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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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MICRODYNE CORPORATION
(NAME OF SUBJECT COMPANY)
MICRODYNE CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, PAR VALUE $0.10 PER SHARE
(TITLE OF CLASS OF SECURITIES)
595067109
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MICHAEL E. JALBERT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MICRODYNE CORPORATION
3601 EISENHOWER AVENUE
ALEXANDRIA, VIRGINIA 22304
(703) 329-3700
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
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Copy to:
CURTIS M. COWARD, ESQ.
MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P.
8280 GREENSBORO DRIVE
SUITE 900
MCLEAN, VIRGINIA 22102
MORTON A. PIERCE, ESQ.
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 259-8000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Microdyne Corporation, a Maryland
corporation (the "Company"), and the address of the principal executive offices
of the Company is 3601 Eisenhower Avenue, Alexandria, Virginia 22304. The title
of the class of equity securities to which this statement relates is the common
stock, par value $0.10 per share, of the Company (the "Company Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the cash tender offer (the "Offer") disclosed in
the Tender Offer Statement on Schedule 14D-1, dated December 9, 1998 (the
"Schedule 14D-1") and the Offer to Purchase filed as exhibit (a)(1) thereto
(the "Offer to Purchase"), of L-M Acquisition Corporation, a Maryland
corporation ("Purchaser") and a wholly owned subsidiary of L-3 Communications
Corporation, a Delaware corporation ("Parent") which is wholly owned subsidiary
of L-3 Communications Holdings, Inc., a Delaware corporation ("Holdings"), to
purchase all of the outstanding shares of Common Stock, par value $0.10 per
share, of the Company (the "Shares") at a price of $5.00 per Share, net to the
seller in cash without interest thereon (the "Offer Price"), upon the terms and
conditions set forth therein. The Offer is being made by Purchaser pursuant to
the Agreement and Plan of Merger, dated as of December 3, 1998 (the "Merger
Agreement"), by and among the Company, Parent and Purchaser, a copy of which is
filed as Exhibit 1 hereto and incorporated herein by reference. Following
satisfaction or waiver of certain conditions and subject to certain terms set
forth in the Merger Agreement, the Purchaser will be merged with and into the
Company (the "Merger"), with the Company surviving the Merger (the "Surviving
Corporation") as a wholly owned subsidiary of Parent. The Schedule 14D-1 states
that the address of the principal executive offices of Parent and Purchaser is
600 Third Avenue, New York, New York 10016. A copy of the press releases issued
separately by the Company and Parent on December 3, 1998 are filed as Exhibits
2 and 3 hereto and incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the entity
filing this statement, are set forth in Item 1 above.
(b) Except as described or referred to below, there exists on the date
hereof no material contract, agreement, arrangement or understanding and no
actual or potential conflict of interest between the Company or its affiliates
and (i) the Company, its executive officers, directors or affiliates or (ii)
the executive officers, directors or affiliates of Parent or Purchaser.
Employment and Indemnity Agreements and Compensation Arrangements. Certain
contracts, arrangements and understandings between the Company and certain of
its directors and executive officers are described within the Information
Statement Pursuant to Section 14(f) of the Securities Exchange Act of 1934 and
Rule 14f-1 Thereunder attached as Annex A hereto, which descriptions are
incorporated herein by reference.
The Merger Agreement. The following is a summary of the Merger Agreement,
which summary is qualified in its entirety by reference to the Merger
Agreement, a copy of which is filed as Exhibit 1 hereto and incorporated herein
by reference.
The Offer. The Merger Agreement provides for the commencement of the Offer
as soon as practicable after the date of the Merger Agreement, but in no event
later than five business days from the date of the execution of the Merger
Agreement. The obligations of Purchaser to accept for payment, purchase and pay
for any and all shares validly tendered on or prior to the expiration of the
Offer and not withdrawn are subject to the satisfaction or waiver of certain
conditions (the "Offer Conditions") set forth below under "Offer Conditions."
Purchaser has expressly reserved the right, in its sole discretion, to waive
any of such conditions and make any other changes in the terms and conditions
of the Offer; provided, however, under the terms of the Merger Agreement,
without the written consent of the Company, Purchaser will not amend or waive
the Minimum Condition (as defined in the Offer to Purchase), decrease the price
per Share payable in the Offer, change the form of consideration payable
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in the Offer (other than by adding consideration), reduce the maximum number of
Shares to be purchased in the Offer, or impose conditions to the Offer in
addition to those set forth in the Merger Agreement which are materially
adverse to the holders of Shares. Purchaser shall have no obligation to pay
interest on the purchase price of tendered shares, including in the event
Purchaser exercises its right to extend the period of time during which the
Offer is open. The rights reserved by Purchaser as set forth in the Schedule
14D-1 are in addition to Purchaser's rights to terminate the Offer upon the
failure of the Offer Conditions in Section 15 of the Offer to Purchase to be
satisfied on the Expiration Date. Purchaser covenants and agrees that, subject
to the terms and conditions of the Merger Agreement, including the Offer
Conditions, it will accept for payment and pay for Shares validly tendered and
not withdrawn pursuant to the Offer as promptly as reasonably practicable.
Notwithstanding the foregoing, (x) at each scheduled expiration date of the
Offer prior to the date 90 days from the date of the Merger Agreement, if any
of the Offer Conditions shall have not been satisfied or waived, Purchaser
shall extend the Offer until the date on which such conditions are then
reasonably expected by Purchaser to be satisfied, (y) Purchaser shall extend
the Offer for any period required by any rule, regulation, interpretation or
position of the U.S. Securities and Exchange Commission (the "Commission") or
the staff thereof applicable to the Offer and (z) Purchaser may extend the
Offer up to the tenth business day beyond the latest expiration date that would
otherwise be permitted under clauses (x) and (y) of this sentence. The initial
expiration date of the Offer shall be 20 business days from the commencement of
the Offer in accordance with applicable law. Subject to the terms of the Offer,
including the Offer Conditions, Purchaser will accept for payment, purchase and
pay for all Shares validly tendered and not withdrawn as soon as it is
permitted to do so under applicable law.
The Minimum Condition requires that at least that number of Shares which,
together with any Shares owned by L-3 Communications Holdings, Inc., Parent or
Purchaser, or any controlled entity thereof, constitutes at least a majority of
the voting power (determined on a fully-diluted basis) on the date of purchase,
of all the securities of the Company entitled to vote generally in the election
of directors or in a merger shall have been validly tendered and not withdrawn
prior to the expiration of the Offer.
Offer Conditions. The Merger Agreement provides that, notwithstanding any
other provision of the Offer, Purchaser shall not be required to accept for
payment or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for any Shares tendered pursuant to the Offer,
and may postpone the acceptance for payment or, subject to the restriction
referred to above, payment for any Shares tendered pursuant to the Offer, and
may amend or terminate the Offer (whether or not any Shares have theretofore
been purchased or paid for) if, prior to the expiration of the Offer, (i) a
number of Shares which, together with any Shares owned by Holdings, Parent or
Purchaser, or any controlled affiliate thereof, constitutes at least a majority
of the voting power (determined on a fully-diluted basis), on the date of
purchase, of all the securities of the Company entitled to vote generally in
the election of directors or in a merger shall not have been validly tendered
and not properly withdrawn prior to the expiration of the Offer, (ii) Purchaser
shall have not received the consent of the Required Lenders (as defined in the
Merger Agreement) to the transactions contemplated by the Merger Agreement
under (x) the Revolving Credit Facility as defined in the Merger Agreement and
(y) the Revolving 364 Day Facility (as definied in the Merger Agreement), or
(iii) at any time on or after December 3, 1998 and prior to the acceptance for
payment of Shares, any of the following conditions occurs or has occurred or
Purchaser makes a good faith determination that any of the following conditions
has occurred:
(a) there shall have been instituted and pending any action or proceeding
brought by any governmental authority before any federal or state court, or
any order or preliminary or permanent injunction entered in any action or
proceeding before any federal or state court or governmental,
administrative or regulatory authority or agency, or any other action
taken, proposed or threatened, or statute, rule, regulation, legislation,
interpretation, judgment or order proposed, sought, enacted, entered,
enforced, promulgated, amended, issued or deemed applicable to Parent,
Purchaser, the Company or any subsidiary or affiliate of Purchaser or the
Company or the Offer or the Merger, by any legislative body, court,
government or governmental, administrative or regulatory authority or
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agency which could reasonably be expected to have the effect of: (i) making
illegal, materially delaying or otherwise directly or indirectly
restraining or prohibiting or making materially more costly the making of
the Offer, the acceptance for payment of, or payment for, some of or all
the Shares by Purchaser or any of its affiliates, the consummation of any
of the transactions contemplated by the Merger Agreement or materially
delaying the Merger; (ii) prohibiting or materially limiting the ownership
or operation by the Company or any of its subsidiaries or Parent, Purchaser
or any of Parent's affiliates of all or any material portion of the
business or assets of the Company or any of its subsidiaries or Parent, or
any of its affiliates, or compelling Parent, Purchaser or any of Parent's
affiliates to dispose of or hold separate all or any material portion of
the business or assets of the Company or any of its subsidiaries or Parent,
or any of its affiliates, as a result of the transactions contemplated by
the Offer or the Merger Agreement; (iii) imposing or confirming limitations
on the ability of Parent, Purchaser or any of Parent's affiliates
effectively to acquire or hold or to exercise full rights of ownership of
Shares, including without limitation the right to vote any Shares acquired
or owned by Parent or Purchaser or any of its affiliates on all matters
properly presented to the stockholders of the Company, including without
limitation the adoption and approval of the Merger Agreement and the Merger
or the right to vote any shares of capital stock of any subsidiary directly
or indirectly owned by the Company; or (iv) requiring divestiture by Parent
or Purchaser or any of their affiliates of any Shares;
(b) there shall have occurred any fact that had or could reasonably be
expected to have a Material Adverse Effect (as defined below);
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States, (ii) a decline of
at least 25% in either the Dow Jones Average of Industrial Stocks or the
Standard & Poor's 500 index from the date of the Merger Agreement, (iii)
any material adverse change or any existing or threatened condition, event
or development involving a prospective material adverse change in United
States or other material international currency exchange rates or a
suspension of, or limitation on, the markets therefor, (iv) a declaration
of a banking moratorium or any suspension of payments in respect of banks
in the United States, (v) any limitation (whether or not mandatory) by any
government or governmental, administrative or regulatory authority or
agency, domestic or foreign, on, or any other event that, in the reasonable
judgment of Purchaser, could reasonably be expected to materially adversely
affect the extension of credit by banks or other lending institutions, (vi)
a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States
(except for any such event involving Iraq) or having a Material Adverse
Effect or materially adversely affecting (or material delaying) the
consummation of the Offer or (vii) in the case of any of the foregoing
existing at the time of commencement of the Offer, a material acceleration
or worsening thereof;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Purchaser
the approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any takeover proposal or any other
acquisition of Shares other than the Offer and the Merger, or (ii) any such
corporation, partnership, person or other entity or group shall have
entered into a definitive agreement or an agreement in principle with the
Company with respect to a tender offer or exchange offer for any Shares or
a merger, consolidation or other business combination with or involving the
Company or any of its subsidiaries;
(e) any of the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct, in each case as if such
representations and warranties were made at the time of such determination,
except where the failure of any such representations and warranties to be
true and correct would not have a Material Adverse Effect or would make
materially more costly the making of the Offer or the acceptance for
payment of, or payment for, some or all of the Shares by Purchaser or any
of its affiliates;
(f) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
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(g) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company; or
(h) any waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") applicable to the
purchase of Shares pursuant to the Offer, and any applicable waiting
periods under any material foreign statutes or regulations, shall not have
expired or been terminated, or any material approval, permit, authorization
or consent of any domestic or foreign governmental, administrative or
regulatory agency (federal, state, local, provincial or otherwise) shall
not have been obtained on terms satisfactory to the Parent in its
reasonable discretion;
which, in the reasonable judgment of Purchaser with respect to each and every
matter referred to above and regardless of the circumstances (including any
action or inaction by Purchaser or any of its affiliates other than a breach of
the Merger Agreement) giving rise to any such condition, makes it inadvisable
to proceed with the Offer or with such acceptance for payment of or payment for
Shares or to proceed with the Merger.
The Merger Agreement provides that the foregoing conditions are for the
sole benefit of Purchaser and may be asserted by Purchaser regardless of the
circumstances giving rise to any such condition or may be waived by Purchaser
in whole or in part at any time and from time to time in its sole discretion
(subject to the terms of the Merger Agreement). The failure by Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right, the waiver of any such right with respect to particular facts
and other circumstances shall not be deemed a waiver with respect to any other
facts and circumstances, and each such right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
The Merger. The Merger Agreement provides that, at the Effective Time (as
defined in the Merger Agreement) and subject to the conditions set forth
therein (including the Offer Conditions) and in accordance with the provisions
of the Maryland General Corporation Law (the "MGCL"), Purchaser shall be merged
with and into the Company and the separate corporate existence of Purchaser
shall cease, and the Company shall continue as the surviving corporation of the
Merger (the "Surviving Corporation"). At Parent's election (provided, that such
election shall not adversely affect the ability of the Company to consummate
the transactions contemplated by the Merger Agreement, and provided, further,
that the Company shall not be deemed to have breached any of its
representations or warranties therein if and to the extent such breach results
from such election), the Merger may alternatively be structured so that (i) the
Company and/or its subsidiaries are merged with and into Parent, Purchaser or
any other direct or indirect subsidiary of Parent or (ii) any direct or
indirect subsidiary of Parent other than Purchaser is merged with and into the
Company.
Articles, By-laws, Directors and Officers. The Merger Agreement provides
that at the Effective Time and without any further action on the part of the
Company and Purchaser, the Articles of Amendment and Restatement of the
Company, as amended (the "Articles"), as in effect immediately prior to the
Effective Time, shall be the charter of the Surviving Corporation until
thereafter and further amended as provided therein and under the MGCL. At the
Effective Time and without any further action on the part of the Company and
Purchaser, the By-Laws of the Purchaser shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the Articles of the Surviving Corporation and as provided by law. The
Merger Agreement further provides that the directors of Purchaser immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles and By-Laws of
the Surviving Corporation, and the officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
in each case until their respective successors are duly elected or appointed
(as the case may be) and qualified.
Conversion of Securities. Pursuant to the Merger Agreement, at the
Effective Time, each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares owned by Parent or Purchaser and any held
by stockholders who have not voted in favor of or consented to the Merger and
who have properly demanded appraisal of their Shares in accordance with Section
3-203 of the MGCL
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(the "Dissenting Shares")) shall be cancelled, extinguished and converted into
the right to receive the Merger Consideration, without interest, upon surrender
of the certificate formerly representing such Share in the manner described in
the Merger Agreement, less any withholding taxes required under applicable law.
Each share of common stock of Purchaser issued and outstanding immediately
prior to the Effective Time shall be converted into and become one validly
issued, fully paid and nonassessable share of identical common stock of the
Surviving Corporation.
Conversion of Employee Options. Immediately prior to the Effective Time,
each outstanding employee stock option and any related stock appreciation right
(together, an "Employee Option"), whether or not then exercisable, shall be
cancelled by the Company (provided that with respect to the 3,300 Shares (the
"1988 Options") subject to stock options issued pursuant to the Incentive Stock
Option Plan of 1988, such 1988 Options, to the extent permitted, shall be
cancelled by the Company and otherwise the Company shall use its reasonable
good faith efforts to cancel the 1988 Options), and the holder thereof shall be
entitled to receive at the Effective Time or as soon as practicable thereafter
from the Surviving Corporation in consideration for such cancellation an amount
in cash equal to the product of (a) the number of Shares previously subject to
such Employee Option and (b) the excess, if any, of the Merger Consideration
over the exercise price per Share previously subject to such Employee Option.
Appraisal Rights. The Merger Agreement provides that so long as the Shares
are listed on the Nasdaq National Market ("Nasdaq") on the record date for the
determination of stockholders entitled to vote on the Merger with respect to
mergers other than mergers pursuant to Section 3-106 of the MGCL or a merger of
a 90 percent owned subsidiary with or into its parent or the date notice is
given or waived under Section 3-106 of the MGCL in connection with a merger of
a 90 percent owned subsidiary with or into its parent as the case may be (as
applicable, the "Appraisal Date"), no stockholder of the Company shall have any
rights under Title 3, Subtitle 2 of the MGCL as a result of the transactions
contemplated by the Merger Agreement or the Tender Agreement.
However, the Merger Agreement also provides that if the Shares are not
listed on Nasdaq on the Appraisal Date, Dissenting Shares shall not be
converted into the right to receive the Merger Consideration, but shall be
entitled to receive the consideration as shall be determined pursuant to Title
III, Subtitle 2 of the MGCL; provided, however, that if such holder shall have
failed to perfect or shall have effectively withdrawn or lost his, her or its
right to appraisal and payment under the MGCL, such holder's Shares shall
thereupon be deemed to have been converted, at the Effective Time, into the
right to receive the Merger Consideration, without any interest thereon.
Conduct of Business Pending the Merger. The Company has agreed that,
during the period from the date of the Merger Agreement until the time persons
nominated by Parent or Purchaser constitute a majority of the Company's Board
of Directors, except pursuant to the terms of the Merger Agreement or as
disclosed in the Company's forms, reports, statements and documents filed with
the Commission prior to the date of the Merger Agreement, or unless Purchaser
shall otherwise agree in writing, the businesses of the Company and its
subsidiaries will be conducted only in, and the Company and its subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice and in compliance in all material respects
with applicable laws. The Company has also agreed that the Company and its
subsidiaries shall use their reasonable good faith efforts during such period
to preserve substantially intact the business organization and assets of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries, and to
preserve their present relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations.
By way of amplification and not limitation of the foregoing paragraph, the
Company also has agreed that the Company and its subsidiaries shall refrain
from directly or indirectly taking various actions without the Parent's consent
until the time persons nominated by Parent or Purchaser constitute a majority
of the Company's Board of Directors. These prohibitions cover, among other
things, limitations on making changes to their organizational documents,
selling their capital stock or their property or
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assets, declaring or paying any dividend or other distribution, making changes
in their capital stock, engaging in any material corporate transaction,
including acquisitions and dispositions, incurring debt beyond specified
limits, amending contracts and making capital expenditures beyond specified
limits, increasing the compensation payable to its directors, officers and
employees (except to the extent required under existing plans or agreements),
increasing or granting any severance or termination pay (except to the extent
required, subject to certain limits, under existing policies or agreements),
changing accounting or tax policies, settling any litigation beyond specified
limits or any litigation which relates to the transactions contemplated by the
Merger Agreement, changing the key management structure of the Company or any
of its subsidiaries, transferring or granting any rights to intellectual
property, adopting a plan of complete or partial dissolution or liquidation,
paying or discharging any claims, liabilities or obligations, failing to
maintain the existing insurance policies covering the Company and its
subsidiaries and taking any actions that would make any of the representations
and warranties of the Company contained in the Merger Agreement untrue and
incorrect or result in any of the Offer Conditions not being satisfied.
Stockholders Meeting. Pursuant to the Merger Agreement, the Company,
acting through its Board of Directors, shall, if required in accordance with
applicable law and the Company's Articles and By-Laws, (i) duly call, give
notice of, convene and hold a meeting of its stockholders as soon as
practicable following consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the transactions contemplated
thereby (the "Stockholders Meeting") and (ii) subject to its fiduciary duties
under applicable law as determined in good faith by a majority of the
Disinterested Directors (as defined below) of the Company based on the advice
of independent outside legal counsel to the Disinterested Directors, (A)
include in the Proxy Statement (as defined below) the unanimous recommendation
of the Board of Directors that the stockholders of the Company vote in favor of
the approval of the Merger Agreement and the transactions contemplated thereby
and, subject to the approval of Robinson-Humphrey, the written opinion of
Robinson-Humphrey that the consideration to be received by the stockholders of
the Company pursuant to the Offer and the Merger is fair to such stockholders
and (B) use its reasonable good faith efforts to obtain the necessary approval
of the Merger Agreement and the transactions contemplated thereby by its
stockholders. At the Stockholders Meeting, Parent and Purchaser shall cause all
Shares then beneficially owned by them and their subsidiaries to be voted in
favor of approval of the Merger Agreement and the transactions contemplated
thereby.
The Merger Agreement provides that, notwithstanding the foregoing, in the
event that Purchaser acquires at least 90% of the outstanding Shares, the
Company and Parent agree, subject to the provisions of the Merger Agreement, to
take all necessary and appropriate action to cause the Merger to become
effective as soon as reasonably practicable after such acquisition, without a
meeting of the Company's stockholders, in accordance with Section 3-106 of the
MGCL.
The Merger Agreement also provides that the Company shall not be required
to hold the Stockholders Meeting if the Minimum Condition is not satisfied.
Proxy Statement. The Merger Agreement provides that, if required by
applicable law, as soon as practicable following Parent's request, the Company
shall file with the Commission under the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder, and shall use its reasonable good faith efforts to have cleared by
the Commission, the Proxy Statement with respect to the Stockholders Meeting
(the "Proxy Statement"). Parent, Purchaser and the Company will cooperate with
each other in the preparation of the Proxy Statement. Without limiting the
generality of the foregoing, each of Parent and Purchaser will furnish to the
Company the information relating to it required by the Exchange Act and the
rules and regulations promulgated thereunder to be set forth in the Proxy
Statement. The Company agrees to use its reasonable good faith efforts, after
consultation with the other parties hereto, to respond promptly to any comments
made by the Commission with respect to the Proxy Statement and any preliminary
version thereof filed by it and cause such Proxy Statement to be mailed to the
Company's stockholders at the earliest practicable time.
Company Board Representation. The Merger Agreement provides that, promptly
upon the purchase by Purchaser of Shares pursuant to the Offer, and from time
to time thereafter, Purchaser shall
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be entitled to designate up to such number of directors, rounded up to the next
whole number, on the Board of Directors of the Company as shall give Purchaser
representation on the Board of Directors equal to the product of the total
number of directors on such Board (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Purchaser or any affiliate of Purchaser
bears to the total number of Shares then outstanding, and the Company shall, at
such time, promptly take all action necessary to cause Purchaser's designees to
be so elected, including either increasing the size of the Company's Board of
Directors or securing the resignations of incumbent directors or both.
Notwithstanding the foregoing, the Merger Agreement provides that none of
Parent, Purchaser or the Company shall take any action to remove or replace any
member of the Special Committee (as defined below, see "Item 4, The
Solicitation or Recommendation") after consummation of the Offer and prior to
the Effective Time. If at any time prior to the Effective Time there are less
than two members of the Special Committee, as constituted on the date of the
Merger Agreement (other than upon the resignation of both Disinterested
Directors), on the Company's Board of Directors, Parent, Purchaser and the
Company shall use all reasonable efforts to ensure that two members of the
Company's Board of Directors are Disinterested Directors. In the event that
both Disinterested Directors resign from the Special Committee, Parent,
Purchaser and the Company shall either (i) use their reasonable efforts to
appoint successors as aforesaid or (ii) permit the resigning Disinterested
Directors to appoint their successors in their reasonable discretion. The
Company will use its best efforts to cause persons designated by Purchaser to
constitute the same percentage as is on the Board of (i) each committee of the
Board, (ii) each board of directors of each domestic subsidiary of the Company
and (iii) each committee of each such board, in each case only to the extent
permitted by law. Until Purchaser acquires a majority of the outstanding Shares
on a fully-diluted basis, the Company shall use its best efforts to ensure that
all the members of the Board of Directors and such boards and committees
thereof as of the date hereof who are not employees of the Company shall remain
members of the Board and such committees. The Company's obligations to appoint
designees to its Board of Directors shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder.
Following the election or appointment of Purchaser's designees pursuant to
the Merger Agreement and prior to the Effective Time, any amendment of the
Merger Agreement or the Articles or By-Laws of the Company, any termination of
the Merger Agreement by the Company, any extension by the Company of the time
for the performance of any of the obligations or other acts of Parent or
Purchaser or waiver of any of the Company's rights thereunder, will require the
concurrence of a majority of the directors of the Company then in office who
are (a) either members of the Special Committee (as constituted on the date of
the Merger Agreement) or (b) are neither designated by Purchaser nor are
employees of the Company or any of its subsidiaries (the "Disinterested
Directors").
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
from the date thereof to the Effective Time, the Company shall, and shall cause
its subsidiaries, officers, directors, employees, auditors and other agents, to
afford the officers, employees, auditors and other agents of Parent, and
financing sources who shall agree to be bound by the provisions of the Merger
Agreement as though a party thereto, complete access at all reasonable times to
its officers, employees, agents, properties, offices, plants and other
facilities and to all books and records, and shall furnish Parent and such
financing sources with all financial, operating and other data and information
as Parent, through its officers, employees or agents, or such financing
sources, may from time to time reasonably request.
The Merger Agreement further provides that each of Parent and Purchaser
will hold and treat and will cause its officers, employees, auditors and other
agents to hold and treat in confidence all documents and information concerning
the Company and its subsidiaries furnished to Parent or Purchaser in connection
with the transactions contemplated in the Merger Agreement in accordance with
the Confidentiality Agreement, dated November 8, 1998, between the Company and
Parent, which Confidentiality Agreement shall remain in full force and effect
in accordance with its terms.
No Solicitation of Transactions. The Merger Agreement provides that the
Company, its affiliates and their respective officers, directors, employees,
representatives and agents shall immediately cease any existing discussions or
negotiations, if any, with any parties conducted prior to the date thereof with
respect to any acquisition or exchange of all or any material portion of the
assets of, or any equity interest
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in, the Company or any of its subsidiaries or any business combination with the
Company or any of its subsidiaries. The Company may, directly or indirectly,
furnish information and access, in each case only in response to a request for
such information or access to any person made after the date of the Merger
Agreement which was not encouraged, solicited or initiated by the Company or
any of its affiliates or any of its or their respective officers, directors,
employees, representatives or agents after the date of the Merger Agreement,
pursuant to appropriate confidentiality agreements, and may participate in
discussions and negotiate with such entity or group concerning any merger, sale
of assets, sale of shares of capital stock or similar transaction (including an
exchange of stock or assets) involving the Company or any subsidiary or
division of the Company, if such entity or group has submitted a written
proposal to the Board relating to any such transaction and the members of the
Special Committee, as a result of such proposal, by a majority vote determine,
in their good faith judgment, that based on the advice of independent outside
legal counsel to the members of the Special Committee, failing to take such
action would constitute a breach of the Board of Directors' fiduciary duty
under applicable law. The Board of Directors of the Company shall provide a
copy of any such written proposal to Parent immediately after receipt thereof,
shall notify Parent immediately if any such proposal is made and shall keep
Parent promptly advised of all developments which could reasonably be expected
to culminate in the Board of Directors withdrawing, modifying or amending its
recommendation of the Offer, the Merger and the other transactions contemplated
by the Merger Agreement. Except as set forth above, neither the Company or any
of its affiliates, nor any of its or their respective officers, directors,
employees, representatives or agents, shall, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or
provide any information to, any corporation, partnership, person or other
entity or group (other than Parent and Purchaser, any affiliate or associate of
Parent and Purchaser or any designees of Parent or Purchaser) concerning any
merger, sale of all or any material portion of the assets, the sale of more
than 10% of the outstanding shares of capital stock of the Company or any of
its subsidiaries or similar transactions (including an exchange of stock or
assets) involving the Company or any subsidiary or division of the Company;
provided, however, that nothing in the Merger Agreement shall prevent the Board
of Directors of the Company from taking, and disclosing to the Company's
stockholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to any tender offer; provided, further, that
the Board of Directors of the Company shall not recommend that the stockholders
of the Company tender their Shares in connection with any such tender offer
unless the Board of Directors by a majority vote determines in its good faith
judgment, based on the advice of independent outside legal counsel to the
Company, that failing to take such action would constitute a breach of the
Board of Director's fiduciary duty under applicable law. The Company has agreed
not to release any third party from, or waive any provisions of, (i) any
standstill agreement to which the Company is a party (other than for the
limited purpose of discussions and negotiations permitted above) and (ii) any
confidentiality agreement to which the Company is a party.
Employee Benefits Matters. The Merger Agreement provides that the Company
shall or Parent shall cause the Company and the Surviving Corporation to
promptly pay or provide when due all compensation and benefits earned through
or prior to the Effective Time as provided pursuant to the terms of any
compensation arrangements, employment agreements and employee or director
benefit plans, programs and policies in existence as of the date of the Merger
Agreement for all employees (and former employees) and directors (and former
directors) of the Company. Parent and the Company agree that the Company and
the Surviving Corporation shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
individual agreement with any employee, former employee, director or former
director in effect and disclosed to Parent as of the date of the Merger
Agreement. Nothing in the Merger Agreement requires the continued employment of
any person or prevents the Company and/or the Surviving Corporation from taking
any action or refraining from taking any action which the Company could take or
refrain from taking prior to the Effective Time.
