SCHEDULE 14A
(RULE 14-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Section 240.14a-12
MILTOPE GROUP INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] 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 $0.01 per share
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(2) Aggregate number of securities to which transaction applies:
5,962,623 shares of common stock and 532,336 shares of common
stock reserved for the exercise of issued and outstanding
options, or an aggregate of 6,494,959 shares of common stock
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(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):
$5.78
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(4) Proposed maximum aggregate value of transaction:
6,494,959* shares x $5.78 = $37,540,863
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*For the purposes of calculating the filing fee, each option to
acquire shares of common stock has been deemed exercised or
converted into the shares of common stock subject to such option.
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(5) Total fee paid: $3,037**
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**The fee has been calculated by multiplying the aggregate value
of the transaction (as described above) by 0.00008090 pursuant to
Section 14(g) of the Exchange Act.
[ ] Fee paid previously with preliminary materials.
[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[MILTOPE LOGO]
MILTOPE GROUP INC.
3800 RICHARDSON ROAD SOUTH
HOPE HULL, ALABAMA 36043
_________ __, 2003
Dear Stockholders:
You are cordially invited to attend a special meeting of stockholders
of Miltope Group Inc., to be held at Miltope Group's corporate headquarters,
3800 Richardson Road South, Hope Hull, Alabama 36043, on _______ __, 2003 at
__:00 a.m., Central Time.
At this special meeting, you will be asked to consider and vote upon a
proposal to adopt an Agreement and Plan of Merger, dated as of October 21, 2003,
which provides for the merger of Miltope Group with and into Miltope
Corporation, and the merger of VTK Merger Subsidiary, a wholly-owned subsidiary
of Vision Technologies Kinetics, Inc., with and into Miltope Corporation, and to
approve the mergers. Upon completion of these mergers, you will be entitled to
receive $5.78 in cash, without interest, and one contingent value right, or CVR,
for each share of Miltope Group's common stock that you own on the date of the
mergers, and you will no longer be a stockholder of Miltope Group. Each CVR
represents the nontransferable right to receive a pro rata share of 50% of the
net proceeds, if any, from the lawsuit brought by two of Miltope Group's
subsidiaries against DRS Technologies Inc. and other parties, after adjustments
for taxes.
The board of directors of Miltope Group unanimously approved the
Agreement and Plan of Merger and the mergers and determined that the Agreement
and Plan of Merger and the mergers are fair to, and in the best interests of,
Miltope Group and its stockholders. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE AGREEMENT AND PLAN OF MERGER
AND APPROVAL OF THE MERGERS AT THE SPECIAL MEETING OF THE STOCKHOLDERS. In
arriving at its recommendation, the board of directors gave careful
consideration to a number of factors described in the accompanying proxy
statement. One factor was the separate and independent written opinions of each
of Quarterdeck Investment Partners, LLC and Legacy Partners Group, LLC, the
financial advisors to Miltope Group, stating that the amount of $5.78 per share
to be received by Miltope Group's public stockholders as a result of the mergers
is fair, from a financial point of view, to those stockholders.
The affirmative vote of a majority of the votes entitled to be cast by
the holders of the outstanding shares of Miltope Group's common stock is
required to authorize the mergers. Great Universal Incorporated, has agreed,
pursuant to certain voting agreements, to vote 3,664,478 shares, or
approximately 61.5%, of Miltope Group's common stock in favor of the mergers at
the special meeting of the stockholders. Therefore, unless Miltope Group's board
of directors exercises its right to accept a superior proposal, the requisite
vote to adopt the Agreement and Plan of Merger and approve the mergers is
assured. As further explained in the proxy statement, if you do not vote for the
mergers, you are entitled to have your shares appraised and to receive a payment
for the "fair value" of your shares.
The accompanying proxy statement explains the proposed mergers and
provides specific information concerning the special meeting. It also includes
copies of the Agreement and Plan of Merger, the voting agreements, the
contingent value rights agreement and the separate and independent written
opinions of each of Quarterdeck and Legacy. Please read it carefully.
Whether or not you plan to attend the special meeting, we urge you to
please complete, sign and, in the enclosed self-addressed envelope, return your
proxy as soon as possible so that your vote will be recorded. Even if you return
your proxy card, you may still attend the special meeting and vote your common
stock in person. Your proxy may be revoked at any time before it is voted by
submitting a written revocation or a proxy bearing a later
date to the secretary of Miltope Group, or by attending and voting in person at
the special meeting. For stock held in "street name," you may revoke or change
your vote by submitting instructions to your broker or nominee. IF YOU DO NOT
SEND IN A PROXY OR VOTE AT THE SPECIAL MEETING, IT WILL HAVE THE SAME EFFECT AS
IF YOU VOTED AGAINST THE MERGERS.
Please do not send any certificates for your shares at this time.
Instructions for the purpose of exchanging your shares for the consideration to
be received upon consummation of the mergers will be sent to you following the
consummation of the mergers.
Sincerely,
Thomas R. Dickinson
President and Chief Executive Officer
THIS PROXY STATEMENT IS DATED ________ __, 2003 AND IS FIRST BEING
MAILED TO MILTOPE GROUP'S STOCKHOLDERS ON ___________ __, 2003. THE SPECIAL
MEETING OF MILTOPE GROUP'S STOCKHOLDERS WILL BE HELD ON ________ __, 2003.
[MILTOPE LOGO]
MILTOPE GROUP INC.
3800 RICHARDSON ROAD SOUTH
HOPE HULL, ALABAMA 36043
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD __________, __________, 2003
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Notice is hereby given that a special meeting of stockholders of
Miltope Group Inc., a Delaware corporation, will be held at Miltope Group's
corporate headquarters, 3800 Richardson Road South, Hope Hull, Alabama 36043, on
____________, ______ ___, 2003 at __:00 a.m., Central Time to:
1. Consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, among Miltope Group Inc., Miltope Corporation,
Vision Technologies Kinetics, Inc. and VTK Merger Subsidiary
Corporation, dated as of October 21, 2003, pursuant to which
Miltope Group will merge with and into Miltope Corporation,
and VTK Merger Subsidiary will merge with and into Miltope
Corporation, and to approve the mergers, each as described in
the accompanying proxy statement; and
2. Consider and vote upon such other business as may properly
come before the Special Meeting, including any adjournments or
postponements thereof.
Only holders of record of Miltope Group's common stock as of the close
of business on _________ __, 2003 will be entitled to notice of and to vote at
the special meeting and any adjournments or postponements of the meeting. The
affirmative vote of the holders of a majority of the outstanding shares of
common stock entitled to vote at the special meeting of stockholders is required
to adopt the Agreement and Plan of Merger and approve the mergers. Great
Universal Incorporated, has agreed to vote 3,664,478 shares of common stock, or
approximately 61.5% of Miltope Group's common stock outstanding, in favor of the
Agreement and Plan of Merger at the special meeting of the stockholders.
Therefore, unless Miltope Group's board of directors exercises its right to
accept a superior proposal, the requisite vote to adopt the Agreement and Plan
of Merger and approve the mergers is assured. A form of proxy and a proxy
statement containing more detailed information with respect to matters to be
considered at the special meeting accompany and form a part of this notice.
By Order of the Board of Directors,
Tom B. Dake
Secretary
Hope Hull, Alabama
__________, 2003
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS ABOUT VOTING AND THE MERGERS...........................iii
SUMMARY TERM SHEET...........................................................S-1
INTRODUCTION...................................................................1
FORWARD-LOOKING INFORMATION....................................................1
THE SPECIAL MEETING OF STOCKHOLDERS............................................1
Date, Time and Location...................................................1
Vote Required.............................................................1
Who Can Vote; Record Date.................................................1
Solicitation of Proxies...................................................2
Procedure for Voting......................................................2
Date of Proxy Statement and Mailing.......................................2
THE MERGERS....................................................................2
Structure of the Mergers..................................................2
Background of the Mergers.................................................2
Recommendation of the Board of Directors; Miltope Group's Purpose and
Reasons for the Mergers.................................................5
Opinion of Quarterdeck Investment Partners................................7
Opinion of Legacy Partners Group.........................................13
Interests of Certain Persons in the Mergers that Differ From Your
Interests..............................................................17
Effects of the Mergers...................................................19
Material United States Federal Income Tax Consequences...................19
Regulatory Filings and Approvals.........................................21
Appraisal Rights.........................................................22
THE AGREEMENT AND PLAN OF MERGER..............................................23
The Mergers..............................................................23
Effective Time of the Mergers............................................24
Merger Consideration; Exchange Procedure.................................24
Options..................................................................24
Representations and Warranties...........................................24
Conduct of Business Pending the Mergers..................................26
No Solicitation of Offers; Notice of Proposals from Third Parties........28
Stockholders' Meeting....................................................29
Proxy Statement and Related Documents....................................29
Access to Information....................................................29
Confidentiality..........................................................29
Indemnification and Insurance............................................30
Conditions to the Mergers................................................30
Termination..............................................................31
Expense Reimbursement....................................................33
Termination Fee..........................................................33
Amendment and Waiver.....................................................34
RELATED AGREEMENTS............................................................35
Voting Agreements........................................................35
Contingent Value Rights Agreement........................................35
Indemnity Agreement......................................................36
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THE DRS LITIGATION............................................................36
General..................................................................36
Legal Proceedings........................................................36
THE PARTIES...................................................................37
Miltope Group............................................................37
Miltope Corporation......................................................38
Vision Technologies Kinetics.............................................38
VTK Merger Subsidiary....................................................38
CERTAIN TRANSACTIONS..........................................................39
Letter Agreement with Great Universal....................................39
MARKET PRICES OF AND DIVIDENDS ON THE COMMON STOCK............................39
Market Price Information.................................................39
Dividend Policy..........................................................39
OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS........................39
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND OFFICERS...........................40
WHERE YOU CAN FIND MORE INFORMATION...........................................41
MISCELLANEOUS.................................................................41
Stockholder Proposals....................................................41
Other Matters............................................................42
ANNEX A - Agreement and Plan of Merger.......................................A-1
ANNEX B - Primary Voting Agreement...........................................B-1
ANNEX C - Secondary Voting Agreement.........................................C-1
ANNEX D - Contingent Value Rights Agreement..................................D-1
ANNEX E - Fairness Opinion of Quarterdeck Investment Partners................E-1
ANNEX F - Fairness Opinion of Legacy Partners Group..........................F-1
ANNEX G - Delaware General Corporation Law Section 262.......................G-1
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QUESTIONS AND ANSWERS ABOUT VOTING AND THE MERGERS
Q: WHY AM I RECEIVING THESE MATERIALS?
A: The board of directors of Miltope Group is providing these proxy materials
to give you information to determine how to vote in connection with a
special meeting of stockholders which will take place on ______________
_______, 2003 at __:00 a.m., Central Time.
Q: WHAT SHOULD I DO NOW?
A: Please carefully read this proxy statement. You are invited to attend the
special meeting. However, you should mail your signed and dated proxy card
in the enclosed envelope as soon as possible, so that your shares will be
represented at the special meeting in case you are unable to attend. No
postage is required if the proxy card is returned in the enclosed postage
prepaid envelope and mailed in the United States.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION
CARD?
A: It means your shares are registered differently or are held in more than
one account. Please provide voting instructions for each proxy card that
you receive.
Q: HOW ARE VOTES COUNTED?
A: You may vote "FOR", "AGAINST" or "ABSTAIN." If you "ABSTAIN" or do not
vote, it has the same effect as a vote "AGAINST" adoption of the Agreement
and Plan of Merger and approval of the mergers. If you provide specific
voting instructions, your shares will be voted as you instruct. As further
explained in the section "Appraisal Rights" on page 22 in this proxy
statement, you must vote "AGAINST" or "ABSTAIN" in order to preserve your
appraisal rights. If you sign your proxy card or broker voting instruction
card with no further instructions, your shares will be voted in accordance
with the recommendation of the board of directors to vote "FOR" adoption of
the Agreement and Plan of Merger and approval of the mergers. Great
Universal Incorporated, also referred to as "Great Universal" or "GUI", has
agreed to vote 3,664,478 shares of common stock, or approximately 61.5% of
Miltope Group's common stock, in favor of the Agreement and Plan of Merger
at the special meeting of the stockholders. Therefore, unless Miltope
Group's board of directors exercises its right to accept a superior
proposal, the requisite vote to adopt the Agreement and Plan of Merger and
approve the mergers is assured.
Q: WHAT IS THE RECOMMENDATION OF THE BOARD OF DIRECTORS?
A: The board of directors unanimously recommends that you vote your shares
"FOR" adoption of the Agreement and Plan of Merger and approval of the
mergers.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares for you ONLY if you instruct your broker
how to vote for you. Your broker should mail information to you that will
explain how to give it these instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the mergers are consummated, we will send you written
instructions that will explain how to exchange your certificates for $5.78
per share in cash, without interest, and one CVR per share. Please do not
send in your certificates now or with your proxies. Hold your certificates
until you receive our instructions.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?
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A: Yes. You may revoke your proxy or change your vote by sending a notice to
Tom B. Dake, our corporate secretary, by sending in a later dated, signed
proxy card before the meeting or by attending the meeting in person;
provided that if your shares are held in "street name" by a broker or other
nominee, you obtain a proxy to vote at the meeting from the broker or other
nominee.
Q: WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS
TO ME?
A: Your receipt of cash and CVRs in exchange for your shares in the mergers
will be a taxable event for United States federal income tax purposes. Your
tax consequences will depend on your personal situation. You should consult
your tax advisor for a full understanding of the tax consequences of the
mergers to you and the characterization of the CVRs for tax purposes.
Q: DO I HAVE APPRAISAL RIGHTS?
A: Yes. Under Delaware law, you have appraisal rights in connection with the
mergers so long as you take all the steps required to perfect your rights.
These steps are described under the section "Appraisal Rights" on page 22
in this proxy statement.
Q: WHEN DO YOU EXPECT THE MERGERS TO BE COMPLETED?
A: We are working toward completing the mergers as quickly as possible.
However, Miltope Group and Vision Technologies Kinetics cannot complete the
mergers until they satisfy additional conditions, including the receipt of
all required regulatory authority and other governmental approvals. We are
unable to predict when the mergers will be completed since we do not know
when the companies will satisfy all of the conditions set forth in the
Agreement and Plan of Merger.
Q: WHO CAN ANSWER MY QUESTIONS?
A: If you have more questions about the mergers or if you need additional
copies of the proxy statement or the enclosed proxy card, you should
contact our Chief Financial Officer, Mr. Tom B. Dake at (334) 285-8665.
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SUMMARY TERM SHEET
THIS SUMMARY TERM SHEET DOES NOT CONTAIN ALL OF THE INFORMATION
CONTAINED IN THE PROXY STATEMENT THAT MAY BE IMPORTANT TO YOU IN DECIDING HOW TO
VOTE ON THE AGREEMENT AND PLAN OF MERGER. YOU ARE URGED TO READ CAREFULLY THIS
ENTIRE PROXY STATEMENT IN ORDER TO UNDERSTAND THE MERGERS FULLY. WE ALSO
ENCOURAGE YOU TO READ THE AGREEMENT AND PLAN OF MERGER, WHICH IS ATTACHED AS
ANNEX A TO THIS PROXY STATEMENT, AS IT IS THE LEGAL DOCUMENT THAT GOVERNS THE
MERGERS. YOU MAY OBTAIN ADDITIONAL INFORMATION ABOUT MILTOPE GROUP WITHOUT
CHARGE BY FOLLOWING THE INSTRUCTIONS IN THE SECTION ENTITLED "WHERE YOU CAN FIND
MORE INFORMATION" ON PAGE 41.
THE PARTIES (SEE PAGE 37)
Miltope Group Inc.
3800 Richardson Road South
Hope Hull, Alabama 36043
(334) 285-8665
Miltope Group Inc., a Delaware corporation, is the parent company of
Miltope Corporation, an Alabama corporation, IV Phoenix Group, Inc., a New York
corporation, also referred to as "PGI", and Miltope Business Products, Inc., a
New York corporation.
Miltope Corporation
3800 Richardson Road South
Hope Hull, Alabama 36043
(334) 285-8665
Miltope Corporation is a wholly-owned subsidiary of Miltope Group.
Miltope Corporation designs, develops and manufactures computers and computer
peripheral equipment for military, industrial and commercial applications where
reliable operation of the equipment in challenging environments is imperative.
Vision Technologies Kinetics, Inc.
225 Reinekers Lane, Suite 525
Alexandria, Virginia 22314
(703) 683-8970
Vision Technologies Kinetics, Inc., a Delaware corporation, provides
design and engineering services for military vehicles, weapon systems and
munitions. Vision Technologies Kinetics is a direct wholly-owned subsidiary of
Vision Technologies Systems, Inc., a Delaware corporation, with headquarters in
Alexandria, Virginia, and an indirect wholly-owned subsidiary of Singapore
Technologies Engineering Ltd., a Singapore company.
VTK Merger Subsidiary Corporation
225 Reinekers Lane, Suite 525
Alexandria, Virginia 22314
(703) 683-8970
VTK Merger Subsidiary Corporation is an Alabama corporation formed on
September 8, 2003 and a wholly-owned subsidiary of Vision Technologies Kinetics.
VTK Merger Subsidiary has not, to date, conducted any significant activities
other than those incident to its formation, its execution of the Agreement and
Plan of Merger and the related documents, and its participation in the
preparation of this proxy statement. VTK Merger Subsidiary currently has no
material assets or liabilities, other than its rights and obligations under the
Agreement and Plan of Merger and the related documents, and has not generated
any material revenues or expenses.
THE MERGERS (SEE PAGE 2)
STRUCTURE OF THE MERGERS. Miltope Group will be merged with and into
Miltope
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Corporation, with Miltope Corporation surviving the merger, and VTK Merger
Subsidiary will be merged with and into Miltope Corporation, with Miltope
Corporation surviving the merger and continuing to operate its business as a
direct wholly-owned subsidiary of Vision Technologies Kinetics. The separate
existence of each of Miltope Group and VTK Merger Subsidiary will cease. (See
pages 2 and 23 and Annex A)
STOCKHOLDER VOTE. You are being asked to vote to adopt the Agreement
and Plan of Merger and approve the mergers. Under the Delaware General
Corporation Law, or the DGCL, the affirmative vote of at least a majority of the
votes entitled to be cast by the holders of the outstanding shares of common
stock of Miltope Group, whether in person or by proxy, is required to adopt the
Agreement and Plan of Merger and approve the mergers. GUI has agreed to vote
approximately 61.5% of the outstanding shares of Miltope Group's common stock in
favor of the adoption of the Agreement and Plan of Merger and approval of the
mergers. Therefore, unless Miltope Group's board of directors exercises its
right to accept a superior proposal, the requisite vote to adopt the Agreement
and Plan of Merger and approve the mergers is assured. (See pages 1 and 35 and
Annexes B and C)
EFFECTIVENESS OF THE MERGERS. The mergers will be effective upon the
filing of both articles of merger with the Secretary of State of the State of
Alabama, in accordance with the Alabama Business Corporation Act, and a
certificate of merger with the Secretary of State of the State of Delaware, in
accordance with the DGCL, or at such later time as is specified in the articles
of merger and certificate of merger. (See page 24)
PRICE FOR YOUR STOCK. At the effective time of the mergers, each share
of Miltope Group's common stock issued and outstanding immediately prior to the
effective time (except for shares of common stock held by stockholders who
exercise their appraisal rights) will be cancelled and automatically converted
into the right to receive $5.78 in cash, without interest, and one contingent
value right. Miltope Group's shares will no longer be traded on The Nasdaq
SmallCap Market or be registered under the Securities Exchange Act of 1934, as
amended. (See page 24)
CONTINGENT VALUE RIGHT. Each contingent value right, or CVR, represents
the nontransferable right to receive a pro rata share of 50% of the net
proceeds, if any, from the lawsuit brought by Miltope Corporation and PGI
against DRS Technologies and other parties, also referred to in this proxy
statement as the "DRS litigation," after adjustments for taxes. Pursuant to the
Contingent Value Rights Agreement, or CVR Agreement (attached as Annex D to this
proxy statement), $0.7 million has been set aside from the merger consideration
to fund certain costs and expenses associated with the litigation. The CVRs will
not be assignable or otherwise transferable by holders of the CVRs, except by
will, upon death or by operation of law. The CVRs will not be evidenced by a
certificate or other instrument. (See page 35 and Annex D)
THE DRS LITIGATION (SEE PAGE 36)
On October 3, 2001, Miltope Corporation and PGI filed a lawsuit in the
United States District Court for the Eastern District of New York against DRS
Technologies, its affiliate DRS Electronic Systems, Inc. and former officers,
directors and employees of PGI. In their complaint and subsequent amended
complaint, Miltope Corporation and PGI alleged damages based on, among other
things, misappropriated trade secrets and trade secret know-how, infringement of
several trademarks held by Miltope Corporation and PGI, breach of a
confidentiality agreement, tortious interference with contracts, breach of
fiduciary duty, unjust enrichment and unfair competition. DRS Technologies and
DRS Electronic Systems answered the complaint, denying the claims against them,
but did not file any counterclaims. The individual defendants also denied the
claims against them. Three of the individual defendants, who were former
officers and directors of Miltope Corporation and PGI, filed counterclaims
alleging damages based on, among other things, breach of their employment or
severance agreements with PGI and/or Miltope Corporation. In total, these
individual defendants are seeking approximately $2.9 million in damages. Miltope
Corporation and PGI deny the counterclaims made by these defendants.
Miltope Corporation and PGI seek total damages against all defendants
of not less than $19 million. In addition, Miltope Corporation and PGI seek
punitive and treble damages, royalties on the DRS Technologies products that
incorporate Miltope Corporation's and PGI's trade secrets, injunctive relief,
attorneys' fees and interest. The CVR agreement provides that GUI shall act as
the representative of the holders of the CVRs. GUI, as
S-2
representative, is authorized to approve or reject any settlement of any aspect
or portion of the DRS litigation. If this lawsuit does not ultimately result in
a judgment or settlement favorable to MILTOPE CORPORATION or PGI, the CVRs will
be worthless. As of the filing of this proxy statement, the court has not set a
trial date for this action, but Miltope Group believes that a trial will
commence within six months.
BOARD OF DIRECTORS RECOMMENDATION (SEE PAGE 5)
The board of directors of Miltope Group has approved the Agreement and
Plan of Merger and determined that the mergers are fair to, and in the best
interests of, Miltope Group's stockholders. The board of directors unanimously
recommends that Miltope Group's stockholders vote in favor of the adoption of
the Agreement and Plan of Merger and approval of the mergers.
FAIRNESS OPINIONS (SEE PAGES 7 AND 13 AND ANNEXES E AND F)
Each of Quarterdeck Investments Partners, LLC and Legacy Partners
Group, LLC delivered separate and independent opinions to the board of directors
of Miltope Group, dated as of October 21, 2003, that, based upon certain
assumptions made, matters considered and limits of the review undertaken (as
described in the opinions), the consideration to be received by the stockholders
of Miltope Group as a result of the mergers is fair from a financial point of
view to the stockholders. Copies of Quarterdeck's opinion and Legacy's opinion
are attached to this proxy statement as Annex E and Annex F, respectively, and
should be read in their entirety.
THE SPECIAL MEETING OF STOCKHOLDERS (SEE PAGE 1)
The special meeting of Miltope Group's stockholders will be held on
____ __, 2003, at __:00 a.m., Central Time, at Miltope Group's headquarters,
3800 Richardson Road South, Hope Hull, Alabama 36043.
VOTE REQUIRED; RECORD DATE (SEE PAGE 1)
The affirmative vote of at least a majority of the votes entitled to be
cast by the holders of the outstanding shares of common stock of Miltope Group,
whether in person or by proxy, is required to adopt the Agreement and Plan of
Merger and approve the mergers. You can vote at the special meeting all of the
shares of common stock that you owned of record as of the close of business on
_________ __, 2003, which is the record date fixed by the board of directors for
the special meeting. Because GUI has agreed to vote approximately 61.5% of
Miltope Group's outstanding common stock in favor of the adoption of the
Agreement and Plan of Merger and approval of the mergers, unless Miltope Group's
board of directors exercises its right to accept a superior proposal, the
requisite vote to adopt the Agreement and Plan of Merger and approve the mergers
is assured.
SOLICITATION OF PROXIES (SEE PAGE 2)
The cost of preparing, assembling, printing, mailing and distributing
the notice of special meeting, this proxy statement and proxies shall be borne
by Miltope Group.
PROCEDURE FOR VOTING (SEE PAGE 2)
Only holders of record of Miltope Group's common stock on the record
date will be entitled to vote at the special meeting and any adjournments or
postponements of that meeting. Please return the proxy as soon as possible so
that your vote will be recorded. Even if you return your proxy card, you may
still attend the special meeting and vote your common stock in person.
APPRAISAL RIGHTS (SEE PAGE 22)
If you do not vote for the mergers, you are entitled to have your
shares appraised and to receive a payment for the "fair value" of your shares.
S-3
VOTING AGREEMENTS (SEE PAGE 35 AND ANNEXES B AND C)
GUI has entered into voting agreements with Miltope Group, Vision
Technologies Kinetics and VTK Merger Subsidiary. Under the voting agreements,
GUI has agreed to vote all of the Miltope Group common stock it owns in favor of
the adoption of the Agreement and Plan of Merger and approval of the mergers.
GUI owns approximately 61.5% of Miltope Group's outstanding common stock. In the
event that the board of directors of Miltope Group terminates the Agreement and
Plan of Merger to accept a superior proposal, the Secondary Voting Agreement,
pursuant to which GUI is required to vote shares representing approximately
26.5% of Miltope Group's outstanding common stock in favor of the mergers, may
be terminated. GUI would continue to be obligated, under the Primary Voting
Agreement, to vote shares representing approximately 35% of Miltope Group's
outstanding common stock in favor of the mergers.
CONDITIONS TO COMPLETING THE MERGERS (SEE PAGE 30)
The completion of the mergers depends on the satisfaction of a number
of conditions which are specified in the Agreement and Plan of Merger.
TERMINATING THE AGREEMENT AND PLAN OF MERGER (SEE PAGE 31)
Miltope Group and Vision Technologies Kinetics can mutually agree at
any time to terminate the Agreement and Plan of Merger. Also, under certain
circumstances, either Miltope Group, on the one hand, or Vision Technologies
Kinetics, on the other hand, can decide to terminate the Agreement and Plan of
Merger. If the termination of the Agreement and Plan of Merger is due to Miltope
Group's breach, then Miltope Group is required to pay the expenses of Vision
Technologies Kinetics in connection with the negotiation of the mergers in an
amount not to exceed $1,000,000. In the event that Miltope Group terminates the
mergers in order to accept a superior proposal, or in certain circumstances
Miltope Group terminates the Agreement and Plan of Merger and a superior
proposal has been made but not accepted or, within a period of nine months after
such termination, a subsequent takeover transaction has been consummated,
Miltope Group may be required to pay Vision Technologies Kinetics a termination
fee in an amount equal to $1,800,000.
NO SOLICITATION OF PROPOSALS (SEE PAGE 29)
Miltope Group has agreed in the Agreement and Plan of Merger not to
encourage (including by way of furnishing non-public information), initiate,
participate in, or solicit any offer or proposal which constitutes any other
offer or proposal concerning any (i) tender or exchange offer involving more
than 20% of its common stock, (ii) merger, consolidation, recapitalization,
restructuring or other business combination or similar transaction involving
Miltope Group or its subsidiaries, (iii) issuance, sale or other disposition
(including by way of merger, consolidation, business combination, share
exchange, joint venture or similar transaction) of Miltope Group's common stock
or other equity interests representing 20% or more of the Miltope Group's voting
power, (iv) sale, lease or disposition directly or indirectly by merger,
consolidation, business combination, share exchange, joint venture or otherwise,
of assets representing 20% or more of the consolidated assets, revenues or net
income of Miltope Group and its subsidiaries, or (v) combination of any of the
foregoing. Miltope Group has agreed that, in the event of an unsolicited offer
or proposal as described above, it will not engage in negotiations or
discussions with, or provide any information to, any person or company relating
to or in connection with the offer or proposal. In addition, Miltope Group has
agreed not to enter into any agreement with respect to any offer or proposal as
described above or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the mergers or any
other transaction contemplated by the Agreement and Plan of Merger.
However, Miltope Group may furnish information concerning its business,
properties or assets to any person pursuant to a customary confidentiality
agreement and may discuss and negotiate and participate in discussions and
negotiations with such person concerning an acquisition proposal if (i) such
person has made a superior proposal and (ii) the board of directors determines
in good faith, after receiving advice from outside legal counsel to Miltope
Group, that the failure to provide such information or to engage in such
discussions or negotiations would constitute a breach of the fiduciary
obligations of the board of directors to Miltope Group's
S-4
stockholders.
REGULATORY FILINGS AND APPROVALS (SEE PAGE 21)
Miltope Group does not believe that any material federal or state
regulatory approvals, filings or notices are required by it in connection with
the mergers, except for the filing of this proxy statement with the Securities
and Exchange Commission, the filing of a certificate of merger with the
Secretary of State of the State of Delaware, the filing of articles of merger
with the Secretary of State of the State of Alabama and a voluntary filing with
the Committee on Foreign Investment in the United States, also referred to as
"CFIUS," pursuant to the Exon-Florio Amendment promulgated under the Omnibus
Trade and Competitiveness Act of 1988, also referred to as the "Exon-Florio
Amendment."
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 19)
The receipt of cash and CVRs by you pursuant to the mergers or pursuant
to your exercise and perfection of appraisal rights will be a taxable event for
you for federal income tax purposes and may also be taxable events under
applicable state, local and foreign tax laws. The tax consequences to you will
depend upon the facts and circumstances applicable to you and the
characterization of the CVRs for tax purposes. Accordingly, you should consult
your tax advisor with respect to the federal, state, local or foreign tax
consequences of the mergers.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS THAT DIFFER FROM YOUR INTERESTS
(SEE PAGE 17)
In considering the recommendation of the board of directors, you should
be aware that certain officers, directors and stockholders of Miltope Group have
relationships or interests in the mergers and the transactions contemplated
thereby that are different from the interests of other stockholders and that may
present actual or potential conflicts of interest. In connection with the
closing of the mergers, GUI will receive approximately $21.2 million and
3,664,478 CVRs for its stock. If Miltope Group had not agreed to the mergers,
GUI would not have been able to sell any substantial portion of its shares of
Miltope Group's common stock due to the volume restriction of Rule 144 and the
general lack of trading volume. Henry Guy and David Marcus are members of
Miltope Group's board of directors and members of GUI's board of directors.
Miltope Group's board of directors was aware of these potential and actual
conflicts of interest and considered them in evaluating the proposed mergers.
QUESTIONS
If you have any questions about the mergers or if you need additional
copies of the proxy statement or the enclosed proxy card, you should contact our
Chief Financial Officer, Mr. Tom B. Dake at (334) 285-8665.
S-5
INTRODUCTION
Vision Technologies Kinetics has supplied all information in this proxy
statement relating to it. Miltope Group has not independently verified any of
the information relating to Vision Technologies Kinetics. No persons have been
authorized to give any information or to make any representations other than
those contained in this proxy statement.
FORWARD-LOOKING INFORMATION
The matters discussed in this proxy statement that are not historical
facts are "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and Miltope Group intends that such
forward looking statements be subject to the safe harbors created thereby.
Miltope Group warns that caution should be taken in relying upon any forward
looking statements contained herein, as they involve a number of risks and
uncertainties that may cause the actual results of Miltope Group to be
materially different from any future results expressed or implied by such
forward looking statements. Examples of such risks and uncertainties include,
but are not limited to, the ability of Miltope Group to consummate the sale of
Miltope Group, future demand for Miltope Group's products and services, general
economic conditions, actions of competitors, termination of contracts at the
convenience of the United States government, customer funding variations in
connection with multi-year contracts and follow-on options, the ability to
succeed in the DRS litigation and obtain any proceeds therefrom, the value of
the CVRs, and other risks and uncertainties. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. Miltope Group does not undertake any obligation
to update or revise any forward looking statement made by it or on its behalf,
whether as a result of new information, future events or otherwise.
THE SPECIAL MEETING OF STOCKHOLDERS
DATE, TIME AND LOCATION
The special meeting of Miltope Group's stockholders will be held on
____ __, 2003, at _:00 a.m., Central Time, at Miltope Group's headquarters, 3800
Richardson Road South, Hope Hull, Alabama 36043.
VOTE REQUIRED
Under the DGCL, the affirmative vote of at least a majority of the
votes entitled to be cast by the holders of the outstanding shares of common
stock of Miltope Group, whether in person or by proxy, is required to adopt the
Agreement and Plan of Merger and approve the mergers. The presence in person or
by proxy of the holders of a majority of the outstanding shares of common stock
of Miltope Group constitutes a quorum for a stockholder vote on the adoption of
the Agreement and Plan of Merger and approval of the mergers at the special
meeting. Each share of common stock entitles the holders thereof to one (1) vote
on the adoption of the Agreement and Plan of Merger and approval of the mergers.
Proxies submitted that contain abstentions or broker non-votes will be deemed
present at the special meeting only for determining the presence of a quorum.
Abstentions and broker non-votes with respect to the vote on the adoption of the
Agreement and Plan of Merger and approval of the mergers will have the effect of
votes against the adoption of the Agreement and Plan of Merger and approval of
the mergers. Because GUI has agreed to vote approximately 61.5% of Miltope
Group's outstanding common stock in favor of the adoption of the Agreement and
Plan of Merger and approval of the mergers, unless Miltope Group's board of
directors exercises its right to accept a superior proposal, the requisite vote
to adopt the Agreement and Plan of Merger and approve the mergers is assured.
WHO CAN VOTE; RECORD DATE
You can vote at the special meeting all of the shares of common stock
that you owned of record as of the close of business on _________ __, 2003,
which has been fixed by the board of directors as the record date for the
special meeting. If you own shares that are registered in someone else's name
(for example, a broker), you need to
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direct that person to vote those shares or obtain an authorization from them and
vote the shares yourself at the special meeting. As of the close of business on
the record date, there were [5,962,623] shares of common stock outstanding held
by approximately _____ stockholders of record.
SOLICITATION OF PROXIES
The cost of preparing, assembling, printing, mailing and distributing
the notice of special meeting, this proxy statement and proxies shall be borne
by Miltope Group. Miltope Group also will reimburse brokers, banks and other
custodians, nominees and fiduciaries, who are holders of record of the common
stock of Miltope Group, for their reasonable out-of-pocket expenses incurred in
connection with forwarding proxy soliciting materials to the beneficial owners
of shares of common stock. In addition to the use of the mail, proxies may be
solicited without extra compensation by directors, officers and employees of
Miltope Group by personal interview, telephone, telegram, cablegram, facsimile
or other means of electronic communication.
PROCEDURE FOR VOTING
Only holders of record of Miltope Group's common stock on the record
date will be entitled to vote at the special meeting and any adjournments or
postponements of that meeting. Please return the proxy as soon as possible so
that your vote will be recorded. Even if you return your proxy card, you may
still attend the special meeting and vote your common stock in person. Your
proxy may be revoked at any time before it is voted by submitting a written
revocation or a proxy bearing a later date to the Secretary of Miltope Group, or
by attending and voting in person at the special meeting. For stock held in
"street name," you must follow the procedures required by the holder of record,
which is usually a brokerage firm or bank, to revoke a proxy. You should contact
the holder of record directly for more information on these procedures.
DATE OF PROXY STATEMENT AND MAILING
This proxy statement is dated ______ __, 2003 and is first being mailed
to stockholders of Miltope Group on or about ______ __, 2003.
THE MERGERS
STRUCTURE OF THE MERGERS
Miltope Group will be merged with and into Miltope Corporation, with Miltope
Corporation surviving the merger. Additionally, VTK Merger Subsidiary will be
merged with and into Miltope Corporation, with Miltope Corporation surviving the
merger. Miltope Corporation will continue to operate its business as a direct
wholly-owned subsidiary of Vision Technologies Kinetics. The separate existence
of each of Miltope Group and VTK Merger Subsidiary will cease.
BACKGROUND OF THE MERGERS
Miltope Group's board of directors has evaluated, on a continuing
basis, the business and operations of Miltope Group, as well as the strategic
direction and prospects of its business in light of the conditions and trends in
its industry as part of Miltope Group's long-term strategy to maximize
stockholder value.
The board of directors became concerned that the continuing
consolidation in the defense industry would put smaller suppliers at a
competitive disadvantage and that the challenging defense appropriations
environment was creating uncertainty for those firms having a limited array of
product offerings. Therefore, the board of directors determined that it was in
the best interests of Miltope Group and its stockholders to seek a strategic
acquisition partner.
Accordingly, on June 24, 2002, Miltope Group retained Quarterdeck to
provide advice regarding Miltope Group's long-term financial strategy.
2
From July 2002 through August 2002, Miltope Group, with the help of
Quarterdeck and other representatives, prepared materials regarding a potential
sale of Miltope Group.
From August 2002 through September, 2002, Quarterdeck, on behalf of
Miltope Group, contacted a total of 93 potential buyers. This total included 57
potential strategic buyers and 36 potential financial buyers. Quarterdeck
provided 37 of the 93 potential buyers with offering documents.
On September 12, 2002, four potential buyers submitted preliminary,
non-binding indications of interest to acquire Miltope Group. During the
following month, two of these potential buyers withdrew from the process because
of internal events, limited resources and/or a focus on alternative acquisition
opportunities. Of the other two of these potential buyers, both subsequently
attended management presentations and one also conducted a cursory review and
investigation of Miltope Group's business and arrangements. In late November,
the latter potential buyer withdrew its interest, citing a lack of a strategic
fit, an inability to realize cost saving synergies and concerns about the DRS
litigation. Shortly thereafter, the remaining potential buyer also withdrew its
interest.
In early October 2002, Quarterdeck contacted a number of strategic
buyers who were unable to devote the resources to the transaction during the
initial process.
On November 6, 2002, Vision Technologies Systems, Inc., the sole
stockholder of Vision Technologies Kinetics, received an offering memorandum and
indicated that it would submit an indicative offer in early December.
In late November, Quarterdeck, on behalf of Miltope Group, contacted
twelve additional potential financial buyers to evaluate Miltope Group's
business.
In December 2002, two strategic buyers, including Vision Technologies
Systems, submitted a preliminary, non-binding indication of interest.
Additionally, a third strategic buyer provided a verbal indication of interest.
From January 7 through January 9, 2003, Miltope Group's management made
presentations to these three strategic buyers. On January 27, 2003, a potential
financial buyer submitted a non-binding, preliminary indication of interest.
Between February and March, 2003, these four potential buyers met with
management and/or commenced a due diligence investigation of the company.
Subsequently, all of these potential buyers, other than Vision Technologies
Kinetics, withdrew their interest and declined to submit offers.
On March 10, 2003, Vision Technologies Systems submitted an offer for
the purchase of all of the outstanding shares of Miltope Group, and the
assumption of outstanding debt, at an equity value of $26 million and an
enterprise value of $34.4 million. In connection with the offer, Vision
Technologies Systems required as a condition that GUI agree to enter into an
agreement in support of the transaction.
On March 25, 2003, Miltope Group's board of directors met to consider
the offer from Vision Technologies Systems and determined that it was inadequate
given Miltope Group's projected performance. The board of directors rejected the
offer from Vision Technologies Systems as not maximizing stockholder value.
On April 1, 2003, Vision Technologies Systems increased its offer to an
equity value of $31.1 million and an enterprise value of $39.5 million. At that
time, Vision Technologies Systems also revised its list of outstanding
conditions in connection with the mergers, including that Miltope Group and GUI
sign an exclusivity agreement, pursuant to which, among other things, Miltope
Group and GUI would be restricted from discussing sale transactions with other
potential buyers for approximately three weeks, whether or not Miltope Group or
GUI initiated such discussions. In addition, Vision Technologies Systems
continued to require as a condition to the transaction that GUI agree to enter
into agreements in support of the transaction.
On April 2, 2003, Miltope Group's board of directors met to consider
the revised offer from Vision Technologies Systems and determined that it was
inadequate given Miltope Group's projected performance. The board of directors
rejected the offer from Vision Technologies Systems as not maximizing
stockholder value. Accordingly, Miltope Group did not enter into the proposed
exclusivity letter.
On April 10, 2003, GUI asked Quarterdeck to assess other strategic
alternatives available to Miltope
3
Group.
On April 24, 2003, Quarterdeck presented various alternatives available
to Miltope Group including merging with another public company, acquisitions and
issuing stock to raise capital for acquisitions.
After additional discussion between representatives of Miltope Group
and Vision Technologies Systems, on May 20, 2003, Vision Technologies Systems
once again revised its offer price to an enterprise value of $42.95 million. In
connection with this revised offer, Miltope Group's board of directors met and
determined to pursue further negotiations, and continue the due diligence
process, with Vision Technologies Systems. Miltope Group resumed discussions
with Vision Technologies Systems and Vision Technologies Systems resumed its due
diligence investigation of the company.
On May 21, 2003, Miltope Group and Vision Technologies Systems entered
into an exclusivity agreement, pursuant to which, among other things, Miltope
Group was restricted, through June 25, 2003, from discussing sale transactions
with other potential buyers, whether or not Miltope Group initiated such
discussions. Also on May 21, 2003, GUI and Vision Technologies Systems entered
into a separate exclusivity agreement, pursuant to which, among other things,
GUI was restricted, through June 25, 2003, from discussing with other potential
buyers sale transactions involving Miltope Group, whether or not GUI initiated
such discussions.
From May 2003 through July 2003, Vision Technologies Systems continued
its due diligence review of the company. During this period, the parties
negotiated substantial issues regarding the structure of the transaction, tax
treatment and other matters. In connection with these negotiations, Vision
Technologies Systems included, as a condition to the mergers, that GUI would
agree to enter into voting agreements, that Miltope Group's board of directors
would approve the voting agreements and that GUI would enter into an indemnity
agreement in connection with certain tax and environmental matters.
On June 19, 2003, Miltope Group engaged Legacy to issue a fairness
opinion with respect to the mergers.
On June 25, 2003, the exclusivity period under the parties' May 21,
2003 exclusivity agreements expired.
On July 16, 2003, the parties extended the exclusivity period through
July 28, 2003.
On July 22, 2003, the parties and their representatives met in
Washington, DC to further negotiate the terms and conditions of the transaction.
On July 28, 2003, the exclusivity period under the parties' two July
16, 2003 exclusivity agreements expired and the parties extended the exclusivity
period through August 18, 2003 for Miltope Group and through August 30, 2003 for
GUI.
On July 30, 2003, the parties generally agreed to a form of an
agreement and plan of merger, but could not agree on the cash consideration in
the mergers and certain structural issues because of, among other things, the
ongoing DRS litigation and the proceeds Miltope Group anticipated as result of
the litigation.
On August 18, 2003, the exclusivity period under Miltope Group's July
28, 2003 exclusivity agreement expired and the parties extended the exclusivity
period through August 30, 2003.
On August 30, 2003, the exclusivity period expired under both GUI's
July 28, 2003 exclusivity agreement and Miltope Group's August 18, 2003
exclusivity agreement.
On September 4, 2003, the parties agreed on a general structure to
allow Miltope Group the appropriate financial resources to pursue the DRS
litigation, while still allowing Miltope Group's stockholders to benefit from
4
the proceeds the company anticipates as a result of the litigation. The parties
had determined that contingent value rights, or CVRs, could be issued to Miltope
Group's stockholders in addition to the cash consideration in the mergers. The
parties continued to negotiate the Agreement and Plan of Merger and a Contingent
Value Rights Agreement in accordance with this new structure.
From September 4, 2003 through October 9, 2003, the parties continued
to negotiate material aspects of the Agreement and Plan of Merger and the CVR
payment structure.
On October 9, 2003, the parties negotiated an increased enterprise
value of Miltope Group in the amount of $44.95 million. Because of Quarterdeck's
involvement in, and extensive knowledge of, the transaction, Legacy requested
that the company expand Quarterdeck's engagement to also include the delivery of
a fairness opinion. The company agreed and, on October 9, 2003, if engaged
Quarterdeck to issue a fairness opinion with respect to the mergers, separately
and independently from Legacy.
On October 14, 2003, Miltope Group issued a press release announcing
that it had reached a non-binding oral agreement with an unaffiliated third
party concerning the possible acquisition of Miltope Group. The company also
announced in the press release that pricing terms ranged from $5.25 to $5.90.
On October 21, 2003, Miltope Group's board of directors, after
receiving separate and independent fairness opinions from both Quarterdeck and
Legacy, and Miltope Corporation's board of directors both approved the Agreement
and Plan of Merger, the CVR Agreement and the indemnity agreement, each with
Vision Technologies Kinetics, a wholly-owned subsidiary of Vision Technologies
Systems, and Miltope Group's board of directors also approved the voting
agreements.
On October 22, 2003, Miltope Group and Vision Technologies Kinetics
jointly issued a press release announcing that the two companies had agreed on
the terms of merger, pursuant to which, Miltope Corporation would become a
wholly-owned subsidiary of Vision Technologies Kinetics.
RECOMMENDATION OF THE BOARD OF DIRECTORS; MILTOPE GROUP'S PURPOSE AND REASONS
FOR THE MERGERS
At a meeting of the board of directors held on October 21, 2003,
Miltope Group's board of directors, after careful review of the documents, facts
and circumstances relating to the mergers, and after hearing the separate and
independent presentations of Quarterdeck and Legacy regarding the fairness of
the transaction to the stockholders of Miltope Group, unanimously concluded,
based in part on the presentations of its two financial advisors, that the
mergers, and the terms and provisions of the Agreement and Plan of Merger,
including the merger consideration of $5.78 in cash per share and one CVR per
share, were fair and in the best interests of Miltope Group's stockholders,
unanimously approved the Agreement and Plan of Merger and the voting agreements,
authorized Miltope Group to enter into the Agreement and Plan of Merger and the
voting agreements and unanimously resolved to recommend to the stockholders of
Miltope Group that they vote to adopt the Agreement and Plan of Merger and
approve the mergers.
