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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
VERTEX COMMUNICATIONS CORPORATION
(Name of Subject Company)
VERTEX COMMUNICATIONS CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.10
(Title of Class of Securities)
925320-10-3
(CUSIP Number of Class of Securities)
J. REX VARDEMAN
VERTEX COMMUNICATIONS CORPORATION
2600 NORTH LONGVIEW STREET
KILGORE, TEXAS 75662-6842
(903) 984-0555
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of the Person(s) Filing
Statement)
COPY TO:
WILLIAM F. PYNE, ESQ.
THOMPSON & KNIGHT L.L.P.
1700 PACIFIC AVENUE, SUITE 3300
DALLAS, TEXAS 75201
(214) 969-1700
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Vertex Communications Corporation, a
Texas corporation (the "Company"). The principal executive offices of the
Company are located at 2600 North Longview Street, Kilgore, Texas 75662-6842.
The class of equity securities to which this statement relates is the Common
Stock ("Common Stock") of the Company, par value $0.10 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer disclosed in the Schedule 14D-1,
dated November 18, 1999 (the "Schedule 14D-1"), of Signal Acquisition
Corporation, a Texas corporation (the "Purchaser") and a wholly owned subsidiary
of Tripoint Global Communications Inc., a Delaware corporation ("Parent"), to
purchase all of the outstanding Shares at a price per share of $22.00 (the
"Offer Price") net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
November 18, 1999 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with the Offer to Purchase and any amendments or
supplements to the Letter of Transmittal and the Offer to Purchase, constitute
the "Offer" and are contained in the Schedule 14D-1). According to the
Schedule 14D-1 the address of the principal executive offices of Parent and
Purchaser are each located at 565 Fifth Avenue, 17th Floor, New York, New York
10017.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 11, 1999 (the "Merger Agreement"), among Parent, the Purchaser
and the Company pursuant to which, as soon as practicable following the
consummation of the Offer and satisfaction or waiver, if permissible, of all
conditions to the Merger (as defined herein) the Purchaser will be merged with
and into the Company (the "Merger"), with the Company surviving the Merger as a
wholly-owned subsidiary of Parent (the "Surviving Corporation"). At the
effective time of the Merger (the "Effective Time"), each outstanding Share
(other than Shares held by shareholders who perfect their dissent rights under
Texas law, Shares owned by the Company as treasury stock, and Shares owned by
any direct or any indirect wholly-owned subsidiary of Parent or of the Company)
will be converted into the right to receive the Offer Price in cash (the "Per
Share Merger Consideration"), without interest thereon.
The Offer is conditioned upon, among other things, (a) there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which would represent at least a majority of all outstanding Shares on a
fully diluted basis (the "Minimum Tender Condition"), (b) 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 having
expired or been terminated and (c) the period of time for any applicable review
process by the Committee on Foreign Investment in the United States ("CFIUS")
under Section 721(a) of the Defense Production Act of 1950, as amended (the
"Exon-Florio Act"), having expired and CFIUS not having taken any action or made
any recommendation to the President of the United States to block or to prevent
consummation of the Offer or the Merger. The Purchaser reserves the right
(subject to the applicable rules and regulations of the Securities and Exchange
Commission ("SEC")) to waive or reduce the Minimum Tender Condition and to elect
to purchase, pursuant to the Offer, fewer than the minimum number of Shares
necessary to satisfy the Minimum Tender Condition in the event that either
(a) the Company provides the Purchaser with prior written consent to do so or
(b) the failure of the Minimum Tender Condition to be satisfied results from the
failure of the Principal Shareholders (as defined below) to validly tender their
Shares prior to the expiration of the Offer, or from the withdrawal of any of
the Principal Shareholders' Shares prior to the expiration of the Offer. As used
herein, Shares on a fully diluted basis means all outstanding securities
entitled generally to vote in the election of directors of the Company on a
fully diluted basis, after giving effect to the exercise or conversion of all
options, rights and securities exercisable or convertible into such voting
securities. A copy of the Merger Agreement is filed herewith as Exhibit 1 and
incorporated herein by reference.
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Simultaneously with entering into the Merger Agreement, Parent and the
Purchaser also entered into a Company Shareholder Agreement (the "Shareholder
Agreement") with each member of the Board of Directors of the Company (the
"Board") and William L. Anton (collectively, the "Principal Shareholders"),
pursuant to which each Principal Shareholder has agreed, among other things, to
tender all the Shares that he beneficially owns (including Shares issuable upon
exercise of Company Stock Options (as defined below)) at a price per Share equal
to the Offer Price. If the Principal Shareholders fail to tender their Shares
pursuant to the Offer, or withdraw their Shares prior to the expiration of the
Offer, Parent will have the option to purchase such Shares at the Offer Price
following consummation of the Offer. The Principal Shareholders collectively own
approximately 13.1% of all outstanding Shares (assuming the exercise of all
Company Stock Options held by the Principal Shareholders).
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)(1) Certain contracts, agreements, arrangements, or understandings
between the Company and its executive officers, directors or affiliates are
described in the Information Statement Pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1 thereunder (the "Information
Statement") attached hereto as Annex I and incorporated herein by reference.
(b)(2) Descriptions of (i) the Merger Agreement, (ii) the Shareholder
Agreement and (iii) the Confidentiality Agreement between Parent and the Company
dated as of September 28, 1999 are set forth below. Except as described or
referenced in this Item 3(b), there are no material contracts, agreements,
arrangements or understandings, or any potential or actual conflicts of interest
between the Company or its affiliates and the Company, Parent, the Purchaser or
any of their respective executive officers, directors or affiliates.
THE MERGER AGREEMENT.
The Merger Agreement provides that following the satisfaction of the
conditions described below under "Conditions to Obligations of Each Party Under
the Merger Agreement," the Purchaser will be merged with and into the Company,
and each outstanding Share (other than Shares held by shareholders who perfect
their dissent rights under Texas law, Shares owned by the Company as treasury
stock and Shares owned by Parent or any direct or indirect wholly owned
subsidiary of Parent or of the Company) will be converted into the right to
receive the Per Share Merger Consideration, without interest.
VOTE REQUIRED TO APPROVE MERGER. The Texas Business Corporation Act
("TBCA") requires, among other things, that the adoption of any plan of merger
or consolidation of the Company be approved by the Board and generally by
two-thirds of the holders of the Company's outstanding voting securities.
Article 2.28D of the TBCA, however, provides that a corporation's articles of
incorporation may provide that the act of the shareholders on any matter for
which the affirmative vote of the holders of a specified portion of the shares
entitled to vote is required by the TBCA shall be the affirmative vote of the
holders of a specified portion, but not less than a majority of the shares
entitled to vote on the matter, rather than the affirmative vote otherwise
required by the TBCA. Under the Company's articles of incorporation, only a
majority vote is required to approve the Merger. The Board has approved the
Offer and the Merger. Consequently, the only additional action of the Company
necessary to effect the Merger is approval by the shareholders of the Company if
the "short-form" merger procedure described below is not available. If the
Purchaser acquires, through the Offer or otherwise, voting power with respect to
at least a majority of the outstanding Shares (which would be the case if the
Minimum Tender Condition were satisfied and the Purchaser were to accept for
payment Shares
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tendered pursuant to the Offer), it would have sufficient voting power to effect
the Merger without the vote of any other shareholder of the Company. However,
Article 5.16 of the TBCA also provides that if a purchaser owns at least 90% of
each class of outstanding shares (pursuant to the Offer or otherwise), the
purchaser, by action of the board of directors of the purchaser and without the
action or vote by the shareholders of either corporation, can effect a
short-form merger with the target company. Accordingly, if, as a result of the
Offer or otherwise, the Purchaser acquires or controls the voting power of at
least 90% of the outstanding Shares, the Purchaser could, and intends to, effect
the Merger without prior notice to, or any action by, any other shareholder of
the Company.
CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THE MERGER AGREEMENT. The
respective obligations of each party to effect the Merger under the Merger
Agreement is subject to the satisfaction at or prior to the closing date of the
Merger of the following conditions, any or all of which may be waived by Parent
and the Purchaser, in whole or in part, to the extent permitted by applicable
law: (a) the Merger Agreement shall have been approved by the requisite vote of
the shareholders of the Company, if required by applicable law (the "Company
Shareholder Approval"); (b) the waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired, and the period of time for any applicable review process by CFIUS
under the Exon-Florio Act shall have expired and CFIUS shall not have taken any
action or made any recommendation to the President of the United States to block
or prevent the consummation of the Offer or the Merger; (c) any consents,
approvals and filings under any foreign antitrust law, the absence of which
would prohibit the consummation of the Merger, shall have been obtained or made;
(d) no temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect and any
party asserting this condition shall have used all reasonable efforts to prevent
the entry of any such injunction or other order and to appeal as promptly as
possible any such injunction or other order that may be entered; and (e) the
Purchaser or Parent shall have accepted for payment and paid for all Shares
validly tendered and not withdrawn pursuant to the Offer; provided that this
condition shall be deemed satisfied with respect to the obligation of the
Purchaser and Parent to effect the Merger if the Purchaser fails to accept for
payment or pay for Shares pursuant to the Offer in violation of the Merger
Agreement.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
and the Offer and the Merger may be abandoned at any time (notwithstanding
approval of the Merger by the shareholders of the Company) prior to the
Effective Time PROVIDED that if the Shares are accepted for payment pursuant to
the Offer, neither Parent nor the Purchaser may terminate this Agreement or
abandon the Merger except pursuant to the following clause (a), (b)(i) or
b(iii): (a) by mutual written consent of Parent, the Purchaser and the Company;
(b) by either the Parent or the Company (i) if any court of competent
jurisdiction or other governmental authority issues an order, decree or ruling
or takes any other action permanently enjoining, restraining or otherwise
prohibiting the Merger, and such order, decree or ruling or other action shall
have become nonappealable; (ii) if (A) as a result of the failure of any of the
conditions to the Offer, (1) the Purchaser shall have failed to commence the
Offer within 20 days following the date of the Merger Agreement or (2) the Offer
shall have terminated or expired in accordance with its terms without the
Purchaser having purchased any Shares pursuant to the Offer or (B) the Purchaser
shall not have accepted for payment any Shares pursuant to the Offer prior to
March 11, 2000 (the "Termination Date"), PROVIDED that the right to terminate
pursuant to clause (b)(ii) shall not be available (x) to the Company as a result
of the occurrence of any event set forth in paragraph (d) under Section 14 of
the Offer to Purchase or (y) to any party whose failure to fulfill any of its
obligations under the Merger Agreement or the Shareholder Agreement (each a
"Transaction Agreement" and together the "Transaction Agreements") results in
the failure of any such condition or if the failure of such condition results
from facts or circumstances that constitute a breach of any representation or
warranty of such party contained in any Transaction Agreement; or (iii) if, upon
a vote at a duly held meeting to obtain the Company Shareholder Approval, such
approval is not
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obtained, PROVIDED, HOWEVER, that the Merger Agreement may not be terminated by
Parent pursuant to this clause (b)(iii) if Parent does not cause all Company
Shares acquired pursuant to the Offer or otherwise owned by the Purchaser or any
other subsidiary of Parent to be voted in favor of the Merger Agreement; (c) by
Parent, if the Company breaches or fails to perform in any material respect any
of its representations, warranties or covenants contained in any Transaction
Agreement, which breach or failure to perform (i) would give rise to the failure
of a condition set forth in Section 14 of the Offer to Purchase and (ii) cannot
be or has not been cured within 30 days after written notice to the Company of
such breach; (d) by Parent or the Purchaser if either Parent or the Purchaser is
entitled to terminate the Offer as a result of the occurrence of any event set
forth in paragraph (d) under Section 14 of the Offer to Purchase; or (e) by the
Company if the Board withdraws or modifies its approval or recommendation of the
Transaction Agreements, the Offer or the Merger in the circumstances described
below under the caption "Company Takeover Proposals", PROVIDED that, in order
for termination pursuant to this clause (e) to be deemed effective, the Company
shall have complied with all of its obligations as described below under
"Company Takeover Proposals", including the notice provisions therein, and with
all applicable requirements described below under "Fees and Expenses," including
payment of the Termination Fee.
COMPANY TAKEOVER PROPOSALS. Pursuant to the Merger Agreement, the Company
was required to, and to cause its Representatives (as defined below) to, cease
immediately all current discussions and negotiations regarding any proposal that
constitutes, or may reasonably be expected to lead to, a Company Takeover
Proposal (as defined below). Further, the Company has agreed that it will not,
and will not authorize or permit any of its subsidiaries, or any officer,
director, employee, investment banker, financial advisor, attorney, accountant
or other advisor or representative (collectively, "Representatives") of the
Company or any of its subsidiaries to, (i) directly or indirectly solicit,
initiate or encourage the submission of any Company Takeover Proposal,
(ii) enter into any agreement with respect to any Company Takeover Proposal or
(iii) directly or indirectly participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Company Takeover
Proposal; PROVIDED, HOWEVER, that prior to the earlier to occur of acceptance
for payment of Shares pursuant to the Offer and approval of the Merger Agreement
by the Company's shareholders, the Company may, to the extent that a failure to
do so would violate the fiduciary obligations of the Board under applicable law,
as determined in good faith by a majority of the Disinterested Directors (as
defined below) based on the advice of outside counsel, in response to a Superior
Company Proposal (as defined below) that was not solicited by the Company or its
Representatives and that did not otherwise result from a breach or a deemed
breach of the non-solicitation provisions of the Merger Agreement, and subject
to compliance with the notice requirements described below, (x) furnish
information with respect to the Company to the person making such Superior
Company Proposal pursuant to a confidentiality agreement not less restrictive of
the other party than the confidentiality agreement between the Company and
Parent and (y) participate in discussions or negotiations regarding such
Superior Company Proposal. "Disinterested Director" means, with respect to any
Company Takeover Proposal, any member of the Board that is not an affiliate or
Representative of the person making such Company Takeover Proposal. Without
limiting the foregoing, any violation of the restrictions set forth in the
preceding sentence by any Representative or affiliate of the Company or any
subsidiary of the Company, whether or not such person is purporting to act on
behalf of the Company or any subsidiary of the Company or otherwise, would be
deemed to be a breach of the Merger Agreement by the Company.
The Merger Agreement provides further that, except as described below,
neither the Company, nor the Board nor any committee thereof shall (a) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent or the Purchaser, the approval or recommendation by the Board or any such
committee of the Transaction Agreements, the Offer or the Merger, (b) approve or
cause the Company or any subsidiary of the Company to enter into any letter of
intent, agreement in
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principle, acquisition agreement or similar agreement (each, an "Acquisition
Agreement") relating to any Company Takeover Proposal or (c) approve or
recommend, or propose publicly to approve or recommend, any Company Takeover
Proposal. Notwithstanding the foregoing, if, prior to the earlier to occur of
acceptance for payment of Shares pursuant to the Offer and approval of the
Merger Agreement by the shareholders of the Company, the Board receives a
Superior Company Proposal which was not solicited by the Company and which did
not otherwise result from a breach of the non-solicitation provisions of the
Merger Agreement, and the Board determines in good faith, based on the advice of
outside counsel, that the failure to do so would violate its fiduciary
obligations under applicable law, the Board may withdraw or modify its approval
or recommendation of the Transaction Agreements, the Offer or the Merger;
provided that such determination shall be made at a time that is after the third
business day following the receipt by Parent of written notice advising Parent
that the Board is prepared to accept a Superior Company Proposal, specifying the
material terms and conditions of such Superior Company Proposal and identifying
the person making such Superior Company Proposal.
In addition, under the Merger Agreement, the Company has agreed to promptly
advise Parent, orally and in writing, of any Company Takeover Proposal or any
inquiry with respect to, or that could reasonably be expected to lead to, any
Company Takeover Proposal (including any change to the terms of any such Company
Takeover Proposal or inquiry) and the identity of the person making any such
Company Takeover Proposal or inquiry. The Company shall (i) keep Parent fully
informed of the status of any such Company Takeover Proposal or inquiry
(including any change to the terms of any such Company Takeover Proposal or
inquiry) and (ii) provide to Parent copies of all correspondence and other
written material sent or provided by any third party to the Company, or by the
Company to any third party, in connection with any Company Takeover Proposal, as
soon as practicable after receipt or delivery thereof.
The Merger Agreement provides that the provisions described above will not
prohibit the Company from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or making any disclosure to the Company's
shareholders if, in the good faith judgment of the Board, based on the advice of
outside counsel, failure so to disclose would constitute a violation of
applicable law; PROVIDED, HOWEVER, that neither the Company, nor the Board nor
any committee thereof shall withdraw or modify, or propose publicly to withdraw
or modify, its position with respect to the Transaction Agreements, the Offer or
the Merger (unless it is permitted to do so as described above) or approve or
recommend, or propose publicly to approve or recommend, a Company Takeover
Proposal.
"Company Takeover Proposal" means any inquiry, proposal or offer for (a) a
merger, consolidation, dissolution, recapitalization, liquidation or other
business combination involving the Company or any subsidiary of the Company,
(b) the acquisition by any person in any manner, directly or indirectly, of a
number of shares of any class of equity securities of the Company or any
subsidiary of the Company equal to or greater than 20% of the number of such
shares outstanding before such acquisition or (c) the acquisition by any person
in any manner, directly or indirectly, of assets that constitute 20% or more of
the net revenues, net income or assets of the Company or any subsidiary of the
Company, in each case other than the Offer, the Merger and the other
transactions contemplated by the Transaction Agreements (the "Transactions") and
other than the sale of Vertex Satcom Systems, Inc., a subsidiary of the Company,
on terms approved by Parent (the "Satcom Sale") (the transactions referred to in
clauses (a), (b) and (c) being referred to herein as "Company Takeover
Transactions").
"Superior Company Proposal" means any bona fide proposal made by a third
party to acquire substantially all the equity securities or assets of the
Company, pursuant to a tender or exchange offer, merger, consolidation,
liquidation or dissolution, recapitalization, sale of all or substantially all
its assets or otherwise, (a) on terms which the Board determines in its good
faith judgment to be superior from a
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financial point of view to the holders of Shares than the Transactions (based on
the written opinion, with only customary qualifications, of the Company's
independent financial advisor, which has been provided to Parent), taking into
account all the terms and conditions of such proposal, the Transaction
Agreements and any proposal by Parent to amend the terms of the Transactions,
(b) for which financing, to the extent required, is then committed or which, in
the good faith judgment of the Board, is reasonably capable of being obtained by
such third party and (c) for which, in the good faith judgment of the Board, no
regulatory approvals are required, including antitrust approvals, that could not
reasonably be expected to be obtained.
FEES AND EXPENSES. Except with respect to the circumstances described
below, the Merger Agreement provides that each of Parent, the Purchaser and the
Company will bear its own fees and expenses in connection with the Merger
Agreement regardless of whether the Merger is consummated.
The Merger Agreement provides that in the event that (i) (A) a Company
Takeover Proposal shall have been made known to the Company or shall have been
made directly to its shareholders or any person shall have announced an
intention (whether or not conditional) to make a Company Takeover Proposal,
(B) thereafter the Merger Agreement is terminated as a result of the failure of
the conditions to the Offer, the failure to receive the Company Shareholder
Approval or an uncured material breach by the Company and (C) within 12 months
after such termination a Company Takeover Transaction is consummated or the
Company (or one or more of the Company's subsidiaries representing in the
aggregate 20% or more of the net revenues, net income or the assets of the
Company and the Company's subsidiaries taken as a whole), enters into an
Acquisition Agreement with respect to, approves or recommends a Company Takeover
Transaction or (ii) the Merger Agreement is terminated by the Company after
receiving a Superior Company Proposal as described above or by Parent or the
Purchaser as a result of the failure of the conditions set forth in
paragraph (d) referred to in Section 14 of the Offer to Purchase, then the
Company must promptly, but in no event later than, in the case of clause (i),
the date of the earliest to occur of such consummation, approval, or
recommendation of a Company Takeover Transaction or the entering into of such
Acquisition Agreement, or in the case of clause (ii), the date of such
termination, pay to Parent a fee equal to $3.84 million (the "Termination Fee"),
payable by wire transfer of same day funds. If the Company is required to pay to
Parent a fee pursuant to either of the above clauses, the Company will also
reimburse Parent and the Purchaser for all their out-of-pocket expenses actually
incurred in connection with the Transaction Agreements, the Offer, the Merger
and the other Transactions in an amount not to exceed $640,000. Such
reimbursement shall be paid upon demand following termination of the Merger
Agreement. The payment of any amounts due pursuant to this provision do not
constitute the exclusive remedy of Parent and the Purchaser under the
Transaction Agreements. Without limiting the generality of the foregoing, in the
event of a breach or deemed breach by the Company of the no solicitation
provisions of the Merger Agreement, Parent and the Purchaser will be entitled to
the other remedies contained in the Merger Agreement, including an injunction,
and all other remedies available at law or in equity to which Parent and the
Purchaser are entitled.
