fees and expenses that is approved by the court
and (b) $360,000. These attorneys fees and expenses will not be deducted from the merger
consideration.
Additional Disclosures
As contemplated by the proposed settlement, the Company is providing certain additional
disclosures that are supplemental to those contained in the proxy statement previously mailed to
you. None of the Company or any of the other defendants has admitted wrongdoing of any kind,
including but not limited to inadequacies in any disclosure, the materiality of any disclosure that
the plaintiff contends should have been made, any breach of any fiduciary duty, or aiding or
abetting any of the foregoing. The additional disclosures are as follows:
The Merger Background of the Merger
Price Negotiations with Orbotech
2
The first full paragraph on page 15 of the proxy statement makes reference to negotiations
between Credit Suisse and Lehman Brothers in which Credit Suisse indicated that Orbotech would need
to pay significantly more than $14.18 per share of the Companys stock and that a price in the
range of $16.50 to $17.00 per share would be an appropriate basis on which to continue
negotiations. As pages 1316 of the proxy statement describe, the process by which the Company and
Orbotech agreed to the final price of $15.60 per share was a lengthy one, with each party at times
taking positions meaningfully above or below that number in an effort to converge on a middle
ground that would be acceptable to both. The $16.50 to $17.00 per share range arose out of the
meeting of the Companys Board of Directors on April 28, 2008, during which the Board directed
management and the Companys advisors to indicate to Orbotech that its then-current proposal of
$14.18 was inadequate, and to counterpropose an amount per share in excess of $16.00. In short,
$16.50 to $17.00 per share was a negotiating position; as were all of the other dollar amounts
proposed by the parties other than the final $15.60 per share price.
Orbotechs Proposed Employee-Related Closing Condition
The sixth and seventh paragraphs on page 16 of the proxy statement and the last paragraph on
page 21 of the proxy statement make reference to Orbotechs request for, and ultimate agreement to
forego, an employee-related closing condition in the merger agreement. As proposed by Orbotech,
the condition would have made its obligation to complete the merger contingent on (i) certain
specified employees of the Company and an agreed-upon percentage of the Companys other employees
having entered into forward employment agreements with Orbotech and (ii) none of such employees
having expressed an intention (which had not been subsequently reversed) not to comply with the
terms of such employment agreements. The Company advised Orbotech at a number of points in the
process that this condition was unacceptable. As discussed on pages 16 and 21 of the proxy
statement, on June 12, 2008, Orbotech agreed to forego this condition in exchange for modifications
to the retention arrangements for certain of the Companys employees and access to a broad group of
the Companys employees for purposes of holding discussions regarding their future employment with
the combined company.
The Merger Fairness Opinion Delivered to the Companys Board of Directors
Discounted Cash Flow Analysis
The subsection entitled
Discounted Cash Flow Analysis
on pages 2526 of the proxy statement
makes reference to Credit Suisse having calculated a range of estimated terminal values for the
Company by multiplying the terminal year net operating profit after taxes, based on estimates of
Photon Dynamics management, by selected next twelve months (NTM) net operating profit after taxes
multiples of 12.0x to 20.0x. These NTM net operating profit after taxes multiples were selected
based on a review of the then-current trading multiples of the companies identified in the proxy
statement under the caption
The Merger Fairness Opinion Delivered to the Companys Board of
Directors Selected Companies Analysis
, as well as
of the Company.
At the bottom of page 25, the same subsection also makes reference to Credit Suisse having
calculated present values as of June 30, 2008 of the cash flows and the terminal value of the
Company using discount rates ranging from 12.0% to 16.0%. These discount rates were selected based
on a weighted average cost of capital calculation, which factored in, among other things, the
unlevered betas for certain of the companies identified in the proxy statement under the caption
"
The Merger Fairness Opinion Delivered to the Companys Board of Directors Selected
Companies Analysis
, as well as for the Company.
Selected Companies Analysis
The subsection entitled
Selected Companies Analysis
on pages 2627 of the proxy statement
makes reference to eighteen publicly traded companies that Credit Suisse selected as part of its
analysis. These companies were chosen because they are publicly traded companies that operate in a
similar industry to the Company or have similar lines of business to the Company. After
application of these criteria, Credit Suisse identified the companies listed on page 26 of the
proxy statement as those that were comparable to the Company for purposes of its analysis.
However, none of the companies selected is identical or directly comparable to the Company. There
may have been other companies that met these criteria but none were identified as comparable to the
Company by Credit Suisse.