The board of directors, in determining that the terms of the Agreement
and Plan of Merger were advisable, fair and in the best interests of Miltope
Group's stockholders, and in determining to recommend to the stockholders of
Miltope Group that they adopt the Agreement and Plan of Merger and approve the
mergers, considered certain factors, including but not limited to, the
following:
(i) the financial condition, assets, results of operations, business
and prospects of Miltope Group and the risks inherent in
achieving those prospects, including, without limitation, future
demand for Miltope Group's products and services, general
economic conditions, actions of competitors, termination of
contracts at the convenience of the United States government and
customer funding variations in connection with multi-year
contracts and follow-on options;
(ii) the volumes at which the common stock has traded in recent
periods;
(iii) the negotiations which took place between Vision Technologies
Kinetics, on the one hand, and Miltope Group, on the other hand,
with respect to the merger consideration and the belief by the
5
members of the board of directors that $5.78 per share was the
highest price that Vision Technologies Kinetics would agree to
pay or that could be obtained from any other source reasonably
capable of consummating a transaction;
(iv) that the merger consideration to be received by Miltope Group's
stockholders in the mergers reflects an increased negotiated
enterprise value of Miltope Group of approximately $10.35
million, or approximately 30%, when compared to the initial
purchase price offered by Vision Technologies Systems in March
2003;
(v) expressions of interest from other prospective purchasers;
(vi) the trading prices at which the common stock traded since
Miltope Group's initial public offering;
(vii) the potential for Miltope Corporation and PGI to succeed in the
DRS litigation and the amount of net proceeds that could be
recovered from the litigation, by settlement or judgment, and
the fact that, if the mergers are effected, each of Miltope
Group's stockholders will have the right, as a result of the
CVR, to obtain a portion of any such proceeds;
(viii) the risks that Miltope Corporation and PGI will not succeed in
the DRS litigation and that the costs and expenses associated
with the litigation could exceed any proceeds from the
litigation;
(ix) the strategic fit with Vision Technologies Kinetics given the
nature of the respective businesses;
(x) the separate and independent opinions of each of Quarterdeck and
Legacy as to the fairness, from a financial point of view, of
the cash portion of the merger consideration to be received by
Miltope Group's stockholders, as set forth in each such opinion
and the analyses presented to the board of directors of Miltope
Group by these financial advisors on October 21, 2003; and
(xi) the availability of appraisal rights under the DGCL to holders
of common stock who dissent from the mergers, which rights
provide stockholders who dispute the fairness of the merger
consideration with an opportunity to have a court determine the
fair value of their shares.
Each of the foregoing factors supported the decision of Miltope Group's
board of directors. The board of directors viewed all of the foregoing factors
as important in reaching its conclusion and did not assign any particular weight
to any individual factor.
The board of directors also considered the following potentially
negative factors in their deliberations concerning the mergers, which factors
are not listed in any relative order of importance:
(i) following the mergers, the stockholders of Miltope Group will
cease to participate in any future earnings growth or increase
in value of Miltope Group;
(ii) the actual or potential conflicts of interest that certain
officers, directors and stockholders of Miltope Group have in
connection with the mergers;
(iii) a portion of the merger consideration is contingent and
payable pursuant to the CVRs only in the event that Miltope
Corporation and PGI are successful in the DRS litigation; and
that if Miltope Corporation and PGI do not obtain a
substantial award or favorable settlement in the DRS
litigation, little or no payment will be made under the CVRs;
and
(iv) the possibility that the mergers will not be consummated and
the resulting effects to Miltope Group and to the stockholders
of Miltope Group.
The board of directors viewed all of the foregoing factors as important
in reaching their conclusion. In
6
light of the number and variety of factors the board of directors considered in
connection with its evaluation of the mergers, the board of directors did not
find it practicable to assign relative weights to the foregoing factors, and,
accordingly, the board of directors did not do so. Rather, the board of
directors based its recommendation on the totality of the information presented
to and considered by it, except that particular consideration was placed on: (i)
the separate and independent opinions of Quarterdeck and Legacy that the cash
portion of the merger consideration, $5.78 per share, was fair, from a financial
point of view, to the stockholders of Miltope Group, as set forth in their
respective opinions; and (ii) the negotiations that took place between Miltope
Group and Vision Technologies Kinetics.
The purpose of effecting the mergers at this time is to provide the
stockholders of Miltope Group with an opportunity to liquidate their investment
in Miltope Group for cash at a significant premium to the average market price
for the common stock during the past several years. The board of directors
determined that it was an appropriate time to enter into the mergers based on
its knowledge of the industry in which Miltope Group competes and its belief
that the value of the common stock in the foreseeable future could be less than
the value that could be obtained through the mergers.
The foregoing discussion of the factors considered by the board of
directors is not meant to be exhaustive, but includes all material factors
considered by the board of directors to support its recommendation.
THE BOARD OF DIRECTORS BELIEVES THAT THE MERGERS ARE FAIR TO, AND IN
THE BEST INTERESTS OF, MILTOPE GROUP'S STOCKHOLDERS. THE BOARD OF DIRECTORS HAS
ADOPTED THE AGREEMENT AND PLAN OF MERGER AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE ADOPTION OF THE AGREEMENT AND PLAN OF MERGER AND APPROVAL OF THE
MERGERS.
Except to the extent a recommendation is made in a person's capacity as
a director, no executive officer of Miltope Group has made any recommendation
with respect to the adoption of the Agreement and Plan of Merger, approval of
the mergers or any other transaction contemplated by the Agreement and Plan of
Merger.
OPINION OF QUARTERDECK INVESTMENT PARTNERS
Miltope Group retained Quarterdeck under an engagement letter, dated
June 24, 2002, to act as financial advisor regarding Miltope Group's long-term
financial strategy. Pursuant to the terms of Quarterdeck's financial advisor
engagement letter, Quarterdeck assisted Miltope Group in soliciting and
assessing expressions of interest in Miltope Group. The solicitations generated
interest from multiple parties and, ultimately, culminated with the execution of
the Agreement and Plan of Merger.
Miltope Group selected Quarterdeck as its financial advisor with
respect to the mergers because Quarterdeck is an investment banking firm that
has substantial experience in the global aerospace, defense and government
services markets and is familiar with Miltope Group and prospective acquirers of
Miltope Group. As part of its investment banking business, Quarterdeck is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions and valuations for corporate and other purposes in
the global aerospace, defense and government services markets.
In connection with the proposed mergers, on October 9, 2003, Miltope
Group retained Quarterdeck under an engagement letter to render its written
opinion to Miltope Group's board of directors as to whether the merger
consideration to be received in connection with the proposed mergers is fair,
from a financial point of view, to the stockholders of Miltope Group, other than
holders of shares as to which statutory appraisal rights are perfected, pursuant
to the terms of the Agreement and Plan of Merger.
The merger consideration was determined in arm's-length negotiations
between Miltope Group and Vision Technologies Systems. Pursuant to Quarterdeck's
fairness opinion engagement letter, Quarterdeck was not retained for the purpose
of making a recommendation, nor did it make a recommendation, as to the amount
of consideration to be paid in the mergers. No restrictions or limitations were
imposed by Miltope Group upon Quarterdeck with
7
respect to the investigations made or the procedures followed by Quarterdeck in
rendering its opinion.
On October 21, 2003, Miltope Group's board of directors met to review
the proposed mergers. During this meeting, Quarterdeck reviewed with the board
of directors certain financial analyses, as described below. At the meeting,
Quarterdeck rendered to the board of directors its oral opinion, subsequently
confirmed by delivery of a written opinion, dated as of October 21, 2003, that,
based upon and subject to the various considerations set forth in the opinion,
the merger consideration was fair, from a financial point of view, to the
stockholders of Miltope Group, other than holders of shares as to which
statutory appraisal rights are perfected.
The full text of Quarterdeck's opinion, which sets forth, among other
things, assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by Quarterdeck in rendering
its opinion is attached as Annex E to this proxy statement and is incorporated
herein by reference in its entirety. Miltope Group and its board of directors
urge its stockholders to, and they should, read the Quarterdeck opinion
carefully and in its entirety. The summary of the Quarterdeck opinion in this
proxy statement is qualified in its entirety by reference to the full text of
the Quarterdeck opinion.
Quarterdeck's opinion was provided for the information and assistance
of the board of directors in connection with its consideration of the mergers.
The Quarterdeck opinion addresses only the fairness, from a financial point of
view and as of the date of the Quarterdeck opinion, of the merger consideration,
does not address Miltope Group's underlying business decision to effect the
mergers and does not constitute a recommendation to any stockholder as to how
such stockholder should vote or act on any matter relating to the mergers.
Quarterdeck's opinion did not address in any way any other merger terms or
agreements including, without limitation, the financial or other terms of any
voting, contingent value rights or indemnity agreement.
Quarterdeck's opinion spoke only as of the date it was rendered, was
based on the conditions as they existed and information with which it was
supplied as of such date and was without regard to any market, economic,
financial, legal, tax or other circumstances or event of any kind or nature
which might exist or occur after such date. Unless otherwise noted, all of
Quarterdeck's analyses were performed based on market information available as
of October 17, 2003.
In connection with its opinion, Quarterdeck, among other things:
o reviewed a draft dated as of October 21, 2003, of the
Agreement and Plan of Merger and certain other related
agreements;
o reviewed certain publicly available business and financial
information relating to Miltope Group;
o reviewed certain other information relating to Miltope Group,
including certain internal financial analyses, budgets,
reports and other information, that Miltope Group provided to
or discussed with Quarterdeck; and
o met with Miltope Group's management team to discuss historical
and current operations, financial conditions and prospects, as
well as the impact on Miltope Group and its prospects of the
economy and their industry, including the effect of the
current economic environment.
In connection with its review, Quarterdeck did not assume any
responsibility for independent verification of any of the foregoing information
and relied on such information being complete and accurate in all material
respects. With respect to the financial forecasts for Miltope Group that
Quarterdeck reviewed, Quarterdeck was advised, and assumed, that such forecasts
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of Miltope Group's management team as to Miltope Group's
future financial performance. Quarterdeck was not requested to make, and did not
make, an independent evaluation or appraisal of Miltope Group's assets or
liabilities (contingent or otherwise), nor was Quarterdeck furnished with any
such evaluations or appraisals. Quarterdeck did not make an independent
assessment of any lawsuit or legal advice. The Quarterdeck opinion necessarily
is based upon information available to it as of the date of the opinion and upon
financial, economic, market and other conditions as they existed and could be
evaluated on the date of the opinion. In
8
addition, Quarterdeck assumed that the mergers would be consummated upon the
terms set forth in the Agreement and Plan of Merger without material alteration
thereof. Quarterdeck assumed, in all respects material to its analysis, that the
representations and warranties of each party contained in the Agreement and Plan
of Merger were true and correct, that each party would perform all of its
covenants and agreements under the Agreement and Plan of Merger and that all
conditions to the consummation of the mergers would be satisfied without waiver.
In preparing its opinion to Miltope Group's board of directors,
Quarterdeck performed a variety of financial and comparative analyses. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. Quarterdeck believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and of the factors considered by it, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying the Quarterdeck opinion. No company or transaction used in
the analysis performed by Quarterdeck as a comparison is identical to Miltope
Group or to the mergers. In addition, Quarterdeck may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so that the range of
valuation resulting from any particular analysis described below should not be
taken to be Quarterdeck's view of Miltope Group's actual value. In performing
its analyses, Quarterdeck made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond Miltope Group's control. The analyses performed by Quarterdeck
are not necessarily indicative of actual values or actual future results, which
may be significantly more or less favorable than that suggested by such
analyses. In addition, analyses relating to the value of businesses or assets do
not purport to be appraisals or to necessarily reflect the prices at which
businesses or assets may actually be sold. The analyses performed were prepared
solely as part of Quarterdeck's analysis of the fairness, from a financial point
of view, of the mergers and were provided to Miltope Group's board of directors
in connection with the delivery of the Quarterdeck opinion. Quarterdeck did not
place any weight on any potential value of the CVRs when making its analyses and
does not make any representations with regard to the value of the CVRs.
The following is a brief summary of the material analyses performed by
Quarterdeck in connection with the preparation of its opinion, and presented to
Miltope Group's board of directors at its meeting held on October 21, 2003.
Certain of the summaries of the financial analyses include information presented
in tabular format. In order to understand fully the material financial analyses
used by Quarterdeck, the tables should be read together with the text of each
summary. The tables alone do not constitute a complete description of the
material financial analyses.
HISTORICAL TRADING ANALYSIS. To provide contextual data and comparative
market information, Quarterdeck reviewed the historical trading data of Miltope
Group's common stock over various periods ending October 17, 2003 and compared
such data with the cash merger consideration. The following table sets forth the
average closing price of Miltope Group's common stock for those periods and the
premium implied by the cash merger consideration in the mergers to those
historical average closing prices:
AVERAGE IMPLIED
PERIOD CLOSING PRICE PREMIUM PAID
------ ------------- ------------
October 17, 2003 $5.65 2.3%
Last Three Months $4.84 19.4%
Last Six Months $4.08 41.7%
Last Twelve Months $3.75 54.1%
Last Two Years $3.23 78.9%
COMPARABLE COMPANY ANALYSIS. To provide contextual data and comparative
market information, Quarterdeck compared selected historical operating and
financial ratios for Miltope Group to certain publicly traded aerospace and
defense manufacturing companies that Quarterdeck deemed relevant.
In conducting its analysis, Quarterdeck compared, among other things,
the enterprise value of Miltope
9
Group implied by the cash merger consideration, expressed as a multiple of
actual (as adjusted for one time or unusual items that were publicly disclosed)
latest twelve months, or LTM, revenue, earnings before interest, taxes,
depreciation and amortization (also referred to as "EBITDA"), and earnings
before interest and taxes (also referred to as "EBIT") as of June 30, 2003 and
to estimated revenue and EBITDA for the 2003 calendar year (as available) to the
respective low, mean, median and high enterprise value multiples of the
comparable companies implied by the public trading value of their common stock.
In addition, Quarterdeck compared, among other things, the cash merger
consideration expressed as a multiple of estimated earnings per share for the
2003 calendar year, or "CY", and the 2004 calendar year (as available) to the
respective low, mean, median and high price to earnings multiples of the
comparable companies implied by the public trading prices of their common stock.
Quarterdeck reviewed information as of October 17, 2003 to calculate specified
financial and operating information, market values and trading multiples (as
described below), and then compared Miltope Group's financial and operating
information, market values and trading multiples as of October 17, 2003, with
the corresponding financial and operating information, market values and
multiples of the following selected companies: The Allied Defense Group, Inc.,
Ducommun, Inc., Nortech Systems, Inc., Reinhold Industries, Inc., Sparton Corp.,
Tadiran Communications Ltd. and Teledyne Technologies Inc. Although Quarterdeck
used these companies for comparative purposes, no company utilized in the
Comparable Company Analysis is identical to Miltope Group. Accordingly,
consideration of the results cannot be limited to a quantitative review of the
mathematical analysis, such as determining the average or median, and involves
complex considerations and judgments concerning differences in industry
performance, general business, economic, market and financial conditions and
other matters concerning the companies as well as Miltope Group.
IMPLIED COMPARABLE COMPANY ANALYSIS MULTIPLES
ENTERPRISE VALUE TRANSACTION -------------------------------------
AS A MULTIPLE OF: MULTIPLES LOW MEAN MEDIAN HIGH
----------------- --------- ---- ---- ------ ----
LTM Revenue ........ 0.7x 0.3x 0.6x 0.6x 0.9x
LTM EBITDA ......... 7.4x 2.6x 5.8x 6.8x 8.3x
LTM EBIT ........... 9.1x 3.7x 8.1x 9.4x 12.1x
2003 CY Revenue .... 0.7x 0.6x 0.6x 0.6x 0.6x
2003 CY EBITDA ..... 6.5x 4.1x 6.4x 6.4x 8.6x
Quarterdeck selected a range about the mean enterprise value to LTM
EBITDA multiple for the Comparable Company Analysis which resulted in an implied
valuation range of $3.75 to $4.70 per share of Miltope Group's common stock.
PRECEDENT TRANSACTION ANALYSIS. Using publicly available information,
Quarterdeck reviewed Miltope Group's implied transaction multiples relative to
the corresponding multiples of nineteen precedent transactions in the aerospace
and defense manufacturing industry and related industries with enterprise values
approximately corresponding to the enterprise value of Miltope Group implied by
the cash merger consideration. No transaction utilized as a comparison in the
Precedent Transaction Analysis is identical to the mergers. Accordingly,
consideration of the results cannot be limited to a quantitative review of the
mathematical analysis, such as determining the average or median, and involves
complex considerations and judgments concerning differences in industry
performance, general business, economic, market and financial conditions and
other matters concerning the companies as well as Miltope Group. For each of
these precedent transactions, Quarterdeck compared as a multiple of LTM revenue
and EBITDA the enterprise value of each transaction (as available), calculated
as of the effective date of each transaction.
10
DATE ACQUIROR TARGET
- ---- -------- ------
August 21, 2003(1) Cubic Corporation ECC International Corporation
September 18, 2003 Itronix Corporation Golden Gate Capital
September 3, 2003 Aeroflex Incorporated MCE Technologies, Inc.
July 31, 2003 Aeroflex Incorporated Racal Wireless Solution Group
March 27, 2003 BAE SYSTEMS Electronic Systems Ltd. Advanced Power Technology, Inc.
March 11, 2003 ECO Corp. Darlington
February 18, 2003 DRS Technologies, Inc. Power Technology Inc.
February 7, 2003 EDO Corp. AERA
January 22, 2003 Emcore Corp. Optoelectronics Business/Agere Systems, Inc.
December 19, 2002 L-3 Communications Holdings Ship Analytics, Inc.
December 18, 2002 Northrop Grumman Corp. Fibersense Technology Corp.
December 13, 2002 Three-Five Systems Inc. ETMA Corp.
December 6, 2002 BAE SYSTEMS North America Condor Pacific Industries, Inc.
November 25, 2002 Crane Co. General Technology Corp.
November 8, 2002 L-3 Communications Holdings International Microwave Corp.
September 24, 2002 L-3 Communications Holdings Technology, Mgmt & Analysis Corp.
August 29, 2002 Esterline Technologies Corp. Flares Business/BAE Systems North America
March 28, 2002 International Rectifier Corp. Military Product Line/Fairchild Semiconductor
January 7, 2002 L-3 Communications Holdings SY Technology, Inc.
SELECTED TRANSACTION MULTIPLES
IMPLIED ------------------------------
TRANSACTION MULTIPLES MEAN MEDIAN
ENTERPRISE VALUE --------------------- ---- -------
AS A MULTIPLE OF:
LTM revenue 0.7x 0.9x 1.0x
LTM EBITDA 7.4x 7.2x 7.4x
Quarterdeck selected a range about the mean enterprise value to LTM
EBITDA multiple for the Precedent Transaction Analysis which resulted in an
implied valuation range of $5.08 to $6.02 per share of Miltope Group's common
stock.
PREMIUMS PAID ANALYSIS. Quarterdeck conducted a premiums paid analysis
based on the premium of the offer price over the trading prices one day, one
week and one month prior to the announcement date of selected representative
transactions from April 7, 2003 to October 9, 2003. Quarterdeck reviewed the
following transactions in all industries involving acquisitions of public
companies with enterprise values between $25 and $75 million.
DATE ACQUIROR TARGET
- ---- -------- ------
October 9, 2003 Bunker Hill Bancorp NS&L Bancorp, Inc.
September 2, 2003 Flexsteel Industries, Inc. DMI Furniture, Inc.
- --------
(1) This transaction has not yet closed. This calculation was based on the
announcement date of the transaction.
11
July 18, 2003 CIVCO Holding, Inc. Colorado MEDtech Inc.
July 18, 2003 Capital Growth Partners LLC United Park City Mines Co.
July 3, 2003 Investor Group Lillian Vernon Corp.
July 2, 2003 Bruker Daltonics Inc. Bruker AXS, Inc.
July 1, 2003 OpenTV Corp. ACTV Inc.
July 1, 2003 Alcan Inc. Baltek Corp
June 30, 2003 Intuitive Surgical, Inc. Computer Motion, Inc.
June 20, 2003 Classic Bancshares, Inc. First Federal Financial
June 16, 2003 Dendrite International, Inc. SYNAVANT, Inc.
May 5, 2003 Oaktree Capital Management LLC Acorn Products, Inc.
April 25, 2003 Sun Bancorp Inc. Steelton Bancorp, Inc.
April 7, 2003 Krispy Kreme Doughnuts Inc. Montana Mills Bread Co., Inc.
The following table presents the premiums of offer prices over the
trading prices one day, one week and one month prior to the announcement date
for the respective transactions, and the implied premiums based on the cash
merger consideration. The information in the table is based on the closing stock
price of Miltope Group on October 17, 2003.
IMPLIED REPRESENTATIVE TRANSACTION PREMIUM
PREMIUMS PAID TO TRANSACTION ----------------------------------
TRADING AVERAGE PREMIUM LOW MEAN MEDIAN HIGH
---------------- ----------- ---- ----- ------ ------
One Day Prior 2.3% 2.2% 37.0% 39.4% 72.6%
One Week 0.6% 2.9% 37.6% 37.9% 75.9%
One Month -5.7% 2.9% 46.0% 34.1% 155.6%
Quarterdeck selected a range within the mean for all periods for the
Premiums Paid Analysis which resulted in an implied valuation range of $7.63 to
$8.19 per share of Miltope Group's common stock.
LEVERAGED BUYOUT ANALYSIS. Using the operating projections provided to
Quarterdeck by Miltope Group's management, Quarterdeck performed an analysis to
determine the potential price per share, under current market conditions, that a
purchaser in a leveraged buyout could theoretically pay for Miltope Group while
earning targeted returns typical for the financial sponsor industry. In
performing this analysis, Quarterdeck assumed that, (i) the mergers would close
by the end of the 2003 fiscal year and the first projected fiscal year would be
2004; and (ii) a pro forma capital structure including (a) leverage multiples
based on estimated CY 2003 adjusted EBITDA, (b) total new leverage with terms
consistent with market pricing and availability and (c) exit multiples
consistent with publicly traded comparable companies.
The Leveraged Buyout Analysis resulted in an implied valuation range of
$4.25 to $4.45 per share of Miltope Group's common stock.
DISCOUNTED CASH FLOW ANALYSIS. Using the operating projections provided
to Quarterdeck by Miltope Group's management, Quarterdeck performed a discounted
cash flow analysis in which it estimated the value of Miltope Group by adding
the discounted value of Miltope Group's annual projected free cash flows for a
five-year time period to the discounted terminal value for Miltope Group.
Quarterdeck used a terminal value based on the mean values derived by the
comparable company analysis and precedent transaction analysis. Miltope Group's
cash flows and terminal value were discounted to present value using weighted
average cost of capital based on the theoretical cost of capital derived from
Miltope Group's recent trading performance.
12
The Discounted Cash Flow Analysis resulted in an implied valuation
range of $4.45 to $5.84 per share of Miltope Group's common stock.
SUMMARY OF ANALYSES. Based on the analyses described above and certain
qualitative considerations, Quarterdeck noted that the cash merger consideration
was within the implied valuation range resulting from two of the analyses, above
the range of two analyses and below the range of the remaining analysis.
Quarterdeck noted that all of its analyses excluded the potential value of the
CVR. In reaching its opinion, Quarterdeck did not assign any particular weight
to any one analysis or the results yielded by that analysis. Rather, having
viewed these results in the aggregate, Quarterdeck exercised its professional
judgment in determining that, based on the aggregate of the analyses used and
the results they yielded, the merger consideration was fair, from a financial
point of view, to Miltope Group's stockholders other than those perfecting their
statutory appraisal rights. Quarterdeck believed it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analyses and,
accordingly, also made qualitative judgments concerning differences between the
characteristics of Miltope Group, the mergers and the data selected for use in
its analyses.
As described above, in connection with the approval of the mergers, the
board of directors of Miltope Group separately retained Quarterdeck to render
this opinion. Quarterdeck will receive a fee of $100,000 from Miltope Group for
rendering its opinion and making the presentation referred to above. This latter
fee is not contingent upon results of the mergers nor the completion of any
transaction involving Miltope Group. Separately, Quarterdeck will receive a fee
of 2.5% of the merger consideration, less any fee paid pursuant to Quarterdeck's
fairness opinion engagement letter, from Miltope Group in connection with the
advisory services it has provided pursuant to Quarterdeck's financial advisor
engagement letter. This fee is contingent upon the completion of a transaction
involving Miltope Group. In addition, should the value of the CVRs elevate the
total enterprise value of the transaction over $45 million after the closing of
the transaction, Quarterdeck will be entitled to additional compensation based
on a new enterprise value. If no transaction occurs, Quarterdeck is entitled to
receive $500,000 from Miltope Group. The terms of both Quarterdeck's engagement
letter and its fairness opinion engagement letter, which are customary in
transactions of this nature, were negotiated at arm's length between Miltope
Group and Quarterdeck. In addition under both engagements, Miltope Group has
agreed to reimburse Quarterdeck for its out-of-pocket expenses, including
attorney's fees, incurred in connection with its engagement and to indemnify
Quarterdeck and certain related persons against any liabilities and expenses
arising out of or in conjunction with its rendering of services pursuant to its
engagement, except if such liabilities are found in a final court judgment to be
the direct result of Quarterdeck's gross negligence, bad faith or willful
misconduct. Quarterdeck has, in the past two years, provided investment banking
services to Singapore Aerospace, an affiliate of Vision Technologies Kinetics,
for which Quarterdeck received $100,000.
OPINION OF LEGACY PARTNERS GROUP
On June 19, 2003, Miltope Group retained Legacy to act as its financial
advisor in connection with the mergers and related matters based on its
qualifications, expertise, reputation, and its knowledge of the business and
affairs of Miltope Group.
The fairness opinion of Legacy is described below.
At the October 21, 2003 meeting of Miltope Group's board of directors,
Legacy reviewed and considered the terms of the mergers and rendered its oral
opinion to the board of directors that, as of that date, the $5.78 cash merger
consideration to be received by the holders of Miltope Group's common stock as
provided in the draft of the Agreement and Plan of Merger, dated as of October
21, 2003, was fair from a financial point of view to the holders of Miltope
Group's common stock (other than holders of dissenting shares and GUI). Legacy
subsequently delivered to Miltope Group's board of directors a written opinion,
dated October 21, 2003, confirming its oral opinion. Pursuant to Legacy's
engagement letter, Legacy was not retained for the purpose of making a
recommendation, nor did it make a recommendation, as to the amount of
consideration to be paid in the mergers. No limitations were imposed by Miltope
Group's board of directors upon Legacy with respect to the investigations made
or the procedures followed by Legacy in rendering its opinion.
13
The full text of Legacy's opinion, dated October 21, 2003, is attached
as Annex F to this proxy statement. Legacy's opinion describes, among other
things, the assumptions made, procedures followed, matters considered, and
limits on the review undertaken in connection with that opinion. Miltope Group's
stockholders are urged to, and should, read the opinion carefully and in its
entirety. Legacy addressed its opinion to Miltope Group's board of directors.
The opinion relates only to the fairness, from a financial point of view, of the
$5.78 per share cash consideration to be received by the holders of Miltope
Group's common stock (other than holders of dissenting shares and GUI) and does
not address any other aspect of the mergers. It does not constitute a
recommendation to any holder of Miltope Group's common stock as to how to vote
at the meeting. The summary of Legacy's opinion set forth in this document is
qualified in its entirety by reference to the full text of such opinion.
In connection with rendering its opinion, Legacy, among other things:
o Reviewed the draft of the Agreement and Plan of Merger,
including the financial terms of the agreement;
o Reviewed certain publicly available business, financial and
other information regarding Miltope Group;
o Reviewed the current and historical market pricing and trading
volume of Miltope Group's stock;
o Compared the publicly available business, financial and other
information regarding Miltope Group with similar information
regarding certain other publicly traded companies that it
deemed relevant;
o Compared the proposed financial terms of the draft of the
Agreement and Plan of Merger with the financial terms of
certain other business combinations and transactions that it
deemed relevant;
o Developed discounted cash flow models for Miltope Group,
relying on forecasts provided by management;
o Developed leveraged buyout models of Miltope Group based on
those same management projections;
o Considered other information such as financials studies as
well as financial and economic/market criteria that it deemed
relevant in the context of determining the fairness, from a
financial point of view, of the proposed transactions;
o Held discussions with members of senior management of Miltope
Group with respect to its business, prospects and strategic
objectives; and
o Reviewed the contents of the data room prepared by Miltope
Group and its advisors.
In rendering its opinion, Legacy relied upon the accuracy and
completeness of the foregoing financial and other information it reviewed for
the purposes of its opinion, and Legacy did not assume any responsibility for
any independent verification of such information. Legacy did not prepare or
obtain any independent valuation or appraisal of any of the assets or
liabilities of Miltope Group or concerning the solvency or fair value of Miltope
Group (within the context of a solvency analysis). With respect to financial
forecasts, Legacy assumed that they had been reasonably prepared on bases
reflecting the best currently available estimates and judgments of management of
Miltope Group as to the future financial performance of Miltope Group, and
Legacy expressed no view as to the reasonableness of such forecasts, projections
and estimates or the assumptions on which they were based.
Further, Legacy's opinion was necessarily based on economic, monetary,
market and other conditions as in effect on, and the information made available
to Legacy as of, the date of its opinion. Legacy's opinion did not address any
aspect of the mergers other than the $5.78 cash merger consideration to the
extent provided in its opinion, and Legacy expressed no opinion as to the CVRs.
Legacy also expressed no opinion as to the underlying business decision to
effect the mergers.
In rendering its opinion, Legacy assumed that the mergers would be
consummated on the terms described
14
in the draft of the Agreement and Plan of Merger without any waiver of any
material terms or conditions by Miltope Group, and that obtaining the necessary
regulatory approvals for the mergers would not have a material adverse effect on
Miltope Group.
The following is a summary of material financial analyses performed by
Legacy in preparation of its oral opinion rendered on October 21, 2003, and
reviewed with Miltope Group's board of directors on that date. These summaries
of financial analyses include information presented in tabular format. In order
to fully understand the financial analyses used by Legacy, the tables must be
read together with the accompanying text of each summary. The tables alone do
not constitute a complete description of the financial analyses.
VALUATION
As part of its analysis, Legacy employed four valuation methodologies:
(1) a comparable companies analysis, (2) a comparable transactions analysis, (3)
a discounted cash flow analysis and (4) a leveraged buyout analysis.
COMPARABLE COMPANIES ANALYSIS. Legacy presented an overview of Miltope
Group, including a review of Miltope Group's historical financial data, and
compared Miltope Group's financial performance, market multiples, and stock
price performance to that of a company index consisting of a certain group of
defense-aerospace companies, also referred to as the "Peer Index". The Peer
Index included data for 11 publicly traded defense-aerospace companies that
Legacy considered comparable to Miltope Group for the purposes of this analysis,
and included the following companies:
The Allied Defense Group, Inc. Innovative Solutions & Support, Inc.
DRS Technologies, Inc. Nortech Systems Incorporated
Ducommun Incorporated Sparton Corporation
Elbit Systems Ltd. Sypris Solutions, Inc.
Esterline Technologies Corporation Teledyne Technologies Incorporated
Herley Industries, Inc.
With regard to Miltope Group's financial performance, Legacy compared
various financial statistics to analyze the operating performance of Miltope
Group versus the Peer Index, using data for the twelve months ended June 30,
2003, or in the case of the companies in the Peer Index the latest available
date.
Legacy also presented an overview of Miltope Group's market multiples
and stock price performance as compared to the respective statistics of the Peer
Index. The comparative analysis for Miltope Group was presented using the
closing price of its common stock of $5.65 on October 17, 2003. Current prices
of the companies in the Peer Index are also as of October 17, 2003. Comparative
stock performance data from this analysis is shown in the following table:
Mean Cash
Prices as a multiple of: Peer Index Miltope Consideration
---------- ------- -------------
LTM Net Sales 0.76x 0.72x 0.73x
LTM EBITDA 7.2x 7.4x(1) 7.6x
LTM EBIT 10.5x 8.8x(1) 8.9x
15
- ----------
(1) Excludes $150,000 in asset impairment, $303,000 in non-recurring
consolidation expense and legal expenses related to the DRS litigation.
COMPARABLE TRANSACTIONS ANALYSIS. Legacy performed an analysis of the
consideration paid in multiple acquisitions of companies. The consideration paid
as a multiple of revenue and EBITDA in the two precedent transactions Legacy
considered most relevant was compared to the multiples implied by the cash
consideration offered to holders of the common stock of Miltope Group (other
than holders of dissenting shares) in the mergers. The two transactions
considered by Legacy to be most relevant were:
Announcement Date Target Name Acquirer Name
----------------- ----------- -------------
08/21/03 ECC International Corp. Cubic Corporation
07/23/03 Simula, Inc. Armor Holdings, Inc.
The multiples of revenues and EBITDA for the precedent transactions
were based on the acquired company's revenues and EBITDA for the most recent
twelve months prior to announcement of the relevant transaction.
ECC/Cubic Simula/Armor Cash Consideration
--------- ------------ ------------------
Price as a matter of:
Revenues 1.11x 1.05x 0.73x
EBITDA 7.4x 6.1x 7.6x
DISCOUNTED CASH FLOW ANALYSIS. Legacy performed a five-year discounted
cash flow analysis to determine a range of present values per share of Miltope
Group's common stock. The earnings projections that formed the basis for the
cash flow and the terminal value were based on management's estimates for the
years 2004 through 2008. The cash flow stream and terminal values were
discounted to present values using a range of discount rates from 11% to 13%,
which Legacy viewed as the appropriate discount rate range for a company with
Miltope Group's risk characteristics.
Two methods of discounted cash flow analysis were employed: a terminal
EBITDA multiple method using valuation multiples of 6.0x, 6.5x and 7.0x with
implied free cash flow growth rates ranging from 2.4% to 5.4%; and a constant
free cash flow growth method using free cash flow growth rates of 2.5%, 3.0% and
3.5% with implied EBITDA multiples ranging from 4.9x to 6.9x. Employing these
methods produced an implied per share value range for Miltope Group's stock of
$4.14 to $6.02.
LEVERAGED BUYOUT ANALYSIS. Legacy also performed a leveraged buyout
analysis to arrive at a range of values for Miltope Group's stock. This analysis
assumed target equity returns between 25% and 30% and EBITDA exit multiples of
5x to 6x. The projections that formed the basis for this analysis were
management's estimates for the years 2004 through 2008. Legacy used assumptions
regarding leverage multiples and interest rates that it considered to be
reasonable under the circumstances. This analysis produced an implied valuation
of between $4.25 and $4.75 per share for Miltope Group's stock.
The summaries set forth above do not purport to be complete
descriptions of the analyses conducted by Legacy. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to a partial
16
analysis or summary description. Legacy believes that its analyses must be
considered as a whole and that selecting portions of its analyses, without
considering the analyses taken as a whole, would create an incomplete view of
the analyses underlying its opinion. In addition, Legacy considered the results
of all such analyses and did not assign relative weights to any of the analyses,
so that the ranges of valuations resulting from any particular analysis
described above should not be taken to be Legacy's view of the actual value of
Miltope Group's common stock.
In performing its analyses, Legacy made numerous assumptions with
respect to industry performance, general business, economic and regulatory
conditions and other matters, many of which are beyond the control of Miltope
Group. The analyses performed by Legacy are not necessarily indicative of actual
values, trading values or actual future results that might be achieved, all of
which may be significantly more or less favorable than suggested by these
analyses. Legacy's analyses were prepared solely as part of its analysis of the
fairness, from a financial point of view, of the $5.78 per share cash
consideration to be received by the holders of Miltope Group's common stock
(other than holders of dissenting shares and GUI) in the mergers and do not
purport to be appraisals or to reflect the prices at which Miltope Group might
be sold.
No company or transaction used in any of the analyses is identical to
Miltope Group or the mergers. Accordingly, an analysis of the results of the
foregoing necessarily involves complex considerations and judgments concerning
financial and operating characteristics of Miltope Group and other factors that
could affect the public trading value of the companies to which they are being
compared. Mathematical analysis (such as determining the average or median) is
not in itself a meaningful method of using comparable transaction data or
comparable company data.
In addition, as described above, Legacy's opinion was one of many
factors taken into consideration by Miltope Group's board of directors in making
its determination to approve the mergers. Consequently, the analyses described
above should not be viewed as determinative of the opinion of Miltope Group's
board of directors with respect to the value of Miltope Group or whether the
board of directors would be willing to agree to a different consideration. The
consideration to be received by the holders of Miltope Group's common stock
(other than holders of dissenting shares) was determined through negotiations
between Miltope Group and Vision Technologies Systems and was approved by
Miltope Group's board of directors.
As part of its investment banking business, Legacy is continuously
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, competitive biddings, and valuations for corporations and
other purposes.
As consideration for Legacy's services, Miltope Group has paid Legacy a
fee of $112,500. In addition, Miltope Group has agreed, among other things, to
reimburse Legacy for all out-of-pocket expenses incurred in connection with the
services provided by Legacy, and to indemnify and hold harmless Legacy and
certain related parties from and against certain liabilities and expenses, which
may include certain liabilities under the federal securities laws, in connection
with its engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS THAT DIFFER FROM YOUR INTERESTS
In considering the recommendation of the board of directors, you should
be aware that certain officers, directors and stockholders of Miltope Group have
relationships or interests in the mergers and the transactions contemplated
thereby, including those referred to below, that are different from the
interests of other stockholders and that may present actual or potential
conflicts of interest.
In connection with the closing of the mergers, GUI will receive
approximately $21.2 million and 3,664,478 CVRs for its stock. If Miltope Group
had not agreed to the mergers, GUI would not have been able to sell any
substantial portion of its shares of Miltope Group's common stock due to the
volume restriction of Rule 144 and the general lack of trading volume. Henry Guy
and David Marcus are members of both Miltope Group's board of directors and
GUI's board of directors.
Vision Technologies Systems required, as a condition to the mergers,
that GUI enter into, and GUI has entered into, voting agreements with Miltope
Group, Vision Technologies Kinetics and VTK
17
Merger Subsidiary. Under the voting agreements, GUI has agreed to vote all of
the Miltope Group common stock it owns in favor of the adoption of the Agreement
and Plan of Merger and approval of the mergers. GUI owns approximately 61.5% of
Miltope Group's outstanding common stock. In the event that the board of
directors of Miltope Group terminates the Agreement and Plan of Merger to accept
a superior proposal, the Secondary Voting Agreement, pursuant to which GUI is
required to vote shares representing approximately 26.5% of Miltope Group's
outstanding common stock in favor of the mergers, may be terminated. GUI would
continue to be obligated, under the Primary Voting Agreement, to vote shares
representing approximately 35% of Miltope Group's outstanding common stock in
favor of the mergers.
Each share of Miltope Group's common stock entitles the holders thereof
to one vote on the Agreement and Plan of Merger. Because GUI has agreed to vote
approximately 61.5% of Miltope Group's outstanding common stock in favor of the
adoption of the Agreement and Plan of Merger and approval of the mergers, unless
Miltope Group's board of directors exercises its right to accept a superior
proposal, the requisite vote to adopt the Agreement and Plan of Merger and
approve the mergers is assured.
As of October 21, a total of 532,336 shares of Miltope Group's common
stock were reserved for issuance pursuant to outstanding options granted under
Miltope Group's common stock option plans, of which 287,960 were held by
executive officers and five directors of Miltope Group. Prior to the effective
time of the mergers, the board of directors will take appropriate action to
provide that, immediately prior to the effective time of the mergers, each then
outstanding option to purchase Miltope Group's shares will become exercisable in
full, and to the extent not so exercised or validly canceled, will be forfeited
as of the effective time. The board of directors may additionally take such
action as may be necessary to permit any holder of options to, in lieu of
exercise, elect to have any such option cancelled at the effective time and to
receive (A) a payment in cash equal to the product of (i) the excess, if any, of
$5.78 over the applicable exercise price per share of common stock subject to
such stock option and (ii) the total number of shares of common stock subject to
such stock option and (B) only if cash is paid for such option, one CVR for each
share subject to such option.
Under the CVR Agreement, Miltope Corporation is required to reimburse
GUI, as the stockholder representative, for reasonable expenses and
disbursements incurred in connection with its rights and obligations under the
CVR Agreement.
As a condition to the mergers, Vision Technologies Systems required
that GUI enter into an indemnity agreement with respect to certain tax and
environmental matters. On October 21, 2003, for the benefit of all of Miltope
Group's Stockholders, and for no additional consideration, GUI entered into the
indemnity agreement.
On October 21, 2003, Miltope Group, Miltope Corporation and GUI entered
into a letter agreement, pursuant to which, among other things, GUI has agreed
to accept deferred repayment of the amount of $649,000 due to GUI for certain
management and consulting services provided by GUI to Miltope Group and Miltope
Corporation. The services rendered by GUI were not provided in connection with,
and do not relate to, the mergers.
Until the effective time of the mergers, Miltope Group will keep in
effect in its by-laws, and thereafter for a period of six years, Vision
Technologies Kinetics will keep in effect in its articles of incorporation or
by-laws, certain provisions that provide for the indemnification and exculpation
of the present or former officers, directors, employees and agents of Miltope
Group. These provisions may protect the current directors and officers of
Miltope Group and its subsidiaries from potential liability in the scope of
their service.
As more fully described in the Agreement and Plan of Merger, Miltope
Corporation will maintain officers' and directors' liability insurance covering
those persons who are covered by Miltope Group's directors' and officers'
insurance as of the date of the Agreement and Plan of Merger or the effective
time of the mergers for a period of one year after the effective time and, for a
period of five years thereafter, will maintain directors' and officers'
insurance for such persons through the directors' and officers' insurance of an
affiliate of Vision Technologies Kinetics on terms consistent with those
applicable to other officers and directors covered under such directors' and
officers' insurance. Such insurance may protect the current directors and
officers of Miltope Group and its subsidiaries from potential liability in the
scope of their service.
The Agreement and Plan of Merger also provides that, after the
effective time of the mergers, Miltope Corporation is required to arrange for
each employee, director and officer of Miltope Group and its subsidiaries who
was participating in any of the benefit plans of Miltope Group or any of its
subsidiaries immediately before the effective time of the mergers and who
remains an employee, director or officer of Miltope Corporation after the
effective time of the mergers, to be eligible to participate in any counterpart
benefit plans in which employees, directors and officers of Miltope Corporation
participate.
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Ronald V. Hite is the Chairman and Chief Executive Officer of Cypress
International, Inc. In March 2002, approximately 13 months before Mr. Hite
became a member of Miltope Group's board of directors, Cypress and Hoak
Breedlove Wesneski & Co. ("HBW") entered into an agreement, pursuant to which,
HBW agreed to pay Cypress 15% of any retainers and success fees received by HBW
from clients referred to HBW by Cypress. Pursuant to that arrangement and the
mergers, Cypress received a fee from HBW, Vision Technologies Kinetics's
financial advisor, equal to 15% of the retainer that HBW received from Vision
Technologies Kinetics with respect to the Miltope Group opportunity and will
receive, upon the closing of the mergers, a fee equal to 15% of the success fee
that HBW will receive from Vision Technologies Kinetics if the mergers are
effected.
The board of directors was aware of these potential and actual
conflicts of interest and considered them in evaluating the proposed mergers.
EFFECTS OF THE MERGERS
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.
Pursuant to the Agreement and Plan of Merger, the certificate of incorporation
and bylaws of Miltope Corporation in effect immediately prior to the effective
time will be the certificate of incorporation and bylaws of the surviving
corporation.
MARKET FOR THE SHARES. Miltope Group's shares of common stock are
currently listed and traded on The Nasdaq SmallCap Market under the symbol
"MILT". Upon consummation of the mergers, Miltope Group will no longer meet the
criteria for continued listing on The Nasdaq SmallCap Market or trading on any
other securities market and will accordingly be delisted.
CONTINUED INTEREST IN MILTOPE GROUP. Upon the effectiveness of the
mergers, Miltope Group will cease to exist. Under the DGCL, stockholders of
Miltope Group who do not vote for the adoption of the Agreement and Plan of
Merger and approval of the mergers and who comply with the requirements of the
DGCL on appraisal rights may elect to receive, in cash, the judicially
determined fair market value of their shares of common stock in lieu of the
merger consideration of $5.78 in cash and one CVR per share.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material Federal income tax
consequences of the mergers to holders of Miltope Group's common stock. It does
not address all aspects of Federal income taxation that may be important to you
in light of your particular circumstances. For example, it does not address tax
consequences that may apply to you if you are a taxpayer that is subject to
special treatment under the Federal income tax laws, such as a bank, financial
institution, broker-dealer, insurance company, foreign person, or tax-exempt
entity, or if you acquired your Miltope Group's common stock by exercising
employee stock options or otherwise as compensation. It also does not address
any aspect of state, local or foreign taxation. This discussion assumes that, at
the time of the mergers, you will hold your Miltope Group's common stock as a
capital asset.
The following discussion is based on the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury Regulations promulgated thereunder,
administrative rules and practice, and judicial precedent, all as of the date
hereof. All of these authorities are subject to change, possibly with
retroactive effect, and any such change could alter the tax consequences
discussed herein. Miltope Group has not requested and will not request a ruling
from the Internal Revenue Service (the "Service") as to any of the federal tax
consequences of the mergers, and there can be no assurance that the Service will
not disagree with or seek to challenge any of the conclusions set forth herein.
ALL HOLDERS OF MILTOPE GROUP'S COMMON STOCK ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL OR OTHER TAX CONSEQUENCES TO
THEM OF THE MERGER.
GENERAL TAX TREATMENT TO MILTOPE GROUP'S STOCKHOLDERS
In general, the mergers will be a taxable transaction to holders of
Miltope Group's common stock. Unless open transaction treatment applies (as
discussed below), and except as discussed under "Characterization of the CVRs,"
you will recognize gain or loss at the time of the mergers measured by the
difference between (1) the amount of cash and the fair market value (at the time
of the mergers) of the CVRs you receive and (2) your tax basis in your Miltope
Group's common stock. Such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if your holding period is more than one year.
Your initial tax basis in the CVRs will equal the fair market value of such CVR
upon receipt. The holding period of the CVRs will begin on the day following the
date of the mergers. The installment method of reporting any gain will not be
available with respect to the sale of your shares of Miltope Group's common
stock.
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If a payment is made with respect to a CVR, you will recognize gain in
the amount by which the payment exceeds your tax basis in the CVR. If no payment
is made or the payment is less than your tax basis in the CVR, you will
recognize a loss. The character of any gain or loss recognized on such a payment
is not entirely clear, and may depend on the characterization of the CVRs for
tax purposes (see "Characterization of the CVRs").
If the fair market value of the CVRs at the time of the mergers cannot
be determined, open transaction treatment might be available with respect to the
reporting of gain on the mergers. It is the position of the Internal Revenue
Service, reflected in Treasury Regulations, that only in "rare and extraordinary
cases" is the value of property so uncertain that open transaction treatment is
available. If "open transaction" treatment does apply, you would not take the
CVRs into account in determining your gain or loss at the time of the mergers.
Instead, at that time you would recognize gain (but not loss) to the extent the
cash you receive exceeds your tax basis in your Miltope Group's common stock.
Thereafter, payments received under the CVRs (other than amounts treated as
imputed interest) would first be treated as a non-taxable return of basis to the
extent the cash you received did not exceed your tax basis in your Miltope
Group's common stock, with any excess treated as capital gain. Such capital gain
will be long-term capital gain if you held your Miltope common stock for more
than one year. If the DRS litigation is ultimately resolved in such a way that
the amount (if any) that you receive with respect to the CVR (other than any
amount treated as imputed interest), plus the amount of cash that you received
at the time of the mergers, is less than your basis in your Miltope Group's
common stock, you will recognize the difference as a loss at that time. Such
loss will be capital, and will be long-term if, at the time of the mergers, you
held your Miltope Group's common stock for more than one year. Any amount
treated as imputed interest will be taxable as ordinary income (whether you
otherwise have a gain or loss).
There is no authority directly on point with respect to whether the
receipt of CVRs under the mergers is eligible for open transaction treatment and
accordingly, holders of CVRs are urged to consult their tax advisors regarding
this issue.