CONDUCT OF BUSINESS OF THE COMPANY. Pursuant to the Merger Agreement, the
Company has agreed that from the date of the Merger Agreement to the Effective
Time, unless otherwise expressly permitted by the Merger Agreement or agreed to
in writing by Parent, it will and will cause each of its subsidiaries to:
(a) conduct its business diligently and in the usual, regular and ordinary
course of business and in substantially the same manner as previously conducted;
(b) use all reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and employees
and keep its relationships with customers, suppliers and others having business
dealings with it; (c) maintain its assets in as good working order and condition
as at present, ordinary wear and tear excepted, consistent with past practices;
and (d) maintain in full force and effect current insurance policies or other
comparable insurance coverage with respect to the assets and potential
liabilities thereof.
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PROHIBITED ACTIONS BY THE COMPANY. Under the Merger Agreement, the Company
has agreed that, except as expressly permitted by the Merger Agreement or
otherwise agreed to in writing by Parent, from the date of the Merger Agreement
until the Effective Time, it will not, and will not permit any of its
subsidiaries to, make any material change in personnel, operations or finance,
or do any of the following without the prior written consent of Parent: (i) (A)
declare, set aside or pay any dividends on, or make any other distributions in
respect of, any of its capital stock, other than dividends and distributions by
a direct or indirect wholly owned subsidiary of the Company to its parent,
(B) split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any subsidiary
of the Company or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities other than pursuant to
the provisions of the Merger Agreement relating to Company Stock Options and the
TIW Systems, Inc. Stock Bonus Plan; (ii) issue, deliver, sell, grant, pledge or
otherwise encumber or subject to any lien (A) any shares of its capital stock,
(B) any voting securities, (C) any securities convertible into or exchangeable
for, or any options, warrants or rights to acquire, any such shares, voting
securities or convertible or exchangeable securities or (D) any "phantom" stock,
"phantom" stock rights, stock appreciation rights or stock-based performance
units, other than the issuance of Shares upon the exercise of Company Stock
Options outstanding on the date of the Merger Agreement and in accordance with
their present terms; (iii) amend the Company's articles of incorporation, the
Company's by-laws or other comparable charter or organizational documents other
than pursuant to the Merger Agreement; (iv) acquire or agree to acquire (A) by
merging or consolidating with, or by purchasing the assets of, or by any other
manner, any equity interest in or business or any corporation, partnership,
company, limited liability company, joint venture, association or other business
organization or division thereof or (B) any assets that, individually, are in
excess of $100,000 or, in the aggregate, are in excess of $300,000, except
purchases of inventory in the ordinary course of business consistent with past
practice; (v) (A) grant to any officer or director of the Company or any
subsidiary of the Company any increase in compensation, except in the ordinary
course of business consistent with past practice or to the extent required under
employment agreements filed as exhibits to documents filed by the Company with
the SEC and publicly available prior to the date of the Merger Agreement (the
"Filed Company SEC Documents"), (B) grant to any employee, officer or director
of the Company or any subsidiary of the Company any increase in severance or
termination pay, except to the extent required under any agreement filed as an
exhibit to the Filed Company SEC Documents, (C) establish, adopt, enter into or
amend any Company benefit agreement, (D) establish, adopt, enter into or amend
in any material respect any collective bargaining agreement or Company benefit
plan or (E) take any action to accelerate any rights or benefits, or make any
material determinations not in the ordinary course of business consistent with
past practice, under any collective bargaining agreement or Company benefit plan
or Company benefit agreement, other than pursuant to the provisions of the
Merger Agreement relating to Company Stock Options and the TIW Systems, Inc.
Stock Bonus Plan; (vi) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been required
by a change in generally accepted accounting principles; (vii) sell, lease (as
lessor), license or otherwise dispose of or subject to any lien any properties
or assets that are material, individually or in the aggregate, to the Company
and its subsidiaries, taken as a whole, except (A) sales of inventory and excess
or obsolete assets in the ordinary course of business consistent with past
practice and (B) the Satcom Sale; (viii) (A) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
the Company or any subsidiary of the Company, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, or (B) make any loans, advances or capital
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contributions to, or investments in, any other person, other than to or in the
Company or any direct or indirect wholly owned subsidiary of the Company;
(ix) make or agree to make any new capital expenditure or expenditures that,
individually, is in excess of $100,000 or, in the aggregate, are in excess of
$300,000 in any calendar quarter; (x) make or change any material tax election
or settle or compromise any material tax liability or refund; (xi) (A) pay,
discharge, settle or satisfy any claims, liabilities, obligations or litigation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by the unaudited
financial statements of the Company for its fiscal year ended September 30, 1999
(the "1999 Company Financial Statements") or incurred since the date of such
financial statements in the ordinary course of business consistent with past
practice, (B) cancel any indebtedness that is material, individually or in the
aggregate, to the Company and its subsidiaries taken as a whole, or waive any
claims or rights of substantial value or (C) waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill or similar agreement to
which the Company or any subsidiary of the Company is a party; (xii) adopt a
plan of complete or partial liquidation or resolutions providing for or
authorizing a liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization other than for the liquidation of any
subsidiary of the Company into the Company; (xiii) make or renew, extend, amend,
modify, or waive any material provisions of any contract or commitment or
relinquish or waive any material contract rights or agree to the termination of
any material contract, except in the ordinary course of business consistent with
prior practice; (xiv) institute, settle, or agree to settle any action or
proceeding pending before any court or other governmental entity; or
(xv) authorize, or commit or agree to take, any of the foregoing actions.
DIRECTORS. The Merger Agreement provides that, promptly upon the acceptance
for payment of, and payment by the Purchaser for, any Shares pursuant to the
Offer, the Purchaser will be entitled to designate such number of directors on
the Board as will give the Purchaser, subject to compliance with Section 14(f)
of the Exchange Act, representation on the Board equal to at least that number
of directors, rounded up to the next whole number, which is the product of
(a) the total number of directors on the Board (giving effect to the directors
elected pursuant to this sentence) multiplied by (b) the percentage that
(i) such number of Shares so accepted for payment and paid for by the Purchaser
plus the number of Shares otherwise owned by the Purchaser or any other
subsidiary of Parent bears to (ii) the number of such Shares outstanding, and
the Company will, at such time, cause the Purchaser's designees to be so
elected; PROVIDED that in the event that the Purchaser's designees are appointed
or elected to the Board, until the Effective Time the Board will have at least
two directors who were directors on the date of the Merger Agreement and who are
not officers of the Company (the "Independent Directors"); and PROVIDED FURTHER
that in such event, if the number of Independent Directors is reduced below two
for any reason whatsoever, the remaining Independent Director will be entitled
to designate a person to fill such vacancy who will be deemed to be an
Independent Director or, if no Independent Directors then remain, the other
directors will designate two persons to fill such vacancies who are not current
or former officers, shareholders or affiliates of the Company, Parent or the
Purchaser, and such persons will be deemed to be Independent Directors. Subject
to applicable law, the Company will take all action requested by Parent
necessary to effect any such election, including mailing to its shareholders the
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company will
make such mailing with the mailing of the Schedule 14D-9 (provided that the
Purchaser shall have provided to the Company on a timely basis all information
required to be included in the Information Statement with respect to the
Purchaser's designees). In connection with the foregoing, the Company will
promptly, at the option of the Purchaser, either increase the size of the Board
or obtain the resignation of such number of its current directors as is
necessary to enable the Purchaser's designees to be elected or appointed to the
Board as provided above.
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STOCK OPTIONS. The Merger Agreement provides that, as soon as practicable
following the date of the Merger Agreement, the Board (or, if appropriate, any
committee administering the Company Stock Plans (as defined below)) shall adopt
such resolutions or take such other actions as are required to adjust the terms
of all outstanding Company Stock Options and all outstanding Company SARs (as
defined below) to provide that (i) each outstanding Company Stock Option may be
exercised, whether or not such Company Stock Option is vested, immediately prior
to the acceptance for payment of Shares pursuant to the Offer, contingent on and
subject to the consummation of the Offer, PROVIDED that the Shares issued upon
such exercise are tendered into the Offer and not withdrawn and (ii) each
Company Stock Option and Company SAR outstanding that is not exercised prior to
the acceptance for payment of Shares pursuant to the Offer shall be canceled
effective immediately prior to the acceptance for payment of Shares pursuant to
the Offer with the holder thereof becoming entitled to receive an amount of cash
equal to the product of (x) the excess, if any, of (A) the Per Share Merger
Consideration over (B) the exercise price per Share subject to such Company
Stock Option or Company SAR, multiplied by (y) the number of Shares issuable
pursuant to the unexercised portion of such Company Stock Option or Company SAR;
PROVIDED, HOWEVER, that no cash payment will be made with respect to any Company
SAR that is related to a Company Stock Option in respect of which such a cash
payment is made. All amounts payable pursuant to this paragraph will be subject
to any required withholding of taxes or proof of eligibility of exemption
therefrom and will be paid at or as soon as practicable following the Effective
Time, but in any event within one business day following the Effective Time,
without interest.
The Company will use its best efforts to obtain all consents of the holders
of the Company Stock Options if such consents are determined to be necessary to
effectuate the foregoing as mutually agreed by Parent and the Company. The
cancellation of a Company Stock Option in exchange for the cash payment
described in the preceding paragraph will be deemed a release of any and all
rights the holder of such Company Stock Option had or may have had in respect
thereof, and any necessary consents from all such holders shall so provide.
Notwithstanding anything to the contrary contained in the Merger Agreement,
payment shall, at Parent's request, be withheld in respect of any Company Stock
Option until all necessary consents are obtained.
As soon as practicable following the date of the Merger Agreement, the Board
(or, if appropriate, any committee administering the Company Stock Plans) will
take or cause to be taken such actions as are required to cause (x) the Company
Stock Plans to terminate as of the Effective Time and (y) the provisions in any
other Company benefit plan providing for the issuance, transfer or grant of any
capital stock of the Company or any interest in respect of any capital stock of
the Company to be deleted as of the Effective Time. The Company will ensure that
following the Effective Time no holder of a Company Stock Option or Company SAR
or any participant in any Company Stock Plan or other Company benefit plan will
have any right thereunder to acquire any capital stock of the Company or the
Surviving Corporation.
The Company will take or cause to be taken all actions required to cause the
TIW Systems, Inc. Stock Bonus Plan to be amended as of immediately prior to the
Effective Time to provide that, in the event the Company's Common Stock ceases
to be readily tradable (within the meaning of Q/A-2(d)(1)(iv)(A) of Treas. Reg.
Section 1.411(d)-4), distributions of benefits under such plan will be in the
form of cash; provided that the foregoing will not apply in the event that prior
to the Effective Time (i) such plan has received a favorable determination
letter from the Internal Revenue Service in respect of the termination of the
plan, (ii) such plan has been terminated and (iii) all benefits payable under
such plan have been paid in full to each plan participant and beneficiary
entitled to receive benefits in respect of the termination of such plan.
"Company Stock Option" means any option to purchase Common Stock granted
under any Company Stock Plan.
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"Company SAR" means any stock appreciation right linked to the price of
Common Stock and granted under any Company Stock Plan.
"Company Stock Plans" means the Company's 1995 Stock Compensation Plan, the
Company's Stock Option Plan for Key Employees, the Company's Non-Employee
Directors Stock Option Plan and the Company's Outside Directors Stock Option
Plan, in each case as amended from time to time.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) For six years after the
Effective Time, the Surviving Corporation (or any successor to the Surviving
Corporation) will honor all the Company's obligations to indemnify, defend and
hold harmless the present and former officers and directors of the Company and
its subsidiaries and certain other individuals (each an "Indemnified Party")
against losses, claims, damages, liabilities, costs, fees and expenses
(including reasonable fees and disbursements of counsel and judgments, fines,
losses, claims, liabilities and amounts paid in settlement provided that any
such settlement is effected with the written consent of Parent or the Surviving
Corporation, which consent shall not unreasonably be withheld) arising out of
actions or omissions occurring at or prior to the Effective Time ("Losses") to
the extent such obligations of the Company exist under the TBCA, the terms of
the Company's articles of incorporation or the Company's by-laws, in each case
as in effect on the date of the Merger Agreement, or under any indemnification
agreement between the Company or any subsidiary of the Company, as applicable,
and the Indemnified Party that has been filed as an exhibit to the Filed Company
SEC Documents or that has been previously identified and delivered to Parent;
PROVIDED that in the event any claim or claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such claims. In the event
that the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other person and is not the continuing
or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision will be made so
that the successors and assigns of the Surviving Corporation shall expressly
assume the obligations set forth in this paragraph. The indemnification
provisions in the Merger Agreement are (i) intended to be for the benefit of,
and to be enforceable by, each Indemnified Party, his or her heirs and his or
her representatives and (ii) in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such person may have by
contract or otherwise.
REASONABLE EFFORTS. Upon the terms and subject to the conditions set forth
in the Merger Agreement, each of the parties will use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Offer, the Merger and the other Transactions, including
(i) the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from governmental entities and the making of all necessary
registrations and filings (including filings with governmental entities, if any)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any governmental entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging the Transaction Agreements or the
consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other governmental entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the Transactions and to fully carry out the
purposes of the Transaction Agreements; PROVIDED, HOWEVER, that Parent will not
be required to consent to any action described in paragraph (a) under
Section 14 of the Offer to Purchase. In connection with and without limiting the
foregoing, the Company and the Board will (i) take all action necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to any Transaction or the Transaction Agreements, (ii) if any
state takeover statute or similar statute or regulation becomes applicable to
the Transaction Agreements, take all action necessary to ensure that the Offer,
the
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Merger and the other Transactions may be consummated as promptly as practicable
on the terms contemplated by the Transaction Agreements and otherwise to
minimize the effect of such statute or regulation on the Offer, the Merger and
the other Transactions and (iii) cooperate with Parent and the Purchaser in the
arrangements for obtaining the financing required to consummate the Offer and
the Merger, and to pay related fees and expenses. Nothing in the Merger
Agreement will require Parent to waive any substantial rights or agree to any
substantial limitation on its operations or to dispose of any asset or
collection of assets of the Company, Parent or any of their respective
subsidiaries or affiliates. Notwithstanding the foregoing, the Company is not
prohibited from taking any action permitted by the non-solicitation provisions
of the Merger Agreement described under "Company Takeover Proposals" above.
DIRECTORS AND OFFICERS. The directors of the Purchaser immediately prior to
the Effective Time will be the directors of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, in each case until the earlier of their
resignation or removal or until their respective successors are duly elected or
appointed and qualified.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties.
PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. Termination or
amendment of, or extensions or waivers under, the Merger Agreement, in order to
be effective, require in the case of Parent, the Purchaser or the Company,
action by its Board of Directors or the duly authorized designee of its Board of
Directors. In the event the Purchaser's designees are elected to the Board as
described above, after such election and prior to the Effective Time, (i) the
affirmative vote of a majority of the Independent Directors will be required in
addition to any required approval by the full Board to (A) amend or terminate
the Merger Agreement on behalf of the Company, (B) waive any of the Company's
rights, benefits or remedies under the Merger Agreement or (C) extend the time
for performance of the Purchaser's obligations under the Merger Agreement and
(ii) the Independent Directors will have the power, acting together, to exercise
any right of the Company under the Merger Agreement that the Company otherwise
fails to exercise to the extent that the failure to exercise such right would
materially adversely affect the holders of Shares other than Parent, the
Purchaser and their respective subsidiaries and affiliates.
THE SHAREHOLDER AGREEMENT.
Pursuant to the Shareholder Agreement, each Principal Shareholder has
agreed, among other things, to tender all the Shares that he owns (or has the
right to acquire upon the exercise of Company Stock Options) pursuant to the
Offer. In addition, each Principal Shareholder has granted the Purchaser an
option to purchase all his Shares at a price per Share equal to the Offer Price
in the event that such Principal Shareholder fails to tender such Shares
pursuant to the Offer, or withdraws such Shares prior to expiration of the
Offer. The Shareholder Agreement and all rights and obligations of the parties
to the Shareholder Agreement will terminate on the earlier to occur of the
Effective Time and the termination of the Merger Agreement in accordance with
its terms.
Each Principal Shareholder severally has agreed that prior to the
termination of the Shareholder Agreement, except as otherwise provided therein:
(a) such Principal Shareholder will not (i) sell, transfer, pledge, assign or
otherwise dispose of, or enter into any contract, option or other arrangement
(including any profit sharing arrangement) with respect to the sale, transfer,
pledge, assignment or other disposition of such Principal Shareholder's Shares
to any person other than pursuant to the Offer and the Merger, (ii) enter into
any voting arrangement, whether by proxy, voting agreement or otherwise, with
respect to such Principal Shareholder's Shares or (iii) commit or agree to take
any of the foregoing actions, (b) until the Merger is consummated or the Merger
Agreement is terminated,
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such Principal Shareholder will not, nor will such Principal Shareholder permit
any investment banker, attorney or other advisor or representative of such
Principal Shareholder to (i) directly or indirectly solicit, initiate or
encourage the submission of any Company Takeover Proposal, (ii) enter into any
agreement with respect to any Company Takeover Proposal or (iii) directly or
indirectly participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, any Company Takeover Proposal;
PROVIDED, HOWEVER, that the Principal Shareholder may furnish information with
respect to the Company to a person and participate in discussions or
negotiations with such person regarding a Superior Company Proposal if at such
time the Company is permitted to furnish information and engage in discussions
or negotiations with, and is actually furnishing information to and engaging in
discussions or negotiations with, such person regarding such Superior Company
Proposal pursuant to the nonsolicitation provisions of the Merger Agreement,
(c) at any meeting of shareholders of the Company called to vote upon the Merger
and the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) with respect to the Merger and the Merger Agreement is sought, such
Principal Shareholder will, including by executing a written consent
solicitation if requested by Parent, vote (or cause to be voted) such Principal
Shareholder's Shares in favor of the Merger Agreement and (d) at any meeting of
shareholders of the Company or at any adjournment thereof or in any other
circumstances upon which such Principal Shareholder's vote, consent or other
approval is sought, such Principal Shareholder will vote (or cause to be voted)
such Principal Shareholder's Shares against (i) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company, (ii) any Company Takeover
Proposal and (iii) any amendment of the Company's articles of incorporation or
bylaws or other proposal or transaction involving the Company or any of its
subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent, delay or nullify the Offer, the Merger, the
Merger Agreement or any of the other Transaction or change in any manner the
voting rights of any class of capital stock of the Company. The Shareholder
Agreement provides that each Principal Shareholder executed the Shareholder
Agreement solely in his or her capacity as the record holder and beneficial
owner of such Principal Shareholder's Shares and nothing therein shall limit or
affect any actions taken by a Principal Shareholder in his capacity as an
officer or director of the Company or any subsidiary of the Company to the
extent specifically permitted by the Merger Agreement.