Pursuant to the Merger Agreement, Parent shall cause the Surviving
Corporation, for the period ending on December 31, 1999, to provide employee
benefits under plans, programs and arrangements which, in the aggregate, will
provide benefits to the employees of the Surviving Corporation (other than
employees covered by a collective bargaining agreement) which are no less
favorable than those provided pursuant to the plans, programs and arrangements
of the Company in effect on the date of the Merger
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Agreement (other than stock-based plans) and employees covered by collective
bargaining agreements shall be provided with such benefits as shall be required
under the terms of any applicable collective bargaining agreement; provided,
however, that nothing in the Merger Agreement shall prevent the amendment or
termination of any such plan, program or arrangement, require that the
Surviving Corporation provide or permit investment in the securities of Parent,
the Company or the Surviving Corporation or interfere with the Surviving
Corporation's right or obligation to make such changes as are necessary to
conform with applicable law. On and after January 1, 2000, Parent shall provide
employees of the Surviving Corporation (other than those covered by collective
bargaining agreements) with benefits, in the aggregate, that are no less
favorable than those provided to similarly situated employees of subsidiaries
of Parent.
Directors' and Officers' Indemnification and Insurance. The Merger
Agreement provides that from the Effective Time through the sixth anniversary
of the date on which the Effective Time occurs, Parent shall, or shall cause
the Surviving Corporation to, indemnify and hold harmless each present and
former officer, director or employee of the Company (the "Indemnified
Parties"), against all claims, losses, liabilities, damages, judgments, fines,
reasonable fees, reasonable costs or reasonable expenses, including, without
limitation, reasonable attorneys' fees and disbursements (collectively,
"Costs"), incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of the fact that the Indemnified Party is or was a director,
officer or employee of the Company and pertaining to matters existing or
occurring at or prior to the Effective Time (including, without limitation, the
Merger Agreement and the transactions and actions contemplated thereby),
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent permitted under applicable law; provided, that no Indemnified
Party may settle any such claim without the prior approval of Parent or the
Surviving Corporation (such consent not to be unreasonably withheld). Each
Indemnified Party will be entitled to advancement of expenses incurred in the
defense of any claim, action, suit, proceeding or investigation; provided, that
any person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification. Without limiting the foregoing, in the event that any claim,
action, suit, proceeding or investigation is brought against an Indemnified
Party (whether arising before or after the Effective Time), the Indemnified
Parties as a group may retain one counsel (plus appropriate local counsel)
satisfactory to Parent or the Surviving Corporation.
The Merger Agreement also provides that the By-Laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in Article VIII of the By-laws of the
Company, which provisions shall not be amended, repealed or otherwise modified
for a period of three years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at the Effective Time
were directors, officers or employees of the Company.
The Merger Agreement provides that Parent shall, or shall cause the
Surviving Corporation to maintain, at no expense to the beneficiaries, in
effect for six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company
(provided, that Parent or the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which
are not materially less advantageous) with respect to matters occurring at or
prior to the Effective Time to the extent available; provided, however, that in
no event shall Parent or the Surviving Corporation be required to expend more
than an amount per year in excess of 150% of current annual premiums paid by
the Company (which the Company represents and warrants to be not more than
$140,000) to maintain or procure insurance coverage pursuant to the Merger
Agreement; and provided, further, that if the annual premiums of such insurance
coverage would exceed 150% of current annual premiums, Parent or the Surviving
Corporation shall obtain a policy with the greatest coverage available for a
cost not exceeding 150% of current annual premiums. In the event any claim is
made against present or former directors, officers or employees of the Company
(the "Indemnitees") that is covered or potentially covered by insurance, none
of the Surviving Corporation, Parent or any Indemnitee shall do anything that
would forfeit, jeopardize, restrict or limit the insurance coverage available
for that claim until the final disposition thereof.
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The Merger Agreement further provides that (i) Parent and Purchaser
acknowledge that the Company is party to indemnification agreements (the
"Indemnification Agreements") with each of its current directors, (ii) Parent
and Purchaser agree that all rights in favor of such persons under the
Indemnification Agreements shall survive the Merger and shall continue in full
force and effect and without modification (except for such modifications which
would enlarge the rights) after the Effective Time in accordance with the
provisions of such Indemnification Agreements, (iii) Parent will cause the
Surviving Corporation to comply fully with its obligations under the Merger
Agreement and the Indemnification Agreements and (iv) the Company, Parent and
Purchaser acknowledge that nothing in Section 6.7 of the Merger Agreement will
limit any rights in favor of such persons under the Indemnification Agreements.
Notification of Certain Matters. Pursuant to the Merger Agreement, the
Company shall give reasonably prompt notice to Parent, and Parent shall give
reasonably prompt notice to the Company, in each case, after it becomes aware,
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in the Merger Agreement to be untrue or inaccurate in any material
respects at or prior to the Effective Time and (ii) any material failure of the
Company, Parent or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
the Merger Agreement; provided, however, that the delivery of any notice
pursuant to the foregoing shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Further Action; Reasonable Good Faith Efforts. The Merger Agreement
provides that, upon the terms and subject to the conditions thereof, each of
the parties thereto shall use its reasonable good faith efforts to take, or
cause to be taken, all appropriate action, and to do or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement as promptly as practicable, including, but not limited to (i)
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Proxy Statement, any required filings under the HSR Act and any
amendments to any thereof and (ii) using its reasonable good faith efforts to
make all required regulatory filings and applications and to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company
and its subsidiaries as are necessary for the consummation of the transactions
contemplated by the Merger Agreement and the Tender Agreement and to fulfill
the conditions to the Offer and the Merger. Notwithstanding the foregoing,
Purchaser and its affiliates shall not be required to divest, or agree to any
restrictions with respect to, any of its businesses or assets or the businesses
or assets to be acquired in connection with the transactions contemplated by
the Merger Agreement. The Company will use reasonable good faith efforts to
cooperate with Parent and Purchaser as may be reasonably necessary with respect
to consummating the financing for the Offer and the Merger. Parent and
Purchaser will use reasonable good faith efforts to obtain the consents as
promptly as practicable of the required lenders under Parent's Credit Agreement
and 364 day Credit Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of the
Merger Agreement, the proper officers and directors of each party to the Merger
Agreement shall use their reasonable good faith efforts to take all such
necessary action.
Public Announcements. Parent and the Company shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by the Merger Agreement, including the
Offer or the Merger and the Tender Agreement, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with its securities
exchange.
Disposition of Litigation. Pursuant to the Merger Agreement, the Company
agrees that it will not settle any litigation currently pending, or commenced
after the date of the Merger Agreement, against the Company or any of its
directors by any stockholder of the Company relating to the Offer or the Merger
Agreement, without the prior written consent of Parent. Except as permitted by
the Merger Agreement, the Company will not voluntarily cooperate with any third
party which has sought or may seek after the date of the Merger Agreement to
restrain or prohibit or otherwise oppose the Offer or the Merger and will
cooperate with Parent and Purchaser to resist any such effort to restrain or
prohibit or otherwise oppose the Offer or the Merger.
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State Takeover Statutes. The Merger Agreement provides that during the
term thereof the Board of Directors of the Company shall not (i) repeal or
otherwise alter the resolutions of the Board of Directors that render Section
3-602 of the MGCL (or any similar provision) inapplicable to the Offer, the
Merger, the Merger Agreement, the Tender Agreement (as defined below), the
other transactions contemplated thereby and any Consensual Transaction and (ii)
amend the By-Laws of the Company so as to render Section 3-702(a)(i) of the
MGCL (or any similar provision) applicable to the transactions contemplated by
the Merger Agreement and the Tender Agreement, including, without limitation,
the Offer, or to any Consensual Transaction.
Stop Transfer Order. The Merger Agreement provides that the Company will
instruct the Company's transfer agent that, except as provided in the Tender
Agreement, there is a stop transfer order with respect to all of the Shares
held by the Stockholders (as defined below under the heading "Tender
Agreement") and that the Tender Agreement places limits on the transfer of such
Shares.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto.
Representations and warranties of the Company include, without limitation,
certain matters concerning the Company's capitalization, the Company's
authority to execute, deliver and perform under, and the Board of Directors'
approval of, the Offer, the Merger, the Merger Agreement, the Tender Agreement
and the transactions contemplated thereby (including approvals and amendments
so as to render inapplicable limitations on certain business combinations
contained in the MGCL), absence of any conflicts with charter documents and
contracts, required filings and consents, compliance with law, Commission
filings and financial statements, absence of certain changes or events, absence
of litigation, employee benefit plans, tax matters, environmental matters,
brokers and Year 2000 issues. Some of the representations are qualified by a
"Material Adverse Effect" clause. "Material Adverse Effect" means any change or
effect that would be materially adverse to the business, operations, assets,
financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
Representations and warranties of Parent and Purchaser include, without
limitation, certain matters relating to their organization and qualification to
do business, their authority to enter into the Merger Agreement and to
consummate the transactions contemplated thereby, their filings with the SEC in
connection with the Offer, consents and approvals required for the execution
and delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby and, subject to obtaining consents from the Required
Lenders (as defined in the Merger Agreement), the availability of funds
sufficient to consummate the Offer and the Merger on the terms contemplated
thereby.
Conditions of the Merger. Under the Merger Agreement, the respective
obligations of the Parent and Purchaser, on the one hand, and the Company, on
the other hand, to consummate the Merger are subject at the Effective Time to
the satisfaction of the following conditions: (a) if required by the MGCL, the
Merger Agreement shall have been approved by the affirmative vote of the
stockholders of the Company by the requisite vote in accordance with the
Articles and the MGCL; (b) no statute, rule, regulation, executive order,
decree, ruling, injunction or other order (whether temporary, preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by any
United States or state court or governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger; (c) any waiting
period applicable to the Merger under the HSR Act shall have terminated or
expired; and (d) Purchaser shall have purchased Shares pursuant to the Offer.
Termination Events. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company as follows:
(a) By mutual written consent of Parent, Purchaser and the Company;
(b) By Parent or the Company if any court of competent jurisdiction or
other governmental body located or having jurisdiction within the United
States or any country or economic region in which either the Company or
Parent, directly or indirectly, has material assets or operations, shall
have issued a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise
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prohibiting the Offer or the Merger and such order, decree, ruling or other
action is or shall have become final and nonappealable and, with respect to
any court or governmental body located outside the United States, such
order, decree, ruling or other action would have a Material Adverse Effect
or a material adverse effect on the business, operations, assets, financial
condition or results of operations of Parent and its subsidiaries taken as
a whole;
(c) By Parent if due to an occurrence or circumstance which would result
in a failure to satisfy any of the Offer Conditions, Purchaser shall have
(i) terminated the Offer or (ii) failed to pay for Shares pursuant to the
Offer within 120 days following the date of the Merger Agreement unless
such failure to pay for Shares is a result of the failure of Parent or
Purchaser to perform any of its covenants and agreements contained in the
Merger Agreement;
(d) By the Company if (i) (A) Purchaser fails to commence the Offer as
provided in the Merger Agreement, (B) Purchaser fails to pay for Shares
pursuant to the Offer within 120 days following the date of the Merger
Agreement, unless such failure to pay for Shares is the result of the
failure of the Company to perform any of its covenants and agreements
contained in the Merger Agreement, or (C) Purchaser shall have terminated
the Offer or (ii) prior to the purchase of Shares pursuant to the Offer,
any person shall have made a bona fide offer to acquire the Company as a
result of which a majority of the members of the Special Committee conclude
in good faith on the advice of independent outside legal counsel to the
members of the Special Committee that termination of the Merger Agreement
is necessary in order for the Board of Directors to comply with its
fiduciary obligations under applicable law (provided that such termination
under this clause (d) shall not be effective until the Company has made
payment of the fee, if any, required simultaneous with such termination
pursuant to the Merger Agreement); or
(e) By Parent prior to the purchase of Shares pursuant to the Offer, if
(i) following any negotiations by the Company with any person (other than
Parent or Purchaser) that has proposed a Third Party Acquisition (as
defined below), there shall have been a breach of any covenant or agreement
on the part of the Company contained in the Merger Agreement such that the
conditions set forth in clause (f) of the Offer Conditions and/or the
conditions of the parties to consummate the Merger contained in the Merger
Agreement would not be satisfied which shall not have been cured prior to
the earlier of (A) 10 days following notice of such breach and (B) two
business days prior to the date on which the Offer expires, (ii) the Board
of Directors shall have withdrawn or modified (including by amendment of
the Schedule 14D-9) in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger or shall
have recommended another offer or transaction, or shall have resolved to
effect any of the foregoing, or (iii) the Minimum Condition shall not have
been satisfied by the expiration date of the Offer and on or prior to such
date (A) any person (other than Parent or Purchaser) shall have made and
not withdrawn a bona fide proposal or public announcement or communication
to the Company with respect to a Third Party Acquisition or (B) any person
(including the Company or any of its affiliates or subsidiaries), other
than Parent or any of its affiliates shall have become the beneficial owner
of more than 25% of the Shares.
In the event of the termination of the Merger Agreement as described
above, the Merger Agreement shall forthwith become void and there shall be no
liability on the part of any party thereto except as set forth below; provided,
however, that nothing therein will relieve any party from liability for any
breach of the Merger Agreement.
Termination Fee and Expenses. (a) If (A) the Company terminates the Merger
Agreement pursuant to clause (d)(ii) above, (B) the Company terminates the
Merger Agreement pursuant to clause (d)(i)(B) at a time when Parent had a right
to terminate the Merger Agreement pursuant to clause (e) above or (C) Parent
terminates the Merger Agreement pursuant to clause (e) above (each, a "Fee
Termination Event"), then (x) in the event of a termination pursuant to clause
(e)(i) or pursuant to clause (d)(i)(B) at a time when Parent had a right to
terminate the Merger Agreement pursuant to clause (e)(i), if the Company or any
of its subsidiaries enters into an agreement with respect to a Third Party
Acquisition (an "Acquisition Agreement") within 12 months of termination, the
Company shall pay Parent $1.25 million
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simultaneously with the signing of the Acquisition Agreement and an additional
$1.25 million on the consummation of a Third Party Acquisition pursuant to such
Acquisition Agreement or if a Third Party Acquisition occurs within 12 months
of termination without the execution of an Acquisition Agreement, the Company
shall pay Parent $2.5 million on the consummation of the Third Party
Acquisition and (y) in the event of any other Fee Termination Event, the
Company shall pay to Parent a fee, in cash (as a condition and prior to such
Fee Termination Event if such event is a termination by the Company and within
one business day of such termination if such event is a termination by Parent),
of $1.25 million and, if a Third Party Acquisition occurs within 12 months, an
additional $1.25 million on the consummation of such transaction. Parent shall
not be entitled to a fee under this clause if Parent is in material breach of
the Merger Agreement and such breach has not been cured within 10 days
following notice of such breach. Notwithstanding the foregoing provisions, the
Company in no event shall be obligated to pay to Parent more than $2.5 million
pursuant to this clause (a).
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger, tender offer or otherwise
by any person or group of persons acting in concert other than Parent,
Purchaser or any affiliate thereof (a "Third Party"); (ii) the acquisition by a
Third Party of 35% or more of the assets of the Company and its subsidiaries,
taken as a whole, in one transaction or a related series of transactions; (iii)
the acquisition by a Third Party of more than 35% of the outstanding Shares, in
one transaction or a related series of transactions; (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (v) the repurchase by the Company or any of its
subsidiaries of 15.0% or more of the outstanding Shares.
(b) If the Merger Agreement is terminated due to the failure to satisfy
the Offer Condition set forth in clause (ii) of the first paragraph of the
Offer Conditions, then Parent shall pay to the Company a fee, in cash, of $1.25
million within one business day of such termination; provided that the Company
shall not be entitled to a fee under this clause (b) if the Company is in
material breach of the Merger Agreement and such breach has not been cured
within 10 days following notice of such breach.
(c) Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with the Merger Agreement and the
transactions contemplated thereby.
Tender Agreement. Concurrently with the execution and delivery of the
Merger Agreement, the Parent and certain stockholders of the Company (Philip T.
Cunningham and certain trusts established by him, Maura Spaeth, Katherine
Cunningham and Neal Sanders as agent for Roman Herzig and Gallerie Nissl)
holding approximately 43.9% of the issued and outstanding Shares of the Company
(the "Stockholders") have contractually agreed with Parent by execution and
delivery of that certain Tender Agreement among Parent and the Stockholders
dated as of December 3, 1998 (the "Tender Agreement"), among other things, to
tender his, her or its Shares in the Offer and not withdraw any Shares so
tendered; provided that the Merger Agreement has not been terminated; and
provided further that the Stockholders are entitled to receive the same
consideration to be received by the other stockholders of the Company in the
Offer. Each Stockholder also agrees to, so long as such Stockholder is required
to tender his, her or its Shares pursuant to the preceding sentence to (a) vote
the Shares in favor of the approval of the Merger Agreement, (b) vote the
Shares against any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement, and (c) vote
the Shares against any action or agreement (other than the Merger Agreement or
the transactions contemplated thereby) that would impede, interfere with,
delay, postpone or attempt to discourage the Merger or the Offer. After the
date of the Tender Agreement, each Stockholder shall not, so long as such
Stockholder is required to tender his, her or its Shares, purport to vote (or
execute a consent with respect to) such Shares (other than in accordance with
the requirements of the Tender Agreement) or grant any other proxy or power of
attorney with respect to any Shares, deposit any Shares into a voting trust or
enter into any agreement (other than the Tender Agreement), arrangement or
understanding with any person, directly or indirectly, to vote, grant any proxy
or give instructions with respect to the voting of such Shares. The Tender
Agreement also provides that no Stockholder or any employee, representative or
agent thereof, shall, directly or indirectly, encourage, solicit, participate
in or initiate discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group (other than
Parent and its subsidiaries, any
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<PAGE>
affiliate or associate of Parent and its subsidiaries or any designees of
Parent or its subsidiaries) concerning any merger, sale of all or any material
portion of the assets, sale of shares of capital stock or similar transactions
(including an exchange of stock or assets) involving the Company or any
subsidiary or division of the Company; provided, however, that nothing in the
nonsolicitation provision of the Tender Agreement shall prevent Mr. Cunningham
from taking any action required to be taken by him in his capacity as a
director consistent with the requirements of the Merger Agreement. If any
Stockholder, or any employee, representative or agent of any Stockholder,
receives an inquiry or proposal with respect to the sale of Shares, then such
Stockholder shall promptly inform Parent of the terms and conditions, if any,
of such inquiry or proposal and the identity of the person making it. Each
Stockholder shall, and shall cause his, her or its employees, representatives
and agents to, immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
The Tender Agreement also provides for the payment by the Stockholders to
Parent of a Topping Fee (as defined below) as follows:
(a) In the event that any Topping Fee Event (as defined below) shall
occur, each Stockholder shall pay to Parent any Topping Fee due to Parent
with respect to his, her or its Shares in connection with such Topping Fee
Event. Payment of Topping Fees to Parent shall be due immediately following
the consummation of the related Topping Fee Event and shall be payable in
immediately available funds by wire transfer to the account designated in
writing by Parent; provided, that if the Selling Price is payable in a form
other than cash ("Non-Cash Consideration") and the Stockholders are legally
prohibited from selling the Non-Cash Consideration into the market, the
Stockholders, at their option, may pay a pro rata portion of the Topping
Fee in the same form of consideration as the Non-Cash Consideration so long
as Parent is granted registration rights with respect to the Non-Cash
Consideration on terms no less favorable than the registration rights, if
any, granted to any of the Stockholders. For the avoidance of doubt, the
Tender Agreement provides that Topping Fees shall be payable, from time to
time, upon the occurrence of each Topping Fee Event.
(b) For purposes of the Topping Fee provisions of the Tender Agreement,
the following terms shall have the following meanings:
"Initial Amount" shall equal $0.50, as adjusted from time to time in
accordance with the Tender Agreement.
"Selling Price" shall mean the consideration per share (whether cash
or non-cash) to be received by any Stockholder in connection with a
Topping Fee Event; provided that if the consideration received by such
Stockholder in connection with a Topping Fee Event shall be other than
cash, (i) in the case of securities listed on a national securities
exchange or traded on Nasdaq, the per share value of such consideration
shall be equal to the closing price per share listed on such national
securities exchange or Nasdaq on the date the Topping Fee Event is
consummated and (ii) in the case of consideration in a form other than
such securities, the per share value shall be determined in good faith
as of the date the Topping Fee Event is consummated by Parent and the
Stockholders, or, if Parent and the Stockholders cannot reach agreement,
by a nationally recognized investment banking firm reasonably acceptable
to the parties, which determination shall be conclusive for all purposes
of the Tender Agreement.
"Set Amount" shall equal $5.50, as adjusted from time to time in
accordance with the Tender Agreement.
"Topping Fee" shall mean a fee payable by a Stockholder to Parent
equal to the product of (i) the number of Shares directly or indirectly
sold or disposed by such Stockholder or otherwise in respect of which
such Stockholder is entitled to receive consideration and (ii) (A) if
the Selling Price is less than or equal to the Set Amount, the Selling
Price less $5.00 or (B) if the Selling Price is greater than the Set
Amount, the sum of (1) the Initial Amount plus (2) 50% of the excess of
the Selling Price less the Set Amount.
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"Topping Fee Event" shall mean (a) direct or indirect sale or other
disposition by any Stockholder of his or its Shares, (b) a merger or
consolidation of Company or any of its subsidiaries (or similar
transaction) with or into another person, (c) a sale or other
disposition of all or substantially all of the assets of Company and/or
its subsidiaries (whether in one or more transactions) or (d) any other
extraordinary transaction involving Company or any of its subsidiaries
or any of their respective assets, in each case, in which any
Stockholder is entitled to receive, cash or non-cash consideration with
respect to any of his or its Shares, provided that such sale, other
disposition, merger, consolidation or other extraordinary transaction is
consummated (or a definitive written agreement with respect thereto is
entered into) within twelve (12) months after any Fee Termination
pursuant to the Merger Agreement, provided further that any of the
transactions described in clauses (a)-(d) above that involve Parent or
any of its subsidiaries shall not be deemed to constitute a Topping
Event.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation. The Board of Directors has unanimously approved the
Merger Agreement and the transactions contemplated thereby and determined that
the terms of the Offer and the Merger as set forth in the Merger Agreement are
fair to, and in the best interests of, the Company's stockholders. For the
reasons set forth below, the Board of Directors unanimously recommends that
stockholders accept the Offer and tender their Shares pursuant to the Offer.
(b) Background; Reasons for the Recommendation. In late September 1998,
the Company received indications of interest from two financial buyers
regarding potential business combinations with the Company. The financial
buyers each proposed acquiring the Company for approximately $4.50 per Share.
Each proposal required that Philip T. Cunningham, Chairman of the Board of
Directors, participate as an investor along with the buyer in the acquisition
of the Company.
On September 28, 1998, the Board of Directors met to discuss the potential
business combinations described above and the possibility that under such
proposals, Mr. Cunningham would be an investor in such transactions. As a
result of the potential conflicts of interest created by Mr. Cunningham's
possible participation in such transactions, the Board of Directors appointed
H. Brian Thompson and Gregory W. Fazakerley to a committee of independent
directors not affiliated with Mr. Cunningham and not employed by the Company
(the "Special Committee") to consider any proposal for a business combination
with the Company and to make a recommendation to the Board of Directors for
consideration and action by the Board of Directors. The Board of Directors
further authorized the Special Committee to engage independent legal counsel
and a financial advisor to advise the Special Committee.
On October 5, 1998, the Special Committee retained Dewey Ballantine LLP
("Dewey Ballantine") to act as legal advisor to the Special Committee. Dewey
Ballantine reviewed with the Special Committee the purpose and function of the
Special Committee and the fiduciary duties of the members of the Special
Committee to the stockholders of the Company. The Special Committee interviewed
a number of investment banking firms. On October 19, 1998 the Special Committee
retained The Robinson-Humphrey Company, LLC ("Robinson-Humphrey") to act as
financial advisor to the Special Committee, based in part on
Robinson-Humphrey's familiarity with (and prior engagements by) the Company.
The Company and Robinson-Humphrey thereafter terminated existing arrangements
between them relating to financial advisory services.
During the week of October 19, 1998, the Special Committee met on several
occasions with its financial and legal advisors. The Special Committee
discussed the status of contacts with the two financial buyers who had
submitted indications of interest. The Special Committee reviewed with
Robinson-Humphrey various alternatives for soliciting other potential
purchasers. At the conclusion of those discussions, the Special Committee
directed Robinson-Humphrey to continue discussions with interested parties
while simultaneously contacting a number of financial buyers and strategic
partners to gauge their interest in acquiring the Company.
In mid October 1998, Michael E. Jalbert, President and Chief Executive
Officer of the Company called Robert V. LaPenta, President and Chief Financial
Officer of Parent to discuss the prospect of a
15
<PAGE>
transaction between the Company and Parent. On October 24, 1998, Mr. Jalbert
and Mr. LaPenta met to discuss further the prospect of a transaction between
the Company and Parent.
On November 2, 1998, Messrs. Jalbert, LaPenta, Lanza and Cunningham met to
further explore a potential business combination between Parent and the
Company. Later that day, Mr. Jalbert met with a potential financial buyer. Mr.
Jalbert advised Robinson-Humphrey of these contacts so that Robinson-Humphrey
could pursue further discussions with these parties.
On November 5, 1998, the Special Committee met with its financial and
legal advisors to discuss the status of contacts with potential acquirors,
including Parent. Robinson-Humphrey advised the Special Committee that it had
made preliminary inquiries of approximately 25 potential acquirors about the
Company, but none of those parties had made a proposal to acquire the Company.
Later that day, Parent presented the Special Committee with a proposal to
acquire all of the Shares of the Company for $4.75 per Share, subject to
certain conditions and including a request that the Company negotiate
exclusively with Parent for a period of time regarding a potential transaction.
That same day the Special Committee met with its financial and legal advisors
to consider Parent's proposal and determined that the price offered by Parent
was not acceptable and that Robinson-Humphrey should negotiate with Parent to
obtain a better offer and to indicate to Parent that the Company was not
prepared to enter into exclusive negotiations.
On November 6, 1998, the Special Committee met with its financial and
legal advisors to discuss the status of Robinson-Humphrey's negotiations with
Parent and the status of contacts with other potential acquirors.
Robinson-Humphrey reported that Parent was prepared to consider increasing its
offer to $5.00 per Share, subject to certain conditions. The Special Committee
instructed Robinson-Humphrey to continue to solicit and entertain offers from
other potential acquirors.
Parent executed a confidentiality agreement with the Company on November
8, 1998 and commenced its due diligence review of the Company the following
day. Over the course of the next several days, representatives of Parent and
counsel to Parent met with members of senior management of the Company and
reviewed certain information regarding the Company.
On November 11, 1998, counsel to Parent delivered drafts of the Merger
Agreement and Tender Agreement to counsel to the Company and to counsel to the
Special Committee.
On November 13, 1998, the Special Committee met with its financial and
legal advisors to discuss a financial analysis of the Company prepared by
Robinson-Humphrey. Robinson-Humphrey also reviewed with the Special Committee
the status of discussions with Parent and with other potential bidders. The
Special Committee also discussed the terms of the draft transaction documents
with Dewey Ballantine. The Special Committee considered: (i) the terms of the
draft Tender Agreement pursuant to which Parent proposed to acquire an option
on Mr. Cunningham's Shares and thus control such Shares even if the Merger
Agreement was terminated, which would effectively preclude a third party from
making an alternative proposal to acquire the Company; (ii) that the
transaction was conditioned on Parent obtaining consents of its lenders and
Parent's satisfaction of further due diligence; (iii) the circumstances under
which the Company could negotiate with third-parties with respect to
alternative proposals to acquire the Company; and (iv) the amount of the
proposed termination fee and the circumstances under which the proposed
termination fee would be required to be paid. The Special Committee concluded
that the terms of the draft Merger Agreement and draft Tender Agreement were
not acceptable and authorized its legal and financial advisors to negotiate
with respect to these issues, in addition to the proposed offer price, with
Parent and its counsel. The Special Committee also instructed Robinson-Humphrey
to continue to assist other parties with their due diligence review of the
Company and to continue to contact other potentially interested parties.
Later that day, Dewey Ballantine and Robinson-Humphrey had discussions
with Parent regarding the proposed offer price and the major issues presented
by the draft agreements. Parent indicated a willingness to consider the Special
Committee's objections to the terms of draft agreements, but Parent stated it
would not consider a price in excess of $5.00 per share.