CHARACTERIZATION OF THE CVRS
Due to a lack of controlling legal authority with respect to
instruments similar to the CVRs, the characterization of the CVRs for tax
purposes is not clear. However, it is likely that the CVRs will be treated as
either (i) debt of Miltope Corporation, (ii) a contractual right not treated as
debt, (iii) an equity interest in Miltope Corporation, or (iv) an undivided
interest in the DRS litigation.
In general, the characterization of the CVRs should not materially
affect the tax consequences as discussed above, except that:
o If the CVRs are treated as debt instruments, under the contingent
payment debt instrument rules a holder would be required to include
currently an amount in income as interest (based on the yield of
"comparable" debt instruments) in advance of the receipt of any
payment, regardless of a holder's method of accounting. THUS, UNDER
THIS CHARACTERIZATION, YOU COULD BE REQUIRED TO INCLUDE AMOUNTS IN
INCOME DURING THE PERIOD YOU HOLD THE CVRs, EVEN THOUGH YOU WILL HAVE
RECEIVED NO CASH AND MAY NOT EVER RECEIVE SUCH AMOUNTS.
o If the CVRs are treated as equity, it is possible that, at the time of
the mergers, you will only recognize gain with respect to the portion
of your Miltope Group's common stock that is exchanged for cash, and
not with respect to that portion which is exchanged for CVRs.
o As noted above, the character of income recognized in respect of a
payment or the CVRs may differ depending on how the CVRs are
characterized.
You should consult your own tax advisor as to the characterization of
the CVRs for tax purposes and the consequences to you of such characterization.
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BACKUP WITHHOLDING
Holders of Miltope Group's common stock may be subject to backup
withholding at the current rate of 28 percent (or such other rate that may be in
effect at the time payment is made with respect to the CVRs, if any) with
respect to consideration received pursuant to the mergers or upon a payment
under the CVRs unless you provide a correct taxpayer identification number in
the manner required and you certify that you are not subject to backup
withholding or are an "exempt recipient." Backup withholding is not an
additional tax, but rather may be credited against the taxpayer's tax liability
for the year.
The foregoing summary of United States federal income tax consequences
is included herein for general information only. Accordingly, shareholders are
urged to consult their own tax advisors regarding the federal, state, local,
foreign, and other tax consequences of the exchange offer in light of their
particular circumstances.
REGULATORY FILINGS AND APPROVALS
GENERAL
Miltope Group does not believe that any material federal or state
regulatory approvals, filings or notices are required by Miltope Group in
connection with the mergers other than: (i) filings required under the Exchange
Act; (ii) filing of a certificate of merger with the Secretary of State of the
State of Delaware; (iii) filing of articles of merger with the Secretary of
State of the State of Alabama; and (iv) as described further below, required
filings with CFIUS pursuant to the Exon-Florio Amendment. Miltope Group believes
that none of these filings would present an obstacle to the prompt completion of
the mergers.
THE EXON-FLORIO AMENDMENT
The Exon-Florio Amendment authorizes the President of the United States
or his designee to make an investigation to determine the effects on national
security of mergers, acquisitions and takeovers by or with foreign persons which
could result in foreign control of persons engaged in interstate commerce in the
United States. The President has delegated authority to investigate proposed
transactions to the CFIUS.
In order for the President to exercise his authority to suspend or
prohibit an acquisition, the President must make two findings: (i) that there is
credible evidence that leads the President to believe that the foreign interest
exercising control might take action that threatens to impair national security
and (ii) that provisions of law other than the Exon-Florio Amendment and the
International Emergency Economic Powers Act do not provide adequate and
appropriate authority for the President to protect the national security in
connection with the acquisition. The President's actions are not subject to
judicial review. If the President makes such findings, he may take action for
such time as he considers appropriate to suspend or prohibit the relevant
acquisition. The President may direct the Attorney General to seek appropriate
relief, including divestment relief, in the District Courts of the United States
in order to implement and enforce the Exon-Florio Amendment.
Absent certain conditions, the Exon-Florio Amendment does not obligate
the parties to an acquisition to notify CFIUS of a proposed transaction.
However, if notice of a proposed acquisition is not submitted, then the
transaction remains indefinitely subject to review by the President under the
Exon-Florio Amendment.
On November __, 2003, Miltope Group and Vision Technologies Kinetics
filed a joint notice of the proposed mergers with CFIUS. Although Miltope Group
believes that the mergers should not raise any national security concerns, there
can be no assurance that CFIUS will not determine to conduct an investigation of
the mergers and, if an investigation is commenced, there can be no assurance
regarding the outcome of such investigation.
Any determination that an investigation is called for must be made
within 30 days of notice of the proposed transaction. If a determination is
made, any investigation must be completed within 45 days of the determination
and any decision to take action must be announced within 15 days of completion
of the investigation.
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APPRAISAL RIGHTS
Record holders of the common stock are entitled to appraisal rights
under Section 262 of the DGCL in connection with the mergers. The following
discussion is not a complete statement of the law pertaining to appraisal rights
under the DGCL and is qualified in its entirety by reference to the full text of
Section 262 which is reprinted in its entirety as Annex G to this proxy
statement. Except as set forth herein and in Annex G, holders of common stock
will not be entitled to appraisal rights in connection with the mergers.
Under the DGCL, record holders of common stock who follow the
procedures set forth in Section 262 and who have not voted in favor of the
adoption of the Agreement and Plan of Merger and approval of the mergers
(including record holders who abstain from voting) will be entitled to have
their common stock appraised by the Delaware Court of Chancery (the "Court") and
to receive payment of the "fair value" of such shares, exclusive of any element
of value arising from the accomplishment or expectation of the mergers, together
with a fair rate of interest, as determined by such court.
Under Section 262, where a merger agreement is to be submitted for
adoption, or a merger is submitted for approval, at a meeting of stockholders,
as in the case of the special meeting, not less than 20 days prior to such
meeting, Miltope Group must notify each of the holders of common stock at the
close of business on the record date for such meeting that such appraisal rights
are available and include in each such notice a copy of Section 262. This proxy
statement constitutes such notice for purposes of the special meeting. Any
stockholder of record who wishes to exercise appraisal rights should review the
following discussion and Annex G carefully because failure to timely and
properly comply with the procedures specified in Section 262 will result in the
loss of appraisal rights under the DGCL.
A holder of common stock wishing to exercise appraisal rights must
deliver to Miltope Group, before the vote on the adoption of the Agreement and
Plan of Merger and approval of the mergers at the special meeting, a written
demand for appraisal of such holder's common stock. A holder of common stock
will not satisfy the notice requirement under Section 262, if the holder merely
votes against the mergers. In addition, a holder of common stock wishing to
exercise appraisal rights must hold of record such common stock on the date the
written demand for appraisal is made and must continue to hold such common stock
through the effective time of the mergers.
Only a holder of record of common stock is entitled to assert appraisal
rights for the common stock registered in that holder's name. A demand for
appraisal should reasonably inform Miltope Group of the holder's identity and
that the holder intends to demand an appraisal with respect to such holder's
common stock.
Within 10 days after the effective time, Miltope Group, as the
surviving corporation, must send a notice as to the effectiveness of the mergers
to each person who has satisfied the appropriate provisions of Section 262 and
who has not voted in favor of adoption of the Agreement and Plan of Merger and
approval of the mergers as of the effective time. Within 120 days after the
effective time, but not thereafter, the surviving corporation or any such
stockholder who has satisfied the foregoing conditions and is otherwise entitled
to appraisal rights, may file a petition in the Court demanding a determination
of the "fair value" of the common stock held by such stockholder. If no such
petition is filed, appraisal rights will be lost for all stockholders who had
previously demanded appraisal of their common stock. Stockholders of Miltope
Group who wish to exercise their appraisal rights should therefore regard it as
their obligation to take all steps necessary to perfect their appraisal rights
in the manner prescribed in Section 262.
Within 120 days after the effective time, any record holder of common
stock who has complied with the provisions of Section 262 will be entitled, upon
written request, to receive from the surviving corporation a statement setting
forth the aggregate number of shares of common stock not voted in favor of
approval of the Agreement and Plan of Merger and with respect to which demands
for appraisal were received by Miltope Group, and the aggregate number of
holders of such shares of common stock. Such statement must be mailed within ten
(10) days after the written request therefor has been received by the surviving
corporation or within ten (10) days after expiration of the time for delivery of
demands for appraisal under Section 262, whichever is later.
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If a petition for appraisal is timely filed, after a hearing on such
petition, the Court will determine the holders of common stock entitled to
appraisal rights and will appraise the "fair value" of the shares of common
stock, exclusive of any element of value arising from the accomplishment or
expectation of the mergers, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the "fair value." Holders considering
seeking appraisal should be aware that the "fair value" of their common stock as
determined under Section 262 could be more than, the same as or less than the
value of the merger consideration that they would otherwise receive if they had
not sought appraisal of their common stock. The Delaware Supreme Court has
stated that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered in the appraisal proceedings. In addition, Delaware
courts have decided that the statutory appraisal remedy, depending on factual
circumstances, may or may not be a dissenter's exclusive remedy. The Court will
also determine the amount of interest, if any, to be paid upon the amounts to be
received by persons whose shares of common stock have been appraised. The costs
of the action may be determined by the Court and taxed upon the parties as the
Court deems equitable. Upon application of a holder, the Court may also order
that all or a portion of the expenses incurred by any holder of common stock in
connection with an appraisal, including without limitation, reasonable
attorneys' fees and the fees and expenses of experts, be charged pro rata
against the value of all of the common stock entitled to appraisal.
Any stockholder of Miltope Group who has duly demanded an appraisal in
compliance with Section 262 will not, after the effective time, be entitled to
vote such stockholder's common stock for any purpose nor, after the effective
time, be entitled to the payment of dividends or other distributions thereon
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective time).
If no petition for an appraisal is filed within the time provided, or
if a stockholder of Miltope Group delivers to the surviving corporation a
written withdrawal of his or her demand for an appraisal and an acceptance of
the mergers, within 60 days after the effective time or with the written
approval of the surviving corporation thereafter, then the right of such
stockholder to an appraisal will cease and such stockholder shall be entitled to
receive the merger consideration. No pending appraisal proceeding in the Court
will be dismissed as to any stockholder without the approval of the Court, which
approval may be conditioned on such terms as the Court deems just.
STOCKHOLDERS DESIRING TO EXERCISE THEIR APPRAISAL RIGHTS SHOULD
STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN SECTION 262 OF THE DGCL.
FAILURE TO FOLLOW ANY OF SUCH PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER
OF APPRAISAL RIGHTS UNDER SECTION 262 OF THE DGCL.
THE AGREEMENT AND PLAN OF MERGER
The following is a summary of the material provisions of the Agreement
and Plan of Merger. This summary is qualified in its entirety by reference to
the full text of the Agreement and Plan of Merger, a copy of which is attached
as Annex A to this proxy statement and incorporated herein by reference. Any
capitalized terms used and not defined below have the meanings given to them in
the Agreement and Plan of Merger.
THE MERGERS
The Agreement and Plan of Merger provides that, upon the terms and
provisions of and subject to the conditions set forth in the Agreement and Plan
of Merger, the certificate of merger and the articles of merger, at the
effective time, Miltope Group will be merged with and into Miltope Corporation,
and VTK Merger Subsidiary will be merged with and into Miltope Corporation.
Following the effective time, Miltope Group and VTK Merger Subsidiary will cease
to exist as separate entities and Miltope Corporation shall be the surviving
corporation and a direct wholly-owned subsidiary of Vision Technologies
Kinetics.
The directors of Miltope Corporation immediately prior to the effective
time will be the directors of the surviving corporation. The officers of the
Miltope Corporation immediately prior to the effective time will be the officers
of the surviving corporation.
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EFFECTIVE TIME OF THE MERGERS
The mergers shall become effective upon the filing of both a
certificate of merger with the Secretary of State of the State of Delaware, in
accordance with the DGCL, and articles of merger with the Secretary of State of
the State of Alabama, in accordance with the Alabama Business Corporation Act,
or at such later time as is agreed upon by the parties and specified in the
certificate of merger and articles of merger.
MERGER CONSIDERATION; EXCHANGE PROCEDURE
At the effective time of the mergers, each share of Miltope Group
common stock issued and outstanding immediately prior to the effective time
(except for shares of common stock held in Miltope Group's treasury or by
stockholders who exercise their appraisal rights) will be cancelled and
automatically converted into the right to receive $5.78 in cash, without
interest, and one CVR.
Each CVR represents the nontransferable right to receive a pro rata
share of 50% of the net proceeds, if any, from the lawsuit brought by Miltope
Corporation and PGI against DRS Technologies and other parties, after
adjustments for taxes.
Promptly after the effective time, a paying agent will mail, to each
holder of record of a certificate or certificates which represented outstanding
shares of the capital stock immediately prior to the effective time, a letter of
transmittal and instructions for surrendering such certificates in exchange for
the merger consideration. In accordance with the terms of the CVR agreement,
such holders of record (or their assignees or transferees by death or operation
of law) will be entitled to receive the CVR payment amount, if any, in
connection with the DRS litigation.
Miltope Group's stockholders should not submit their stock certificates
for exchange until receipt of the letter of transmittal and instructions
referred to above.
OPTIONS
As of October 21, a total of 532,336 shares of Miltope Group's common
stock were reserved for issuance pursuant to outstanding options granted under
Miltope Group's common stock option plans Prior to the effective time of the
mergers, the board of directors will take appropriate action to provide that,
immediately prior to the effective time of the mergers, each then outstanding
option to purchase Miltope Group's shares will become exercisable in full, and
to the extent not so exercised or validly canceled, will be forfeited as of the
effective time. The board of directors may additionally take such action as may
be necessary to permit any holder of options to, in lieu of exercise, elect to
have any such option cancelled at the effective time and to receive (A) a
payment in cash equal to the product of (i) the excess, if any, of $5.78 over
the applicable exercise price per share of common stock subject to such stock
option and (ii) the total number of shares of common stock subject to such stock
option and (B) only if cash is paid for such option, one CVR for each share
subject to such option.
REPRESENTATIONS AND WARRANTIES
The Agreement and Plan of Merger contains, subject to specified
exceptions and qualifications, representations and warranties customary in
transactions of this type, including the representations and warranties by
Miltope Group, and in some cases Miltope Corporation, with regard to the
following:
o organization, standing and corporate power;
o capital structure;
o subsidiaries;
o corporate power and authorization;
24
o SEC documents;
o conflicts;
o financial statements;
o certain changes and events (or the absence thereof) since
December 31, 2002;
o tax matters;
o litigation;
o compliance with the Employee Retirement Income Security Act of
1974 (commonly referred to as "ERISA"), as amended;
o environmental matters
o real property and leased property;
o intellectual property;
o material contracts;
o compliance with laws;
o insurance;
o personnel and labor relations;
o brokers and finders;
o delivery of Legacy fairness opinion; and
o vote required;
The Agreement and Plan of Merger also contains representations and
warranties made by Vision Technologies Kinetics and VTK Merger Subsidiary
relating to the following:
o organization, standing and corporate power;
o corporate power and authorization;
o conflicts;
o consents and approvals required for the mergers;
o financing arrangements;
o fees for finders;
o accuracy of information supplied for inclusion in this proxy
statement; and
25
o any status as an "interested stockholder" of Miltope Group.
CONDUCT OF BUSINESS PENDING THE MERGERS
The Agreement and Plan of Merger provides that, except as otherwise
disclosed to Vision Technologies Kinetics and VTK Merger Subsidiary, and with
certain other exceptions, prior to the effective time, Miltope Group will not,
and will not permit its subsidiaries to, do or agree to do any of the following:
o conduct its business in a manner other than in the ordinary
course of business and it shall preserve its business
organization and business relationships;
o issue, sell, transfer or pledge any treasury stock of Miltope
Group or any capital stock of any of its subsidiaries
beneficially owned by it;
o amend its charter, bylaws or similar organizational documents;
o split, combine or reclassify the outstanding shares or any
outstanding capital stock, or authorize or create a new class of
capital stock, of any of Miltope Group's subsidiaries;
o declare, set aside or pay any dividend or other distribution
payable in cash, stock or property, with respect to its capital
stock or enter into any agreement with respect to the voting of
its capital stock;
o issue, sell, pledge, dispose of or encumber any additional shares
of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to
acquire (or stock appreciation rights with respect to), capital
stock of any class of Miltope Group or its subsidiaries, other
than certain shares reserved for issuance pursuant to the
exercise of certain options;
o transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber any assets having a value in excess of $250,000 other
than pursuant to existing contracts or commitments or the sale or
purchase of goods in the ordinary course of business consistent
with past practice, or enter into any commitment or transaction
outside the ordinary course of business consistent with past
practice;
o redeem, purchase or otherwise acquire, directly or indirectly,
any of its capital stock;
o make any change in the compensation payable or to become payable
to any of its officers, directors, agents or consultants, or to
persons providing management services, enter into or amend any
employment, severance, consulting, termination or other
employment-related agreement, arrangement or benefit plan or make
any loans to any of its officers, directors, employees,
affiliates, agents or consultants or make any change in its
existing borrowing or lending arrangements for or on behalf of
any of such persons pursuant to a benefit plan or otherwise;
o with certain exceptions, pay, make or amend any current benefit
plan, agreement or arrangement to provide for any accrual or
arrangement for payment of any pension, retirement allowance or
other employee benefit pursuant to any existing benefit plan,
agreement or arrangement to any officer, director, employee or
affiliate;
o with certain exceptions, pay or make any accrual or arrangement
for payment to any officers, directors, employees or affiliates
of Miltope Group of any amount relating to unused vacation days;
o with certain exceptions, adopt, pay, grant, issue, accelerate, or
accrue salary or other payments or benefits pursuant to any
pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock
appreciation right or other stock-based incentive, group
insurance, severance pay, retirement or other employee benefit
plan, agreement or arrangement,
26
or any employment or consulting agreement with or for the benefit
of any director, officer, employee, agent or consultant;
o modify, amend or terminate any material agreement or waive,
release or assign any material rights or claims, except in each
case in the ordinary course of business consistent with past
practice;
o cancel or terminate any material insurance policy naming Miltope
Group or any of its subsidiaries as a beneficiary or a loss
payable payee without notice to Vision Technologies Kinetics;
o except in the ordinary course of business under lines of credit
in existence on the date hereof, incur or assume any
indebtedness, in each case for borrowed money, in a principal
amount in excess of $250,000 in the aggregate for Miltope Group
and its subsidiaries taken as a whole;
o assume, guarantee, endorse or otherwise become liable or
responsible for any obligations of any other person (other than
those exclusively among Miltope Group and its subsidiaries)
except in the ordinary course of business;
o make any loans, advances or capital contributions to, or
investments in, any other person (other than those exclusively
among Miltope Group and its subsidiaries) unless such loan,
advance, capital contribution or investment is made in the
ordinary course of business consistent with past practice and
does not exceed $50,000 individually and $250,000 in the
aggregate;
o make any commitments for capital expenditures other than in
amounts less than $150,000 individually and $500,000 in the
aggregate;
o acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any interest in any person or
any division thereof or any assets, except in the ordinary course
of business consistent with past practice;
o change any of the accounting methods, policies or procedures used
by it unless required by GAAP;
o except as required by applicable law, make any tax election or
change any tax election already made, adopt any tax accounting
method, change any tax accounting method unless required by
applicable law, enter into any tax allocation agreement, tax
sharing agreement, tax indemnity agreement or closing agreement,
settle any tax claim or assessment or consent to any tax claim or
assessment or any waiver of the statute of limitations for any
such claim or assessment;
o pay, discharge or satisfy any claims, liabilities or obligations,
other than those in the ordinary course of business or those that
Miltope Group or any of its subsidiaries is required to make by
any law, rule or regulation of any governmental entity or by any
contractual obligation not prohibited by the Agreement and Plan
of Merger, in either case, only if such payment, discharge or
satisfaction does not exceed $250,000 in the aggregate;
o pre-pay any long-term debt, except in the ordinary course of
business in an amount not to exceed $250,000 in the aggregate for
Miltope Group and its subsidiaries taken as a whole;
o accelerate or delay collection of notes or accounts receivable in
advance of or beyond their regular due dates or the dates when
the same would have been collected in the ordinary course of
business consistent with past practice;
o delay or accelerate payment of any account payable or in advance
of its due date or the date such liability would have been paid
in the ordinary course of business consistent with past practice;
27
o vary the inventory practices of Miltope Group or its subsidiaries
in any material respect from past practices;
o adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of Miltope Group or any of its subsidiaries (other
than the mergers contemplated by this proxy statement);
o knowingly take any action that would reasonably be expected to
result in any of the conditions to the mergers not being
satisfied, or that would give rise to a right of termination of
the Agreement and Plan of Merger for Vision Technologies Kinetics
or VTK Merger Subsidiary under the Agreement and Plan of Merger;
o enter into any agreement or take any other action that would
present a material risk of delaying the mergers or that would
require a consent of a third party for the consummation of the
mergers;
o enter into any agreement that would have the effect of subjecting
Vision Technologies Kinetics, Miltope Corporation, as the
surviving corporation of the mergers, or any of their affiliates
to any non-compete or other material restrictions on their
respective businesses following the closing;
o waive, release, assign, settle or compromise any material
litigation or arbitration;
o write up, write down or write off the book value of any assets,
individually or in the aggregate, for Miltope Group and its
subsidiaries taken as a whole, in excess of $150,000, except for
depreciation and amortization in accordance with GAAP
consistently applied and except for the write-down of obsolete
inventory in the ordinary course of business;
o take any action to exempt or make not subject to (A) the
provisions of Section 203 of the DGCL, or (B) any other state
takeover law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote shares,
any person (other than Vision Technologies Kinetics, VTK Merger
Subsidiary and any subsidiaries of Vision Technologies Kinetics)
or any action taken thereby, which person or action would have
otherwise been subject to the restrictive provisions thereof and
not exempt therefrom;
o effect a plant closing or mass layoff affecting any site of
employment or one or more facilities or operating units within
any site of employment or facility of Miltope Group or any
subsidiary without the prior written consent of Vision
Technologies Kinetics;
o terminate more than forty-nine (49) employees within a site of
employment or facility of Miltope Group or any subsidiary or
operating unit within a site of employment or facility or
operating unit of Miltope Group or any subsidiary without
providing prior written notice to Vision Technologies Kinetics;
or
o enter into any agreement, contract, commitment or arrangement to
do any of the foregoing or to authorize any of the foregoing.
NO SOLICITATION OF OFFERS; NOTICE OF PROPOSALS FROM THIRD PARTIES
Miltope Group has agreed that it will immediately cease any existing
discussions or negotiations, if any, with any other person of an offer or
proposal concerning any (i) tender or exchange offer involving more than 20% of
its common stock, (ii) merger, consolidation, recapitalization, restructuring or
other business combination or similar transaction involving Miltope Group or its
subsidiaries, (iii) issuance, sale or other disposition (including by way of
merger, consolidation, business combination, share exchange, joint venture or
similar transaction) of Miltope Group's common stock or other equity interests
representing 20% or more of the Miltope Group's voting power, (iv)
28
sale, lease or disposition directly or indirectly by merger, consolidation,
business combination, share exchange, joint venture or otherwise, of assets
representing 20% or more of the consolidated assets, revenues or net income of
Miltope Group and its subsidiaries, or (v) combination of any of the foregoing.
Miltope Group is required to promptly request that all confidential information
furnished on behalf of Miltope Group with respect to such and offer or proposal
be returned. Miltope Group is also required to notify Vision Technologies
Kinetics promptly if any inquiries or proposals are received by, any information
is requested from, or any negotiations or discussions are sought to be initiated
or continued with Miltope Group or its subsidiaries, in each case in connection
with such an offer or proposal including certain details in connection
therewith.
Miltope Group has also agreed in the Agreement and Plan of Merger not
to encourage (including by way of furnishing non-public information), initiate,
participate in, or solicit any such offer or proposal. Miltope Group has agreed
that, in the event of an unsolicited offer or proposal as described above, it
will not engage in negotiations or discussions with, or provide any information
to, any person or company relating to or in connection with the offer or
proposal. In addition, Miltope Group has agreed not to enter into any agreement
with respect to any offer or proposal as described above or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the mergers or any other transaction contemplated by the
Agreement and Plan of Merger.
However, Miltope Group may furnish information concerning its business,
properties or assets to any person pursuant to a customary confidentiality
agreement and may discuss and negotiate and participate in discussions and
negotiations with such person concerning an acquisition proposal if (i) such
person has made a superior proposal and (ii) the board of directors determines
in good faith, after receiving advice from outside legal counsel to Miltope
Group, that the failure to provide such information or to engage in such
discussions or negotiations would constitute a breach of the fiduciary
obligations of the board of directors to Miltope Group's stockholders.
STOCKHOLDERS' MEETING
The Agreement and Plan of Merger provides that Miltope Group will take
all actions necessary in accordance with the laws of the State of Delaware
including calling a special meeting of Miltope Group's stockholders, as promptly
as practicable, which is the special meeting to which this proxy statement
relates, to consider and vote in favor of adoption of the Agreement and Plan of
Merger and approval of the mergers.
PROXY STATEMENT AND RELATED DOCUMENTS
The Agreement and Plan of Merger requires Miltope Group to prepare this
proxy statement and file it with the SEC. Miltope Group will mail this proxy
statement to the stockholders of Miltope Group as soon as the proxy statement
has been cleared by the SEC. Except as expressly permitted in the Agreement and
Plan of Merger, this proxy statement must include the fairness opinion of Legacy
and the recommendation of the board of directors in favor of the approval of
both the mergers and the Agreement and Plan of Merger.
ACCESS TO INFORMATION
The Agreement and Plan of Merger provides that Vision Technologies
Kinetics and its officers, employees, accountants, counsel, financing sources
and other representatives will have reasonable access for reasonable purposes,
during normal business hours prior to closing, to all properties, books,
contracts, commitments and records of Miltope Group and may receive copies of
each additional report or other document filed by Miltope Group pursuant to
federal securities laws and information regarding any material business
development and all other information concerning its business, properties and
personnel as Vision Technologies Kinetics may reasonably request.
CONFIDENTIALITY
The Agreement and Plan of Merger provides that, unless otherwise
provided by law, Vision Technologies
29
Kinetics and VTK Merger Subsidiary are required to keep and will cause their
respective representatives and agents to keep confidential all confidential
information about and furnished by Miltope Group, provided, that Vision
Technologies Kinetics may cause certain confidential information to be disclosed
to prospective financing sources.
INDEMNIFICATION AND INSURANCE
Until the effective time of the mergers, Miltope Group will keep in
effect in its by-laws, and thereafter for a period of six years, Vision
Technologies Kinetics will keep in effect in its articles of incorporation or
by-laws, certain provisions that provide for the indemnification and exculpation
of the present or former officers, directors, employees and agents of Miltope
Group.
As more fully described in the Agreement and Plan of Merger, Miltope
Corporation will maintain officers' and directors' liability insurance covering
those persons who are covered by Miltope Group's directors' and officers'
insurance as of the date of the Agreement and Plan of Merger or the effective
time of the mergers for a period of one year after the effective time and, for a
period of five years thereafter, will maintain directors' and officers'
insurance for such persons through the directors' and officers' insurance of an
affiliate of Vision Technologies Kinetics on terms consistent with those
applicable to other officers and directors covered under such directors' and
officers' insurance.
CONDITIONS TO THE MERGERS
The completion of the mergers depends on a number of conditions being
satisfied, including the following, each of which is more fully described in the
Agreement and Plan of Merger which has been attached to this proxy statement as
Annex A:
The respective obligations of each party to effect the mergers are
subject to the following conditions:
o the affirmative vote of at least a majority of the votes entitled
to be cast by the holders of the common stock of Miltope Group
shall have been obtained; and
o no statute, rule, regulation, order, decree, judgment, ruling or
injunction shall have been instituted, pending, enacted or
promulgated by any governmental entity or any court of competent
jurisdiction which directly restrains or prohibits the
consummation of the mergers in accordance with the terms of the
Agreement and Plan of Merger.
The obligation of Vision Technologies Kinetics and VTK Merger
Subsidiary to effect the mergers is subject to the following additional
conditions:
o (i) each of Miltope Group and Miltope Corporation shall have
performed in all material respects each of its covenants and
agreements contained in the Agreement and Plan of Merger required
to be performed and (ii) each of the representations and
warranties of each of Miltope Group and Miltope Corporation made
in the Agreement and Plan of Merger shall have been true and
correct when made and shall be true and correct in all respects
as if made on and as of the closing date or other date specified
therein;
o the Agreement and Plan of Merger and the documents and
instruments executed and delivered in connection with it shall
have been duly authorized, executed and delivered by each of
Miltope Group and Miltope Corporation and each of Miltope Group
and Miltope Corporation shall have performed or complied with
each such documents and instruments in all material respects;
o there shall not have occurred, since October 21, 2003, any
material adverse effect (as more fully described in the Agreement
and Plan of Merger) or any event or development that would,
individually or in the aggregate, reasonably be expected to have
a material adverse effect;
30
o Miltope Group shall have obtained each material company consent;
o all regulatory approvals, including in particular, under the
Exon-Florio Amendment shall have been obtained and shall be in
full force and effect as of the closing date;
o on or prior to the date of the Agreement and Plan of Merger,
certain persons were required to execute and deliver written
waivers of their rights to receive any payment or benefit to the
extent necessary to avoid treatment as an "excess parachute
payment" under the Internal Revenue Code;
o an indemnity agreement by and among Miltope Corporation, GUI, and
Vision Technologies Kinetics was required to be duly authorized,
executed and delivered by Miltope Corporation and GUI on or prior
to the date of the Agreement and Plan of Merger and must be in
full force and effect as of the closing date and neither Miltope
Corporation nor GUI shall be in breach of the indemnity
agreement; and
o Miltope Group shall have delivered a closing certificate to
Vision Technologies Kinetics.
The obligation of Miltope Group and Miltope Corporation to effect the
mergers is subject to the following additional conditions:
o (i) each of Vision Technologies Kinetics and VTK Merger
Subsidiary shall have performed in all material respects each of
its covenants and agreements contained in the Agreement and Plan
of Merger required to be performed at or prior to the closing
date and (ii) each of the representations and warranties of
Vision Technologies Kinetics and VTK Merger Subsidiary made in
the Agreement and Plan of Merger shall have been true and correct
when made and shall be true and correct in all respects as if
made on and as of the closing date or other date specified
therein;
o the Agreement and Plan of Merger and the documents and
instruments executed and delivered in connection with it shall
have been duly authorized, executed and delivered by each of
Vision Technologies Kinetics and VTK Merger Subsidiary and Vision
Technologies Kinetics and VTK Merger Subsidiary shall have
performed or complied with each such documents and instruments in
all material respects; and
o Vision Technologies Kinetics shall have delivered a closing
certificate to Miltope Group.
TERMINATION
The Agreement and Plan of Merger may be terminated at any time prior to
the effective time as follows:
o by the mutual written consent of Vision Technologies Kinetics and
Miltope Group, in each case acting through its board of
directors;
o by either Vision Technologies Kinetics or Miltope Group if the
consummation of the mergers is prohibited by any court of
competent jurisdiction or other government entity by an order,
decree or ruling, which the parties to the Agreement and Plan of
Merger use their best efforts to vacate, which permanently
prohibits consummation of the mergers in accordance with the
terms of the Agreement and Plan of Merger and is final and
non-appealable and shall not have resulted from a material breach
of representation or warranty covenant by the terminating party;
o by either Vision Technologies Kinetics or Miltope Group if the
stockholders of Miltope Group reject or otherwise fail to adopt
the Agreement and Plan of Merger at a special meeting of
stockholders;
31
o by Vision Technologies Kinetics if, without any material breach
by Vision Technologies Kinetics or VTK Merger Subsidiary of its
representations, warranties, obligations under the Agreement and
Plan of Merger, the closing of the mergers shall not have
occurred on or before the date which is six months from the date
of the Agreement and Plan of Merger, provided, however, that
Vision Technologies Kinetics may not terminate the Agreement and
Plan of Merger if Vision Technologies Kinetics shall have (i)
failed to fulfill any obligation under the Agreement and Plan of
Merger, which failure has been a principal cause of, or resulted
in, the failure of any condition to the closing to have been
satisfied on or before the closing of the mergers, or (ii)
otherwise materially breached the Agreement and Plan of Merger;
o by Miltope Group if, without any material breach by Miltope Group
of its representations, warranties, obligations under the
Agreement and Plan of Merger, the closing of the mergers shall
not have occurred on or before the closing date, provided,
however, that Miltope Group may not terminate the Agreement and
Plan of Merger if Miltope Group shall have (i) failed to fulfill
any obligation under the Agreement and Plan of Merger, which
failure has been a principal cause of, or resulted in, the
failure of any condition to the closing to have been satisfied on
or before the closing of the mergers, or (ii) otherwise
materially breached the Agreement and Plan of Merger;
o by Miltope Group, if (i) Vision Technologies Kinetics shall have
breached in any material respect any material covenant or other
agreement contained in the Agreement and Plan of Merger, (ii) any
representations or warranties of Vision Technologies Kinetics or
VTK Merger Subsidiary contained in the Agreement and Plan of
Merger which are qualified as to materiality shall fail to be
true and correct in all respects when made or as if made at such
time, (iii) any representation or warranty of Vision Technologies
Kinetics or VTK Merger Subsidiary made in the Agreement and Plan
of Merger which is not so qualified shall fail to be true and
correct in all material respects when made or as if made at such
time, or (iv) to allow Miltope Group to enter into an agreement
in accordance with the Agreement and Plan of Merger with respect
to a superior offer, but only after Miltope Group has convened a
special meeting of its stockholders and its stockholders have
rejected the mergers and the Agreement and Plan of Merger, and
after the Miltope Group fulfills its other obligations under the
Agreement and Plan of Merger, which breach or failure to be true
and correct cannot be or has not been cured within ten (10)
business days after Miltope Group gives written notice of the
breach to Vision Technologies Kinetics;
o by Vision Technologies Kinetics, if (i) Miltope Group and Miltope
Corporation shall have breached in any material respect any
material covenant or other agreement contained in the Agreement
and Plan of Merger, (ii) any representations or warranties of
either Miltope Group or Miltope Corporation contained in the
Agreement and Plan of Merger which are qualified as to
materiality shall fail to be true and correct in all respects
when made or as if made at such time, or (iii) any representation
or warranty of Miltope Group and Miltope Corporation made in the
Agreement and Plan of Merger which is not so qualified shall fail
to be true and correct in all material respects when made or as
if made at such time, which breach or failure to be true and
correct cannot be or has not been cured within ten (10) business
days after Vision Technologies Kinetics gives written notice of
the breach to Miltope Group;
o by Vision Technologies Kinetics, if (i) the board of directors of
Miltope Group shall have withdrawn or modified in a manner
adverse to VTK Merger Subsidiary, or failed upon Vision
Technologies Kinetics's request to reconfirm, its approval or
recommendation of the mergers or the Agreement and Plan of
Merger, (ii) the board of directors of Miltope Group shall have
determined to accept, or shall have determined to recommend to
Miltope Group's stockholders that they approve, a takeover
proposal, or Miltope Group shall have entered into or shall have
publicly announced its intention to enter into, a definitive
written agreement or written agreement in principle providing for
a takeover proposal or (iii) a tender offer or exchange offer
that, if successful, would result in any person or group becoming
a beneficial owner of 20% or more of the outstanding shares is
commenced (other than by Vision Technologies Kinetics or an
affiliate of Vision Technologies Kinetics) and the board of
directors fails to recommend against acceptance of such offer by
the stockholders of Miltope Group; or
32
o by Vision Technologies Kinetics if either of the voting
agreements, as more fully described below, shall cease to be in
full force or if GUI is in material breach thereof; or if any
person or group other than Vision Technologies Kinetics, an
affiliate of Vision Technologies Kinetics or GUI becomes the
beneficial owner of 20% or more of the outstanding shares of
Miltope Group, provided that any amounts payable shall be
adjusted less any amounts paid previously.
In the event of termination of the Agreement and Plan of Merger by
either Miltope Group or Vision Technologies Kinetics, written notice of the
termination, and the provision to which such termination is made, will be
provided to the other party and the Agreement and Plan of Merger shall forthwith
become void and have no effect. Nothing in the Agreement and Plan of Merger will
relieve Vision Technologies Kinetics and VTK Merger Subsidiary from liability
for any breach of the Agreement and Plan of Merger or relieve any party from
liability, or limit liability, for any willful breach or willful
misrepresentation under the Agreement and Plan of Merger, or prevent any party
from asserting any equitable relief available to it.
EXPENSE REIMBURSEMENT
In the event that the Agreement and Plan of Merger is terminated for
one of the following reasons, Miltope Group is required to pay Vision
Technologies Kinetics's and VTK Merger Subsidiary's out-of-pocket expenses not
in excess of $1,000,000:
o the stockholders of Miltope Group reject or otherwise fail to
adopt the Agreement and Plan of Merger at a special meeting of
stockholders and no takeover proposal has been made or received
prior to the termination of the Agreement and Plan of Merger;
o Vision Technologies Kinetics terminates the Agreement and Plan of
Merger because Miltope Group or Miltope Corporation has breached
a material representation or warranty under the Agreement and
Plan of Merger or a person or group becomes a beneficial owner of
20% or more of the outstanding shares of Miltope Group and no
takeover proposal has been made or received prior to the
termination of the Agreement and Plan of Merger; or
o by either Miltope Group or Vision Technologies Kinetics, without
a material breach by the terminating party of its representations
or warranties under the Agreement and Plan of Merger and the
closing of the mergers shall not have occurred on or before the
date which is six months from the date of the Agreement and Plan
of Merger and a takeover proposal has been made known to Miltope
Group and not withdrawn prior to the date of termination, unless
the termination is due to a material adverse effect caused by
Vision Technologies Kinetics or its affiliates.
TERMINATION FEE
In the event that the Agreement and Plan of Merger is terminated for
one of the following reasons, Miltope Group is required to pay Vision
Technologies Kinetics $1,800,000:
o the stockholders of Miltope Group reject or otherwise fail to
adopt the Agreement and Plan of Merger at a special meeting of
stockholders and (i) a takeover proposal has been made and not
withdrawn prior to the date of the special meeting or (ii) a
binding agreement with respect to a takeover proposal is entered
into or the transactions constituting a takeover proposal are
consummated within 9 months after such termination, provided that
any amounts payable shall be adjusted less any amounts paid
previously;
o Miltope Group terminates the Agreement and Plan of Merger to
enter into an agreement for a superior offer;
o Vision Technologies Kinetics terminates the Agreement and Plan of
Merger because either (i) Miltope Group or Miltope Corporation
has breached in any material respect any of its material
covenants or
33
other agreement contained in the Agreement and Plan of Merger,
(ii) any representation or warranty of Miltope Group or Miltope
Corporation made in the Agreement and Plan of Merger which is
qualified as to materiality has failed to be true and correct in
all respects when made or (iii) any representation or warranty of
Miltope Group or Miltope Corporation made in the Agreement and
Plan of Merger which is not qualified as to materiality has
failed to be true and correct in all material respects when made
which was not cured within ten business days of the receipt of
written notice of the breach and there has been a take over
proposal received or made to Miltope Group prior to the date of
termination or there is a subsequently accepted takeover proposal
consummated within 9 months after such termination, provided that
any amounts payable shall be adjusted less any amounts paid
previously;
o Vision Technologies Kinetics terminates the Agreement and Plan of
Merger because (i) the board of directors of Miltope Group has
withdrawn or modified in a manner adverse to VTK Merger
Subsidiary, or has failed upon Vision Technologies Kinetics's
request to reconfirm, its approval or recommendation of the
mergers or Agreement and Plan of Merger, (ii) the board of
directors of Miltope Group has determined to accept, or has
determined to recommend to Miltope Group's stockholders that they
approve a takeover proposal, or Miltope Group has entered into or
has publicly announced its intention to enter into, a definitive
written agreement or written agreement in principle providing for
a takeover proposal or (iii) a tender offer or exchange offer
that, if successful, would result in any person or group becoming
a beneficial owner of 20% or more of the outstanding shares is
commenced (other than by Vision Technologies Kinetics, an
affiliate of Vision Technologies Kinetics or GUI) and the board
of directors has failed to recommend against acceptance of such
offer by the stockholders of Miltope Group; or
o Vision Technologies Kinetics terminates the Agreement and Plan of
Merger because (i) either of the voting agreements, as more fully
described below, has ceased to be in full force or if GUI is in
material breach thereof, or (ii) if any person or group other
than Vision Technologies Kinetics, an affiliate of Vision
Technologies Kinetics or GUI has become the beneficial owner of
20% or more of the outstanding shares of Miltope Group; and a
takeover proposal has been received or made known to the Company
prior to the date of termination, provided that any amounts
payable shall be adjusted less any amounts paid previously.
Any expense reimbursement amount or termination fee shall be paid, in
accordance with the terms set out in the Agreement and Plan of Merger, by wire
transfer of immediately available funds and Miltope Group shall have no further
obligations to Vision Technologies Kinetics or VTK Merger Subsidiary.
AMENDMENT AND WAIVER
Subject to applicable law, the Agreement and Plan of Merger may be
amended by written agreement of the parties to the Agreement and Plan of Merger,
by action taken by the parties' respective board of directors, at any time prior
to the closing date. However, after stockholder approval, no such amendment,
modification or supplement may reduce the amount or change the form of the
merger consideration or materially adversely affect the rights of such
stockholders.
At any time prior to the effective time, the parties may, by actions
taken by their respective board members and set in writing, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties of
the other parties contained in the Agreement and Plan of Merger or in any
document delivered pursuant to the Agreement and Plan of Merger, and (iii)
subject to the provisions of the Agreement and Plan of Merger, waive compliance
by the other parties with any of the agreements or conditions contained in the
Agreement and Plan of Merger.
34
RELATED AGREEMENTS
VOTING AGREEMENTS
On October 21, 2003, Miltope Group, Vision Technologies Kinetics, VTK
Merger Subsidiary and GUI entered into a Primary Voting Agreement (attached to
this proxy statement as Annex B) and a Secondary Voting Agreement (attached to
this proxy statement as Annex C), pursuant to which, GUI, the holder of a
majority of MGI's capital stock, has agreed to vote in favor of the mergers at
the special meeting of Miltope Group's stockholders. In addition, under the
voting agreements, GUI is required to vote against any takeover proposal in most
circumstances and it is restricted from disposing its shares in any way or
granting a proxy or other authorization with respect to its shares. Pursuant to
the voting agreements, GUI has granted to, and appointed, Vision Technologies
Kinetics and VTK Merger Subsidiary an irrevocable proxy and attorney-in-fact to
vote its shares of Miltope Group. In addition, the voting agreements prohibit
GUI and its affiliates from encouraging, soliciting or participating in any
conversations or negotiations with any persons concerning a takeover proposal.
In the voting agreements, GUI also waived its appraisal rights with respect to
the mergers.
GUI owns approximately 61.5% of Miltope Group's outstanding common
stock. In the event that the board of directors of Miltope Group terminates the
Agreement and Plan of Merger to accept a superior proposal, the Secondary Voting
Agreement, pursuant to which, GUI is required to vote shares representing
approximately 26.5% of Miltope Group's outstanding common stock in favor of the
mergers, may be terminated. GUI would continue to be obligated, under the
Primary Voting Agreement, to vote shares representing approximately 35% of
Miltope Group's outstanding common stock in favor of the mergers.
CONTINGENT VALUE RIGHTS AGREEMENT
On October 21, 2003, Miltope Group, Miltope Corporation, GUI and Vision
Technologies Kinetics entered into a Contingent Value Rights Agreement (attached
to this proxy statement as Annex D), pursuant to which, Miltope Group will
create and issue CVRs to its stockholders of record immediately prior to the
effective time. Each CVR represents the contingent, nontransferable right to
receive a pro rata share of 50% of the net proceeds, if any, from the DRS
litigation, after adjustments for taxes.
If there are any net proceeds from the DRS litigation, the amount of
cash payable for each CVR held by holders of the CVR on the payment date will be
determined based on either of the following two formulas, depending on the
amount of Claims Expenses. The term "Claims Expenses" refers to the sum of all
fees, costs and expenses (including attorneys fees and expenses) incurred or
accrued after the effective time of the mergers by Miltope Group and its
affiliates in prosecuting and settling the DRS litigation (including defending
against any counterclaims), including amounts paid or payable in settlement or
in judgment of any counterclaims against Miltope Group and its affiliates. In
addition, any amounts paid or payable by Miltope Group or its affiliates in
settlement or judgment of any counterclaims in the litigation are considered
"Claims Expenses," whether paid or payable before or after the effective time of
the mergers. If the full and final settlement of, or judgment with respect to,
the litigation occurs prior the effective time, then "Claims Expenses" also
includes all of the fees, costs and expenses paid or payable since October 21,
2003. The term "Litigation Proceeds" refers to all cash and non-cash
compensation, payments, penalties, interest and other damages, if any, recovered
or received (at trial, on appeal or by settlement) by Miltope Group or its
affiliates as a result of the DRS litigation. The term "Tax Allocation" means
the result obtained by multiplying the Litigation Proceeds by 20%.
a. If the Claims Expenses are equal to or less than $700,000, then the
dollar amount paid for each CVR will equal:
($700,000 - CLAIMS EXPENSES) + 50% X (LITIGATION PROCEEDS - TAX ALLOCATION)
---------------------------------------------------------------------------
TOTAL NUMBER OF CVRs
b. If the Claims Expenses exceed $700,000, then the dollar amount paid
for each CVR will equal:
35
50% X (LITIGATION PROCEEDS - TAX ALLOCATION) - 50% X (CLAIMS EXPENSE - $700,000)
- --------------------------------------------------------------------------------
TOTAL NUMBER OF CVRs
As accounted for in these two formulas, $0.7 million of additional merger
consideration will be paid by Vision Technologies Kinetics to fund certain costs
and expenses associated with the litigation.
In addition, under the CVR Agreement, Miltope Corporation shall
maintain, indirectly or directly, a register of the CVRs. Following the
effective date of the mergers and the complete conclusion of the DRS litigation
(including, without limitation, final judgments with respect to, or final
settlement of, all related claims and the receipt by Miltope Corporation or any
of its affiliates of any proceeds in connection therewith), Miltope Corporation
and the designated representative of Miltope Group's stockholders shall agree on
the aggregate CVR payment amount in accordance with the CVR Agreement and
Miltope Corporation shall establish a CVR payment date. On the CVR payment date,
Miltope Corporation will cause the CVR payment to be delivered to each of the
holders of the CVRs by check mailed to the respective addresses reflected on the
CVR register at the close of business on the last business day prior to the CVR
payment date.
The CVR Agreement provides that GUI shall act as the representative of
the holders of CVRs. GUI, as representative, is authorized to approve or reject
any settlement of any aspect or portion of the DRS litigation.
INDEMNITY AGREEMENT
On October 21, 2003, Miltope Corporation, GUI and Vision Technologies
Kinetics entered into an indemnity agreement, pursuant to which, GUI has agreed
to indemnify Vision Technologies Kinetics, Miltope Corporation, and PGI in
connection with certain tax and environmental matters.