Under the Shareholder Agreement each Principal Shareholder has, subject to
the termination of the Shareholder Agreement, irrevocably granted to, and
appointed, Parent, Stephen Green and Jack Haegele, or any of them, and any
individual designated by any of them, and each of them, such Principal
Shareholder's proxy and attorney-in-fact (with full power of substitution), for
and in the name, place and stead of such Principal Shareholder, to vote such
Principal Shareholder's Shares, or grant a consent or approval in respect of
such Shares, in the manner specified above.
CONFIDENTIALITY AGREEMENT.
Pursuant to the Confidentiality Agreement dated September 28, 1999, between
the Company and Parent (the "Confidentiality Agreement"), the Company and Parent
agreed to keep confidential certain information exchanged between such parties.
The Confidentiality Agreement also contains customary standstill provisions. The
Merger Agreement provides that certain information exchanged pursuant to the
Merger Agreement will be subject to the Confidentiality Agreement.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors
At a meeting of the Board of Directors held on November 11, 1999, the Board
unanimously approved the Shareholder Agreement and the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger.
The Board of Directors unanimously adopted resolutions (i) recommending that
the Company's shareholders accept the Offer and tender their Shares pursuant to
the Offer, (ii) recommending that the Company's shareholders approve the Merger
Agreement and the Merger and (iii) determining that the Offer and the Merger are
fair to and in the best interests of the shareholders of the Company.
A letter to the shareholders communicating the recommendation of the Board
and a joint press release announcing the Offer, the Merger and the Merger
Agreement are filed herewith as Exhibit 4 and Exhibit 5, respectively, and are
incorporated herein by reference.
(b) Background of the Offer; Reasons for the Board of Directors'
Recommendations
BACKGROUND OF THE OFFER
On January 8, 1997, Jack Haegele, Chief Executive Officer and a director of
Parent, met with J. Rex Vardeman, Chairman of the Board, President and Chief
Executive Officer of the Company, in Kilgore, Texas to discuss possible
acquisition of the Company by Parent. This meeting was followed by a phone call
by Mr. Haegele on January 24, 1997 to further discuss this matter.
No further discussions between the Company and Parent regarding a possible
acquisition occurred until April 19, 1999, when Mr. Haegele and Mr. Vardeman met
again in Las Vegas, Nevada to discuss the possible acquisition of the Company by
Parent.
On August 25, 1999, Mr. Haegele and Gary Kanipe, President of RSI Products,
Inc., a subsidiary of Parent, met with Mr. Vardeman in Dallas, Texas to make a
proposal to acquire the Company and to discuss the price range for the
transaction.
On September 23, 1999, the Company's Board met to consider whether
management should pursue discussions with Parent regarding the sale of the
Company. The Board authorized management to continue to explore, monitor and
report to the Board on strategic alternatives available to the Company,
including the possible acquisition of the Company by Parent. The Board also
authorized management to retain a qualified investment banking firm to advise
and assist the Board and management in a review of the Company's strategic
alternatives.
On September 28, 1999, the Company entered into a Confidentiality Agreement
with Parent. Parent then began its due diligence review of the Company's
business and financial condition. Concurrently with its due diligence review,
Parent engaged in various discussions and meetings with management and employees
of the Company, and the Company's advisors to negotiate the terms of the Merger
Agreement and the Shareholder Agreement.
On October 21, 1999, the Company's Board met to discuss the status of the
discussions and negotiations with Parent regarding a potential acquisition. The
Company and its counsel had received a preliminary draft of a merger agreement
from Parent's counsel. Counsel to the Company explained in detail the terms of
the preliminary draft merger agreement and answered questions regarding these
terms. Mr. Vardeman also advised the Board that the Company had engaged Frost
Securities, Inc. ("Frost Securities") as its financial advisor.
On October 27, 1999, the Company's Board met to discuss the status of the
negotiations with Parent. The Board instructed management and the Company's
advisors to continue to negotiate the terms of a merger agreement with Parent
and to keep the Board currently appraised on an ongoing
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basis of the status of such negotiations. Following the October 27th Board
meeting, extensive negotiations occurred concerning the terms of the Merger
Agreement and the Shareholder Agreement.
On November 4, 1999, the Board met to discuss the proposed Merger. At this
meeting, Frost Securities made a presentation to the Board regarding the
fairness from a financial point of view of the proposed per Share consideration
to be received by holders of Shares in the Offer and the Merger and counsel to
the Company explained in detail the terms of the current draft of the merger
agreement and the shareholder agreement. On November 10, 1999, Parent completed
its due diligence review of the Company and informed representatives of the
Company that Parent was willing to proceed with the transaction at a price of
$22.00 per Share. On November 11, 1999 Frost Securities delivered its opinion to
the Board that, as of such date, and subject to the conditions and limitations
set forth therein, the consideration to be received by holders of Shares in the
Offer and the Merger is fair, from a financial point of view. On November 11,
1999, the Company's Board unanimously approved the Merger Agreement, the
Shareholder Agreement, the Offer and the Merger.
The parties executed and delivered the Merger Agreement and the Shareholder
Agreement on the evening of November 11, 1999 and publicly announced the
transaction before the New York Stock Exchange opened for trading on the morning
of November 12, 1999.
REASONS FOR THE TRANSACTION; FACTORS CONSIDERED BY THE BOARD
In approving the Offer and the Merger and recommending that all shareholders
tender their Shares pursuant to the Offer and approve and adopt the Merger
Agreement and the transactions contemplated by the Merger Agreement, the Board
considered a number of factors, including:
(i) the financial and other terms and conditions of the Offer, the Merger
and the Merger Agreement, including the $22.00 per Share consideration
to be received by the Company's shareholders in the Offer and the
Merger, as well as the fact that shareholders would receive a cash
payment with no financing condition;
(ii) the belief of the Board after considering the possible alternatives to
the Offer and the Merger, that no other buyer would be likely to be
willing to purchase all of the outstanding Shares at a price
significantly above the $22.00 Offer Price;
(iii) the historical market price performance of the Shares, the fact that
the $22.00 per Share consideration represents: a premium of
approximately 48.5% over the $14.81 closing sales price for the Shares
on the New York Stock Exchange on November 11, 1999, the last trading
day prior to the public announcement of the execution of the Merger
Agreement; a premium of approximately 38.0% over the $15.94 closing
sales price one week prior, on November 4, 1999; a premium of
approximately 12.8% over the 52-week high of $19.50 per Share; a
premium of approximately 46.5% over the 52-week average of $15.02 per
Share; and a premium of approximately 96.6% over the 52-week low of
$11.19 per Share;
(iv) the presentation of Frost Securities at the meeting of the Board held
November 4, 1999 and the opinion of Frost Securities dated
November 11, 1999, to the effect that, as of such date and based upon
and subject to certain matters stated in such opinion, the proposed
$22.00 per Share consideration to be received by holders of Shares in
the Offer and the Merger was fair, from a financial point of view, to
such holders. The full text of the written opinion of Frost Securities,
dated November 11, 1999, which sets forth assumptions made, matters
considered and limitations on the review undertaken in connection with
the opinion, is filed herewith as Exhibit 6 and is incorporated herein
by reference. Shareholders are urged to read such opinion of Frost
Securities in its entirety;
(v) the fact that, in the event that the Board decided to accept a Superior
Company Proposal of a third party, the Board may, subject to compliance
with the terms of the Merger Agreement,
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terminate the Merger Agreement and pay Parent the Termination Fee of
$3.84 million, plus out-of-pocket expenses not in excess of $640,000.
The Board believed that such termination provision would not be a
significant deterrent to a higher offer by a third party interested in
acquiring the Company;
(vi) the belief of the Board that the terms of the Merger Agreement would
not unduly discourage third parties from making bona fide proposals
subsequent to the execution of the Merger Agreement and the fact that
if a third party were to make an unsolicited Superior Company Proposal,
the Company, in the exercise of its fiduciary duties, could determine
to provide information to and engage in negotiations with such third
party;
(vii) the financial condition, historical results of operations and business
and strategic objectives of the Company, including the risks involved
in achieving those objectives; and
(viii) other historical information concerning the Company's business,
prospects, financial performance and condition, operations, technology,
management and competitive condition.
The Board did not find it necessary or practical to assign relative weights
to the above factors or determine that any factor was determinative or of more
importance than other factors. Rather, the Board viewed its position and
recommendation as being based on the totality of the information presented to
and considered by it. In addition, it is possible that different members of the
Board assigned different weights to the various factors described above.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Frost Securities to act as its financial advisor in
connection with the Offer and the Merger. The Company has agreed to pay Frost
Securities a fee of $150,000 for rendering its fairness opinion. Of such fee,
$50,000 was paid to Frost Securities at the time of its engagement, $50,000 was
paid at the time Frost Securities rendered its fairness opinion, and the balance
of $50,000 will be payable to Frost Securities upon consummation of the Offer
and the Merger. The Company also has agreed to reimburse Frost Securities for
travel and other reasonable out-of-pocket expenses, including the reasonable
fees and disbursements of its legal counsel, and to indemnify Frost Securities
and related parties against certain liabilities, including liabilities under the
federal securities laws, arising out of Frost Securities' engagement.
In the ordinary course of business, Frost Securities may actively trade
securities of the Company for its own account and for the account of customers
and, accordingly, may at times hold a short or long position in such securities.
Neither the Company nor any other persons acting on its behalf currently
intends to employ, retain or compensate any other person to make solicitations
or recommendations to shareholders on its behalf concerning the Offer, except
that solicitations or recommendations may be made by directors, officers or
employees of the Company for which services no additional compensation will be
paid.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in Shares have
been effected during the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company.
(b) Certain of the Company's officers and directors have entered into an
agreement with Parent and the Purchaser in which they have agreed to tender
their Shares promptly in the Offer as described in Item 3 hereof under the
heading "Shareholder Agreement." To the knowledge of the Company, its executive
officers, directors and affiliates presently intend to tender, pursuant to the
Offer, any Shares that are held of record or are beneficially owned by them.
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ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer that relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Items 3(b) or 4(b) above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
matters referred to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) The Information Statement attached as Annex I hereto and incorporated
herein by reference is being furnished pursuant to Rule 14f-1 under the Exchange
Act in connection with the potential designation by Parent, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than at
a meeting of shareholders, as described in Item 3.
(b) Holders of Shares do not have dissenters' rights as a result of the
Offer alone. However, if the Merger is consummated, holders of Shares will have
certain rights pursuant to the provisions of Articles 5.11, 5.12, 5.13 and 5.16
of the TBCA to dissent from the Merger Agreement and to demand payment in cash
of the fair value of their Shares. If the statutory procedures are complied
with, such rights can lead to a judicial determination of the fair value
required to be paid in cash to such dissenting holders for their Shares. Any
such judicial determination of the fair value of Shares, in the case where the
proposed corporate action is submitted to a vote of the shareholders, will be
the value of the Shares as of the day immediately preceding the shareholder
meeting, excluding any appreciation or depreciation in anticipation of the
proposed action. In the case where the proposed corporate action is approved
without a meeting, the fair value of the Shares will be the value of the Shares
as of the date the written consent authorizing the action was delivered to the
Company, excluding any appreciation or depreciation in anticipation of the
action.
If any holder of Shares who demands appraisal under the TBCA fails to
perfect, or effectively withdraws or loses his right to appraisal, as provided
in the TBCA, the Shares of such holder will be converted into the Per Share
Merger Consideration in accordance with the Merger Agreement.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the TBCA and is qualified in its entirety by the full
text of Articles 5.11, 5.12, 5.13 and 5.16 of the TBCA.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
Exhibit 1 -- Agreement and Plan of Merger, dated November 11, 1999,
among the Purchaser, Parent and the Company.
Exhibit 2 -- Company Shareholder Agreement, dated November 11, 1999,
among the Principal Shareholders, Parent and the
Purchaser.
Exhibit 3 -- Confidentiality Agreement, dated as of September 28, 1999,
between Parent and the Company.
Exhibit 4 -- Letter to Shareholders, dated November 18, 1999.*
Exhibit 5 -- Joint press release issued by the Company and Parent on
November 12, 1999.
Exhibit 6 -- Opinion of Frost Securities dated November 11, 1999.*
</TABLE>
- ------------------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
16
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
<TABLE>
<S> <C> <C>
VERTEX COMMUNICATIONS CORPORATION
By: /s/ J. REX VARDEMAN
-----------------------------------------
Name: J. Rex Vardeman
Title: President and Chief Executive
Officer
</TABLE>
Dated: November 18, 1999
17
<PAGE>
ANNEX I
VERTEX COMMUNICATIONS CORPORATION
2600 NORTH LONGVIEW STREET
KILGORE, TEXAS 75662
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 THEREUNDER
------------------------
GENERAL INFORMATION
This Information Statement is mailed on or about November 18, 1999, as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Vertex Communications Corporation, a Texas corporation (the
"Company"), to the holders of record of shares of common stock ("Common Stock")
of the Company, par value $0.10 per share. You are receiving this Information
Statement in connection with the possible election of persons designated by the
Purchaser (as defined below) to a majority of the seats on the Board of
Directors of the Company (the "Board").
On November 11, 1999, the Company, Tripoint Global Communications Inc., a
Delaware corporation ("Parent"), and Signal Acquisition Corporation, a Texas
corporation and a wholly-owned subsidiary of Parent (the "Purchaser"), entered
into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which
(i) Purchaser will commence a tender offer (the "Offer") for all of the
Company's outstanding shares of Common Stock at a price of $22.00 per share, net
to the seller in cash without interest thereon, and (ii) the Purchaser will be
merged with and into the Company (the "Merger"). As a result of the Offer and
the Merger, the Company will become a wholly owned subsidiary of Parent.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. Capitalized terms used herein and not otherwise defined shall have
the meaning set forth in the Schedule 14D-9.
YOU ARE URGED TO READ THIS INFORMATION STATEMENT CAREFULLY. YOU ARE NOT,
HOWEVER, REQUIRED TO TAKE ANY ACTION IN CONNECTION WITH THIS INFORMATION
STATEMENT.
The information contained in this Information Statement concerning the
Purchaser, Parent and the Parent's Designees has been furnished to the Company
by the Purchaser. The Company assumes no responsibility for the accuracy or
completeness of such information.
INFORMATION CONCERNING THE COMPANY
On November 11, 1999, the Company had issued and outstanding 5,116,314
shares of Common Stock, which is the only class of its capital stock
outstanding.
Each holder of Common Stock is entitled to one vote for each share held on
matters to be acted on by shareholders, including the election of directors.
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of shares of the Common Stock of the Company as of November 11, 1999,
by (i) each person known by the Company to own more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) the Company's
Chief Executive Officer, (iv) each of the Company's four other most highly
I-1
<PAGE>
compensated executive officers for fiscal 1999 and (v) the directors and
executive officers of the Company as a group. The persons and entities named in
the table have sole voting and investment power with respect to all such shares
owned by them, unless otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER OR GROUP(1) BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------ -------------------- --------
<S> <C> <C>
Fidelity Management & Research Company...................... 511,000 10.0%
Ryback Management Corporation............................... 263,700 5.2
EQSF Advisers, Inc.......................................... 306,900 6.0
Dimensional Fund Advisors, Inc.............................. 289,900 5.7
J. Rex Vardeman(2).......................................... 199,570 3.9
James D. Carter(2).......................................... 103,833 2.0
A. Don Branum(2)............................................ 89,000 1.7
Rein Luik(3)................................................ 71,710 1.4
Bill R. Womble(2)........................................... 30,550 *
Donald E. Heitzman, Sr.(2).................................. 24,000 *
John G. Farmer(2)........................................... 13,000 *
Louis E. Becker(4).......................................... 2,835 *
All directors and executive officers as a group
(12 persons)(5)........................................... 695,561 13.0
------- ----
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
Common Stock.
(1) The addresses of the persons or entities shown in the foregoing table who
are beneficial owners of more than 5% of the Common Stock are as follows:
Fidelity Management & Research Company, 82 Devonshire Street, Boston,
Massachusetts 02109; Ryback Management Corporation, 7711 Carondelet Avenue,
Box 16900, St. Louis, Missouri 63105; EQSF Advisers, Inc., 767 Third Avenue,
New York, New York 10017; and Dimensional Fund Advisors, Inc., 1299 Ocean
Avenue, Suite 650, Santa Monica, California 90401.
(2) Includes 42,000, 37,000, 42,000, 15,000, 19,000, and 13,000 shares as to
which beneficial ownership could be acquired by Messrs. Vardeman, Carter,
Branum, Womble, Heitzman, and Farmer, respectively, within sixty days of
November 11, 1999, upon the exercise of outstanding options.
(3) Includes 2,080 shares held of record by the TIW Systems, Inc. Stock Bonus
Trust (the "Trust") for the account of Dr. Luik, as to which shares
Dr. Luik shares voting and investment powers pursuant to the terms of the
Trust.
(4) Represents shares held of record by the Trust for the account of Louis E.
Becker, as to which shares Mr. Becker shares voting and investment powers
pursuant to the terms of the Trust.
(5) Includes an aggregate of 226,333 shares as to which beneficial ownership
could be acquired by all such persons within sixty days of November 11,
1999, upon the exercise of outstanding options.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Merger Agreement provides that, promptly upon the acceptance for payment
and payment by the Purchaser of the shares of Common Stock pursuant to and
subject to the conditions of the Offer, Purchaser shall be entitled to designate
directors (the "Purchaser Designees") on the Board of the Company that will give
Parent representation proportionate to its ownership interest; provided, however
that until the effective time of the Merger, the Company shall have at least two
directors who were directors as of the date of the Merger Agreement and not
officers of the Company on the Board (the "Independent Directors"). The Merger
Agreement requires the Company promptly to take necessary action to cause the
Purchaser Designees to be elected or appointed to the Board of the Company under
the circumstances described therein.
I-2
<PAGE>
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the directors and executive officers of Parent listed in
Schedule I attached hereto. The Purchaser has informed the Company that each of
the individuals listed in Schedule I has consented to act as a director, if so
designated. The business address of Parent and the Purchaser is 565 Fifth
Avenue, 17th Floor, New York, NY 10017. It is expected that the Purchaser
Designees may assume office at any time following the purchase by the Purchaser
pursuant to the Offer, which purchase will not be earlier than December 16,
1999, and that upon assuming office, the Purchaser Designees will thereafter
constitute at least a majority of the Board.
The names of current directors and executive officers of the Company, their
ages as of November 11, 1999, and certain other information about them (based
upon information provided by such persons) are set forth below. As indicated
above, some (or all) of the current directors may resign effective immediately
following the purchase of shares of Common Stock by Purchaser pursuant to the
Offer.
<TABLE>
<CAPTION>
DIRECTOR
AND/OR
EXECUTIVE
OFFICER
NAME OF DIRECTOR AND/OR EXECUTIVE OFFICER AGE POSITION(S)* SINCE
- ----------------------------------------- -------- -------------------------------------------- ---------
<S> <C> <C> <C>
J. Rex Vardeman(1)(2)................... 60 Chairman of the Board, President, Chief 1984
Executive Officer of the Company
A. Don Branum(2)........................ 62 Senior Vice President of the Company 1984
James D. Carter(2)...................... 53 Vice President and Chief Financial Officer, 1984
Treasurer and Director of the Company
Bill R. Womble(1)(3).................... 61 Director of the Company 1984
Donald E. Heitzman, Sr.(1)(3)........... 74 Director of the Company 1992
John G. Farmer(3)....................... 52 Director of the Company
Rein Luik............................... 63 Vice President and Director of the Company; 1997
and President, TIW Systems, Inc.
Joe A. Ylitalo.......................... 53 Secretary and General Counsel of the 1997
Company; Secretary, Vertex Microwave
Products, Inc., and Secretary, Vertex-New
Mexico, Inc.
William L. Anton........................ 61 Vice President of the Company 1984
H. Dean Bunnell......................... 52 Vice President of the Company; and President 1995
and Chief Executive Officer, Vertex
Electronic Products, Inc.