16
<PAGE>
Over the next two weeks, representatives of the Special Committee, the
Company and Parent discussed the Special Committee's proposed revisions to the
draft agreements. As a result, Parent agreed (i) to eliminate the proposed
option in the Tender Agreement; (ii) to eliminate the conditioning of the
transaction on the completion of due diligence; (iii) to decrease the
termination fee payable to Parent to $1.25 million upon termination and $1.25
million upon consummation of an alternative transaction; (iv) to provide for
payment of a fee of $1.25 million by Parent to the Company in the event that
the Merger Agreement was terminated due to the failure of Parent to obtain the
consent of its lenders; and (v) to an exception under certain circumstances to
restrictions on the Company's ability to negotiate with third-parties with
respect to alternative proposals to acquire the Company. Parent's
representatives indicated their belief that the consent of Parent's lenders
would be obtained and agreed to make a representation to that effect in the
Merger Agreement. See "Representations and Warranties" above.
During two meetings in mid-November, the Special Committee was informed by
Robinson-Humphrey of two other indications of interest: an offer by a financial
buyer of $4.00 per Share in cash plus a pro rata portion per Share of 15%
ownership of the entity purchasing the Company and another proposal to acquire
the Company for $4.50 per Share in cash. The Special Committee directed
Robinson-Humphrey to inform these bidders that the indicated prices were
unacceptable and to inform these bidders and all other potential bidders to
submit proposals to acquire the Company, if any, as soon as possible.
On November 30, 1998, Robinson-Humphrey reviewed with the Special
Committee the financial terms of Parent's offer and the results of the process
undertaken by Robinson-Humphrey at the direction of the Special Committee to
solicit other third party indications of interest in acquiring the Company.
Robinson-Humphrey informed the Special Committee that all of the parties
contacted by Robinson-Humphrey either remained committed to their prior
proposals or declined to submit a proposal at that time. Robinson-Humphrey
reviewed with the Special Committee certain financial considerations relating
to Parent's proposal. Robinson-Humphrey then indicated that, assuming no
material change in the transaction or in market conditions, it was prepared to
deliver an opinion to the Board of Directors to the effect that the $5.00 per
Share cash consideration to be received in the Offer and the Merger by
stockholders of the Company was fair, from a financial point of view, to such
holders. The Special Committee also reviewed with its legal advisor the terms
of the proposed Merger Agreement and proposed Tender Agreement. Thereafter, the
Special Committee resolved, subject to the final Merger Agreement and Tender
Agreement being in substantially the form reviewed and considered by the
Special Committee and subject to the delivery of Robinson-Humphrey's opinion,
to recommend that the Board of Directors approve the Merger Agreement and the
transactions contemplated by the Merger Agreement and the Tender Agreement.
Later that day, at a meeting of the Board of Directors, the Board of
Directors received presentations similar to those delivered earlier to the
Special Committee.
At a meeting of the Board of Directors held on December 2, 1998,
Robinson-Humphrey rendered to the Special Committee and the Board of Directors
an oral opinion (subsequently confirmed by delivery of a written opinion dated
December 3, 1998) to the effect that the $5.00 per Share cash consideration to
be received in the Offer and the Merger by stockholders of the Company is fair,
from a financial point of view, to such holders. Thereafter, the Board of
Directors (i) determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair to, and in
the best interests of, the Company and its stockholders; (ii) approved the
Merger Agreement and the transactions contemplated thereby; and (iii) resolved
to recommend that the Company's stockholders accept the Offer and tender their
Shares into the Offer and approve and adopt the Merger Agreement and the
transactions contemplated thereby.
On December 3, 1998, the Merger Agreement and the Tender Agreement were
executed and each of the Company and Parent issued a press release announcing
the execution of the agreements.
In reaching its conclusion to approve the Merger Agreement and the
transactions contemplated thereby, and to recommend that stockholders tender
their Shares pursuant to the Offer, and the Board of Directors considered a
number of factors, including without limitation the following:
17
<PAGE>
1. The familiarity of the Board of Directors with the Company's business,
financial condition, results of operations, properties and prospects as an
independent entity, the nature of the industry in which it operates and
presentations by the Company's management and Robinson-Humphrey.
2. The presentations of Robinson-Humphrey as to various financial matters
and the opinion of Robinson-Humphrey to the effect that the consideration
to be received by the stockholders of the Company in the Offer and the
Merger is fair, from a financial point of view, to such stockholders. The
full text of the opinion of Robinson-Humphrey is attached hereto as Annex B
and is incorporated herein by reference. STOCKHOLDERS ARE URGED TO
CAREFULLY READ THE OPINION OF ROBINSON-HUMPHREY IN ITS ENTIRETY.
3. The terms and conditions of the Merger Agreement, including, among
other things: (a) the structural features of the Offer, which provide for a
prompt cash tender offer for all outstanding Shares to be followed, if
certain conditions are satisfied, by the Merger (thereby enabling the
stockholders to obtain the benefits of the transaction at the earliest
possible time); (b) that the provisions of the Merger Agreement enable the
Company to provide information and access to unsolicited bidders for the
Company, to negotiate (upon receipt of a written proposal) with such
bidders if required in the exercise of directors' fiduciary duties, and to
terminate the Merger Agreement in response to a bona fide offer to acquire
the Company prior to consummation of the Offer (if required in the exercise
of directors' fiduciary duties) with the payment of $1.25 million upon
termination and $1.25 million upon consummation of an alternative
transaction; and (c) that the Company would receive a fee of $1.25 million
if the Merger Agreement is terminated due to Parent's inability to obtain
the consents of its lenders. See "Item 3. The Merger Agreement."
4. The terms and conditions of the Tender Agreement. See "Item 3. The
Tender Agreement."
5. The results of the process undertaken by Robinson-Humphrey to identify
and solicit third party indications of interest in the Company and the
nature of contacts and in certain cases, proposals, received from certain
other parties.
6. The historical trading prices of the Shares and the premium
represented by the offer price of $5.00 per share.
7. The recommendation of the Special Committee as set forth above that
the Board of Directors approve the Merger Agreement and the transaction
contemplated thereby and the Tender Agreement.
In light of the number and variety of factors that the Board of Directors
considered in connection with its evaluation of the Offer and the Merger, the
Board of Directors did not find it practicable to quantify or otherwise assign
relative weights to any of the foregoing factors and, accordingly, the Board of
Directors did not do so. In addition, individual members at the Board of
Directors may have given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Robinson-Humphrey on an exclusive basis to act as
financial advisor to the Special Committee for a period of twelve months with
respect to a possible sale, merger or other business combination involving the
Company. Robinson-Humphrey received (i) a retainer of $25,000 upon its
execution of the engagement letter and (ii) a fee of $250,000 for the fairness
opinion delivered by Robinson-Humphrey with respect to the Offer and the
Merger. Upon consummation of a business combination, Robinson-Humphrey will
receive a fee of 1% of the total consideration involved in the sale of the
Company (less any amounts paid to Robinson-Humphrey under (i) and (ii) above).
The Company also agreed to reimburse Robinson-Humphrey for its
reasonable-out-of-pocket expenses, including reasonable legal fees and
expenses, and to indemnify Robinson-Humphrey and certain related persons and
entities against certain liabilities arising out of its engagement.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Other than the execution and delivery of the Tender Agreement as
described above pursuant to which certain stockholders of the Company have
agreed to take or to refrain from taking certain actions, including without
limitation, to tender such stockholders' Shares and not to withdraw any Shares
so tendered and to vote in favor of the Merger Agreement (see "Item 3.
Indentity and Background" above), during the past sixty (60) days, no
transactions in the Shares have been effected by the Company or, to the best of
the Company's knowledge, by any executive officer, directors, affiliate or
subsidiary of the Company.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates or subsidiaries currently intend to tender all Shares
which are held of record or beneficially owned by such persons pursuant to the
Offer, other than Shares, if any, held by such persons which, if tendered,
could cause such person to incur liability under the provisions of Section
16(b) of the Securities Exchange Act of 1934, as amended.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Prior to entering into the Merger Agreement, the Company had
preliminary contacts with other entities that had expressed interest in the
Company. Upon execution of the Merger Agreement, the Company ceased contacts
with such other entities. No discussions are underway or are being undertaken
by the Company in response to the Offer that relate to or would result in (1)
an extraordinary transaction, such as a merger or reorganization, involving the
Company or any of its subsidiaries; (2) a purchase, sale or transfer of a
material amount of assets by the Company or any of its subsidiaries; (3) a
tender offer for or other acquisition of securities by or of the Company; or
(4) any material change in the present capitalization or dividend policy of the
Company.
(b) There is no transaction, board resolution, agreement in principle or
signed contract in response to the Offer other than as disclosed in Item 3(b)
and Item 4(a) of this statement, that relates to or would result in (1) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any of its subsidiaries; (2) a purchase, sale or transfer of a
material amount of assets by the Company or any of its subsidiaries; (3) a
tender offer for or other acquisition of securities by or of the Company; or
(4) any material change in the present capitalization of dividend policy of the
Company.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached as Annex A hereto is being furnished in
connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Company's Board of
Directors other than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
1 Agreement and Plan of Merger, dated as of December 3, 1998, by and among
Microdyne Corporation, L-M Acquisition Corporation, a Maryland
corporation and L-3 Communications Corporation, a Delaware corporation.
2 Tender Agreement by and among L-3 Communications Corporation, Philip T.
Cunningham, the Successor Trust to Philip T. Cunningham Grantee Retained
Annuity Trust #1, Philip T. Cunningham Grantor Retained Annuity Trust #2,
Maura Spaeth, Katherine Cunningham and Neal Sanders, as agent for Roman
Herzig and Gallerie Nissl dated December 3, 1998.
3 Letter to Stockholders dated December 9, 1998.*
4 Opinion of Robinson-Humphrey dated December 3, 1998.*
5 Press Release issued by Microdyne Corporation on December 3, 1998.
6 Press Release issued by L-3 Communications Corporation on December 3, 1998.
* Included in copies mailed to stockholders.
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SIGNATURE
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: December 9, 1998
Microdyne Corporation
By: /s/ Michael E. Jalbert
------------------------------------
Michael E. Jalbert
President and Chief Executive
Officer
20
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ANNEX A
MICRODYNE CORPORATION
3601 EISENHOWER AVENUE
ALEXANDRIA, VIRGINIA 22304
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES
ECHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about December 9, 1998,
as part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to the holders of shares ("Shares") of common stock, $0.10
par value per share (the "Common Stock"), of Microdyne Corporation (the
"Company"). Capitalized terms used and not otherwise defined herein shall have
the meaning ascribed to them in the Schedule 14D-9. You are receiving this
Information Statement in connection with the possible election of persons
designated by Purchaser to a majority of the seats on the Board of Directors of
the Company (the "Board of Directors"). The Merger Agreement requires the
Company, after the purchase by Purchaser pursuant to its cash tender offer to
acquire all of the Shares (the "Offer") of such number of Shares representing
not less than a majority of the outstanding shares of Common Stock on a fully
diluted basis, to cause Purchaser's designees (the "Designees") to be elected
to a majority of the seats on the Board of Directors as set forth below. This
Information Statement is required by Section 14(f) of the Securities Exchange
Act of 1934 (the "Exchange Act") and Rule 14f-1 thereunder. You are urged to
read this Information Statement carefully. However, you are not required to
take any action.
Pursuant to the Merger Agreement, on December 9, 1998, Parent commenced
the Offer. The Offer is scheduled to expire on January 7, 1999.
The information contained in this Information Statement (including
information listed in Schedule I attached hereto) concerning Parent, Purchaser
and the Designees has been furnished to the Company by Parent and Purchaser,
and the Company assumes no responsibility for the accuracy or completeness of
such information.
The Common Stock is the only class of voting securities of the Company
outstanding. Each share of Common Stock has one vote. As of November 30, 1998,
there were 50,000,000 shares of Common Stock authorized and 13,111,201 shares
of Common Stock issued and outstanding.
BOARD OF DIRECTORS
GENERAL
The Board of Directors is currently comprised of one member who is the
principal shareholder and former Chief Executive Officer of the Company (Philip
T. Cunningham), one member who is a former executive officer of the Company
(Christopher M. Maginniss), one member who is President and Chief Executive
Officer (Michael E. Jalbert) and three non-employee members (Curtis M. Coward,
Gregory W. Fazakerley, and H. Brian Thompson).
DESIGNEES
Pursuant to the Merger Agreement, promptly upon the acceptance for payment
of and payment by Purchaser in accordance with the Offer for Shares
representing not less than a majority of the outstanding Shares on a
fully-diluted basis, Purchaser shall be entitled to designate such number of
directors (rounded to the next whole number) as shall give Purchaser
representation on the Board of Directors equal to the percentage of outstanding
Shares then beneficially owned by Purchaser and, upon such designation, the
Company shall promptly take all action necessary, including, if necessary,
increasing the size of the Board of Directors or securing the resignation of
some of its incumbent directors, to enable the Designees to be so elected to
the Board of Directors.
Purchaser has informed the Company that it will choose the Designees from
the directors and executive officers of Parent listed in Schedule I attached
hereto. Purchaser has informed the Company
A-1
<PAGE>
that each of the directors and executive officers listed in Schedule I has
consented to act as a director if so designated. The business address of Parent
and Purchaser is 600 Third Avenue, New York, New York 10016.
It is expected that the Designees may assume office at any time following
the purchase by Purchaser pursuant to the Offer of such number of Shares
representing not less than a majority of the outstanding shares of Common Stock
on a fully-diluted basis and that upon assuming office, the Designees will
thereafter constitute at least a majority of the Board of Directors.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The names, ages and principal occupation for the past five years and
directorships of the Company's directors and executive officers are as follows:
DIRECTORS
The following table sets forth, for each director, the director's age,
position held with the Company, and the date such person became a director of
the Company. Following the table is a brief description of each director's
principal occupation for at least the past five years.
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE OFFICE HELD WITH COMPANY
- ---------------------------------- ----- --------- --------------------------------------
<S> <C> <C> <C>
Philip T. Cunningham ............. 61 1991 Chairman of the Board
Christopher M. Maginniss ......... 62 1991 Director
Curtis M. Coward ................. 52 1995 Director
Gregory W. Fazakerley ............ 50 1991 Director
H. Brian Thompson ................ 59 1991 Director
Michael E. Jalbert ............... 53 1998 President and Chief Executive Officer
</TABLE>
Philip T. Cunningham assumed the offices of Chairman of the Board,
President and Chief Executive Officer of the Company in June 1991 upon the
merger of Federal Technology Corporation (FTC) and the Company ("the Merger").
Prior to the Merger, Mr. Cunningham had served as President and Chairman of the
Board of FTC since its inception in 1984. Mr. Cunningham holds an M.B.A. degree
from Harvard Business School and a B.S. from Holy Cross College. As of March
10, 1997, Mr. Cunningham relinquished his positions of President and Chief
Executive Officer of the Company, and now serves only as Chairman of the Board.
Christopher M. Maginniss has served as Executive Vice President of the
Company since June 1991, and as Treasurer from June 1991 through March 1998. In
March 1997, Mr. Maginniss was named President -- Support Services Division. Mr.
Maginniss had served as Executive Vice President of FTC from June 1987 until
the Merger. Mr. Maginniss resigned from the company as of September 30, 1998.
He holds an M.S. degree from the U.S. Naval Post Graduate School and a B.A.
from Colby College.
Curtis M. Coward has been a Partner in the law firm of McGuire, Woods,
Battle & Boothe LLP, McLean, Virginia since 1986. He is also special counsel to
the government of the Republic of Kazakhstan. Previously, Mr. Coward was
President and Chief Executive Officer of Air Virginia/AVAIR from 1982 to 1986
and was Chairman of the Board of Directors of the Regional Airline Association
in 1985. He is a Director of the Atlantic Council of the United States and
trustee of the U.S. Naval Academy Foundation. Mr. Coward holds a J.D. from the
College of William and Mary and a B.A. from Denison University.
Gregory W. Fazakerley is Chairman and Chief Executive Officer of
Development Resources, Inc., a Washington, D.C.-based real estate development
firm. Mr. Fazakerley is the managing general partner of C/G Investments, a real
estate partnership; a member of the Board of Directors of the District of
Columbia Building Industry Association; and a member of the Board of Directors
of the YMCA of the Greater Metropolitan Washington area. Mr. Fazakerley is a
graduate of the American University in Washington, D.C.
H. Brian Thompson is Vice Chairman of Qwest Communications International,
a worldwide long distance telecommunications company with corporate
headquarters in Denver, Colorado. Previously, Mr.
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<PAGE>
Thompson served as Chairman of the Board and Chief Executive Officer of LCI
International, as Executive Vice President of MCI Communications Corporation,
as the President of Subscription Television of America, and spent nine years
with McKinsey and Company, an international management consulting firm. He is a
director of Bell Canada International, Comcast UK Cable Partners and Golden
Books Family Entertainment Inc. Mr. Thompson is a trustee of Capitol College, a
commissioner of the Global Information Infrastructure Commission, and a member
of the Listed Company Advisory Committee of the New York Stock Exchange Board
of Directors. Mr. Thompson holds an M.B.A. from Harvard Business School and a
B.S. from the University of Massachusetts.
Michael E. Jalbert was named President and Chief Executive Officer of
Microdyne on March 10, 1997. Prior to joining Microdyne, Mr. Jalbert was
President and Chief Executive Officer from 1995 to 1997 of IDB Communications,
a Bethesda, Maryland satellite service communications provider. From 1992 to
1995, Mr. Jalbert was President of the CSD division of Diversey Corporation, a
Chemical manufacturer based in Livonia, Michigan. Mr. Jalbert joined the
Diversey Corporation from West Chemical Corporation, a specialty chemical
manufacturing company based in Princeton, New Jersey, where he was President
and Chief Operating Officer from 1987 to 1992. Mr. Jalbert attended the
Executive Program at the University of Virginia's Darden School of Business in
1976 and holds a B.S. from the Loyola-Concordia University which he received in
1967.
EXECUTIVE OFFICERS
The current executive officers of the Company are: Michael E. Jalbert,
President and Chief Executive Officer; Massoud Safavi, Vice President, Chief
Financial Officer, and Treasurer; George Spiczak, Vice President -- Corporate
Resources; Robert Andrews, President -- Microdyne Communication Technologies
Inc.; John Oakes, President -- Microdyne Outsourcing Inc.; and James Ridgell,
Chief Operating Officer -- Advanced Technology Group.
There are no family relationships among any of the executive officers,
directors, or persons nominated to become directors of the Company. The
executive officers are chosen annually at the first meeting of the Board of
Directors following the annual meeting of stockholders and serve for one year
and until their successors are chosen and qualify.
The previous identification of directors sets forth the age and business
experience of, and certain other information regarding, Mr. Jalbert.
Massoud Safavi, 45, has served as the Chief Financial Officer for
Microdyne since June 26, 1997. Prior to joining Microdyne, Mr. Safavi spent
nine years with UNC, Inc. where he served as Assistant Treasurer, division
Chief Financial Officer, as well as the Director of Audit. Mr. Safavi is a
C.P.A. and C.M.A. He also holds a B.S. from the University of Pennsylvania's
Wharton School of Business and an M.B.A from the University of Chicago's
Graduate School of Business.
George R. Spiczak, 52, has served as Vice President -- Corporate Resources
since June 2, 1997. Before joining Microdyne, Mr. Spiczak was Director of Human
Resources, Mid-Atlantic Region, for the Turner Construction Company. For 28
years, Mr. Spiczak served in the U.S. Army, where he retired with the rank of
Colonel. Mr. Spiczak holds a B.S. in aviation management from Embry-Riddle
Aeronautical University and an M.S. in Public Administration from Shippensburg
State University.
Robert Andrews, 44, joined Microdyne on March 16, 1998 as President --
Microdyne Communication Technologies Inc. Before joining Microdyne, Mr. Andrews
spent five years with ICG Communications, Inc., where he served has Senior Vice
President -- Strategic Planning, President -- ICG Satellite Services, Vice
President, Finance -- ICG Satellite Services, and Director of Corporate Finance
and Budgets. Mr. Andrews holds an M.B.A and B.S.B.A. from the University of
Denver.
John Oakes, 55, joined Microdyne on June 29, 1998 as President --
Microdyne Outsourcing Inc. Before joining Microdyne, Mr. Oakes spent eight
years with Teleserve Corporation, where he served as President and Chief
Executive Officer. Mr. Oakes holds a B.S. in foreign service from Georgetown
University.
A-3
<PAGE>
James Ridgell, 52, joined Microdyne on August 17, 1998 as Chief Operating
Officer -- Advanced Technology Group. Before joining Microdyne, Mr. Ridgell
served as Director of Systems Development and Test at Raytheon Systems Inc.
from 1997 to 1998, as Vice President of Operations at IDB Mobile
Communications, Inc. from 1995 to 1997, and as General Manager at Hughs Link
Corporation from 1991 to 1995. Mr. Ridgell holds an M.S. in Electrical
Engineering from Johns Hopkins University and a B.S. in Electrical Engineering
from the University of Maryland.
BOARD MEETINGS AND COMMITTEES
During the period commencing September 29, 1997 and ending on September
30, 1998 (fiscal 1998), there were eight meetings of the Board of Directors of
the Company (including seven regular meetings and one special meeting). During
such period, each of the incumbent Directors attended all of the Board meetings
held while he was a director, except Mr. Thompson who was not able to attend
two meetings, and all committee meetings held while he served on such
committees.
Messrs. Fazakerley (Chairman), Coward, and Thompson serve as members of
the Audit Committee of the Board of Directors of the Company. The Audit
Committee held one meeting during fiscal 1998. The Audit Committee is
responsible for recommending and selecting the appointment of outside auditors,
reviewing financial reports of the Company and performing such other functions
as directed from time to time by the Board.
Messrs. Thompson (Chairman), Coward, and Fazakerley serve as members of
the Compensation and Governance Committee of the Company. The Compensation and
Governance Committee held one meeting during fiscal 1998. The Compensation
Committee is responsible for considering compensation of officers of the
Company.
Messrs. Fazakerley (Chairman) and Thompson serve as members of the
Independent Committee of the Board of Directors of the Company. This special
committee was formed for the purpose of considering and/or making
recommendations to the Company's Board of Directors with respect to possible
transactions involving the Company. The committee held one meeting during the
fiscal year ended September 30, 1998.
The Board of Directors currently does not have a standing nominating
committee or a committee performing similar functions.
DIRECTORS COMPENSATION
Directors of the Company who are not also officers receive $1,000 per each
Board or committee meeting attended, whether regularly scheduled or special;
$1,000 for telephone meetings; and reimbursement of reasonable expenses
incurred in attending meetings. Directors who are not also executive officers
receive, in addition to the foregoing fees and expense reimbursements, a
quarterly fee of $4,000.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
Sections 2-405.2 and 2-418 of the Maryland General Corporation Law
("MGCL") give Maryland Corporations broad powers to indemnify their present and
former directors and officers against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with threatened, pending or completed actions, suits or
proceedings to which they are parties or are threatened to be made parties by
reason of being or having been such directors or officers, subject to specified
conditions and exclusions; gives a director or officer who successfully defends
an action the right to be so indemnified; and permits a corporation to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or otherwise.
As permitted by Section 2-405.2 and 2-418 of the MGCL, Article NINTH of
the Articles provides that the Company's directors and officers shall be liable
to the Company only if it is proven that the director or officer actually
received an improper benefit or profit or if an adverse judgment or final
adjudication is entered against such director or officer based on a finding
that the director's or officer's
A-4
<PAGE>
action or failure to act giving rise to liability was the result of active or
deliberate dishonesty. Similarly, Article VIII of the Bylaws provides for the
indemnification by the Company of its directors, officers, employees and agents
against liabilities and expenses incurred in connection with actions, suits or
proceedings brought against them by a third party or in the right of the
Corporation by reason of the fact that they were or are such directors,
officers, employees or agents.
The Company has entered into agreements to indemnify its directors in
addition to the indemnification provided for in the Bylaws. These agreements,
among other things, will indemnify the Company's directors for certain expenses
(including attorneys' fees) and all losses, claims, liabilities, judgments,
fines and settlement amounts incurred by such person arising out of or in
connection with such person's service as a director of the Company to the
fullest extent permitted by applicable law.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 3, 1998, the number of
shares and percentage of the Common Stock owned by all persons known by the
Company to own beneficially more than 5% of the Common Stock, by each director,
by each executive officer named in the Summary Compensation Table, and by all
directors and executive officers as a group. This information has been obtained
in part from such persons and in part from the Company's records. Each person
has sole voting and investment power with respect to the shares indicated
except for shares which may be acquired upon exercise of options and as
otherwise noted.
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------
NAME OWNED (1) % OF CLASS
- ---------------------------------------------------------------------- -------------------- -----------
<S> <C> <C>
Philip T. Cunningham ................................................. 5,001,887 (2) 38.1%
Christopher M. Maginniss ............................................. 267,702 1.5%
Curtis M. Coward ..................................................... 30,000 *
Gregory W. Fazakerley ................................................ 39,667 (3) *
H. Brian Thompson .................................................... 45,667 (4) *
Michael E. Jalbert ................................................... 174,646 1.3%
Massoud Safavi ....................................................... 22,026 *
George Spiczak ....................................................... 17,882 *
Robert Andrews ....................................................... 2,000 *
John Oakes ........................................................... 0 *
James Ridgell ........................................................ 0 *
All directors and executive officers as a group (11 persons) ......... 5,551,477 42.3%
State of Wisconsin ................................................... 970,000 (5) 7.4%
Investment Board
P.O. Box 7842
Madison, WI 53707
</TABLE>
- ----------
* Less than 1%
(1) Includes shares that would be issued pursuant to the exercise of stock
options that are able to be exercised within 60 days, as follows: Mr.
Maginniss, 151,000 shares; Mr. Coward, 20,000 shares; Mr. Fazakerley,
36,667 shares; Mr. Thompson, 36,667 shares; Mr. Jalbert, 166,668 shares;
Mr. Safavi, 16,667 shares; Mr. Spiczak, 16,667 shares.
(2) Includes 621,400 shares held in a trust or which Mr. Cunningham is
trustee.
(3) Includes 3,000 shares beneficially owned by a trust for Mr. Fazakerley's
son of which Mr. Fazakerley is a co-trustee (Mr. Fazakerley shares voting
and dispositive power with respect to such shares).
(4) Includes 5,000 shares directly owned by Mr. Thompson, 2,000 shares
beneficially owned by Mr. Thompson's spouse as trustee for Mr. Thompson's
son, and 2,000 shares beneficially owned by Mr.
A-5
<PAGE>
Thompson's spouse as trustee for Mr. Thompson's daughter. Mr.
Thompson disclaims beneficial ownership of the shares held in trust
for his son and daughter.
(5) According to a Schedule 13G filed with the Securities and Exchange
Commission and received by the Company from the State of Wisconsin
Investment Board, this public pension fund has sole voting and
investment power with respect to these shares.
CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS
During October 1997, Microdyne entered into an agreement with Mr.
Maginniss. Under the terms of the agreement, the officer exchanged two notes
receivable totaling $506,429 for 116,702 shares of Common Stock, upon exercise
of certain stock options held by him. The terms of the agreement further
stipulate that the officer will repay the Company the full value of the notes
receivable due to the Company and any accrued interest thereon no later than
October 1, 2000 and that the shares of Common Stock acquired by Mr. Maginniss
are pledged as collateral to secure repayment of the notes receivable. The
notes receivable have an annual interest rate of 6%. On December 2, 1998, the
Board of Directors of the Company authorized and directed that $400,000 of the
$506,429 loan then due from Christopher Maginniss be forgiven, effective
January 2, 1999, and released Mr. Maginniss from any and all obligation in
connection with the amount of such loan forgiven.
On January 9, 1998, the Company entered into an Agreement and General
Release with Christopher Maginniss pursuant to which Mr. Maginniss remained
employed with the Company, at an annual salary of $195,000, through September
30, 1998 at which time he retired. Such agreement provides for Mr. Maginniss to
receive a guaranteed bonus of $35,000 for 1998, payable in four quarterly
installments, and certain "salary continuation" for the following years in the
following annual amounts: October 1, 1998 through September 30, 2000 --
$195,000; October 1, 2000 through September 30, 2002 -- $100,000; and October
1, 2002 through September 30, 2004 -- $50,000. The agreement also provides for
the continuation of certain benefits to Mr. Maginniss after September 30, 1998.
As of March 1, 1998, the Company provided a non-interest bearing bridge
loan to Mr. Jalbert in the amount of $400,000 for the purchase of his principal
residence. $250,000 of the loan is due 60 days after the sale of his current
residence, and the remainder of the loan is due in five years. $200,000 of the
loan balance was forgiven by the Company in the form of a bonus granted to Mr.
Jalbert for the year ended September 30, 1998 (see "Employment and
Noncompetition Agreements"). $200,000 of the loan remains outstanding as of the
date hereof.