THE DRS LITIGATION
GENERAL
In the spring of 2000, the Chief Operating Officer of DRS Technologies,
Inc., a competitor of Miltope Group, spoke with Richard Pandolfi, then the
President and Chief Executive Officer of PGI, regarding the possible acquisition
by DRS Technologies of Miltope Group. A confidentiality agreement was signed by
DRS and Mr. Pandolfi to protect Miltope Corporation's and PGI's trade secrets
from misappropriation by DRS Technologies. Pursuant to this confidentiality
agreement, DRS Technologies undertook extensive due diligence and Miltope
Corporation and PGI disclosed various confidential documents and information to
DRS Technologies.
On or around October 24, 2000, DRS Technologies submitted an offer to
purchase all of the capital stock of Miltope Group, which GUI, Miltope Group's
majority shareholder, rejected. Key PGI executives and employees, including
Richard Pandolfi, shortly thereafter began consulting for, and assisting, DRS
Technologies in developing products and expanding their markets. Many key
employees eventually resigned from PGI and became full-time employees of DRS
Technologies.
LEGAL PROCEEDINGS
On October 3, 2001, Miltope Corporation and PGI filed a lawsuit in the
United States District Court for the Eastern District of New York against DRS
Technologies, its affiliate DRS Electronic Systems and former officers,
directors and employees of PGI. This lawsuit is entitled MILTOPE CORPORATION AND
IV PHOENIX GROUP, INC. V. DRS TECHNOLOGIES, INC., DRS ELECTRONIC SYSTEMS, INC.,
RICHARD PANDOLFI, PATRICIA WILSON, RUSSELL MEYER, AMIR SHAFY, ANTON LAUB, JOSEPH
EDMAN, SUNNY SHUM AND MICHAEL GAVIGAN (Case No. 01/6545).
The complaint filed by Miltope Corporation and PGI, as amended, alleges
misappropriation of trade secrets, breach of the confidentiality agreement
signed prior to the due diligence, unjust enrichment, unfair competition and
trademark infringement. Miltope Corporation and PGI also allege tortious
interference with business relationships, tortious interference with contracts
and conspiracy to breach fiduciary duty. Specifically,
36
such claims relate to the activities of certain former employees of PGI and the
hiring of some of those employees by DRS Technologies and DRS Electronic
Systems. Miltope Corporation and PGI seek damages for each of these claims.
DRS Technologies and DRS Electronic Systems answered the complaint and
denied the claims against them, but did not file any counterclaims. The
individual defendants also denied the claims. Three of the individual defendants
filed counterclaims alleging, among other things, breach of their employment and
severance agreements with Miltope Corporation and/or PGI. Defendant Pandolfi
counterclaimed and alleged that PGI failed to pay him certain salary, severance,
commissions, accrued vacation, benefits, business expenses and consulting fees.
Mr. Pandolfi further alleged that PGI refused to return certain of his property.
Mr. Pandolfi is seeking a total of approximately $2 million in damages.
Defendant Patricia Wilson, the former Chief Operating Officer and Vice President
of Sales for PGI, counterclaimed that PGI breached her employment agreement and
withheld her past due salary and severance benefits under such agreement. Ms.
Wilson is seeking a total of approximately $372,000 in damages. Defendant
Russell Meyer, the former Vice President of Engineering for PGI, counterclaimed
that Miltope Corporation and PGI breached his employment agreement and withheld
his past due salary and severance benefits. Mr. Meyer is seeking a total of
approximately $550,000 in damages. Miltope Corporation and PGI deny the
counterclaims made by these defendants.
Miltope Corporation and PGI seek total damages against all defendants
of not less than $19 million. In addition, Miltope Corporation and PGI seek
punitive and treble damages, royalties on the DRS Technologies products that
incorporate Miltope Corporation's and PGI's trade secrets, injunctive relief,
attorneys' fees and interest.
The CVR Agreement provides that GUI shall act as the representative of
the holders of CVRs. GUI, as representative, is authorized to approve or reject
any settlement of any aspect or portion of the DRS litigation.
As of the filing of this proxy statement, the court has not set a trial
date. Certain discovery remains to be completed, but Miltope Group believes that
a trial will commence within six months.
THE RESULTS OF COMPLEX LEGAL PROCEEDINGS ARE DIFFICULT TO PREDICT. IT
IS MILTOPE GROUP'S POSITION THAT IT CONTINUES TO SUFFER DAMAGES TO THIS DAY AS A
RESULT OF THE DEFENDANTS' ALLEGEDLY UNLAWFUL PRACTICES. HOWEVER, THERE CAN BE NO
ASSURANCE THAT MILTOPE CORPORATION OR PGI AND/OR ANY OF THEIR AFFILIATES WILL
OBTAIN A JUDGMENT OR SETTLEMENT FAVORABLE TO THEM AS A RESULT OF THE DRS
LITIGATION. NEITHER MILTOPE GROUP, NOR ANY OF ITS RESPECTIVE AFFILIATES, MAKES
ANY REPRESENTATION AS TO THE AMOUNT, IF ANY, OF ANY POTENTIAL RECOVERY FROM THE
DRS LITIGATION. IN ADDITION, IF THERE IS A RECOVERY, THERE CAN BE NO ASSURANCE
AS TO THE TIMING OF ANY SUCH RECOVERY. IT COULD BE A LENGTHY TIME BEFORE ANY
RECOVERY IS OBTAINED. IT IS NOT POSSIBLE TO PREDICT THE TIMING OR OUTCOME OF THE
RESOLUTION OF THIS LAWSUIT WITH ANY CERTAINTY.
IF THIS LAWSUIT DOES NOT ULTIMATELY RESULT IN A JUDGMENT OR SETTLEMENT
FAVORABLE TO MILTOPE CORPORATION OR PGI, THE CVRS WILL BE WORTHLESS.
THE PARTIES
MILTOPE GROUP
Miltope Group Inc, incorporated in Delaware in March 1984, is the
parent company of Miltope Corporation, PGI and Miltope Business Products.
Miltope Corporation was originally incorporated as a New York corporation in
1975 to acquire the assets and business of the Military Equipment Division of
Potter Instrument Company, Inc. and, until June 1984, was a wholly-owned
subsidiary of Stonebrook Group Inc. (formerly Stenbeck Reassurance Co. Inc.)
("SGI"). In June 1984, all of the outstanding stock of Miltope Group was issued
to SGI in exchange for all of the outstanding stock of Miltope Corporation. SGI
is a privately held corporation that, since 1975, has supported the formation
and funding of companies engaged in the development and manufacture of
electronic hardware for defense and communications applications and in
communications services. In January 1985, stockholders of Miltope Group
(including SGI) sold 700,000 shares of Miltope Group's common stock in an
initial
37
public offering. In November 1985, Miltope Group sold an additional 1,000,000
shares of its common stock to the public.
In September 1994, Miltope Group relocated its headquarters from
Melville, New York to Montgomery, Alabama. On December 30, 1994, Miltope
Corporation merged with and into a newly formed Alabama corporation, which
succeeded to all of the New York corporation's assets and liabilities. On
January 1, 1995, Modern Holdings Incorporated (formerly XSource Corporation), a
Delaware corporation ("MHI"), acquired 62.8% of the outstanding shares of common
stock of Miltope Group pursuant to certain share exchange transactions with SGI,
which at such time was a holder of 55.6% of the outstanding shares of common
stock of Miltope Group, and Stuvik AB, a Swedish corporation and, at such time,
a holder of approximately 7.2% of the outstanding shares of Miltope Group's
common stock. Prior to June of 1999, MHI was a subsidiary of GUI and a
wholly-owned subsidiary of MIC-USA Inc., a Delaware corporation ("MIC-USA")and a
wholly-owned subsidiary of Millicom International Cellular S.A.. In connection
with the reorganization of GUI in June 1999, Miltope Group became a subsidiary
of GUI, which became a wholly-owned subsidiary of Great Universal LLC, a
Delaware limited liability company ("GU-LLC"), the sole member of which, from
the date of reorganization until December 31, 1999, was MIC-USA. On December 31,
1999, The 1999 Great Universal LLC Trust, Bruce H. Grant as trustee (the
"Trust"), was formed and MIC-USA assigned all ownership interest of GU-LLC to
the Trust as the sole member of GU-LLC. GU-LLC provides, through its operating
subsidiaries, integrated network products and services, consulting engineering,
billing systems applications, television and media and specialized electronics
products and services.
On April 1, 2000, Miltope Group entered into an agreement with GUI, to
acquire GUI's ownership of 90% of the outstanding stock of PGI. Since GUI,
through its controlling interest in Miltope Group, continues to own a
controlling interest in PGI after the acquisition, the acquisition was recorded
on Miltope Group's books at GUI's historical cost and accounted for on an
"as-if-pooled basis".
MILTOPE CORPORATION
Miltope Corporation designs, develops, and manufactures computers and
computer peripheral equipment for military, industrial and commercial
applications where reliable operation of the equipment in challenging
environments is imperative. The systems provided are qualified for use in
airborne, shipboard, and ground based applications. Miltope Corporation's
product lines include a broad range of computers, computer workstations,
servers, printers, disk cartridges, and mass storage systems. Miltope
Corporation continues to increase its presence in the military arena including
United States Air Force avionics and ground based systems as well as United
States Army system diagnostics. Miltope Corporation's equipment is designed and
qualified for use as part of in-flight entertainment, cabin management, and
communication systems and is certified for use aboard virtually every commercial
and business jet platform.
VISION TECHNOLOGIES KINETICS
Vision Technologies Kinetics, Inc., a Delaware corporation, provides
design and engineering services for military vehicles, weapon systems and
munitions. Vision Technologies Kinetics is a direct wholly-owned subsidiary of
Vision Technologies Systems, Inc., a Delaware corporation, with headquarters in
Alexandria, Virginia, and an indirect wholly-owned subsidiary of Singapore
Technologies Engineering Ltd., a Singapore company.
VTK MERGER SUBSIDIARY
VTK Merger Subsidiary is an Alabama corporation that was formed on
September 8, 2003. VTK Merger Subsidiary has not, to date, conducted any
significant activities other than those incident to its formation, its execution
of the Agreement and Plan of Merger and the related documents, and its
participation in the preparation of this proxy statement. VTK Merger Subsidiary
currently has no material assets or liabilities, other than its rights and
obligations under the Agreement and Plan of Merger and the related documents,
and has not generated any material revenues or expenses.
38
CERTAIN TRANSACTIONS
LETTER AGREEMENT WITH GREAT UNIVERSAL
On October 21, 2003, Miltope Group, Miltope Corporation and GUI entered
into a letter agreement, pursuant to which, among other things, GUI has agreed
to accept deferred repayment of the amount of $649,000 due to GUI for certain
management and consulting services provided by GUI to Miltope Group and Miltope
Corporation. The services rendered by GUI were not provided in connection with,
and do not relate to, the mergers.
MARKET PRICES OF AND DIVIDENDS ON THE COMMON STOCK
MARKET PRICE INFORMATION
Miltope Group's common stock is traded publicly on The Nasdaq SmallCap
Market under the symbol "MILT". The following table sets forth the high bid and
low asked prices on The Nasdaq SmallCap Market for each quarter during fiscal
years 2001, 2002 and 2003. Such quotations represent inter-dealer prices without
retail markup, markdown or commission and may not necessarily represent actual
transactions.
PERIOD HIGH LOW
------ ---- ---
Fiscal 2001 First Quarter $ 1.25 $ 0.66
Second Quarter 2.18 0.79
Third Quarter 2.20 1.40
Fourth Quarter 2.88 1.47
Fiscal 2002 First Quarter 2.17 1.40
Second Quarter 5.70 1.58
Third Quarter 3.75 2.51
Fourth Quarter 4.50 2.54
Fiscal 2003 First Quarter 4.50 2.98
Second Quarter 4.75 2.93
Third Quarter 6.70 2.88
Fourth Quarter 6.45 5.45
(through October 21, 2003)
On October 22, 2003, Miltope Group announced that it had signed the
Agreement and Plan of Merger which provides, among other things, that Vision
Technologies Kinetics will acquire the outstanding shares of the common stock of
Miltope Group for $5.78 in cash and one CVR for each share of common stock held
Miltope Group's stockholders. On October 21, 2003, the closing price of the
common stock on The Nasdaq SmallCap Market was $5.58 per share. On November 5,
2003 the closing price of the common stock on The Nasdaq SmallCap Market was
$6.02 per share. You are urged to obtain a current market quotation for your
shares of common stock.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our stock since our
organization. Under the terms of our revolving bank line of credit, our ability
to pay cash dividends to our stockholders is restricted. Miltope Group does not
presently anticipate paying cash dividends on its common stock.
OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
ownership of voting securities of Miltope Group by each person who is known to
Miltope Group's management to have been the beneficial owner of more than 5% of
the outstanding shares of Miltope Group's common stock as of October 21, 2003:
39
NAME AND ADDRESS AMOUNT AND NATURE
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP* PERCENT OF CLASS
-------------- ------------------- ----------------------- ----------------
common stock Great Universal Incorporated 3,664,478 61.5%
($0.01 par value) 153 E. 53rd Street
New York, NY 10022
* Unless otherwise noted, all shares are directly owned.
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND OFFICERS
The following table sets forth certain information as of October 21,
2003 regarding the ownership of Miltope Group's voting securities by (i) each
director of Miltope Group's board of directors, (ii) each executive officer of
Miltope Group and Miltope Corporation, and (iii) all of Miltope Group's
directors and executive officers as a group, and as to the percentage of
outstanding shares held by them on that date:
NAME OF BENEFICIAL AMOUNT AND NATURE OF
TITLE OF CLASS OWNER DIRECTORS BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
- -------------- --------------- ------------------------ ----------------
common stock William L. Dickinson 83,345 (2) 1.3%
common stock Henry Guy** 9,000 (3) *
common stock Jerry O. Tuttle 53,865 (4) *
common stock David E. Marcus*** 9,000 (5) *
common stock Ronald V. Hite 9,000 (6) *
EXECUTIVE OFFICERS
WHO ARE NOT DIRECTORS
---------------------
common stock Thomas R. Dickinson 96,000 (7) 1.5%
common stock Robert G. Kaseta 70,500 (8) 1.1%
common stock Tom B. Dake 59,700 (9) *
common stock Edward F. Crowell 38,020 (10) *
common stock Executive officers and 28,430 (2) 6.7%
directors as a group (3) (4) (5) (6)
(10 persons) (7) (8) (9) (10)
* Represents less than one percent of the class.
** President and Chief Executive Officer of GUI, Miltope Group's principal
stockholder.
*** Chairman of the Board of GUI, Miltope Group's principal stockholder.
(1) Unless otherwise noted, all shares are directly owned. Includes shares that
may be acquired pursuant to options
40
exercisable on October 21, 2003, and within sixty days of October 21, 2003,
pursuant to Rule 13d-3 under the Exchange Act.
(2) Represents 10,250 shares of common stock owned by Mr. Dickinson and 73,095
shares of common stock that Mr. Dickinson may acquire upon exercise of stock
options.
(3) Represents 4,000 shares of common stock owned by Mr. Guy and 5,000 shares of
common stock that Mr. Guy may acquire upon exercise of stock options.
(4) Represents 4,000 shares of common stock owned by Mr. Tuttle and 49,865
shares of common stock that Mr. Tuttle may acquire upon exercise of stock
options.
(5) Represents 4,000 shares of common stock owned by Mr. Marcus and 5,000 shares
of common stock that Mr. Marcus may acquire upon exercise of stock options.
(6) Represents 4,000 shares of common stock owned by Mr. Hite and 5,000 shares
of common stock that Mr. Hite may acquire upon exercise of stock options.
(7) Represents 1,000 shares of common stock owned by Mr. Dickinson and 95,000
shares of common stock that Mr. Dickinson may acquire upon exercise of stock
options.
(8) Represents 1,200 shares of common stock owned by Mr. Kaseta, 65,000 shares
of common stock that Mr. Kaseta may acquire upon exercise of stock options and
4,300 shares of common stock held by Mr. Kaseta's wife. Mr. Kaseta disclaims
beneficial ownership of the shares owned by his wife.
(9) Represents 1,600 shares of common stock owned by Mr. Dake, 55,000 shares of
common stock that Mr. Dake may acquire upon exercise of stock options and 3,100
shares of common stock owned by Mr. Dake's wife. Mr. Dake disclaims beneficial
ownership of the shares owned by his wife.
(10) Represents 20 shares of common stock owned by Mr. Crowell and 38,000 shares
of common stock that Mr. Crowell may acquire upon exercise of stock options.
WHERE YOU CAN FIND MORE INFORMATION
Miltope Group is currently subject to the information requirements of
the Exchange Act and in accordance therewith files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial and other matters. Copies of such reports, proxy statements and other
information may be copied (at prescribed rates) at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and at the following Regional Offices of the
Securities and Exchange Commission: 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 233 Broadway, New York, New York 10279. For further
information concerning the SEC's public reference rooms, you may call the
Securities and Exchange Commission at 1-800-SEC-0330. Some of this information
may also be accessed on the World Wide Web through the SEC's Internet address at
"http://www.sec.gov." The common stock is listed on Nasdaq Small Cap Market, and
materials also may be inspected at the offices of The Nasdaq SmallCap Market at
33 Whitehall Street, New York, NY 10004.
MISCELLANEOUS
STOCKHOLDER PROPOSALS
Miltope Group intends to hold an annual meeting in 2004 only if the
mergers are not consummated. If the mergers are not consummated, stockholders of
Miltope Group may submit proposals for consideration at the next annual meeting
of Miltope Group's stockholders. In order to be included for the next annual
meeting, stockholder proposals must have been received by Miltope Group no later
than January 2, 2004 and must have complied with the requirements of Rule 14a-8
under the Exchange Act.
41
OTHER MATTERS
The board of directors does not intend to bring before the special
meeting for action any matters other than those specifically referred to above
and is not aware of any other matters which are proposed to be presented by
others. If any other matters or motions should properly come before the special
meeting, the persons named in the proxy intend to vote thereon in accordance
with their judgment on such matters or motions, including any matters or motions
dealing with the conduct of the special meeting.
No person is authorized to give any information or to make any
representations with respect to the matters described in this proxy statement
other than those contained herein. Any information or representations with
respect to such matters not contained herein or therein must not be relied upon
as having been authorized by Miltope Group. The delivery of this proxy statement
shall not under any circumstances create any implication that there has been no
change in the affairs of Miltope Group since the date hereof or that the
information in this proxy statement is correct as of any time subsequent to the
date hereof.
By Order of the Board of Directors,
Tom D. Dake
Secretary
______ __, 2003
42
Annex A
AGREEMENT AND PLAN OF MERGER
AMONG
VISION TECHNOLOGIES KINETICS, Inc.,
Parent,
VTK MERGER SUBSIDIARY CORPORATION,
Merger Subsidiary,
MILTOPE GROUP INC.,
the Company,
AND
MILTOPE CORPORATION,
the DSS Cleared Company
DATED AS OF OCTOBER 21, 2003
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGERS........................................................A-2
SECTION 1.1 The Mergers..............................................A-2
SECTION 1.2 Effective Time...........................................A-2
SECTION 1.3 Closing..................................................A-2
SECTION 1.4 Directors and Officers of the Surviving Corporation......A-3
SECTION 1.5 Effect of the Mergers....................................A-3
SECTION 1.6 Subsequent Actions.......................................A-3
SECTION 1.7 Articles of Incorporation; By-Laws.......................A-3
SECTION 1.8 Actions by Company and the DSS Cleared Company...........A-4
ARTICLE II CONVERSION OF SECURITIES..........................................A-4
SECTION 2.1 Conversion of Securities.................................A-4
SECTION 2.2 Dissenting Shares........................................A-5
SECTION 2.3 Surrender of Shares; Stock Transfer Books................A-6
SECTION 2.4 Stock Plans..............................................A-8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................A-8
SECTION 3.1 Organization and Qualification...........................A-8
SECTION 3.2 Capitalization...........................................A-9
SECTION 3.3 Subsidiaries............................................A-10
SECTION 3.4 Authorization...........................................A-11
SECTION 3.5 SEC Documents...........................................A-12
SECTION 3.6 No Conflicts............................................A-13
SECTION 3.7 Financial Statements....................................A-14
SECTION 3.8 Absence of Certain Changes or Events....................A-14
SECTION 3.9 Tax Matters.............................................A-14
SECTION 3.10 Litigation..............................................A-17
SECTION 3.11 ERISA Compliance........................................A-17
SECTION 3.12 Environmental Matters...................................A-19
SECTION 3.13 Real Property and Leased Property.......................A-20
SECTION 3.14 Intellectual Property...................................A-21
SECTION 3.15 Contracts...............................................A-22
SECTION 3.16 Compliance With Laws....................................A-24
SECTION 3.17 Insurance Coverage......................................A-24
SECTION 3.18 Personnel; Labor Relations..............................A-25
SECTION 3.19 Brokers and Finders.....................................A-26
SECTION 3.20 Opinion of Legacy.......................................A-26
SECTION 3.21 Vote Required...........................................A-26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY...A-26
A-i
SECTION 4.1 Organization and Power..................................A-26
SECTION 4.2 Authorization...........................................A-27
SECTION 4.3 No Conflicts............................................A-27
SECTION 4.4 Consents and Approvals..................................A-27
SECTION 4.5 Financing of the Mergers................................A-28
SECTION 4.6 Finder's Fees...........................................A-28
SECTION 4.7 Disclosure..............................................A-28
SECTION 4.8 Interested Stockholder..................................A-28
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER............................A-28
SECTION 5.1 Interim Operations of the Company.......................A-28
SECTION 5.2 Takeover Proposals......................................A-31
SECTION 5.3 No Solicitation.........................................A-32
ARTICLE VI ADDITIONAL AGREEMENTS............................................A-34
SECTION 6.1 Special Meeting; Proxy Statement........................A-34
SECTION 6.2 Meeting of Stockholders of the Company..................A-35
SECTION 6.3 Additional Agreements...................................A-35
SECTION 6.4 Notification of Certain Matters.........................A-36
SECTION 6.5 Access; Confidentiality.................................A-37
SECTION 6.6 Publicity...............................................A-38
SECTION 6.7 Directors' and Officers' Insurance and Indemnification..A-38
SECTION 6.8 Employee Benefits.......................................A-39
SECTION 6.9 Merger Subsidiary Compliance............................A-40
SECTION 6.10 Reasonable Best Efforts.................................A-40
SECTION 6.11 Taxes...................................................A-40
ARTICLE VII CONDITIONS......................................................A-41
SECTION 7.1 Conditions to Each Party's Obligation to Effect
the Mergers.......................................A-41
SECTION 7.2 Conditions to Parent's and Merger Subsidiary's
Obligation to Effect the Mergers..................A-41
SECTION 7.3 Conditions to the Company's Obligation to Effect
the Mergers.......................................A-43
ARTICLE VIII TERMINATION....................................................A-43
SECTION 8.1 Termination.............................................A-43
SECTION 8.2 Effect of Termination...................................A-45
ARTICLE IX GENERAL PROVISIONS...............................................A-48
SECTION 9.1 Amendment...............................................A-48
SECTION 9.2 Waiver..................................................A-48
SECTION 9.3 Non-Survival of Representations and Warranties..........A-48
SECTION 9.4 Notices.................................................A-49
SECTION 9.5 Headings................................................A-49
SECTION 9.6 Exhibits, Schedules and Annexes.........................A-49
SECTION 9.7 Counterparts............................................A-50
A-ii
SECTION 9.8 Governing Law...........................................A-50
SECTION 9.9 Pronouns................................................A-50
SECTION 9.10 Time Periods............................................A-50
SECTION 9.11 No Strict Construction..................................A-50
SECTION 9.12 Entire Agreement........................................A-50
SECTION 9.13 Severability............................................A-51
SECTION 9.14 Successors and Assigns..................................A-51
SECTION 9.15 Fees and Expenses.......................................A-51
A-iii
INDEX OF ANNEXES AND EXHIBITS
Annex A - Form of Voting Agreements......................................... A-1
Annex B - Articles of Incorporation of the DSS Cleared Company.............. B-1
Exhibit 6.6 - Joint Press Release........................................... C-1
INDEX OF DEFINED TERMS
Term Location
- ---- --------
Affidavit of Loss................................................. 2.3(e)
Agreement......................................................... Preamble
Alabama Law ...................................................... Recitals
Ancillary Agreement............................................... 3.4(a)
Articles of Merger................................................ 1.2
Benefit Plan...................................................... 3.11(a)
Bid............................................................... 3.15(g)(i)
Board of Directors................................................ Recitals
Cash Consideration................................................ 2.1(a)
CERCLA............................................................ 3.12(c)
Certificate of Merger............................................. 1.2
Certificates...................................................... 2.3(b)
Closing........................................................... 1.3
Closing Date...................................................... 1.3
COBRA............................................................. 3.11(f)
Code.............................................................. 3.9(m)(iv)
Common Stock...................................................... 3.2
Company........................................................... Preamble
Company Agreements................................................ 3.6
Company Financial Advisor......................................... 3.19
Company Letter.................................................... Article III
Company Representatives........................................... 5.2
Confidentiality Agreement......................................... 5.3(b)
Counterpart Plans................................................. 6.8
Covered Persons................................................... 6.7(b)
CVR............................................................... 2.1(a)
CVR Agreement..................................................... Recitals
D&O Insurance..................................................... 6.7(b)
Delaware Law...................................................... Recitals
Dissenting Shares................................................. 2.2(a)
DSS Cleared Company............................................... Preamble
DSS Cleared Company Board of Directors............................ Recitals
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Term Location
- ---- --------
Effective Time.................................................... 1.2
Encumbrances...................................................... 3.13(a)
Environmental Laws................................................ 3.12(c)
Environmental Permits............................................. 3.12(c)
ERISA............................................................. 3.11(a)
ERISA Affiliate................................................... 3.11(a)
Exchange Act...................................................... 3.5(a)
Exchange Agent.................................................... 2.3(a)
Exon-Florio Amendment............................................. 7.2(f)
Expense Reimbursement Amount...................................... 8.2(c)(i)
Financial Statements.............................................. 3.7(a)
GAAP.............................................................. 3.7(a)
Governmental Entity............................................... 3.6
Government Contract............................................... 3.15(g)(ii)
Great Universal................................................... Recitals
Hazardous Substances.............................................. 3.12(c)
HSR Act........................................................... 6.3(a)
Income Tax........................................................ 3.9(m)(iii)
Income Taxes...................................................... 3.9(m)(iii)
Indemnified Person(s)............................................. 6.7(a)
Intellectual Property............................................. 3.14(a)
IRS .............................................................. 3.11(a)
Leased Property................................................... 3.13(b)
Legacy............................................................ 1.8
Material Adverse Effect........................................... 3.1(b)
Material Company Consents......................................... 6.3(b)
Mergers........................................................... Recitals
Merger Consideration.............................................. 2.1(a)
Merger Subsidiary................................................. Preamble
Notice of Superior Proposal....................................... 5.3(b)
Non-employee Directors............................................ 2.4
Options........................................................... 2.4
Other Intellectual Property....................................... 3.14(a)
Outside Date...................................................... 8.1(d)
Parent............................................................ Preamble
Permitted Encumbrances............................................ 3.13(a)
Person............................................................ 2.3(d)
Proxy Statement................................................... 6.1(a)
Real Property..................................................... 3.13(a)
Record Date Stockholders.......................................... 2.1(e)
Registered Intellectual Property.................................. 3.14(a)
Regulatory Approvals.............................................. 3.6
SEC............................................................... 3.5(a)
SEC Documents..................................................... 3.5(a)
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Term Location
- ---- --------
Section 280G Waiver............................................... 7.2(f)
Securities Act.................................................... 3.5(a)
Shares............................................................ Recitals
Special Meeting................................................... 6.1(a)
Stock Plans....................................................... 2.4
Subsequently Accepted Takeover Proposal........................... 8.2(c)(ii)(A)
Subsidiary........................................................ 3.3
Superior Proposal................................................. 5.3(b)
Surviving Corporation............................................. 1.1
Takeover Proposal................................................. 5.2
Tax............................................................... 3.9(m)(i)
Tax Authority..................................................... 3.9(m)(i)
Taxable........................................................... 3.9(m)(i)
Taxes............................................................. 3.9(m)(i)
Tax Return........................................................ 3.9(m)(ii)
Termination Fee................................................... 8.2(c)(ii)
Treasury Regulations.............................................. 3.9(m)(v)
U.S. Court........................................................ 3.10
U.S. Government................................................... 3.15(g)(iii)
Voting Agreements................................................. Recitals
WARN Act.......................................................... 3.18(a)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of October 21,
2003, among Vision Technologies Kinetics, Inc., a Delaware corporation
("Parent"), VTK Merger Subsidiary Corporation, an Alabama corporation and a
wholly-owned subsidiary of Parent ("Merger Subsidiary"), Miltope Group Inc., a
Delaware corporation (the "Company"), and Miltope Corporation, an Alabama
corporation and a wholly-owned subsidiary of the Company (the "DSS Cleared
Company").
RECITALS:
WHEREAS, the parties contemplate that, at the Effective Time (as
defined below), (i) the Company will merge with and into the DSS Cleared Company
and (ii) Merger Subsidiary will merge with and into the DSS Cleared Company
(collectively, the "Mergers");
WHEREAS, each of the board of directors of the Company (the "Board of
Directors") and the board of directors of the DSS Cleared Company (the "DSS
Cleared Company Board of Directors") has approved, and deems it advisable and in
the best interests of its stockholders and shareholders, respectively, to
consummate, the Mergers upon the terms and subject to the conditions set forth
herein;
WHEREAS, the board of directors of each of Parent and Merger Subsidiary
has approved, and deems it advisable and in the best interests of Merger
Subsidiary's shareholders to consummate, the Mergers upon the terms and subject
to the conditions set forth herein;
WHEREAS, also in furtherance of the transactions contemplated hereby,
each of the Board of Directors and the DSS Cleared Company Board of Directors
has approved the Mergers in accordance with the General Corporation Law of the
State of Delaware (the "Delaware Law") and the Alabama Business Corporation Act
(the "Alabama Law"), respectively, and upon the terms and subject to the
conditions set forth herein;
WHEREAS, also in furtherance of the transactions contemplated hereby,
the board of directors of each of Parent and Merger Subsidiary has approved the
Mergers in accordance with the Delaware Law and the Alabama Law upon the terms
and subject to the conditions set forth herein;
WHEREAS, the Board of Directors has determined that the consideration
to be paid in the Mergers for each share of the issued and outstanding common
stock, $0.01 par value per share, of the Company (the "Shares") is fair to the
holders of such shares and has resolved to recommend that its stockholders adopt
and approve this Agreement and the CVR Agreement (as defined below), the Mergers
and each of the transactions contemplated hereby upon the terms and subject to
the conditions set forth herein;
WHEREAS, as a condition and inducement to Parent's and Merger
Subsidiary's entering into this Agreement and incurring the obligations set
forth herein, the Company's majority stockholder, Great Universal Incorporated,
a Delaware corporation ("Great Universal"), who beneficially owns 3,664,478
Shares, concurrently herewith is entering into voting agreements
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(collectively, the "Voting Agreements"), dated as of the date hereof, with
Parent, in the forms attached hereto as Annex A, pursuant to which Great
Universal has agreed, among other things, to vote the Shares held by Great
Universal in favor of the Mergers and the adoption of this Agreement, upon the
terms and subject to the conditions set forth therein;
WHEREAS, the Company, the DSS Cleared Company, Parent and Great
Universal have entered into a Contingent Value Rights Agreement dated as of the
date hereof (the "CVR Agreement") pursuant to which the Company will issue CVRs
(as defined below) as part of the Merger Consideration (as defined below); and
WHEREAS, the Company, the DSS Cleared Company, Parent and Merger
Subsidiary desire to make certain representations, warranties, covenants and
agreements in connection with the Mergers.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGERS
SECTION 1.1 THE MERGERS. Upon the terms and subject to the conditions
of this Agreement and in accordance with the Alabama Law and the Delaware Law,
at the Effective Time, the Mergers shall occur, the separate corporate existence
of the Company and Merger Subsidiary shall cease, and the DSS Cleared Company
shall continue as the surviving corporation of the Mergers. The DSS Cleared
Company as the surviving corporation after the Mergers is sometimes referred to
hereinafter as the "SURVIVING CORPORATION."
SECTION 1.2 EFFECTIVE TIME. Subject to the provisions of this
Agreement, the parties hereto shall cause articles of merger (the "ARTICLES OF
MERGER") and a certificate of merger (the "CERTIFICATE OF MERGER"), each
relating to the Mergers and in customary form and substance, to be executed and
filed on or before the Closing Date (as defined below) (or on such other date as
the Company, the DSS Cleared Company and Parent may agree) with the Secretary of
State of the State of Alabama and the Secretary of State of the State Delaware,
respectively, in such form as required by, and executed in accordance with, the
relevant provisions of the Alabama Law or the Delaware Law, as applicable. The
Mergers shall become effective on the date on which the Articles of Merger is
duly filed with the Secretary of State of the State of Alabama and the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware, or such time as is agreed upon by the parties and specified in the
Articles of Merger or the Certificate of Merger, as applicable, and such time is
hereinafter referred to as the "EFFECTIVE TIME."
SECTION 1.3 CLOSING. Unless this Agreement shall have been terminated
pursuant to Section 8.1 hereof and subject to the satisfaction or waiver of all
conditions set forth in Article VII hereof, the closing of the Mergers (the
"CLOSING") shall take place at 10:00 a.m. on a date (the "CLOSING DATE") to be
specified by the parties hereto, which shall be no later than the second (2nd)
business day after satisfaction or waiver of all of the conditions set forth in
Article VII
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hereof provided that all such conditions continue to be so satisfied or waived
on such second (2nd) business day, and if not so satisfied or waived, the
Closing shall be automatically extended from time to time until the first (1st)
subsequent business day on which all such conditions are again so satisfied or
waived, subject, however, to Article VIII hereof, at the offices of Latham &
Watkins LLP, 555 Eleventh Street, N.W. Suite 1000, Washington, D.C. 20004,
unless another date or place is agreed to in writing by the parties hereto.
SECTION 1.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors of Merger Subsidiary immediately before the Effective Time shall be
the initial directors of the Surviving Corporation, and the officers of the
Company immediately before the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their successors are duly elected
or appointed and qualified or until the earlier of their death, resignation or
removal in accordance with the articles of incorporation and the by-laws of the
Surviving Corporation. If, at the Effective Time, a vacancy shall exist on the
board of directors or in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by the Alabama Law.
SECTION 1.5 EFFECT OF THE MERGERS. At the Effective Time, the effect of
the Mergers shall be as provided in this Agreement and the applicable provisions
of the Alabama Law and the Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company, Merger Subsidiary and the DSS
Cleared Company shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company, Merger Subsidiary and the DSS Cleared
Company shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.6 SUBSEQUENT ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company, Merger Subsidiary or the
DSS Cleared Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Mergers or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of either the
Company, Merger Subsidiary or the DSS Cleared Company, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.7 ARTICLES OF INCORPORATION; BY-LAWS.
(a) At the Effective Time, the articles of incorporation of the DSS
Cleared Company attached hereto as ANNEX B, as in effect immediately before the
Effective Time, shall be the articles of incorporation of the Surviving
Corporation until thereafter amended as provided by the Alabama Law and such
articles of incorporation.
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(b) At the Effective Time, the By-Laws of the DSS Cleared Company,
as in effect immediately before the Effective Time, shall be the by-laws of the
Surviving Corporation until thereafter amended as provided by the Alabama Law,
the articles of incorporation of the Surviving Corporation and such by-laws.
SECTION 1.8 ACTIONS BY COMPANY AND THE DSS CLEARED COMPANY. Each of the
Board of Directors and DSS Cleared Company Board of Directors hereby approves of
and consents to the Mergers and represents to Parent and Merger Subsidiary that
each such board of directors, at a meeting duly called and held on the date
hereof, at which a majority of directors of each board was present, has
unanimously (i) determined that this Agreement and the CVR Agreement and the
transactions contemplated hereby and thereby, including the Mergers, are fair
to, and in the best interests of, the Company and the DSS Cleared Company and
their stockholders and shareholders, respectively, (ii) duly authorized, adopted
and approved this Agreement and the CVR Agreement and approved the Mergers and
the other transactions contemplated hereby, (iii) resolved to recommend that the
Company's and the DSS Cleared Company's stockholders and shareholders,
respectively, authorize, adopt and approve this Agreement and the CVR Agreement
and the transactions contemplated hereby and thereby, including the Mergers;
PROVIDED, HOWEVER, that the Company's recommendation to its stockholders may be
withheld, withdrawn, amended or modified in accordance with the terms of Section
5.3(c) hereof and (iv) taken all other action necessary to render Section 203 of
the Delaware Law inapplicable to the Mergers and the Voting Agreements. The
Company further represents, that, prior to the execution hereof, Legacy Partners
Group, LLC ("LEGACY") has delivered to the Board of Directors its written
opinion, dated the date hereof, that the Merger Consideration to be received by
the holders of Shares pursuant to the Mergers is fair to such holders of Shares
from a financial point of view.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Mergers and without any action on the part of the Company, the DSS Cleared
Company, Parent, Merger Subsidiary, or the holder of any of the following
securities:
(a) Each Share issued and outstanding immediately before the
Effective Time (other than any Shares to be canceled pursuant to Section 2.1(b)
hereof and any Dissenting Shares (as defined in Section 2.2(a) hereof, if any)),
without any action on the part of the holder thereof, shall be converted into
and solely represent the right to receive (i) an amount in cash equal to $5.78
per share, without interest (the "CASH CONSIDERATION") payable to the holder
thereof upon surrender of the certificate representing such Share or an
Affidavit of Loss (as defined in Section 2.3(e) hereof) in the manner provided
in Section 2.3 hereof and (ii) one contingent value right (a "CVR") which shall
represent the contingent right to receive the CVR Payment Amount (as defined in
the CVR Agreement), if any. The Cash Consideration and the CVR to be received in
respect of each Share pursuant to this Section 2.1(a) are together referred to
in this Agreement as the "MERGER CONSIDERATION". All such Shares, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
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thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate or provision of an Affidavit of Loss in accordance
with Section 2.3 hereof, without interest.
(b) Each Share held in the treasury of the Company or the DSS
Cleared Company and each Share owned by Parent, Merger Subsidiary or any direct
or indirect wholly-owned subsidiary of Parent or Merger Subsidiary immediately
before the Effective Time shall be canceled and extinguished and no payment or
other consideration shall be made with respect thereto.
(c) Each share of common stock, par value $0.01 per share, of Merger
Subsidiary issued and outstanding immediately before the Effective Time shall
thereafter represent one validly issued, fully paid and non-assessable share of
common stock, par value $0.01 per share, of the Surviving Corporation and shall
be the only issued and outstanding capital stock of the Surviving Corporation.
(d) Each share of common stock, par value $0.01 per share, of the
DSS Cleared Company, issued and outstanding immediately before the Effective
Time, without any action on the part of the holder thereof, shall, at the
Effective Time, no longer be outstanding and shall automatically be canceled and
extinguished and no payment or other consideration shall be made with respect
thereto, and each such holder thereof shall cease to have any rights with
respect thereto and shall receive no consideration in the Mergers.
(e) Under the terms of the CVR Agreement, the holders of record of
Shares immediately prior to the Effective Time (the "RECORD DATE STOCKHOLDERS")
will be entitled to receive the CVR Payment Amount, if any, in connection with
the settlement or judgment of the claims and counterclaims in the lawsuit
entitled MILTOPE CORPORATION AND IV PHOENIX GROUP, INC. V. DRS TECHNOLOGIES,
INC., DRS ELECTRONIC SYSTEMS, INC., RICHARD PANDOLFI, PATRICIA WILSON, RUSSELL
MEYER, AMIR SHAFY, ANTON LAUB, JOSEPH EDMAN, SUNNY SHUM, AND MICHAEL GAVIGAN
(Case No. 01 6545, U.S. District Court for the Eastern District of New York;
filed October 3, 2001). As set forth in the CVR Agreement, the CVRs will not be
assignable or otherwise transferable in any manner by the holders thereof,
except by will, upon death or by operation of law.
SECTION 2.2 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
any Shares held by a holder who has demanded and perfected his demand for
appraisal of his Shares in accordance with Section 262 of the Delaware Law and
as of the Effective Time has neither effectively withdrawn nor lost his right to
such appraisal ("DISSENTING SHARES") shall not be converted into or represent a
right to receive cash pursuant to Section 2.1 hereof, but the holder thereof
shall be entitled to only such rights as are granted by the Delaware Law.
(b) Notwithstanding the provisions of Section 2.2(a) hereof, if any
holder of Shares who demands appraisal of his Shares under the Delaware Law
shall effectively withdraw or lose (through failure to perfect or otherwise) his
right to appraisal, then as of the Effective Time or the occurrence of such
event, whichever occurs later, such holder's Shares shall automatically be
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converted into and represent only the right to receive the Merger Consideration
as provided in Section 2.1(a) hereof, without interest thereon, upon surrender
of the certificate or certificates representing such Shares or provision of an
Affidavit of Loss pursuant to Section 2.3 hereof.
(c) The Company shall (i) give Merger Subsidiary prompt notice of
any written demands for appraisal, withdrawals of such demands, and any other
instruments served pursuant to Section 262 of the Delaware Law and received by
the Company, and (ii) allow Merger Subsidiary to direct all negotiations and
proceedings with respect to demands for appraisal under the Delaware Law. The
Company shall not voluntarily make any payment with respect to any such demands
for appraisal and shall not, except with the prior written consent of Merger
Subsidiary or Parent, which may be given or withheld in its sole and absolute
discretion, settle or offer to settle any such demands.
SECTION 2.3 SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
(a) Before the Effective Time, Merger Subsidiary shall designate a
bank or trust company reasonably acceptable to the Company to act as paying
agent for the Company and agent for holders of Shares in connection with the
Mergers (the "EXCHANGE AGENT") to receive and pay the funds necessary to make
the payment of the Cash Consideration contemplated by Section 2.l(a) hereof. At
the Effective Time, Merger Subsidiary shall deposit, or cause to be deposited,
in trust with the Exchange Agent for the benefit of holders of Shares the
aggregate Cash Consideration to which such holders shall be entitled at the
Effective Time pursuant to Section 2.1(a) hereof. The funds held by the Exchange
Agent pursuant to this Section 2.3 shall not be used for any purpose other than
the payment of the Cash Consideration pursuant hereto.
(b) Each holder of a certificate or certificates representing any
Shares canceled upon the Mergers, which immediately prior to the Effective Time
represented outstanding Shares (the "CERTIFICATES") whose Shares were converted
pursuant to Section 2.1(a) hereof may thereafter surrender such Certificate or
Certificates to the Exchange Agent, as agent for such holder, to effect the
surrender of such Certificate or Certificates on such holder's behalf for a
period ending six (6) months after the Effective Time. Merger Subsidiary agrees
that promptly after the Effective Time it shall cause the distribution to the
Record Date Stockholders as of the Effective Time of materials to facilitate
such surrender pursuant to Section 2.3(c) hereof. Upon the surrender of
Certificates, the holder of such Certificates shall be entitled to receive, in
exchange therefore, (i) cash in an amount equal to the Cash Consideration
multiplied by the number of Shares represented by such Certificates and (ii) the
number of CVRs into which such Shares have been converted pursuant to Section
2.1(a). Until so surrendered, each Certificate (other than Certificates
representing Dissenting Shares and Certificates representing Shares held by
Merger Subsidiary or Parent or in the treasury of the Company) shall represent
solely the right to receive the aggregate Merger Consideration relating thereto.
(c) Promptly after the Effective Time, the Exchange Agent shall send
to each holder of record, as of the Effective Time, of a Certificate or
Certificates theretofore evidencing Shares, other than Certificates formerly
representing Shares to be canceled pursuant to Section 2.1(b) hereof, a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions advising such holder of the
procedure for surrendering to the Exchange
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Agent such Certificates for exchange into the Merger Consideration. Upon the
surrender of a Certificate to the Exchange Agent together with and in accordance
with such transmittal form duly executed and any other documents reasonably
required by such instructions (including, without limitation, a properly
completed Internal Revenue Service Form W-9 or suitable substitute form
establishing as exemption from backup withholding), the holder thereof shall be
entitled to receive promptly in exchange therefor the Merger Consideration
deliverable in respect of each Share formerly represented thereby and such
Certificate shall forthwith be canceled. Upon such surrender, the Exchange Agent
promptly will deliver the Merger Consideration. No interest or dividends shall
be paid or accrue on the Merger Consideration.
(d) If delivery of the Merger Consideration is to be made to an
individual, general partnership, limited partnership, corporation, limited
liability company or any other legal entity (each a "PERSON"), other than the
Person in whose name a surrendered Certificate or instrument is registered, it
shall be a condition to such delivery that the Certificate or instrument so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the Person requesting such delivery in a name other than that
of the registered holder of the Certificate or instrument surrendered shall pay
to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of Merger Subsidiary or the Exchange
Agent that such taxes either have been paid or are not applicable.
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed ("AFFIDAVIT OF LOSS") and the
delivery of an indemnity bond in form and substance and with surety reasonably
satisfactory to the Surviving Corporation, the Surviving Corporation will
deliver or cause to be delivered in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof as
determined in accordance with this Article II and without any interest thereon.
(f) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall not be any further registration of transfers of
Shares or any shares of capital stock thereafter on the records of the Company.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for Merger Consideration as
provided in this Article II. No interest shall accrue or be paid on the Cash
Consideration or CVRs deliverable upon the surrender of a Certificate or
Certificates which immediately before the Effective Time represented outstanding
Shares.
(g) Promptly following the date which is six (6) months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Exchange Agent to deliver to it any cash (including any interest received with
respect thereto), Certificates and other documents in its possession relating to
the transactions contemplated hereby, which had been made available to the
Exchange Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or similar laws) with respect to the
Merger Consideration deliverable upon due surrender of their Certificates,
without any interest thereon. Notwithstanding the foregoing, neither the
Surviving Corporation nor the Exchange Agent shall be liable to any holder of a
Certificate for Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
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(h) The Cash Consideration paid in the Mergers shall be net to the
holder of Shares in cash, subject to reduction only for any applicable federal
back-up withholding or, as set forth in Section 2.3(d), stock transfer taxes
payable by such holder. The CVR Payment Amount, if any, paid under the CVR
Agreement shall be net to the holder of CVRs in cash, subject to adjustment as
set forth in the CVR Agreement and reduction for any applicable federal back-up
withholding.
SECTION 2.4 STOCK PLANS. Prior to the Effective Time, the Board of
Directors shall adopt appropriate resolutions and take all other actions
necessary and appropriate to provide that, immediately prior to the Effective
Time, each then outstanding option to purchase Shares (an "OPTION") granted
under any stock option plans or agreements of the Company (all of which are set
forth on Section 3.2 of the Company Letter, collectively, the "STOCK PLANS"),
will be exercisable in full and, to the extent not so exercised or validly
canceled, be forfeited as of the Effective Time. The Board of Directors may take
such action as may be necessary or desirable to permit any holder of an Option
to, in lieu of exercise, elect to have the Option canceled (a "CANCELED OPTION")
at the Effective Time and to receive, in exchange and full settlement therefor
and in consideration of the cancellation of such Option, (i) a payment in cash
(subject to any applicable withholding tax) equal to the product of (x) the
excess, if any, of the Cash Consideration over the per Share exercise price of
such Option, and (y) the number of Shares subject to such Option and (ii) only
if cash is paid pursuant to clause (i) above, one CVR for each Share subject to
such Option (together, the "OPTION CONSIDERATION"). Any such election to receive
the Option Consideration will be conditioned upon the Option holder providing to
the Company prior to the Effective Time a consent to cancellation and release in
such form as is approved by Parent. From and after the Effective Time, such
Canceled Options shall no longer be exercisable by the former holder thereof,
but shall only entitle such holder to the delivery of the Option Consideration.