Manfred Stupnik......................... 57 Vice President of the Company; and 1995
President, Vertex Microwave Products, Inc.
Louis E. Becker......................... 65 Vice President of the Company; and 1998
President, Vertex Antenna Systems, LLC
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Stock Option Committee of the Outside Directors Stock Option
Plan.
(3) Member of the Audit Committee.
* All executive officers of the Company are elected annually by the Board and
serve at the discretion of the Board. There are no family relationships
between any director or executive officer of the Company and any other such
person.
J. REX VARDEMAN is a co-founder of the Company and has served as Chairman of
the Board, President, Chief Executive Officer and a director since its inception
in October 1984. Prior to founding the Company, Mr. Vardeman served as Vice
President of Harris Antenna Operations ("Harris Antenna
I-3
<PAGE>
Operations"), a unit of the Satellite Communications Division of Harris
Corporation ("Harris"), until the acquisition in 1984 of the Harris Antenna
Operations by the Company. In 1973, Mr. Vardeman co-founded Radio Mechanical
Structures, Inc. ("RMS"), the predecessor to the Harris Antenna Operations, and
served as its Vice President and General Manager and a director until the
acquisition of RMS by Harris in 1977. For more than ten years prior thereto, he
was employed by E-Systems, Inc., a major electronics company, in various
engineering and management positions.
A. DON BRANUM, a co-founder of the Company, has served as Senior Vice
President, Assistant Secretary, and a director since its inception in
October 1984, and as Vice President/General Manager of the Company's Vertex
Antenna Division from April 1994 through August 1998. Prior to joining the
Company, Mr. Branum served as Vice President of the Harris Antenna Operations,
with responsibility for product marketing. Mr. Branum served as President of
Dallas Telecommunications, Inc., a communication marketing and consulting firm
which he founded from 1981 through 1984. From 1978 through 1981, Mr. Branum
served as Vice President and General Manager of the Satellite Communications
Division of Harris, of which the Harris Antenna Operations were a part.
Mr. Branum was a co-founder of RMS in 1973 and served as its President and a
director until its acquisition by Harris in 1977. He holds no other
directorships.
JAMES D. CARTER has served the Company as Vice President and Chief Financial
Officer, Treasurer and a director since its inception in October 1984. Prior to
joining the Company, Mr. Carter was employed by Harris as Controller of the
Harris Antenna Operations since 1978. For more than six years prior thereto,
Mr. Carter was employed by Harris in various accounting positions. Mr. Carter
holds no other directorships.
BILL R. WOMBLE has served as a director of the Company since October 1984.
He has been continuously engaged in the private practice of law since 1963 and
is a senior partner in the firm of Thompson & Knight L.L.P. (attorneys), in
Dallas, Texas. Mr. Womble holds no other directorships.
DONALD E. HEITZMAN, SR. has served as a director of the Company since
September 1992. Mr. Heitzman is President of International & Defense
Consultants, of Dallas, Texas, a private consulting firm which he founded in
May 1992. He was previously employed by Electrospace Systems, Inc.
(telecommunications systems), as Senior Vice President of International Business
Development for more than five years. Mr. Heitzman holds no other directorships.
JOHN G. FARMER has served as a director of the Company since August 1997.
Mr. Farmer is Co-Managing Partner of Stratford Capital Partners, L.P., a
Dallas-based small business investment company (SBIC) founded in 1995 and
affiliated with the Hicks, Muse, Tate & Furst organization. Prior to joining
Stratford Capital Partners, Mr. Farmer served as Senior Vice President and
Regional Manager for GE Capital's Corporate Finance Group from 1990 through
1994. From 1975 to 1990, Mr. Farmer served in a variety of senior management
positions at MBank Dallas, N.A. ("MBank"), including Chairman, Chief Executive
Officer, and a director of MVenture Corp. (MBank's wholly-owned subsidiary and
SBIC) from 1985 until his departure from MBank in 1990. Mr. Farmer serves as a
director of Hollywood Theater Holdings, Inc. (movie entertainment centers).
REIN LUIK has served as a director of the Company since August 1997 and as
Vice President of the Company since June 1997, immediately following the
Company's acquisition of TIW Systems, Inc. ("TIW") as a wholly-owned subsidiary
of the Company. Dr. Luik, the founder of TIW, has served as President of TIW
since its inception in 1976 and continues to serve in that position since its
acquisition by the Company. Prior to founding TIW, Dr. Luik was employed by the
WDL Division of Aeronutronic Ford Corporation from 1962 to 1976, initially as an
engineer and subsequently as Manager of its Antenna Subsystems Engineering
Department. Dr. Luik holds no other directorships.
JOE A. YLITALO has served as Secretary and General Counsel of the Company
since January 1997, as Secretary, Vertex Microwave Products, Inc. since
October 1991 and as Secretary, Vertex--New
I-4
<PAGE>
Mexico, Inc. since October 1997. Prior to January 1997, Mr. Ylitalo was employed
as General Counsel of the Company for more than five years.
WILLIAM L. ANTON has served as Vice President of the Company since
October 1984 and as Vice President--Marketing of Vertex Antenna Products
Division from September 1995 to October 1998. Mr. Anton previously served in the
position of Vice President--International Marketing from October 1987 until
September 1995, and as Vice President--Operations from December 1984 through
October 1987. From April 1984 through December 1984 and from August 1977 until
April 1984, Mr. Anton served as Director of Operations and Program Director,
respectively, of the Harris Antenna Operations.
H. DEAN BUNNELL has served as Vice President of the Company since
January 1995, immediately following the acquisition of Vertex Electronic
Products, Inc. ("VEPI"), formerly Maxtech, Inc., as a wholly-owned subsidiary of
the Company. Mr. Bunnell is a co-founder of VEPI and has served as its President
and Chief Executive Officer since its inception in 1989, and has continued to
serve in such positions since the Company's acquisition of VEPI.
MANFRED STUPNIK has served as Vice President of the Company since
January 1995 and as President of Vertex Microwave Products, Inc. ("VMPI"),
formerly Gamma-f Corp., a wholly-owned subsidiary of the Company, since 1991.
Prior thereto, Mr. Stupnik held positions as Vice President of Operations and
Vice President-Commercial Products during his 26 years of continuous tenure with
VMPI.
LOUIS E. BECKER has served as Vice President of the Company since
October 1998 and as President of Vertex Antenna Systems, LLC ("VAS"), formerly a
division of TIW, since its organization in October 1998 following the
acquisition of TIW as a wholly-owned subsidiary of the Company. He was
co-founder of TIW in 1976, and served continuously as its Executive Vice
President until October 1998. Prior to 1976, he was employed by the WDL Division
of Aeronutronic Ford Corporation, where he was responsible for managing the
Structural/Mechanical Engineering Department.
INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND COMMITTEES
The business affairs of the Company are managed under the direction of the
Board. The Board meets on a regularly scheduled basis during the fiscal year of
the Company to review significant developments affecting the Company and to act
on matters requiring Board approval. It also holds special meetings as required
from time to time when important matters arise requiring Board action between
scheduled meetings. The Board or its authorized committees met ten times and
acted by unanimous written consent four times during the 1999 fiscal year.
During fiscal year 1999, each incumbent director participated in at least 75% of
the aggregate of (i) the total number of meetings of the Board (held during the
period for which he was a director) and (ii) the total number of meetings of all
committees of the Board on which he served (during the period that he served).
For the Board as a whole, attendance was 100% during the 1999 fiscal year.
The Board has established Audit, Compensation, and Outside Directors Stock
Option Committees to devote attention to specific subjects and to assist it in
the discharge of its responsibilities. The functions of these committees, their
current members and the number of meetings held during fiscal year 1999 are
described below.
AUDIT COMMITTEE. The Audit Committee recommends to the Board the
appointment of the firm selected to be independent public accountants for the
Company and monitors the performance and independence of such firm; reviews and
approves the scope of the annual audit and quarterly reviews and evaluates with
the independent public accountants the Company's annual audit and annual
consolidated financial statements; reviews with management the status and
effectiveness of internal accounting controls; evaluates problem areas having a
potential financial impact on the Company which
I-5
<PAGE>
may be brought to its attention by management, the independent public
accountants or the Board; and evaluates all public financial reporting documents
of the Company. Bill R. Womble, Donald E. Heitzman, Sr. and John G. Farmer are
members of the Audit Committee. The Audit Committee met one time during the 1999
fiscal year.
COMPENSATION COMMITTEE. The Compensation Committee is empowered to review
and advise management and make determinations with respect to the compensation
and other employment benefits of executive officers and key employees of the
Company. The Compensation Committee also administers the Company's Stock Option
Plan for Key Employees, the 1995 Stock Compensation Plan for officers, directors
(other than non-employee directors), employees and advisors, Management
Incentive Compensation Plan for officers and key employees and Employee Profit
Sharing Bonus Plan for employees. The Compensation Committee is authorized,
among other powers, to determine from time to time the individuals to whom stock
options shall be granted, the number of shares to be covered by each option and
the time or times at which options shall be granted pursuant to the stock option
plans for officers and other employees.
The Compensation Committee is comprised of J. Rex Vardeman (Chairman) and
Messrs. Womble and Heitzman. The Compensation Committee held two meetings and
acted by unanimous written consent three times during the 1999 fiscal year.
STOCK OPTION COMMITTEE. The Company's Outside Directors Stock Option Plan
(the "Outside Directors Plan") is administered by the Stock Option Committee of
the Board comprised of Messrs. Vardeman (Chairman), Carter and A. Don Branum,
each of whom is an executive officer and director of the Company and ineligible
to participate in such plan. The Outside Directors Plan defines "Outside
Directors" eligible to participate in such plan as those directors of the
Company who are not regular salaried employees of the Company or its
subsidiaries. The Outside Directors Plan expired on December 31, 1996, but
certain previously granted stock options remain validly issued and outstanding
pursuant to the terms of such plan. The Stock Option Committee held no meetings
during the 1999 fiscal year.
The Company does not have a nominating committee. The functions customarily
attributable to a nominating committee are performed by the Board as a whole.
I-6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table sets forth certain information regarding all cash
compensation paid or to be paid by the Company or any of its subsidiaries, as
well as other compensation paid or accrued, during the fiscal years indicated,
to the Company's Chief Executive Officer and each of the Company's four other
most highly compensated executive officers (the "Named Executive Officers") for
such respective periods in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION PAYOUTS
----------------------------------------- ----------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ LTIP
FISCAL COMPENSATION AWARD(S) SARS PAYOUTS
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) ($)(2) ($) (#) ($)
- --------------------------- -------- ---------- ------------ ------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Rex Vardeman,........... 1999 $275,000 $ 10,000 -- -- 25,000(4) --
Chairman of the Board, 1998 250,000 105,000 -- -- -- --
President and Chief 1997 225,000 92,000 -- -- -- --
Executive Officer
A. Don Branum,............. 1999 190,000 8,500 -- -- 25,000(4) --
Senior Vice President 1998 185,000 87,000 -- -- -- --
1997 175,000 37,000 -- -- -- --
James D. Carter,........... 1999 175,000 7,500 -- -- 25,000(4) --
Vice President and Chief 1998 165,000 76,000 -- -- -- --
Financial Officer and 1997 145,000 61,000 -- -- -- --
Treasurer
Rein Luik,................. 1999 215,000 -- -- -- -- --
Vice President; 1998 210,000 49,000 -- -- -- --
President, TIW Systems, 1997 275,000 -- -- -- -- --
Inc.(5)
Louis E. Becker,........... 1999 165,000 21,000 -- -- -- --
Vice President; 1998 160,000 30,000 -- -- -- --
President, Vertex Antenna 1997 170,000 -- -- -- -- --
Systems, LLC(7)
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)(3)
- --------------------------- -------------
<S> <C>
J. Rex Vardeman,........... $ 4,800
Chairman of the Board, 800
President and Chief 800
Executive Officer
A. Don Branum,............. 4,800
Senior Vice President 800
800
James D. Carter,........... 4,800
Vice President and Chief 800
Financial Officer and 800
Treasurer
Rein Luik,................. 4,800
Vice President; 15,497(6)
President, TIW Systems, 15,041(6)
Inc.(5)
Louis E. Becker,........... 4,800
Vice President; 9,692(8)
President, Vertex Antenna 12,750(8)
Systems, LLC(7)
</TABLE>
- ------------------------------
(1) Includes incentive bonus payments earned for services rendered to the
Company or a subsidiary in the year indicated that were paid in the
following year.
(2) Excludes certain incidental perquisites, the total of which did not exceed
the lesser of $50,000 or 10% of the cash compensation for any named
individual.
(3) Except as noted in footnotes (6) and (8) below, the amounts reflected in
this column consist of the annual employer matching payments to the
Company's qualified Savings/Profit Sharing Plan.
(4) Incentive stock options to acquire shares of Common Stock pursuant to the
Company's 1995 Stock Compensation Plan.
(5) Information included in the Summary Compensation Table as to Dr. Luik's 1997
salary compensation (i) represents compensation for services to TIW
Systems, Inc. ("TIW"), a wholly-owned subsidiary of the Company, and since
June 11, 1997, as Vice President of the Company, and (ii) reflects the
annualized amount of such compensation as if he had been employed in such
capacities for the entire fiscal year. Dr. Luik actually earned and was paid
salary compensation of $84,800 from the effective date of the Company's
acquisition of TIW, June 11, 1997, until the end of the 1997 fiscal year.
(6) Includes the fiscal year 1997 and 1998 respective employer contributions of
(i) $4,750 and $4,846 to TIW's qualified 401(k) Plan and (ii) $10,291 and
$10,651 to TIW's qualified Money Purchase Pension Plan for the benefit of
Dr. Luik.
(7) Information included in this Summary Compensation Table as to Mr. Becker's
1997 salary compensation (i) represents compensation for services to Vertex
Antenna Products, LLC ("VAS"), formerly a division of TIW, and since
June 11, 1997, as Vice President of the Company, and (ii) reflects the
annualized amount of such compensation as if he had been employed in such
capacities for the entire fiscal year. Mr. Becker actually earned and was
paid salary compensation of $52,500 from the effective date of the Company's
acquisition of TIW, June 11, 1997, until the end of the 1997 fiscal year.
(8) Includes the fiscal year 1997 and 1998 respective employer contributions of
(i) $4,750 and $3,692 to VAS's qualified 401(k) Plan and (ii) $8,000 and
$6,000 to VAS's qualified Money Purchase Pension Plan for the benefit of
Mr. Becker.
I-7
<PAGE>
OPTION GRANTS DURING FISCAL YEAR 1999
The following table provides information related to options to acquire
shares of Common Stock granted to the Named Executive Officers of the Company
during fiscal year 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
----------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(2) YEAR ($/SH)(3) DATE 5% 10%
- ---- ---------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
J. Rex Vardeman................... 10,000 3.2% $14.875 10/13/08 $93,548 $237,069
15,000 4.8% 12.4375 8/02/09 117,328 297,333
A. Don Branum..................... 10,000 3.2% 14.875 10/13/08 93,548 237,069
15,000 4.8% 12.4375 8/02/09 117,328 297,333
James D. Carter................... 10,000 3.2% 14.875 10/13/08 93,548 237,069
15,000 4.8% 12.4375 8/02/09 117,328 297,333
Rein Luik......................... -- -- -- -- -- --
Louis E. Becker................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The potential realizable value illustrates the value that may be realized
upon exercise of the option immediately prior to the expiration of its term,
assuming the specified compounded rates of appreciation of the Company's
Common Stock over the term of the option. These values do not take into
account provisions of the option providing for termination of the option
following termination of employment, transferability or vesting over five
years.
(2) Incentive stock options to acquire shares of Common Stock granted pursuant
to the Company's 1995 Stock Compensation Plan for a term of ten years from
the date of grant. The options vest and are initially exercisable with
respect to 20% of the shares covered thereby on each anniversary date
thereof in 2000 through 2004, are nontransferable and are subject to
termination under conditions upon death, disability and cessation of
employment of the optionee.
(3) The exercise price per share of the option was equal to 100% of the fair
market value of the Common Stock per share on the date of grant.
1999 OPTION EXERCISES AND FISCAL YEAR END HOLDINGS
The following table sets forth information with respect to options exercised
by the Named Executive Officers of the Company during fiscal year 1999 and the
number and value of unexercised options and SARs held at fiscal year end.
I-8
<PAGE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END(#) AT FY-END ($)(*)
SHARES ACQUIRED VALUE REALIZED --------------------------- ---------------------------
NAME ON EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Rex Vardeman.......... -- -- 35,000 30,000 $17,813 $0
A. Don Branum............ -- -- 35,000 30,000 17,813 0
James D. Carter.......... -- -- 30,000 30,000 11,875 0
Rein Luik................ -- -- -- -- 0 0
Louis E. Becker.......... -- -- -- -- 0 0
</TABLE>
- ------------------------------
* The closing price for the Company's Common Stock as reported by the New York
Stock Exchange on September 30, 1999, was $11.1875 per share. The indicated
value is calculated on the basis of the difference between the option
exercise price per share and $11.1875, multiplied by the number of shares of
Common Stock underlying each option.
COMPENSATION OF DIRECTORS
The Company has adopted a policy whereby all outside directors
(non-employees) receive directors' fees of $1,000 for each meeting of the Board
attended (exclusive of telephonic meetings) and for each meeting of a committee
of the Board attended (exclusive of committee meetings held on the same day as
Board meetings). No director who is an employee of the Company receives any fees
for services as a director or member of any committee of the Board. All
directors are reimbursed for reasonable travel and out-of-pocket expenses
incurred in connection with attendance at meetings of the Board or of committees
of the Board.
In addition, the Company has adopted the Outside Directors Plan whereby
stock option grants have been made from time to time on an irregular basis to
reward director performance and to encourage those qualifying directors of the
Company who are not employees to participate in the Company's long-term success.
Pursuant to this plan, the Company has previously granted non-qualified stock
options in fiscal year 1993 to Messrs. Womble and Heitzman to purchase 5,000
shares of Common Stock each at the exercise price of $10 per share, in fiscal
year 1995 for an additional 5,000 shares of Common Stock each at an exercise
price of $12 per share, and in fiscal year 1998 for an additional 5,000 shares
of Common Stock each at an exercise price of $17 per share. To date,
Messrs. Heitzman and Womble have exercised their 1993 options of 5,000 shares
each, and Mr. Womble has also exercised his 1995 option of 5,000 shares.
In fiscal year 1998, the Company also adopted the Non-Employee Directors
Stock Option Plan, whereby stock option grants may be made from time to time on
an irregular basis to reward director performance and to encourage those
qualifying directors to participate in the Company's success. Pursuant to this
plan, in fiscal year 1998 the Company granted non-qualified stock options to
Messrs. Womble, Heitzman, and Farmer in the amount of 5,000 shares, 5,000
shares, and 10,000 shares, respectively, at an exercise price of $25.00 per
share. During fiscal year 1999 these 1998 options were modified to amend the
exercise price to $16.4375 per share. In addition, in fiscal year 1999 the
Company granted non-qualified stock options to Messrs. Womble, Heitzman, and
Farmer in the amount of 5,000 shares, 4,000 shares, and 3,000 shares,
respectively, at an exercise price of $12.4375 per share. To date, none of these
options have been exercised.
EMPLOYMENT AGREEMENTS
J. Rex Vardeman, A. Don Branum, and James D. Carter, in their capacities as
(i) Chairman of the Board, President and Chief Executive Officer, (ii) Senior
Vice President and Assistant Secretary, and (iii) Vice President and Chief
Financial Officer and Treasurer, respectively, have each executed
I-9
<PAGE>
employment agreements with the Company. These employment agreements are each for
three-year terms which automatically renew on a daily basis.