On November 13, 1998, the Company provided a loan to Mr. Safavi in the
amount of $90,000. The note carries a simple interest rate that will be the
lowest rate paid by Microdyne during the term of the note. The current interest
rate on Microdyne's debt as approximately 7%. The note is due in full no later
than December 31, 2001. The entire balance of the loan remains outstanding as
of the date hereof.
Pursuant to the Agreement and Plan of Merger among L-3 Communications
Corporation, L-M Acquisition Corporation and the Company dated as of December
3, 1998, options held by employees of the Company are to be cancelled
immediately prior to the effective time of the merger contemplated by such
agreement and each employee holding such options is to receive cash equal to
the excess of $5.00 over the exercise price of such employee's options. As a
consequence thereof, each of the following would be entitled to receive the
following amounts with respect to such options; Mr. Maginniss -- $61,125;
Massoud Safavi -- $28,150; and George Spiczak -- $12,500.
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<PAGE>
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table below sets forth individual compensation
information for the Chief Executive Officer and the four other most highly paid
executive officers at September 30, 1998, for services rendered in all
capacities during the fiscal years ended September 30, 1998, September 28, 1997
and September 29, 1996.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- -----------------------------
OTHER ANNUAL OPTIONS
NAME AND COMPENSATION AWARDED
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) (1) (IN SHARES)
- ---------------------------- ------ ------------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Philip T. Cunningham 1998 184,166 0 200,000 (2) 0
(Chairman, Board of 1997 230,155 0 200,000 (2) 0
Directors, former CEO) 1996 270,625 0 200,000 (2) 0
Michael E. Jalbert 1998 257,019 200,000 0 0
(President and CEO) 1997 129,808 135,000 0 0
1996 0 0 0 0
Christopher M. Maginniss 1998 202,501 35,000 0 0
(former EVP and VP -- SSD) 1997 222,708 40,000 0 0
1996 225,479 0 0 0
Massoud Safavi 1998 151,887 103,350 0 50,000
(Vice President and CFO) 1997 36,865 14,000 0 50,000
1996 0 0 0 0
George R. Spiczak 1998 131,016 50,380 0 25,000
Vice President -- Corporate
Resources 1997 42,000 26,800 0 50,000
1996 0 0 0 0
</TABLE>
(1) Does not include compensation associated with perquisites because such
amounts do not exceed the lesser of either $50,000 or 10% of total salary
and bonus disclosed.
(2) Represents payments to Mr. Cunningham pursuant to the Noncompeition
Agreement between the Company and Mr. Cunningham dated June 21, 1991 (see
"Noncompetition Agreement" below).
The following table provides information concerning each grant of options
to purchase the Company's common stock during fiscal year 1998 to persons named
in the Summary Compensation Table. There were no stock appreciation rights
(SARs) granted.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE
- ---------------------------------- ------------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Philip T. Cunningham ............. 0 0 0 n/a
Christopher M. Maginniss ......... 0 0 0 n/a
Michael E. Jalbert ............... 0 0 0 n/a
Massoud Safavi ................... 50,000 7.4% $ 4.44 6/30/03
George R. Spiczak ................ 25,000 3.7% $ 4.50 5/31/03
</TABLE>
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<PAGE>
The following table depicts option exercise activity in the last fiscal
year and fiscal year-end option values with respect to each of the executive
officers named in the Summary Compensation Table. The value of unexercised
in-the-money options at September 30, 1998 equals the market value of the
underlying common stock at September 30, 1998 minus the exercise price. The
fair market value of Microdyne common stock at September 30, 1998 was $2.6875.
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 AND
SEPTEMBER 30, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SHARES UNEXERCISED UNEXERCISED IN-
ACQUIRED VALUE OPTIONS AT THE-MONEY
NAME ON EXERCISE REALIZED 9/30/98 OPTIONS AT 9/30/98
- ---------------------------------- ------------- ---------- ------------- -------------------
<S> <C> <C> <C> <C>
Philip T. Cunningham ............. None 0 0 0
Christopher M. Maginniss ......... 116,702 $317,429 151,000 E 0
Michael E. Jalbert ............... None 0 166,668 E 0
133,332 U 0
Massoud Safavi ................... None 0 16,667 E 0
83,333 U 0
George R. Spiczak ................ None 0 16,667 E 0
58,333 U 0
</TABLE>
E Exercisable
U Unexercisable
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
EMPLOYMENT AGREEMENTS
Effective June 21, 1991, the date of the merger between the Company and
Federal Technology Corporation, the Company entered into an Executive
Employment Agreement with Mr. Cunningham. Under the terms of the Executive
Employment Agreement, Mr. Cunningham became the Company's Chairman of the
Board, President and Chief Executive Officer. The employment agreement had a
term of three years with an initial base annual salary of $200,000. On October
24, 1995, the Company entered into a new Executive Employment Agreement with
Mr. Cunningham with respect to the same positions at an initial base salary of
$275,000, which may be adjusted upward by the Board of Directors. The agreement
also provides, among other things, that Mr. Cunningham is eligible to
participate in discretionary bonuses authorized and declared by the Board of
Directors. Mr. Cunningham's employment could be terminable (i) upon his death
or (ii) by the Company in the event he became permanently disabled, in which
case Mr. Cunningham would be entitled to certain salary continuation rights.
The agreement expires in 1999. On March 10, 1997, Mr. Jalbert assumed the role
of President and Chief Executive Officer, formerly held by Mr. Cunningham. As a
result, Mr. Cunningham's salary was adjusted to $170,000 annually to reflect
compensation for his continuing work as Chairman of the Board of Directors.
Effective March 10, 1997, the Company entered into an Executive Employment
Agreement with Mr. Jalbert which agreement expires in 1999. Under the terms of
the Executive Employment Agreement, Mr. Jalbert became the Company's President
and Chief Executive Officer. The employment agreement had a term of two years
with a base annual salary of $250,000, which may be adjusted upward by the
Board of Directors. In addition, the agreement also provided for the grant to
Mr. Jalbert of options to purchase 300,000 shares of the Company's stock at a
fixed price of $5.00 per share which are exercisable over the next three years
and which expire over the next five years. The agreement also provides, among
other things, that Mr. Jalbert is eligible to participate in additional stock
options and discretionary bonuses authorized and declared by the Board of
Directors. Mr. Jalbert's employment could be terminable (i) upon his death or
(ii) by the Company in the event he became permanently disabled, in which case
Mr. Jalbert would be entitled to certain salary continuation rights.
Mr. Jalbert's employment agreement provides that in the event of a change
of control of the Company (as defined therein) and in the event of a material
change in operations of the Company or Mr. Jalbert's duties or responsibilities
and Mr. Jalbert resigns from the Company within one hundred eighty
A-8
<PAGE>
(180) calendar days after such change in control, Mr. Jalbert shall be entitled
to receive certain payments as discussed below. By letter dated October 24,
1998, the Company informed Mr. Jalbert that it had chosen not to renew his
employment agreement with the Company beyond its initial term, by which letter
the Company, among other things, awarded and confirmed the award of bonuses
totaling $200,000.00, Such $200,000.00 bonuses are to be paid to Mr. Jalbert in
the form of forgiveness by the Company of like amounts of Mr. Jalbert's
indebtedness to the Company (see "Certain Relationships, Transactions and
Arrangements"). By letter dated December 2, 1998, the Company confirmed (i) the
terms of such $200,000.00 bonus, (ii) Mr. Jalbert's right to receive a $262,500
lump sum "change of control" payment as described and upon satisfaction of
those conditions set forth in paragraphs 8(c) and 14 of his employment
agreement and (iii) that pursuant to paragraph 1 of his employment agreement
and as a consequence of his termination of employment, Mr. Jalbert was entitled
to receive from the Company his base salary (to be paid monthly at an annual
rate of $262,500) and benefits through November 9, 1999.
By Letter Agreement dated June 20, 1997, the Company employed Massoud
Safavi as its Vice President/Chief Financial Officer. Such letter agreement
provided for an annualized salary of $135,000, payable semi-monthly
(subsequently increased) and certain benefits generally available to the
Company's executive officers. In addition, such agreement provides that that in
the event of a change of control of the Company (defined as a replacement of
more than half ( 1/2) of the Board of Directors within a one hundred and twenty
(120) calendar day period) and in the event of a material change in operations
of the Company or Mr. Safavi's duties or responsibilities and he resigns from
the Company within one hundred eighty (180) calendar days after such change in
control, Mr. Safavi shall receive a severance benefit equal to twelve months of
base salary.
NONCOMPETITION AGREEMENT
On June 21, 1991, Mr. Cunningham entered into a Noncompetition Agreement
with the Company pursuant to which he agreed that, during the term of the
agreement, he would not, among other things, participate in any manner
described in the agreement in any business which competes with the Company.
This Noncompetition Agreement was extended on June 21, 1995 for an additional
term of four years. The Noncompetition Agreement also generally prohibits Mr.
Cunningham from soliciting business from certain customers and suppliers of the
Company and from disclosing certain information about the Company. The
Noncompetition Agreement provides for the payment to Mr. Cunningham of $200,000
per year commencing June 21, 1995 and continuing for four years thereafter,
unless Mr. Cunningham fails to comply with certain of the covenants set forth
in the agreement. Mr. Cunningham is entitled to continue to receive the
payments under the Noncompetition Agreement notwithstanding termination of his
employment for any reason.
BOARD COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation and Governance Committee of the Board of Directors. The members of
the Committee are Messrs. Fazakerley, Coward and Thompson, none of whom is a
past or present employee of the Company. There are four primary elements to the
executive compensation program: salary, annual bonuses, long-term incentive
compensation, and fringe benefits.
This program is designed to provide a direct relationship between
executive compensation and corporate performance. The intent is to enhance
stockholder value by means of an executive program that attracts, retains, and
rewards executive officers who contribute to the Company's success. The primary
quantitative measures of corporate performance are revenues, margins, and
earnings per share. The Committee may consider significant qualitative factors
such as the achievement of corporate goals and the general business
environment.
SALARY
The Compensation Committee establishes the salary for the top five most
highly compensated executives, with the exception of Mr. Jalbert, for which a
salary floor is established as part of his Executive Employment Agreement. The
Chief Executive Officer sets salary levels for all other executives based on
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<PAGE>
the guidelines set by the Compensation Committee. In all cases, the levels set
will be based on the responsibilities and duties of the position, comparative
industry salary structure for similar positions, and individual performance.
Compensation for specific functional roles such as sales, business development,
operations, and finance is based on the Company's overall performance as well
as the executive's direct contribution to the corporation. Examples of the
factors to be evaluated include divisional sales and contribution goals,
development or acquisition of new business or product lines, significant cost
reductions resulting in improved profitability, or other similar actions that
enhance stockholder value.
PERFORMANCE BONUSES
The Compensation Committee sets the bonuses for the top five most highly
compensated executives. The Chief Executive Officer sets bonus levels for all
other executives consistent with individual performance each year. The
Company's bonus system is designed to be flexible to meet changes in the
Company's needs and the corporate environment. The payment of bonuses is used
to motivate employees to produce favorable results.
The same business factors that are used to establish salary are also used
for setting bonuses, but different weight may be applied to various factors in
setting bonuses. The Compensation Committee's responsibility is to review
annually the measures by which corporate bonuses will be granted.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentives for executives are provided by grants under the
Microdyne Key Employee Stock Option Plan. Stock options and stock ownership
serve to align the financial interests of management with those of the
stockholders. Stock options provide executives with an incentive to increase
the long-term profitability of the Company and the value of its stock. Such
options generally will become exercisable over a period of years from the date
of grant. The number of options to be granted to any employee is determined by
the Compensation Committee based on recommendations from the Chief Executive
Officer.
FRINGE BENEFITS AND PERQUISITES
To provide competitive compensation and to enhance executive performance,
the Company provides fringe benefits and perquisites to executives. The fringe
benefits are evaluated as part of an executive's overall compensation package,
and include those items deemed appropriate for the Company's size and those
benefits that are common in the community. In addition to the normal fringe
benefits, the Compensation Committee has specifically authorized the following
fringe benefits:
Loans to executives may be made from time to time. In general, loans are
limited to short-term bridge loans or to amounts consistent with appropriate
executive compensation levels. The loan must provide for reasonable interest
and repayment terms. Loans may be authorized by the Chief Executive Officer up
to 125% of the executive's salary. Larger loans must be approved by the
Compensation Committee.
Life insurance for executives may be provided on a group or individual
basis. Life insurance programs may include key man, group insurance, individual
life insurance for estate planning, and split-dollar life insurance. Any life
insurance program that involves a substantial expenditure of corporate funds
must be approved by the Compensation Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION
Compensation decisions for all executives, including Mr. Jalbert, are
generally based on the criteria described in the above sections. The Committee
also considers pertinent industry data on the level of compensation paid to
executive officers in other companies, including those of comparable size and
which are direct competitors, and of companies that are larger in size but
whose markets are the Company's targets for growth.
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<PAGE>
The Committee set Mr. Jalbert's salary at $262,500 in fiscal 1998. Mr.
Jalbert participates in the Company's stock option program for executives and
was granted 300,000 stock options that become exercisable over three years as
part of his employment agreement.
The Internal Revenue Code currently limits the deductibility for federal
income tax purposes of compensation paid to the Company's chief executive
officer and to each of the other four most highly compensated executive
officers. The Company may deduct certain types of compensation paid to any of
these individuals only to the extent that during any fiscal year such
compensation does not exceed one million dollars. The Compensation Committee
believes that such limitation will not apply to the compensation to be paid by
the Company to its executive officers for the foreseeable future and no
modifications have been made in the Company's compensation programs due to
these limits.
H. Brian Thompson, Chairman
Curtis M. Coward
Gregory W. Fazakerley
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Curtis M. Coward, a Director of the Company and a member of the
Compensation Committee, is a partner of the law firm McGuire, Woods, Battle &
Boothe, LLP, outside corporate counsel to the Company.
PERFORMANCE GRAPH
The graph below compares the performance over a five-year period of the
Company's common stock to that of the Russell 2000, a broad market index, and
the Russell Technology Group. It assumes that $100 is invested in the Company's
common stock, the Russell 2000, and the Russell Technology Group on September
30, 1993, and that all dividends were reinvested. In aggregate, the Company's
stock has decreased 42% since September 30, 1993. The Russell 2000 index,
compiled by the Frank Russell Company of Tacoma, Washington, shows the total
return (share price plus reinvested dividends) of 2,000 publicly-traded small-
and mid-capitalization companies. The Russell 2000 has increased 55% over the
five-year period ended September 30, 1998. The Russell Technology Group, also
compiled by the Frank Russell Company, is a subset of approximately 285
companies within the Russell 2000, and is also a total return index. From
September 30, 1993 to September 30, 1998, the Russell Technology Group
increased 68%. The Company is a component of both indices.
[GRAPHIC OMITTED]
NOTES:
o Microdyne has not paid dividends during the past five years. Microdyne
Corporation data represent the closing prices of the Company's common stock
on September 30, 1993 ($4.625, which has been
A-11
<PAGE>
established as 100 on the index) and for September 30, 1994, October 1,
1995, September 29, 1996, September 28, 1997, and September 30, 1998. Those
prices and the respective index points are: 1994: $4.75 (103); 1995: $25.375
(549); 1996: $5.875 (127); 1997: $6.25 (135); 1998: $2.6875 (58). Microdyne
data provided courtesy of NASDAQ.
o The Russell 2000 index points are as follows: September 30, 1993: 100;
September 30, 1994: 103; October 1, 1995: 127; September 29, 1996: 143;
September 28, 1997: 191; September 30, 1998: 155. Russell 2000 data
provided courtesy of Frank Russell Co.
o The Russell Technology Group index points are as follows: September 30,
1993: 100; September 30, 1994: 108; October 1, 1995: 176; September 29,
1996: 187; September 28, 1997: 236; September 30, 1998: 168. Russell
Technology Group data provided courtesy of Frank Russell Co.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the Commission and each exchange on
which the Company's securities are registered. Officers, directors and greater
than ten percent stockholders are required by Commission regulations to furnish
the Company with copies of all ownership forms they file. Based on a review of
such copies and other records available to the Company, to the Company's
knowledge, all section 16(a) filing requirements applicable to the Company's
directors, officers and greater than ten percent beneficial stockholders were
complied with.
A-12
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT, PURCHASER AND HOLDINGS
As of the date of this Information Statement, Purchaser has not determined
who will be Designees. However, such Designees will be selected from the
following list of directors and executive officers of Parent and Holdings upon
the purchase by Purchaser pursuant to the Offer of Shares representing not less
than a majority of the outstanding shares of Common Stock on a fully diluted
basis. The information contained herein concerning Parent, Holdings and
Purchaser and their respective directors and executive officers has been
furnished by Parent, Holdings and Purchaser. The Company assumes no
responsibility for the accuracy or completeness of such information.
The name, present principal occupation or employment and five-year
employment history of each director and executive officer of Parent and
Holdings and certain other information is set forth below. The business address
of each director and executive officer is 600 Third Avenue, New York, New York
10016. Unless otherwise indicated, each occupation described below refers to
employment with Parent and Holdings. Except as noted, none of the persons
listed below owns any Shares or has engaged in any transactions with respect to
Shares during the past 60 days. During the last five years, neither Parent nor
Holdings, nor any director or executive officer thereof indicated has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) nor was such person a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction, and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws. Unless otherwise
indicated, all directors and executive officers listed below are citizens of
the United States.
Directors and Executive Officers of the Purchaser. The name and position
with the Purchaser of each director and executive officer of the Purchaser are
set forth below. The other required information with respect to each such
person is set forth under "Directors and Executive Officers of the Parent"
below. All directors and executive officers listed below are citizens of the
United States.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Christopher C. Cambria .......... President, Secretary and Director
Lawrence W. O'Brien ............. Vice President and Treasurer
</TABLE>
Directors and Executive Officers of the Parent and Holdings. The name,
business address, present principal occupation or employment and material
occupations, positions, offices or employments during the last five years of
each director and executive officer of Parent and Holdings and certain other
information are set forth below. The business address of each such director and
executive officer is: c/o L-3 Communications Corporation, 600 Third Avenue, New
York, New York 10016. Unless otherwise indicated, each occupation set forth
opposite an individual's name refers to employment with Parent and Holdings.
All directors and executive officers listed below are citizens of the United
States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---------------- ---------------------------------------------
<S> <C>
DIRECTORS
David J. Brand ......... Director (since 4/97); Managing Director of Lehman Brothers
(since 1996); Senior Vice President of Lehman Brothers
(1994-1996); Vice President of Lehman Brothers (1991-1994).
</TABLE>
A-13
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---------------- ---------------------------------------------
<S> <C>
Thomas A. Corcoran ............ Director (since 7/97); President and Chief Operating Officer of
the Electronics Systems Sector of Lockheed Martin (since 3/95);
President of Electronics Group of Martin Marietta Corporation
( 1993-1995).
Alberto M. Finali ............. Director (since 4/97); Managing Director of Lehman Brothers
(since 1997); Senior Vice President of Lehman Brothers
(1993-1997); Vice President of Lehman Brothers (1989-1993).
Eliot M. Fried ................ Director (since 4/97); Managing Director of Lehman Brothers
(since 1986).
Frank C. Lanza ................ Director; Chairman and Chief Executive Officer (since 4/97);
Executive Vice President of Lockheed Martin and President and
Chief Operating Officer of Lockheed Martin's C(3)I and
Systems Integration Sector (4/96-4/97); President and Chief
Operating Officer of Loral (since 1981).
Robert V. LaPenta ............. Director; President and Chief Financial Officer (since 4/97); Vice
President of Lockheed Martin and Vice President and Chief
Financial Officer of Lockheed Martin's C(3)I and Systems
Integration Sector (4/96-4/97); Senior Vice President and
Controller of Loral (1981-4/96).
Frank H. Menaker, Jr. ......... Director (since 4/97); Senior Vice President and General
Counsel of Lockheed Martin (since 7/96); Vice President and
General Counsel of Lockheed Martin (3/95-7/96); Vice President
of Martin Marietta Corporation (1982-1995); General Counsel of
Martin Marietta (1981-1995).
Robert B. Millard ............. Director (since 4/97); Managing Director of Lehman Brothers
(since 1983).
John E. Montague .............. Director (since 4/97); Vice President and Chief Financial Officer
of Lockheed Martin Global Telecommunications, Inc. (since
8/98); Vice President of Financial Strategies at Lockheed Martin
(since 3/95); Vice President of Corporate Development and
Investor Relations at Martin Marietta Corporation (1991-1995).
John M. Shalikashvili ......... Director (since 8/98); Senior Officer of the United States
Military and Principal Military Advisor to the President of the
United States, the Secretary of Defense and National Security
Council (1993-1997).
Alan H. Washkowitz ............ Director (since 4/97); Managing Director of Lehman Brothers
(since 1978).
OFFICERS
Jimmie V. Adams ............... Vice President -- Washington D.C. Operations (since 4/97); Vice
President of Lockheed Martin's Washington Operations for
C(3)I and Systems Integration Sector (4/96-4/97); Vice President
of Lorals Washington Operations for C(3)I and Systems
Integration Sector (since 1993).
</TABLE>
A-14
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---------------- ---------------------------------------------
<S> <C>
Christopher C. Cambria ......... Vice President -- General Counsel and Secretary (since 6/97);
Associate at Fried, Frank, Harris, Shriver, and Jacobson
(1994-1997); associate at Cravath, Swaine and Moore
( 1981-1993).
Frank C. Lanza ................. Chairman and Chief Executive Officer.
Robert V. LaPenta .............. President and Chief Financial Officer.
Robert F. Mehmel ............... Vice President -- Planning and Assistant Secretary (since 4/97);
Director of Financial Planning and Capital Review for Lockheed
Martin's C(3)I and Systems Integration Sector (4/96-4/97); held
several accounting and financial analysis positions at Loral
Electronic Systems (1984-1996).
Lawrence W. O'Brien ............ Vice President -- Treasurer (since 6/97); Vice President and
Treasurer of Pechiney Corporation (since 1981).
Joseph S. Paresi ............... Vice President -- Product Development (since 4/97); Corporate
Director of Technology for Lockheed Martin's C(3)I and
Systems Integration Sector (since 4/96); Corporate Director of
Technology for Loral (since 1993).
Robert Riscassi ................ Vice President -- Washington D.C. Operations (since 4/97); Vice
President of Land Systems for Lockheed Martin C(3)I and
Systems Integration Sector (4/96-4/97); Vice President of Land
Systems for Lorals C(3)I and Systems Integration Sector (since
1993).
Lawrence H. Schwartz ........... Vice President -- Business Development (since 5/97); Vice
President of Technology for Lockheed Martin's C(3)I and
Systems Integration Sector (4/96-5/97); Vice President of
Technology at Loral (since 1987).
Michael T. Strianese ........... Vice President -- Finance and Controller (since 4/97); Vice
President and Controller of Lockheed Martin's C(3)I and
Systems Integration Sector (4/96-4/97); Director of Special
Projects at Loral (1991-4/96).
</TABLE>
Ownership of Shares by Directors and Executive Officers.
None.
A-15
<PAGE>
ANNEX B
THE ROBINSON-HUMPHREY COMPANY, LLC
CORPORATE FINANCE INVESTMENT BANKERS
DEPARTMENT SINCE 1894
December 3, 1998
Special Committee of the Board of Directors
Board of Directors
Microdyne Corporation
3601 Eisenhower Avenue
Alexandria, VA 22304
Gentlemen:
We understand that Microdyne Corporation (the "Company"), L-3
Communications Corporation ("Parent") and L-M Acquisition Corporation
("Purchaser"), a wholly-owned subsidiary of Parent, have entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of December 3,
1998. Pursuant to the Merger Agreement, (i) Purchaser shall commence an offer
(the "Offer") to purchase for cash all of the issued and outstanding shares of
common stock, par value $0.10 per share, of the Company (the "Common Stock") at
a price of $5.00 per share, net to the seller in cash (the "Consideration") and
(ii) subsequent to the consummation of the Offer, Purchaser will be merged with
and into the Company (the "Merger") and, together with the Offer, the
"Transaction") pursuant to which each outstanding share of Common Stock not
acquired in the Offer will be converted into the right to receive the
Consideration. The terms and conditions of the Transaction are more fully set
forth in the Merger Agreement.
We have been requested by the Special Committee of the Board of Directors
of the Company to render our Opinion with respect to the fairness to the
holders of the Common Stock, from a financial point of view, of the
Consideration to be received by such holders in the Transaction.
In arriving at the Opinion set forth below, we have, among other things:
1. Reviewed the Merger Agreement;
2. Reviewed certain publicly available information concerning the Company
which we believe to be relevant to our analysis;
3. Reviewed certain internal financial statements and other financial and
operating data concerning the Company furnished to us by the Company;
4. Conducted discussions with members of Company management concerning its
business, operations, present condition and prospects;
5. Reviewed the trading history of the Common Stock for a period from
November 20, 1997 to the date of this letter;
ATLANTA FINANCIAL CENTER
3333 PEACHTREE ROAD, NE o ATLANTA, GEORGIA 30326
(404) 266-6000
B-1
<PAGE>
Special Committee of the Board of Directors
Board of Directors
Microdyne Corporation
December 3, 1998
Page 2
6. Reviewed the historical market prices and trading activity for the
Common Stock and compared them with those of certain publicly traded
companies which we deemed to be reasonably similar to the Company;
7. Compared the results of operations and present financial condition of
the Company with those of certain publicly traded companies which we
deemed to be reasonably similar to the Company;
8. Reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions which we deemed
relevant;
9. Performed certain financial analyses with respect to the Company's
projected future operating performance; and
10. Reviewed such other financial statistics and analyses and performed
such other investigations and took into account such other matters as we
deemed appropriate.
We have relied upon the accuracy and completeness of the financial and
other information provided to us by the Company in arriving at our Opinion
without independent verification. With respect to the financial forecasts for
the years 1999 through 2001, we have assumed that the assumptions provided by
management have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management. In arriving at
our Opinion, we conducted only a limited physical inspection of the properties
and facilities of the Company. We have not made or obtained any evaluations or
appraisals of the assets or liabilities of the Company. Our opinion is
necessarily based upon market, economic and other conditions as they exist on,
and can be evaluated as of, the date of this letter.
We have acted as financial advisor to the Special Committee of the Board
of Directors of the Company in connection with the Transaction and will receive
a fee for our services which is in part contingent upon the consummation of the
Transaction. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of the rendering of this Opinion. We have also
performed various investment banking services for the Company in the past, and
have received customary fees for such services. In the ordinary course of our
business, we may actively trade in the Common Stock for our own account and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that the Consideration to be received by the holders of the Common
Stock in the Transaction is fair from a financial point of view to such
holders.
Very truly yours,
THE ROBINSON-HUMPHREY COMPANY, LLC
B-2
<PAGE>
EXHIBITS
1 Agreement and Plan of Merger, dated as of December 3, 1998, by and among
Microdyne Corporation, L-M Acquisition Corporation, a Maryland corporation
and L-3 Communications Corporation, a Delaware corporation.
2 Tender Agreement by and among L-3 Communications Corporation, Philip T.
Cunningham, the Successor Trust to Philip T. Cunningham Grantee Retained
Annuity Trust #1, Philip T. Cunningham Grantor Retained Annuity Trust #2,
Maura Spaeth, Katherine Cunningham and Neal Sanders, as agent for Roman
Herzig and Gallerie Nissl dated December 3, 1998.