At, or as soon as practicable after, the Effective Time, Parent shall or shall
cause the Surviving Corporation to provide each holder of a Canceled Option
which is validly canceled pursuant to this Section 2.4 with a lump-sum cash
payment equal to the Cash Consideration payable to such holder hereunder. The
holders of Options which are "out of the money" (I.E., having a per Share
exercise price equal to or in excess of the Cash Consideration) shall not
receive any consideration with respect to the forfeiture of such Options as of
the Effective Time. Prior to the Effective Time, the Company shall use its
reasonable best efforts to ensure that holders of Options that are neither
exercised nor canceled will have no rights with respect to the Options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary as
set forth in this Article III, except to the extent provided in that certain
letter delivered by the Company to Parent and Merger Subsidiary dated as of the
date hereof (the "COMPANY LETTER"), as follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION.
(a) Each of the Company and the DSS Cleared Company is a corporation
duly organized, validly existing and in good standing under the laws of the
States of Delaware and Alabama, respectively. Each of the Company and the DSS
Cleared Company has all requisite
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corporate power and authority and all necessary governmental approvals to carry
on its business as it is now being conducted and to own, lease and operate its
assets.
(b) Each of the Company and the DSS Cleared Company is duly
qualified or licensed to do business as a foreign corporation in good standing
in every jurisdiction where the character of its properties, owned or leased, or
the nature of its activities make such qualification, license or good standing
necessary, except where the failure to be so qualified, licensed or in good
standing would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. As used in this Agreement,
"MATERIAL ADVERSE EFFECT" means any material adverse change in or effect on the
business, operations, properties (including intangible properties), financial
condition, results of operations, assets, liabilities or prospects of the
Company and its Subsidiaries (as defined below) taken as a whole, excluding any
such changes or effects directly resulting from any one or more of the
following: (1) material adverse changes in the U.S. financial or securities
markets or the U.S. economy in general, (2) material adverse changes in the
defense industry in general, to the extent that the effects thereof do not
disproportionately impact the Company or any of its Subsidiaries, or (3) any
knowingly competitive action taken with respect to the Company's U.S. business
or operations by Parent or Singapore Technologies Engineering Ltd. or any of its
control subsidiaries, other than actions or inactions by Parent or Merger
Subsidiary which are contemplated or permitted by this Agreement or any of the
Ancillary Agreements.
(c) The Company has heretofore delivered to Parent complete and
correct copies of the Company's Certificate of Incorporation and By-Laws, each
as amended and in effect on the date hereof. The Company is not in violation of
any of the provisions of its Certificate of Incorporation or By-Laws. Complete
and correct copies of all minute books of the Company since 1995 have been made
available by the Company to Parent.
SECTION 3.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 shares of common stock, par value $0.01 per share (the
"COMMON STOCK"). As of the date hereof, (i) 5,962,623 Shares were issued and
outstanding, (ii) 848,489 shares were issued and held in the treasury of the
Company, and (iii) a total of 532,336 Shares were reserved under the Company's
Stock Plans in respect of outstanding and future awards. Section 3.2 of the
Company Letter sets forth a true, accurate and complete list of all outstanding
Options and the exercise prices and vesting schedules thereof. Except as
disclosed in Section 3.2 of the Company Letter, all outstanding Options were
granted pursuant to the Company's 1995 Stock Option and Performance Award Plan.
All the outstanding shares of the Company's capital stock are, and all Shares
which may be issued pursuant to the exercise of outstanding Options will be,
when issued in accordance with the terms thereof, duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights. Except as
disclosed in this Section 3.2 or as set forth in Section 3.2 of the Company
Letter, (w) there are no shares of capital stock of the Company authorized,
issued or outstanding, the Common Stock is the only class of capital stock
outstanding and no other series or classes of capital stock has been authorized,
(x) there are no existing options, warrants, calls, preemptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any Subsidiary obligating the Company or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or other equity interest in the Company or any Subsidiary or
securities convertible or exchangeable for
A-9
such shares or equity interests or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement, arrangement or commitment, (y) there are
no bonds, debentures, notes or other securities having the right to vote on any
matters on which shareholders of the Company or any of its Subsidiaries may vote
issued or outstanding and (z) there are no outstanding contractual obligations
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any Shares, or the capital stock of the Company or of any Subsidiary of
the Company. Except as disclosed in Section 3.2 of the Company Letter, there are
no voting trusts or other agreements to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or any Subsidiary (including, without limitation, agreements restricting
the transfer of, affecting the voting rights of, requiring the repurchase,
redemption or disposition of, or containing any right of first refusal with
respect to, requiring the registration for sale of, or granting any preemptive
or anti-dilutive right with respect to, any shares of capital stock of or other
equity interests in the Company or any Subsidiary). Except as set forth on
Section 3.2 of the Company Letter, there are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or other similar rights with
respect to the Company.
SECTION 3.3 SUBSIDIARIES. Section 3.3 of the Company Letter contains a
complete and accurate list of each of the Company's Subsidiaries, the
jurisdiction of incorporation of each such Subsidiary, and the Company's equity
interest therein. Each Subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and carry on its
business as it is now being conducted. Each Subsidiary is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or leased or the nature of its activities
makes such qualification, licensing or good standing necessary, except where the
failure to be so qualified, licensed or in good standing would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Except as set forth on Section 3.3 of the Company Letter, each outstanding share
of capital stock of each Subsidiary is duly authorized, validly issued, fully
paid, non-assessable and free of preemptive rights and is owned, beneficially
and of record, by the Company or another Subsidiary free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or any Subsidiary's voting rights,
charges or other encumbrances of any nature whatsoever. Except as disclosed in
Section 3.3 of the Company Letter, (i) there are no shares of capital stock of
any Subsidiary authorized, issued or outstanding, (ii) there are no existing
options, warrants, calls, preemptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the issued
or unissued capital stock of any Subsidiary obligating any of its Subsidiaries
to issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock or other equity interest in a Subsidiary or securities
convertible or exchangeable for such shares or equity interests or obligating
any Subsidiary to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement, arrangement or commitment, (iii) there
are no bonds, debentures, notes or other securities having the right to vote on
any matters on which shareholders of a Subsidiary may vote issued or outstanding
and (iv) there are no outstanding contractual obligations of any Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of any
Subsidiary. There are no outstanding contractual obligations of the Company or
any Subsidiary to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Subsidiary
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or any other person, other than guarantees by the Company of any indebtedness or
other obligations of a wholly-owned Subsidiary. Except as set forth on Section
3.3 of the Company Letter, none of the Company or any of the Subsidiaries holds
shares of capital stock or other equity interests in any other person. Except as
disclosed in Section 3.3 of the Company Letter, there are no voting trusts or
other agreements to which any Subsidiary is a party with respect to the voting
of any capital stock or other equity interests in any other person (including,
without limitation, agreements restricting the transfer of, affecting the voting
rights of, requiring the repurchase, redemption or disposition of, or containing
any right of first refusal with respect to, requiring the registration for sale
of, or granting any preemptive or anti-dilutive right with respect to, any
shares of capital stock or other equity interests in any other person). The
Company has heretofore delivered to Parent complete and correct copies of each
Subsidiary's Certificate of Incorporation and By-Laws (and any other comparable
constituent documents), each as amended and in effect on the date hereof. Each
Subsidiary is not in violation of any of the provisions of its Certificate of
Incorporation or By-Laws (and any other comparable constituent documents).
Complete and correct copies of all minute books of each Subsidiary have been
made available by the Company to Parent. Except as set forth on Section 3.3 of
the Company Letter, there are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or other similar rights with respect to any
Subsidiary. For purposes of this Agreement, the term "SUBSIDIARY" shall mean any
corporation or other entity a majority of whose outstanding voting stock or
ownership interests ordinarily entitled to vote for the election of a majority
of the Board of Directors or other governing body is directly or indirectly
owned by the Company or one or more other Subsidiaries.
SECTION 3.4 AUTHORIZATION.
(a) Each of the Company and the DSS Cleared Company has all
requisite corporate power to execute and deliver this Agreement and all other
documents and instruments to be executed and delivered by it in connection
herewith, including without limitation the Voting Agreements and the CVR
Agreement (each, an "ANCILLARY AGREEMENT") and, subject to the adoption of this
Agreement by the stockholders of the Company, to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by each
of the Company and the DSS Cleared Company of this Agreement and all Ancillary
Agreements to which it is a party, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by its board of directors and no other corporate action on the part
of the Company or the DSS Cleared Company is necessary to authorize the
execution and delivery by the Company and the DSS Cleared Company of this
Agreement and all Ancillary Agreements to which it is a party and the
consummation by it of the transactions contemplated hereby and thereby, except
the adoption and approval of this Agreement and the Mergers by the Company's
stockholders as contemplated by Section 6.1 hereof. This Agreement and each
Ancillary Agreement to which it is a party constitutes a valid and legally
binding agreement of each of the Company and the DSS Cleared Company enforceable
in accordance with its terms.
(b) Each of the Company and the DSS Cleared Company has taken all
necessary and appropriate actions so that the restrictions on business
combinations contained in Section 203 of the Delaware Law will not apply with
respect to or as a result of this Agreement, the Voting Agreements or any other
Ancillary Agreement and the transactions contemplated hereby and
A-11
thereby, including the Mergers, without any further action on the part of the
stockholders or the board of directors of either company. Complete and accurate
copies of all of the board of directors resolutions reflecting such actions have
been previously provided to Parent. No other state takeover statute or similar
statute or regulation applies or purports to apply to the Mergers or any other
transaction contemplated by this Agreement, the Voting Agreements or any other
Ancillary Agreement.
SECTION 3.5 SEC DOCUMENTS.
(a) Except as disclosed in Section 3.5(a) of the Company Letter, the
Company has timely filed with the Securities and Exchange Commission (the
"SEC"), and heretofore has made available to Parent, true and complete copies of
all reports, schedules, forms, statements and other documents required to be so
filed by it from January 1, 2000 through the date hereof under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE Act"), or the Securities Act of
1933, as amended (the "SECURITIES ACT"), including (i) the annual reports on
Form 10-K for all fiscal years ended during such period, (ii) the quarterly
reports on Form 10-Q required for all fiscal quarters during such period, and
(iii) its proxy or information statements relating to meetings of, or actions
taken without a meeting by, the stockholders of the Company held during such
period (the "SEC DOCUMENTS").
(b) As of its respective date, or if amended, as of the date of the
last such amendment, each SEC Document, including, without limitation, any
financial statements or schedules included therein (i) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (ii) except
as disclosed in Section 3.5(b) of the Company Letter, complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations promulgated by
the SEC thereunder. None of the Company's Subsidiaries has any class of
securities registered under, or is subject to the periodic reporting
requirements of, the Exchange Act.
(c) The Company maintains a system of accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP (as defined below) and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(d) The Company is neither engaged in any transactions with, nor has
any obligations to, any unconsolidated entities that are contractually limited
to activities that facilitate the Company's transfer of or access to assets,
including, without limitation, structured finance entities and special purpose
entities, or otherwise engage in, or have any obligations under, any off-balance
sheet transactions or arrangements.
A-12
(e) The Company is not engaged in any trading activities involving
commodity contracts or other trading contracts which are not currently traded on
a securities or commodities exchange and for which the market value cannot be
determined.
(f) The Proxy Statement (as defined below) and any other filings,
and any amendments or supplements thereto, when filed by the Company with the
SEC, or when distributed or otherwise disseminated to the Company's
stockholders, as applicable, will comply as to form in all material respects
with the applicable requirements of the Exchange Act. The Proxy Statement, as
supplemented or amended, if applicable, at the time such Proxy Statement or any
amendment or supplement thereto is first mailed to the Company's stockholders
and at the time such stockholders vote on adoption and approval of this
Agreement and the Mergers at the Special Meeting, and any other SEC filing
(other than the Proxy Statement) or any amendment or supplement thereto, at the
time of the filing and at the time of any distribution or dissemination thereof,
in each case, will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section 3.5(f)
will not apply to statements or omissions included in the Proxy Statement or any
other SEC filings based upon information furnished in writing to the Company by
Parent or Merger Subsidiary specifically for use therein.
(g) The Company has previously provided to Parent a complete and
correct copy of any amendment or modification which has not yet been filed with
the SEC to any agreement, document or other instrument which previously had been
filed by the Company with the SEC pursuant to the Securities Act or the Exchange
Act.
(h) Except as set forth in the SEC Documents, since the date of the
Company's last proxy or information statement filed with the SEC, no event has
occurred that would be required to be reported by the Company pursuant to Item
404 of Regulation S-K promulgated by the SEC.
SECTION 3.6 NO CONFLICTS. Except as disclosed in Section 3.6 of the
Company Letter and for filings, permits, authorizations, consents and approvals
as may be required under the Exchange Act, the execution, delivery or
performance of this Agreement and the Ancillary Agreements by each of the
Company and the DSS Cleared Company, the consummation by each of the Company and
the DSS Cleared Company of the transactions contemplated hereby and thereby or
compliance by each of the Company and the DSS Cleared Company with any of the
provisions hereof and thereof will not (i) conflict with or result in any breach
of any provision of the Certificate of Incorporation, the By-Laws or similar
organizational documents of the Company or any of its Subsidiaries, (ii) require
on the part of either the Company or the DSS Cleared Company any filing or
notice with, or any permit, authorization, consent, certification, waiver or
approval from, any international, national, foreign, federal, state or local
judicial, legislative, executive, administrative or regulatory body or authority
(a "GOVERNMENTAL ENTITY") including, without limitation, in relation to U.S. and
non-U.S. security matters and the HSR Act (as defined below) (collectively,
"REGULATORY APPROVALS"), (iii) require any consent or approval under, result in
a violation or breach of, or constitute a change of control or (with or without
due notice or lapse of time or both) a default (or give rise to (x) any right of
termination, vesting, amendment, cancellation or acceleration or to receive any
other or additional payments, (y) the creation of any lien or other encumbrance
on any property or asset of the Company or any
A-13
Subsidiary or (z) the loss of any benefit) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license, permit,
contract (including, without limitation any Government Contract (as defined
below)) agreement or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which any of them or any of their
properties or assets is bound (the "COMPANY AGREEMENTS"), or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company, any of its Subsidiaries or any of their properties or assets, except in
the case of clauses (ii), (iii) and (iv) for any matter otherwise covered by
such clauses which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
SECTION 3.7 FINANCIAL STATEMENTS.
(a) The consolidated financial statements included in the SEC
Documents (the "FINANCIAL STATEMENTS") fairly present, in all material respects,
the consolidated financial position and the consolidated results of operations
and cash flows (and changes in financial position, if any) of the Company and
its consolidated Subsidiaries as of the times and for the periods referred to
therein, subject, in the case of unaudited, interim financial statements, to the
lack of footnotes and normal year-end adjustments and to any other adjustments
or exceptions described therein, all in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated therein or in the notes
thereto). The books and records of the Company and each Subsidiary have been,
and are being, maintained in accordance with applicable legal and accounting
requirements.
(b) Except as and to the extent set forth on the consolidated
balance sheet of the Company and its consolidated Subsidiaries as of December
31, 2002 included in the SEC Documents, including the notes thereto, none of the
Company or any consolidated Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in notes thereto prepared in
accordance with GAAP applied on a consistent basis, except for liabilities or
obligations incurred in the ordinary course of business since December 31, 2002
that would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
SECTION 3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except to the extent
disclosed in Section 3.8 of the Company Letter or in the SEC Documents filed
prior to the date hereof, since December 31, 2002, the Company and its
Subsidiaries have conducted their businesses in the ordinary course consistent
with past practice and, since such date, there has not been (i) any Material
Adverse Effect or any event or development that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, (ii) any
event or development that would, individually or in the aggregate, reasonably be
expected to prevent or materially delay the performance of this Agreement or any
Ancillary Agreement by the Company, or (iii) any action taken by the Company or
any Subsidiary, or any other occurrence, that, if taken or occurred during the
period from the date of this Agreement through the Effective Time, would
constitute a breach of Section 5.1.
SECTION 3.9 TAX MATTERS.
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(a) Each of the Company and its Subsidiaries has timely filed all
federal income and all other material Tax Returns (as defined below) that are
required to be filed by or with respect to the Company and its Subsidiaries. All
such Tax Returns were complete and accurate in all material respects. Except as
disclosed in Section 3.9 of the Company Letter, the Company and its Subsidiaries
are not the beneficiaries of any extension of time within which to file any such
Tax Returns. The Company has delivered or made available to Parent correct and
complete copies of all federal Income Tax Returns and all other material Tax
Returns and all material examination reports, ruling requests and statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries.
(b) Each of the Company and its Subsidiaries has timely paid all
Taxes (as defined below) due and owing, whether or not shown on any Tax Returns
(except for Taxes that are being contested in good faith by appropriate
proceedings) or for which reserves, which are adequate under GAAP, have been
established.
(c) Except as disclosed in Section 3.9(c) of the Company Letter,
each of the Company and its Subsidiaries has complied in all material respects
with all applicable laws, rules and regulations relating to the withholding of
Taxes and has timely withheld and paid to the proper Governmental Entity all
amounts required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor or stockholder.
(d) Except as disclosed in Section 3.9(d) of the Company Letter, (i)
no audits or other administrative or court proceedings are presently pending
with regard to any Taxes for which the Company or any of its Subsidiaries could
be liable, (ii) no dispute or claim concerning any Taxes for which the Company
or any of its Subsidiaries could be liable has been claimed or raised by any Tax
Authority in writing to the Company, and (iii) no claim has been made in writing
to the Company by any authority in a jurisdiction where the Company and its
Subsidiaries do not file Tax Returns that the Company or any such Subsidiary is,
or may be, subject to taxation by that jurisdiction.
(e) The unpaid Taxes of the Company and its Subsidiaries (i) did
not, as of the balance sheet date of December 31, 2002, exceed the reserve for
Tax liability (excluding any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
balance sheet contained in the year ending December 31, 2002 financial
statements (rather than any notes thereto) and (ii) will not exceed that reserve
as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company and its Subsidiaries
in filing their Tax Returns.
(f) There are no Encumbrances for Taxes, other than Permitted
Encumbrances (as defined below), on any of the assets of the Company or its
Subsidiaries.
(g) None of the Company or any of its Subsidiaries has (i) consented
at any time under Section 341(f)(1) of the Code (as defined below) to have the
provisions of Section 341(f)(2) of the Code apply to any disposition of any of
their assets; (ii) agreed, or is required, to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise;
(iii) made an election, or is required, to treat any of its assets as owned by
another Person pursuant to the provisions of former Section 168(f) of the Code
or as tax-exempt
A-15
bond financed property or tax-exempt use property within the meaning of Section
168 of the Code; (iv) acquired and does not own any assets that directly or
indirectly secure any debt the interest on which is tax exempt under Section
103(a) of the Code; (v) made and will not make a consent dividend election under
Section 565 of the Code; or (vi) made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state or local
Tax provision.
(h) There are no Tax-sharing agreements or similar arrangements
(including Tax indemnity arrangements) with respect to or involving the Company
or its Subsidiaries.
(i) Except as set forth in Section 3.9(i) of the Company Letter,
neither the Company nor its Subsidiaries has any liability for the Taxes of any
Person (other than Taxes of the Company or its Subsidiaries) under Treasury
Regulations (as defined below) Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise.
(j) Neither the Company nor any of its Subsidiaries (while any such
Subsidiary was part of the Company's consolidated tax group) has distributed the
stock of any corporation in a transaction satisfying the requirements of Section
355 of the Code since April 16, 1997, and neither the stock of the Company nor
the stock of any of its Subsidiaries has been distributed in a transaction
satisfying the requirements of Section 355 of the Code since April 16, 1997.
(k) There is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company or any ERISA Affiliate (as
defined below) that, individually or collectively, provides for the payment by
the Company of any amount that is not deductible under Section 162(a)(1) or 404
of the Code.
(l) None of the Company and its Subsidiaries has been a United State
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(m) For purposes of this Agreement:
(i) "TAX" (including, with correlative meaning, the terms
"TAXES" and "TAXABLE") means (x) any net income, gross income, gross
receipts, sales, use, ad valorem, transfer, transfer gains, franchise,
profits, license, withholding, payroll, employment, social security (or
similar), unemployment, excise, or real or personal property tax,
together with any interest and any penalty, addition to tax or
additional amount or deductions imposed by any governmental body
(domestic or foreign) (a "TAX AUTHORITY") responsible for the
imposition of any such tax, whether disputed or not, including any
liability arising under any tax sharing agreement, with respect to the
Company or any of its Subsidiaries; (y) any liability for the payment
of any amount of the type described
A-16
in the immediately preceding clause (x) as a result of the Company or
any of its Subsidiaries being a member of an affiliated or combined
group with any other corporation at any time on or prior to the Closing
Date; and (z) any liability of the Company or any of its Subsidiaries
for the payment of any amounts of the type described in the immediately
preceding clause (x) as a result of a contractual obligation to
indemnify any other person.
(ii) "TAX RETURN" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
(iii) "INCOME TAX" or "INCOME TAXES" shall mean all Taxes which
are based on or measured by income.
(iv) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(v) "TREASURY REGULATIONS" shall mean the Treasury Regulations
promulgated under the Code.
SECTION 3.10 LITIGATION. Except as set forth in the SEC Documents or as
disclosed in Section 3.10 of the Company Letter, there is (i) no suit, claim,
action or proceeding pending, (ii) to the knowledge of the Company, no
investigation pending, or (iii) to the knowledge of the Company, no suit, claim,
action, proceeding or investigation threatened, in each case against the Company
or any of its Subsidiaries or for which the Company or any Subsidiary is
obligated to indemnify a third party, including but not limited to any suit or
action involving a products liability claim, at law or in equity or before any
United States federal or state court of competent jurisdiction (a "U.S. COURT"),
United States federal, state or local administrative body or arbitration
tribunal, or any foreign or other court of competent jurisdiction,
administrative body or arbitration tribunal, which (x) if determined adversely
to the Company or its Subsidiaries would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or (y) challenges
the validity or propriety, or seeks to prevent or materially delay consummation
of the Mergers or any transaction contemplated by this Agreement, the Voting
Agreements or any other Ancillary Agreement or otherwise prevent or materially
delay performance by the Company of its material obligations under this
Agreement, the Voting Agreements or any other Ancillary Agreement.
SECTION 3.11 ERISA COMPLIANCE.
(a) Section 3.11(a) of the Company Letter sets forth a true and
complete list of all "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and all
other bonus, deferred compensation, pension, profit-sharing, retirement,
medical, life, disability income, severance, stock purchase, stock option,
incentive or other employee benefit plans that are currently, or were in the
past six years, maintained, contributed to, or required to be maintained or
contributed to, by the Company or any of its Subsidiaries or any other Person
that, together with the Company, is treated as a single employer under Sections
414(b), (c), (m) or (o) of the Code (each an "ERISA AFFILIATE"), for the benefit
of any current or former employees, officers or directors of the Company or any
ERISA Affiliate, or under which the Company or its ERISA Affiliates may incur
any material liability (individually, a "BENEFIT PLAN"). In addition, with
respect to each Benefit Plan, the Company has delivered or made available to
Parent correct and complete copies of (i) all Benefit Plans, including without
limitation all plan documents and all amendments thereto, (ii) all trust
A-17
agreements, insurance contracts or other funding vehicles, and all amendments
thereto, relating to any Benefit Plan, (iii) all summaries and summary plan
descriptions, including any summary of material modifications, (iv) the most
recent annual reports (Form 5500 series) filed with the IRS with respect to such
Benefit Plan, (v) the most recent determination or opinion letter, if any,
issued by the United States Internal Revenue Service ("IRS") with respect to any
Benefit Plan and any pending request for such a determination letter, and (vi)
all filings not of the type previously described made with any Governmental
Entities.
(b) Each Benefit Plan has been established and administered in all
material respects in accordance with its terms, and all contributions required
to be made under the terms of any of the Benefit Plans as of the date of this
Agreement have been timely made. The Company, each ERISA Affiliate and each
Benefit Plan are in compliance in all material respects with applicable
provisions of ERISA, the Code and other applicable laws, rules and regulations.
(c) Except as disclosed in Section 3.11(c) of the Company Letter,
(i) all Benefit Plans intended to be qualified under Section 401(a) of the Code
have been the subject of determination or opinion letters from the Internal
Revenue Service to the effect that such Benefit Plans are qualified and exempt
from federal income Taxes under Section 401(a) and 501(a), respectively, of the
Code, and to the best knowledge of the Company nothing has occurred, whether by
action or failure to act, that would reasonably be expected to cause the loss of
such qualification, (ii) no Benefit Plan intended to be qualified under Section
401(a) of the Code has been amended since the date of its most recent
determination letter or application therefor in any material respect, except as
required by law, (iii) all Benefit Plans have been amended, to the extent
necessary, to comply with the so-called GUST legislation, (iv) no Benefit Plan
has experienced a full or partial plan termination, (v) there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code and other than a transaction that is exempt under a statutory
or administrative exemption) with respect to any Benefit Plan that would result
in material liability to the Company or an ERISA Affiliate, (vi) each Benefit
Plan can be amended, terminated or otherwise discontinued after the Effective
Time in accordance with its terms, without material liability to the Company,
(vii) no suit, administrative proceeding, action or other litigation has been
brought, or to the knowledge of Company is threatened, against or with respect
to any Benefit Plan, including any audit or inquiry by the IRS or United States
Department of Labor (other than routine benefits claims), (viii) neither the
Company nor any ERISA Affiliate sponsors, maintains, contributes to or has an
obligation to contribute to, or has sponsored, maintained, contributed to or had
an obligation to contribute to any multiemployer plan within the meaning of
Section 3(37) of ERISA (a "MULTIEMPLOYER PLAN") or any pension plan that is
subject to Title IV of ERISA, (ix) neither the Company nor any ERISA Affiliate
has incurred any liability due to a complete or partial withdrawal from a
Multiemployer Plan or due to the termination or reorganization of a
Multiemployer Plan, and (x) neither the Company nor any ERISA Affiliate has any
liability under ERISA Section 502. Except as disclosed in Section 3.11(c) of the
Company Letter, all reports, returns and similar documents with respect to
material Benefit Plans required to be filed with any Governmental Entity or
distributed to any Benefit Plan participant have been fully and timely filed.
(d) Except as disclosed in Section 3.11(d) of the Company Letter, no
event has occurred and, to the best knowledge of the Company, no condition
exists that would subject the Company, either directly or by reason of its
affiliation with an ERISA Affiliate, to any material
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Tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other
applicable laws, rules and regulations in connection with a Benefit Plan.
(e) Except as disclosed in Section 3.11(e) of the Company Letter, no
amount that could be received (whether in cash or property or the vesting of
property) in connection with the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreement by any employee, officer or
director of the Company or any of its Subsidiaries who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any Benefit Plan could be characterized as an "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code); neither the Company nor
any of its Subsidiaries has any obligation to "gross up" or otherwise compensate
any such person with respect to the imposition of any excise tax on payments to
such person.
(f) Except as required by Law, no Benefit Plan provides any of the
following retiree or post-employment benefits to any person: medical, disability
or life insurance benefits. The Company and each ERISA Affiliate are in material
compliance with (i) the requirements of the applicable health care continuation
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the regulations (including proposed regulations)
thereunder ("COBRA") and any similar state law and (ii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996,
as amended, and the regulations (including the proposed regulations) thereunder.
(g) Except as set forth in Section 3.11(g) of the Company Letter,
neither the Company nor any of its Subsidiaries maintains, sponsors, contributes
or has any liability with respect to any employee benefit plan program or
arrangement that provides benefits outside of the United States to non-resident
aliens with no United States source income.
SECTION 3.12 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.12
of the Company Letter:
(a) Each of the Company and its Subsidiaries is now and has always
been in compliance with all Environmental Laws and the Company has all
Environmental Permits necessary for the conduct and operation of the business as
now being conducted, and all such permits are in good standing, except where the
failure to be in such compliance or to maintain such Environmental Permits would
not have a Material Adverse Effect.
(b) (i) There is not now and has not been any Hazardous Substance
used, generated, treated, stored, transported, disposed of, released, handled or
otherwise existing on, under, about, or emanating from or to (x) any property
currently owned, leased or operated by the Company or any Subsidiary or (y) any
property formerly owned, leased or operated by the Company or any Subsidiary (at
the time such property was so owned, leased or operated), except in all cases in
material compliance with all applicable Environmental Laws; (ii) neither the
Company nor any Subsidiary has received any notice of alleged, actual or
potential responsibility or liability for, or any inquiry or investigation
regarding, any release or threatened release of Hazardous Substances or alleged
violation of, or non-compliance with, any Environmental Law, nor is the Company
or any Subsidiary aware of any information which would reasonably be expected to
form the basis of any such notice or claim; (iii) there is no site to which the
Company or any Subsidiary has
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transported or arranged for the transport of Hazardous Substances which is or
would reasonably be expected to become the subject of any action under
Environmental Laws; (iv) there is not now nor has there ever been any
underground or aboveground storage tank at any (x) property currently owned,
leased or operated by the Company or any Subsidiary or (y) any property formerly
owned, leased or operated by the Company or any Subsidiary (at the time such
property was so owned, leased or operated); (v) complete and correct copies of
sampling results, environmental or safety audits or inspections, or other
written reports concerning environmental, health or safety issues, pertaining to
any property or business currently or formerly owned, leased or operated by the
Company or any Subsidiary that are in the Company's possession or control have
been provided to Parent; and (vi) neither the Company nor any Subsidiary has
knowingly released any person or entity from any claim, liability or
responsibility under any Environmental Law nor has it knowingly waived any
rights concerning any claims under any Environmental Law.
(c) For purposes of this Agreement:
(i) "ENVIRONMENTAL LAWS" means any and all applicable
international, federal, state, or local laws, statutes, ordinances,
regulations, policies, rules, judgments, orders, court decisions,
Environmental Permit, restrictions and licenses, which regulate or
relate to the protection or clean up of the environment; the use,
treatment, storage, transportation, handling, disposal or release of
Hazardous Substances, the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural
resources; or the health and safety of persons or property, including
without limitation protection of the health and safety of employees; or
impose liability or responsibility with respect to any of the
foregoing, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C.ss.9601 et
seq.)("CERCLA"), or any other law of similar effect;
(ii) "ENVIRONMENTAL PERMITS" means any material permit, license,
authorization or approval required under applicable Environmental Laws;
and
(iii) "HAZARDOUS SUBSTANCES" means any pollutant, chemical,
substance and any toxic, infectious, carcinogenic, reactive, corrosive,
ignitable or flammable chemical, or chemical compound, or hazardous
substance, material or waste, whether solid, liquid or gas, that is
subject to regulation, control or remediation under any Environmental
Laws, including without limitation, asbestos in any form, urea
formaldehyde, PCBs, radon gas, crude oil or any fraction thereof, all
forms of natural gas, petroleum products or by-products or derivatives.
SECTION 3.13 REAL PROPERTY AND LEASED PROPERTY.
(a) Section 3.13(a) of the Company Letter sets forth a complete list
of all real property currently owned by the Company or any of its Subsidiaries
(the "REAL PROPERTY") and all real property formerly owned by the Company or any
of its Subsidiaries. Except as set forth in Section 3.13(a) of the Company
Letter, the Company or one of its Subsidiaries has good, valid and marketable
title to the Real Property, free and clear of all liens, claims, restrictions,
mortgages and encumbrances ("ENCUMBRANCES"), other than Permitted Encumbrances
(as
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defined below), except in all cases where the failure to have such title would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. As used in this Agreement, the term "PERMITTED ENCUMBRANCES"
means (i) those Encumbrances set forth in Section 3.13(a) of the Company Letter,
(ii) Encumbrances, including, without limitation, by easements, granted in favor
of any Governmental Entity or utility company for the customary provision of
utilities and services to the Real Property or any improvements thereon, (iii)
Encumbrances for water and sewage charges and current taxes not yet due and
payable or being contested in good faith, (iv) mechanics', carriers', workers',
repairers', materialmen's, warehousemen's and other similar Encumbrances arising
or incurred in the ordinary course of business, (v) Encumbrances arising or
resulting from any action taken by Parent or Merger Subsidiary, or (vi) such
other Encumbrances which, together with the Encumbrances set forth under clauses
(ii) to (v) above, are not substantial in amount, do not materially detract from
the value or impair the use of the property subject thereto, or impair the
operations of the Company or any Subsidiary and which have arisen only in the
ordinary course of business and consistent with past practice.
(b) Set forth in Section 3.13(b) of the Company Letter is a correct
and complete list of all Company Agreements under which the Company or any
Subsidiary is a lessee ("LEASED PROPERTY"). The Company and each of its
Subsidiaries enjoys peaceful and undisturbed possession under all such Company
Agreements, all of such Company Agreements are valid and none of them is in
default under any such lease, except for any matters otherwise covered by this
sentence which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(c) The Company and each of its Subsidiaries have obtained all
appropriate licenses, permits, easements and rights of way required to use and
operate the Real Property in the manner in which the Real Property and Leased
Property currently are being used and operated, except for such licenses,
permits, easements or rights of way the failure of which to have obtained would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.14 INTELLECTUAL PROPERTY.
(a) Except as disclosed in Section 3.14(a) of the Company Letter,
the Company and each Subsidiary have exclusive ownership of and title to each
issued patent, pending patent application, registered trademark, registered
trade name, registered service mark and registered copyright owned or used in
and material to the business of the Company and its Subsidiaries taken as a
whole (collectively, the "REGISTERED INTELLECTUAL Property"), and to the
knowledge of the Company, the Company and each Subsidiary has exclusive
ownership of and rights to use each material patent application, unregistered
trademark, trademark application, unregistered trade name, unregistered service
mark, unregistered copyright and other trade secret or other proprietary
intellectual property (the "OTHER INTELLECTUAL PROPERTY" and collectively with
the Registered Intellectual Property, the "INTELLECTUAL PROPERTY") owned by or
used in and material to the business of the Company and its Subsidiaries taken
as a whole.
(b) Except as set forth in Section 3.14(b) of the Company Letter:
(i) to the knowledge of the Company, the current use by the Company and each
Subsidiary of such Intellectual Property does not infringe upon the rights of
any other Person; (ii) to the knowledge of the
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Company, no other Person is infringing upon the rights of the Company or any
Subsidiary in any such Intellectual Property; (iii) no written claim of
invalidity or conflicting ownership rights with respect to any Intellectual
Property has been made by a third party and no such Intellectual Property is the
subject of any pending or, to the Company's knowledge, threatened action, suit,
claim, investigation, arbitration or other proceeding; (iv) no person or entity
has given written notice to the Company or any Subsidiary that the use of any
Intellectual Property by the Company, any Subsidiary or any licensee is
infringing or has infringed any domestic or foreign patent, trademark, service
mark, trade name, or copyright or design right, or that the Company, any
Subsidiary or any licensee has misappropriated or improperly used or disclosed
any trade secret, confidential information or know-how; (v) the making, using,
selling, manufacturing, marketing, licensing, reproduction, distribution, or
publishing of any process, machine, manufacture or product related to any
Intellectual Property, does not and will not infringe any domestic or foreign
patent, trademark, service mark, trade name, copyright or other intellectual
property right of any third party, and does not and will not involve the
misappropriation or improper use or disclosure of any trade secrets,
confidential information or know-how of any third party; and (vi) there exists
no prior act or current conduct or use by the Company, any Subsidiary or, to the
Company's knowledge, any third party that would void or invalidate any
Intellectual Property; and except in the case of clauses (iii), (iv), (v) and
(vi) for any matter otherwise covered by such clauses which would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
SECTION 3.15 CONTRACTS.
(a) Except as disclosed in Section 3.15(a) of the Company Letter or
filed as exhibits to the SEC Documents, none of the Company Agreements (i) is
material to the business, financial condition or results of operations of the
Company and its Subsidiaries taken as a whole or is otherwise a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K
promulgated by the SEC); (ii) involves aggregate expenditures in excess of
$250,000; (iii) involves annual expenditures in excess of $50,000 and is not
cancelable within one year; (iv) contains any non-compete or exclusivity
provisions with respect to any material line of business or material geographic
area with respect to the Company, any Subsidiary or any of the Company's current
or future affiliates, or which restricts the conduct of any material line of
business by the Company, any Subsidiary or any of the Company's current or
future affiliates, or any geographic area in which the Company, any Subsidiary
or any of the Company's current or future affiliates may conduct business, in
each case in any material respect, or (v) could prohibit or materially delay the
consummation of the Mergers or any of the other transactions contemplated by
this Agreement or any Ancillary Agreement. Each of the Company Agreements is
valid, binding and enforceable and in full force and effect, except where
failure to be valid, binding and enforceable and in full force and effect would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. There are no defaults (nor does there exist any condition which
upon the passage of time or the giving of notice would cause such a default) on
the part of the Company or its Subsidiaries, nor to the Company's knowledge, on
the part of third parties, under the Company Agreements, except those defaults
that would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
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(b) Except as disclosed in Section 3.15(b) of the Company Letter or
filed as exhibits to the SEC Documents, none of the Company or any Subsidiary is
a party to or bound by any Company Agreement any of the benefits to any party of
which will be increased, or the vesting of the benefits to any party of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, the Voting Agreements or any other Ancillary Agreement or the
value of any of the benefits to any party of which will be calculated on the
basis of any of the transactions contemplated by this Agreement, the Voting
Agreements or any other Ancillary Agreement.
(c) With respect to each Government Contract (as defined below) to
which the Company or any of its Subsidiaries is a party or Bid (as defined
below): (i) the Company or its Subsidiary that is a party to such Government
Contract or Bid has complied with all material terms and conditions and all
applicable requirements of statute, rule, regulation, order or agreement,
whether incorporated expressly, by reference or by operation of law; (ii) all
representations and certifications were current, accurate and complete in all
material respects when made, and the Company or its Subsidiary has complied with
all such representations and certifications; (iii) no allegation has been made,
either orally or in writing, that the Company or its Subsidiary that is a party
to such Government Contract or Bid is in breach or violation of any statutory,
regulatory or contractual requirement; (iv) no termination for convenience,
termination for default, cure notice or show cause notice has been issued and
received by the Company or any Subsidiary; (v) no material cost incurred by the
Company or one of its Subsidiaries or one of their respective subcontractors has
been questioned or disallowed; and (vi) no money due to the Company or one of
its Subsidiaries has been (or has threatened to be) withheld or set off.
(d) Neither the Company, any of its Subsidiaries or any of their
current or, to the Company's knowledge, former employees is (or for the last
three years has been) (i) under administrative, civil or criminal investigation,
indictment or information, audit or internal investigation with respect to any
alleged irregularity, misstatement or omission regarding a Government Contract
or Bid, or (ii) suspended or debarred from doing business with the U.S.
Government or any state or local government or declared non-responsible or
ineligible for government contracting. Neither the Company nor any of its
Subsidiaries has made a voluntary disclosure to any U.S. Government, state or
local government entity with respect to any alleged irregularity, misstatement
or omission arising under or relating to any Government Contract or Bid. The
Company does not have knowledge of any circumstances that would warrant the
institution of suspension or debarment proceedings or the finding of
non-responsibility or ineligibility on the part of the Company or one of its
Subsidiaries or any of the current employees in the future.
(e) Neither the U.S. Government, any state or local government nor any
prime contractor, subcontractor or vendor has asserted in writing any claim or
initiated any dispute proceeding against the Company or any of its Subsidiaries
or one of their current employees, nor has the Company or one of its
Subsidiaries asserted any claim or initiated any dispute proceeding, directly or
indirectly, against any such party, concerning any Government Contract or Bid.
The Company has no knowledge of any facts upon which such a claim or dispute
proceeding may be based.
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(f) For purposes of this Section 3.15, the following terms shall have
the following meanings:
(i) "BID" means any quotation, bid or proposal by the Company
or any of its Subsidiaries which, if accepted or awarded, would lead to a
contract with the U.S. Government or any other entity, including a prime
contractor or a higher tier subcontractor to the U.S. Government, for the
design, manufacture or sale of products or the provision of services by
the Company or one of its Subsidiaries;
(ii) "GOVERNMENT CONTRACT" means any prime contract,
subcontract, teaming agreement or arrangement, joint venture, basic
ordering agreement, letter contract, purchase order, delivery order,
change order, arrangement or other commitment of any kind relating to the
business of the Company or one of its Subsidiaries between the Company or
one of its Subsidiaries and (x) the U.S. Government, (y) any prime
contractor to the U.S. Government or (z) any subcontractor with respect
to any contract described in clause (x) or (y).
(iii) "U.S. GOVERNMENT" means the United States government
including any and all agencies, commissions, branches, instrumentalities
and departments thereof.
SECTION 3.16 COMPLIANCE WITH LAWS. Except for laws, rules and regulations
relating to tax matters, ERISA compliance, environmental matters and
intellectual property (which are exclusively provided for in Sections 3.9, 3.11,
3.12 and 3.14 hereof, respectively), the operations of the business of the
Company and its Subsidiaries as currently conducted are not in violation of, nor
is the Company or any of its Subsidiaries in default under, or violation of, any
federal, state or local law, statute, regulation, license or permit or any
order, judgment or decree of any Governmental Entity to or by which the Company
or any of its Subsidiaries or any of their assets or properties are bound or
affected, except for such violations or defaults as have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company and its Subsidiaries have been duly granted all
authorizations, licenses, permits, certificates, approvals and clearances
necessary for the Company and its Subsidiaries to own, lease and operate their
properties or to carry on their respective businesses substantially in the
manner described in the SEC Documents filed prior to the date hereof and as
currently conducted, except those the failure of which to obtain would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.17 INSURANCE COVERAGE. The Company and each of its Subsidiaries
have policies of insurance and bonds with reputable insurers in such amounts and
of the type reasonably appropriate for the conduct of the business or ownership
and operation of the assets of the Company and its Subsidiaries and covering
such risks as are in accordance with normal industry practice for companies
engaged in businesses similar to that of the Company and its Subsidiaries
(taking into account the cost and availability of such insurance). All such
policies are in full force and effect, all premiums due and payable have been
paid, and no written notice of cancellation or termination has been received
with respect to any such policy. Except as disclosed in Section 3.17 of the
Company Letter, there is no material claim pending under any of such policies or
bonds as to which coverage has been denied or disputed in writing by the
underwriters of such policies or bonds and which denial or dispute is likely to
be adversely
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determined to the Company and its Subsidiaries, and which if so adversely
determined, in whole or in part, would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.18 PERSONNEL; LABOR RELATIONS.
(a) Except as disclosed in Section 3.18(a) of the Company Letter, (i)
neither the Company nor any Subsidiary is the subject of any action,
arbitration, governmental or other examination or investigation, hearing,
administrative or other proceeding asserting that the Company or any Subsidiary
has committed an unfair labor practice (within the meaning of the National Labor
Relations Act or comparable state law) or seeking to compel the Company or any
Subsidiary to bargain with any labor organization as to wages or conditions of
employment which if adversely determined, individually or in the aggregate with
other such proceedings so adversely determined, would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, (ii) neither
the Company nor any Subsidiary is party to any collective bargaining agreement,
(iii) there is not any strike or other labor dispute involving the Company or
any Subsidiary pending or, to the Company's knowledge, threatened, or any
activity involving any of their respective employees seeking to certify a
collective bargaining unit or engaging in any other labor organizing activity,
and (iv) since January 1, 2000, neither the Company nor any Subsidiary has
effected (A) a plant closing affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of the
Company or any Subsidiary or (B) a mass layoff affecting any site of employment
or facility or operating unit within any site of employment or facility of the
Company or any Subsidiary, nor has the Company or any Subsidiary engaged in
layoffs or employment terminations sufficient in number to trigger application
of the Worker Adjustment and Retraining Notification Act (the "WARN ACT") or of
any state or local law equivalent to the WARN Act. For the purposes of this
Section 3.18, "plant closing," "mass layoff," "site of employment," "operating
unit" and "employment loss" shall have the meanings ascribed to such terms in
the WARN Act or the implementing regulations thereof, or any state or local law
equivalent to the WARN Act. None of the Company or any Subsidiary is liable for
any payment to any trust or other fund or to any Governmental Entity with
respect to unemployment compensation benefits, social security or other benefits
or obligations for employees (other than routine payments to be made in the
ordinary course of business and consistent with past practice).
(b) The Company has identified in Section 3.18(b) of the Company
Letter and has made available to Parent true and complete copies of (i) all
severance and employment agreements with directors, officers or employees of or
consultants to the Company or any Subsidiary; (ii) all severance programs and
policies of each of the Company and each Subsidiary with or relating to its
employees; and (iii) all plans, programs, agreements and other arrangements of
the Company and each Subsidiary with or relating to its directors, officers,
employees or consultants which contain change in control provisions. Except as
set forth in Section 3.18(b) of the Company Letter, none of the execution and
delivery of this Agreement or any Ancillary Agreement or the consummation of the
transactions contemplated hereby or thereby will (either alone or in conjunction
with any other event, such as termination of employment) (i) result in any
payment (including, without limitation, severance, unemployment compensation,
parachute or otherwise) becoming due to any director or any employee of the
Company or any Subsidiary or affiliate from the Company or any Subsidiary or
affiliate under
A-25
any Company Benefit Plan or otherwise, (ii) significantly increase any benefits
otherwise payable under any Company Benefit Plan or (iii) result in any
acceleration of the time of payment or vesting of any material benefits. No
individual who is a party to an employment agreement listed in Section 3.18(b)
of the Company Letter or any agreement incorporating change in control
provisions with the Company or its Subsidiaries has terminated employment or
been terminated, nor has any event occurred that could give rise to a
termination event, in either case under circumstances that has given, or could
give, rise to a severance obligation on the part of the Company under such
agreement. Section 3.18(b) of the Company Letter sets forth the Company's best
estimates of the amounts payable to the executives listed therein, as a result
of the transactions contemplated by this Agreement, any Ancillary Agreement
and/or any subsequent employment termination (including any cash-out or
acceleration of options and restricted stock and any "gross-up" payments with
respect to any of the foregoing), based on compensation data applicable as of
the date of such Company Letter and the assumptions stated on that Company
Letter.
SECTION 3.19 BROKERS AND FINDERS. No broker, finder or investment
banker, other than the Legacy and Quarterdeck Investment Partners, LLC (the
"Company Financial Advisor"), is entitled to any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby. The
Company has previously provided Parent with a true and complete copy of each
agreement between the Company and each of Legacy and the Company Financial
Advisor pursuant to which such firms would be entitled to any payment in
connection with the Mergers or any other transaction contemplated by this
Agreement, the Voting Agreements or any other Ancillary Agreement.