3
At the bottom of page 26, the same subsection also makes reference to a range of selected
multiples that Credit Suisse derived from its selected companies analysis. These multiples are set
forth below:
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Selected Companies
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Selected Companies
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(All)
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(All)
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Metric
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Low
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High
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Revenue
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Calendar Year 2007 Actual
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1.0
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x
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2.0
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x
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Calendar Year 2008 Estimate
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0.7
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1.5
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Calendar Year 2009 Estimate
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1.0
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1.5
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Average*
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1.0
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1.5
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EPS
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Calendar Year 2008 Estimate
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7.0
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12.0
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Calendar Year 2009 Estimate
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10.0
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15.0
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Average*
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12.0
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18.0
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*
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Average represents the range of multiples applied to the average of calendar year 2007 actual
operating statistics and calendar years 2008 and 2009 estimated operating statistics.
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Selected Transactions Analysis
The subsection entitled
Selected Transactions Analysis
on pages 2728 of the proxy statement
makes reference to 23 precedent transactions announced since January 1, 2002, as to which Credit
Suisse reviewed publicly available information and data as part of its analysis. These precedent
transactions were selected because they involved public company targets that provide capital
equipment or related products or services to the semiconductor or flat panel display industries.
At the bottom of page 27, the same subsection also makes reference to a range of selected
multiples that Credit Suisse derived from its selected transactions analysis. These multiples are
set forth below:
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Selected
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Selected
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Transactions
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Transactions
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Metric
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Low
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High
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Revenue
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LTM
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1.25
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x
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2.25
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x
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NTM
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1.00
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2.00
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EPS
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NTM
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15.0
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x
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25.0
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x
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Miscellaneous
The second paragraph under the heading
Miscellaneous
on page 28 of the proxy statement makes
reference to the fact that in the ordinary course of business, Credit Suisse and its affiliates may
acquire, hold or sell, for its and its affiliates own accounts and the accounts of customers,
equity, debt and other securities and financial instruments (including bank loans and other
obligations) of the Company, Orbotech and any other company that may be involved in the merger, as
well as provide investment banking and other financial services to such companies. During the past
two years, Credit Suisse has not provided investment banking services to Orbotech or its
affiliates.
The Merger Projected Financial Information
The projected financial information set forth on page 29 of the proxy statement reflects a
projected decrease in the Companys total revenue from $172 million in calendar year 2009 to $130
million in calendar year 2010,
followed by increases from that level in calendar years 2011 and 2012. The projected
financial information further
4
indicates that from calendar year 2009 to calendar year 2010, the
Companys management expects similar decreases in EBIT, net operating profit after tax and
unlevered free cash flow, followed by increases from the respective levels of those financial
metrics in calendar years 2011 and 2012. As discussed in the section of the proxy statement
entitled
The Recommendation of the Companys Board of Directors and the Companys Reasons for the
Merger
on pages 1719 of the proxy statement and in the Companys annual and quarterly reports
filed with the SEC, the flat panel display equipment market is highly cyclical and volatile, and
the Companys business is dependent on a handful of key customers. The projections of a decline in
the Companys financial performance during calendar year 2010 and subsequent recovery from those
levels reflect managements expectation that the Company will reach a cyclical low point in its
business during 2010 and will recover thereafter.
The qualifications and cautionary notes relating to the Companys projected financial
information set forth on pages 28 and 29 of the proxy statement apply equally to the preceding
paragraph.
Dissenters Rights of Appraisal
Reference is made to the section entitled Dissenters Rights of Appraisal beginning on page
48 of the proxy statement and summarizing the procedures by which the Companys shareholders may
dissent from the merger and demand statutory appraisal rights under the California General
Corporation Law. As noted in the fifth paragraph on page 48, any shareholder who wishes to
exercise dissenters rights in connection with the merger must vote against the merger and the
merger agreement and must make a written demand to the Company that it purchase such shareholders
shares at fair market value. The sixth paragraph on page 48 sets forth certain additional
requirements that apply to any such written demand, including the date by which any such written
demand must be received by the Company. The proxy statement is hereby amended and supplemented to
indicate that any such written demand must be received by the Company no later than the date of the
special meeting relating to the merger, and the third bullet of the sixth paragraph on page 48 is
accordingly stricken and replaced with be received not later than the date of the special
meeting;.
The other requirements that apply to any potential exercise of dissenters rights in
connection with the merger remain as described on pages 4850 of the proxy statement and in Annex C
thereto, and the summary of Sections 1300 through 1313 of the California General Corporation Law
contained in the proxy statement (as revised above) remains qualified in its entirety by reference
to the full text of those sections as set forth in Annex C.
Regulatory Clearances
The
only regulatory clearances that remain prior to the closing
of the merger are (1) the
expiration of the waiting period under the HSR Act and (2) the expiration or termination of the
CFIUS review process. CFIUS continues to review the transaction, and the parties expect to refile
their notice of the transaction in order to facilitate that review.
By Order of the Board of Directors,
/s/ Carl C. Straub, Jr.
Carl C. Straub, Jr.
General Counsel and Secretary
San Jose, California
August 28, 2008
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Photon Dynamics (NASDAQ:PHTN)
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