3 Letter to Stockholders dated December 9, 1998.
4 Opinion of Robinson-Humphrey dated December 3, 1998.
5 Press Release issued by Microdyne Corporation on December 3, 1998.
6 Press Release issued by L-3 Communications Corporation on December 3, 1998.
<PAGE>
----------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
L-3 COMMUNICATIONS CORPORATION,
L-M ACQUISITION CORPORATION
and
MICRODYNE CORPORATION
Dated as of December 3, 1998
----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE OFFER....................................................................2
SECTION 1.1 The Offer..............................................2
SECTION 1.2 Company Action.........................................3
ARTICLE II
THE MERGER...................................................................5
SECTION 2.1 The Merger.............................................5
SECTION 2.2 Effective Time.........................................5
SECTION 2.3 Effects of the Merger..................................6
SECTION 2.4 Articles of Amendment and Restatement; By-Laws.........6
SECTION 2.5 Directors and Officers.................................6
SECTION 2.6 Conversion of Securities...............................6
SECTION 2.7 Treatment of Employee Options..........................7
SECTION 2.8 Appraisal Rights.......................................7
SECTION 2.9 Surrender of Shares; Stock Transfer Books..............8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................9
SECTION 3.1 Organization and Qualification; Subsidiaries..........10
SECTION 3.2 Articles and By-Laws..................................10
SECTION 3.3 Capitalization........................................10
SECTION 3.4 State Takeover Statutes; Authority Relative to
This Agreement........................................11
SECTION 3.5 No Conflict; Required Filings and Consents............12
SECTION 3.6 Compliance............................................13
SECTION 3.7 SEC Filings; Financial Statements.....................13
SECTION 3.8 Absence of Certain Changes or Events..................14
SECTION 3.9 Absence of Litigation.................................15
SECTION 3.10 Employee Benefit Plans...............................15
SECTION 3.11 Tax Matters..........................................17
SECTION 3.12 Offer Documents; Proxy Statement.....................18
SECTION 3.13 Environmental Matters................................19
SECTION 3.14 Brokers..............................................19
SECTION 3.15 Year 2000............................................19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER........................................................20
SECTION 4.1 Corporate Organization................................20
SECTION 4.2 Authority Relative to This Agreement..................20
SECTION 4.3 No Conflict; Required Filings and Consents............20
-i-
<PAGE>
Page
SECTION 4.4 Offer Documents; Proxy Statement......................21
SECTION 4.5 Brokers...............................................22
SECTION 4.6 Financing.............................................22
SECTION 4.7 Operations of Purchaser...............................22
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER......................................23
SECTION 5.1 Conduct of Business of the Company Pending the
Merger................................................23
ARTICLE VI
ADDITIONAL AGREEMENTS.......................................................26
SECTION 6.1 Stockholders Meeting..................................26
SECTION 6.2 Proxy Statement.......................................27
SECTION 6.3 Company Board Representation; Section 14(f) ..........27
SECTION 6.4 Access to Information; Confidentiality................28
SECTION 6.5 No Solicitation of Transactions.......................29
SECTION 6.6 Employee Benefits Matters.............................30
SECTION 6.7 Directors' and Officers' Indemnification and
Insurance.............................................31
SECTION 6.8 Notification of Certain Matters.......................33
SECTION 6.9 Further Action; Reasonable Good Faith Efforts.........33
SECTION 6.10 Public Announcements.................................34
SECTION 6.11 Disposition of Litigation............................34
SECTION 6.12 State Takeover Statutes..............................34
SECTION 6.13 Stop Transfer Order..................................34
ARTICLE VII
CONDITIONS OF MERGER........................................................35
SECTION 7.1 Conditions to Obligation of Each Party to
Effect the Merger.....................................35
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER...........................................35
SECTION 8.1 Termination...........................................35
SECTION 8.2 Effect of Termination.................................37
SECTION 8.3 Fees..................................................37
SECTION 8.4 Amendment.............................................38
SECTION 8.5 Waiver................................................38
ARTICLE IX
GENERAL PROVISIONS..........................................................38
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements............................................38
SECTION 9.2 Notices...............................................39
-ii-
<PAGE>
SECTION 9.3 Certain Definitions...................................39
SECTION 9.4 Severability..........................................41
SECTION 9.5 Entire Agreement; Assignment..........................41
SECTION 9.6 Parties in Interest...................................41
SECTION 9.7 Governing Law.........................................42
SECTION 9.8 Headings..............................................42
SECTION 9.9 Counterparts..........................................42
Annex A - Offer Conditions
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 3, 1998
(the "Agreement"), among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation
("Parent"), L-M ACQUISITION CORPORATION, a Maryland corporation and a wholly
owned subsidiary of Parent ("Purchaser"), and MICRODYNE CORPORATION, a Maryland
corporation (the "Company").
WHEREAS, as promptly as practicable (but in no event later
than five business days after the public announcement of the execution hereof),
the Purchaser shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) an offer (the
"Offer") to purchase for cash all of the issued and outstanding shares of
Common Stock, par value $0.10 per share (referred to herein as either the
"Shares" or "Company Common Stock"), of the Company at a price of $5.00 per
Share, net to the seller in cash, subject to there being validly tendered and
not withdrawn prior to the expiration of the Offer, that number of Shares of
the Company beneficially owned by Parent or the Purchaser which represent at
least a majority of the Shares outstanding on a fully diluted basis and to the
other conditions set forth in Annex A hereto.
WHEREAS, as a condition to their willingness to enter into
this Agreement and consummate the transactions contemplated hereby, Parent and
Purchaser have required that Philip T. Cunningham and the Successor Trust to
Philip T. Cunningham Grantor Retained Annuity Trust #1, Philip T.
Cunningham-Grantor Retained Annuity Trust #2, Maura Spaeth, Katherine
Cunningham and Neal Sanders as agent for Roman Herzig and Gallerie Nissl
(collectively, the "Stockholders") agree to tender Shares (as hereinafter
defined) owned by them in accordance with the Tender Agreement, dated as of the
date hereof (the "Tender Agreement"), among Parent and the Stockholders; and in
order to induce Parent and Purchaser to enter into this Agreement, the
Stockholders have agreed to execute and deliver the Tender Agreement.
WHEREAS, the Board of Directors of the Company has (i)
determined that the consideration to be paid for each Share in the Offer and in
the Merger (as defined below) is fair to and in the best interests of the
stockholders of the Company, (ii) exempted the transactions contemplated by
this Agreement and the transactions contemplated pursuant to this Agreement and
the Tender Agreement and the transactions contemplated thereby and any other
transactions entered into after the date hereof between the Company and Parent
or any of its subsidiaries or between Parent or any of its subsidiaries and the
Stockholders with the approval of the Board of Directors of the Company (a
"Consensual Transaction") so as to render inapplicable Section 3-602 of the
Maryland General Corporation Law (the "MGCL") to the transactions contemplated
hereby and thereby), (iii) amended the By-laws of the Company so as to render
inapplicable Section 3-702(a)(i) of
<PAGE>
the MGCL to the transactions contemplated by this Agreement and the Tender
Agreement, including, without limitation, the Offer, and to any Consensual
Transaction, and (iv) resolved to recommend acceptance of the Offer and the
Merger and approval of this Agreement by such stockholders; and
WHEREAS, the Board of Directors of the Company and Purchaser
have each approved the merger (the "Merger") of Purchaser with and into the
Company in accordance with the MGCL upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that this Agreement shall
not have been terminated in accordance with Section 8.1 and no event shall have
occurred and no circumstance shall exist which would result in a failure to
satisfy any of the conditions or events set forth in Annex A hereto (the "Offer
Conditions"), Purchaser shall commence the Offer as soon as practicable after
the date hereof, and in any event within five business days from the date
hereof. The obligation of Purchaser to accept for payment Shares tendered shall
be subject to the satisfaction of the Offer Conditions. Purchaser expressly
reserves the right, in its sole discretion, to waive any such condition and
make any other changes in the terms and conditions of the Offer, provided that,
unless previously approved by the Company in writing, (i) Purchaser may not
amend or waive the Minimum Condition, (ii) no change may be made which
decreases the price per Share payable in the Offer, (iii) there shall be no
change to the form of consideration payable in the Offer (other than by adding
consideration), (iv) there shall be no reduction in the maximum number of
Shares to be purchased in the Offer, or (v) there shall be no imposition of any
condition to the Offer in addition to those set forth herein which is
materially adverse to holders of the Shares. Purchaser covenants and agrees
that, subject to the terms and conditions of this Agreement, including the
Offer Conditions, it will accept for payment and pay for Shares validly
tendered and not withdrawn pursuant to the Offer as promptly as reasonably
practicable; provided, that (x) at each scheduled expiration date of the Offer
prior to the date 90 days from the date hereof, if any of the Offer Conditions
shall not be satisfied or waived, Purchaser shall extend the Offer until the
date on which such conditions are then reasonably expected by Purchaser to be
satisfied, (y) Purchaser shall extend the Offer for any period required by any
rule, regulation, interpretation
<PAGE>
or position of the SEC or the staff thereof applicable to the Offer and (z)
Purchaser may extend the Offer up to the tenth business day beyond the latest
expiration date that would otherwise be permitted under clause (x) or (y) of
this sentence. The initial expiration date of the Offer shall be 20 business
days from the commencement of the Offer in accordance with applicable law.
Subject to the foregoing, it is agreed that the Offer Conditions are for the
benefit of Purchaser and may be asserted by Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by Purchaser or Parent not inconsistent with the terms hereof) or,
except with respect to the Minimum Condition, may be waived by Purchaser, in
whole or in part at any time and from time to time, in its sole discretion.
(b) As soon as reasonably practicable after the date hereof,
and in any event within five business days from the date hereof, Purchaser and
Parent shall file their Tender Offer Statement on Schedule 14D-1 (the "Schedule
14D-1") with respect to the Offer with the Securities and Exchange Commission
(the "SEC"). The Schedule 14D-1 will contain an Offer to Purchase and forms of
the related letter of transmittal (which Schedule 14D-1, Offer to Purchase and
other documents, together with any further supplements or amendments thereto,
are referred to herein collectively as the "Offer Documents"). Parent,
Purchaser and the Company each agrees promptly to correct any information
provided by it for use in the Offer Documents that shall have become false or
misleading in any material respect, and Parent and Purchaser further agree to
take all steps necessary to cause the Schedule 14D-1 as so corrected to be
filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of Shares, in each case as and to the extent required
by applicable federal securities laws. The Company and its counsel shall be
given a reasonable opportunity to review and comment on the Offer Documents
prior to their filing with the SEC. Parent and Purchaser agree to provide the
Company with any comments that may be received from the SEC or its staff with
respect to the Offer Documents promptly after receipt thereof.
(c) Notwithstanding any other provision contained herein, the
Offer shall terminate upon termination of this Agreement pursuant to Section
8.1.
SECTION 1.2 Company Action. (a) The Company hereby approves
of and consents to the Offer and represents and warrants that: (i) its Board of
Directors, acting upon the unanimous recommendation of the independent
directors (the "Special Committee") of the Board of Directors, at a meeting
duly called and held on December 2, 1998, has unanimously (A) determined that
this Agreement and the transactions contemplated hereby, including each of the
Offer and the Merger, are fair to and in the best interests of the holders of
Shares, (B) exempted the Offer, the Merger, this Agreement and the Tender
Agreement and
<PAGE>
the transactions contemplated hereby and thereby so as to render Section 3-602
of the MGCL inapplicable thereto and to any Consensual Transaction, (C) amended
the By-laws of the Company so as to render inapplicable Section 3-702(a)(i) of
the MGCL to the transactions contemplated by this Agreement and the Tender
Agreement, including, without limitation, the Offer, and to any Consensual
Transaction,(D)declared the Merger to be advisable and directed that the Merger
be submitted for consideration at a special meeting of the stockholders of the
Company and (E) resolved to recommend that the stockholders of the Company
accept the Offer, tender their Shares to Purchaser thereunder and approve this
Agreement and the transactions contemplated hereby; and (ii) The
Robinson-Humphrey Company, LLC (the "Financial Adviser") has delivered to the
Board of Directors of the Company and the Special Committee its written opinion
(or oral opinion to be confirmed in writing) that the consideration to be
received by holders of Shares pursuant to each of the Offer and the Merger is
fair to such holders from a financial point of view. The Company has been
authorized by the Financial Adviser to permit, subject to prior review and
consent by such Financial Adviser (such consent not to be unreasonably
withheld), the inclusion of such fairness opinion (or a reference thereto) in
the Offer Documents and in the Schedule 14D-9 referred to below and the Proxy
Statement referred to in Section 3.12. The Company hereby consents to the
inclusion in the Offer Documents of the recommendations of the Company's Board
of Directors described in this Section 1.2(a).
(b) The Company shall file with the SEC, contemporaneously
with Schedule 14D-1 pursuant to Section 1.1, a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9"), containing the recommendations of the
Company's Board of Directors described in Section 1.2(a)(i) and shall promptly
mail the Schedule 14D-9 to the stockholders of the Company; provided, that in
the event of a proposed Third Party Acquisition (as defined in Section 8.3),
the Company shall not be required to make such filing with such recommendations
or make such mailing if a majority of the Special Committee Members (as defined
below) conclude in good faith based on advice of independent outside legal
counsel to the Special Committee that taking any such action would constitute a
breach of the fiduciary duties of the Board of Directors of the Company under
applicable law. "Special Committee Members" shall mean directors of the Company
who are (a) members of the Special Committee (as constituted on the date
hereof) or (b) nominees of such Special Committee who are not (1) employees of
the Company or any of its subsidiaries, (2) Philip T. Cunningham or (3)
affiliates and associates of Philip T. Cunningham. The Schedule 14D-9 and all
amendments thereto will comply in all material respects with the Exchange Act
and the rules and regulations promulgated thereunder. The Company, Parent and
Purchaser each agrees promptly to correct any information provided by it for
use in the Schedule 14D-9 that
<PAGE>
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to holders of Shares, in
each case as and to the extent required by applicable federal securities laws.
(c) In connection with the Offer, if requested by Purchaser,
the Company shall promptly furnish Purchaser with mailing labels, security
position listings, any non-objecting beneficial owner lists and any available
listings or computer files containing the names and addresses of the record
holders of Shares, each as of a recent date, and shall promptly furnish
Purchaser with such additional information (including but not limited to
updated lists of stockholders, mailing labels, security position listings and
non-objecting beneficial owner lists) and such other assistance as Parent,
Purchaser or their agents may reasonably require in communicating the Offer to
the record and beneficial holders of Shares.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with the MGCL, at the Effective
Time (as defined in Section 2.2), Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). At Parent's election
(provided, that such election shall not adversely affect the ability of the
Company to consummate the transactions contemplated hereby, and provided,
further, that the Company shall not be deemed to have breached any of its
representations or warranties herein if and to the extent such breach results
from such election), the Merger may alternatively be structured so that (i) the
Company and/or its subsidiaries are merged with and into Parent, Purchaser or
any other direct or indirect subsidiary of Parent or (ii) any direct or
indirect subsidiary of Parent other than Purchaser is merged with and into the
Company. In the event of such an election, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect such election.
SECTION 2.2 Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing articles of merger
(the "Articles of Merger") with the State Department of Assessments and
Taxation of the State of Maryland, in such form as required by and executed in
accordance with the relevant provisions of the MGCL (the date and time of the
acceptance of record of the Articles of Merger by
<PAGE>
the State Department of Assessments and Taxation of the State of Maryland (or
such later time as is specified in the Articles of Merger) being the "Effective
Time").
SECTION 2.3 Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the MGCL. Without limiting
the generality of the foregoing and subject thereto, at the Effective Time all
the property, rights, privileges, immunities, powers and franchises of the
Company and Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 2.4 Articles of Amendment and Restatement; By-Laws.
(a) At the Effective Time and without any further action on the part of the
Company and Purchaser, the Articles of Amendment and Restatement of the Company
(as amended, the "Articles") as in effect immediately prior to the Effective
Time shall be the charter of the Surviving Corporation until thereafter and
further amended as provided therein and under the MGCL.
(b) At the Effective Time and without any further action on
the part of the Company and Purchaser, the By-Laws of Purchaser shall be the
By-Laws of the Surviving Corporation and thereafter may be amended or repealed
in accordance with their terms or the Articles of the Surviving Corporation and
as provided by law.
SECTION 2.5 Directors and Officers. The directors of
Purchaser immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the Articles and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors
are duly elected or appointed (as the case may be) and qualified.
SECTION 2.6 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to
the Effective Time (other than any Shares to be cancelled pursuant to Section
2.6(b) and any Dissenting Shares (as defined in Section 2.8(b)) shall be
cancelled, extinguished and converted into the right to receive $5.00 in cash
or any higher price that may be paid pursuant to the Offer (the "Merger
Consideration") payable to the holder thereof, without interest, upon surrender
of the certificate formerly representing such
<PAGE>
Share in the manner provided in Section 2.9, less any required withholding
taxes.
(b) Each share of Company Common Stock owned by Parent or
Purchaser, in each case immediately prior to the Effective Time, shall be
cancelled and retired without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(c) Each share of common stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of identical
common stock of the Surviving Corporation.
SECTION 2.7 Treatment of Employee Options. Immediately prior
to the Effective Time, each outstanding employee stock option and any related
stock appreciation right (together, an "Employee Option"), whether or not then
exercisable, shall be cancelled by the Company (provided that with respect to
the 3,300 Shares (the "1988 Options") subject to stock options issued pursuant
to the Incentive Stock Option Plan of 1988, such 1988 Options, to the extent
permitted, shall be cancelled by the Company and otherwise the Company shall
use its reasonable good faith efforts to cancel the 1988 Options), and the
holder thereof shall be entitled to receive at the Effective Time or as soon as
practicable thereafter from the Surviving Corporation in consideration for such
cancellation an amount in cash equal to the product of (a) the number of Shares
previously subject to such Employee Option and (b) the excess, if any, of the
Merger Consideration over the exercise price per Share previously subject to
such Employee Option.
SECTION 2.8 Appraisal Rights. (a) So long as the Company
Common Stock is listed on the National Market System of NASDAQ on the record
date for the determination of stockholders entitled to vote on the Merger with
respect to mergers other than mergers pursuant to Section 3-106 of the MGCL or
a merger of a 90 percent owned subsidiary with or into its parent or the date
notice is given or waived under Section 3-106 of the MGCL in connection with a
merger of a 90 percent owned subsidiary with or into its parent as the case may
be (as applicable, the "Appraisal Date"), no stockholder of the Company shall
have any rights under Title 3, Subtitle 2 of the MGCL as a result of the
transactions contemplated by this Agreement or the Tender Agreement.
(b) If the Company Common Stock is not listed on the National
Market System of NASDAQ on the Appraisal Date, shares of Company Common Stock
that are issued and outstanding immediately prior to the Effective Time and
which are held by stockholders who have not voted in favor of or consented to
the Merger and shall have delivered a written demand for appraisal of such
shares of Company Common Stock in the time and manner provided in
<PAGE>
Section 3-203 of the MGCL and shall not have failed to perfect or shall not
have effectively withdrawn or lost their rights to appraisal and payment under
the MGCL (the "Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration, but shall be entitled to receive the
consideration as shall be determined pursuant to Title III, Subtitle 2 of the
MGCL; provided, however, that if such holder shall have failed to perfect or
shall have effectively withdrawn or lost his, her or its right to appraisal and
payment under the MGCL, such holder's shares of Company Common Stock shall
thereupon be deemed to have been converted, at the Effective Time, into the
right to receive the Merger Consideration set forth in Section 2.6(a) of this
Agreement, without any interest thereon.
(c) The Company shall give Parent (i) prompt notice of any
written objection to the transactions contemplated by this Agreement or any
demands for appraisal pursuant to Section 3-203 of the MGCL received by the
Company, withdrawals of such demands, and any other instruments served pursuant
to the MGCL and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
MGCL. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to any such demands for appraisal or offer to
settle or settle any such demands.
SECTION 2.9 Surrender of Shares; Stock Transfer Books. (a)
Prior to the Effective Time, Purchaser shall designate a bank or trust company
to act as agent for the holders of Shares in connection with the Merger (the
"Paying Agent") to receive the Merger Consideration to which holders of Shares
shall become entitled pursuant to Section 2.6(a). When and as needed, Parent or
Purchaser will make available to the Paying Agent sufficient funds to make all
payments pursuant to Section 2.9(b). Such funds shall be invested by the Paying
Agent as directed by Purchaser or, after the Effective Time, the Surviving
Corporation, provided that such investments shall be in obligations of or
guaranteed by the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank
repurchase agreements or banker's acceptances of commercial banks with capital
exceeding $500 million. Any net profit resulting from, or interest or income
produced by, such investments will be payable to the Surviving Corporation or
Parent, as Parent directs.
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each record holder, as of the Effective
Time, of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates"), a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss
<PAGE>
and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates for payment of the Merger Consideration therefor.
Upon surrender to the Paying Agent of a Certificate, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and such Certificate shall then be cancelled.
No interest shall be paid or accrued for the benefit of holders of the
Certificates on the Merger Consideration payable upon the surrender of the
Certificates. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that
the person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable.
(c) At any time following twelve months after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent
to deliver to it any funds (including any interest received with respect
thereto) which had been made available to the Paying 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 other similar laws) only as general creditors thereof with respect
to the Merger Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
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.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration
of transfers of shares of Company Common Stock on the records of the Company.
From and after the Effective Time, the holders of Certificates evidencing
ownership of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided for herein or by applicable law.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Purchaser that, except as specifically set forth on the corresponding Schedule
of the Disclosure Schedules delivered by the Company to the Parent and
Purchaser prior to the execution of this Agreement (the "Disclosure Schedules")
with respect to such representation and warranty:
SECTION 3.1 Organization and Qualification; Subsidiaries.
Each of the Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. Each of the Company and each of its subsidiaries
is duly qualified or licensed as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing which would not, individually or in
the aggregate, have a Material Adverse Effect (as defined below). When used in
connection with the Company or any of its subsidiaries, the term "Material
Adverse Effect" means any change or effect that would be materially adverse to
the business, operations, assets, financial condition or results of operations
of the Company and its subsidiaries taken as a whole.
SECTION 3.2 Articles and By-Laws. The Company has heretofore
furnished to Parent a complete and correct copy of the Articles and the By-Laws
of the Company and its subsidiaries as currently in effect. Such Articles and
By-Laws are in full force and effect and no other organizational documents are
applicable to or binding upon the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries is in violation of any provisions of
its Articles or By-Laws or other constitutive documents.
SECTION 3.3 Capitalization. The authorized capital stock of
the Company consists of 50,000,000 shares of Company Common Stock. As of
November 30, 1998, (i) 13,111,201 shares of Company Common Stock were issued
and outstanding, all of which were validly issued, fully paid and nonassessable
and were issued free of preemptive (or similar) rights, and (ii) an aggregate
of 1,571,302 shares of Company Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding Employee Options issued pursuant to the Company Plans (as defined
in Section 3.10). Since November 30, 1998, no options to purchase shares of
Company
<PAGE>
Common Stock have been granted and no shares of Company Common Stock have been
issued except for shares issued pursuant to the exercise of Employee Options
outstanding as of November 30, 1998. Except (i) as set forth above, and (ii) as
a result of the exercise of Employee Options outstanding as of November 30,
1998, there are outstanding or authorized (a) no shares of capital stock or
other voting securities of the Company, (b) no securities of the Company
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (c) no options or other rights to acquire from the
Company, and no obligation of the Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company and (d) no equity equivalents, interests in
the ownership or earnings of the Company or other similar rights (collectively,
"Company Securities"). There are no outstanding obligations of the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities. There are no other options, calls, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or any of its subsidiaries to which
the Company or any of its subsidiaries is a party. All shares of Company Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid and nonassessable and free
of preemptive (or similar) rights. There are no outstanding contractual
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the capital stock of
any subsidiary or to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any such subsidiary or any other
entity. Each of the outstanding shares of capital stock of each of the
Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by the Company or another wholly
owned subsidiary of the Company and are owned free and clear of all security
interests, liens, claims, pledges, agreements, limitations in voting rights,
charges or other encumbrances of any nature whatsoever, except where the
failure to own such shares free and clear would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has delivered to Parent
prior to the date hereof a list of all subsidiaries and other persons in which
the Company, directly or indirectly, owns in excess of 10% of the stock or
other equity interests of such person ("Associated Entity") which evidences,
among other things, the amount of capital stock or other equity interests owned
by the Company, directly or indirectly, in such subsidiaries or Associated
Entities. No entity in which the Company owns, directly or indirectly, less
than a 50% equity interest is, individually or when taken together with all
such other entities, material to the business of the Company and its
subsidiaries taken as a whole.
<PAGE>
SECTION 3.4 State Takeover Statutes; Authority Relative to
This Agreement. The Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than, with respect to the
Merger, the approval of this Agreement by the holders of at least a majority of
the outstanding shares of Company Common Stock if and to the extent required by
applicable law, and the filing of appropriate merger documents as required by
the MGCL). This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery hereof
by Parent and Purchaser, constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered
in a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing. The Board of Directors of the Company has (i) approved the Offer,
the Merger, this Agreement, the Tender Agreement and the transactions
contemplated hereby and thereby to render Section 3-602 of the MGCL (or any
similar provision) inapplicable to the Offer, the Merger, this Agreement, the
Tender Agreement, the other transactions contemplated hereby and thereby and
any Consensual Transaction, and (ii) amended the By-laws of the Company so as
to render inapplicable Section 3-702(a)(i) of the MGCL (or any similar
provision) to the transactions contemplated by this Agreement and the Tender
Agreement, including, without limitation, the Offer, and to any Consensual
Transaction. As a result of the foregoing actions, the only vote required to
authorize the Merger is the affirmative vote of a majority of the outstanding
Shares.
SECTION 3.5 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement by the Company do not
and will not: (i) conflict with or violate the Articles or By-Laws of the
Company or the equivalent organizational documents of any of its subsidiaries;
(ii) assuming that all consents, approvals and authorizations contemplated by
clauses (i), (ii) and (iii) of subsection (b) below have been obtained and all
filings described in such clauses have been made, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or
any of its subsidiaries or by which its or any of their respective properties
are bound or affected; or (iii) result in any breach or violation of or
constitute a default (or an event
<PAGE>
which with notice or lapse of time or both could become a default) or result in
the loss of a material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
are bound or affected, except, in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which would
not, individually or in the aggregate, have a Material Adverse Effect or
prevent or materially delay the consummation of the Offer or the Merger or
otherwise prevent the Company from performing its obligations under this
Agreement.
(b) The execution, delivery and performance of this Agreement
by the Company and the consummation of the Merger by the Company do not and
will not require any consent, approval, authorization or permit of, action by,
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except for (i) applicable requirements, if any, of the
Exchange Act and the rules and regulations promulgated thereunder, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), state securities, takeover and Blue Sky laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the MGCL
and (iii) such consents, approvals, authorizations, permits, actions, filings
or notifications the failure of which to make or obtain would not (x) prevent
or materially delay consummation of the Offer or the Merger, (y) otherwise
prevent or materially delay the Company from performing its obligations under
this Agreement or (z) have a Material Adverse Effect.
SECTION 3.6 Compliance. Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties are
bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
are bound or affected, except for any such conflicts, defaults or violations
which would not, individually or in the aggregate, have a Material Adverse
Effect. The Company and its subsidiaries have all permits, licenses,
authorizations, exemptions, orders, consents, approvals and franchises from
governmental and regulatory agencies required to conduct their respective
businesses as now being conducted, except for such permits, licenses,
authorizations, exemptions, orders, consents, approvals, and franchises the
absence of which
<PAGE>
would not individually or in the aggregate have a Material Adverse Effect.
SECTION 3.7 SEC Filings; Financial Statements. (a) The
Company and, to the extent applicable, each of its then or current
subsidiaries, has filed all forms, reports, statements and documents required
to be filed with the SEC since September 29, 1996 (collectively, the "SEC
Reports"), each of which has complied as to form in all material respects with
the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the rules and regulations promulgated thereunder, or the
Exchange Act and the rules and regulations promulgated thereunder, each as in
effect on the date so filed. The Company has heretofore delivered or promptly
will deliver to Parent, in the form filed with the SEC (including any
amendments thereto), the SEC Reports. None of such SEC Reports contained, when
filed, any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Except to the extent revised or
superseded by a subsequent filing with the SEC (a copy of which has been
provided to Parent prior to the date hereof), none of the SEC Reports filed by
the Company since September 28, 1997 and prior to the date hereof contains any
untrue statement of a material fact or omits to state a material fact required
to be stated or incorporated by reference therein or necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the audited consolidated financial statements of
the Company (including any related notes thereto) included in its Annual
Reports on Form 10-K for each of the two fiscal years ended September 29, 1996
and September 28, 1997 filed with the Commission, which have previously been
furnished to Parent, complies as to form in all material respects with all
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, has been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto) and fairly
presents in all material respects the consolidated financial position of the
Company and its subsidiaries at the respective date thereof and the
consolidated results of its operations and changes in cash flows for the
periods indicated.
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and its subsidiaries at September 30, 1998,
including the notes thereto, neither the Company nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which would be required to be reflected on a balance
sheet or in the notes thereto prepared in accordance with
<PAGE>
generally accepted accounting principles, except for liabilities or obligations
incurred in the ordinary course of business since September 30, 1998 which
would not, individually or in the aggregate, have a Material Adverse Effect.
(d) The Company has heretofore furnished to Parent a complete
and correct copy of any amendments or modifications which have not yet been
filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the
Securities Act and the rules and regulations promulgated thereunder or the
Exchange Act and the rules and regulations promulgated thereunder.