SECTION 3.20 OPINION OF LEGACY. Legacy has delivered to the Board of
Directors its written opinion, dated the date hereof, that the Merger
Consideration to be received by the holders of Shares pursuant to the Mergers is
fair to such holders of Shares from a financial point of view.
SECTION 3.21 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote, if any, of the holders of
any class or series of capital stock or other equity interests of the Company or
the DSS Cleared Company necessary to approve the Mergers.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
Parent and Merger Subsidiary, jointly and severally, hereby represent and
warrant to the Company and the DSS Cleared Company as follows:
SECTION 4.1 ORGANIZATION AND POWER.
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Parent has all requisite
corporate power and authority to enter into this Agreement, and all other
documents and instruments to be executed and delivered
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by it in connection herewith, and to carry out its obligations hereunder and
thereunder, and to own, operate and lease its properties and to carry out its
business as it is now being conducted.
(b) Merger Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of its formation.
Merger Subsidiary has all requisite corporate power and authority to enter into
this Agreement, and all other documents and instruments to be executed and
delivered by it in connection herewith, and to carry out its obligations
hereunder and thereunder. Merger Subsidiary is a wholly-owned subsidiary of
Parent, has been organized solely for the purpose of consummating the Mergers
has conducted no business or operations of any nature and has incurred no
obligations or liabilities other than those created by or in connection with
this Agreement.
SECTION 4.2 AUTHORIZATION. The execution and delivery of this Agreement
and all other documents and instruments to be executed and delivered by Parent
and Merger Subsidiary in connection herewith, and the due consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Parent and
Merger Subsidiary and no other corporate proceedings on the part of Parent or
Merger Subsidiary are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement constitutes (and each document
and instrument contemplated by this Agreement, when executed and delivered in
accordance with the provisions hereof, will constitute) a valid and legally
binding agreement of each of Parent and Merger Subsidiary, enforceable against
them in accordance with its terms.
SECTION 4.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement by Parent and Merger Subsidiary and the consummation of the
transactions contemplated hereby or in connection herewith, including, without
limitation, the financing thereof, do not and will not constitute a conflict
with, breach or violation of or default (or an event which with notice or lapse
of time or both would become a default) under (i) Parent's Certificate of
Incorporation or By-Laws, as amended to date; (ii) Merger Subsidiary's Articles
of Incorporation or By-laws, as amended to date; (iii) any agreement,
instrument, license, franchise or permit to which Parent or Merger Subsidiary is
subject or by which Parent or Merger Subsidiary is bound; (iv) any statute,
administrative regulation, order, writ, injunction, decree or arbitration award
to which Parent or Merger Subsidiary is subject or by which Parent or Merger
Subsidiary is bound; or (v) any statutory or decisional law (or any duty or
obligation thereunder, derived therefrom or related thereto), rule or regulation
to which Parent, Merger Subsidiary, their respective officers, directors or
affiliates is subject or to which such Person is bound except, in the case of
clauses (iii), (iv) and (v) for any matter otherwise covered by such clauses
which (x) would not reasonably be expected to prevent or materially delay
consummation of the Mergers or otherwise prevent or materially delay performance
by Parent or Merger Subsidiary of their material obligations under this
Agreement or any agreement executed and delivered by them in connection
herewith, or (y) are not material to Merger Subsidiary or Parent.
SECTION 4.4 CONSENTS AND APPROVALS. Except for filings, approvals or
consents required by (i) the Secretary of State of the State of Delaware; (ii)
the Exchange Act; and (iii) such other statutes, rules or regulations which may
require registrations, authorizations, consents or approvals relating to matters
that, in the aggregate, are not material to Merger Subsidiary or Parent, neither
Parent nor Merger Subsidiary is required to submit any notice, report,
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registration, declaration or other filing with or obtain any consent, approval
or authorization from any Governmental Entity or third party in connection with
the execution and delivery by Parent or Merger Subsidiary of this Agreement or
the consummation of the transactions contemplated hereby.
SECTION 4.5 FINANCING OF THE MERGERS. Parent and Merger Subsidiary
have, or will have at the Effective Time, the funds necessary to consummate the
Mergers.
SECTION 4.6 FINDER'S FEES. No broker, finder, investment banker or
other Person or entity, other than Hoak Breedlove Wesneski & Co., whose
compensation will be paid by Parent, is entitled, in connection with the
transactions contemplated hereby, to any broker's commission, finder's fee,
investment banker's fee or similar payment from Parent, Merger Subsidiary or the
Company based upon arrangements made by or on behalf of Parent or Merger
Subsidiary.
SECTION 4.7 DISCLOSURE. The information with respect to Parent or
Merger Subsidiary or any of their Subsidiaries that either of them furnishes to
the Company specifically for use in the Proxy Statement and any other related
filings, at the time of the filing thereof, at the time of any distribution or
dissemination thereof and at the time of the Special Meeting, will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 4.8 INTERESTED STOCKHOLDER. At no time during the three (3)
years prior to the date of this Agreement has Parent, Merger Subsidiary, or any
of their respective affiliates or associates been an "interested stockholder" of
the Company within the meaning of, and as defined in, Section 203 of the
Delaware Law.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company covenants
and agrees that, from the date hereof until the Effective Time, without the
prior written approval of Parent, which approval shall not be unreasonably
withheld, delayed or conditioned, the Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, do or agree to do, any of
the following:
(a) conduct the business of the Company and its Subsidiaries in a
manner other than in the ordinary and usual course and each of the Company and
its Subsidiaries shall, subject to the other restrictions contained in this
Agreement, use its best efforts to preserve its business organization intact and
maintain its existing relations with customers, suppliers, employees, creditors
and business associates;
(b) directly or indirectly, (i) except upon exercise of Options or
other rights to purchase Shares outstanding on the date hereof, issue, sell,
transfer or pledge or agree to sell, transfer or pledge any treasury stock of
the Company or any capital stock of any of its Subsidiaries beneficially owned
by it; (ii) amend its or any of its Subsidiaries' Certificate of Incorporation
or By-laws or similar organizational documents; or (iii) split, combine or
reclassify
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the outstanding Shares or any outstanding capital stock, or authorize or create
a new class of capital stock, of any of the Subsidiaries of the Company;
(c) other than the payment of dividends or other distributions by
Subsidiaries to the Company or to other Subsidiaries: (i) declare, set aside or
pay any dividend or other distribution payable in cash, stock or property, with
respect to its capital stock or enter into any agreement with respect to the
voting of its capital stock; (ii) issue, sell, pledge, dispose of or encumber
any additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire (or stock
appreciation rights with respect to), capital stock of any class of the Company
or its Subsidiaries, other than Shares reserved for issuance on the date hereof
pursuant to the exercise of Options outstanding on the date hereof; (iii) except
as disclosed in Section 5.1(c) of the Company Letter, transfer, lease, license,
sell, mortgage, pledge, dispose of, or encumber any assets having a value in
excess of $250,000 (or authorize any of the foregoing), other than pursuant to
existing contracts or commitments or the sale or purchase of goods in the
ordinary course of business consistent with past practice, or enter into any
commitment or transaction outside the ordinary course of business consistent
with past practice; or (iv) redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock;
(d) except as disclosed in Section 5.1(d) of the Company Letter, make
any change in the compensation payable or to become payable to any of its
officers, directors, agents or consultants, or to Persons providing management
services, provided that changes in compensation payable to other employees may
be made in the ordinary course of business consistent with past practice
(provided individual increases in employee compensation do not exceed 5% per
annum), enter into or amend any employment, severance, consulting, termination
or other employment-related agreement, arrangement or Benefit Plan or make any
loans to any of its officers, directors, employees, affiliates, agents or
consultants or make any change in its existing borrowing or lending arrangements
for or on behalf of any of such Persons pursuant to a Benefit Plan or otherwise,
other than the hiring of non-management personnel in the ordinary course of
business each having an annual salary not in excess of $75,000;
(e) except (i) pursuant to Benefit Plans existing at the date hereof,
or as disclosed in Section 3.11(a) of the Company Letter, (ii) as required by
any law, rule or regulation of any Governmental Entity, (iii) as disclosed in
Section 5.1(e) of the Company Letter, and (iv) pursuant to Section 2.4 hereof,
pay or make, or amend or agree to amend any Benefit Plan, agreement or
arrangement existing at the date hereof to provide for any accrual or
arrangement for payment of any pension, retirement allowance or other employee
benefit pursuant to any existing Benefit Plan, agreement or arrangement to any
officer, director, employee or affiliate or pay or agree to pay or make any
accrual or arrangement for payment to any officers, directors, employees or
affiliates of the Company of any amount relating to unused vacation days, adopt
or pay, grant, issue, accelerate, or accrue salary or other payments or benefits
pursuant to any pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right or
other stock-based incentive, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any director, officer, employee, agent or
consultant, whether past or present;
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(f) modify, amend or terminate any material Company Agreement or
waive, release or assign any material rights or claims, except in each case in
the ordinary course of business consistent with past practice;
(g) cancel or terminate any material insurance policy naming the
Company or any of its Subsidiaries as a beneficiary or a loss payable payee
without notice to Parent;
(h) (i) except in the ordinary course of business under lines of
credit in existence on the date hereof, incur or assume any indebtedness, in
each case for borrowed money, in a principal amount in excess of $250,000 in the
aggregate for the Company and its Subsidiaries taken as a whole; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for any obligations of any other Person (other than,
with respect to (x) the Company, any Subsidiary or (y) any Subsidiary, the
Company or any other Subsidiary) except in the ordinary course of business or
make any loans, advances or capital contributions to, or investments in, any
other Person (other than, with respect to (1) the Company, any Subsidiary or (2)
any Subsidiary, the Company or any other Subsidiary), except for any such matter
undertaken in the ordinary course of business consistent with past practice
PROVIDED, in any event, that such obligations, loans, advances, contributions or
investments do not exceed $50,000 individually and $250,000 in the aggregate;
(iii) make any commitments for, or make or authorize any, capital expenditures
other than in amounts less than $150,000 individually and $500,000 in the
aggregate other than as disclosed in Section 5.1(h) of the Company Letter or
(iv) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) any interest in any Person or any division
thereof or any assets, except in the ordinary course of business consistent with
past practice;
(i) (i) change any of the accounting methods, policies or
procedures used by it unless required by GAAP or (ii) except as required by
applicable law, make any Tax election or change any Tax election already made,
adopt any Tax accounting method, change any Tax accounting method unless
required by applicable law, enter into any tax allocation agreement, tax sharing
agreement, tax indemnity agreement or closing agreement, settle any Tax claim or
assessment or consent to any Tax claim or assessment or any waiver of the
statute of limitations for any such claim or assessment;
(j) (i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations in the ordinary course of business or any
such payment, discharge or satisfaction that the Company or any of its
Subsidiaries is required to make by any law, rule or regulation of any
Governmental Entity or by any contractual obligation not prohibited by this
Section 5.1, PROVIDED such payment, discharge or satisfaction does not exceed
$250,000 in the aggregate (ii) pre-pay any long-term debt, except in the
ordinary course of business in an amount not to exceed $250,000 in the aggregate
for the Company and its Subsidiaries taken as a whole, (iii) accelerate or delay
collection of notes or accounts receivable in advance of or beyond their regular
due dates or the dates when the same would have been collected in the ordinary
course
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of business consistent with past practice, (iv) except as disclosed in Section
5.1(j) of the Company Letter, delay or accelerate payment of any account payable
or in advance of its due date or the date such liability would have been paid in
the ordinary course of business consistent with past practice, or (v) vary the
inventory practices of the Company or its Subsidiaries in any material respect
from past practices;
(k) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries (other than the Mergers);
(l) (i) knowingly take, or agree to commit to take, any action that
would reasonably be expected to result in any of the conditions to the Mergers
not being satisfied, or that would give rise to a right of termination of this
Agreement for Parent or Merger Subsidiary pursuant to Section 8.1 hereof or (ii)
enter into any agreement or take any other action that would present a material
risk of delaying the Mergers or that would require a consent of a third party
for the consummation of the Mergers;
(m) enter into any agreement that would have the effect of subjecting
Parent, the Surviving Corporation or any of their affiliates to any non-compete
or other material restrictions on their respective businesses following the
Closing;
(n) waive, release, assign, settle or compromise any material
litigation or arbitration;
(o) write up, write down or write off the book value of any assets,
individually or in the aggregate, for the Company and its Subsidiaries taken as
a whole, in excess of $150,000, except for depreciation and amortization in
accordance with GAAP consistently applied and except for the write down of
obsolete inventory in the ordinary course of business;
(p) take any action to exempt or make not subject to (A) the
provisions of Section 203 of the Delaware Law, or (B) any other state takeover
law or state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares, any Person (other than Parent, Merger
Subsidiary and any subsidiaries of Parent) or any action taken thereby, which
Person or action would have otherwise been subject to the restrictive provisions
thereof and not exempt therefrom;
(q) except to the extent disclosed in Section 5.1(q) of the Company
Letter, (i) effect a plant closing or mass layoff affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company or any Subsidiary without the prior
written consent of Parent or (ii) terminate more than forty-nine (49) employees
within a site of employment or facility of the Company or any Subsidiary or
operating unit within a site of employment or facility or operating unit of the
Company or any Subsidiary without providing prior written notice to Parent. For
the purposes of this Section 5.1(q), "plant closing," "operating unit," and
"employment loss" shall have the meanings ascribed to such terms in Section 3.18
of this Agreement; and
(r) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize any of the foregoing.
SECTION 5.2 TAKEOVER PROPOSALS. The Company agrees that it will, and
that it will cause the officers, directors, investment bankers, attorneys,
accountants, employees and other agents or representatives of the Company and
its Subsidiaries (collectively, the "COMPANY
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REPRESENTATIVES") to, immediately cease and cause to be terminated any existing
discussions or negotiations, if any, with any Person conducted heretofore with
respect to any possibility or consideration of making a Takeover Proposal (as
defined below), and will promptly request that all confidential information
furnished on behalf of the Company with respect thereto be returned. The Company
shall notify Parent promptly (and in any event within one (1) business day) in
writing if any inquiries or proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with the Company, any of its Subsidiaries or any Company
Representatives, in each case in connection with any Takeover Proposal including
the identity of the Person and its affiliates making such proposal, inquiry or
offer and any information requested from it or of any negotiations or
discussions being sought to be initiated with it, and shall furnish to Parent a
written summary of the material terms and conditions of any such proposal,
inquiry or offer. The Company agrees that it shall keep Parent fully informed
promptly of any developments in the status and terms of any of the foregoing. As
used in this Agreement, "TAKEOVER PROPOSAL" shall mean any offer or proposal
(other than the Mergers) concerning any (i) tender or exchange offer involving
more than 20% of the Shares, (ii) merger, consolidation, recapitalization,
restructuring or other business combination or similar transaction involving the
Company or any of its Subsidiaries, (iii) issuance, sale or other disposition
(including by way of merger, consolidation, business combination, share
exchange, joint venture or similar transaction) of Shares or other equity
interests representing 20% or more of the voting power of the Company, (iv)
sale, lease or disposition directly or indirectly by merger, consolidation,
business combination, share exchange, joint venture or otherwise, of assets
representing 20% or more of the consolidated assets, revenues or net income of
the Company and its Subsidiaries, or (v) combination of any of the foregoing.
SECTION 5.3 NO SOLICITATION.
(a) The Company will not, nor will it authorize or permit the Company
Representatives to, directly or indirectly: (i) encourage (including by way of
furnishing non-public information), initiate, participate in, or solicit any
offer or proposal which constitutes any Takeover Proposal; (ii) in the event of
an unsolicited Takeover Proposal for the Company, engage in negotiations or
discussions with, or provide any information to, any Person (other than Parent,
any of its affiliates or representatives) relating to or in connection with any
Takeover Proposal; or (iii) enter into any agreement with respect to any
Takeover Proposal or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Mergers or any
other transaction contemplated by this Agreement.
(b) Notwithstanding the foregoing, prior to the Effective Time, the
Company may furnish information concerning its business, properties or assets to
any Person pursuant to a customary confidentiality agreement (the terms or
provisions of which are no more favorable to such Person than the terms or
provisions with respect to Parent and Merger Subsidiary pursuant to the
Confidentiality Agreement, dated November 6, 2002, between an affiliate of
Parent and the Company Financial Advisor on behalf of the Company (the
"CONFIDENTIALITY Agreement")), and may discuss and negotiate and participate in
discussions and negotiations with such Person concerning a Takeover Proposal
only if (i) such Person has made a Superior Proposal and (ii) the Board of
Directors determines in good faith, after receiving advice from outside legal
counsel to the Company, that the failure to provide such information or to
engage in such discussions or negotiations would constitute a breach of the
fiduciary obligations of the Board of Directors to
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the Company's stockholders. A "SUPERIOR PROPOSAL" shall mean a bona fide
Takeover Proposal made by a third party which was not solicited in violation of
this Agreement by the Company, any of its Subsidiaries, or any Company
Representative or affiliate of the Company, and which, in the good faith
judgment of the Board of Directors, taking into account the various legal,
financial and regulatory aspects of the Takeover Proposal and the Person making
such Takeover Proposal, (x) if accepted, would be capable of being consummated
by such third party without a financing contingency, and (y) if accepted would,
based upon the written opinion of Legacy, result in a transaction that is more
favorable to the Company's stockholders, from a financial point of view, than
the Mergers. The Company shall promptly, and in any event within one (1)
business day following any determination by the Board of Directors that a
Takeover Proposal (or any amendment thereto) is a Superior Proposal, notify
Parent in writing ("NOTICE OF SUPERIOR PROPOSAL") of such determination of the
same, which notice shall include the identity of the bidder and a reasonable
summary of the terms and conditions of the Superior Proposal or, if a Superior
Proposal is amended, the terms and conditions as so amended. If Parent does not,
within three (3) business days after Parent's receipt of a Notice of Superior
Proposal or of any such notice with respect to any amended proposal, make an
irrevocable written offer or enter into a definitive written agreement amending
this Agreement to provide for a transaction which the Board of Directors has
determined in its judgment (after receiving the advice of Legacy) to be at least
as favorable to the Company's stockholders as the Superior Proposal, the
Company, by action of its Board of Directors, may terminate this Agreement
pursuant to and in accordance with clause (iv) of Section 8.1(f) and enter into
an agreement with respect to a Superior Proposal.
(c) Neither the Board of Directors nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Parent or Merger Subsidiary, the approval or recommendation by the
Board of Directors or any such committee of the Mergers and the adoption and
approval of this Agreement, (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal, or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement related to any Takeover Proposal. Nothing contained in this Section
5.3(c) shall prohibit the Company (x) from taking and disclosing to its
stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated
under the Exchange Act with regard to a Takeover Proposal (provided that the
Board of Directors shall not withdraw or modify in an adverse manner its
approval or recommendation of the Mergers or this Agreement except as set forth
below) or (y) in the event that a Superior Proposal is made and the Board of
Directors determines in good faith, after receiving advice from outside counsel,
that it would otherwise constitute a breach of the fiduciary obligations of the
Board of Directors to the Company's stockholders, from withdrawing or modifying
its recommendation of the Mergers prior to the Special Meeting; PROVIDED that
such withdrawal or modification cannot be made earlier than three (3) business
days following the day of delivery of written notice to Parent of its intention
to do so, and, PROVIDED FURTHER, that such withdrawal or modification can only
be made if the Company is in compliance with all other provisions of this
Agreement. Any such withdrawal or modification shall not change the approval of
the Board of Directors for purposes of causing Section 203 of the Delaware Law
to be inapplicable to the Mergers and the Voting Agreements. Nothing contained
in this Section 5.3(c) shall affect the Company's obligations under Section
6.1(a) to hold and convene the Special Meeting and to submit this Agreement and
the Mergers for adoption and approval.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 SPECIAL MEETING; PROXY STATEMENT. As promptly as
practicable following the date of this Agreement, the Company shall:
(a) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "SPECIAL Meeting") for the purpose of obtaining the
necessary approvals of the Mergers and this Agreement by the stockholders of the
Company;
(b) prepare and, after consultation with and review by Parent and its
outside counsel, file with the SEC a preliminary proxy statement relating to the
Mergers and this Agreement and use its reasonable best efforts (i) to obtain and
furnish the information required to be included by the SEC in such proxy
statement and, after consultation with and review by Parent, to respond promptly
to any comments made by the SEC with respect to the preliminary proxy statement
and promptly cause a definitive proxy (the "PROXY STATEMENT") to be mailed to
its stockholders and, if necessary, after the Proxy Statement shall have been so
mailed, promptly circulate amended or supplemental proxy material and, if
required in connection therewith, resolicit proxies; PROVIDED, that no such
amended or supplemental proxy material will be mailed by the Company without
consultation with and review by Parent and its outside counsel (which review
shall not be unreasonably delayed) and (ii) to obtain the necessary adoption and
approval of this Agreement and the Mergers by the stockholders of the Company;
(c) include in the Proxy Statement the fairness opinion of Legacy, as
described in Section 1.8 of this Agreement, and the recommendation of the Board
of Directors that stockholders of the Company vote in favor of the approval of
the Mergers and the adoption of this Agreement, unless a Superior Proposal is
made and the Board of Directors determines, in accordance with Section 5.3(c) of
this Agreement, that including the recommendation would constitute a breach of
the fiduciary obligations of the Board of Directors to the Company's
stockholders; PROVIDED, HOWEVER, that the Company agrees that its obligations
under Section 6.1(a) to hold and convene the Special Meeting and to submit this
Agreement and the Mergers for adoption and approval shall not be affected by a
determination by the Board of Directors that it cannot make such recommendation
to the Company's stockholders;
(d) promptly notify Parent of the receipt of any comments from the SEC
and of any request from the SEC for amendments or supplements to the preliminary
proxy statement or the Proxy Statement or for additional information, and will
promptly supply Parent and its outside counsel with copies of all written
correspondence between the Company or its representatives, on the one hand, and
the SEC or members of its staff, on the other hand, with respect to the
preliminary proxy statement, the Proxy Statement or the Mergers;
(e) promptly notify Parent of the receipt of any comments from the SEC
with respect to the CVRs, supply Parent and its outside counsel with copies of
all written correspondence between the Company or its representatives, on the
one hand, and the SEC or members of its staff, on the other hand, with respect
to the CVRs, consult with Parent prior to responding to
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such comments and permit Parent and its outside counsel to participate in any
and all correspondence, discussions or communications with the SEC regarding the
CVRs;
(f) promptly inform Parent and its outside counsel if at any time
prior to the Special Meeting, any event should occur that is required by
applicable law to be set forth in an amendment of, or a supplement to, the Proxy
Statement, in which case, the Company, with the cooperation and approval of and
in consultation with Parent and its outside counsel, will, upon learning of such
event, promptly prepare and mail such amendment or supplement; and (g) promptly
correct the Proxy Statement if and to the extent that it shall have become false
or misleading in any material respect (and each of Parent and Merger Subsidiary,
with respect to written information supplied by it specifically for use in the
Proxy Statement, promptly shall notify the Company of any required corrections
of such information and cooperate with the Company with respect to correcting
such information) and to supplement the information contained in the Proxy
Statement to include any information that shall become necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading in any material respect.
SECTION 6.2 MEETING OF STOCKHOLDERS OF THE COMPANY. Subject to
Section 5.3 hereof, at the Special Meeting, the Company shall use its reasonable
best efforts to solicit from stockholders of the Company proxies in favor of the
Mergers and shall take all other action necessary or, in the reasonable opinion
of Merger Subsidiary, advisable to secure any vote or consent of stockholders
required by the Delaware Law or the Alabama Law to effect the Mergers. Merger
Subsidiary agrees that it shall vote, or cause to be voted, in favor of the
Mergers all Shares directly or indirectly beneficially owned by it.
SECTION 6.3 ADDITIONAL AGREEMENTS.
(a) The Company and Parent shall use their reasonable best efforts to
(i) take, or cause to be taken, all appropriate action and do, or cause to be
done, all things necessary, proper or advisable under applicable law or
otherwise to consummate and make effective the transactions contemplated by this
Agreement as promptly as practicable, (ii) obtain from any Governmental Entities
any Regulatory Approvals required to be obtained or to avoid any action or
proceeding by any Governmental Entity (including, without limitation, those in
connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions contemplated
herein, including without limitation the Mergers, and (iii) make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Mergers required under (x) the Exchange Act, and any
other applicable federal or state securities Laws, (y) the Exon-Florio Amendment
and the HSR Act and (z) any other applicable law; PROVIDED, that the Company and
Parent shall cooperate with each other in connection with (1) preparing and
filing of the Proxy Statement and any other filings, (2) determining whether any
action by or in respect of, or filing with, any Governmental Entity is required,
in connection with the consummation of the Mergers and (3) seeking any such
actions, consents, approvals or waivers or making any such filings, including
providing copies of all filed documents to the non-filing party and its advisors
prior to filing and, if requested, accepting all reasonable additions, deletions
or changes suggested in connection therewith; and PROVIDED,
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FURTHER, that nothing in this Section 6.3 shall require Parent to agree to (A)
the imposition of conditions, (B) the requirement of divestiture of assets or
property or (C) the requirement of expenditure of money by Parent to a third
party in exchange for any such consent. The Company and Parent shall furnish to
each other all information required for any application or other filing under
the rules and regulations of any applicable law (including all information) in
connection with the transactions contemplated by this Agreement.
(b) The Company shall give (or shall cause its Subsidiaries to give)
any notices to third parties, and use, and cause its Subsidiaries to use, all
reasonable best efforts to obtain (i) the consents under the Company Agreements
set forth in Section 3.6(a) of the Company Letter (the "MATERIAL COMPANY
CONSENTS"), and (ii) any other third party consents which are necessary, proper
or advisable to consummate the transactions contemplated in this Agreement;
PROVIDED, HOWEVER, with respect solely to (ii) above, the Company and Parent
shall coordinate and cooperate in determining whether any actions, consents,
approvals or waivers are required to be obtained from third parties in
connection with consummation of the Mergers. In the event the Company fails to
obtain any of the foregoing consents, the Company shall use all reasonable
efforts, and shall take any such actions reasonably requested by Parent, to
minimize any adverse effect upon the Company, and its businesses resulting, or
which would reasonably be expected to result after the consummation of the
Effective Time, from the failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time, the
Company shall promptly notify Parent in writing of any pending or, to the
knowledge of the Company, threatened action, suit, arbitration or other
proceeding or investigation by any Governmental Entity or any other person (i)
challenging or seeking material damages in connection with the Mergers or any
other transaction contemplated by this Agreement or the Voting Agreements or
(ii) seeking to restrain or prohibit the consummation of the Mergers or any
other transaction contemplated by this Agreement or the Voting Agreements or
otherwise limit the right of Parent or any subsidiary of Parent to own or
operate all or any portion of the businesses or assets of the Company or any of
its Subsidiaries, which, in either case, would reasonably be expected to have a
Material Adverse Effect.
SECTION 6.4 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice to Parent and Merger
Subsidiary of the occurrence or non-occurrence of any event whose occurrence or
non-occurrence would be likely to cause (i) any representation or warranty made
by the Company or the DSS Cleared Company contained in this Agreement which is
qualified as to Material Adverse Effect to be untrue or inaccurate at any time
from the date hereof to the Effective Time, (ii) any other representation or
warranty made by the Company or the DSS Cleared Company contained in this
Agreement to be untrue or inaccurate at any time from the date hereof to the
Effective Time (other than such untruth or inaccuracy which would not,
individually or in the aggregate, have a Material Adverse Effect), (iii) any
condition set forth in Section 7.1 or 7.3 to be unsatisfied at any time from the
date hereof to the Closing Date or (iv) any failure on the part of the Company
or the DSS Cleared Company to comply with or satisfy in any material respect any
material covenant, condition or agreement to be complied with or satisfied by it
hereunder.
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(b) Parent shall give prompt notice to the Company of the occurrence
or non-occurrence of any event whose occurrence or non-occurrence would be
likely to cause (i) any representation or warranty made by Parent or Merger
Subsidiary contained in this Agreement which is qualified as to materiality to
be untrue or inaccurate at any time from the date hereof to the Effective Time,
(ii) any other representation or warranty made by Parent or Merger Subsidiary
contained in this Agreement to be untrue or inaccurate in a material respect at
any time from the date hereof to the Effective Time, (iii) any condition set
forth in Section 7.1 or 7.2 to be unsatisfied at any time from the date hereof
to the Closing Date or (iv) any failure on the part of the Parent or Merger
Subsidiary to comply with or satisfy in any material respect any material
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
(c) The delivery of any notice pursuant to this Section 6.4 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice or the right of such party to terminate this Agreement.
SECTION 6.5 ACCESS; CONFIDENTIALITY.
(a) Subject to any restrictions under applicable law, the Company
shall continue to give (and shall cause each of its Subsidiaries to give) the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, reasonable access for reasonable purposes in light of
the transactions contemplated by this Agreement, during normal business hours
during the period prior to the Closing Date to all its properties, books,
contracts, commitments and records and, during such period, the Company shall
(and shall cause each of its Subsidiaries to) furnish promptly to Parent (i) a
copy of each report, schedule, registration statement and other document
publicly filed or received by it during such period pursuant to the requirements
of federal securities laws and (ii) information regarding any material business
development of the Company or any Subsidiary and all other information
concerning its business, properties and personnel as Parent may reasonably
request; PROVIDED, HOWEVER, that the Company shall not be required to waive any
legal privilege by virtue of this Section 6.5. The Company shall use its
reasonable best efforts to enter into an appropriate agreements with Parent to
allow for disclosures under this Section 6.5(a) without waiving or otherwise
relinquishing any applicable privileges. During this period, the Company will
also consult with Parent on all matters outside the ordinary course of business
relating to the Company's business and strategy. The Company expressly agrees
that from the date hereof until the Closing Date, the Company will provide
Parent and Merger Subsidiary with all documents, materials and information in
the Company's possession or control pertaining to environmental matters
concerning any current or previous Company owned, leased or operated property,
facility, or business including compliance with and responsibility or liability
under, any Environmental Laws or related to Hazardous Substances. The Company
grants access to Parent to any of its currently owned, leased or operated
properties, for environmental investigation, including invasive testing if
reasonably warranted and recommended by a qualified consultant at the conclusion
of a Phase I Environmental Audit; PROVIDED, HOWEVER, that Parent provide a
written work plan for Company's prior review and approval for any such invasive
work. Unless otherwise required by law and until the Closing Date, Parent and
Merger Subsidiary shall hold any such information which is non-public
information in confidence and shall not use such information except in
accordance with, and shall otherwise abide by, the provisions of the
Confidentiality Agreement. No
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investigation pursuant to this Section 6.5(a) shall affect any representation or
warranty made by the Company hereunder.
(b) Prior to the Closing, the Company and its accountants, counsel,
agents and other representatives shall cooperate with Parent by providing
information about the Company which is necessary for Parent and its accountants,
agents, counsel and other representatives to prepare the Disclosure Documents.
Notwithstanding the penultimate sentence of Section 6.5(a) hereof, Parent may
disclose, or cause its representatives to disclose, and at the request of
Parent, the Company shall and shall cause its Subsidiaries to disclose
information concerning the Company and its Subsidiaries and their respective
businesses, assets and properties, and the transactions contemplated by this
Agreement to prospective financing sources in connection therewith, provided
that such financing sources agree to hold such information in confidence in
accordance with, and shall otherwise abide by, the provisions of the
Confidentiality Agreement.
SECTION 6.6 PUBLICITY. The initial press release with respect to the
execution of this Agreement shall be a joint press release in the form attached
hereto as Exhibit 6.6. Thereafter, so long as this Agreement is in effect and
subject to the other provisions of this Agreement, neither the Company, Parent
nor any of their respective affiliates shall issue or cause the publication of
any press release or other announcement with respect to the Mergers, this
Agreement or the other transactions contemplated hereby without the prior
consent of the other party, except after receiving the advice of outside legal
counsel, and after informing all the parties hereto, that such release or
announcement is required by law or by any listing agreement with or rules of a
national securities exchange or trading market. If so advised, Parent and the
Company shall consult with each other before issuing, and provide each other the
opportunity to comment upon, any such press release or other public statements
with respect to such transactions.
SECTION 6.7 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION.
(a) Until the Effective Time the Company shall keep in effect Article
IX of its By-Laws, and thereafter for a period of six (6) years, the Surviving
Corporation shall keep in effect in its Articles of Incorporation or By-Laws
provisions which provides for indemnification and exculpation of the present or
former officers, directors, employees and agents (the "INDEMNIFIED PERSON(S)")
of the Company to the extent provided by Articles IX of the Company's By-laws on
the date hereof.
(b) The Parent shall maintain, or shall cause the Surviving
Corporation to maintain, the Company's and its Subsidiaries existing officers'
and directors' liability insurance ("D&O INSURANCE") covering those persons who
are covered by the Company's D&O Insurance as of the date hereof or as of the
Effective Time (the "COVERED Persons") for a period of one (1) year after the
Effective Time and, for a period of five (5) years thereafter, shall maintain
D&O Insurance for such Covered Persons through the D&O Insurance of an affiliate
of Parent on terms used consistent with those applicable to other officers and
directors covered under such D&O Insurance; PROVIDED, that the Surviving
Corporation may substitute therefor policies of substantially equivalent
coverage and amounts containing terms no less favorable to such former directors
or officers (but without creating any gaps in coverage); PROVIDED, FURTHER, that
the Surviving Corporation shall not in any event be required to pay an annual
premium for the D&O Insurance in excess of 150% the last annual premium paid
prior to the date of this Agreement,
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which premium the Company represents and warrants to be approximately
$90,000.00; PROVIDED, FURTHER, that if the annual premiums of such insurance
coverage exceed such amount, Parent shall be obligated to obtain a policy with
the best coverage available for a cost not exceeding such amount. Each of
Parent, Merger Subsidiary and the Company acknowledge and hereby agree that each
of the Covered Persons is intended to be a third party beneficiary of the terms
of this Section 6.7(b). The Surviving Corporation shall reimburse each
Indemnified Person for his or her reasonable expenses in enforcing his or her
rights under this Section 6.7, including reasonable attorneys fees, unless a
court of competent jurisdiction shall determine, and such determination shall
have become final and non-appealable, that indemnification of such Indemnified
Person in the manner contemplated hereby, is prohibited by applicable law.
(c) If the Surviving Corporation or any successor or assign shall (i)
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation or entity of such consolidation or merger, or (ii)
transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns thereof shall assume
the obligations set forth in this Section 6.7; PROVIDED, HOWEVER, no such
assignment or assumption shall relieve the Surviving Corporation (or any
successor or assign) of its obligations set forth in (or imposed pursuant to)
this Section 6.7.
SECTION 6.8 EMPLOYEE BENEFITS. On and after the Effective Time, Parent
agrees to cause the Surviving Corporation to arrange for each employee, director
and officer of the Company and its Subsidiaries who was participating in any of
the Benefit Plans of the Company or any Subsidiary immediately before the
Effective Time and who remains an employee, director or officer of the Surviving
Corporation after the Effective Time, to be eligible to participate in any
counterpart benefit plans in which employees, directors and officers of the
Surviving Corporation participate (the "COUNTERPART PLANS"), in accordance with
the terms and conditions thereof, and if such Counterpart Plans exist, to
provide that for purposes of eligibility, vesting and determination of level of
benefits, but not accrual of or entitlement to benefits, such participants shall
receive full credit for years of service with the Company and/or any Subsidiary
and prior employers to the extent such service is taken into account under such
Benefit Plans, PROVIDED that such service shall not be recognized to the extent
that such recognition would result in a duplication of benefits or to the extent
that such service was not recognized under the applicable Benefit Plan
immediately before the Effective Time. The Surviving Corporation shall give
credit under those of its Counterpart Plans that are welfare benefit plans for
all co-payments made, amounts credited toward deductibles and out-of-pocket
maximums, and time accrued against applicable waiting periods, by employees and
officers (in each case including their eligible dependents) of the Company and
the Subsidiaries, to the extent given under the applicable Benefit Plan of the
Company or any Subsidiary immediately before the Effective Time, and shall waive
all pre-existing condition restrictions otherwise applicable to employees and
officers of the Company or any Subsidiary under the Counterpart Plans that are
welfare benefit plans in which employees and officers of the Company and any
Subsidiary become eligible to participate on or following the Effective Time,
but only to the extent restrictions were not applicable to the relevant
participant under the applicable Benefit Plan immediately prior to the Effective
Time. Notwithstanding anything to the contrary herein, the Stock Plans of the
Company will not be continued after, and shall be terminated as of, the
Effective Time.
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SECTION 6.9 MERGER SUBSIDIARY COMPLIANCE. Parent shall cause Merger
Subsidiary to timely perform and comply with all of its obligations under or
related to this Agreement, including, without limitation, all obligations in or
with respect to the Mergers.
SECTION 6.10 REASONABLE BEST EFFORTS.
(a) Prior to the Closing, upon the terms and subject to the terms,
provisions and conditions of this Agreement, Parent, Merger Subsidiary, the
Company and the DSS Cleared Company agree to use their respective reasonable
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable.
(b) No party shall willfully perform any act which if performed, or
willfully omit to perform any act which if omitted to be performed, would
prevent or excuse the consummation of the Mergers.
SECTION 6.11 TAXES.
(a) Parent, Great Universal and the Company and its Subsidiaries shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Agreement and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company, its Subsidiaries and Great Universal
agree (i) to retain all books and records with respect to Tax matters pertinent
to each of the Company and its Subsidiaries relating to any Taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Parent, any extensions thereof) of
the respective Taxable periods, and to abide by all record retention agreements
entered into with any Taxing authority, (ii) to deliver or make available to
Parent, within sixty (60) days after the Closing Date, copies of all such books
and records, and (iii) to give the other party reasonable written notice prior
to transferring, destroying or discarding any such books and records and, if the
other party so requests, the Company and its Subsidiaries or Great Universal, as
the case may be, shall allow the other party to take possession of such books
and records. Parent and Great Universal further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(b) All transfer, documentary, sales, use, stamp, registration and
other substantially similar Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (collectively, "TRANSFER
TAXES") shall be borne by Great Universal and Parent equally.
(c) The Company shall have delivered to Parent a form of notice to the
Internal Revenue Service in accordance with the requirements of Treasury
Regulations Section 1.897-
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2(h)(2) and in form and substance reasonably acceptable to Parent along with
written authorization for Parent to deliver such notice form to the Internal
Revenue Service on behalf of the Company upon the Closing.
ARTICLE VII
CONDITIONS
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS. The respective obligations of each party to effect the Mergers shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or Merger Subsidiary, as the case may be, to the extent
permitted by applicable law:
(a) STOCKHOLDER APPROVAL. The Mergers and this Agreement shall have
been approved and adopted by the requisite vote of the holders of the Shares;
and
(b) NO RESTRAINTS. No statute, rule, regulation, order, decree,
judgment, ruling or injunction shall have been instituted, pending, enacted or
promulgated by any Governmental Entity or any court of competent jurisdiction
which directly restrains or prohibits the consummation of the Mergers in
accordance with the terms of this Agreement; PROVIDED, HOWEVER, that each of the
parties hereto shall have used reasonable efforts to prevent and appeal as
necessary any of the foregoing.
SECTION 7.2 CONDITIONS TO PARENT'S AND MERGER SUBSIDIARY'S OBLIGATION
TO EFFECT THE MERGERS. The respective obligations of Parent and Merger
Subsidiary to effect the Mergers shall be subject to the satisfaction on or
prior to the Closing Date of each of the following conditions, any and all of
which may be waived in whole or in part by Parent or Merger Subsidiary, as the
case may be, to the extent permitted by applicable law:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. (i)
Each of the Company and the DSS Cleared Company shall have performed in all
material respects each of its covenants and agreements contained in this
Agreement required to be performed at or prior to the Closing Date, (ii) each of
the representations and warranties of each of the Company and the DSS Cleared
Company made in this Agreement which is qualified as to materiality shall have
been true and correct when made and shall be true and correct in all respects as
of the Closing Date as if made on and as such date (other than representations
and warranties which address matters only as of a certain date which shall be
true and correct as of such certain date), and (iii) each of the representations
and warranties of each of the Company and the DSS Cleared Company made in this
Agreement that is not so qualified shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such certain
date).
(b) ANCILLARY AGREEMENTS. Each of the Ancillary Agreements to which
each of the Company and the DSS Cleared Company is or will be a party shall have
been duly authorized,
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executed and delivered by each of the Company and the DSS Cleared Company and
each of the Company and the DSS Cleared Company shall have performed or complied
with each such Ancillary Agreement in all material respects.
(c) MATERIAL ADVERSE EFFECT. Since the date hereof, there shall not
have occurred any Material Adverse Effect or any event or development that
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(d) CONSENTS. The Company shall have obtained each Material Company
Consent, each of which is in full force and effect as of the Closing Date.
(e) REGULATORY APPROVALS. All Regulatory Approvals, including in
particular under Section 721 of the Defense Production Act of 1950, as amended,
and the regulations and rules thereunder (the "EXON-FLORIO Amendment") shall
have been obtained and shall be in full force and effect as of the Closing Date;
PROVIDED that such Regulatory Approvals shall not impose terms or conditions
which (i) restrain, prohibit or materially limit Parent's or Merger Subsidiary's
ownership or operation (or that of their respective subsidiaries or affiliates)
of all or any material portion of the business or assets of the Company (or the
Surviving Corporation) and its (or the Surviving Corporation's) Subsidiaries,
taken as a whole, or (ii) compel Parent or any of its subsidiaries or affiliates
to dispose of or hold separate all or any material portion of the business or
assets of the Company (or the Surviving Corporation) and its (or the Surviving
Corporation's) Subsidiaries, taken as a whole. Parent acknowledges that the
requirement to enter into a special security agreement or voting trust agreement
with respect to the Surviving Corporation shall not constitute a term or
condition described in clauses (i) and (ii) above.
(f) SECTION 280G WAIVERS. On or prior to the date hereof, the Company,
the DSS Cleared Company and each Person to whom any payment or benefit is
required or proposed to be made in connection or association with the
consummation of the transactions contemplated by this Agreement or any Ancillary
Agreement that could constitute an "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) shall have executed and delivered a written
waiver, in a form approved by Parent, of such Person's rights to receive such
payment or benefit to the extent necessary to avoid treatment as an "excess
parachute payment" (a "SECTION 280G WAIVER"), and each such Section 280G Waiver
shall be in full force and effect as of the Closing Date.
(g) INDEMNITY AGREEMENT. The Indemnity Agreement by and among the DSS
Cleared Company, Great Universal and Parent shall have been duly authorized,
executed and delivered by the DSS Cleared Company and Great Universal on or
prior to the date hereof, shall be in full force and effect as of the Closing
Date and neither the DSS Cleared Company nor Great Universal shall be in breach
thereof.
(h) COMPANY OFFICERS CERTIFICATE. The Company shall have delivered to
Parent a certificate, dated the Closing Date, signed by the chief executive
officer or chief financial officer of the Company, certifying that the
conditions set forth in Sections 7.2(a), (c), (d), (e) and (f) have been
satisfied.
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SECTION 7.3 CONDITIONS TO THE COMPANY'S OBLIGATION TO EFFECT THE
MERGERS. The obligation of the Company to effect the Mergers shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, to the extent permitted by applicable law:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. (i)
Each of Parent and Merger Subsidiary shall have performed in all material
respects each of its covenants and agreements contained in this Agreement
required to be performed at or prior to the Closing Date, (ii) each of the
representations and warranties of Parent and Merger Subsidiary made in this
Agreement which is qualified as to materiality shall have been true and correct
when made and shall be true and correct in all respects as of the Closing Date
as if made on and as such date (other than representations and warranties which
address matters only as of a certain date which shall be true and correct as of
such certain date), and (iii) each of the representations and warranties of
Parent and Merger Subsidiary made in this Agreement that is not so qualified
shall have been true and correct in all material respects when made and shall be
true and correct in all material respects on and as of the Closing Date as if
made on and as of such date (other than representations and warranties which
address matters only as of a certain date which shall be true and correct in all
material respects as of such certain date).
(b) ANCILLARY AGREEMENTS. Each of the Ancillary Agreements to which
Parent and Merger Subsidiary is or will be a party shall have been duly
authorized, executed and delivered by Parent and Merger Subsidiary, as the case
may be, and Parent and Merger Subsidiary, as the case may be, shall have
performed or complied with each such Ancillary Agreement in all material
respects.
(c) PARENT OFFICERS CERTIFICATE. Parent shall have delivered to the
Company a certificate, dated the Closing Date, signed by the chief executive
officer or chief financial officer of Parent, certifying that the condition set
forth in Section 7.3(a) has been satisfied.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time before the
Effective Time, whether before or after stockholder approval:
(a) By mutual written consent of Parent and the Company, in each case
acting through its board of directors; or
(b) By either Parent or the Company if any court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree or
ruling (which order, decree or ruling the parties hereto shall use their best
efforts to vacate), in each case permanently restraining, enjoining or otherwise
prohibiting the Mergers and such order, decree, ruling or other action shall
have become final and non-appealable and shall not have resulted from a material
breach of a representation, warranty or covenant by the terminating party; or
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(c) By either Parent or the Company, if at the Special Meeting, the
stockholders of the Company reject or otherwise fail to adopt and approve this
Agreement and the Mergers; or
(d) By Parent if, without any material breach by Parent or Merger
Subsidiary of its representations, warranties or obligations under this
Agreement, the Closing shall not have occurred on or before the date which is
six months from the date of this Agreement (the "OUTSIDE DATE"), PROVIDED,
HOWEVER, that Parent may not terminate this Agreement pursuant to this Section
8.1(d) if Parent shall have (i) failed to fulfill any obligation under this
Agreement, which failure has been a principal cause of, or resulted in, the
failure of any condition to the Closing to have been satisfied on or before such
date, or (ii) otherwise materially breached this Agreement; or
(e) By the Company if, without any material breach by the Company of
its representations, warranties or obligations under this Agreement, the Closing
shall not have occurred on or before the Outside Date, PROVIDED, HOWEVER, that
the Company may not terminate this Agreement pursuant to this Section 8.1(e) if
the Company shall have (i) failed to fulfill any obligation under this
Agreement, which failure has been a principal cause of, or resulted in, the
failure of any condition to the Closing to have been satisfied on or before such
date, or (ii) otherwise materially breached this Agreement; or
(f) By the Company, if (i) Parent or Merger Subsidiary shall have
breached in any material respect any material covenant or other agreement
contained in this Agreement, (ii) any representation or warranty of Parent or
Merger Subsidiary made in this Agreement which is qualified as to materiality
shall fail to be true and correct in all respects when made or as if made at
such time, (iii) any representation or warranty of Parent or Merger Subsidiary
made in this Agreement which is not so qualified shall fail to be true and
correct in all material respects when made or as if made at such time, or (iv)
to allow the Company to enter into an agreement in accordance with Section
5.3(b) hereof with respect to a Superior Offer, but only after the Company has
convened a Special Meeting pursuant to Section 6.1(a) and the Company's
stockholders have rejected the Mergers and this Agreement, and after the Company
fulfills its obligations under Section 8.2 hereof on or prior to such
termination (provided that the Company's right to terminate this Agreement under
this Section 8.1(f)(iv) shall not be available if the Company is then in breach
of Section 5.2 or 5.3), in each case with respect to clauses (i), (ii) and
(iii), which breach or which failure to be true and correct cannot be or has not
been cured within ten (10) business days of the receipt of written notice
thereof; or
(g) By Parent, if (i) either the Company or the DSS Cleared Company
shall have breached in any material respect any material covenant or other
agreement contained in this Agreement, (ii) any representation or warranty of
either the Company or the DSS Cleared Company made in this Agreement which is
qualified as to materiality shall fail to be true and correct in all respects
when made or as if made at such time or (iii) any representation or warranty of
either the Company or the DSS Cleared Company made in this Agreement which is
not so qualified shall fail to be true and correct in all material respects when
made or as if made at such time, in each case which breach or which failure to
be true and correct cannot be or has not been cured within ten (10) business
days of the receipt of written notice thereof; or
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(h) By Parent, if (i) the Board of Directors of the Company shall have
withdrawn or modified in a manner adverse to Merger Subsidiary, or failed upon
Parent's request to reconfirm, its approval or recommendation of the Mergers or
this Agreement (or determined to do any of the foregoing), (ii) the Board of
Directors shall have determined to accept, or shall have determined to recommend
to the Company's stockholders that they approve, a Takeover Proposal, or the
Company shall have entered into or shall have publicly announced its intention
to enter into, a definitive written agreement or written agreement in principle
providing for a Takeover Proposal or (iii) a tender offer or exchange offer
that, if successful, would result in any Person or group becoming a beneficial
owner of 20% or more of the outstanding Shares is commenced (other than by
Parent or an affiliate of Parent) and the Board of Directors fails to recommend
against acceptance of such offer by the stockholders of the Company (including
by taking no position or a neutral position with respect thereto); or
(i) By Parent, if (i) either of the Voting Agreements shall cease to
be in full force and effect or Great Universal is in material breach thereof; or
(ii) any Person (other than Parent, an affiliate of Parent or Great Universal)
or group becomes the beneficial owner of 20% or more of the outstanding Shares.