Among other provisions, these agreements provide that, in consideration for
remaining in the employ of the Company, each officer is entitled, subject to
certain conditions, to receive benefits in the event of termination of
employment under certain circumstances, including, among other reasons, a Change
of Control of the Company. If such an officer is terminated for a reason other
than (a) his death, disability or retirement, (b) for cause, or (c) his
voluntary termination other than for good reason, such officer would be entitled
to receive from the Company, except as otherwise indicated below, a lump-sum
severance payment equal to the sum of the following payments: (i) the officer's
full base salary through the effective date of his termination at the rate then
in effect, (ii) any authorized but unreimbursed business expenses and any
vacation benefits which have accrued but are unpaid or unused as of the
effective date of termination, (iii) any accrued but unpaid annual bonus
compensation to the effective date of termination, but without accelerating the
bonus payment date, (iv) an amount equal to three times the average aggregate
direct annual compensation (salary and bonus) of the officer for the five fiscal
years of the Company ended immediately prior to the effective date of his
termination, and (v) in the event such officer is subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), resulting from any "excess parachute payment" received by such officer
as described in Section 280G(b) of the Code, an amount sufficient to ensure that
after payment of such excise tax, plus interest or penalties thereon, if any, as
the result of such "excess parachute payment," such officer will retain free and
clear of all claims, taxes, and impositions an amount equal to such excise tax,
interest and penalties, if any, imposed upon the excess payment received. In the
event that any such officer receives a parachute payment as a result of
termination of employment, such officer would be deemed to receive an "excess
parachute payment" if it equals or exceeds 300% of the officer's "base amount,"
generally the average annual compensation received by such officer over the five
most recent tax years. The "excess parachute payment" is computed as that
portion of the "parachute payment" which exceeds the "base amount."
In addition, Rein Luik and Louis E. Becker, each in his capacity as
President and Vice President, respectively, of TIW entered into an agreement
with TIW, effective as of June 11, 1997, which includes the same provisions for
a similar term as summarized above as related to his employment in such capacity
with TIW or its successors.
Within one year following the consummation of the Offer, each of J. Rex
Vardeman, James D. Carter, A. Don Branum, Rein Luik, and Louis E. Becker will
have the right, in accordance with their respective employment agreements with
the Company or its subsidiary, as applicable, to discontinue his duties with the
Company or subsidiary, as applicable, and receive the compensation described
above.
Certain key employees of the Company have executed proprietary information
protection agreements acknowledging that all their discoveries made while an
employee of the Company will be the property of the Company and that they will
not disclose trade secrets or other confidential information of the Company to
others.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. Pursuant to rules designed to enhance disclosure of executive
compensation policies, the Company is required to provide certain data and
information regarding compensation and benefits provided to its Chief Executive
Officer and four other most highly compensated officers. The disclosure
requirements for these executive officers include the use of tables and a report
explaining the rationale and considerations which resulted in fundamental
executive compensation decisions affecting these individuals. In response to
this requirement, the Compensation Committee submits the following report for
inclusion in this Information Statement. The data and information included in
the various
I-10
<PAGE>
compensation tables appearing elsewhere in this Information Statement should be
read in conjunction with and are deemed to be a part of this report.
NAMED EXECUTIVE OFFICERS. This report includes disclosure of the required
compensation information for the Company's Named Executive Officers for 1999.
COMPENSATION COMMITTEE. Decisions on compensation of the Company's
executive officers are made by the three-member Compensation Committee comprised
of J. Rex Vardeman, Chairman, Bill R. Womble and Donald E. Heitzman, Sr.
COMPENSATION POLICIES. The Company's executive compensation policies, as
endorsed by the Board of Directors, are designed to:
- Provide competitive levels of compensation which support a
pay-for-performance policy that integrates pay with achievement of annual
and long-term performance goals by the Company as a whole and its
respective subsidiaries and divisions, rewards noteworthy corporate
performance, and recognizes individual initiative and achievements;
- Provide a comprehensive program which enhances opportunities to achieve
strategic business initiatives and facilitates the recruitment, retention
and motivation of talented executives whose abilities are critical to the
long-term success and competitiveness of the Company; and
- Reward executives for long-term strategic management which supports the
Company's strategy of providing superior value to its shareholders.
Target levels of overall compensation of the Named Executive Officers are
intended to be reasonably consistent with those paid to similarly situated
executives of other employers of comparable size in the Company's industry, but
are increasingly being weighted toward programs contingent upon the performance
by the Company or its respective subsidiaries or divisions, as applicable. As a
result of the increased emphasis on tying executive compensation to corporate
performance (either of the Company as a whole or its respective subsidiaries or
divisions, as appropriate), in any particular year the Company's executives may
be paid more or less than executives of the Company's competitors, depending
upon the Company's performance or the performance of its respective subsidiaries
or divisions, as applicable. The Compensation Committee also endorses the
concept that stock ownership by management and stock-based performance
compensation arrangements are beneficial in aligning the interests of management
and shareholders in the enhancement of shareholder value. Thus, the Compensation
Committee has increasingly utilized these elements in determining the Company's
compensation benefits for its executive officers.
Compensation paid the Company's executive officers in 1999, as reflected in
the foregoing tables as to the Named Executive Officers, consisted of base
salary, annual bonus and the granting of stock options to certain of the Named
Executive Officers under the Company's 1995 Stock Plan (as hereinafter defined).
RELATIONSHIP TO PERFORMANCE. The Compensation Committee's emphasis on tying
pay to performance criteria is reflected in the cash compensation paid to the
Named Executive Officers for 1999, as a range from approximately 3.5% to
approximately 7.9% of the amounts paid to four of the Named Executive Officers
for 1999 (approximately 3.5% for the Chief Executive Officer) resulted from
performance-based compensation pursuant to the Company's Management Incentive
Compensation Plan (the "Management Incentive Plan") for annual cash incentive
bonuses of the Company as a whole, its subsidiaries (the "Subsidiaries") and its
divisions (the "Divisions"). The objective measures of performance that are
utilized under the Management Incentive Plan include targeted versus actual
annual net income after tax of the Company as a whole, and targeted versus
actual net pre-tax income for its respective Divisions and Subsidiaries, each
viewed separately. Subjective considerations are considered only in establishing
base salaries and, to a lesser degree, the criteria for establishing the
I-11
<PAGE>
annual operating plan for the Company as a whole, its Divisions and its
Subsidiaries, respectively, from which annual cash bonuses are determined and in
determining the target annual bonus award of each participant pursuant to the
Management Incentive Plan of the Company, its Divisions and its Subsidiaries, as
applicable.
ANNUAL SALARIES. For 1999, the Compensation Committee established the
annual base salaries of the respective Named Executive Officers at levels based
on increases ranging from approximately 2.4% to 10.0% (approximately 10.0% for
the Chief Executive Officer), as compared to their annual base salaries
prevailing in 1998. These adjustments for 1999 were warranted as to each Named
Executive, including the Chief Executive Officer, based on enhanced duties and
responsibilities, competitive data, individual performance, initiative and
contribution to overall corporate performance, tenure and internal comparability
considerations. Additionally, for 1998 the Company experienced the most
successful year in its history, having achieved increases of approximately 41%
in sales, approximately 41% in net income, and approximately 29% in earnings per
share compared to the results of fiscal year 1997. Accordingly, consistent with
the Company's executive compensation policy of tying executive compensation to
performance, the 1999 base salaries of the Named Executive Officers were
increased as compared to 1998 salary levels.
ANNUAL BONUSES. The annual cash incentive bonuses payable under the
respective Management Incentive Plans to the Named Executive Officers reported
in the Summary Compensation Table are based primarily on objective criteria and
to a lesser extent on subjective standards. Objective criteria include actual
versus target annual net income after tax of the Company as a whole, and actual
versus target annual net pre-tax income of each of the Company's Divisions and
Subsidiaries, respectively. Subjective criteria encompass factors considered
(i) in promulgating the annual operating plan and (ii) in determining the target
bonus award for each eligible participant under the applicable Management
Incentive Plan based upon the above described standards utilized in determining
annual base salaries. Target annual net income, after tax or pre-tax, as
applicable, utilized for purposes of establishing target annual cash incentive
bonuses for the year is based on the annual operating plan for the Company, its
Divisions, and its Subsidiaries, developed by management and approved by the
Board of Directors as a whole. In October 1998, the full Board of Directors,
acting upon the recommendations and with the participation of management,
established the following: (i) the parameters of the 1999 annual operating plan,
including, among other information, the financial objectives of the Company, its
Divisions, and its Subsidiaries, for such year; (ii) the percentage of net
income after tax of the Company to be available as the aggregate annual bonus
fund under the Company's Management Incentive Plan for its eligible
participants, including certain of the Named Executive Officers, measured by the
degree of achievement of the Company's actual net income after tax for 1998, as
compared to the target net income after tax for such year pursuant to the annual
operating plan; (iii) the percentage of pre-tax income of its respective
Divisions to be available as the aggregate annual bonus fund under the
Management Incentive Plan applicable to each Division for its eligible
participants, including certain of the Named Executive Officers, measured by the
degree of achievement of each Division's actual pre-tax income for 1999, as
compared to its target pre-tax income for such year pursuant to the annual
operating plan; and (iv) the percentage of pre-tax income of its respective
Subsidiaries to be available as the aggregate annual bonus fund under the
Management Incentive Plan applicable to each Subsidiary for its eligible
participants, including two of the Named Executive Officers, measured by the
degree of achievement of each Subsidiary's actual pre-tax income for 1999, as
compared to its target pre-tax income for such year pursuant to the annual
operating plan.
In October 1998, through application of the criteria described above, the
Compensation Committee determined the target annual bonus award of each eligible
participant under the Management Incentive Plan, including each Named Executive,
as a percentage share of the target annual bonus fund available under such
plans, respectively, for 1999. As a result of the performance of the Company as
a whole, its Divisions, and its Subsidiaries in 1999, the Compensation Committee
I-12
<PAGE>
determined the actual 1999 cash bonus award for each Named Executive, including
the Chief Executive Officer, by applying the objective criteria described above,
which procedure was also uniformly applied in determining the actual 1999 cash
bonuses for all other officers of the Company (including its Divisions) and its
Subsidiaries. The Compensation Committee followed the same procedure in
October 1999 to determine target 2000 cash incentive bonus awards pursuant to
the Management Incentive Plan.
STOCK OPTION GRANTS. The Company has adopted two stock option plans
(collectively, the "Stock Plans") to provide long-term incentive compensation
for eligible participants: the Stock Option Plan for Key Employees (the "Key
Employee Plan") and the 1995 Stock Compensation Plan (the "1995 Stock Plan").
Generally, executive officers and other key employees of the Company (including
its Divisions) and its Subsidiaries are entitled to participate in these Stock
Plans. Stock option grants under the Stock Plans provide the right to purchase
shares of the Company's Common Stock at fair market value (the average of the
high and low trading prices) on the date of grant. Additionally, the 1995 Stock
Plan provides that optionees may be granted stock appreciation rights with
respect to shares of Common Stock covered by related options granted under such
plan, which permit optionees to be paid the appreciation on the related stock
option in lieu of exercising such option. Each stock option granted under the
Key Employee Plan or the 1995 Stock Plan is effectively exercisable based on an
incremental vesting schedule of 20% per annum over five years; and may have a
maximum term of seven years under the Key Employee Plan or ten years pursuant to
the 1995 Stock Plan. The Stock Plans are structured to encourage the retention
of shares purchased under the Stock Plans and provide long-term compensation
opportunities to participating executives and other key employees only to the
extent that shareholders of the Company have benefitted.
In 1999, the Compensation Committee approved the grant of certain stock
options pursuant to the 1995 Stock Plan to the respective Named Executive
Officers indicated in the tables accompanying this report. Option grants have
been made from time to time on an infrequent basis under the Stock Plans to
reward executive performance and to encourage optionees to participate in the
Company's long-term success as measured by the value of the Company's Common
Stock. Factors considered in determining the amounts of options include
multiples of base salary (designed to create greater opportunities commensurate
with enhanced responsibilities), competitive data, managerial abilities, and
individual initiative and achievements.
The 1999 annual compensation of J. Rex Vardeman, President and Chief
Executive Officer, as reflected in certain tables accompanying this report, was
based on the policies described above.
Respectfully submitted,
COMPENSATION COMMITTEE
of the Board of Directors
J. Rex Vardeman, CHAIRMAN
Bill R. Womble
Donald E. Heitzman, Sr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1999, the members of the Compensation Committee were
responsible for determining executive compensation and made decisions related to
stock option grants to certain officers other than executive officers. J. Rex
Vardeman, Chairman of the Board, President and Chief Executive Officer, serves
as Chairman of the Compensation Committee and participated in deliberations
concerning executive officer compensation.
I-13
<PAGE>
No member or nominee for election as a member of the Board or any Committee
of the Board has an interlocking relationship with the board (or member of such
board) or any committee (or member of such committee) of a board of any other
company.
STOCK PERFORMANCE INFORMATION
The following chart illustrates the percentage of change in the cumulative
total shareholder return on the Company's Common Stock during each of the fiscal
years in the five-year period ended September 30, 1999, compared with the
cumulative total returns on the Center for Research in Security Prices ("CRSP")
Index for The Nasdaq Stock Market (U.S. Companies) and the CRSP Index for Nasdaq
Communications Equipment Stocks, respectively, for the same periods.
I-14
<PAGE>
STOCK PERFORMANCE*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VERTEX COMMUNICATIONS CORPORATION CRSP INDEX FOR THE NASDAQ STOCK MARKET (US COMPANIES)
<S> <C> <C>
1994 100.0 100.0
1995 153.3 138.1
1996 148.9 163.8
1997 214.4 225.0
1998 163.3 228.8
1999 99.4 317.5
<CAPTION>
CRSP INDEX FOR THE NASDAQ COMMUNICATIONS EQUIPMENT STOCKS
<S> <C>
1994 100.0
1995 201.4
1996 229.1
1997 250.7
1998 150.3
1999 426.8
</TABLE>
LEGEND
<TABLE>
<CAPTION>
INDEX DESCRIPTION 09/1994 09/1995 09/1996 09/1997 09/1998 09/1999
----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Vertex Communications Corporation 100.0 153.3 148.9 214.4 163.3 99.4
CRSP Index for NASDAQ Stock Market 100.0 138.1 163.8 225.0 228.8 371.5
CRSP Index for Nasdaq Communication Equipment Stocks 100.0 201.4 229.1 250.7 150.3 426.8
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indices are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year end, is not a trading
day, the preceding trading day is used.
D. The index level for each series was set to $100.00 on September 30, 1994.
* The comparison assumes (i) $100 was invested on September 30, 1994, in
the Company's Common Stock and in each of the foregoing indices and
(ii) that any dividends paid by companies included in the comparative
indices were reinvested in additional shares of the same class of equity
securities of such companies at the frequency with which dividends were
paid during the applicable periods depicted.
The stock performance information depicted in the preceding chart is not
necessarily indicative of future stock price performance. The chart shall not be
deemed to be incorporated by reference in any filing by the Company under the
Securities Act of 1933, as amended, or the Exchange Act, except to the extent
that the Company specifically incorporates such information by reference.
I-15
<PAGE>
CERTAIN TRANSACTIONS
The Board of the Company has adopted a policy that transactions between the
Company, its officers, directors, principal shareholders, and affiliates be
conducted on terms at least as favorable to the Company as those which could be
obtained from independent parties.
The Company has entered into certain indemnification agreements with each of
its directors and executive officers to provide the maximum indemnification
allowed pursuant to its articles of incorporation, bylaws and applicable law.
Mr. Womble, a director of the Company, is a partner of Thompson & Knight
L.L.P., a Dallas, Texas law firm that has been retained by the Company as its
corporate counsel.
SECTION 16 REQUIREMENTS
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and reports of
changes in ownership with the SEC. Such persons are required by SEC regulation
promulgated pursuant to the Exchange Act to furnish the Company with copies of
all Section 16(a) report forms they file with the SEC.
Based solely on its review of the copies of such report forms received by it
with respect to fiscal year 1999, or written representations from certain
reporting persons, the Company believes that all filing requirements applicable
to its directors, officers and persons who own more than 10% of a registered
class of the Company's equity securities have been timely complied with in
accordance with Section 16(a) of the Exchange Act.
I-16
<PAGE>
SCHEDULE I
As of the date of this Information Statement, the Purchaser has not
determined who will be the Purchaser Designees. However, such Purchaser
Designees will be selected from the following list of directors and executive
officers of Parent promptly upon the purchase by the Purchaser of shares of
Common Stock of the Company pursuant to the Offer. The information contained
herein concerning Parent and its directors and executive officers has been
furnished by Parent and the 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 Purchaser
Designee and certain other information is set forth below. Except as noted, none
of the persons listed below owns any shares of Common Stock or has engaged in
any transactions with respect to shares of Common Stock during the past
60 days. During the last five years, neither Parent, the Purchaser nor any
individual indicated below 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. All of the individuals listed below are citizens of the United
States.
<TABLE>
<CAPTION>
NAME AND TITLE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
-------------- ---------------------------------------------------------------------------
<S> <C>
Jack Haegele,.......................... Mr. Haegele has been Chairman and Chief Executive Officer of TBG Industries
Chief Executive Officer and Director Inc., the majority shareholder of Parent, since 1997. He was President and
Chief Operating Officer of TBG Holdings NV from 1992 to 1997.
Stephen Green,......................... Mr. Green has been Vice President and General Counsel of TBG Services Inc.,
Vice President and Director an affiliate of Parent, since 1997. Prior to 1997, he was Assistant General
Counsel with TBG Services Inc. and affiliated companies.
Donald Hofmann,........................ Mr. Hofmann has been a General Partner of Chase Capital Partners since
Director 1992. Chase Capital Partners is an affiliate of Chase Manhattan Bank and is
a minority shareholder of Parent.
Robert B. Levine,...................... Mr. Levine is Vice President-Taxes of TBG Services Inc., an affiliate of
Vice President Parent.
</TABLE>
The business address for Messrs. Haegele, Green and Levine is 565 Fifth
Avenue, 17th Floor, New York, New York 10017.
The business address for Mr. Hofmann is 380 Madison Avenue, 12th Floor, New
York, New York 10017.
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
EXHIBIT DESCRIPTION
- ------- ------------------------------------------------------------
Exhibit 1 -- Agreement and Plan of Merger, dated November 11, 1999,
among the Purchaser, Parent and the Company.
Exhibit 2 -- Company Shareholder Agreement, dated November 11, 1999,
among the Principal Shareholders, Parent and the
Purchaser.
Exhibit 3 -- Confidentiality Agreement, dated as of September 28, 1999,
between Parent and the Company.
Exhibit 4 -- Letter to Shareholders, dated November 18, 1999.*
Exhibit 5 -- Joint press release issued by the Company and Parent on
November 12, 1999.