SECTION 3.8 Absence of Certain Changes or Events. Since
September 30, 1998, except as contemplated by this Agreement, disclosed in the
SEC Reports filed and publicly available prior to the date of this Agreement,
the Company and its subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since such
date, there has not been (i) any changes in the financial condition, results of
operations, assets, business or operations of the Company or any of its
subsidiaries that would reasonably likely materially delay or impair the
ability of the Company to effect the closing of the transactions contemplated
hereby, (ii) any condition, event or occurrence, other than such conditions or
events or occurrences which, individually or in the aggregate, have not had and
would not have a Material Adverse Effect, (iii) any damage, destruction or loss
(whether or not covered by insurance) with respect to any assets of the Company
or any of its subsidiaries individually or in the aggregate in excess of $1.0
million, (iv) any labor, dispute or any labor union organizing activity, or any
actual or threatened strike, work stoppage, slowdown or lockout, or any
material change in its relationship with employees, customers, distributors or
suppliers,(v) any revaluation by the Company of any of its material assets,
including but not limited to writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business,
(vi) any entry by the Company or any of its subsidiaries into any commitment or
transactions material to the Company and its subsidiaries taken as a whole
other than in the ordinary course of business,(vii) receipt of any notice of
termination or the occurrence of a default or the breach of any material
contract, lease or other agreement, or (viii) any other action which, if it had
been taken after the date hereof, would have required the consent of Parent
under Section 5.1 hereof.
SECTION 3.9 Absence of Litigation. Except as disclosed with
reasonable specificity in the SEC Reports filed and publicly available prior to
the date of this Agreement, there are no suits, claims, actions, proceedings or
investigations pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries, or any properties or rights of the
<PAGE>
Company or any of its subsidiaries, other than such suits, claims, actions,
proceedings or investigations that (i) individually or in the aggregate, have
not had and would not have a Material Adverse Effect or (ii) seek to delay or
prevent the consummation of the transactions contemplated hereby and are not
reasonably likely to succeed. As of the date hereof, neither the Company nor
any of its subsidiaries nor any of their respective properties is or are
subject to any order, writ, judgment, injunction, decree, determination or
award having, or which would have, a Material Adverse Effect or would prevent
or materially delay the consummation of the transactions contemplated hereby.
SECTION 3.10 Employee Benefit Plans. Except as set forth in
the SEC Reports and except as would not, individually or in the aggregate, have
a Material Adverse Effect:
(a) Schedule 3.10 of the Disclosure Schedule contains a true
and complete list of each "employee benefit plan" (within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, multiemployer plans within the
meaning of ERISA section 3(37)), stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required in
the future as a result of the transactions contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding or
not, under which any employee or former employee of the Company or any of its
subsidiaries has any present or future right to benefits or under which the
Company or any of its subsidiaries has any present or future liability. All
such plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "Company Plans".
(b) With respect to each Company Plan, the Company has
delivered to the Parent a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by the Company or any of its subsidiaries to their employees
concerning the extent of the benefits provided under a Company Plan; and (iv)
for the two most recent years (A) the Form 5500 and attached schedules, (B)
audited financial statements, (C) actuarial valuation reports and (D)
attorney's response to an auditor's request for information.
(c) (i) Each Company Plan has been established and
administered in accordance with its terms, and in compliance with
<PAGE>
the applicable provisions of ERISA, the Internal Revenue Code as of 1986, as
amended (the "Code") and other applicable laws, rules and regulations; (ii)
each Company Plan which is intended to be qualified within the meaning of Code
section 401(a) is so qualified and has received a favorable determination
letter as to its qualification, and nothing has occurred, whether by action or
failure to act, that would cause the loss of such qualification; (iii) no event
has occurred and no condition exists that would subject the Company or any of
its subsidiaries, either directly or by reason of their affiliation with any
member of their "Controlled Group" (defined as any organization which is a
member of a controlled group of organizations within the meaning of Code
sections 414(b), (c), (m) or (o)), to any tax, fine, lien or penalty imposed by
ERISA, the Code or other applicable laws, rules and regulations; (iv) for each
Company Plan with respect to which a Form 5500 has been filed, no material
change has occurred with respect to the matters covered by the most recent Form
since the date thereof; and (v) no "reportable event" (as such term is defined
in ERISA section 4043), "prohibited transaction" (as such term is defined in
ERISA section 406 and Code section 4975) that is not exempt or "accumulated
funding deficiency" (as such term is defined in ERISA section 302 and Code
section 412 (whether or not waived)) has occurred with respect to any Company
Plan.
(d) With respect to each of the Company Plans that is not a
multiemployer plan within the meaning of section 4001(a)(3) of ERISA but is
subject to Title IV of ERISA, as of the Effective Time, the assets of each such
Company Plan are at least equal in value to the present value of the accrued
benefits (vested and unvested) of the participants in such Company Plan on a
termination and projected benefit obligation basis, based on the actuarial
methods and assumptions indicated in the most recent actuarial valuation
reports.
(e) With respect to any multiemployer plan (within the
meaning of ERISA section 4001(a)(3)) to which the Company, any of its
subsidiaries or any member of their Controlled Group has any liability or
contributes (or has at any time contributed or had an obligation to
contribute): (i) none of the Company, any of its subsidiaries or any member of
their Controlled Group has incurred any withdrawal liability under Title IV of
ERISA or would be subject to such liability if, as of the Effective Time, the
Company, any of its subsidiaries or any member of their Controlled Group were
to engage in a complete withdrawal (as defined in ERISA section 4203) or
partial withdrawal (as defined in ERISA section 4205) from any such
multiemployer plan; and (ii) no such multiemployer plan is in reorganization or
insolvent (as those terms are defined in ERISA sections 4241 and 4245,
respectively).
(f) With respect to any Company Plan, (i) no actions, suits
or claims (other than routine claims for benefits in the ordinary course) are
pending or threatened, and (ii) no facts or
<PAGE>
circumstances exist that could give rise to any such actions, suits or claims.
(g) No Company Plan exists that would result in the payment
to any present or former employee of the Company or any of its subsidiaries of
any money or other property or accelerate or provide any other rights or
benefits to any present or former employee of the Company or any of its
subsidiaries as a result of the transaction contemplated by this Agreement,
whether or not such payment would constitute a parachute payment within the
meaning of Code section 280G.
SECTION 3.11 Tax Matters. The Company and each of its
subsidiaries, and any consolidated, combined, unitary or aggregate group for
tax purposes of which the Company or any of its subsidiaries is or has been a
member has timely filed all Tax Returns required to be filed by it in the
manner provided by law, has paid all Taxes shown thereon to be due and has
provided adequate reserves in its financial statements for any Taxes that have
not been paid, whether or not shown as being due on any Tax Returns. All such
Tax Returns were true, correct and complete in all material respects when
filed. No (i) material claim for unpaid Taxes has become a lien or encumbrance
of any kind against the property of the Company or any of its subsidiaries or
is being asserted against the Company or any of its subsidiaries; (ii) audit of
any Tax Return of the Company or any of its subsidiaries is being conducted by
a Tax authority; and (iii) extension of the statute of limitations on the
assessment of any Taxes is currently in effect with respect to the Company or
any of its subsidiaries. For purposes of this Agreement, "Taxes" shall mean any
taxes of any kind, including but not limited to those on or measured by or
referred to as income, gross receipts, capital, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall
profits taxes, customs, duties or similar fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any governmental authority, domestic or
foreign. For purposes of this Agreement, "Tax Return" shall mean any return,
report or statement required to be filed with any governmental authority with
respect to Taxes, including any schedule or attachment thereto or amendment
thereof.
SECTION 3.12 Offer Documents; Proxy Statement. Neither the
Schedule 14D-9, nor any of the information supplied by the Company for
inclusion in the Offer Documents, shall, at the respective times such Schedule
14D-9, the Offer Documents or any amendments or supplements thereto are filed
with the SEC or are first published, sent or given to stockholders, as the case
may be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light
<PAGE>
of the circumstances under which they were made, not misleading. Neither the
proxy statement to be sent to the stockholders of the Company in connection
with the Stockholders Meeting (as defined in Section 6.1) nor the information
statement to be sent to such stockholders, as appropriate (such proxy statement
or information statement, as amended or supplemented, is herein referred to as
the "Proxy Statement"), shall, at the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to stockholders and at
the time of the Stockholders Meeting and at the Effective Time, be false or
misleading with respect to any material fact, or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders Meeting which
has become false or misleading. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information supplied by
Parent or Purchaser or any of their respective representatives which is
contained in the Schedule 14D-9 or the Proxy Statement. The Schedule 14D-9 and
the Proxy Statement will comply in all material respects as to form with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
SECTION 3.13 Environmental Matters. Except as set forth in
the SEC Reports, neither the Company nor any of its subsidiaries is in
violation of any applicable law, rule, regulation, decree or order of any
governmental or regulatory authority applicable to the Company or its
subsidiaries, except for violations which would not have a Material Adverse
Effect. Without limiting the foregoing, except for matters which would not have
a Material Adverse Effect and those matters disclosed in the SEC Reports, (a)
businesses of the Company and its subsidiaries are being conducted in
compliance with applicable Environmental Laws (as defined below), (b) the
businesses of the Company and its subsidiaries (past or present) have not made,
caused or contributed to any material release of any hazardous or toxic waste
or substance into the environment at any facility now or formerly owned or
operated by the Company or its past or present subsidiaries and (c) neither the
Company nor any of its subsidiaries is subject to any compliance agreement or
settlement agreement from an alleged violation of Environmental Laws. For
purposes hereof, "Environmental Laws" shall mean all applicable laws relating
to pollution or protection of the environment, including, without limitation,
the Resource Conservation and Recovery Act, the Federal Water Pollution Control
Act, the Toxic Substances Control Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Federal Clean Air Act, the
Federal Toxic Substance Control Act and any state law equivalents thereof.
<PAGE>
SECTION 3.14 Brokers. No broker, finder or investment banker
(other than the Financial Adviser) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by and on behalf of the Company.
The Company has heretofore furnished to Parent a complete and correct copy of
all agreements between the Company and the Financial Adviser pursuant to which
such firm would be entitled to any payment relating to the transactions
contemplated hereby.
SECTION 3.15 Year 2000. All the computer-based systems of the
Company and its subsidiaries, including its information data bases, accounting
systems and data processing systems, will not be materially adversely affected
by, and will continue to operate in the same manner as such systems currently
operate notwithstanding, Year 2000; provided that the Company does not
represent or warrant that the databases and systems of its material suppliers
and customers will not be adversely affected due to the Year 2000. None of the
Intellectual Property or other assets of the Company and its subsidiaries used
in their current products will be materially adversely affected by, and each
thereof will continue to operate in the same manner as it currently operates
notwithstanding, Year 2000. As used herein, the term "Year 2000" means the
occurrence of or calculation involving the Year 2000 A.D., or other calendar
dates occurring through December 31, 2010.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent
and warrant to the Company that:
SECTION 4.1 Corporate Organization. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and has
the requisite corporate power and authority and any necessary governmental
authority to own, operate or lease its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power, authority and governmental
approvals could not, individually or in the aggregate, reasonably be expected
to prevent the consummation of the Offer or the Merger.
SECTION 4.2 Authority Relative to This Agreement. Each of
Parent and Purchaser has all necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
<PAGE>
this Agreement by each of Parent and Purchaser and the consummation by each of
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Purchaser other than filing and recordation of appropriate merger documents as
required by the MGCL. This Agreement has been duly executed and delivered by
Parent and Purchaser and, assuming due authorization, execution and delivery by
the Company, constitutes a legal, valid and binding obligation of each such
corporation enforceable against such corporation in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered
in a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing.
SECTION 4.3 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement by Parent and
Purchaser do not and will not: (i) conflict with or violate the respective
certificates or articles of incorporation or by-laws of Parent or Purchaser;
(ii) assuming that all consents, approvals and authorizations contemplated by
clauses (i), (ii) and (iii) of subsection (b) below have been obtained and all
filings described in such clauses have been made, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Parent or
Purchaser or by which either of them or their respective properties are bound
or affected; or (iii) result in any breach or violation of or constitute a
default (or an event which with notice or lapse of time or both could become a
default) or result in the loss of a material benefit under, or give rise to any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the property or assets of
Parent or Purchaser pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Purchaser is a party or by which Parent or Purchaser or any
of their respective properties are bound or affected, except, in the case of
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which could not, individually or in the aggregate,
reasonably be expected to prevent the consummation of the Offer or the Merger.
(b) The execution, delivery and performance of this Agreement
by Parent and Purchaser do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the Exchange Act and the rules and
regulations promulgated thereunder, the HSR Act, state securities, takeover and
Blue Sky laws, (ii) the filing and recordation of appropriate merger or other
documents as required
<PAGE>
by the MGCL, (iii) the consent of the Required Lenders (having the meaning
assigned to such term under the Credit Agreement and the 364 Day Credit
Agreement referred to below) under (x) the Amended and Restated Credit
Agreement dated as of August 13, 1998 (the "Credit Agreement"), among Parent,
the several lenders from time to time a party thereto, BankAmerica Robertson
Stevens and Lehman Commercial Paper Inc., as Arrangers (the "Arrangers"), Bank
of America National Trust & Savings Association, as Administrative Agent (the
"Administration Agent"), and Lehman Commercial Paper Inc., as Documentation
Agent and Syndication Agent (the "Documentation Agent"), and (y) the 364 Day
Credit Agreement dated as of August 13, 1998 (the "364 Day Credit Agreement"),
among Parent, the several lenders from time to time a party thereto, the
Arrangers, the Administration Agent and the Documentation Agent, and (iv) such
consents, approvals, authorizations, permits, actions, filings or notifications
the failure of which to make or obtain would not, individually or in the
aggregate, reasonably be expected to prevent the consummation of the Offer or
the Merger.
SECTION 4.4 Offer Documents; Proxy Statement. The Offer
Documents, as filed pursuant to Section 1.1, will not, at the time such Offer
Documents are filed with the SEC or are first published, sent or given to
stockholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
information supplied by Parent for inclusion in the Proxy Statement shall not,
on the date the Proxy Statement is first mailed to stockholders, at the time of
the Stockholders Meeting (as defined in Section 6.1) or at the Effective Time,
contain any statement which, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect to any
material fact, or shall omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders Meeting which
has become false or misleading. Notwithstanding the foregoing, Parent and
Purchaser make no representation or warranty with respect to any information
supplied by the Company or any of its representatives which is contained in or
incorporated by reference in any of the foregoing documents or the Offer
Documents. The Offer Documents, as amended and supplemented, will comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder.
SECTION 4.5 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission from the
Company in connection with the transactions
<PAGE>
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or Purchaser.
SECTION 4.6 Financing. Subject to the consent of the Required
Lenders under the Credit Agreement and the 365 Day Credit Agreement, Parent and
Purchaser have as of the date hereof and will have available to them, upon
consummation of the Offer and at the Effective Time, immediately available
funds necessary to consummate the transactions contemplated by this Agreement.
Parent and Purchaser reasonably believe that such consents of the Required
Lenders will be obtained.
SECTION 4.7 Operations of Purchaser. Purchaser has been
formed solely for the purpose of engaging in the transactions contemplated
hereby and prior to the Effective Time will have engaged in no other business
activities and will have incurred no liabilities or obligations other than as
contemplated herein.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the
Merger. The Company covenants and agrees that, during the period from the date
hereof until the time persons nominated by Parent or Purchaser constitute a
majority of the Board of Directors, except pursuant to the terms hereof or as
disclosed in the SEC Reports, or unless Purchaser shall otherwise agree in
writing, the businesses of the Company and its subsidiaries shall be conducted
only in, and the Company and its subsidiaries shall not take any action except
in, the ordinary course of business and in a manner consistent with past
practice and in compliance in all material respects with applicable laws; and
the Company and its subsidiaries shall each use its reasonable good faith
efforts to preserve substantially intact the business organization and assets
of the Company and its subsidiaries, to keep available the services of the
present officers, employees and consultants of the Company and its subsidiaries
and to preserve the present relationships of the Company and its subsidiaries
with customers, suppliers and other persons with which the Company or any of
its subsidiaries has significant business relations. By way of amplification
and not limitation, neither the Company nor any of its subsidiaries shall,
between the date of this Agreement and the time persons nominated by Parent or
Purchaser constitute a majority of the Board of Directors, directly or
indirectly do, or propose or commit to do, any of the following, except as
otherwise contemplated by this Agreement, as previously disclosed in the SEC
Reports filed prior to the date of this Agreement or as set forth in Schedule
5.1 of the Disclosure Schedule, without the prior written consent of Parent:
<PAGE>
(a) Amend or otherwise change its Articles or By-Laws
or equivalent organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, (A) any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind
to acquire any shares of capital stock, or any other ownership
interest (including but not limited to stock appreciation rights or
phantom stock), of the Company or any of its subsidiaries (except for
the issuance of up to 1,571,302 shares of Company Common Stock
issuable in accordance with the terms of Employee Options outstanding
as of November 30, 1998) or (B) any property or assets, whether
tangible or intangible, of the Company or any of its subsidiaries,
except for sales of products in the ordinary course of business and in
a manner consistent with past practice;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock
or any capital stock of any of its subsidiaries;
(e) (i) Acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof or any material assets, (ii) incur
any indebtedness for borrowed money (other than indebtedness incurred
under the Company's existing revolving credit facility in the ordinary
course of business consistent with past practice to fund working
capital requirements) or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans,
advances or capital contributions to, or investments in, any other
person, (iii) make or start any bid or proposal, or enter into or
renew or amend in any material respect any contract or agreement other
than in the ordinary course of business consistent with past practice
that would involve aggregate consideration under such bid, proposal,
contract or agreement in excess of $4.0 million or is bid, proposed or
renewed at an amount at which the Company would expect such bid,
proposal or renewal to result in a loss thereunder to the Company,
(iv) except for expenditures relating to the anticipated acquisition
of Oracle Software in accordance with the Edgemark Systems Proposal
for Microdyne dated September 9, 1998, authorize any single capital
expenditure which is in excess of $250,000 or capital expenditures
which are, in the
<PAGE>
aggregate, in excess of $1.0 million for the Company and its
subsidiaries taken as a whole, (v) enter into any transaction,
contract or commitment with any affiliate of the Company, or (vi)
except as contemplated or permitted by clauses (i)-(v) of this Section
5.1(e), enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this
Section 5.1(e);
(f) Except to the extent required under existing employee and
director benefit plans, agreements or arrangements as in effect on the
date of this Agreement, increase the compensation or fringe benefits
of any of its directors, officers or employees, except for increases
in salary or wages of employees of the Company or its subsidiaries who
are not officers of the Company in the ordinary course of business in
accordance with past practice, or grant any retention, severance or
termination pay not currently required to be paid under existing
severance plans to or enter into any employment, consulting or
severance agreement or arrangement with any present or former
director, officer or other employee of the Company or any of its
subsidiaries, or establish, adopt, enter into or amend or terminate
any collective bargaining agreement or Company Plan, including, but
not limited to, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any directors, officers
or employees;
(g) Except as may be required as a result of a change in law
or in generally accepted accounting principles, change any of the
accounting methods, practices or principles used by it;
(h) Make or change any Tax election, make or change any
method of accounting with respect to Taxes, file any amended Tax
Return or settle or compromise any material Tax liability;
(i) Settle or compromise any pending or threatened suit,
action or claim for an aggregate amount in excess of $100,000 or which
is material or which relates to the transactions contemplated hereby;
(j) Make any change in the key management structure of the
Company or any of its subsidiaries, including, without limitation, the
hiring of additional officers or the termination of existing officers;
(k) Other than in the ordinary course of business, transfer
or grant any rights under any Intellectual
<PAGE>
Property, or modify any existing rights with respect thereto; provided
that the Company shall not grant an exclusive license with respect to
any Intellectual Property;
(l) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its subsidiaries not
constituting an inactive subsidiary (other than the Merger);
(m) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business in accordance with the terms of such
obligation or liability and consistent with past practice of
liabilities reflected or reserved against in the financial statements
of the Company or incurred in the ordinary course of business and
consistent with past practice;
(n) Fail to maintain in full force and effect the existing
insurance policies covering the Company and its subsidiaries and their
respective properties, assets and businesses (provided, that the
Company may substitute therefor policies providing for coverages no
less favorable to the Company and its subsidiaries on terms and
conditions no less favorable to the Company and its subsidiaries); or
(o) Take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Sections 5.1(a)
through 5.1(n) or any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue and incorrect as of the date when made if such action
had then been taken, or would result in any of the conditions set
forth in Annex A not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders Meeting. (a) The Company, acting
through its Board of Directors, shall, if required in accordance with
applicable law and the Company's Articles and By-Laws, (i) duly call, give
notice of, convene and hold a meeting of its stockholders as soon as
practicable following consummation of the Offer for the purpose of considering
and taking action on this Agreement and the transactions contemplated hereby
(the "Stockholders Meeting") and (ii) subject to its fiduciary duties under
applicable law as determined in good faith by a majority of the Disinterested
Directors (as defined in Section 6.3(c)) of the Company based on the advice of
independent outside legal counsel to the Disinterested Directors, (A) include
in the Proxy
<PAGE>
Statement the unanimous recommendation of the Board of Directors that the
stockholders of the Company vote in favor of the approval of this Agreement and
the transactions contemplated hereby and, subject to the approval of the
Financial Advisor, the written opinion of the Financial Adviser that the
consideration to be received by the stockholders of the Company pursuant to the
Offer and the Merger is fair to such stockholders and (B) use its reasonable
good faith efforts to obtain the necessary approval of this Agreement and the
transactions contemplated hereby by its stockholders. At the Stockholders
Meeting, Parent and Purchaser shall cause all Shares then beneficially owned by
them and their subsidiaries to be voted in favor of approval of this Agreement
and the transactions contemplated hereby.
(b) Notwithstanding the foregoing, in the event that
Purchaser shall acquire at least 90% of the outstanding Shares, the Company and
Parent agree, subject to Article VII, to take all necessary and appropriate
action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
stockholders, in accordance with Section 3-106 of the MGCL.
(c) Notwithstanding anything to the contrary contained in
this Agreement, the Company shall not be required to hold the Stockholders
Meeting if the Minimum Condition is not satisfied.
SECTION 6.2 Proxy Statement. If required by applicable law,
as soon as practicable following Parent's request, the Company shall file with
the SEC under the Exchange Act and the rules and regulations promulgated
thereunder, and shall use its reasonable good faith efforts to have cleared by
the SEC, the Proxy Statement with respect to the Stockholders Meeting. Parent,
Purchaser and the Company will cooperate with each other in the preparation of
the Proxy Statement. Without limiting the generality of the foregoing, each of
Parent and Purchaser will furnish to the Company the information relating to it
required by the Exchange Act and the rules and regulations promulgated
thereunder to be set forth in the Proxy Statement. The Company agrees to use
its reasonable good faith efforts, after consultation with the other parties
hereto, to respond promptly to any comments made by the SEC with respect to the
Proxy Statement and any preliminary version thereof filed by it and cause such
Proxy Statement to be mailed to the Company's stockholders at the earliest
practicable time.
SECTION 6.3 Company Board Representation; Section 14(f). (a)
Promptly upon the purchase by Purchaser of Shares pursuant to the Offer, and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as shall give Purchaser representation on the Board of
Directors equal to the product of the total number of directors on such Board
(giving effect to the directors
<PAGE>
elected pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Purchaser or any affiliate of
Purchaser bears to the total number of Shares then outstanding, and the Company
shall, at such time, promptly take all action necessary to cause Purchaser's
designees to be so elected, including either increasing the size of the Board
of Directors or securing the resignations of incumbent directors or both.
Notwithstanding the foregoing, none of Parent, Purchaser or the Company shall
take any action to remove or replace any member of the Special Committee after
consummation of the Offer and prior to the Effective Time. If at any time prior
to the Effective Time there are less than two members of the Special Committee,
as constituted on the date hereof (other than upon the resignation of both
Disinterested Directors), on the Company's Board of Directors, Parent,
Purchaser and the Company shall use all reasonable efforts to ensure that two
members of the Company's Board of Directors are Disinterested Directors. In the
event that both Disinterested Directors resign from the Special Committee,
Parent, Purchaser and the Company shall either (i) use their reasonable efforts
to appoint successors as aforesaid or (ii) permit the resigning Disinterested
Directors to appoint their successors in their reasonable discretion. The
Company will use its best efforts to cause persons designated by Purchaser to
constitute the same percentage as is on the Board of (i) each committee of the
Board, (ii) each board of directors of each domestic subsidiary of the Company
and (iii) each committee of each such board, in each case only to the extent
permitted by law. Until Purchaser acquires a majority of the outstanding Shares
on a fully diluted basis, the Company shall use its best efforts to ensure that
all the members of the Board and such boards and committees as of the date
hereof who are not employees of the Company shall remain members of the Board
and such boards and committees.
(b) The Company's obligations to appoint designees to its
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. The Company shall promptly (subject to the
prompt provision of information by Parent and Purchaser) take all actions
required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 6.3 and shall include in the Schedule 14D-9 or a
separate Rule 14f-1 information statement provided to stockholders such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 6.3. Parent or Purchaser will promptly supply to the Company and
be solely responsible for any information with respect to either of them and
their nominees, officers, directors and affiliates required by Section 14(f)
and Rule 14f-1.
(c) Following the election or appointment of Purchaser's
designees pursuant to this Section 6.3 and prior to the Effective Time, any
amendment of this Agreement or the
<PAGE>
Articles or By-Laws of the Company, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Parent or Purchaser or waiver of any of the
Company's rights hereunder, will require the concurrence of a majority of the
directors of the Company then in office who are (a) either members of the
Special Committee (as constituted on the date hereof) or (b) are neither
designated by Purchaser nor are employees of the Company or any of its
subsidiaries (the "Disinterested Directors").
SECTION 6.4 Access to Information; Confidentiality. (a) From
the date hereof to the Effective Time, the Company shall, and shall cause its
subsidiaries, officers, directors, employees, auditors and other agents to,
afford the officers, employees, auditors and other agents of Parent, and
financing sources who shall agree to be bound by the provisions of this Section
6.4 as though a party hereto, complete access at all reasonable times to its
officers, employees, agents, properties, offices, plants and other facilities
and to all books and records, and shall furnish Parent and such financing
sources with all financial, operating and other data and information as Parent,
through its officers, employees or agents, or such financing sources may from
time to time reasonably request.
(b) Each of Parent and Purchaser will hold and treat and will
cause its officers, employees, auditors and other agents to hold and treat in
confidence all documents and information concerning the Company and its
subsidiaries furnished to Parent or Purchaser in connection with the
transactions contemplated in this Agreement in accordance with the
Confidentiality Agreement, dated November 8, 1998, between the Company and
Parent, which Confidentiality Agreement shall remain in full force and effect
in accordance with its terms.
(c) No investigation pursuant to this Section 6.4 shall
affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
SECTION 6.5 No Solicitation of Transactions. The Company, its
affiliates and their respective officers, directors, employees, representatives
and agents shall immediately cease any existing discussions or negotiations, if
any, with any parties conducted heretofore with respect to any acquisition or
exchange of all or any material portion of the assets of, or any equity
interest in, the Company or any of its subsidiaries or any business combination
with the Company or any of its subsidiaries. The Company may, directly or
indirectly, furnish information and access, in each case only in response to a
request for such information or access to any person made after the date hereof
which was not encouraged, solicited or initiated by the Company or any of its
affiliates or any of its or their respective
<PAGE>
officers, directors, employees, representatives or agents after the date
hereof, pursuant to appropriate confidentiality agreements, and may participate
in discussions and negotiate with such entity or group concerning any merger,
sale of assets, sale of shares of capital stock or similar transaction
(including an exchange of stock or assets) involving the Company or any
subsidiary or division of the Company, if such entity or group has submitted a
written proposal to the Board relating to any such transaction and the Special
Committee Members, as a result of such proposal, by a majority vote determine,
in their good faith judgment, that based on the advice of independent outside
legal counsel to the Special Committee Members, failing to take such action
would constitute a breach of the Board's fiduciary duty under applicable law.
The Board shall provide a copy of any such written proposal to Parent
immediately after receipt thereof, shall notify Parent immediately if any such
proposal is made and shall keep Parent promptly advised of all developments
which could reasonably be expected to culminate in the Board of Directors
withdrawing, modifying or amending its recommendation of the Offer, the Merger
and the other transactions contemplated by this Agreement. Except as set forth
in this Section 6.5, neither the Company or any of its affiliates, nor any of
its or their respective officers, directors, employees, representatives or
agents, shall, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent
and Purchaser, any affiliate or associate of Parent and Purchaser or any
designees of Parent or Purchaser) concerning any merger, sale of all or any
material portion of the assets, the sale of more than 10% of the outstanding
shares of capital stock of the Company or any of its subsidiaries or similar
transactions (including an exchange of stock or assets) involving the Company
or any subsidiary or division of the Company; provided, however, that nothing
herein shall prevent the Board from taking, and disclosing to the Company's
stockholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to any tender offer; provided, further, that
the Board shall not recommend that the stockholders of the Company tender their
Shares in connection with any such tender offer unless the Board by a majority
vote determines in its good faith judgment, based on the advice of independent
outside legal counsel to the Company, that failing to take such action would
constitute a breach of the Board's fiduciary duty under applicable law. The
Company agrees not to release any third party from, or waive any provisions of,
(i) any standstill agreement to which the Company is a party (other than for
the limited purpose of discussions and negotiations permitted by this Section
6.5) and (ii) any confidentiality agreement to which the Company is a party.