SECTION 8.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement as provided in
Section 8.1 hereof, written notice thereof shall forthwith be given to the other
party or parties specifying the provision hereof pursuant to which such
termination is made.
(b) In the event of termination of this Agreement by either the
Company, on one hand, or Parent and Merger Subsidiary on the other hand, as
provided in Section 8.1, this Agreement shall forthwith become null and void and
there shall be no liability on the part of Parent, Merger Subsidiary, the
Company or the DSS Cleared Company, except (i) as set forth in Sections 8.2(c),
(d) or (e) hereof and (ii) nothing herein shall relieve Parent or Merger
Subsidiary from liability for any breach of this Agreement or relieve any party
from liability, or limit its liability, for any willful breach or willful
misrepresentation hereunder, or prevent any party from asserting any equitable
remedies available to it for such willful breach or willful misrepresentation.
(c) (i) The Company shall pay to Parent an amount equal to Parent's
and Merger Subsidiary's actual and reasonably documented out-of-pocket
expenses (including without limitation, fees payable to all banks,
investment banking firms and other financial institutions and their
respective counsel, and all fees of counsel, accountants, financial
printers, experts and consultants to Parent) not in excess of $1,000,000
(the "EXPENSE REIMBURSEMENT AMOUNT") if this Agreement is terminated for
any of the following reasons:
(A) Parent or the Company shall have terminated this
Agreement pursuant to Section 8.1(c) and no Takeover Proposal
shall have been received or made known to the Company prior to the
date of termination (regardless of whether such Takeover Proposal
has been publicly announced);
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(B) Parent shall have terminated this Agreement pursuant
to Section 8.1(g) or 8.1(i)(i) and no Takeover Proposal shall have
been received or made known to the Company prior to the date of
termination (regardless of whether such Takeover Proposal has been
publicly announced); or
(C) Parent shall have terminated this Agreement pursuant
to Section 8.1(d) or the Company shall have terminated this
Agreement pursuant to Section 8.1(e), and a Takeover Proposal
shall have been made known to the Company and not withdrawn prior
to the date of termination (regardless of whether such Takeover
Proposal has been publicly announced), PROVIDED, HOWEVER, if
Parent terminates this Agreement pursuant to Section 8.1(d) where
the failure of the Closing to occur by the Outside Date is due to
the existence of a Material Adverse Effect caused by the action of
the Parent or its affiliates, the Company shall not have any
obligation to pay the Expense Reimbursement Amount.
(ii) The Company shall pay Parent an amount equal to $1,800,000
(the "TERMINATION FEE") if the Agreement is terminated for any of the
following reasons:
(A) Parent or the Company shall have terminated this
Agreement pursuant to Section 8.1(c) and either (1) a Takeover
Proposal shall have been made and not withdrawn prior to the date
of the Special Meeting or (2) a binding agreement with respect to
a Takeover Proposal is entered into or the transactions
constituting a Takeover Proposal are consummated within 9 months
after such termination (the entering into a binding agreement with
respect to, or the consummation of, a Takeover Proposal within
such period, a "SUBSEQUENTLY ACCEPTED TAKEOVER PROPOSAL"),
provided any amounts payable under this Section 8.2(c)(ii)(A)
shall be less any amounts previously paid pursuant to Section
8.2(c)(i)(A) above;
(B) the Company shall have terminated this Agreement
pursuant to Section 8.1(f)(iv);
(C) Parent shall have terminated this Agreement pursuant
to Section 8.1(g) and either (1) a Takeover Proposal shall have
been received or made known to the Company prior to the date of
termination or (2) there is a Subsequently Accepted Takeover
Proposal, provided any amounts payable under this Section
8.2(c)(ii)(D) shall be less any amounts previously paid pursuant
to Section 8.2(c)(i)(B) above; or
(D) Parent shall have terminated this Agreement pursuant
to Section 8.1(h).
(E) Parent shall have terminated this Agreement pursuant
to Section 8.1(i) and a Takeover Proposal shall have been received
or made known to the Company prior to the date of termination;
provided any amounts payable under this Section 8.2(c)(ii)(E)
shall be less any amounts previously paid pursuant to Section
8.2(c)(i)(B) above.
A-46
(iii) Any Expense Reimbursement Amount or Termination Fee, as the
case may be, shall be payable by the Company in accordance with the
following:
(A) with respect to amounts payable under Sections
8.2(c)(i)(B), 8.2(c)(i)(C)(1), 8.2(c)(ii)(C)(1), 8.2(c)(ii)(D) or
8.2(c)(ii)(E), not later than one (1) business day after the date
of termination or, with respect to an Expense Reimbursement
Amount, such later date as Parent presents to the Company its
documented expenses;
(B) with respect to amounts payable under Sections
8.2(c)(ii)(A)(2), 8.2(c)(i)(C)(2) or 8.2(c)(ii)(C)(2), the earlier
of the date the binding agreement with respect to the Subsequently
Accepted Takeover Proposal is entered into or the transactions
constituting the Subsequently Accepted Takeover Proposal are
consummated; and
(C) with respect to amounts payable under Sections
8.2(c)(i)(A), 8.2(c)(ii)(A)(1) or 8.2(c)(ii)(B) on or prior to the
date of termination or, with respect to an Expense Reimbursement
Amount, such later date as Parent presents to the Company its
documented expenses.
(iv) Any Expense Reimbursement Amount or Termination Fee, as the
case may be, shall be payable by wire transfer of immediately available
funds to an account as Parent may designate in writing to the Company.
Subject to Section 8.2(b) and the following sentence, upon payment of any
Expense Reimbursement Amount or Termination Fee required to be paid
pursuant to this Section 8.2(c), the Company shall have no further
obligation to Parent or Merger Subsidiary, under this Agreement or
otherwise; PROVIDED, HOWEVER, that if the Company fails to pay promptly
the amounts required pursuant to this Section 8.2(c) and in order to
obtain such payment Parent or Merger Subsidiary commences a suit which
results in a final non-appealable judgment against the Company for such
amounts, the Company shall pay to Parent or Merger Subsidiary (x) the
costs and expenses (including reasonable attorneys' fees) incurred by
Parent or Merger Subsidiary in connection with such suit and (y) interest
on all such amounts required to be paid at the rate announced by Citibank
N.A. as its "reference rate" in effect on the date such amounts were
required to be paid. The Company's obligation to pay an Expense
Reimbursement Amount or Termination Fee, as the case may be, under this
Section 8.2 shall survive termination of this Agreement and continue
until such amount is paid, including without limitation amounts payable
under Section 8.2(c)(iii)(B).
(v) The Company acknowledges that the Expense Reimbursement
Amount and Termination Fee provided for in this Section 8.2 is an
integral part of the transactions contemplated by this Agreement and that
without the Expense Reimbursement Amount and Termination Fee provided for
above, neither Parent nor Merger Subsidiary would enter into this
Agreement.
(d) Each party, if so requested by the other party, will return
promptly every document furnished to it by or on behalf of the other party in
connection with the transactions
A-47
contemplated hereby, whether so obtained before or after the execution of this
Agreement, and any copies thereof (except for copies of documents publicly
available) which may have been made, and will use reasonable efforts to cause
its representatives and any representatives of financial institutions and
investors and others to whom such documents were furnished promptly to return
such documents and any copies thereof any of them may have made.
(e) The parties' obligations under Sections 6.5, 6.6 and Article IX
hereof shall continue indefinitely notwithstanding any termination of this
Agreement, PROVIDED THAT, with respect to Section 6.5, the parties' obligations
to keep information confidential shall terminate three (3) years from the date
hereof. This Section 8.2 shall survive any termination of this Agreement and the
Confidentiality Agreement will remain in full force and effect in the event of
such termination.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time before or after adoption and approval hereof by the stockholders of
the Company but, after such adoption and approval, no amendment shall be made
which reduces the amount or changes the form of Merger Consideration to be paid
in the Mergers or in any way materially adversely affects the rights of holders
of the Shares without the further adoption and approval of such holders. This
Agreement may not be amended except by an instrument in writing signed by or on
behalf of each of the parties hereto.
SECTION 9.2 WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken by their respective boards of directors, may (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other parties contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
satisfaction of any of the conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
SECTION 9.3 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Sections
6.5, 6.7, and 6.8 hereof and this Article IX, and, without limitation by the
specific enumeration of the foregoing, each and every other agreement contained
in this Agreement or any certificate or other document delivered pursuant to
this Agreement and which contemplates performance after the Effective Time,
shall survive the Mergers. None of the representations, warranties and
agreements (other than those agreements referred to in the previous sentence of
this Section 9.3) contained in this Agreement or in any exhibit, disclosure
schedule, certificate or other instrument delivered pursuant to this Agreement
shall survive the earliest to occur of the Effective Time and the termination of
this Agreement.
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SECTION 9.4 NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be deemed given if in
writing and delivered personally or sent by overnight courier (providing proof
of delivery), postage prepaid or by facsimile (which is confirmed).
if to Parent or Merger Subsidiary:
225 Reineckers Lane, Suite 525
Alexandria, Virginia 22314
Attention: Misty Walsh
Facsimile: (703) 683-8979
with a copy to:
Michael W. Sturrock, Esq.
Latham & Watkins LLP
80 Raffles Place #14-20
UOB Plaza 2, Singapore 048624
Facsimile: (+65) 6536-1171
if to the Company or the DSS Cleared Company:
3800 Richardson Road South
Hope Hull, Alabama 36043
Attention: President
Facsimile: (334) 613-6519
with a copy to:
Leonard Gubar, Esq.
Piper Rudnick LLP
1251 Avenue of the Americas
New York, New York 10020
Facsimile: (212) 835-6001
or to such other address as may have been designated in a prior notice. Notices
shall be deemed to have been given when received.
SECTION 9.5 HEADINGS. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
SECTION 9.6 EXHIBITS, SCHEDULES AND ANNEXES. The Exhibits, Schedules
and Annexes referred to in this Agreement shall be deemed to be an integral part
of this Agreement as if fully rewritten herein.
A-49
SECTION 9.7 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same document.
SECTION 9.8 GOVERNING LAW.
(a) This Agreement, including all matters of construction, validity
and performance, shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware, as applied to contracts made, executed
and to be fully performed in such state by citizens of such state, without
regard to conflict of laws principles.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.8(b).
SECTION 9.9 PRONOUNS. The use of a particular pronoun herein shall not
be restrictive as to gender or number but shall be interpreted in all cases as
the context may require.
SECTION 9.10 TIME PERIODS. Unless otherwise provided herein, any action
required hereunder to be taken within a certain number of days shall be taken
within that number of calendar days; PROVIDED, HOWEVER, that if the last day for
taking such action fails on a weekend or a holiday, the period during which such
action may be taken shall be automatically extended to the next business day.
SECTION 9.11 NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against either
party.
SECTION 9.12 ENTIRE AGREEMENT. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations and prior agreements between the parties (other than
those incorporated herein, including the Confidentiality Agreement) are merged
into this Agreement, and there are no representations, warranties,
A-50
covenants, understandings, or agreements, oral or otherwise, in relation thereto
among the parties other than those incorporated herein and to be delivered
hereunder.
SECTION 9.13 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
SECTION 9.14 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Parent may
substitute any direct or indirect wholly-owned subsidiary of Parent for Merger
Subsidiary without consent of the Company or the DSS Cleared Company, but any
such transfer or assignment will not relieve Parent, the Company or the DSS
Cleared Company of its obligations under this Agreement. Except for Sections 6.7
hereof, and except as otherwise provided in this Agreement, nothing in this
Agreement is intended or shall be construed to confer on any Person other than
the parties hereto any rights or benefits hereunder.
SECTION 9.15 FEES AND EXPENSES. Except as otherwise set forth in this
Agreement, each party hereto shall bear all fees and expenses incurred by such
party in connection with, relating to or arising out of the execution, delivery
and performance of this Agreement and the transactions contemplated hereby
(including the Mergers).
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
VISION TECHNOLOGIES KINETICS, INC.
By: /s/ JOHN COBURN
----------------------------------------
Name: John Coburn
Title: Authorized Representative
VTK MERGER SUBSIDIARY CORPORATION
By: /s/ ALFRED W. CLARK
----------------------------------------
Name: Alfred W. Clark
Title: President
MILTOPE GROUP INC.
By: /s/ THOMAS R. DICKINSON
----------------------------------------
Name: Thomas R. Dickinson
Title: President and CEO
MILTOPE CORPORATION
By: /s/ THOMAS R. DICKINSON
----------------------------------------
Name: Thomas R. Dickinson
Title: President and CEO
S-1
Annex B
PRIMARY VOTING AGREEMENT
AGREEMENT made as of this 21st day of October, 2003 by and among Vision
Technologies Kinetics, Inc., a Delaware corporation ("PARENT"), VTK Merger
Subsidiary Corporation, an Alabama corporation ("MERGER SUBSIDIARY"), Miltope
Group Inc., a Delaware corporation (the "COMPANY"), and Great Universal
Incorporated, a Delaware corporation (the "STOCKHOLDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, Merger Subsidiary, the Company and Miltope Corporation, an
Alabama corporation and wholly-owned subsidiary of the Company (the "DSS CLEARED
COMPANY"), have entered into an Agreement and Plan of Merger (as such agreement
may be amended from time to time, the "MERGER AGREEMENT"), pursuant to which the
Company and Merger Subsidiary will merge with and into the DSS Cleared Company
(the "MERGERS"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein set forth, the
parties hereto intending to be legally bound hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" within the
meaning of Section 13(d) of the Exchange Act.
(b) "COMPANY COMMON STOCK" shall mean at any time the Common
Stock, $0.01 par value per share, of the Company.
(c) "PROHIBITED ACT" shall have the meaning set forth in Section
2(a).
(d) "SUBJECT SHARES" shall mean 2,086,918 shares of Company Common
Stock held by the Stockholder or its affiliates as set forth opposite the
Stockholder's name on Schedule I hereto, all of which are Beneficially Owned by
the Stockholder.
B - 1
Capitalized terms used and not otherwise defined herein have the respective
meanings ascribed to them in the Merger Agreement.
2. AGREEMENTS.
(a) VOTING AGREEMENT. The Stockholder shall, at any meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
of the holders of Company Common Stock, however called, or in connection with
any written consent of the holders of Company Common Stock, vote (or cause to be
voted) the Subject Shares, (i) in favor of the Mergers, the execution, delivery
and performance by the Company of the Merger Agreement and the approval and
adoption of the terms thereof and each of the other actions contemplated by the
Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof, and (ii) against any Takeover Proposal (including any
Superior Proposal) and against any action or agreement that could reasonably be
expected to: (A) impede, frustrate, prevent, nullify or adversely affect, or
delay the consummation of the transactions contemplated under, this Agreement or
the Merger Agreement, (B) result in the breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company,
the DSS Cleared Company, Parent or the Merger Subsidiary under the Merger
Agreement or (C) result in any of the conditions set forth in Article VII of the
Merger Agreement not being fulfilled (collectively, the actions referred to in
(A) through (C), "PROHIBITED ACTS").
(b) NO INCONSISTENT AGREEMENTS. The Stockholder hereby covenants
and agrees that, except as contemplated by this Agreement and the Merger
Agreement, it shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Subject Shares, any Options Beneficially Owned by
the Stockholder or any interest therein, (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
such Subject Shares, Options or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Subject
Shares or Options, (iv) deposit such Subject Shares of Options into a voting
trust or enter into a voting agreement or arrangement with respect to such
Subject Shares or Options, or (v) take any action that constitutes or results in
a Prohibited Act.
(c) GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY.
(i) The Stockholder hereby irrevocably grants to, and
appoints, Parent and Merger Subsidiary, or either of them, in their respective
capacities as officers of Parent, and any individual who shall hereafter succeed
to any such office of Parent, and each of them individually, the Stockholder's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of the Stockholder, to vote the Subject Shares, or grant a
consent or approval in respect of the Subject Shares in favor of any or all of
the Mergers and the transactions contemplated by the Merger Agreement, and
against any Takeover Proposal (including any Superior Proposal) or action or
agreement that constitutes or results in a Prohibited Act. In addition, the
Stockholder further agrees that, if the Board of Directors fails or refuses to
submit the Merger Agreement and the Mergers to the stockholders of the Company
as required under the Merger Agreement, then the proxy granted hereby shall
include the ability to vote all Subject Shares held of record or Beneficially
Owned by it to (A) call or cause to be
B - 2
called a special meeting of stockholders of the Company to submit the Merger
Agreement and the Mergers to the stockholders of the Company for a vote, and (B)
approve all or any actions incident to the Merger Agreement and the Mergers or
the other matters referred to in this Section 3 by stockholder written consent.
(ii) The Stockholder represents that any proxies heretofore
given in respect of the Subject Shares are not irrevocable, and that any such
proxies are hereby revoked.
(iii) The Stockholder understands and acknowledges that Parent
is entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement. The Stockholder hereby affirms that
the irrevocable proxy set forth in this Section 2(c) is given in connection with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of the Stockholder under this Agreement.
The Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. The Stockholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 212(e)
of the Delaware Law.
(d) NO SOLICITATION. The Stockholder hereby agrees, in the
capacity of stockholder or otherwise, that neither the Stockholder nor any of
its subsidiaries or affiliates shall (and the Stockholder shall use its best
efforts to cause its officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any Person or
group (other than Parent, any of its affiliates or representatives) concerning
any Takeover Proposal or take any other action which the Company would be
prohibited from taking under Sections 5.2 and 5.3(a) of the Merger Agreement.
The Stockholder will, and will cause its subsidiaries, affiliates and the
respective officers, directors, employees, representatives, investment bankers,
attorneys, accountants and other agents of the Stockholder and its subsidiaries
and affiliates to, (i) immediately cease any existing activities, discussion or
negotiations with any parties conducted heretofore with respect to any
possibility of consideration of making a Takeover Proposal, (ii) immediately
request that all confidential information furnished on behalf of the Stockholder
with respect thereto be returned and (iii) promptly (and in any event within one
(1) business day) notify Parent in writing if any inquiries or proposals are
received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Stockholder in
connection with any Takeover Proposal including the identity of the Person and
its affiliates making such proposal, inquiry or offer and any information
requested from it or of any negotiations or discussions being sought to be
initiated with it, and shall furnish to Parent a written summary of the material
terms and conditions of any such proposal, inquiry or offer. The Stockholder
agrees that it shall keep Parent fully informed promptly of any developments in
the status and terms of any of the foregoing.
(e) WAIVER OF APPRAISAL RIGHTS. The Stockholder hereby waives any
rights of appraisal or rights of dissent from the Mergers that the Stockholder
may have.
B - 3
(f) PROXY STATEMENT. The Stockholder hereby permits Parent and
Merger Subsidiary to publish and disclose in the Proxy Statement (including all
documents and schedules filed with the SEC), its identity and ownership of the
Subject Shares and the nature of its commitments, arrangements and
understandings under this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
hereby represents and warrants to Parent as follows:
(a) OWNERSHIP OF SUBJECT SHARES. The Stockholder is the record and
Beneficial Owners of the Subject Shares. On the date hereof, the Subject Shares,
together with the shares of Company Common Stock Beneficial Owned by Stockholder
which are subject to the Secondary Voting Agreement, dated the date hereof, by
and among Parent, Merger Subsidiary, the Company and Stockholder, constitute all
of the shares of Company Common Stock owned of record or Beneficially Owned by
the Stockholder and its affiliates. The Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Section 2 hereof, sole power of disposition, sole power of conversion, sole
power to demand appraisal rights and sole power to agree to all of the matters
set forth in this Agreement, in each case with the respect to all of the Subject
Shares with no limitations, qualifications or restrictions of such rights,
subject to applicable securities laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. The Stockholder has the corporate
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
the Stockholder is a party including, without limitation, any voting agreement,
proxy arrangement, pledge agreement, shareholder agreement or voting trust. This
Agreement has been duly and validly executed and delivered by the Stockholder
and constitutes a valid and binding agreement of the Stockholder, enforceable
against the Stockholder in accordance with its terms. The Board of Directors of
the Company has approved, for purposes of Section 203 of the Delaware Law and
any applicable provision of the Company's certificate of incorporation, the
terms of this Agreement, including, without limitation, the irrevocable proxy
and voting provisions set forth in Section 2 hereof. There is no beneficiary or
holder of a voting trust certificate or other interest of any trust of which the
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by the Stockholder of the
transactions contemplated hereby.
(c) NO CONFLICTS. Except for filings under the Exchange Act, (i)
no filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by the Stockholder, the consummation by the Stockholder of the
transactions contemplated hereby or compliance by the Stockholder with any of
the provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to the Stockholder, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any
B - 4
note, loan agreement, bond, mortgage, indentures, license, contract,
arrangement, agreement or other instrument or obligation of any kind to which
the Stockholder is a party or by which the Stockholder or any of its properties
or assets may be bound, or (C) violate any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to the Stockholder or any of
its properties or assets.
(d) NO ENCUMBRANCES. Except as permitted by this Agreement, the
Subject Shares and the certificates representing such Subject Shares are now,
and at all times during the term hereof will be, held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder, free and clear of all
Encumbrances, proxies, voting trusts or agreements, understandings or
arrangements or any other rights whatsoever, except for and such Encumbrances or
proxies arising hereunder.
(e) NO FINDER'S FEES. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.
(f) RELIANCE BY PARENT. The Stockholder understands and
acknowledges that Parent is entering into, and causing Merger Subsidiary to
enter into, the Merger Agreement in reliance upon the Stockholder's execution
and delivery of this Agreement.
4. REPRESENTATION AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY.
(a) POWER; BINDING AGREEMENT. Each of Parent and Merger Subsidiary
has the corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by each of Parent and Merger Subsidiary will not violate any
other agreement to which either of them is a party. This Agreement has been duly
and validly executed and delivered by each of Parent and Merger Subsidiary and
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary, enforceable against the Stockholder in accordance with its terms.
(b) NO CONFLICTS. Except for filings under the Exchange Act, (i)
no filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by each of
Parent and Merger Subsidiary and the consummation by each of Parent and Merger
Subsidiary of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by each of Parent and Merger
Subsidiary, the consummation by each of Parent and Merger Subsidiary of the
transactions contemplated hereby or compliance by each of Parent and Merger
Subsidiary with any of the provisions hereof shall (A) conflict with or result
in any breach of any organizational documents applicable to either Parent or
Merger Subsidiary, (B) result in a violation or breach of, or constitute (with
or without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indentures, license, contract, arrangement, agreement or other
instrument or obligation of any kind to which either Parent or Merger Subsidiary
is a party or by which either of Parent or Merger Subsidiary or
B - 5
any of their properties or assets may be bound, or (C) violate any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to either
Parent or Merger Subsidiary or any of their properties or assets.
5. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
6. STOP TRANSFER. The Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Subject Shares, unless such
transfer is made in accordance with this Agreement. In the event of a stock
dividend or distribution, or any change in the Company Common Stock by reason of
any stock dividend, split-up, recapitalization, combination, exchange of shares
or the like, the term "SUBJECT SHARES" shall refer to and include the Subject
Shares as well as all such stock dividends and distributions and any shares into
which or for which any or all of the Subject Shares may be changed or exchanged.
7. TERMINATION. The covenants and agreements contained herein with
respect to the Subject Shares shall terminate upon the earlier to occur of (i)
the Closing Date and (ii) the termination of the Merger Agreement in accordance
with its terms; PROVIDED THAT if the termination of the Merger Agreement gives
rise to, or, with the passing of time could give rise to, the requirement that a
Termination Fee be paid under the Merger Agreement, then this Agreement shall
not terminate until 24 months after the date hereof.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations and prior agreements between the parties (other than
those incorporated herein) are merged into this Agreement, and there are no
representations, warranties, covenants, understandings, or agreements, oral or
otherwise, in relation thereto among the parties other than those incorporated
herein and to be delivered hereunder.
(b) BINDING AGREEMENT. This Agreement and the obligations
hereunder shall attach to the Subject Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Subject Shares
shall pass, whether by operation of law or otherwise, including, without
limitation, the Stockholder's successors. Notwithstanding any transfer of
Subject Shares, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise without the prior written consent of the other parties.
B - 6
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(e) NOTICES. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be deemed given if in
writing and delivered personally or sent by overnight courier (providing proof
of delivery), postage prepaid or by facsimile (which is confirmed).
if to Parent or Merger Subsidiary:
225 Reineckers Lane, Suite 525
Alexandria, VA 22314
Attention: Misty Walsh
Facsimile: (703) 683-8979
with a copy to:
Michael W. Sturrock, Esq.
Latham & Watkins LLP
80 Raffles Place #14-20
UOB Plaza 2, Singapore 048624
Facsimile: (+65) 6536-1171
if to the Company:
3800 Richardson Road South
Hope Hull, AL 36043
Attention: President
Facsimile: (334) 613-6591
B - 7
with a copy to:
Leonard Gubar, Esq.
Piper Rudnick LLP
1251 Avenue of the Americas
New York, New York 10020
Facsimile: (212) 835-6001
if to the Stockholder:
153 East 53rd Street
59th Floor
New York, New York 10022
Facsimile: (212) 702-4666
with a copy to:
Leonard Gubar, Esq.
Piper Rudnick LLP
1251 Avenue of the Americas
New York, New York 10020
Facsimile: (212) 835-6001
or to such other address as may have been designated in a prior notice. Notices
shall be deemed to have been given when received.
(f) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore in the event
of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
(g) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative or exclusive, and the exercise of
any thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.
(h) NO WAIVER. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such other right, power or remedy or to
demand such compliance.
B - 8
(i) NO THIRD PARTY BENEFICIARIES. Subject to the provisions of
Section 9(b) hereof, this Agreement is not intended to be for the benefit of,
and shall not be enforceable by, any person or entity who or which is not a
party hereto.
(j) GOVERNING LAW. This Agreement, including all matters of
construction, validity and performance, shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, as applied to
contracts made, executed and to be fully performed in such state by citizens of
such state, without regard to conflict of laws principles.
(k) DESCRIPTIVE HEADINGS. The descriptive headings used herein
used herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
(l) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same instrument.
[Signature Page Follows]
B - 9
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed as of the day and year first above written.
VISION TECHNOLOGIES KINETICS, INC.
By: /s/ JOHN COBURN
-------------------------------------------
Name: John Coburn
Title: Authorized Representative
VTK MERGER SUBSIDIARY CORPORATION
By: /s/ ALFRED W. CLARK
-------------------------------------------
Name: Alfred W. Clark
Title: President
MILTOPE GROUP INC.
By: /s/ THOMAS R. DICKINSON
-------------------------------------------
Name: Thomas R. Dickinson
Title: President and CEO
GREAT UNIVERSAL INCORPORATED
By: /s/ HENRY LEE GUY
-------------------------------------------
Name: Henry Lee Guy
Title: President and CEO
S-1
SCHEDULE I
SUBJECT SHARES
STOCKHOLDER SUBJECT SHARES
----------- --------------
GREAT UNIVERSAL INCORPORATED 2,086,918
Schedule - I
Annex C
SECONDARY VOTING AGREEMENT
AGREEMENT made as of this 21st day of October, 2003 by and among Vision
Technologies Kinetics, Inc., a Delaware corporation ("PARENT"), VTK Merger
Subsidiary Corporation, an Alabama corporation ("MERGER SUBSIDIARY"), Miltope
Group Inc., a Delaware corporation (the "COMPANY"), and Great Universal
Incorporated, a Delaware corporation (the "STOCKHOLDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, Merger Subsidiary, the Company and Miltope Corporation, an Alabama
corporation and wholly-owned subsidiary of the Company (the "DSS CLEARED
COMPANY"), have entered into an Agreement and Plan of Merger (as such agreement
may be amended from time to time, the "MERGER AGREEMENT"), pursuant to which the
Company and Merger Subsidiary will merge with and into the DSS Cleared Company
(the "MERGERS"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein set forth, the
parties hereto intending to be legally bound hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing. Without duplicative counting of the same securities by the same holder,
securities Beneficially Owned by a Person shall include securities Beneficially
Owned by all other Persons with whom such Person would constitute a "group"
within the meaning of Section 13(d) of the Exchange Act.
(b) "COMPANY COMMON STOCK" shall mean at any time the Common
Stock, $0.01 par value per share, of the Company.
(c) "PROHIBITED ACT" shall have the meaning set forth in
Section 2(a).
(d) "SUBJECT SHARES" shall mean 1,577,560 shares of Company
Common Stock held by the Stockholder or its affiliates as set forth opposite the
Stockholder's name on Schedule I hereto, together with any shares acquired by
the Stockholder or its affiliates in any
C - 1
capacity after the date hereof and prior to the termination of the Agreement,
whether upon exercise of Options or by means of purchase, dividend, distribution
or otherwise, all of which are Beneficially Owned by the Stockholder.
Capitalized terms used and not otherwise defined herein have the respective
meanings ascribed to them in the Merger Agreement.
2. AGREEMENTS.
(a) VOTING AGREEMENT. The Stockholder shall, at any meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
of the holders of Company Common Stock, however called, or in connection with
any written consent of the holders of Company Common Stock, vote (or cause to be
voted) the Subject Shares, (i) in favor of the Mergers, the execution, delivery
and performance by the Company of the Merger Agreement and the approval and
adoption of the terms thereof and each of the other actions contemplated by the
Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof, and (ii) against any Takeover Proposal (including any
Superior Proposal) and against any action or agreement that could reasonably be
expected to: (A) impede, frustrate, prevent, nullify or adversely affect, or
delay the consummation of the transactions contemplated under, this Agreement or
the Merger Agreement, (B) result in the breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company,
the DSS Cleared Company, Parent or the Merger Subsidiary under the Merger
Agreement or (C) result in any of the conditions set forth in Article VII of the
Merger Agreement not being fulfilled (collectively, the actions referred to in
(A) through (C), "PROHIBITED ACTS").
(b) NO INCONSISTENT AGREEMENTS. The Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement and the
Merger Agreement, it shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Subject Shares, any Options Beneficially Owned by
the Stockholder or any interest therein, (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
such Subject Shares, Options or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Subject
Shares or Options, (iv) deposit such Subject Shares of Options into a voting
trust or enter into a voting agreement or arrangement with respect to such
Subject Shares or Options, or (v) take any action that constitutes or results in
a Prohibited Act.
(c) GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY.
(i) The Stockholder hereby irrevocably grants to, and
appoints, Parent and Merger Subsidiary, or either of them, in their respective
capacities as officers of Parent, and any individual who shall hereafter succeed
to any such office of Parent, and each of them individually, the Stockholder's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of the Stockholder, to vote the Subject Shares, or grant a
consent or approval in respect of the Subject Shares in favor of any or all of
the Mergers and the transactions contemplated by the Merger Agreement, and
against any Takeover Proposal (including any Superior Proposal) or action or
agreement that constitutes or results in a
C - 2
Prohibited Act. In addition, the Stockholder further agrees that, if the Board
of Directors fails or refuses to submit the Merger Agreement and the Mergers to
the stockholders of the Company as required under the Merger Agreement, then the
proxy granted hereby shall include the ability to vote all Subject Shares held
of record or Beneficially Owned by it to (A) call or cause to be called a
special meeting of stockholders of the Company to submit the Merger Agreement
and the Mergers to the stockholders of the Company for a vote, and (B) approve
all or any actions incident to the Merger Agreement and the Mergers or the other
matters referred to in this Section 3 by stockholder written consent.
(ii) The Stockholder represents that any proxies
heretofore given in respect of the Subject Shares are not irrevocable, and that
any such proxies are hereby revoked.
(iii) The Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement. The Stockholder hereby affirms that
the irrevocable proxy set forth in this Section 2(c) is given in connection with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of the Stockholder under this Agreement.
The Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. The Stockholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 212(e)
of the Delaware Law.
(d) NO SOLICITATION. The Stockholder hereby agrees, in the
capacity of stockholder or otherwise, that neither the Stockholder nor any of
its subsidiaries or affiliates shall (and the Stockholder shall use its best
efforts to cause its officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any Person or
group (other than Parent, any of its affiliates or representatives) concerning
any Takeover Proposal or take any other action which the Company would be
prohibited from taking under Sections 5.2 and 5.3(a) of the Merger Agreement.
The Stockholder will, and will cause its subsidiaries, affiliates and the
respective officers, directors, employees, representatives, investment bankers,
attorneys, accountants and other agents of the Stockholder and its subsidiaries
and affiliates to, (i) immediately cease any existing activities, discussion or
negotiations with any parties conducted heretofore with respect to any
possibility of consideration of making a Takeover Proposal, (ii) immediately
request that all confidential information furnished on behalf of the Stockholder
with respect thereto be returned and (iii) promptly (and in any event within one
(1) business day) notify Parent in writing if any inquiries or proposals are
received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Stockholder in
connection with any Takeover Proposal including the identity of the Person and
its affiliates making such proposal, inquiry or offer and any information
requested from it or of any negotiations or discussions being sought to be
initiated with it, and shall furnish to Parent a written summary of the material
terms and conditions of any such proposal, inquiry or offer. The Stockholder
agrees that it shall keep Parent fully informed promptly of any developments in
the status and terms of any of the foregoing.
C - 3
(e) WAIVER OF APPRAISAL RIGHTS. The Stockholder hereby waives
any rights of appraisal or rights of dissent from the Mergers that the
Stockholder may have.
(f) PROXY STATEMENT. The Stockholder hereby permits Parent and
Merger Subsidiary to publish and disclose in the Proxy Statement (including all
documents and schedules filed with the SEC), its identity and ownership of the
Subject Shares and the nature of its commitments, arrangements and
understandings under this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
hereby represents and warrants to Parent as follows:
(a) OWNERSHIP OF SUBJECT SHARES. The Stockholder is the record
and Beneficial Owners of the Subject Shares. On the date hereof, the Subject
Shares, together with the shares of Company Common Stock Beneficial Owned by
Stockholder which are subject to the Primary Voting Agreement, dated the date
hereof, by and among Parent, Merger Subsidiary, the Company and Stockholder,
constitute all of the shares of Company Common Stock owned of record or
Beneficially Owned by the Stockholder and its affiliates. The Stockholder has
sole voting power and sole power to issue instructions with respect to the
matters set forth in Section 2 hereof, sole power of disposition, sole power of
conversion, sole power to demand appraisal rights and sole power to agree to all
of the matters set forth in this Agreement, in each case with the respect to all
of the Subject Shares with no limitations, qualifications or restrictions of
such rights, subject to applicable securities laws and the terms of this
Agreement.
(b) POWER; BINDING AGREEMENT. The Stockholder has the corporate
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
the Stockholder is a party including, without limitation, any voting agreement,
proxy arrangement, pledge agreement, shareholder agreement or voting trust. This
Agreement has been duly and validly executed and delivered by the Stockholder
and constitutes a valid and binding agreement of the Stockholder, enforceable
against the Stockholder in accordance with its terms. The Board of Directors of
the Company has approved, for purposes of Section 203 of the Delaware Law and
any applicable provision of the Company's certificate of incorporation, the
terms of this Agreement, including, without limitation, the irrevocable proxy
and voting provisions set forth in Section 2 hereof. There is no beneficiary or
holder of a voting trust certificate or other interest of any trust of which the
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by the Stockholder of the
transactions contemplated hereby.
(c) NO CONFLICTS. Except for filings under the Exchange Act,
(i) no filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by the Stockholder, the consummation by the Stockholder of the
transactions contemplated hereby or compliance by the Stockholder with any of
the provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to the Stockholder, (B) result in a
violation or breach of, or constitute (with or without notice or lapse
C - 4
of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, bond, mortgage,
indentures, license, contract, arrangement, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of its properties or assets may be bound, or (C) violate any
order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to the Stockholder or any of its properties or assets.
(d) NO ENCUMBRANCES. Except as permitted by this Agreement, the
Subject Shares and the certificates representing such Subject Shares are now,
and at all times during the term hereof will be, held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder, free and clear of all
Encumbrances, proxies, voting trusts or agreements, understandings or
arrangements or any other rights whatsoever, except for and such Encumbrances or
proxies arising hereunder.
(e) NO FINDER'S FEES. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.
(f) RELIANCE BY PARENT. The Stockholder understands and
acknowledges that Parent is entering into, and causing Merger Subsidiary to
enter into, the Merger Agreement in reliance upon the Stockholder's execution
and delivery of this Agreement.
4. REPRESENTATION AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY.
(a) POWER; BINDING AGREEMENT. Each of Parent and Merger
Subsidiary has the corporate power and authority to enter into and perform all
of its obligations under this Agreement. The execution, delivery and performance
of this Agreement by each of Parent and Merger Subsidiary will not violate any
other agreement to which either of them is a party. This Agreement has been duly
and validly executed and delivered by each of Parent and Merger Subsidiary and
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary, enforceable against the Stockholder in accordance with its terms.
(b) NO CONFLICTS. Except for filings under the Exchange Act,
(i) no filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by each of
Parent and Merger Subsidiary and the consummation by each of Parent and Merger
Subsidiary of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by each of Parent and Merger
Subsidiary, the consummation by each of Parent and Merger Subsidiary of the
transactions contemplated hereby or compliance by each of Parent and Merger
Subsidiary with any of the provisions hereof shall (A) conflict with or result
in any breach of any organizational documents applicable to either Parent or
Merger Subsidiary, (B) result in a violation or breach of, or constitute (with
or without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indentures, license,
C - 5
contract, arrangement, agreement or other instrument or obligation of any kind
to which either Parent or Merger Subsidiary is a party or by which either of
Parent or Merger Subsidiary or any of their properties or assets may be bound,
or (C) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to either Parent or Merger Subsidiary or any of their
properties or assets.
5. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
6. STOP TRANSFER. The Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Subject Shares, unless such
transfer is made in accordance with this Agreement. In the event of a stock
dividend or distribution, or any change in the Company Common Stock by reason of
any stock dividend, split-up, recapitalization, combination, exchange of shares
or the like, the term "SUBJECT SHARES" shall refer to and include the Subject
Shares as well as all such stock dividends and distributions and any shares into
which or for which any or all of the Subject Shares may be changed or exchanged.
7. TERMINATION. The covenants and agreements contained herein with
respect to the Subject Shares shall terminate upon the earlier to occur of (i)
the Closing Date and (ii) the termination of the Merger Agreement in accordance
with its terms; PROVIDED THAT, if the termination of the Merger Agreement gives
rise to, or, with the passing of time could give rise to, the requirement that a
Termination Fee be paid under the Merger Agreement, then this Agreement shall
not terminate until 24 months after the date hereof. Notwithstanding the
foregoing, in the event a Superior Proposal is made and the Board of Directors
makes a good faith determination to withdraw or modify its recommendation that
the stockholders of the Company adopt and approve the Merger Agreement and the
Merger, this Agreement shall be terminable by any party hereto upon such
withdrawal or modification occurring in accordance with Section 5.3(c) of the
Merger Agreement.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations and prior agreements between the parties (other than
those incorporated herein) are merged into this Agreement, and there are no
representations, warranties, covenants, understandings, or agreements, oral or
otherwise, in relation thereto among the parties other than those incorporated
herein and to be delivered hereunder.
(b) BINDING AGREEMENT. This Agreement and the obligations
hereunder shall attach to the Subject Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Subject Shares
shall pass, whether by operation of law or
C - 6
otherwise, including, without limitation, the Stockholder's successors.
Notwithstanding any transfer of Subject Shares, the transferor shall remain
liable for the performance of all obligations of the transferor under this
Agreement.
(c) ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be deemed given if in
writing and delivered personally or sent by overnight courier (providing proof
of delivery), postage prepaid or by facsimile (which is confirmed).
if to Parent or Merger Subsidiary:
225 Reineckers Lane, Suite 525
Alexandria, VA 22314
Attention: Misty Walsh
Facsimile: (703) 683-8979
with a copy to:
Michael W. Sturrock, Esq.
Latham & Watkins LLP
80 Raffles Place #14-20
UOB Plaza 2, Singapore 048624
Facsimile: (+65) 6536-1171
if to the Company:
3800 Richardson Road South
Hope Hull, AL 36043
Attention: President
Facsimile: (334) 613-6591
with a copy to:
Leonard Gubar, Esq.
Piper Rudnick LLP
1251 Avenue of the Americas
New York, New York 10020
Facsimile: (212) 835-6001
C - 7
if to the Stockholder:
153 East 53rd Street
59th Floor
New York, New York 10022
Facsimile: (212) 702-4666
with a copy to:
Leonard Gubar, Esq.
Piper Rudnick LLP
1251 Avenue of the Americas
New York, New York 10020
Facsimile: (212) 835-6001
or to such other address as may have been designated in a prior notice. Notices
shall be deemed to have been given when received.
(f) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore in the event
of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
(g) REMEDIES CUMULATIVE. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative or exclusive, and the exercise
of any thereof by any party shall not preclude the simultaneous or later
exercise of any other such right, power or remedy by such party.
(h) NO WAIVER. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such other right, power or remedy or to
demand such compliance.
(i) NO THIRD PARTY BENEFICIARIES. Subject to the provisions of
Section 9(b) hereof, this Agreement is not intended to be for the benefit of,
and shall not be enforceable by, any person or entity who or which is not a
party hereto.
(j) GOVERNING LAW. This Agreement, including all matters of
construction, validity and performance, shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, as applied to
contracts made, executed and to be fully performed in such state by citizens of
such state, without regard to conflict of laws principles.
C - 8
(k) DESCRIPTIVE HEADINGS. The descriptive headings used herein
used herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
(l) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
[Signature Page Follows]
C - 9
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be duly executed as of the day and year first above written.
VISION TECHNOLOGIES KINETICS, INC.
By: /s/ JOHN COBURN
--------------------------------------
Name: John Coburn
Title: Authorized Representative
VTK MERGER SUBSIDIARY CORPORATION
By: /s/ ALFRED W. CLARK
--------------------------------------
Name: Alfred W. Clark
Title: President
MILTOPE GROUP INC.
By: /s/ THOMAS R. DICKINSON
--------------------------------------
Name: Thomas R. Dickinson
Title: President and CEO
GREAT UNIVERSAL INCORPORATED
By: /s/ HENRY LEE GUY
--------------------------------------
Name: Henry Lee Guy
Title: President and CEO
S-1
SCHEDULE I
SUBJECT SHARES
STOCKHOLDER SUBJECT SHARES
----------- --------------
GREAT UNIVERSAL INCORPORATED 1,577,560
Schedule - I
Annex D
CONTINGENT VALUE RIGHTS AGREEMENT
This CONTINGENT VALUE RIGHTS AGREEMENT, dated as of October 21, 2003
(this "Agreement"), is entered into by and among MILTOPE GROUP, INC., a Delaware
corporation ("MGI"), MILTOPE CORPORATION, an Alabama corporation (the
"Company"), VISION TECHNOLOGIES KINETICS, INC., a Delaware corporation
("Parent"), and GREAT UNIVERSAL INCORPORATED, a Delaware corporation (the
"Representative").
RECITALS:
WHEREAS, MGI, the Company, Parent and VTK Merger Subsidiary Corporation
have entered into an Agreement and Plan of Merger dated as of October 21, 2003
(the "Merger Agreement"), pursuant to which MGI and VTK Merger Subsidiary
Corporation will each merge with and into the Company, with the Company
surviving the mergers as a direct wholly-owned subsidiary of Parent;
WHEREAS, pursuant to the Merger Agreement the Company agreed to create
and issue to MGI's stockholders of record immediately prior to the Effective
Time contingent value rights (the "CVRs") as hereinafter described; and
WHEREAS, all things necessary have been done to make the CVRs, when
issued pursuant to the Merger Agreement and hereunder, the valid obligations of
the Company and to make this Agreement a valid agreement of the Company, in
accordance with its terms.
NOW, THEREFORE, for and in consideration of the premises and the
consummation of the transactions referred to above, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders (as
hereinafter defined), as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS.
(a) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well
as the singular;
(ii) all accounting terms used herein and not expressly
defined shall have the meanings assigned to such terms in
accordance with generally accepted accounting principles, and the
term "generally accepted accounting principles" means such
accounting principles as are generally accepted in the United
States at the time of any computation;
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(iii) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision;
(iv) unless the context otherwise requires, words
describing the singular number shall include the plural and vice
versa, words denoting any gender shall include all genders and
words denoting natural Persons shall include corporations,
partnerships and other Persons and vice versa; and
(v) all references to "including" shall be deemed to
mean including without limitation.
(b) The following terms shall have the meanings ascribed to them as
follows:
"Affiliate" of a Person means a Person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person.
"Board of Directors" means the board of directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
secretary or an assistant secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in New York, New York are authorized or obligated by
law or executive order to remain closed.
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States or Singapore government or any agency
or instrumentality thereof having maturities of not more than six months from
the date of acquisition, (b) certificates of deposit with maturities of six
months or less from the date of acquisition, bankers acceptances with maturities
not exceeding six months and overnight bank deposits, in each case with any
commercial bank organized and in existence under the laws of the United States
and having capital and surplus in excess of $500 million, (c) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (a) and (b) above entered into with any financial
institution meeting the qualifications specified in clause (b) above, (d)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Ratings Services and in each case maturing
within 180 days after the date of acquisition, (e) investments in commercial
paper, maturing not more than 180 days after the date of acquisition, issued by
a corporation organized and in existence under the laws of the United States or
any foreign country recognized by the United States with a rating at the time as
of which any investment therein is made of "P-111 (or higher) according to
Moody's Investor Service, Inc. or "A-11, (or higher) according to Standard
Poor's Ratings Services, and (f) money market mutual funds substantially all of
the assets of which are of the type described in the foregoing clauses (a)
through (e) above.