Exhibit 6 -- Opinion of Frost Securities dated November 11, 1999.*
</TABLE>
- ------------------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
<PAGE>
CONFORMED COPY
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of November 11, 1999,
among
TRIPOINT GLOBAL COMMUNICATIONS INC.,
SIGNAL ACQUISITION CORPORATION
and
VERTEX COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE OFFER AND THE MERGER
SECTION 1.01. The Offer.......................................................2
SECTION 1.02. Company Actions.................................................4
SECTION 1.03. The Merger......................................................5
SECTION 1.04. Closing.........................................................5
SECTION 1.05. Effective Time..................................................5
SECTION 1.06. Effects.........................................................6
SECTION 1.07. Articles of Incorporation
and By-laws...................................................6
SECTION 1.08. Directors.......................................................6
SECTION 1.09. Officers........................................................6
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock.........................................6
SECTION 2.02. Exchange of Certificates........................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization, Standing and Power...............................11
SECTION 3.02. Company Subsidiaries; Equity
Interests....................................................12
SECTION 3.03. Capital Structure..............................................12
SECTION 3.04. Authority; Execution and Delivery;
Enforceability...............................................14
SECTION 3.05. No Conflicts; Consents.........................................15
SECTION 3.06. SEC Documents and Financial Statements.........................17
SECTION 3.07. Information Supplied...........................................18
SECTION 3.08. Absence of Certain Changes
or Events....................................................19
SECTION 3.09. Taxes..........................................................20
SECTION 3.10. Absence of Changes in Benefit Plans............................21
SECTION 3.11. ERISA Compliance; Excess Parachute
Payments.....................................................22
<PAGE>
ii
SECTION 3.12. Litigation.....................................................25
SECTION 3.13. Compliance with Applicable Laws................................26
SECTION 3.14. Environmental Matters..........................................27
SECTION 3.15. Contracts......................................................28
SECTION 3.16. Title to Properties............................................30
SECTION 3.17. Intellectual Property..........................................31
SECTION 3.18. Labor Matters..................................................32
SECTION 3.19. Brokers........................................................32
SECTION 3.20. Opinion of Financial Advisor...................................32
SECTION 3.21. Year 2000 Compliance...........................................32
SECTION 3.22. Potential Conflicts of Interest................................33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
SECTION 4.01. Organization, Standing and Power...............................34
SECTION 4.02. Sub............................................................34
SECTION 4.03. Authority; Execution and Delivery;
Enforceability...............................................34
SECTION 4.04. No Conflicts; Consents.........................................35
SECTION 4.05. Information Supplied...........................................36
SECTION 4.06. Brokers........................................................36
SECTION 4.07. Financing......................................................37
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business............................................37
SECTION 5.02. No Solicitation................................................41
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Preparation of Proxy Statement;
Shareholders Meeting.........................................44
SECTION 6.02. Access to Information;
Confidentiality..............................................46
SECTION 6.03. Reasonable Efforts; Notification...............................47
SECTION 6.04. Stock Options..................................................48
SECTION 6.05. Indemnification................................................50
SECTION 6.06. Fees and Expenses..............................................53
SECTION 6.07. Public Announcements...........................................54
SECTION 6.08. Transfer Taxes.................................................54
SECTION 6.09. Directors......................................................55
SECTION 6.10. Shareholder Litigation.........................................56
<PAGE>
iii
SECTION 6.11. Compliance of Sub..............................................56
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Each Party's Obligation to
Effect the Merger............................................56
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination....................................................58
SECTION 8.02. Effect of Termination..........................................60
SECTION 8.03. Amendment......................................................60
SECTION 8.04. Extension; Waiver..............................................61
SECTION 8.05. Procedure for Termination, Amendment,
Extension or Waiver..........................................61
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Nonsurvival of Representations
and Warranties...............................................61
SECTION 9.02. Notices........................................................61
SECTION 9.03. Definitions....................................................63
SECTION 9.04. Interpretation; Disclosure Letters.............................63
SECTION 9.05. Severability...................................................64
SECTION 9.06. Counterparts...................................................64
SECTION 9.07. Entire Agreement; No Third-Party
Beneficiaries................................................64
SECTION 9.08. GOVERNING LAW..................................................65
SECTION 9.09. Assignment.....................................................65
SECTION 9.10. Enforcement....................................................65
EXHIBIT A Conditions of the Offer...........................A-1
<PAGE>
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER dated
as of November 11, 1999 among TRIPOINT GLOBAL
COMMUNICATIONS INC., a Delaware corporation
("PARENT"), SIGNAL ACQUISITION CORPORATION, a Texas
corporation and a wholly owned subsidiary of Parent
("SUB"), and VERTEX COMMUNICATIONS CORPORATION, a
Texas corporation (the "COMPANY").
WHEREAS the respective Boards of Directors of Parent, Sub and
the Company have approved the acquisition of the Company by Parent on the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes
to cause Sub to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "OFFER") to purchase all the outstanding
shares of common stock, par value $.10 per share, of the Company (the "COMPANY
COMMON STOCK"), at a price per share of Company Common Stock of $22.00, net to
the seller in cash (such amount, or any greater amount per share paid pursuant
to the Offer, the "OFFER PRICE"), on the terms and subject to the conditions set
forth in this Agreement;
WHEREAS the respective Boards of Directors of Parent, Sub and
the Company have approved the merger (the "MERGER") of Sub into the Company on
the terms and subject to the conditions set forth in this Agreement, whereby
each issued share of Company Common Stock not owned directly or indirectly by
Parent or the Company shall be converted into the right to receive an amount in
cash equal to the Offer Price;
WHEREAS, simultaneously with the execution and delivery of
this Agreement, Parent and certain shareholders of the Company (the "PRINCIPAL
SHAREHOLDERS") are entering into an agreement (the "SHAREHOLDER AGREEMENT", and
together with this Agreement, the "TRANSACTION AGREEMENTS") pursuant to which
the Principal Shareholders will agree to take specified actions in furtherance
of the Offer and the Merger; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger
<PAGE>
2
and also to prescribe various conditions to the Offer and the Merger.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
The Offer and the Merger
SECTION 1.01. THE OFFER. (a) Provided that this Agreement
shall not have been terminated in accordance with Article VIII hereof and
subject to the conditions set forth in Exhibit A hereto (the "TENDER OFFER
CONDITIONS"), as promptly as practicable but in no event later than five
business days after the date of the public announcement by Parent and the
Company of this Agreement (the "ANNOUNCEMENT DATE"), Sub shall, and Parent shall
cause Sub to, commence the Offer within the meaning of Rule
<PAGE>
3
14d-2 under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), for all the outstanding shares of Company Common Stock at the Offer
Price. The obligation of Sub to, and of Parent to cause Sub to, commence the
Offer and accept for payment, and pay for, any shares of Company Common Stock
tendered pursuant to the Offer are subject only to the provisions of Article
VIII and the Tender Offer Conditions (any of which may be waived by Sub in its
sole discretion, except as otherwise provided herein). Sub expressly reserves
the right to modify the terms of the Offer, except that, without the prior
written consent of the Company, Sub shall not (i) reduce the number of shares of
Company Common Stock subject to the Offer, (ii) reduce the price per share of
Company Common Stock to be paid pursuant to the Offer, (iii) modify or add to
the Tender Offer Conditions, (iv) waive the Minimum Tender Condition (except
that Sub may waive the Minimum Tender Condition if the failure of such condition
to be satisfied results from the failure of the Principal Shareholders to
validly tender any Subject Shares, as defined in the Shareholder Agreement,
prior to the expiration of the Offer, or from the withdrawal of any Subject
Shares prior to the expiration of the Offer) or amend any other term of the
Offer in any manner materially adverse to the holders of Company Common Stock or
(v) except as provided below, extend the Offer if all the Tender Offer
Conditions have been satisfied. Subject to the terms and conditions hereof, the
Offer shall remain open until midnight, New York City time, on the date that is
20 business days after the Offer is commenced (within the meaning of Rule 14d-2
of the Exchange Act); PROVIDED, HOWEVER, that without the prior written consent
of the Company, Sub may (A) if at the scheduled initial or any extended
expiration date (whether extended pursuant to this clause (A) or otherwise) of
the Offer any of the Tender Offer Conditions shall not have been satisfied or
waived, extend the Offer for up to five business days from such scheduled
initial or extended expiration date, (B) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the
Offer, (C) if at the scheduled initial or any extended expiration date of the
Offer all the Tender Offer Conditions are satisfied and more than 70% but less
than 90% of the Fully Diluted Shares (as defined in Exhibit A) have been validly
tendered and not withdrawn in the Offer, extend the Offer up to a maximum of 10
additional business days in the aggregate beyond the latest expiration date that
would otherwise be permitted under clause (A) or (B) of this sentence and (D)
extend the Offer for any reason for a period of not more than three business
days beyond the latest expiration date that would otherwise be permitted under
clause (A), (B) or (C) of this sentence. On the terms and subject to the
conditions of the Offer and this Agreement, Parent shall cause Sub to, and Sub
shall, accept for payment and pay for all shares of Company Common Stock validly
tendered and not withdrawn pursuant to the Offer that Sub becomes obligated to
purchase pursuant to the Offer as soon as practicable after the expiration of
the Offer.
(b) On the date of commencement of the Offer, Parent and Sub
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents
included therein pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the "OFFER DOCUMENTS"). Each of Parent, Sub
and the Company shall promptly correct any information provided by it for use in
the Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and each of Parent and Sub shall
take all steps necessary to amend or supplement the Offer Documents and to cause
the Offer Documents as so amended or supplemented to be filed with the SEC and
to be disseminated to the Company's shareholders, in each case as and to the
extent required by applicable Federal securities laws. Parent and Sub shall
provide the
<PAGE>
4
Company and its counsel in writing with any comments Parent, Sub or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Sub on a
timely basis the funds sufficient to accept for payment, and pay for, any and
all shares of Company Common Stock that Sub becomes obligated to accept for
payment, and pay for, pursuant to the Offer. Parent and Sub shall comply with
the obligations respecting prompt payment pursuant to Rule 14e-1(c) under the
Exchange Act.
SECTION 1.02. COMPANY ACTIONS. (a) The Company hereby approves
of and consents to the Offer, the Merger and the other transactions contemplated
by the Transaction Agreements (collectively, the "TRANSACTIONS"), subject, in
the case of the Merger, to receipt of the Company Shareholder Approval and
subject to withdrawal of such approval and consent if permitted by Section
5.02(b).
(b) On the date the Offer Documents are filed with the SEC,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended or
supplemented from time to time, the "SCHEDULE 14D-9") containing the
recommendations described in Section 3.04(b) and shall mail the Schedule 14D-9
to the holders of Company Common Stock. Each of the Company, Parent and Sub
shall promptly correct any information provided by it for use in the Schedule
14D-9 if and to the extent that such information shall have become false or
misleading in any material respect, and the Company shall take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated to
the Company's shareholders, in each case as and to the extent required by
applicable Federal securities laws. The Company shall provide Parent and its
counsel in writing with any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Sub promptly with mailing labels containing the names
and addresses of the record holders of Company Common Stock as of a recent date
and of those persons becoming record holders
<PAGE>
5
subsequent to such date, together with copies of all lists of shareholders,
security position listings and computer files and all other information in the
Company's possession or control regarding the beneficial owners of Company
Common Stock, and shall furnish to Sub such information and assistance
(including updated lists of shareholders, security position listings and
computer files) as Parent may reasonably request in communicating the Offer to
the Company's shareholders. Subject to the requirements of applicable Law (as
defined in Section 3.05(a)), and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Transactions, Parent and Sub shall hold in confidence the information
contained in any such labels, listings and files, shall use such information
only in connection with the Offer and the Merger and, if this Agreement shall be
terminated, shall deliver to the Company all copies of such information then in
their possession.
SECTION 1.03. THE MERGER. On the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Texas
Business Corporation Act (the "TBCA"), Sub shall be merged with and into the
Company at the Effective Time (as defined in Section 1.05). At the Effective
Time, the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "SURVIVING CORPORATION").
SECTION 1.04. CLOSING. The closing (the "CLOSING") of the
Merger shall take place at the offices of Cravath, Swaine & Moore, 825 Eighth
Avenue, New York, New York 10019 at 10:00 a.m. on the second business day
following the satisfaction (or, to the extent permitted by Law, waiver by all
parties) of the conditions set forth in Section 7.01, or at such other place,
time and date as shall be agreed in writing between Parent and the Company. The
date on which the Closing occurs is referred to in this Agreement as the
"CLOSING DATE".
SECTION 1.05. EFFECTIVE TIME. Prior to the Closing, the
Company shall prepare, and on the Closing Date the Company shall file with the
Secretary of State of the State of Texas, articles of merger (the "ARTICLES OF
MERGER") executed in accordance with the relevant provisions of the TBCA and
shall make all other filings or recordings required under the TBCA. The Merger
shall become effective upon issuance of the certificate of merger by the
Secretary of State of the State of Texas, or at such later time as Parent and
the Company shall
<PAGE>
6
agree and specify in the Articles of Merger in accordance with Section 10.03 of
the TBCA (the time the Merger becomes effective being the "EFFECTIVE TIME").
SECTION 1.06. EFFECTS. The Merger shall have the
effects set forth in Article 5.06 of the TBCA.
SECTION 1.07. ARTICLES OF INCORPORATION AND BYLAWS. (a) The
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be amended at the Effective Time so that Article Four,
Section 1 of such Articles of Incorporation reads in its entirety as follows:
"The total number of shares of all classes of stock which the Corporation shall
have authority to issue is 1,000 shares of Common Stock, par value $0.01 per
share." and, as so amended, such Articles of Incorporation shall be the Articles
of Incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable Law.
(b) The By-laws of Sub as in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
SECTION 1.08. DIRECTORS. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.09. OFFICERS. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and qualified, as the case
may be.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. At the Effective Time,
by virtue of the Merger and without any
<PAGE>
7
action on the part of the holder of any shares of Company Common Stock or any
shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid
and non assessable share of common stock, par value $0.01 per share, of
the Surviving Corporation.
(b) CANCELATION OF TREASURY STOCK AND PARENT- OWNED STOCK.
Each share of Company Common Stock that is owned by the Company, Parent
or Sub shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and no Parent Common
Stock or other consideration shall be delivered or deliverable in
exchange therefor. Each share of Company Common Stock that is owned by
any subsidiary of the Company or Parent (other than Sub) shall
automatically be converted into one fully paid and nonassessable share
of common stock, par value $0.01 per share, of the Surviving
Corporation.
(c) CONVERSION OF COMPANY COMMON STOCK. (i) Subject to
Sections 2.01(b) and 2.01(d), each issued share of Company Common Stock
shall be converted into the right to receive an amount in cash equal to
the Offer Price, without interest (the "PER SHARE MERGER
CONSIDERATION").
(ii) The cash payable upon the conversion of shares of Company
Common Stock pursuant to this Section 2.01(c) is referred to
collectively as the "MERGER CONSIDERATION". As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate formerly representing any such
shares of Company Common Stock shall cease to have any rights with
respect thereto, except the right to receive cash in an amount equal to
the Per Share Merger Consideration multiplied by the number of shares
of Company Common Stock formerly represented by such certificate,
without interest, upon surrender of such certificate in accordance with
Section 2.02, subject to Section 2.01(d) hereof.
(d) DISSENT RIGHTS. Notwithstanding anything in this Agreement
to the contrary, shares (the "DISSENT SHARES") of Company Common Stock
that are outstanding immediately prior to the Effective Time
<PAGE>
8
and that are held by any person who is entitled to dissent from and
properly dissents from this Agreement pursuant to, and who complies in
all respects with, Articles 5.11, 5.12, 5.13 and 5.16 of the TBCA, in
each case to the extent applicable (the "DISSENT STATUTES"), shall not
be converted into Merger Consideration as provided in Section 2.01(c),
but rather the holders of Dissent Shares shall be entitled to payment
of the fair value of such Dissent Shares in accordance with the Dissent
Statutes; PROVIDED, HOWEVER, that if any such holder shall fail to
perfect or otherwise shall waive, withdraw or lose the right to receive
payment of fair value under the Dissent Statutes, then the right of
such holder to be paid the fair value of such holder's Dissent Shares
shall cease and such Dissent Shares shall be deemed to have been
converted as of the Effective Time into, and to have become
exchangeable solely for the right to receive, Merger Consideration
as provided in Section 2.01(c). The Company shall serve prompt notice
to Parent of any objections or demands for payment of fair value of
Company Common Stock pursuant to the Dissent Statutes received by the
Company, and Parent shall have the right to participate in and direct
all negotiations and proceedings with respect to such objections or
demands. Prior to the Effective Time, the Company shall not, without
the prior written consent of Parent, make any payment with respect to,
or settle or offer to settle, any such objections or demands, or agree
to do any of the foregoing.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) PAYING AGENT.
Prior to the Effective Time, Parent shall select a bank or trust company
reasonably acceptable to the Company to act as paying agent (the "PAYING AGENT")
for the payment of the Merger Consideration upon surrender of certificates
representing Company Common Stock. At the Effective Time, Parent shall provide
to the Paying Agent the aggregate cash necessary to pay for the shares of
Company Common Stock converted into the right to receive cash pursuant to
Section 2.01(c) (such cash being hereinafter referred to as the "EXCHANGE
FUND").
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable
after the Effective Time, Parent shall cause the Paying Agent to mail to each
holder of record of a certificate or certificates (the "CERTIFICATES") that
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares
<PAGE>
9
were converted into the right to receive Merger Consideration pursuant to
Section 2.01, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent and shall be in such
form and have such other provisions, not inconsistent with this Agreement, as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for Merger Consideration. Upon
surrender of a Certificate for cancelation to the Paying Agent or to such other
agent or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, and such other documents, not inconsistent with this
Agreement, as may reasonably be required by Parent, Parent shall cause the
Paying Agent to pay the holder of such Certificates in exchange therefor cash in
an amount equal to the Per Share Merger Consideration multiplied by the number
of shares of Company Common Stock formerly represented by such Certificate
(other than Certificates representing Dissent Shares, Certificates representing
shares of Company Common Stock held by Parent or Sub or in the treasury of the
Company and Certificates representing shares of Company Common Stock held by any
subsidiary of the Company or Parent (other than Sub)), without interest, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock that is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.02, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the shares of Company Common Stock
theretofore represented by such Certificate have been converted pursuant to
Section 2.01. No interest shall be paid or shall accrue on the cash payable upon
surrender of any Certificate.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration paid in accordance with the terms of this Article II upon
conversion of any shares of Company Common Stock shall be
<PAGE>
10
deemed to have been paid in full satisfaction of all rights pertaining to such
shares of Company Common Stock. After the Effective Time there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of shares of Company Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any certificates
formerly representing shares of Company Common Stock are presented to the
Surviving Corporation or the Paying Agent for any reason, they shall be canceled
and exchanged as provided in this Article II.
(d) LOST CERTIFICATES. In the event any Certificate shall have
been lost, stolen or destroyed, the Paying Agent shall be required to pay the
Per Share Merger Consideration for each share of Company Common Stock formerly
represented by such lost, stolen or destroyed certificate; PROVIDED, HOWEVER,
Sub may require the owner of such lost, stolen or destroyed certificate to
execute and deliver to the Paying Agent a form of affidavit claiming such
Certificate to be lost, stolen or destroyed in form and substance reasonably
satisfactory to Sub and the posting by such owner of a bond in such amount as
Sub may determine is reasonably necessary as indemnity against any claim that
may be made against Sub, Parent, the Company, the Surviving Corporation or the
Paying Agent in connection with the Certificate alleged to have been lost,
stolen or destroyed.
(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund that remains undistributed to the holders of Company Common Stock for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holder of Company Common Stock who has not theretofore complied with this
Article II shall thereafter look only to Parent for payment of its claim for
Merger Consideration.
(f) NO LIABILITY. None of Parent, Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law. If any Certificate has not been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which Merger Consideration in respect of such
Certificate would otherwise escheat to or become the
<PAGE>
11
property of any Governmental Entity (as defined in Section 3.05(b)), any such
shares, cash, dividends or distributions in respect of such Certificate shall,
to the extent permitted by applicable Law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(g) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall invest
any cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Parent.
(h) WITHHOLDING RIGHTS. Parent or the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable to any holder of Company Common Stock pursuant to this Agreement such
amounts as may be required to be deducted and withheld with respect to the
making of such payment under the Code (as defined in Section 3.11(b)), or under
any applicable provision of state, local or foreign tax Law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
SECTION 3.01. ORGANIZATION, STANDING AND POWER. The Company
and each of its subsidiaries (the "COMPANY SUBSIDIARIES") are duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which they are organized and have all requisite corporate power and authority
and possess all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable them to own, lease or otherwise hold their
properties and assets and to conduct their businesses as presently conducted,
other than such franchises, licenses, permits, authorizations and approvals the
lack of which, individually and in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect (as defined
below). The Company and each Company Subsidiary are duly qualified to do
business in each jurisdiction where the nature of their businesses or their
ownership or leasing of their properties make such qualification necessary,
except for failures to be so qualified which, individually and in the aggregate,
have not had and would not reasonably be expected to have a Company Material
Adverse Effect. The term "COMPANY MATERIAL ADVERSE EFFECT," as used in this
Agreement, means a material adverse effect on the business, assets, condition
<PAGE>
12
(financial or otherwise) or results of operations of the Company and the Company
Subsidiaries, taken as a whole, on the ability of the Company to perform its
obligations under the Transaction Agreements or on the ability of the Company to
consummate the Offer, the Merger and the other Transactions. The Company has
made available to Parent true and complete copies of the articles of
incorporation of the Company, as amended to the date of this Agreement (as so
amended, the "COMPANY CHARTER"), and the By-laws of the Company, as amended to
the date of this Agreement (as so amended, the "COMPANY BY-LAWS"), and the
comparable charter and organizational documents of each Company Subsidiary, in
each case as amended through the date of this Agreement.