SECTION 6.6 Employee Benefits Matters. (a) The
Company shall or Parent shall cause the Company and the Surviving
Corporation to promptly pay or provide when due all compensation
<PAGE>
and benefits earned through or prior to the Effective Time as provided pursuant
to the terms of any compensation arrangements, employment agreements and
employee or director benefit plans, programs and policies in existence as of
the date hereof for all employees (and former employees) and directors (and
former directors) of the Company. Parent and the Company agree that the Company
and the Surviving Corporation shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
individual agreement with any employee, former employee, director or former
director in effect and disclosed to Parent as of the date hereof. Nothing
herein shall require the continued employment of any person or prevent the
Company and/or the Surviving Corporation from taking any action or refraining
from taking any action which the Company could take or refrain from taking
prior to the Effective Time.
(b) Except as contemplated herein, Parent shall cause the
Surviving Corporation, for the period ending on December 31, 1999, to provide
employee benefits under plans, programs and arrangements which, in the
aggregate, will provide benefits to the employees of the Surviving Corporation
(other than employees covered by a collective bargaining agreement) which are
no less favorable than those provided pursuant to the plans, programs and
arrangements of the Company in effect on the date hereof (other than
stock-based plans) and employees covered by collective bargaining agreements
shall be provided with such benefits as shall be required under the terms of
any applicable collective bargaining agreement; provided, however, that nothing
herein shall prevent the amendment or termination of any such plan, program or
arrangement, require that the Surviving Corporation provide or permit
investment in the securities of Parent, the Company or the Surviving
Corporation or interfere with the Surviving Corporation's right or obligation
to make such changes as are necessary to conform with applicable law. On and
after January 1, 2000, Parent shall provide employees of the Surviving
Corporation (other than those covered by collective bargaining agreements) with
benefits, in the aggregate, that are no less favorable than those provided to
similarly situated employees of subsidiaries of Parent.
SECTION 6.7 Directors' and Officers' Indemnification and
Insurance. (a) From the Effective Time through the sixth anniversary of the
date on which the Effective Time occurs, Parent shall, or shall cause the
Surviving Corporation to, indemnify and hold harmless each present and former
officer, director or employee of the Company (the "Indemnified Parties"),
against all claims, losses, liabilities, damages, judgments, fines, reasonable
fees, reasonable costs or reasonable expenses, including, without limitation,
reasonable attorneys' fees and disbursements (collectively, "Costs"), incurred
in connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of the
fact that the Indemnified Party is or was a director,
<PAGE>
officer or employee or the Company and pertaining to matters existing or
occurring at or prior to the Effective Time (including, without limitation,
this Agreement and the transactions and actions contemplated hereby), whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent permitted under applicable law; provided, that no Indemnified Party may
settle any such claim without the prior approval of Parent or the Surviving
Corporation (such consent not to be unreasonably withheld). Each Indemnified
Party will be entitled to advancement of expenses incurred in the defense of
any claim, action, suit, proceeding or investigation; provided, that any person
to whom expenses are advanced provides an undertaking to repay such advances if
it is ultimately determined that such person is not entitled to
indemnification. Without limiting the foregoing, in the event that any claim,
action, suit, proceeding or investigation is brought against an Indemnified
Party (whether arising before or after the Effective Time), the Indemnified
Parties as a group may retain one counsel (plus appropriate local counsel)
satisfactory to Parent or the Surviving Corporation.
(b) The By-Laws of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set forth
in Article VIII of the By-laws of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of three years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers or employees
of the Company.
(c) Parent shall, or shall cause the Surviving Corporation to
maintain, at no expense to the beneficiaries, in effect for six years from the
Effective Time the current policies of the directors' and officers' liability
insurance maintained by the Company (provided that Parent or the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less advantageous)
with respect to matters occurring at or prior to the Effective Time to the
extent available; provided, however, that in no event shall Parent or the
Surviving Corporation be required to expend more than an amount per year in
excess of 150% of current annual premiums paid by the Company (which the
Company represents and warrants to be not more than $140,000) to maintain or
procure insurance coverage pursuant hereto; and provided, further, that if the
annual premiums of such insurance coverage would exceed 150% of current annual
premiums, Parent or the Surviving Corporation shall obtain a policy with the
greatest coverage available for a cost not exceeding 150% of current annual
premiums. In the event any claim is made against present or former directors,
officers or employees of the Company (the "Indemnitees") that is covered or
potentially covered by insurance, none of the Surviving Corporation, Parent or
any Indemnitee shall do anything that would forfeit, jeopardize,
<PAGE>
restrict or limit the insurance coverage available for that claim until the
final disposition thereof.
(d) Notwithstanding anything herein to the contrary, if any
claim, action, suit, proceeding or investigation (whether arising before, at or
after the Effective Time) is made against any Indemnified Party, on or prior to
the sixth anniversary of the Effective Time, the provisions of this Section 6.7
shall continue in effect until the final disposition of such claim, action,
suit, proceeding or investigation.
(e) This covenant is intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties and their respective
heirs and legal representatives. The indemnification provided for herein shall
not be deemed exclusive of any other rights to which an Indemnified Party is
entitled, whether pursuant to law, contract or otherwise.
(f) In the event that the Surviving Corporation or Parent or
any of their respective successor or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
6.7, proper provision shall be made so that the successors and assigns of the
Surviving Corporation or Parent shall succeed to the obligations set forth in
this Section 6.7.
(g) Parent and Purchaser acknowledge that the Company is a
party to indemnification agreements (the "Indemnification Agreements") with
each of its current directors as set forth on Schedule 3.8 of the Disclosure
Schedule. Parent and Purchaser agree that all rights in favor of such persons
as set forth in the Indemnification Agreements shall survive the Merger and
shall continue in full force and effect and without modification (except for
such modifications which would enlarge the rights) after the Effective Time in
accordance with the provisions of such Indemnification Agreements, and Parent
shall cause the Surviving Corporation to comply fully with its obligations
hereunder and thereunder. The parties acknowledge that nothing in this Section
6.7 shall limit any rights in favor of Indemnified Parties under the
Indemnification Agreements.
SECTION 6.8 Notification of Certain Matters. The Company
shall give reasonably prompt notice to Parent, and Parent shall give reasonably
prompt notice to the Company, in each case, after it becomes aware, of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respects at or prior to
the Effective Time and (ii) any material failure of
<PAGE>
the Company, Parent or Purchaser, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.8 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.9 Further Action; Reasonable Good Faith Efforts.
Upon the terms and subject to the conditions hereof, each of the parties hereto
shall use its reasonable good faith efforts to take, or cause to be taken, all
appropriate action, and to do or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable, including but not limited to (i) cooperation in the preparation
and filing of the Offer Documents, the Schedule 14D-9, the Proxy Statement, any
required filings under the HSR Act and any amendments to any thereof and (ii)
using its reasonable good faith efforts to make all required regulatory filings
and applications and to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and its subsidiaries as are necessary for
the consummation of the transactions contemplated by this Agreement and the
Tender Agreement and to fulfill the conditions to the Offer and the Merger;
provided that Purchaser and its affiliates shall not be required to divest, or
agree to any restrictions with respect to, any of its businesses or assets or
the businesses or assets to be acquired in connection with the transactions
contemplated hereby. The Company will use reasonable good faith efforts to
cooperate with Parent and Purchaser as may be reasonably necessary with respect
to consummating the financing for the Offer and the Merger. Parent and
Purchaser will use reasonable good faith efforts to obtain the consents as
promptly as practicable of the Required Lenders under the Credit Agreement and
the 364 day Credit Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall use their reasonable good faith efforts to take all such necessary
action.
SECTION 6.10 Public Announcements. Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated by
this Agreement, including the Offer or the Merger and the Tender Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law or any listing agreement
with its securities exchange.
SECTION 6.11 Disposition of Litigation. (a) The Company
agrees that it will not settle any litigation currently
<PAGE>
pending, or commenced after the date hereof, against the Company or any of its
directors by any stockholder of the Company relating to the Offer or this
Agreement, without the prior written consent of Parent.
(b) Except as permitted by Section 6.5 of this Agreement, the
Company will not voluntarily cooperate with any third party which has sought or
may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the
Merger and will cooperate with Parent and Purchaser to resist any such effort
to restrain or prohibit or otherwise oppose the Offer or the Merger.
SECTION 6.12 State Takeover Statutes. During the term of this
Agreement, the Board of Directors of the Company shall not (i) repeal or
otherwise alter the resolutions of the Board of Directors that render Section
3-602 of the MGCL (or any similar provision) inapplicable to the Offer, the
Merger, this Agreement, the Tender Agreement, the other transactions
contemplated hereby and thereby and any Consensual Transaction and (ii) amend
the By-laws of the Company so as to render Section 3-702(a)(i) of the MGCL (or
any similar provision) applicable to the transactions contemplated by this
Agreement and the Tender Agreement, including, without limitation, the Offer,
or to any Consensual Transaction.
SECTION 6.13 Stop Transfer Order. The Company will instruct
the Company's transfer agent that, except as provided in Section 4.3 of the
Tender Agreement, there is a stop transfer order with respect to all of the
Stockholders' Shares and that the Tender Agreement places limits on the
transfer of such Shares.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) If required by the MGCL, this Agreement shall have been
approved by not less than the affirmative vote of the stockholders of the
Company by the requisite vote in accordance with the Company's Articles and the
MGCL.
(b) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any United States
or state court or
<PAGE>
governmental authority which prohibits, restrains, enjoins or restricts the
consummation of the Merger.
(c) Any waiting period applicable to the Merger under the HSR
Act shall have terminated or expired.
(d) Purchaser shall have purchased Shares pursuant to the
Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) By mutual written consent of Parent, Purchaser and the
Company, subject in the case of the Company to Section 6.3(c);
(b) By Parent or the Company if any court of competent
jurisdiction or other governmental body located or having jurisdiction within
the United States or any country or economic region in which either the Company
or Parent, directly or indirectly, has material assets or operations, shall
have issued a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the Offer or the Merger and
such order, decree, ruling or other action is or shall have become final and
nonappealable and, with respect to any court or governmental body located
outside the United States, such order, decree, ruling or other action would
have a Material Adverse Effect or a material adverse effect on the business,
operations, assets, financial condition or results of operations of Parent and
its subsidiaries taken as a whole;
(c) By Parent if due to an occurrence or circumstance which
would result in a failure to satisfy any of the Offer Conditions, Purchaser
shall have (i) terminated the Offer or (ii) failed to pay for Shares pursuant
to the Offer within 120 days following the date hereof, unless such failure to
pay for Shares is a result of the failure of Parent or Purchaser to perform any
of its covenants and agreements contained in this Agreement;
(d) By the Company if (i) (A) Purchaser fails to commence the
Offer as provided in Section 1.1, (B) Purchaser fails to pay for Shares
pursuant to the Offer within 120 days following the date hereof, unless such
failure to pay for Shares is the result of the failure of the Company to
perform any of its covenants and agreements contained in this Agreement, or (C)
Purchaser shall have terminated the Offer or (ii) prior to the
<PAGE>
purchase of Shares pursuant to the Offer, any person shall have made a bona
fide offer to acquire the Company as a result of which a majority of the
Special Committee Members conclude in good faith on the advice of independent
outside legal counsel to the Special Committee Members that termination of this
Agreement is necessary in order for the Board of Directors to comply with its
fiduciary obligations under applicable law (provided that such termination
under this clause (d) shall not be effective until the Company has made payment
of the fee, if any, required simultaneous with such termination pursuant to
Section 8.3(a) hereof); or
(e) By Parent prior to the purchase of Shares pursuant to the
Offer, if (i)following any negotiations by the Company with any person (other
than Parent or Purchaser) that has proposed a Third Party Acquisition, there
shall have been a breach of any covenant or agreement on the part of the
Company contained in this Agreement such that the conditions set forth in
clause (f) of Annex A and/or Section 7.1 would not be satisfied which shall not
have been cured prior to the earlier of (A) 10 days following notice of such
breach and (B) two business days prior to the date on which the Offer
expires,(ii) the Board shall have withdrawn or modified (including by amendment
of the Schedule 14D-9) in a manner adverse to Purchaser its approval or
recommendation of the Offer, this Agreement or the Merger or shall have
recommended another offer or transaction, or shall have resolved to effect any
of the foregoing, or (iii) the Minimum Condition shall not have been satisfied
by the expiration date of the Offer and on or prior to such date (A) any person
(other than Parent or Purchaser) shall have made and not withdrawn a bona fide
proposal or public announcement or communication to the Company with respect to
a Third Party Acquisition or (B) any person (including the Company or any of
its affiliates or subsidiaries), other than Parent or any of its affiliates
shall have become the beneficial owner of more than 25% of the Shares.
SECTION 8.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except as set forth in Section 8.3 and Section 9.1; provided, however,
that nothing herein shall relieve any party from liability for any breach
hereof.
SECTION 8.3 Fees. (a) If (A) the Company terminates this
Agreement pursuant to 8.1(d)(ii) hereof, (B) the Company terminates this
Agreement pursuant to Section 8.1(d)(i)(B) hereof at a time when Parent had a
right to terminate this Agreement pursuant to Section 8.1(e) hereof or (C)
Parent terminates this Agreement pursuant to Section 8.1(e) hereof (each, a
"Fee Termination Event"), then (x) in the event of a termination
<PAGE>
pursuant to Section 8(e)(i)or pursuant to Section 8.1(d)(i)(B) at a time when
Parent had a right to terminate this Agreement pursuant to Section 8.1(e)(i),
if the Company or any of its subsidiaries enters into an agreement with respect
to a Third Party Acquisition (an "Acquisition Agreement") within 12 months of
termination, the Company shall pay Parent $1.25 million simultaneously with the
signing of the Acquisition Agreement and an additional $1.25 million on the
consummation of a Third Party Acquisition pursuant to such Acquisition
Agreement or if a Third Party Acquisition occurs within 12 months of
termination without the execution of an Acquisition Agreement, the Company
shall pay Parent $2.5 million on the consummation of the Third Party
Acquisition and (y) in the event of any other Fee Termination Event, the
Company shall pay to Parent a fee, in cash (as a condition and prior to such
Fee Termination Event if such event is a termination by the Company and within
one business day of such termination if such event is a termination by Parent),
of $1.25 million and, if a Third Party Acquisition occurs within 12 months, an
additional $1.25 million on the consummation of such transaction. Parent shall
not be entitled to a fee under this Section 8.3(a) if Parent is in material
breach of this Agreement and such breach has not been cured within 10 days
following notice of such breach. Notwithstanding the foregoing provisions, the
Company in no event shall be obligated to pay to Parent more than $2.5 million
pursuant to this Section 8.3(a).
"Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of the Company by merger, tender offer or
otherwise by any person or group of persons acting in concert other than
Parent, Purchaser or any affiliate thereof (a "Third Party"); (ii) the
acquisition by a Third Party of 35% or more of the assets of the Company and
its subsidiaries, taken as a whole, in one transaction or a related series of
transactions; (iii) the acquisition by a Third Party of more than 35% of the
outstanding Shares, in one transaction or a related series of transactions;
(iv) the adoption by the Company of a plan of liquidation or the declaration or
payment of an extraordinary dividend; or (v) the repurchase by the Company or
any of its subsidiaries of 15.0% or more of the outstanding Shares.
(b) If this Agreement is terminated due to the failure to
satisfy the Offer Condition set forth in clause (ii) of Annex A, then Parent
shall pay to the Company a fee, in cash, of $1.25 million within one business
day of such termination; provided that the Company shall not be entitled to a
fee under this Section 8.3(b) if the Company is in material breach of this
Agreement and such breach has not been cured within 10 days following notice of
such breach.
<PAGE>
(c) Except as otherwise specifically provided herein, each
party shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
SECTION 8.4 Amendment. Subject to Section 6.3, 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 prior to the Effective Time;
provided, however, that, after approval of the Merger by the stockholders of
the Company, no amendment may be made which would reduce the amount or change
the type of consideration into which each Share shall be converted upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.5 Waiver. Subject to Section 6.3, at any time prior
to the Effective Time, any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
forth in Article II, Section 6.6, Section 6.7, Section 6.10 and Article IX
shall survive the Effective Time and those set forth in Section 6.4(b), Section
8.3 and Article IX shall survive termination of this Agreement.
SECTION 9.2 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
<PAGE>
if to Parent or Purchaser:
L-3 Communications Corporation
600 Third Avenue
New York, New York 10016
Attention: Christopher C. Cambria, Esq.
with an additional copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: William E. Curbow, Esq.
if to the Company:
Microdyne Corporation
3601 Eisenhower Avenue
Alexandria, VA 22304
Attention: Michael E. Jalbert
with copies to:
McGuire, Woods, Battle & Boothe LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Attention: David H. Pankey, Esq.
and
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, N.Y. 10019-6092
Attention: Morton A. Pierce, Esq.
SECTION 9.3 Certain Definitions. For purposes of this
Agreement, the term:
(a) "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;
(b) "beneficial owner" with respect to any Shares means a
person who shall be deemed to be the beneficial owner of such Shares
(i) which such person or any of its affiliates or associates
beneficially owns, directly or indirectly, (ii) which such person or
any of its affiliates or associates (as such term is defined in Rule
12b-2 of the Exchange Act) has, directly or indirectly, (A) the right
to acquire (whether such right is exercisable immediately or subject
only to the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise
<PAGE>
of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding or (iii) which are beneficially owned,
directly or indirectly, by any other persons with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares;
(c) "control" (including the terms "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 policies of a person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement or
otherwise;
(d) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession in the United States,
in each case applied on a basis consistent with the manner in which
the audited financial statements for the fiscal year of the Company
ended September 28, 1997 were prepared;
(e) "knowledge", when used with reference to the Company or
its subsidiaries shall mean the actual knowledge of senior executive
officers of the Company after reasonable investigation.
(f) "Intellectual Property" shall mean intellectual or
property of a similar nature including without limitation trademark
rights, patent rights, copyrights, design rights, proprietary
information and all other intellectual property rights, including,
without limitation, inventions, processes, formulae, technology,
know-how, techniques or other data and information, confidential and
proprietary trade secrets, computer software, technical manuals and
documentation used in connection with any of the foregoing, and
licenses and rights with respect to the foregoing or property of like
nature;
(g) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
(h) "subsidiary" or "subsidiaries" of the Company, the
Surviving Corporation, Parent or any other person means any
<PAGE>
corporation, partnership, joint venture or other legal entity of which
the Company, the Surviving Corporation, Parent or such other person,
as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally entitled to
vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
SECTION 9.4 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
SECTION 9.5 Entire Agreement; Assignment. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof. This Agreement shall not be assigned by operation of law
or otherwise, except that Parent and Purchaser may assign all or any of their
respective rights and obligations hereunder to any direct or indirect wholly
owned subsidiary or subsidiaries of Parent, provided that no such assignment
shall relieve the assigning party of its obligations hereunder if such assignee
does not perform such obligations.
SECTION 9.6 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement , other than rights conferred upon Indemnified
Parties under Section 6.7.
SECTION 9.7 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York except
to the extent Maryland law is mandatorily applicable.
SECTION 9.8 Headings. The descriptive headings
contained in this Agreement are included for convenience of
<PAGE>
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
L-3 COMMUNICATIONS CORPORATION
By: /s/ Christopher C. Cambria
--------------------------------
Name: Christopher C. Cambria
Title: Vice President
L-M ACQUISITION CORPORATION
By: /s/ Christopher C. Cambria
--------------------------------
Name: Christopher C. Cambria
Title: President and Secretary
MICRODYNE CORPORATION
By: /s/ Michael E. Jalbert
--------------------------------
Name: Michael E. Jalbert
Title: President and Chief
Executive Officer
<PAGE>
ANNEX A
Offer Conditions
The capitalized terms used in this Annex A have the meanings
set forth in the attached Agreement, except that the term "Merger Agreement"
shall be deemed to refer to the attached Agreement and the term "Commission"
shall be deemed to refer to the SEC.
Notwithstanding any other provision of the Offer, Purchaser
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the Commission, including Rule 14e-1(c) under the Exchange
Act (relating to Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for any Shares
tendered pursuant to the Offer, and may postpone the acceptance for payment or,
subject to the restriction referred to above, payment for any Shares tendered
pursuant to the Offer, and may amend or terminate the Offer (whether or not any
Shares have theretofore been purchased or paid for) if, prior to the expiration
of the Offer, (i) a number of shares of Company Common Stock which, together
with any Shares owned by L-3 Communications Holdings, Inc., Parent or
Purchaser, or any controlled affiliate thereof, constitutes at least a majority
of the voting power (determined on a fully-diluted basis), on the date of
purchase, of all the securities of the Company entitled to vote generally in
the election of directors or in a merger shall not have been validly tendered
and not properly withdrawn prior to the expiration of the Offer (the "Minimum
Condition"), (ii) Purchaser shall have not received the consent of the Required
Lenders (having the meaning assigned to such term under the Credit Agreement
and the 364 Day Credit Agreement) to the transactions contemplated by the
Merger Agreement under (x) the Credit Agreement and (y) the 364 Day Credit
Agreement, or (iii) at any time on or after December 3,1998 and prior to the
acceptance for payment of Shares, any of the following conditions occurs or has
occurred or Purchaser makes a good faith determination that any of the
following conditions has occurred:
(a) there shall have been instituted and pending any action
or proceeding brought by any governmental authority before any federal
or state court, or any order or preliminary or permanent injunction
entered in any action or proceeding before any federal or state court
or governmental, administrative or regulatory authority or agency, or
any other action taken, proposed or threatened, or statute, rule,
regulation, legislation, interpretation, judgment or order proposed,
sought, enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to Parent, Purchaser, the Company or any subsidiary
or affiliate of Purchaser or the Company or the Offer or the Merger,
by any legislative body, court, government or governmental,
administrative or regulatory authority or
<PAGE>
agency which could reasonably be expected to have the effect of: (i)
making illegal, materially delaying or otherwise directly or
indirectly restraining or prohibiting or making materially more costly
the making of the Offer, the acceptance for payment of, or payment
for, some of or all the Shares by Purchaser or any of its affiliates,
the consummation of any of the transactions contemplated by the Merger
Agreement or materially delaying the Merger; (ii) prohibiting or
materially limiting the ownership or operation by the Company or any
of its subsidiaries or Parent, Purchaser or any of Parent's affiliates
of all or any material portion of the business or assets of the
Company or any of its subsidiaries or Parent, or any of its
affiliates, or compelling Parent, Purchaser or any of Parent's
affiliates to dispose of or hold separate all or any material portion
of the business or assets of the Company or any of its subsidiaries or
Parent, or any of its affiliates, as a result of the transactions
contemplated by the Offer or the Merger Agreement; (iii) imposing or
confirming limitations on the ability of Parent, Purchaser or any of
Parent's affiliates effectively to acquire or hold or to exercise full
rights of ownership of Shares, including without limitation the right
to vote any Shares acquired or owned by Parent or Purchaser or any of
its affiliates on all matters properly presented to the stockholders
of the Company, including without limitation the adoption and approval
of the Merger Agreement and the Merger or the right to vote any shares
of capital stock of any subsidiary directly or indirectly owned by the
Company; or (iv) requiring divestiture by Parent or Purchaser or any
of their affiliates of any Shares;
(b) there shall have occurred any fact that had or could
reasonably be expected to have a Material Adverse Effect;
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States, (ii) a decline of at least 25% in either the Dow Jones Average
of Industrial Stocks or the Standard & Poor's 500 index from the date
hereof, (iii) any material adverse change or any existing or
threatened condition, event or development involving a prospective
material adverse change in United States or other material
international currency exchange rates or a suspension of, or
limitation on, the markets therefor, (iv) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States, (v) any limitation (whether or not mandatory) by any
government or governmental, administrative or regulatory authority or
agency, domestic or foreign, on, or any other event that, in the
reasonable judgment of Purchaser, could
A-2
<PAGE>
reasonably be expected to materially adversely affect the extension of
credit by banks or other lending institutions, (vi) a commencement of
a war or armed hostilities or other national or international calamity
directly or indirectly involving the United States (except for any
such event involving Iraq) or having a Material Adverse Effect or
materially adversely affecting (or material delaying) the consummation
of the Offer or (vii) in the case of any of the foregoing existing at
the time of commencement of the Offer, a material acceleration or
worsening thereof;
(d) (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse
to Parent or Purchaser the approval or recommendation of the Offer,
the Merger or the Merger Agreement, or approved or recommended any
takeover proposal or any other acquisition of Shares other than the
Offer and the Merger, or (ii) any such corporation, partnership,
person or other entity or group shall have entered into a definitive
agreement or an agreement in principle with the Company with respect
to a tender offer or exchange offer for any Shares or a merger,
consolidation or other business combination with or involving the
Company or any of its subsidiaries;
(e) any of the representations and warranties of the Company
set forth in the Merger Agreement shall not be true and correct, in
each case as if such representations and warranties were made at the
time of such determination, except where the failure of any such
representations and warranties to be true and correct would not have a
Material Adverse Effect or would make materially more costly the
making of the Offer or the acceptance for payment of, or payment for,
some or all of the Shares by Purchaser or any of its affiliates;
(f) the Company shall have failed to perform in any material
respect any obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with
by it under the Merger Agreement;
(g) the Merger Agreement shall have been terminated in
accordance with its terms or the Offer shall have been terminated with
the consent of the Company; or
(h) any waiting periods under the HSR Act applicable to the
purchase of Shares pursuant to the Offer, and any applicable waiting
periods under any material foreign statutes or regulations, shall not
have expired or been terminated, or any material approval, permit,
authorization or consent of any domestic or foreign governmental,
administrative or regulatory agency (federal, state, local, provincial
or otherwise) shall not have been obtained on
A-3
<PAGE>
terms satisfactory to the Parent in its reasonable
discretion;
which, in the reasonable judgment of Purchaser with respect to each and every
matter referred to above and regardless of the circumstances (including any
action or inaction by Purchaser or any of its affiliates other than a breach of
the Merger Agreement) giving rise to any such condition, makes it inadvisable
to proceed with the Offer or with such acceptance for payment of or payment for
Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of
Purchaser and may be asserted by Purchaser regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser in whole or in
part at any time and from time to time in its sole discretion (subject to the
terms of the Merger Agreement). The failure by Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A-4
<PAGE>
TENDER AGREEMENT
TENDER AGREEMENT (this "Agreement"), dated as of December 3,
1998, among L-3 Communications Corporation, a Delaware corporation ("Parent"),
and Philip T. Cunningham, Successor Trust to Philip T. Cunningham Grantor
Retained Annuity Trust #1 ("Trust #1"), Philip T. Cunningham Grantor Retained
Annuity Trust #2 ("Trust #2"), Maura Spaeth, Katharine Cunningham, and Neal
Sanders as agent for Roman Herzig and Gallerie Nissl (collectively, the
"Stockholders").
RECITALS
Concurrently herewith, Parent, L-M Acquisition Corporation, a
Maryland corporation and a wholly-owned subsidiary of Parent ("Sub"), and
Microdyne Corporation, a Maryland corporation (the "Company"), are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), pursuant to which Sub agrees to
make an offer (the "Offer") for all outstanding shares of Common Stock, par
value $0.10 per share (the "Common Stock"), of the Company, at a price of $5.00
per share (the "Offer Price"), net in cash, to be followed by a merger (the
"Merger") of Sub with and into the Company.
As a condition to their willingness to enter into the Merger
Agreement and make the Offer, Parent and Sub have required that the
Stockholders agree, and the Stockholders have agreed, among other things, to
tender the number of shares of Common Stock of each Stockholder set forth on
Annex A hereto, together with any additional shares when and if they are
acquired (such shares, and any additional shares when and if they are acquired,
being referred to herein as the "Shares") pursuant to the Offer and not
withdraw any Shares therefrom on the terms and conditions provided for herein.
The Board of Directors of the Company has exempted this
Agreement, the Merger Agreement and the transactions contemplated hereby and
thereby so as to render inapplicable Section 3-602 of the Maryland General
Corporation Law ("MGCL") to the transactions contemplated hereby and thereby.
The Board of Directors of the Company has amended the By-laws of the Company so
as to render inapplicable Section 3-702(a)(i) of the MGCL to the transactions
contemplated by this Agreement and the Merger Agreement.
AGREEMENT
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Agreement to Tender. The Stockholders hereby agree to
validly tender all of their Shares pursuant to the Offer and not withdraw any
Shares therefrom; provided that the Merger Agreement has not been terminated;
and provided further that the Stockholders are entitled to receive the same
consideration to be received by the other stockholders of the Company in the
Offer.