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"Cash Proceeds" means all cash compensation, payments, penalties,
interest and other damages, if any, recovered or received by the Company or any
of its Affiliates as a result of the Litigation, whether such compensation,
penalties, interest or other damages are recovered at trial, upon appeal or in
settlement.
"Claims Expenses" means, without double counting, the sum of all fees,
costs and expenses (including attorneys fees and expenses) incurred or accrued
after the Effective Time by the Company and its Affiliates in prosecuting and
settling the Litigation (including defending against any counterclaims),
including amounts paid or payable in settlement or in judgment of any
counterclaims against the Company in the Litigation and, except as provided in
Section 2.4, excluding any payment of Firm Expenses. "Claims Expenses" shall
also include any amounts paid or payable to or on behalf of the Representative
pursuant to Section 3.4 of this Agreement (whether paid or payable before or
after the Effective Time). Notwithstanding the foregoing, (i) amounts paid or
payable by the Company or its Affiliates in settlement or judgment with respect
to any counterclaims in the Litigation shall be deemed "Claims Expenses" whether
paid or payable before or after the Effective Time and (ii) in the event the
full and final settlement of, or judgment with respect to, the Litigation occurs
prior to the Effective Time, "Claims Expenses" shall mean all fees, costs and
expenses (including attorneys fees and expenses) paid or payable after the date
hereof by the Company and its Affiliates in prosecuting and settling the
Litigation (including defending against any counterclaims).
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Control" (including the terms "controlled", "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock, including the
power to dispose of or vote such stock, as trustee or executor, by contract or
otherwise.
"CVRs" means the contingent value rights to be issued by the Company
pursuant to the Merger Agreement and this Agreement.
"CVR Payment Amount" means, on the CVR Payment Date, an amount of cash
(if positive) with respect to each CVR equal to the quotient of (A)(i)(x) if
Claims Expenses equal or are less than the Reserve, $700,000.00 minus the Claims
Expenses or (y) if Claims Expenses exceed the Reserve, 50% of the result of
$700,000.00 minus the Claims Expenses, plus (ii) 50% of the sum of (1) the
aggregate amount of Litigation Proceeds actually received by the Company or its
Affiliates, minus (2) the Tax Allocation, divided by (B) the total number of
CVRs outstanding on the CVR Payment Date.
"CVR Payment Date" means the date that the CVR Payment Amount is paid by
the Company to the Holders, which shall be established pursuant to Section 2.4.
"CVR Register" and "CVR Registrar" have the respective meanings specified
in Section 2.3(b).
"Effective Time" has the meaning ascribed to such term in the Merger
Agreement.
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"Firm Expenses" has the meaning specified in Section 2.4(e) of this
Agreement.
"Holder" means a Person in whose name a CVR is registered in the CVR
Register.
"Litigation" means the lawsuit entitled MILTOPE CORPORATION AND IV
PHOENIX GROUP, INC. V. DRS TECHNOLOGIES, INC., DRS ELECTRONICS SYSTEMS, INC.,
RICHARD PANDOLFI, PATRICIA WILSON, RUSSELL MEYER, AMIR SHAFY, ANTON LAUB, JOSEPH
EDMAN, SUNNY SHUM, AND MICHAEL GAVIGAN (Case No. 01 6545, U.S. District Court
for the Eastern District of New York; filed October 3, 2001).
"Litigation Proceeds" means the aggregate amount of any and all Cash
Proceeds and Realized Non-Cash Proceeds actually received by the Company or any
of its Affiliates.
"Litigation Proceeds Certificate" has the meaning specified in Section
2.4(a) of this Agreement.
"Merger Agreement" has the meaning set forth in the recitals to this
Agreement.
"Non-Cash Proceeds" means all non-cash compensation, payments, penalties,
interest and other damages, if any, recovered or received by the Company or any
of its Affiliates as a result of the Litigation, whether such compensation,
penalties, interest or other damages are recovered at trial, upon appeal or in
settlement.
"Officer's Certificate, means a certificate signed by the president, any
vice president, the controller, the treasurer, the secretary or any assistant
secretary, in each case of the Company, in his or her capacity as such an
officer, and delivered to the Representative.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, business trust, association, joint-stock company,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Realized Non-Cash Proceeds" means (i) all cash proceeds received in
respect of Non-Cash Proceeds, net of direct expenses incurred in converting such
Non-Cash Proceeds to cash and (ii) the fair market value (as determined pursuant
to Section 2.4) of any Non-Cash Proceeds that would not reasonably be expected
to be realized by receipt of cash in the foreseeable future.
"Representative" means the Person named as the "Representative" in the
first paragraph of this Agreement, until a successor Representative shall have
become such pursuant to the applicable provisions of this Agreement, and
thereafter "Representative" shall mean such successor Representative.
"Resolution" has the meaning specified in Section 2.4(e) of this
Agreement.
"Reserve" means the sum of $700,000.00.
"Successor Representative" means any successor Representative appointed
pursuant to Section 3.5(e)
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"Surviving Person" has the meaning set forth in Section 7.1(a)(1).
"Tax Allocation" means the result obtained by multiplying the Litigation
Proceeds actually received by the Company or its Affiliates by 20%.
SECTION 1.2 NOTICES TO REPRESENTATIVE AND COMPANY. Any request, demand,
authorization, direction, notice, consent, waiver or other document provided or
permitted by this Agreement to be made upon, given or furnished to, or filed
with:
(a) the Representative by any Holder or the Company shall be
sufficient for every purpose hereunder if in writing and delivered
personally, or mailed first-class postage prepaid or sent by a nationally
recognized overnight courier to the Representative addressed to it at 153
East 53rd Street, Suite 5900, New York, NY 10022, or at any other address
previously furnished in writing to the Holders and the Company by the
Representative; or
(b) the Company by the Representative or by any Holder shall be
sufficient for every purpose hereunder if in writing and delivered
personally, telecopied or mailed first-class postage prepaid or sent by a
nationally recognized overnight courier to the Company addressed to it at
225 Reineckers Lane, Suite 525, Alexandria, Virginia 22314, or at any
other address previously furnished in writing to the Representative and
the Holders by the Company.
SECTION 1.3 NOTICE TO HOLDERS. Where this Agreement provides for notice
to Holders, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his, her or its address as it appears in
the CVR Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders.
SECTION 1.4 EFFECT OF HEADINGS. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
SECTION 1.5 SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.6 BENEFITS OF AGREEMENT. Nothing in this Agreement, express
or implied, shall give to any Person (other than the parties hereto, the Holders
and their permitted successors and assigns hereunder) any benefit or any legal
or equitable right, remedy or claim under this Agreement or under any covenant
or provision herein contained, all such covenants and provisions being for the
sole benefit of the parties hereto, the Holders and their permitted successors
and assigns.
SECTION 1.7 GOVERNING LAW. This Agreement and the CVRs shall be
governed by and construed in accordance with the laws of the State of Delaware.
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SECTION 1.8 LEGAL HOLIDAYS. In the event that a CVR Payment Date shall
not be a Business Day, then (notwithstanding any provision of this Agreement to
the contrary) any payment required to be made in respect of the CVRs on such
date need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the applicable CVR
Payment Date.
SECTION 1.9 SEVERABILITY CLAUSE. In case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein. Upon such determination that any term
or other provision is invalid, illegal or unenforceable, the court or other
tribunal making such determination is authorized and instructed to modify this
Agreement so as to effect the original intent of the parties as closely as
possible so that the transactions and agreements contemplated herein are
consummated as originally contemplated to the fullest extent possible.
SECTION 1.10 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be deemed to constitute but one and the same
instrument.
SECTION 1.11 EFFECTIVENESS; TERMINATION. This Agreement shall be
terminated and of no force or effect, and the parties hereto shall have no
liability hereunder, upon the earliest to occur of (i) the payment of all CVR
Payment Amounts required to be paid under the terms of this Agreement, (ii) the
determination that no CVR Payment Amounts are required to be made under the
terms of this Agreement and (iii) the termination of the Merger Agreement in
accordance with the terms thereof, provided that, for the avoidance of doubt, if
the Closing (as defined in the Merger Agreement) occurs, this Agreement shall
only be capable of termination under (i) and (ii) above and shall not be capable
of termination under this clause (iii).
SECTION 1.12 ENTIRE AGREEMENT. This Agreement and the Merger Agreement
represent the entire understanding of the parties hereto with reference to the
transactions and matters contemplated hereby and thereby and this Agreement
supercedes any and all other oral or written agreements hereto made except for
the Merger Agreement. If and to the extent that any provision of this Agreement
is inconsistent or conflicts with the Merger Agreement, this Agreement shall
govern and be controlling.
ARTICLE II
CONTINGENT VALUE RIGHTS
SECTION 2.1 ISSUANCE OF CVRS. The CVRs shall be issued pursuant to the
Merger at the time and in the manner set forth in the Merger Agreement.
SECTION 2.2 NONTRANSFERABLE. The CVRs shall not be assignable or
otherwise transferable by Holders, except by will, upon death or by operation of
law.
SECTION 2.3 NO CERTIFICATE; REGISTRATION; REGISTRATION OF TRANSFER;
CHANGE OF ADDRESS.
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(a) The CVRs shall not be evidenced by a certificate or other
instrument.
(b) The Company shall cause to be kept at the Company's
principal office a register (the register maintained in such office and
in any other office designated pursuant to this Section 2.3 being herein
sometimes referred to as the "CVR Register") in which the Company shall
provide for the registration of CVRs. The secretary of the Company is
hereby initially appointed "CVR Registrar" for the purpose of registering
CVRs and transfers of CVRs as herein provided.
(c) Subject to the restriction on transferability set forth in
Section 2.2, every request made to the Company to transfer a CVR must be
in writing and accompanied by a written instrument of transfer in form
reasonably satisfactory to the Company and the CVR Registrar, duly
executed by the Holder thereof, his attorney duly authorized in writing,
personal representative or survivor and setting forth in reasonable
detail the circumstances relating to the transfer. Upon receipt of such
written notice by the Company, the CVR Registrar shall, subject to his
reasonable determination that the transfer instrument is in proper form
and the transfer otherwise complies with the other terms and conditions
herein, register the transfer of the CVRs in the CVR Register. All
transfers of CVRs registered in the CVR Register shall be the valid
obligations of the Company, evidencing the same right, and shall entitle
the transferee to the same benefits and rights under this Agreement, as
those held by the transferor. No transfer of a CVR shall be valid until
registered in the CVR Register and any transfer not duly registered in
the CVR Register will be void ab initio.
(d) A Holder may make a written request to the CVR Registrar or
the Company to change such Holder's address of record in the CVR
Register. The written request must be duly executed by the Holder. Upon
receipt of such written notice by the CVR Registrar or the Company, the
CVR Registrar shall promptly record the change of address in the CVR
Register.
SECTION 2.4 PAYMENT PROCEDURES.
(a) As promptly as practicable but in no event later than 15
days after the latest to occur of (1) the full and final settlement of,
or the entry of judgment with respect to, the Litigation, including
counterclaims, (2) receipt by the Company or any of its Affiliates of
Litigation Proceeds or any Non-Cash Proceeds, and (3) the Effective Time,
the Company shall deliver to the Representative a certificate (the
"Litigation Proceeds Certificate") setting forth in reasonable detail (i)
the amount of any Cash Proceeds and Realized Non-Cash Proceeds received
by the Company or its Affiliates, if any, (ii) a detailed description of
Non-Cash Proceeds received by the Company, if any, (iii) the fair market
value of any Realized Non-Cash Proceeds described in clause (ii) of the
definition thereof and the methodology used, and calculations made, to
determine such fair market value, (iv) an itemized list in reasonable
detail of the Claims Expenses, (v) the calculation of the Tax Allocation,
(vi) any assumptions underlying the determination of any item used in
making the necessary calculations of the CVR Payment Amount, (vii) any
financial or other documentation reasonably necessary to sufficiently
support the calculation of the CVR Payment Amount, and (viii) the
calculation of the CVR Payment Amount, if any.
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(b) Within 30 days of delivery of the Litigation Proceeds
Certificate, the Representative shall give written notice specifying
whether it agrees with or objects (a "Notice of Agreement" and a "Notice
of Objection", respectively) to the Litigation Proceeds Certificate, the
CVR Payment Amount and the CVR Payment Amount calculation.
(c) If the Representative delivers a Notice of Agreement and
any CVR Payment Amount is payable, the Company shall establish a CVR
Payment Date with respect to such CVR Payment Amount that is within 15
days of the date of the Notice of Agreement. On such CVR Payment Date,
the Company shall then promptly cause the CVR Payment Amount to be
delivered to each of the Holders by check mailed to the address of each
Holder as reflected in the CVR Register as of the close of business on
the last Business Day prior to such CVR Payment Date.
(d) If the Representative delivers a Notice of Objection within
such 30-day period, the Company shall hold an amount of cash equal to the
aggregate CVR Payment Amount, if any, set forth in the Litigation
Proceeds Certificate in a separate bank account invested in Cash
Equivalents until a Resolution is obtained pursuant to the procedures set
forth in Section 2.4(e).
(e) If the Representative delivers a Notice of Objection within
such 30-day period, the Representative shall as promptly as practicable
following delivery of the Notice of Objection, but in no event later than
15 days after delivery of the Notice of Objection, deliver to the Company
a certificate (the "Representative Objection Certificate") setting forth
in reasonable detail each of the objections to the calculations,
valuations, methodologies, lists, computations, assumptions and other
information, including, without limitation, the fair market value of any
Realized Non-Cash Proceeds described in clause (ii) of the definition
thereof (collectively, the "Determinations") that the Representative has
to the Litigation Proceeds Certificate. If the Company does not agree
with the Representative's objections to the Litigation Proceeds
Certificate, then within ten days of the delivery by the Representative
of the Representative Objection Certificate, the Company and the
Representative shall submit the portions of the Determinations set forth
in the Litigation Proceeds Certificate that are in dispute to a mutually
agreed upon independent public accounting firm of national standing that
shall have expertise in income and franchise tax matters and the
valuation of assets and properties (the "Firm"), provided, that the Firm
has not billed the Representative, the Company or the Parent for
professional services within the three-year period immediately prior to
the date of the Litigation Proceeds Certificate. The Firm shall be
instructed to determine whether the Determinations set forth in the
Litigation Proceeds Certificate that are in dispute are correct. If the
Firm determines that such Determinations are correct, the CVR Payment
Amount shall be as set forth in the Litigation Proceeds Certificate, and
the Representative shall be deemed to have delivered a Notice of
Agreement with respect to such Litigation Proceeds Certificate. If the
Firm determines that any of the Determinations set forth in the
Litigation Proceeds Certificate are incorrect in any respect that causes
the CVR Payment Amount determined by the Company to be less than the CVR
Payment Amount determined by the Firm, the Firm's resulting calculation
of the CVR Payment Amount shall be binding on the parties hereto (a
"Resolution"), and in
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addition to the CVR Payment Amount determined by the Firm, the Company
shall pay to the Holders interest on such differential calculated from
the date that the Representative delivered its Notice of objection at an
interest rate equal to the rate actually earned by the Company pursuant
to the investment of such funds in Cash Equivalents. All costs and
expenses billed by the Firm in connection with the performance of its
duties described herein ("Firm Expenses") shall be paid by the Company;
provided, however, that if the Company's determination of the CVR Payment
Amount is:
(i) greater than or equal to 95% of the CVR Payment
Amount determined by the Firm, then 100% of the Firm Expenses
shall be deducted from the CVR Payment Amount;
(ii) greater than or equal to 85% of the CVR Payment
Amount determined by the Firm, but less than 95% of the CVR
Payment Amount determined by the Firm, then 50% of the Firm
Expenses shall be deducted from the CVR Payment Amount; or
(iii) less than 85% of the CVR Payment Amount determined
by the Firm, then the Company shall not be reimbursed for any
portion of the Firm Expenses.
(f) If the Representative does not deliver a Notice of
Agreement or a Notice of objection to the Litigation Proceeds Certificate
within the 30-day period described above, the Representative shall be
deemed to have delivered a Notice of Agreement with respect to such
Litigation Proceeds Certificate, and, if any CVR Payment Amount is
payable, the Company shall establish a CVR Payment Date with respect to
such CVR Payment Amount that is within 15 days following the last day of
such 30-day period. On such CVR Payment Date, the Company shall then
promptly cause the CVR Payment Amount to be delivered to each of the
Holders by check mailed to the address of each Holder as reflected in the
CVR Register as of the close of business on the last Business Day prior
to such CVR Payment Date. If the Representative delivers a Notice of
Objection with respect to such Litigation Proceeds Certificate within the
30-day period described above, then after a Resolution is obtained, the
Company shall establish a CVR Payment Date with respect to such CVR
Payment Amount that is within ten days of the date of such Resolution. On
such CVR Payment Date, the Company shall then promptly cause the CVR
Payment Amount to be delivered to each of the Holders by check mailed to
the address of each Holder as reflected in the CVR Register as of the
close of business on the last Business Day prior to such CVR Payment
Date.
SECTION 2.5 PAYMENTS ON CVRS.
(a) In the event that the Company or its Affiliates receive
payments of Litigation Proceeds on more than one date, then the CVR
Payment Amount with respect to any such Litigation Proceeds shall be paid
with respect to each such receipt of Litigation Proceeds and the
procedures described in Section 2.4 shall apply to each such receipt of
Litigation Proceeds. The calculation of the CVR Payment Amount following
the calculation of the initial CVR Payment Amount shall be made on a
cumulative, non-duplicative, basis to
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reflect the receipt of all Litigation Proceeds, the payment of all Claims
Expenses and the prior payment of any CVR Payment Amounts (including the
$700,000 referred to in the definition thereof) from the date of this
Agreement to the date of determination of each such subsequent CVR
Payment Amount (it being understood, however, that in no event shall the
Holders be obligated or required to refund to the Company or any of its
Affiliates any portion of any CVR Payment Amount previously paid to the
Holders).
(b) The determination by the Company and the Representative of
any CVR Payment Amount pursuant to the procedures set forth in Section
2.4, absent a mathematical error, shall be final and binding on the
Company and each Holder.
(c) Except in the specific cases specified in this Agreement,
no interest shall accrue on any amounts payable on the CVRs to any
Holder.
(d) The Company shall be entitled to deduct and withhold, or
cause to be deducted or withheld, from the CVR Payment Amount otherwise
payable pursuant to this Agreement such amounts as it is required to
deduct and withhold with respect to the making of such payment under the
Code (as defined in the Merger Agreement), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld or
paid over to or deposited with the relevant governmental entity, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the Holder in respect of which such deduction and
withholding was made.
(e) Notwithstanding anything herein to the contrary, in the
event the Company incurs Claims Expenses in excess of $700,000.00, the
Company shall be reimbursed for such excess Claims Expenses out of
Litigation Proceeds, if any, prior to the payment of any CVR Payment
Amount.
SECTION 2.6 NO VOTING, DIVIDENDS OR STATED INTEREST; NO EQUITY OR
OWNERSHIP INTEREST IN THE COMPANY.
(a) The CVRs shall not have any voting or dividend rights and
shall not bear a stated rate of interest.
(b) The CVRs shall not represent any equity or ownership
interest in the Company or in any constituent company to the Merger.
ARTICLE III
THE REPRESENTATIVE
SECTION 3.1 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Representative undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement. The
Representative shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in its
exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs; provided, however, that the
Representative shall not be
D - 10
liable for any acts or omissions except to the extent that the
Representative has engaged in willful misconduct or bad faith or is
grossly negligent in the performance of its duties.
(b) No provision of this Agreement shall be construed to
relieve the Representative from liability for its own willful misconduct
or bad faith or gross negligence, except that no provision of this
Agreement shall require the Representative to expend or risk its own
funds or otherwise incur any financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or
powers.
SECTION 3.2 CERTAIN RIGHTS OF REPRESENTATIVE. The Representative
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement, and no implied covenants or obligations shall be read
into this Agreement against the Representative. In addition:
(a) the Representative shall have the right, and is hereby
authorized on behalf of the Holders, to approve or reject in writing any
settlement of any aspect or portion of the Litigation entered into by the
Company or its Affiliates;
(b) the Representative may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(c) whenever the Representative shall deem it desirable that a
matter be proved or established prior to taking, suffering or omitting
any action hereunder, the Representative may, in the absence of bad faith
or willful misconduct on its part, rely upon an Officer's Certificate;
(d) the Representative may engage and consult with counsel of
its selection and the written advice of such counsel or any opinion of
counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Representative may engage and consult with tax experts,
valuation firms and other experts and third parties that it, in its sole
and absolute discretion, deems appropriate or necessary to enable it to
discharge its duties hereunder;
(f) the permissive rights of the Representative to do things
enumerated in this Agreement shall not be construed as a duty;
(g) the Representative shall not be required to give any note
or surety in respect of the execution of such powers or otherwise in
respect of the premises; and
(h) the initial Representative may be a Holder.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF CVRS. The
recitals contained herein shall be taken as the statements of the Company, and
the Representative assumes no responsibility for their correctness. The
Representative makes no representations as
D - 11
to the validity or sufficiency of this Agreement or the CVRs. The Representative
shall not be accountable or liable for the use or application by the Company of
the Litigation Proceeds or Non-Cash Proceeds.
SECTION 3.4 REIMBURSEMENT AND INDEMNIFICATION OF THE REPRESENTATIVE.
The Company agrees:
(a) except as otherwise expressly provided herein, to pay the
Representative, upon the request of the Representative, all reasonable
expenses and disbursements incurred or to be incurred after the date
hereof by the Representative in accordance with any provision of this
Agreement (including, without limitation, the reasonable compensation and
the expenses and disbursements of its counsel, tax experts, valuation
firms and other experts and third parties as contemplated in Section
3.2); and
(b) to indemnify the Representative and hold it harmless from
and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, reasonable expenses and
reasonable disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable compensation and the expenses and
disbursements of its counsel, tax experts, valuation firms and other
experts and third parties as contemplated in Section 3.2) that may be
imposed on, asserted against or incurred by it resulting or arising from
actions taken under this Agreement by it after the date hereof until the
termination of this Agreement, and the Representative shall be so
indemnified under this Agreement for its own ordinary (but not gross)
negligence, but the Representative does not have the right to be
indemnified under this Agreement for its own willful misconduct or bad
faith or gross negligence.
(c) Notwithstanding Section 3.4(a) and (b), to the extent the
Claims Expenses exceed the Litigation Proceeds, any payment the
Representative is entitled to receive under this Section 3.4 shall be
reduced by the amount by which the Claims Expenses so exceed the
Litigation Proceeds.
SECTION 3.5 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Representative may resign at any time by giving written
notice thereof to the Company.
(b) If at any time the Representative shall become incapable of
acting, any Holder of a CVR may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Representative and the appointment of a successor
Representative.
(c) If the Representative shall resign, be removed or become
incapable of acting, the Company, by a Board Resolution, shall promptly
appoint a qualified successor Representative who is a Holder and not an
officer of the Company. The successor Representative so appointed shall,
forthwith upon its acceptance of such appointment in accordance with this
Section 3.5(c), become the successor Representative.
D - 12
(d) The Company shall give notice of each resignation and each
removal of a Representative and each appointment of a successor
Representative by mailing written notice of such event by first-class
mail, postage prepaid, to the Holders as their names and addresses appear
in the CVR Register. Each notice shall include the name and address of
the successor Representative. If the Company fails to send such notice
within ten days after acceptance of appointment by a successor
Representative, the successor Representative shall cause the notice to be
mailed at the expense of the Company.
SECTION 3.6 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor
Representative appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Representative an instrument accepting such
appointment and a counterpart of this Agreement, and thereupon such successor
Representative, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Representative;
but, on request of the Company or the successor Representative, such retiring
Representative shall execute and deliver an instrument transferring to such
successor Representative all the rights, powers and trusts of the retiring
Representative.
ARTICLE IV
HOLDERS' LISTS AND REPORTS BY REPRESENTATIVE AND COMPANY
SECTION 4.1 COMPANY TO FURNISH REPRESENTATIVE WITH NAMES AND ADDRESSES
OF HOLDERS. The Company shall furnish or cause to be furnished to the
Representative (a) in such form as the Representative may reasonably require,
the names and addresses of the Holders within 15 days of the Effective Time, and
(b) at such times as the Representative may request in writing, within five days
after receipt by the Company of any such request, a list, in such form as the
Representative may reasonably require, of the names and the addresses of the
Holders as of a date not more than 15 days prior to the time such list is
furnished.
ARTICLE V
COVENANTS
SECTION 5.1 PROSECUTION OF LITIGATION BY COMPANY; SETTLEMENT; PERIODIC
REPORTS.
(a) The Company shall prosecute the Litigation in good faith.
In any settlement to resolve the Litigation, the Company shall seek in
good faith a settlement of the Litigation for Cash Proceeds or Non-Cash
Proceeds that will become Realized Non-Cash Proceeds as described in
clause (i) of the definition thereof in as short a period of time after
the settlement is entered as is reasonably practicable. At the time that
any settlement of the Litigation is entered into, the Company and the
Representative shall seek in good faith to agree on the amount, or a
methodology for determining the amount, of any Cash Proceeds, Realized
Non-Cash Proceeds or Non-Cash Proceeds resulting from the settlement and
of the appropriate treatment thereof for purposes of calculating the
Assumed Tax Liability.
D - 13
(b) The Company shall not settle any aspect or portion of the
Litigation without obtaining (i) the prior approval of the specific terms
of such settlement by the Board of Directors and (ii) the prior written
consent of the Representative (which consent shall not be unreasonably
withheld). Unless advised by its counsel in the Litigation that doing so
may adversely affect any legal privilege or protection it may have with
respect to such information in connection with the Litigation, the
Company shall afford the Representative (1) reasonable access to
information concerning the Litigation that is in the possession, custody
or control of the Company and its Affiliates and (2) the reasonable
assistance of the officers, employees, counsel and experts of the Company
and its Affiliates for purposes of performing the Representative's duties
under this Agreement.
(c) Unless advised by its counsel in the Litigation that doing
so may adversely affect any legal privilege or protection it may have
with respect to such information in connection with the Litigation, upon
request by the Representative to the Company from time to time, the
Company shall provide the Representative with such information regarding
the status of the Litigation, including the amount of Claims Expenses
incurred, as shall be reasonably necessary to enable it to satisfy its
obligations hereunder.
(d) The Company in good faith shall convert or cause to be
converted any Non-Cash Proceeds to cash as promptly as reasonable
practicable after receiving any such Non-Cash Proceeds.
(e) The Company shall hold an amount of cash equal to the
aggregate amount of any CVR Payment Amount payable pursuant to this
Agreement in a separate bank account invested in Cash Equivalents until
such cash has been paid to the Holders.
SECTION 5.2 PAYMENT OF CVR PAYMENT AMOUNT. The Company shall duly and
promptly pay each Holder the CVR Payment Amount in the manner provided for in
Section 2.4 and in accordance with the terms of this Agreement. For the
avoidance of doubt, the CVR Payment Amounts will in no way depend on or relate
to the operating results of the Company or any constituent company to the
Merger.
ARTICLE VI
AMENDMENTS
SECTION 6.1 AMENDMENTS WITHOUT CONSENT OF HOLDERS.
(a) Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Representative, in the
Representative's sole and absolute discretion, at any time and from time
to time, may enter into one or more amendments hereto, for any of the
following purposes:
(i) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants
of the Company herein;
D - 14
(ii) to evidence the succession of another Person as a
successor Representative and the assumption by any successor of
the covenants and obligations of the Representative herein;
(iii) to add to the covenants of the Company such further
covenants, restrictions, conditions or provisions as the Board of
Directors and the Representative shall consider to be for the
protection of the Holders; provided that in each case, such
provisions shall not materially adversely affect the interests of
the Holders;
(iv) to cure any ambiguity, to correct or supplement any
provision herein that may be defective or inconsistent with any
other provision herein, or to make any other provisions with
respect to matters or questions arising under this Agreement;
provided that in each case, such provisions shall not materially
adversely affect the interests of the Holders; or
(v) as may be necessary or appropriate to ensure that
the CVRs are not subject to registration under the Securities Act
or the Exchange Act (each as defined in the Merger Agreement),
provided that such provisions shall not materially adversely
affect the interests of the Holders.
(b) Promptly after the execution by the Company and the
Representative of any amendment pursuant to the provisions of this
Section 6.1, the Company shall mail a notice thereof by first class mail
to the Holders at their addresses as they shall appear on the CVR
Register, setting forth in general terms the substance of such amendment.
SECTION 6.2 AMENDMENTS WITH CONSENT OF HOLDERS.
(a) With the consent of the Holders of not less than a majority
of the outstanding CVRs, the Company, when authorized by a Board
Resolution, and the Representative may enter into one or more amendments
hereto for the purpose of adding, eliminating or changing any provisions
of this Agreement if such addition, elimination or change is in any way
materially adverse to the interest of the Holders.
(b) Promptly after the execution by the Company and the
Representative of any amendment pursuant to the provisions of this
Section 6.2, the Company shall mail a notice thereof by first class mail
to the Holders at their addresses as they shall appear on the CVR
Register, setting forth in general terms the substance of such amendment.
SECTION 6.3 EXECUTION OF AMENDMENTS. In executing any amendment
permitted by this Article, the Representative shall be entitled to receive, and
shall be fully protected in relying upon, an opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement. The
Representative may, but is not obligated to, enter into any such amendment that
affects the Representative's own rights, privileges, covenants or duties under
this Agreement or otherwise.
D - 15
SECTION 6.4 EFFECT OF AMENDMENTS. Upon the execution of any amendment
under this Article, this Agreement shall be modified in accordance therewith,
such amendment shall form a part of this Agreement for all purposes and every
Holder shall be bound thereby.
ARTICLE VII
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 7.1 COMPANY MAY CONSOLIDATE, ETC.
(a) The Company shall not consolidate with or merge into any
other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless:
(1) in case the Company shall consolidate with or merge
into any other Person or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, the Person
formed by such consolidation or into which the Company is merged
or the Person that acquires by conveyance or transfer, or that
leases, the properties and assets of the Company substantially as
an entirety (the "Surviving Person") shall expressly assume
payment of amounts on all the CVRs and the performance of every
duty and covenant of this Agreement on the part of the Company to
be performed or observed; and
(2) the Company has delivered to the Representative an
Officer's Certificate, stating that such consolidation, merger,
conveyance, transfer or lease complies with this Article VII and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
(b) For purposes of this Section 7.1, "convey, transfer or
lease its properties and assets substantially as an entirety" shall mean
properties and assets contributing in the aggregate at least 80% of the
Company's total consolidated revenues as reported in the Company's last
available periodic financial report (quarterly or annual, as the case may
be).
SECTION 7.2 SUCCESSOR SUBSTITUTED. Upon any consolidation of or merger
by the Company with or into any other Person, or any conveyance, transfer or
lease of the properties and assets substantially as an entirety to any Person in
accordance with Section 7.1, the Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if the Surviving Person had been named as
the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under this
Agreement and the CVRs.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
D - 16
SG\13666.3
MILTOPE GROUP, INC.
By: /s/ THOMAS R. DICKINSON
--------------------------------------
Name: Thomas R. Dickinson
Title: President and CEO
MILTOPE CORPORATION
By: /s/ THOMAS R. DICKINSON
--------------------------------------
Name: Thomas R. Dickinson
Title: President and CEO
VISION TECHNOLOGIES KINETICS, INC.
By: /s/ JOHN COBURN
--------------------------------------
Name: John Coburn
Title: Authorized Representative
GREAT UNIVERSAL INCORPORATED
By: /s/ HENRY LEE GUY
--------------------------------------
Name: Henry Lee Guy
Title: President and CEO
S-1
Annex E
[Letterhead of Quarterdeck Investment Partners, LLC]
As of October 21, 2003
The Board of Directors
Miltope Group Inc.
3800 Richardson Road South
Hope Hull, Alabama 36043
Gentlemen:
Miltope Group, Inc. ("Miltope" or the "Company") has retained us to deliver to
you our opinion as to the fairness, from a financial point of view, to the
holders of the common shares of the Company (other than holders of shares as to
which statutory dissenters' rights are perfected) of the consideration to be
received by such holders pursuant to the terms of the Agreement and Plan of
Merger dated October 21, 2003 (the "Agreement") among the Company, Miltope
Corporation, a wholly-owned subsidiary of the Company ("Miltope Corporation"),
VTK Merger Subsidiary Corporation ("VTK" or the "Merger Subsidiary"), a
wholly-owned subsidiary of Vision Technologies Kinetics, Inc. (the "Parent" and
together with the Merger Subsidiary, the "Purchaser") and the Parent.
According to the terms of the Agreement, the Company will merge with and into
Miltope Corporation and Subsidiary will merge with and into Miltope Corporation
(both mergers, collectively, the "Merger"); and upon consummation of the Merger,
Merger Sub will pay or cause to be paid to the holders of all of the outstanding
common shares of the Company, including common shares issued upon the exercise
of existing stock options, a cash price of $5.78 per share and Miltope
Corporation will issue to the holders of all of the outstanding common shares of
the Company, including common shares issued upon the exercise of existing stock
options, a contingent value right for each such share (the "Consideration"); in
addition to other terms and conditions set forth in the Agreement (including all
schedules and exhibits thereto) and other agreements contemplated thereby (the
"Merger Agreements").
Quarterdeck Investment Partners, LLC ("Quarterdeck"), a subsidiary of Jefferies
Group, Inc. ("Jefferies"), is an international investment banking firm focusing
exclusively on the global aerospace, defense and government services markets.
With offices in Chicago, Los Angeles, New York and Washington, D.C., Quarterdeck
advises both listed and unlisted companies in its focused markets. Miltope
retained Quarterdeck pursuant to an
E - 1
engagement agreement dated June 24, 2002 (the "Engagement Letter") regarding the
Company's long term financial strategy. Pursuant to the terms of the Engagement
Letter, Quarterdeck assisted the Company in soliciting and assessing expressions
of interest in the Company. The solicitations generated a significant amount of
interest from multiple parties and, ultimately, culminated with the Agreement
between the Company and the Purchaser. In connection with the approval of the
Agreement, the Company separately retained Quarterdeck to render this opinion to
you. Quarterdeck will receive a fee from the Company in connection with the
advisory services it has provided pursuant to the Engagement Letter, including
fees that are contingent upon the completion of a transaction involving the
Company. Quarterdeck will receive a separate fee from the Company for rendering
this opinion. This latter fee is not contingent upon results of the Merger nor
the completion of a transaction involving the Company. In addition, the Company
has agreed to indemnify Quarterdeck for certain liabilities arising out of
either of its engagements. Quarterdeck has in the past provided services to, and
received compensation from, certain of the bidders in the Company's sale
process, including an affiliate of the Purchaser, on matters unrelated to the
proposed acquisition. Quarterdeck's affiliates may own securities of the
Company, the Parent and/or their subsidiaries and affiliates and may maintain a
market in the securities of the Company, the Parent and/or their subsidiaries
and affiliates and may publish research reports regarding such securities. In
the ordinary course of their businesses, Quarterdeck's affiliates may trade or
hold such securities for their own account and for the accounts of their
customers and, accordingly, may at any time hold long or short positions in
those securities.
In connection with this opinion, Quarterdeck has reviewed, relied upon or
performed, among other things, the following:
(i) Reviewed the Merger Agreements, participated in certain
negotiations with the Purchaser and discussed with the officers of
the Company the course of other negotiations with the Purchaser;
(ii) Reviewed certain financial and other information about the Company
that was publicly available;
(iii) Reviewed information furnished to Quarterdeck by the Company's
management, including certain internal financial analysis,
forecasts, projections, budgets, reports and other information;
(iv) Met with the Company's and Miltope Corporation's management
regarding the business prospects, financial outlook and operating
plans of the Company and held discussions concerning the impact on
the Company and its prospects of the economy and the Company's
industry, including the effect of the current economic
environment;
(v) Reviewed and considered the current and historical market prices
of the Company's common shares for the period Quarterdeck deemed
appropriate, as well as the trading volume and public float of
such shares;
(vi) Compared the valuation in the public market of companies similar
to that of the Company in market, product types, and size;
(vii) Reviewed the acquisition valuation multiples of publicly traded
companies which we deemed comparable to the Company;
E - 2
(viii) Performed a discounted cash flow analysis to analyze the present
value of the future cash flow streams that the Company has
indicated it expects to generate;
(ix) Performed a leveraged buyout analysis to analyze the potential
value of the Company in a hypothetical leveraged buyout
transaction;
(x) Performed comprehensive marketing of the business to potential
buyers or merger candidates whose possible interest in a
transaction was solicited and considered by the Company and
Quarterdeck; and
(xi) Evaluated and assessed all offers submitted.
In addition to the foregoing, Quarterdeck performed such other studies,
analyses, and investigations and considered such other financial, economic and
market criteria as it considered appropriate in arriving at its opinion.
In our review and analysis and in rendering the opinion, Quarterdeck has, with
your permission, assumed and relied upon the accuracy and completeness of all of
the financial information, forecasts and other information provided to it by
Miltope or that was publicly available to it, and has not attempted to
independently verify any of such information. This opinion is expressly
conditioned upon such information (whether written or oral) being complete,
accurate and fair in all respects. With respect to the financial projections and
financial models provided to and examined by us, we note that projecting future
results of any company is inherently subject to uncertainty. You have informed
us, however, and we have assumed with your permission, that such projections and
models were reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of the Company as to the
future performance of the Company. In addition, in rendering this opinion, we
have assumed that the Company will perform in accordance with such projections
and models for all periods specified therein. Although such projections and
models did not form the principal basis for our opinion, but rather constituted
one of many items that we employed, changes to such projections and models could
affect the opinion rendered herein. Quarterdeck expresses no opinion as to the
Company's financial projections or the assumptions upon which they are based.
Accordingly, Quarterdeck's analyses must be considered as a whole. Considering
any portion of such analyses or the factors considered, without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying the conclusions expressed herein. We expressly disclaim any
undertaking or obligation to advise any person of any change in any fact or
matter affecting our opinion of which we become aware after the date hereof. In
furnishing this opinion, we do not admit that we are experts within the meaning
of the term "experts" as used in the Securities Act of 1933, as amended, or the
rules and regulations promulgated thereunder.
Quarterdeck has assumed that there have been no material changes in the
Company's assets, financial condition, results of operations, business or
prospects since the most recent financial statements made available to us. In
addition, Quarterdeck has not conducted a physical inspection of the properties
and facilities of the Company and has
E - 3
not made or obtained an independent valuation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company nor has Quarterdeck been
furnished with any such evaluations or appraisals for the Company or any reports
of such physical inspections for the Company, nor does Quarterdeck assume any
responsibility to obtain any such evaluations, appraisals or inspections for the
Company. Quarterdeck's opinion is necessarily based on the economic and market
conditions and other circumstances as they exist and are evaluated by it on the
date hereof.
Quarterdeck, with your permission, has relied on advice of the Company's legal
counsel and independent accountants to the Company as to all legal, tax and
financial reporting matters with respect to the Company, the Merger and the
Merger Agreements. It has assumed that the Merger will be consummated in a
manner that complies in all respects with the applicable provisions of the
Securities Act, as amended, and all other applicable federal and provincial
statues, rules and regulations. Quarterdeck has further assumed, with your
permission, that (i) the Merger will be consummated in accordance with the terms
described in the Merger Agreements, without any further amendments thereto, and
without waiver by the Company of any of the conditions to Merger Subsidiary's
obligations; (ii) there is not now, and there will not as a result of the
consummation of the transactions contemplated by the Merger Agreements be, any
default, or event of default, under any indenture, credit agreement or other
material agreement or instrument to which the Company or any of its subsidiaries
or affiliates is a party; and (iii) all material assets and liabilities
(contingent or otherwise, known or unknown) of the Company are as set forth in
its consolidated financial statements provided to us by the Company.
This opinion is for the benefit and use of the Board of Directors of the Company
(the "Board") in its consideration of the Merger and may not be reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose without our prior written consent. However, this opinion may be included
in its entirety in any filing made by the Company in respect of the Merger with
the Securities and Exchange Commission, provided that this opinion is reproduced
in full and any description of or reference to us or summary of this opinion and
related analysis in such filing is acceptable to us and our counsel. This
opinion does not address the merits of the decision of the Board or the Company
to enter into the Merger Agreements as compared to any alternative business
transaction that might be available to the Company, nor does it address the
underlying business decision of the Board or the Company to engage in the Merger
or the terms of the Merger Agreements. Our opinion does not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to, or whether such stockholder should tender any shares pursuant to,
the Merger and should not be relied upon by any stockholder as such a
recommendation. Further, this opinion addresses only the fairness as of the date
hereof of the Consideration to be received by the stockholders of the Company
from a financial point of view and it does not address any other aspect of the
Merger. Quarterdeck has not been engaged to prepare, and has not prepared, a
valuation of the Company and its opinion should not be construed as such. This
opinion was prepared as of the date hereof and Quarterdeck disclaims any
undertaking or obligation to advise any person of any change in any fact or
matter affecting this opinion after the date hereof.
E - 4
Based upon and subject to the foregoing, Quarterdeck's experience as an
investment bank, its work as described above and other factors we deemed
relevant, Quarterdeck is of the opinion that as of the date hereof the
Consideration to be received by the stockholders of the Company in the Merger is
fair, from a financial point of view, to such stockholders (other than holders
of shares as to which statutory dissenters' rights are perfected).
Very truly yours,
/S/ QUARTERDECK INVESTMENT PARTNERS, LLC
E - 5
Annex F
[Letterhead of Legacy Partners Group]
Board of Directors
Miltope Group Inc.
3800 Richardson Road South
Hope Hull, AL 36043
October 21, 2003
Ladies and Gentlemen:
Miltope Group Inc., a Delaware corporation (the "Company"), is considering
whether to enter into an Agreement and Plan of Merger (the "Acquisition
Agreement"), with Vision Technologies Kinetics, Inc., a Delaware corporation
(the "Acquiror") VTK Merger Subsidiary Corporation, an Alabama corporation (the
"Sub") and Miltope Corporation, an Alabama corporation ("Miltope"). The
Acquisition Agreement will provide for the merger (the "Merger") of the Company
with and into Miltope and the merger of the Sub with and into Miltope, so that
Miltope will become a wholly owned subsidiary of the Acquiror, and each
outstanding share of common stock, par value $0.01 per share, of the Company
will be converted into the right to receive $5.78 in cash (the "Cash
Consideration") plus one contingent value right ("CVR") as defined in the
Acquisition Agreement. You have asked us to advise you with respect to the
fairness to the stockholders of the Company from a financial point of view of
the Cash Consideration to be received by such stockholders pursuant to the terms
of the Acquisition Agreement. This opinion does not address any other aspect of
the Merger or any related transaction, the merits of the underlying decision by
the Company and the Board to enter into the Acquisition Agreement, the relative
merits of the Merger compared with other business strategies that may have been
considered by the Company and the Board or the fairness of the consideration to
be received pursuant to the Acquisition Agreement by Great Universal
Incorporated ("GUI"), which owns a majority of the Company's Common Stock and
has already agreed to vote in favor of the Merger.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the most recent
proposed draft of the Acquisition Agreement dated October 21, 2003. We have also
reviewed certain other information, including financial forecasts, provided to
us by the Company and have met with the Company's management to discuss the
business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and
F-1 Confidential
accurate in all material respects. With respect to the financial forecasts, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the Company's management as
to the future financial performance of the Company. In addition, we have not
been requested to make, and have not made, an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Company,
nor have we been furnished with any such evaluations or appraisals
For purposes of rendering this opinion, we have assumed that the Merger will be
consummated on the terms described in the proposed draft of the Acquisition
Agreement, without waiver of any material terms or conditions, and that in the
course of obtaining any necessary legal, regulatory or third party consents
and/or approvals, no restrictions will be imposed that will have a material
adverse effect on the Merger or other actions contemplated by the Acquisition
Agreement. Our opinion is necessarily based upon financial, economic, market and
other conditions as they exist and can be evaluated on the date hereof.
We will receive a fee for rendering this opinion, which fee is not contingent
upon consummation of the transaction contemplated by the Acquisition Agreement.
It is understood that this letter is for the information of Board of Directors
in connection with its consideration of the Merger, does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Cash Consideration to be received by the stockholders of the Company
in the Merger is fair to such stockholders, other than GUI, from a financial
point of view.
Very truly yours,
LEGACY PARTNERS GROUP LLC
By: /s/ John B. Maier II
----------------------------------------
Name: John B. Maier II
Title: Partner
F-2 Confidential
Annex G
ANNEX G
Delaware General Corporation Law Section 262
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective date
of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
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(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, then, either a constituent corporation before
the effective date of the merger or consolidation, or the surviving or resulting
corporation within ten days thereafter, shall notify each of the holders of any
class or series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or series of
stock of such constituent corporation and shall include in such notice a copy of
this section. Such notice may, and, if given on or after the effective date of
the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10
G-3
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after
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the effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation, then
the right of such stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such approval may
be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
G-5
MILTOPE GROUP INC.
3800 Richardson Road South
Hope Hull, Alabama 36043
THIS PROXY IS SOLICITED BY MILTOPE GROUP
BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON __________ __, 2003
The undersigned holder of common stock of Miltope Group Inc., a
Delaware corporation, hereby appoints ___________________, ___________________
and ___________________, and each of them, as proxies for the undersigned, each
with full power of substitution, for and in the name of the undersigned to act
for the undersigned and to vote, as designated below, all of the shares of stock
of Miltope Group that the undersigned is entitled to vote at the Special Meeting
of Stockholders of Miltope Group, to be held on ______ __, 2003 at ___:00 a.m.,
Central Time, at Miltope Group's corporate headquarters, Miltope Group Inc.,
3800 Richardson Road South, Hope Hull, Alabama 36043 and at any adjournments or
postponements thereof.
The board of directors unanimously recommends a vote FOR adoption of
the Agreement and Plan of Merger and approval of the mergers.
Adoption of the Agreement and Plan of Merger and approval of the
mergers as described in Miltope Group's proxy statement.
[_] FOR [_] AGAINST [_] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Special Meeting, including any
adjournments or postponements thereof.
(Continue and Sign on Other Side)
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSAL SET FORTH HEREIN. WITH REGARD TO ANY OTHER MATTERS THAT
MAY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF, THIS
PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXYHOLDERS AS DESCRIBED IN THE
PROXY STATEMENT IF NO DIRECTION IS MADE.
The undersigned hereby acknowledges receipt of the Notice of the
Special Meeting and the accompanying proxy statement.
-------------------------------
(Signature)
-------------------------------
(Signature if held jointly)
Date ____________________, 2003
Please sign exactly as name appears hereon and mail it promptly even
though you now plan to attend the Special Meeting. When shares are held by joint
tenants, both should sign. When signing as Attorney, Executor, Administrator,
Guardian or Trustee, please add your full title as such. If a corporation,
please sign in full corporate name by president or other authorized officer. If
a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD
AND PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.