SECTION 3.02. COMPANY SUBSIDIARIES; EQUITY INTERESTS. (a) The
letter, dated as of the date of this Agreement, from the Company to Parent and
Sub (the "COMPANY DISCLOSURE LETTER") lists each Company Subsidiary and its
jurisdiction of organization. All the outstanding shares of capital stock of
each Company Subsidiary have been validly issued and are fully paid and
nonassessable and, except as set forth in the Company Disclosure Letter, are
owned by the Company, by another Company Subsidiary or by the Company and
another Company Subsidiary, free and clear of all pledges, liens, charges,
mortgages, encumbrances and security interests of any kind or nature whatsoever
(collectively, "LIENS").
(b) Except for its interests in the Company Subsidiaries and
except for the ownership interests set forth in the Company Disclosure Letter,
the Company does not own, directly or indirectly, any capital stock, membership
interest, partnership interest, joint venture interest or other equity interest
in any person.
SECTION 3.03. CAPITAL STRUCTURE. (a) The authorized capital
stock of the Company consists of 20,000,000 shares of Company Common Stock. At
the close of business on November 11, 1999, (i) 5,116,314 shares of Company
Common Stock were issued and outstanding, (ii) 119,437 shares of Company Common
Stock were held by the Company in its treasury, (iii) 15,000 shares of Company
Common Stock were subject to outstanding Company Stock Options (as defined in
Section 6.04(e)) under the Company's Outside Directors Stock Option Plan, (iv)
65,800 shares of Company Common Stock were subject to outstanding Company Stock
Options under the Company's Stock Option Plan for Key Employees, (v) 589,927
shares of Company Common Stock were subject to outstanding
<PAGE>
13
Company Stock Options under the Company's 1995 Stock Compensation Plan, (vi)
32,000 shares of Company Common Stock were subject to outstanding Company Stock
Options under the Company's Non-Employee Directors Stock Option Plan and (vii)
401,800 additional shares of Company Common Stock were reserved for issuance
pursuant to the Company Stock Plans (as defined in Section 6.04(e)). Except as
set forth above, at the close of business on the date of this Agreement, no
shares of capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. There are no outstanding Company SARs (as
defined in Section 6.04(e)) that were not granted in tandem with a related
Company Stock Option. All outstanding shares of Company capital stock are, and
all such shares that may be issued prior to the Effective Time will be when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar right under
any provision of the TBCA, the Company Charter, the Company By-laws or any
contract, lease, license, indenture, note, bond, agreement, permit, concession,
franchise or other instrument (a "CONTRACT") to which the Company is a party or
otherwise bound. There are not any bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
holders of Company Common Stock may vote ("VOTING COMPANY DEBT"). Except as set
forth above, as of the date of this Agreement, there are not any options,
warrants, rights, convertible or exchangeable securities, "phantom" stock
rights, stock appreciation rights, stock-based performance units, commitments,
Contracts, arrangements or undertakings of any kind to which the Company or any
Company Subsidiary is a party or by which any of them is bound (i) obligating
the Company or any Company Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, the Company or of any
Company Subsidiary or any Voting Company Debt, (ii) obligating the Company or
any Company Subsidiary to issue, grant, extend or enter into any such option,
warrant, right, security, unit, commitment, Contract, arrangement or undertaking
or (iii) that give any person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights occurring to holders
of Company capital stock. As of the date of this Agreement, there are not any
<PAGE>
14
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Company Subsidiary. Except as set forth in the Company Disclosure
Letter or the Filed Company SEC Documents (as defined in Section 3.08), no
person is entitled to registration rights with respect to any shares of Company
Common Stock.
(b) The Company Board or a committee administering the Company
Stock Plans has the power and authority to cause (x) the Company Stock Plans to
terminate as of the Effective Time and (y) the provisions in any other Company
Benefit Plan providing for the issuance, transfer or grant of any capital stock
of the Company or any interest in respect of any capital stock of the Company to
be deleted as of the Effective Time. Following the Effective Time no holder of a
Company Stock Option or Company SAR or any participant in any Company Stock Plan
or other Company Benefit Plan will have any right thereunder to acquire any
capital stock of the Company or the Surviving Corporation.
SECTION 3.04. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. (a) The Company has all requisite corporate power and authority
to execute and deliver this Agreement and, subject to receipt of the Company
Shareholder Approval, to consummate the Transactions. The execution and delivery
by the Company of this Agreement and, except as set forth in the next sentence,
the consummation by the Company of the Transactions have been duly authorized by
all necessary corporate action on the part of the Company, subject, in the case
of the consummation of the Merger, to receipt of the Company Shareholder
Approval. The Company has duly executed and delivered this Agreement and,
assuming due and valid authorization, execution and delivery hereof by Parent
and Sub, this Agreement constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws, now or hereafter in effect, affecting creditor
rights generally and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
(b) The Board of Directors of the Company (the "COMPANY
BOARD"), at a meeting duly called and held, duly
<PAGE>
15
and unanimously adopted resolutions (i) approving the Transaction Agreements,
the Offer, the Merger and the other Transactions, (ii) determining that the
terms of the Offer and the Merger and the other Transactions are fair to and in
the best interests of the Company's shareholders, (iii) recommending that the
holders of Company Common Stock accept the Offer and tender their shares of
Company Common Stock pursuant to the Offer, (iv) directing that this Agreement
be submitted to the Company's shareholders for approval and (v) recommending
that the Company's shareholders approve this Agreement; PROVIDED, HOWEVER, that
the Company Board may subsequently withdraw its recommendations referred to in
this Section 3.04(b) if it is permitted to do so under Section 5.02(b). Such
resolutions are sufficient to render the provisions of Article 13.03 of the TBCA
inapplicable to Parent and Sub and the Transaction Agreements, the Offer, the
Merger and the other Transactions. To the Company's knowledge, no other state
takeover statute or similar statute or regulation applies or purports to apply
to the Company with respect to the Transaction Agreements, the Offer, the Merger
or any other Transaction.
(c) The only vote of holders of any class or series of Company
capital stock necessary to approve and adopt this Agreement and the Merger is
the approval of this Agreement by the affirmative vote of the holders of at
least a majority of the outstanding Company Common Stock (the "COMPANY
SHAREHOLDER APPROVAL") and is only necessary in the event that the number of
shares of Company Common Stock tendered pursuant to the Offer represents less
than 90% of the issued and outstanding shares of Company Common Stock. The
affirmative vote of the holders of Company capital stock, or any of them, is not
necessary to approve any Transaction Agreement other than this Agreement or to
consummate the Offer or any Transaction other than the Merger.
SECTION 3.05. NO CONFLICTS; CONSENTS. (a) Except as set forth
in the Company Disclosure Letter, the execution and delivery by the Company of
this Agreement do not, and the consummation of the Offer, the Merger and the
other Transactions and compliance with the terms of this Agreement will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancelation or acceleration of any material obligation or to loss of a material
benefit under, or to increased, additional, accelerated or guaranteed rights or
entitlements of any person under, or
<PAGE>
16
result in the creation of any Lien upon any of the properties or assets of the
Company or any Company Subsidiary under, any provision of (i) the Company
Charter, the Company By-laws or the comparable charter or organizational
documents of any Company Subsidiary, (ii) any Contract to which the Company or
any Company Subsidiary is a party or by which any of their respective properties
or assets is bound or (iii) subject to the filings and other matters referred to
in Section 3.05(b) and the receipt of the Company Shareholder Approval, any
judgment, order or decree ("JUDGMENT") or statute, law (including common law),
ordinance, rule or regulation ("LAW") applicable to the Company or any Company
Subsidiary or their respective properties or assets, except in the case of
clause (ii) or (iii) where such conflicts, violations or defaults, individually
and in the aggregate, would not reasonably be expected to have a Company
Material Adverse Effect.
(b) No consent, approval, license, permit, order or
authorization ("CONSENT") of, or registration, declaration or filing with, or
permit from, any Federal, state, local or foreign government or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "GOVERNMENTAL
ENTITY") is required to be obtained or made by or with respect to the Company or
any Company Subsidiary in connection with the execution, delivery and
performance of this Agreement or the consummation of the Transactions, other
than (i) compliance with and filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), (ii) the filing of a joint
notification pursuant to Section 721(a) of the Defense Production Act of 1950,
as amended (the "EXON-FLORIO ACT"), (iii) the filing with the SEC of (A) the
Schedule 14D-9, (B) a proxy or information statement relating to the approval of
this Agreement by the Company's shareholders
(the "PROXY STATEMENT"), if such approval is required by Law, (C) any
information statement (the "INFORMATION STATEMENT") required under Rule 14f-1 in
connection with the Offer and (D) such reports under Sections 13 and 16 of the
Exchange Act as may be required in connection with the Transaction Agreements,
the Offer, the Merger and the other Transactions, (iv) the filing of the
Articles of Merger with the Secretary of State of the State of Texas and
appropriate documents with the relevant authorities of the other jurisdictions
in which the Company is qualified to do business, (v) compliance with and such
filings as may be required under applicable Environmental Laws (as
<PAGE>
17
defined in Section 3.14(a)), (vi) such filings as may be required in connection
with the taxes described in Section 6.08 and (vii) such other consents and
filings (the "OTHER COMPANY FILINGS") the failure of which to obtain or make,
individually and in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect or in any manner impede, frustrate, prevent,
delay or nullify the consummation of the Transactions.
SECTION 3.06. SEC DOCUMENTS AND FINANCIAL STATEMENTS. The
Company has filed all reports, schedules, forms, statements and other
documents required to be filed by the Company with the SEC since September
30, 1997 (the "COMPANY SEC DOCUMENTS"). As of its respective date, each
Company SEC Document complied in all material respects with the requirements
of the Exchange Act or the Securities Act of 1933, as amended (the
"SECURITIES ACT"), as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Company SEC Document, and did
not, at the time such Company SEC Document was filed with the SEC, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any Company
SEC Document has been revised or superseded by a later-filed Company SEC
Document, none of the Company SEC Documents contains any untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The unaudited
financial statements of the Company for its fiscal year ended September 30,
1999 (the "1999 COMPANY FINANCIAL STATEMENTS") are set forth in Section 3.06
of the Company Disclosure Letter. The 1999 Company Financial Statements and
the consolidated financial statements of the Company included in the Company
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except as otherwise noted therein
including in the related notes and except, in the case of quarterly unaudited
statements, as permitted by Form 10-Q of the SEC and, in the case of 1999
Company Financial Statements, the absence of notes that would substantially
duplicate disclosure contained in the Filed Company SEC Documents) applied on
a consistent basis
<PAGE>
18
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of quarterly unaudited statements, to normal year-end audit adjustments).
Except as set forth in the 1999 Company Financial Statements and except for
liabilities and obligations incurred since the date of the 1999 Company
Financial Statements in the ordinary course of business or as set forth in the
Company Disclosure Letter, neither the Company nor any Company Subsidiary has
any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a
consolidated balance sheet or in the notes thereto. None of the Company
Subsidiaries is, or has at any time since September 30, 1997 been, subject to
the reporting requirements of Section 13(a) or 15(d) of the Exchange Act.
SECTION 3.07. INFORMATION SUPPLIED. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (i) the Offer Documents, the Schedule 14D-9, the Other Filings (as
defined in Section 4.04) or the Information Statement will, at the time such
document is filed with the SEC or other Governmental Entity, at any time it is
amended or supplemented or at the time it is first published, sent or given to
the Company's shareholders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or (ii) the Proxy Statement will, at
the date it is first mailed to the Company's shareholders or at the time of the
Company Shareholders Meeting (as defined in Section 6.01(b)), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by Parent or Sub
for inclusion or incorporation by reference therein. The Schedule 14D-9, the
Information Statement and the Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder.
<PAGE>
19
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "FILED COMPANY SEC DOCUMENTS") or in the Company
Disclosure Letter, since September 30, 1999, the Company has conducted its
business only in the ordinary course of business, and there has not been:
(i) any event, change, effect or development that,
individually or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect, other than any
event, change, effect or development to the extent attributable to (A)
the economy or the securities markets in general, (B) this Agreement or
the transactions contemplated hereby or the announcement thereof or (C)
the Company's industry in general, and not specifically relating to the
Company or the Company Subsidiaries;
(ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect
to any Company capital stock or any repurchase for value by the Company
of any Company capital stock;
(iii) any split, combination or reclassification of any
Company capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of Company capital stock;
(iv) (A) any granting by the Company or any Company Subsidiary
to any director or officer of the Company or any Company Subsidiary of
any increase in compensation, except in the ordinary course of business
consistent with past practice or as was required under employment
agreements filed as exhibits to the Filed Company SEC Documents, (B)
any granting by the Company or any Company Subsidiary to any such
director or officer of any increase in severance or termination pay,
except as was required under any employment, severance or termination
agreements filed as exhibits to the Filed Company SEC Documents, or (C)
any entry by the Company or any Company Subsidiary into, or any
amendment of, any employment, consulting, deferred compensation,
indemnification, severance or termination agreement or
arrangement with any such director or officer;
<PAGE>
20
(v) any change in accounting methods, principles or practices
by the Company or any Company Subsidiary materially affecting the
consolidated assets, liabilities or results of operations of the
Company, except insofar as may have been required by a change in GAAP;
or
(vi) any material elections with respect to Taxes (as defined
in Section 3.09(g)) by the Company or any Company Subsidiary or
settlement or compromise by the Company or any Company Subsidiary of
any material Tax liability or refund.
SECTION 3.09. TAXES. (a) The Company and each Company
Subsidiary have timely filed, or have caused to be timely filed (taking into
account any extension of time within which to file) on their behalf, all Tax
Returns required to be filed by them, other than those the failure of which to
file, individually and in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect, and all such Tax Returns are
true, complete and accurate in all material respects. All Taxes shown to be due
on such Tax Returns, or otherwise owed, have been timely paid, other than
failures to pay which, individually and in the aggregate, have not had and would
not reasonably be expected to have a Company Material Adverse Effect.
(b) The most recent financial statements contained in the
Filed Company SEC Documents reflect an adequate reserve for all Taxes payable by
the Company and the Company Subsidiaries for all Taxable periods and portions
thereof through the date of such financial statements. To the knowledge of the
Company and the Company Subsidiaries, no deficiency with respect to any Taxes
has been threatened, proposed, asserted or assessed against the Company or any
Company Subsidiary, and no requests for waivers of the time to assess any such
Taxes are pending.
(c) The Federal income Tax Returns of the Company and each
Company Subsidiary consolidated in such Returns have been examined by and
settled with the United States Internal Revenue Service for all years through
the fiscal year ended September 30, 1994. All assessments for Taxes due with
respect to such completed and settled examinations or any concluded litigation
have been fully paid.
(d) There are no material Liens for Taxes (other than for
current Taxes not yet due and payable and
<PAGE>
21
Liens for Taxes that are being contested in good faith by appropriate
proceedings and for which adequate reserves are provided in accordance with GAAP
in the 1999 Company Financial Statements) on the assets of the Company or any
Company Subsidiary. Neither the Company nor any Company Subsidiary is bound by
any tax sharing agreement with another person with respect to Taxes.
(e) Other than the consolidated group in which the Company is
the parent, neither the Company nor any Company Subsidiary has any liability for
the payment of Taxes of any other entity as a result of being a member of an
affiliated, consolidated, combined or unitary group or as a result of any
express or implied obligation to indemnify any other person with respect to the
payment of any Taxes.
(f) Neither the Company nor any Company Subsidiary has engaged
in any transactions giving rise to deferred gain under Treas. Reg. Section
1.1502-13 that has not actually been included in taxable income for Federal
income Tax purposes by the date hereof.
(g) For purposes of this Agreement:
"TAXES" includes all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, and whether
imposed by a local, municipal, governmental, state, foreign, Federal or
other Governmental Entity, or in connection with any agreement with
respect to Taxes, including all interest, penalties and additions
imposed with respect to such amounts.
"TAX RETURN" means any Federal, state, local, provincial or
foreign Tax return, declaration, statement, report, schedule, form or
information return or any amended Tax return relating to Taxes.
SECTION 3.10. ABSENCE OF CHANGES IN BENEFIT PLANS. Except as
disclosed in the Filed Company SEC Documents or in the Company Disclosure
Letter, since September 30, 1998, there has not been any adoption or amendment
in any material respect by the Company or any Company Subsidiary of any
collective bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, thrift, savings, stock bonus, restricted
stock, cafeteria, paid time off, perquisite, fringe benefit, vacation,
severance, disability, death benefit,
<PAGE>
22
hospitalization, medical or other plan, arrangement or understanding (whether or
not legally binding) providing benefits to any current or former employee,
officer or director of the Company or any Company Subsidiary (collectively,
"COMPANY BENEFIT PLANS"). Except as disclosed in the Filed Company SEC Documents
or in the Company Disclosure Letter, there are not any employment, consulting,
deferred compensation, indemnification, severance or termination agreements or
arrangements between the Company or any Company Subsidiary and any current or
former employee, officer or director of the Company or any Company Subsidiary
(collectively, "COMPANY BENEFIT AGREEMENTS").
SECTION 3.11. ERISA COMPLIANCE; EXCESS PARACHUTE PAYMENTS.
(a) The Company Disclosure Letter contains a list and brief description of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "COMPANY PENSION PLANS"), "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA) and all other Company Benefit Plans and
Company Benefit Agreements maintained, or contributed to, by the Company or any
Company Subsidiary, or to which the Company or any Company Subsidiary is a
party, for the benefit of any current or former employees, officers or directors
of the Company or any Company Subsidiary. The Company has made available to
Parent true, complete and correct copies of (i) each Company Benefit Plan and
Company Benefit Agreement (or, in the case of any unwritten Company Benefit Plan
or Company Benefit Agreement a description thereof), (ii) the most recent annual
report on Form 5500 filed with the Internal Revenue Service with respect to each
Company Benefit Plan (if any such report was required), (iii) the most recent
summary plan description for each Company Benefit Plan for which such summary
plan description is required and (iv) each trust agreement and group annuity
contract relating to any Company Benefit Plan.
(b) Except as disclosed in the Company Disclosure Letter, all
Company Pension Plans have received favorable determination letters from the
Internal Revenue Service with respect to "TRA" (as defined in Section 1 of Rev.
Proc. 93-39), to the effect that such Company Pension Plans are qualified and
exempt from Federal income taxes under Sections 401(a) and 501(a), respectively,
of the Internal Revenue Code of 1986, as amended (the "CODE"), and no such
determination letter has been revoked nor, to the knowledge of the
<PAGE>
23
Company, has revocation been threatened, nor has any such Company Pension Plan
been amended since the date of its most recent determination letter or
application therefor in any respect that would adversely affect its
qualification or materially increase its costs. There is no material pending or,
to the knowledge of the Company, threatened litigation relating to the Company
Benefit Plans.