<PAGE>
2. Voting of Shares. Each Stockholder hereby agrees, so long
as such Stockholder is required to tender his or its Shares pursuant to Section
1 of this Agreement, to (a) vote the Shares in favor of the approval of the
Merger Agreement; (b) vote the Shares against any action or agreement that
would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement; and (c) vote the Shares against any action or
agreement (other than the Merger Agreement or the transactions contemplated
thereby) that would impede, interfere with, delay, postpone or attempt to
discourage the Merger or the Offer. Each Stockholder shall not hereafter, so
long as such Stockholder is required to tender his or its Shares pursuant to
Section 1 of this Agreement, purport to vote (or execute a consent with respect
to) such Shares (other than in accordance with the requirements of this Section
2) or grant any other proxy or power of attorney with respect to any Shares,
deposit any Shares into a voting trust or enter into any agreement (other than
this Agreement), arrangement or understanding with any person, directly or
indirectly, to vote, grant any proxy or give instructions with respect to the
voting of such Shares.
3. Representations and Warranties.
3.1 Representations and Warranties of Parent. Parent hereby
represents and warrants to the Stockholders as follows:
(a) Due Authorization. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors
of Parent, and no other corporate proceedings on the part of Parent
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Parent and constitutes a valid and
binding agreement of Parent, enforceable against Parent in accordance
with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) is
subject to general principles of equity.
(b) No Conflicts. Except for (i) filings under the
HSR Act, if applicable, (ii) the applicable requirements of the
Exchange Act and the Securities Act, (iii) the applicable requirements
of state securities, takeover or Blue Sky laws, (iv) such
notifications, filings, authorizing actions, orders and approvals as
may be required under other laws and (v) the consent of the Required
Lenders under the Credit Agreement and the 364 Day Credit Agreement to
the transactions contemplated hereby, (A) no filing with, and no
permit, authorization, consent or approval of, any state, federal or
foreign public body or authority is necessary for the execution of
this Agreement by Parent and the consummation by Parent of the
transactions contemplated hereby and (B) neither the execution and
delivery of this Agreement by Parent nor the consummation by Parent of
the transactions contemplated hereby nor compliance by Parent with any
of the provisions hereof shall (1) conflict with or result in any
breach of any provision of the certificate of incorporation or by-laws
(or similar documents) of Parent, (2) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default (or give
2
<PAGE>
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which Parent is a party
or by which it or any of its properties or assets may be bound or (3)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or any of its properties or assets,
except in the case of (2) or (3) for violations, breaches or defaults
which would not in the aggregate materially impair the ability of
Parent to perform its obligations hereunder.
(c) Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to
execute and deliver this Agreement.
3.2 Representations and Warranties of Stockholders. Each
Stockholder, jointly and severally, hereby represents and warrants to Parent as
follows:
(a) Ownership of Shares. Each Stockholder is the
owner (or, in the case of Neal Sanders only, the authorized
representative of the owner) of the Shares set forth opposite its name
on Annex A hereto and has the power to vote and dispose of such
Shares. To each Stockholder's knowledge, such Shares are validly
issued, fully paid and nonassessable, with no personal liability
attaching to the ownership thereof. Each Stockholder has good title to
the Shares, free and clear of any agreements, liens, adverse claims or
encumbrances whatsoever with respect to the ownership of or the right
to vote such Shares, except that 70,000 Shares owned by Philip T.
Cunningham are pledged to Burke & Herbert Bank as security for certain
outstanding loans.
(b) Power; Binding Agreement. Each Stockholder has
the legal capacity, 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 Stockholder will not violate any
other agreement to which any Stockholder is a party including, without
limitation, any voting agreement, stockholders agreement or voting
trust or, in the cases of Trust #1 and Trust #2, the constitutive
documents of such trust. This Agreement has been duly and validly
authorized, executed and delivered by each Stockholder and constitutes
a valid and binding agreement of each Stockholder, enforceable against
each Stockholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to enforcement
of creditors' rights generally and (ii) is subject to general
principles of equity.
(c) No Conflicts. Except for (i) filings under the
HSR Act, if applicable, (ii) the applicable requirements of the
Exchange Act and the Securities Act, (iii) the applicable requirements
of state securities, takeover or Blue Sky laws and (iv)
such notifications, filings, authorizing actions, orders and approvals
as may be required under other laws, (A) no filing with, and no
permit, authorization, consent or approval of, any state, federal or
foreign public body or authority is necessary for the execution of
this Agreement by each Stockholder and the consummation by each
Stockholder of the
3
<PAGE>
transactions contemplated hereby and (B) neither the execution and
delivery of this Agreement by the Stockholders nor the consummation by
the Stockholders of the transactions contemplated hereby nor
compliance by the Stockholders with any of the provisions hereof shall
(1) conflict with or result in any breach of any provision of the
certificate of incorporation, by-laws, trust or charitable instruments
(or similar documents) of any Stockholder, (2) 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, bond,
mortgage, indenture, license, contract, agreement or other instrument
or obligation to which any Stockholder is a party or by which they or
any of their properties or assets may be bound or (3) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to any Stockholder or any of his or its properties or
assets, except in the case of (2) or (3) for violations, breaches or
defaults which would not in the aggregate materially impair the
ability of the Stockholders to perform their obligations hereunder.
4. Certain Covenants of Stockholder. Each Stockholder hereby
covenants and agrees as follows:
4.1 No Solicitation. No Stockholder nor any employee,
representative or agent of any Stockholder shall, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations
with, or provide any information to, any corporation, partnership, person or
other entity or group (other than Parent and Sub, any affiliate or associate of
Parent and Sub or any designees of Parent or Sub) concerning any merger, sale
of all or any material portion of the assets, sale of shares of capital stock
or similar transactions (including an exchange of stock or assets) involving
the Company or any subsidiary or division of the Company; provided, however,
that nothing in this Section 4.1 shall prevent Philip T. Cunningham from taking
any action required to be taken by him in his capacity as a director consistent
with the requirements of the Merger Agreement. If any Stockholder, or any
employee, representative or agent of any Stockholder, receives an inquiry or
proposal with respect to the sale of Shares, then such Stockholder shall
promptly inform Parent of the terms and conditions, if any, of such inquiry or
proposal and the identity of the person making it. Each Stockholder shall, and
shall cause his or its employees, representatives and agents to, immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing.
4.2 Topping Fee. (a) In the event that any Topping Fee Event
shall occur, each Stockholder shall pay to Parent any Topping Fee due to Parent
with respect to his or its Shares in connection with such Topping Fee Event.
Payment of Topping Fees to Parent shall be due immediately following the
consummation of the related Topping Fee Event and shall be payable in
immediately available funds by wire transfer to the account designated in
writing by Parent; provided that if the Selling Price is payable in a form
other than cash ("Non-Cash Consideration") and the Stockholders are legally
prohibited from selling the Non-Cash Consideration into the market, the
Stockholders, at their option, may pay a pro rata portion of the Topping Fee in
the same form of consideration as the Non-Cash Consideration so long as Parent
is granted registration rights with respect to the Non-Cash Consideration on
terms no less
4
<PAGE>
favorable than the registration rights, if any, granted to any of the
Stockholders. For the avoidance of doubt, Topping Fees shall be payable, from
time to time, upon the occurrence of each Topping Fee Event.
(b) For purposes of this Section 4.2, the following
terms shall have the following meanings:
"Initial Amount" shall equal $0.50, as adjusted from time to
time in accordance with Section 6.
"Selling Price" shall mean the consideration per share
(whether cash or non-cash) to be received by any Stockholder in connection with
a Topping Fee Event; provided that if the consideration received by such
Stockholder in connection with a Topping Fee Event shall be other than cash,
(i) in the case of securities listed on a national securities exchange or
traded on the NASDAQ National Market ("NASDAQ"), the per share value of such
consideration shall be equal to the closing price per share listed on such
national securities exchange or NASDAQ on the date the Topping Fee Event is
consummated and (ii) in the case of consideration in a form other than such
securities, the per share value shall be determined in good faith as of the
date the Topping Fee Event is consummated by Parent and the Stockholders, or,
if Parent and the Stockholders cannot reach agreement, by a nationally
recognized investment banking firm reasonably acceptable to the parties, which
determination shall be conclusive for all purposes of this Agreement.
"Set Amount" shall equal $5.50, as adjusted from time to time
in accordance with Section 6.
"Topping Fee" shall mean a fee payable by a Stockholder to
Parent equal to the product of (i) the number of Shares directly or indirectly
sold or disposed by such Stockholder or otherwise in respect of which such
Stockholder is entitled to receive consideration and (ii) (A) if the Selling
Price is less than or equal to the Set Amount, the Selling Price less the Offer
Price or (B) if the Selling Price is greater than the Set Amount, the sum of
(1) the Initial Amount plus (2) 50% of the excess of the Selling Price less the
Set Amount.
"Topping Fee Event" shall mean (a) the direct or indirect
sale or other disposition by any Stockholder of his or its Shares, (b) a merger
or consolidation of the Company or any of its subsidiaries (or similar
transaction) with or into another person, (c) a sale or other disposition of
all or substantially all of the assets of the Company and/or its subsidiaries
(whether in one or more transactions) or (d) any other extraordinary
transaction involving the Company or any of its subsidiaries or any of their
respective assets, in each case, in which any Stockholder is entitled to
receive, cash or non-cash consideration with respect to any of his or its
Shares, provided that such sale, other disposition, merger, consolidation or
other extraordinary transaction is consummated (or a definitive written
agreement with respect thereto is entered into) within twelve (12) months after
any Fee Termination Event pursuant to the Merger Agreement; provided further
that any of the transactions described in clauses (a) - (d) above that involve
Parent or any of its subsidiaries shall not be deemed to constitute a Topping
Fee Event.
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<PAGE>
4.3 Restriction on Transfer and NonInterference. Each
Stockholder hereby agrees, while this Agreement is in effect, and except as
contemplated hereby, not to (a) sell, transfer, pledge (provided that, subject
to the requirements of this Agreement, 160,000 Shares owned by Philip T.
Cunningham may be pledged to Burke & Herbert Bank and Chevy Chase Bank),
encumber, assign or otherwise dispose of, or enter into any contract, option or
other arrangement or understanding with respect to the sale, transfer, pledge,
encumbrance, assignment or other disposition of, any Shares; provided that any
Stockholder may transfer Shares to any other Stockholder (other than Neal
Sanders as agent for Roman Herzig and Gallerie Nissl); provided further that as
a condition to such transfer, such other Stockholder agrees in writing on terms
reasonably acceptable to Parent to become a party to, and agrees to be bound
by, to the same extent as the transferring Stockholder, the terms of this
Agreement or (b) take any action that would make any representation or warranty
of such Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling such Stockholder from performing or its obligations
under this Agreement.
4.4 Legending of Certificates; Nominees Shares. If requested
by Parent, the Stockholders agree to submit to Parent contemporaneously with or
promptly following execution of this Agreement all certificates representing
their Shares so that Parent may note thereon a legend referring to the rights
granted to it by this Agreement, including, without limitation, the right to
receive Topping Fees pursuant to Section 4.2. If any of the Shares beneficially
owned by the Stockholders are held of record by a brokerage firm in "street
name" or in the name of any other nominee (a "Nominee," and, as to such Shares,
"Nominee Shares"), the Stockholders agree that, upon written notice by Parent
requesting it, the Stockholders will within five days of the giving of such
notice execute and deliver to Parent a limited power of attorney in such form
as shall be reasonably satisfactory to Parent enabling Parent to require the
Nominee to (i) enter into an agreement to the same effect as Section 2 hereof
with respect to the Nominee Shares held by such Nominee, (ii) tender such
Nominee Shares in the Offer pursuant to Section 1 hereof and (iii) submit to
Parent the certificates representing such Nominee Shares for notation of the
above-referenced legend thereon.
4.5 Stop Transfer Order. In furtherance of this Agreement,
concurrently herewith, the Stockholders shall and hereby do authorize the
Company's counsel to notify the Company's transfer agent that, except as
permitted pursuant to Section 4.3 of this Agreement, there is a stop transfer
order with respect to all of the Shares (and that this Agreement places limits
on the transfer of such Shares).
4.6 Prohibited Transfers. No Stockholder may sell, transfer,
hypothecate or otherwise dispose of any Shares to any affiliate or associate of
such Stockholder or in a transaction at less than fair value unless the
transferee of such Shares agrees in writing to become a party to, and to be
bound by, to the same extent as the Stockholders, the terms of this Agreement.
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 action
as may be necessary or desirable to consummate the transactions contemplated by
this Agreement.
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6. Adjustments to Prevent Dilution. In the event of a stock
dividend or distribution, or any change in the Company's Common Stock by reason
of any stock dividend, split-up, reclassification, recapitalization,
combination or the exchange of shares, the term "Shares" shall be deemed to
refer to and include the Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
may be changed or exchanged. In such event, the definitions of "Set Amount" and
"Initial Amount" shall be proportionally adjusted.
7. Miscellaneous.
7.1 Entire Agreement; Assignment. This Agreement (i)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof and (ii) shall not be assigned by operation of law or otherwise,
provided that Parent may assign its rights and obligations hereunder to any
direct or indirect wholly owned parent company or subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
7.2 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
7.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses:
If to the Stockholders: Philip T. Cunningham
304 South St. Asaph Street
Alexandria, Virginia 22314
copy to: Powell, Goldstein, Frazer & Murphy
1001 Pennsylvania Avenue
Suite 600 South
Washington, D.C. 20004
Attention: Joseph Berl, Esq.
If to Parent: L-3 Communications Corporation
600 Third Avenue
New York, New York 10016
7
<PAGE>
Attention: Christopher Cambria, Esq.
copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
7.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
7.5 Cooperation as to Regulatory Matters. If so requested by
Parent, promptly after the date hereof, the Stockholders will use their
reasonable best efforts to make and to cause the Company (if required) to make
all filings which are required under the HSR Act and applicable requirements
and to seek all regulatory approvals required in connection with the
transactions contemplated hereby. The parties shall furnish to each other such
necessary information and reasonable assistance as may be requested in
connection with the preparation of filings and submissions to any governmental
agency, including, without limitation, filings under the provisions of the HSR
Act. The Stockholders shall also use their reasonable best efforts to cause the
Company to supply Parent with copies of all correspondence, filings or
communications (or memoranda setting forth the substance thereof) between the
Company and its representatives and the Federal Trade Commission, the
Department of Justice and any other governmental agency or authority and
members of their respective staffs with respect to this Agreement and the
transactions contemplated hereby.
7.6 Termination. This Agreement shall terminate on the
earlier of (i) the Effective Time or (ii) except for the provisions of Section
4.2, Section 4.4, Section 4.6, Section 6 and Section 7, the termination of the
Merger Agreement in accordance with its terms.
7.7 Waiver of Dissenter's and Appraisal Rights. The
Stockholders agree that they will not exercise any rights to dissent from the
Merger or request appraisal rights of their Shares pursuant to Section 3-202 of
the MGCL or any other similar provisions of law in connection with the
transactions contemplated hereby.
7.8 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, each of the parties hereto agrees that 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.
8
<PAGE>
7.9 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which shall be deemed to be an
original, and all of which shall constitute one and the same agreement.
7.10 Descriptive Headings. The descriptive headings 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.
7.11 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by or on
behalf of each of the parties hereto, all as of the date first above written.
L-3 COMMUNICATIONS CORPORATION
By: /s/ Christopher C. Cambria
-------------------------------------------
Name: Christopher C. Cambria
Title: Vice President
PHILIP T. CUNNINGHAM
By: /s/ Philip T. Cunningham
-------------------------------------------
Name: Philip T. Cunningham
SUCCESSOR TRUST TO
PHILIP T. CUNNINGHAM
GRANTOR RETAINED ANNUITY TRUST #1
By: /s/ Jack Porter
-------------------------------------------
Name: Jack Porter
Title: Trustee
PHILIP T. CUNNINGHAM
GRANTOR RETAINED ANNUITY TRUST #2
By: /s/ Philip T. Cunningham
-------------------------------------------
Name: Philip T. Cunningham
MAURA SPAETH
By: /s/ Maura Spaeth
-------------------------------------------
Name: Maura Spaeth
KATHARINE CUNNINGHAM
By: /s/ Katharine Cunningham
-------------------------------------------
Name: Katharine Cunningham
NEAL SANDERS, as agent for Roman Herzig
and Gallerie Nissl
By: /s/ Neal Sanders
-------------------------------------------
Name: Neal Sanders
Title: Agent
10
<PAGE>
ANNEX A
Number of Shares
Name of Common Stock
- ---- ----------------
Philip T. Cunningham 4,380,487
Successor Trust to Philip T. Cunningham
Grantor Retained Annuity Trust #1 209,847
Philip T. Cunningham Grantor Retained
Annuity Trust #2 621,400
Maura Spaeth 19,300
Katharine Cunningham 23,541
Neal Sanders, as agent for
Roman Herzig
and Gallerie Nissl 500,000
11
<PAGE>
EXHIBIT 3
[MICRODYNE LETTERHEAD]
December 9, 1998
Dear Stockholders:
I am pleased to inform you that Microdyne Corporation has signed a merger
agreement with L-3 Communications Corporation under which a subsidiary of L-3
has commenced a tender offer to purchase all of the outstanding Microdyne
shares at $5.00 per share in cash. The tender offer will be followed by a
merger of the subsidiary into Microdyne in which each remaining Microdyne share
will be converted into the right to receive $5.00 per share in cash.
After careful consideration, your Board of Directors has unanimously
approved the merger agreement, the offer and the merger and determined that the
offer and the merger are fair to, and in the best interests of, Microdyne's
stockholders. Accordingly, the Board of Directors unanimously recommends that
all stockholders accept the offer and tender their shares pursuant to the
offer.
In arriving at its determination and recommendation, the Board of
Directors gave careful consideration to the factors described in the attached
Schedule 14D-9, including the opinion of The Robinson-Humphrey Company, LLC,
dated December 3, 1998, to the effect that the cash consideration to be
received by Microdyne's stockholders in the tender offer and the merger is
fair, from a financial point of view, to the Microdyne's stockholders.
Additional information with respect to the Board of Directors' decision is
contained in the attached Schedule 14D-9, and we urge you to consider this
information carefully.
In addition to the attached Schedule 14D-9, we also enclose L-3's Offer to
Purchase, dated December 9, 1998, together with related materials, including a
Letter of Transmittal, to be used for tendering your shares. These documents
set forth the terms and conditions of the offer and the merger and provide
instructions as to how to tender your shares. We urge you to read the enclosed
materials carefully in making your decision with respect to tendering your
shares pursuant to the offer.
Sincerely,
Philip T. Cunningham
Chairman of the Board of Directors
<PAGE>
EXHIBIT 4
THE ROBINSON-HUMPHREY COMPANY, LLC
CORPORATE FINANCE INVESTMENT BANKERS
DEPARTMENT SINCE 1894
December 3, 1998
Special Committee of the Board of Directors
Board of Directors
Microdyne Corporation
3601 Eisenhower Avenue
Alexandria, VA 22304
Gentlemen:
We understand that Microdyne Corporation (the "Company"), L-3
Communications Corporation ("Parent") and L-M Acquisition Corporation
("Purchaser"), a wholly-owned subsidiary of Parent, have entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of December 3,
1998. Pursuant to the Merger Agreement, (i) Purchaser shall commence an offer
(the "Offer") to purchase for cash all of the issued and outstanding shares of
common stock, par value $0.10 per share, of the Company (the "Common Stock") at
a price of $5.00 per share, net to the seller in cash (the "Consideration") and
(ii) subsequent to the consummation of the Offer, Purchaser will be merged with
and into the Company (the "Merger") and, together with the Offer, the
"Transaction") pursuant to which each outstanding share of Common Stock not
acquired in the Offer will be converted into the right to receive the
Consideration. The terms and conditions of the Transaction are more fully set
forth in the Merger Agreement.
We have been requested by the Special Committee of the Board of Directors
of the Company to render our Opinion with respect to the fairness to the
holders of the Common Stock, from a financial point of view, of the
Consideration to be received by such holders in the Transaction.
In arriving at the Opinion set forth below, we have, among other things:
1. Reviewed the Merger Agreement;
2. Reviewed certain publicly available information concerning the Company
which we believe to be relevant to our analysis;
3. Reviewed certain internal financial statements and other financial and
operating data concerning the Company furnished to us by the Company;
4. Conducted discussions with members of Company management concerning its
business, operations, present condition and prospects;
5. Reviewed the trading history of the Common Stock for a period from
November 20, 1997 to the date of this letter;
ATLANTA FINANCIAL CENTER
3333 PEACHTREE ROAD, NE o ATLANTA, GEORGIA 30326
(404) 266-6000
<PAGE>
Special Committee of the Board of Directors
Board of Directors
Microdyne Corporation
December 3, 1998
Page 2
6. Reviewed the historical market prices and trading activity for the
Common Stock and compared them with those of certain publicly traded
companies which we deemed to be reasonably similar to the Company;
7. Compared the results of operations and present financial condition of
the Company with those of certain publicly traded companies which we
deemed to be reasonably similar to the Company;
8. Reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions which we deemed
relevant;
9. Performed certain financial analyses with respect to the Company's
projected future operating performance; and
10. Reviewed such other financial statistics and analyses and performed
such other investigations and took into account such other matters as we
deemed appropriate.
We have relied upon the accuracy and completeness of the financial and
other information provided to us by the Company in arriving at our Opinion
without independent verification. With respect to the financial forecasts for
the years 1999 through 2001, we have assumed that the assumptions provided by
management have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management. In arriving at
our Opinion, we conducted only a limited physical inspection of the properties
and facilities of the Company. We have not made or obtained any evaluations or
appraisals of the assets or liabilities of the Company. Our opinion is
necessarily based upon market, economic and other conditions as they exist on,
and can be evaluated as of, the date of this letter.
We have acted as financial advisor to the Special Committee of the Board
of Directors of the Company in connection with the Transaction and will receive
a fee for our services which is in part contingent upon the consummation of the
Transaction. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of the rendering of this Opinion. We have also
performed various investment banking services for the Company in the past, and
have received customary fees for such services. In the ordinary course of our
business, we may actively trade in the Common Stock for our own account and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that the Consideration to be received by the holders of the Common
Stock in the Transaction is fair from a financial point of view to such
holders.
Very truly yours,
THE ROBINSON-HUMPHREY COMPANY, LLC
<PAGE>
L-3 COMMUNICATIONS AGREES TO ACQUIRE MICRODYNE
ALEXANDRIA, Va., Dec. 3/PRNewswire/--Microdyne Corporation (Nasdaq: MCDY)
today announced that it has signed a definitive agreement pursuant to which L-3
Communications (NYSE: LLL) is to acquire the Company. Under the terms of the
agreement, L-3 Communications is to purchase all of the outstanding common
stock of Microdyne for $5.00 per share in cash and assume Microdyne's existing
debt. The total value of the transaction is approximately $90.0 million.
Under the acquisition agreement, a cash tender offer is to be commenced by a
wholly owned subsidiary of L-3 Communications. The transaction is subject to
the receipt of a majority of Microdyne's shares outstanding in the tender offer
and the approval of L-3 Communications' lenders, regulatory approvals, and other
customary closing conditions. L-3 Communications has appointed Lehman Brothers
Inc. as dealer/manager for the tender offer.
Philip T. Cunningham, Chairman of the Microdyne Board of Directors and
beneficial owner of approximately 43% of the outstanding Microdyne shares,
has agreed to tender his shares, provided that the acquisition agreement has
not been terminated. As of December 1, 1998, Microdyne had approximately 13.1
million shares outstanding.
L-3 Communications is a leading merchant supplier of secure communication
systems and products, microwave components, avionics and ocean systems and
telemetry instrumentation, space and wireless products. Its customers include
the Department of Defense, U.S. government intelligence agencies, aerospace
and defense prime contractors, foreign governments and commercial
telecommunications and cellular customers.
Headquartered in Alexandria, Virginia, Microdyne Corporation is a diversified
technology and services company. The Company's Microdyne Communication
Technologies subsidiary is a leading global developer, manufacturer, service
and system provider of telemetry, remote monitoring and sensing equipment for
various governmental, industrial and commercial applications. Its Microdyne
Outsourcing subsidiary provides customer service solutions -- call center,
repair center and customer information -- to high-tech service providers and
manufacturers.
The information in this release contains forward-looking information concerning
the acquisition of the Company by L-3 Communications. The forward-looking
statements set forth above involve a number of risks and uncertainties that
could cause actual results to differ materially from such statements, including
satisfaction of any or all of the conditions to which L-3 Communications'
acquisition of the Company is subject. SOURCE Microdyne Corporation
<PAGE>
MCDY) L-3 COMMUNICATIONS AGREES TO ACQUIRE MICRODYNE CORPORATION
- -------------------
Business Editors
NEW YORK--(BUSINESS WIRE)--Dec. 3, 1998--L-3 Communications (NYSE:LLL)
announced today that it has signed a definitive agreement to acquire Microdyne
Corporation (NASDAQ/NM:MCDY).
Under the terms of the agreement, L-3 Communications will purchase all of the
outstanding common stock of Microdyne for $5.00 per share in cash and assume
Microdyne's existing debt. The total value of the transaction is approximately
$90.0 million. The transaction is anticipated to be accretive to earnings in
1999 and is expected to close in early 1999.
For the fiscal year ended September 30, 1998, Microdyne reported actual
revenues of $58.3 million, operating income of $1.3 million and net income of
$0.3 million. On a pro forma basis including acquisitions made during the 1998
fiscal year, Microdyne's revenues were $73.5 million, operating income was $3.6
million and net income was $0.9 million. Microdyne's actual earnings before
interest, taxes, depreciation and amortization (EBITDA) for the recent fiscal
year was $2.9 million. Pro forma EBITDA was $11.1 million, before pro forma
depreciation and amortization expenses of $2.4 million and non-recurring
charges of $5.1 million primarily for the write-off of acquired in-process
research and development costs.
Headquartered in Alexandria, Virginia, Microdyne is a premier global developer
and manufacturer of aerospace telemetry receivers, secure communications and
technical support services, including specialized telemetry high-frequency
radios used in aerospace and satellite communications for data gathering and
analysis. The company also provides products for the government and commercial
segments of the U.S. signal intelligence industry and support and repair
services for electronic products companies. "Microdyne is an excellent
strategic addition to L-3 Communications and meets all our acquisition
objectives," said Frank C. Lanza, chairman and chief executive officer of L-3
Communications. "Its key businesses hold leadership positions in their markets
and its operations expand L-3's existing telemetry and instrumentation and
secure communication operations. Over the past year, the company has reshaped
its portfolio to focus on its core businesses, introduced new products and now
has excellent top-line and bottom-line growth prospects. We also see
significant opportunities to improve Microdyne's operating efficiency and
productivity in administrative areas and through R&D consolidation."
"Specifically, Microdyne's aerospace
<PAGE>
telemetry products enable us to provide total solutions to our space customers
for command, control, telemetry and tracking requirements," said Mr. Lanza.
"Its communications and intelligence processing products complement our
existing secure communication products."
Another significant growth area for Microdyne is its product support
operations. More and more companies are choosing to outsource their technical
support so that they can focus their resources on their core businesses,
control costs and improve the quality of their service to customers.
Microdyne's product support operations offer customer service solutions for
high-technology providers and manufacturers.
Under the acquisition agreement, a cash tender offer will be commenced by a
wholly owned subsidiary of L-3 Communications. The transaction is subject to
the receipt of a majority of Microdyne's shares outstanding in the tender offer
and the approval of L-3 Communications' lenders, regulatory approvals and other
customary closing conditions. Lehman Brothers Inc. has been appointed
dealer/manager for the tender offer.
Philip T. Cunningham, Chairman of the Microdyne Board of Directors and
beneficial owner of approximately 43% of the outstanding Microdyne shares, has
agreed to tender his shares provided that the acquisition agreement has not
been terminated. As of December 1, 1998, Microdyne had approximately 13.1
million shares outstanding.
L-3 Communications is a leading merchant supplier of secure communication
systems and products, microwave components, avionics and ocean systems and
telemetry instrumentation, space and wireless products. Its customers include
the Department of Defense, U.S. government intelligence agencies, aerospace and
defense prime contractors, foreign governments and commercial
telecommunications and cellular customers.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Except for historical information contained herein, the matters set forth
in this news release are forward- looking statements. The forward-looking
statements set forth above involve a number of risks and uncertainties that
could cause actual results to differ materially from any such statement,
including the risks and uncertainties discussed in the company's Safe Harbor
Compliance Statement for Forward-Looking Statements, included in L-3's final
prospectus, dated May 18, 1998, relating to the initial public offering of its
stock, which discussion is incorporated herein by this reference.