(c) Except as disclosed in the Company Disclosure Letter, no
Company Pension Plan, other than any Company Pension Plan that is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a
"COMPANY MULTIEMPLOYER PENSION PLAN"), had, as of the respective last annual
valuation date for each such Company Pension Plan, any "unfunded benefit
liabilities" (as such term is defined in Section 4001(a)(18) of ERISA), based on
actuarial assumptions that have been furnished to Parent, and there has been no
material adverse change in the financial condition of any Company Pension Plan
since its last such annual valuation date. No liability under Subtitle C or D of
Title IV of ERISA has been or is expected to be incurred by the Company or any
Company Subsidiary with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the single-employer plan of
any entity which is considered one employer with the Company under Section 4001
of ERISA or Section 414 of the Code (an "ERISA AFFILIATE"). None of the Company,
any Company Subsidiary, any officer of the Company or any Company Subsidiary or
any of the Company Benefit Plans which are subject to ERISA, including the
Company Pension Plans, any trusts created thereunder or any trustee or
administra tor thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) or any other
breach of fiduciary responsibility that could subject the Company, any Company
Subsidiary or any officer of the Company or any Company Subsidiary to the tax or
penalty on prohibited transactions imposed by such Section 4975 or to any
liability under Section 502(i) or 502(l) of ERISA. None of such Company Benefit
Plans and trusts has been terminated, nor has there been any "reportable event"
(as that term is defined in Section 4043 of ERISA) for which the 30-day
reporting requirement has not been waived with respect to any Company Benefit
Plan during the last five years, and no notice of a reportable event will be
required to be filed in connection with the Transactions. Neither the Company
nor any Company Subsidiary has incurred a "complete
<PAGE>
24
withdrawal" or a "partial withdrawal" (as such terms are defined in Sections
4203 and 4205, respectively, of ERISA) since the effective date of such Sections
4203 and 4205 with respect to any Company Multiemployer Pension Plan. All
contributions and premiums required to be made under the terms of any Company
Benefit Plan as of the date hereof have been timely made or have been reflected
on the most recent consolidated balance sheet filed or incorporated by reference
in the Filed Company SEC Documents. Neither any Company Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived.
(d) With respect to any Company Benefit Plan that is an
employee welfare benefit plan, except as disclosed in the Company Disclosure
Letter, (i) no such Company Benefit Plan is unfunded or funded through a
"welfare benefit fund" (as such term is defined in Section 419(e) of the Code),
(ii) each such Company Benefit Plan that is a "group health plan" (as such term
is defined in Section 5000(b)(1) of the Code), complies with the applicable
requirements of Section 4980B(f) of the Code and (iii) each such Company Benefit
Plan (including any such Plan covering retirees or other former employees) may
be amended or terminated without material liability to the Company and the
Company Subsidiary on or at any time after the Effective Time. Neither the
Company nor any Company Subsidiary has any obligations for retiree health and
life benefits under any Company Benefit Plan or Company Benefit Agreement.
(e) Except as disclosed in the Company Disclosure Letter, the
consummation of the Offer, the Merger or any other Transaction will not (x)
entitle any employee, officer or director of the Company or any Company
Subsidiary to severance pay, (y) accelerate the time of payment or vesting or
trigger any payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Company Benefit Plans or Company
Benefit Agreements other than pursuant to the provisions of Section 6.04 hereof
or (z) result in any breach or violation of, or a default under, any of the
Company Benefit Plans or Company Benefit Agreements.
(f) Other than payments that may be made to the persons listed
in the Company Disclosure Letter (the "PRIMARY COMPANY EXECUTIVES"), any amount
or economic
<PAGE>
25
benefit that could be received (whether in cash or property or the vesting of
property) as a result of the Offer, the Merger or any other Transaction
(including as a result of termination of employment on or following the
Effective Time) by any employee, officer or director of the Company or any of
its affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any Company Benefit Plan or
Company Benefit Agreement or otherwise would not be characterized as an "excess
parachute payment" (as defined in Sec tion 280G(b)(1) of the Code), and no
disqualified individual is entitled to receive any additional payment from the
Company or any Company Subsidiary or any other person in the event that the
excise tax under Section 4999 of the Code is imposed on such disqualified
individual. Set forth in the Company Disclosure Letter is (i) the estimated
maximum amount that could be paid to each Primary Company Executive as a result
of the Offer, the Merger and the other Transactions under all Company Benefit
Plans and Company Benefit Agreements and (ii) the "base amount" (as defined in
Section 280G(b)(3) of the Code) for each Primary Company Executive calculated as
of the date of this Agreement.
SECTION 3.12. LITIGATION. The Company Disclosure Letter sets
forth a true and complete description of all pending, or, to the knowledge of
the Company, threatened, material suits, actions, proceedings or Judgments
against or affecting the Company or any Company Subsidiary and a summary of the
status of and potential liabilities arising from each such suit, action,
proceeding and Judgment. Except as set forth in the Company Disclosure Letter or
in the Filed Company SEC Documents, there is (i) no investigation or review by
any Governmental Entity or self-regulatory authority with respect to the Company
or any Company Subsidiary or any of their respective employees or
representatives (insofar as any such investigation or review relates to their
activities with the Company or any Company Subsidiary) actually pending or, to
the knowledge of the Company, threatened, nor has any Governmental Entity or
self-regulatory authority indicated to the Company or any Company Subsidiary an
intention to conduct the same, (ii) no material claim, action, suit or
proceeding (including any claim, action, suit or proceeding pertaining to
product liability, patent infringement or bodily injury) pending, or, to the
knowledge of the Company, threatened against or affecting the Company or any
Company Subsidiary, the business or assets of the Company or any Company
Subsidiary or any of the directors, shareholders,
<PAGE>
26
employees or representatives of the Company or any Company Subsidiary (insofar
as any such matters relate to their activities with the Company or any Company
Subsidiary) at law or in equity, or before any Governmental Entity, arbitrator
or arbitration panel and (iii) no outstanding Judgment by which the Company or
any Company Subsidiary or their respective business is bound or by which any of
the employees or representatives of the Company or any Company Subsidiary is
prohibited or restricted from engaging in or otherwise conducting the business
of the Company or any Company Subsidiary as presently conducted, except where
such investigations, reviews, claims, actions, suits, proceedings or Judgments,
individually and in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.13. COMPLIANCE WITH APPLICABLE LAWS. Except as
disclosed in the Filed Company SEC Documents or in the Company Disclosure
Letter, the Company and the Company Subsidiaries are in compliance in all
material respects with all applicable Laws (including the Truth-In-Negotiations-
Act, the Procurement Integrity Act, the Foreign Corrupt Practices Act, the Cost
Accounting Standards, the Regulations of applicable Governmental Entities
governing foreign military sales, export controls, illegal boycotts, national
security and any other Laws or orders incorporated expressly, by reference or by
operation of Law into, or otherwise applicable to, any Contract or other
agreement made with the United States of America (a "GOVERNMENT CONTRACT")).
Except as set forth in the Filed Company SEC Documents or in the Company
Disclosure Letter, neither the Company nor any Company Subsidiary has received
any written notice: (i) since September 30, 1997, of any administrative, civil
or criminal investigation or audit (other than Tax audits) by any Governmental
Entity (including any qui tam action brought under the Civil False Claims Act
alleging any irregularity, misstatement or omission arising under or relating to
any Government Contract) relating to the Company or any Company Subsidiary or
(ii) during the past two years, from any Governmental Entity alleging that the
Company or a Company Subsidiary is not in compliance in any material respect
with any applicable Law. Except as set forth in the Company Disclosure Letter,
since September 30, 1997, to the knowledge of the Company, neither the Company
nor any Company Subsidiary nor any of their respective officers or directors is
or has been the subject of any criminal investigation in respect of any
Government Contract. Each of the Company, the Company Subsidiaries and their
respective employees has in effect
<PAGE>
27
all approvals, authorizations, certificates, filings, franchises, licenses,
notices, permits and rights of or with all Governmental Entities ("PERMITS")
necessary for it to own, lease or operate its properties and assets and to carry
on its business and operations as now conducted, except for the failure to have
such Permits that, individually and in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect. There have
occurred no defaults under, or violations of, any such Permit, except for such
defaults and violations that, individually and in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse Effect.
Neither the Offer nor the Merger, in and of itself, would cause the revocation
or cancelation of any such Permit that individually or in the aggregate would
reasonably be expected to have a Company Material Adverse Effect. This Section
3.13 does not relate to matters with respect to Taxes, which are the subject of
Section 3.09, or to environmental matters, which are the subject of Section
3.14.
SECTION 3.14. ENVIRONMENTAL MATTERS. (a) Except as disclosed
in the Filed Company SEC Documents or in the Company Disclosure Letter, (i) the
Company and the Company Subsidiaries are in compliance in all material respects
with Environmental Laws, (ii) the Company and the Company Subsidiaries hold and
are in compliance in all material respects with all Permits required to conduct
their respective businesses and operations under the Environmental Laws, (iii)
during the past three years, neither the Company nor any Company Subsidiary has
received any written communication from a Governmental Entity that alleges that
the Company or a Company Subsidiary is not in compliance in any material respect
with, or has or may have material liability under, any Environmental Law, (iv)
neither the Company nor any Company Subsidiary has entered into or agreed to any
Governmental Entity decree, order or agreement and is not subject to any
judgment relating to compliance with, or to investigation or cleanup, or to
liability, under any Environmental Law, and (v) neither the Company nor any
Company Subsidiary, nor, to the knowledge of either the Company or any Company
Subsidiary, any predecessor of or former subsidiaries of same, has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled, or released any Hazardous Substance, or owned or operated any property
or facility in a manner that has given or would reasonably be expected to give
rise to material liabilities, including any material liability for response
costs, corrective
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28
action costs, personal injury, property damage, natural resources damages or
attorney fees, pursuant to any Environmental Laws. "ENVIRONMENTAL LAWS" means
any applicable Federal, state or local statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, and all common law concerning health
and safety, pollution or protection of the environment or the handling, release,
remediation or exposure to Hazardous Substances. "HAZARDOUS SUBSTANCE" means all
explosive or radioactive substances or wastes, hazardous or toxic substances or
wastes, pollutants and contaminants including petroleum or any fraction thereof
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
(b) Except as set forth in the Company Disclosure Letter, no
Environmental Law imposes any obligation upon the Company or any Company
Subsidiary arising out of or as a condition to the Offer, the Merger or any
other Transaction, including any requirement to modify or to transfer any permit
or license, any requirement to file any notice or other submission with any
Governmental Entity, the placement of any notice, acknowledgment or covenant in
any land records, or the modification of or provision of notice under any
agreement, consent order or consent decree. No Lien has been placed upon any of
the Company's or any of the Company Subsidiaries' properties under any
Environmental Law.
SECTION 3.15. CONTRACTS. (a) Except as filed as an exhibit to
the Filed Company SEC Documents or as set forth in the Company Disclosure
Letter, there are no Contracts that are material to the business, assets,
condition (financial or otherwise) or results of operations of the Company and
the Company Subsidiaries taken as a whole. Neither the Company nor any Company
Subsidiary is in violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice would cause
such a violation of or default under) any Contract to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that, individually and in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in the Company Disclosure Letter or filed as an exhibit to the Filed
Company SEC Documents, neither the Company nor any Company Subsidiary is a party
to any:
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29
(i) Contract that involves performance of services or delivery
of goods, materials, supplies or equipment by the Company or any
Company Subsidiary with a remaining cost to complete in excess of
$250,000;
(ii) employee collective bargaining agreement or other
Contract with any labor union or employment agreement or employment
Contract;
(iii) covenant of the Company or a Company Subsidiary not to
compete (other than pursuant to any radius restriction contained in any
lease, reciprocal easement or development, construction, operating or
similar agreement) or other covenant of the Company or a Company
Subsidiary restricting the development, manufacture, marketing or
distribution of the products and services of the Company or any Company
Subsidiary;
(iv) Contract or other arrangement with any current or former
officer, director or employee of the Company or a Company Subsidiary
(other than employment agreements covered by clause (ii) above);
(v) (A) continuing Contract for the future purchase of
materials, supplies or equipment (other than purchase Contracts and
orders for inventory in the ordinary course of business consistent with
past practice), (B) management, service, consulting or other similar
type of Contract or (C) advertising agreement or arrangement, in any
such case which has an aggregate future liability to any person (other
than the Company or a Company Subsidiary) in excess of $100,000 and is
not terminable by the Company or a Company Subsidiary by notice of not
more than 60 days for a cost of less than $50,000;
(vi) material license, option or other agreement relating in
whole or in part to Intellectual Property (as defined in Section 3.17),
including any license or other agreement under which the Company or a
Company Subsidiary is licensee or licensor of any such Intellectual
Property, except for agreements relating to computer software licensed
to the Company or a Company Subsidiary in the ordinary course of
business; or
(vii) other Contract or commitment to which the Company or any
Company Subsidiary is a party or by or to which it or any of its assets
or business is
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30
bound or subject which has an aggregate future liability to any person
(other than the Company or a Company Subsidiary) in excess of $100,000
and is not terminable by the Company or a Company Subsidiary by notice
of not more than 60 days for a cost of less than $50,000.
(b) Except as disclosed in the Filed Company SEC Documents or
set forth in the Company Disclosure Letter, there are no outstanding claims
against the Company or any Company Subsidiary, either by the U.S. government or
by any prime contractor, subcontractor, vendor or other third party, relating to
any Government Contract arising under the Contracts Disputes Act or otherwise.
Neither the Company nor any Company Subsidiary has any pending default
termination action, open written cure notice or show cause notice (as defined in
the Federal Acquisition Regulations Part 49, P. 49.607(a) and (b), respectively)
in respect of any Government Contract. Except as disclosed in the Filed Company
SEC Documents or set forth in the Company Disclosure Letter, there are no
pending written claims or requests for equitable adjustment under any Government
Contracts by any Governmental Entities. Neither the Company nor any Company
Subsidiary nor any of their respective directors and officers is (or during the
past five years has been) suspended or debarred from doing business with the
U.S. government or is (or during such period was) the subject of a finding of
nonresponsibility or ineligibility for U.S. government contracting. The Company
and each Company Subsidiary are in compliance in all material respects with all
their obligations relating to any equipment or fixtures owned by any
Governmental Entity and loaned, bailed or otherwise furnished to or held by the
Company or any Company Subsidiary.
SECTION 3.16. TITLE TO PROPERTIES. (a) Except as set forth in
the Company Disclosure Letter, the Company and each Company Subsidiary have good
and marketable title to, or valid leasehold interests in, all their properties
and assets except for such as are no longer used or useful in the conduct of
their businesses or as have been disposed of in the ordinary course of business
and except for defects in title, easements, restrictive covenants and similar
encumbrances or impediments that, in the aggregate, do not and will not
materially interfere with their ability to conduct their businesses as currently
conducted. All such assets and properties, other than assets and properties in
which the Company or any Company Subsidiary has leasehold interests, are free
and clear of all Liens other than
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31
those set forth in the Company Disclosure Letter and except for Liens that, in
the aggregate, do not and will not materially interfere with the ability of the
Company and the Company Subsidiaries to conduct their businesses as currently
conducted.
(b) Except as set forth in the Company Disclosure Letter, the
Company and each Company Subsidiary have complied in all material respects with
the terms of all material leases to which they are parties and under which they
are in occupancy, and all such leases are in full force and effect. The Company
and each Company Subsidiary enjoy peaceful and undisturbed possession under all
such material leases.
SECTION 3.17. INTELLECTUAL PROPERTY. Except as set forth in
the Company Disclosure Letter, the Company and the Company Subsidiaries own, or
are validly licensed or otherwise have the right to use, without payment to any
other person, all the patents, trademarks (registered or unregistered), trade
names, service marks, copyrights and applications therefor, other proprietary
intellectual property rights and computer programs (collectively, "INTELLECTUAL
PROPERTY") that is, individually or in the aggregate, material to the conduct of
the business of the Company and the Company Subsidiaries taken as a whole, and
the consummation of the Transactions will not conflict with, alter or impair any
such rights. All Intellectual Property held by the Company and the Company
Subsidiaries is valid and enforceable and (i) neither the Company nor any
Company Subsidiary is, nor will the Company or any Company Subsidiary be as a
result of the execution and delivery of this Agreement or the performance of the
Company's obligations hereunder, infringing on or in violation of, and no claims
are pending or, to the knowledge of the Company, threatened that the Company or
any Company Subsidiary is infringing on or otherwise violating, the rights of
any person with regard to any Intellectual Property and (ii) to the knowledge of
the Company, no person is infringing on or otherwise violating any right of the
Company or any Company Subsidiary with respect to any Intellectual Property
owned by or licensed to the Company or any of the Company Subsidiaries, in each
case other than such failures to be valid and enforceable, infringements,
violations or claims that, individually and in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect.
Neither the Company nor any Company Subsidiary is bound by or a party to any
options, licenses or agreements of any kind relating to the Intellectual
Property of any
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32
other person, except as set forth in the Company Disclosure Letter and except
for agreements relating to computer software licensed to the Company or a
Company Subsidiary in the ordinary course of business.
SECTION 3.18. LABOR MATTERS. Except as set forth in the
Company Disclosure Letter, there are no collective bargaining or other labor
union agreements to which the Company or any Company Subsidiary is a party or by
which any of them is bound. To the knowledge of the Company, since September 30,
1997, neither the Company nor any Company Subsidiary has encountered any labor
union organizing activity, or had any actual or threatened employee strikes,
work stoppages, slowdowns or lockouts.
SECTION 3.19. BROKERS. No broker, investment banker, financial
advisor or other person, other than Frost Securities, Inc., the fees and
expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Offer, the Merger and the other Transactions based upon arrangements
made by or on behalf of the Company. The Company has furnished to Parent a true
and complete copy of all agreements between the Company and Frost Securities,
Inc. relating to the Offer, the Merger and the other Transactions.
SECTION 3.20. OPINION OF FINANCIAL ADVISOR. The Company has
received the opinion of Frost Securities, Inc., dated the date of this
Agreement, to the effect that, as of such date, the consideration to be received
in the Offer and the Merger by the holders of Company Common Stock is fair from
a financial point of view, a signed copy of which opinion has been delivered to
Parent.
SECTION 3.21. YEAR 2000 COMPLIANCE. (a) Except as set forth in
the Company Disclosure Letter, the computer systems of the Company and the
Company Subsidiaries are Year 2000 Compliant (as defined below). All inventory
of the Company and the Company Subsidiaries that is, consists of, includes or
uses computer software is Year 2000 Compliant. The best current estimates of the
Company of capital expenditures to be Year 2000 Compliant are set forth in the
Company Disclosure Letter. To the knowledge of the Company, any failure on the
part of the customers of and suppliers to the Company and the Company
Subsidiaries to be Year 2000 Compliant will not have a Company Material Adverse
Effect.
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33
(b) The term "YEAR 2000 COMPLIANT", with respect to a computer
system or software program, means that such computer system or program will: (i)
recognize, process, manage, represent, interpret and manipulate correctly date-
related data for dates earlier and later than January 1, 2000; (ii) provide date
recognition for any data element without limitation; (iii) function
automatically into and beyond the year 2000 without human intervention and
without any change in operations associated with the advent of the year 2000;
(iv) interpret data, dates and time correctly into and beyond the year 2000; (v)
not produce noncompliance in existing data, nor otherwise corrupt such data,
into and beyond the year 2000; (vi) process correctly after January 1, 2000,
data containing dates before that date; and (vii) recognize all "leap year"
dates, including February 29, 2000.
SECTION 3.22. POTENTIAL CONFLICTS OF INTEREST. Except as
disclosed in the Filed Company SEC Documents or set forth in the Company
Disclosure Letter, since September 30, 1997 there have been no transactions,
agreements, arrangements or understandings between the Company or any Company
Subsidiary, on the one hand, and their respective affiliates, on the other hand,
that would be required to be disclosed under Item 404 of Regulation S-K under
the Securities Act. Except as disclosed in the Filed Company SEC Documents or
set forth in the Company Disclosure Letter, (i) no officer of the Company or any
Company Subsidiary owns, directly or indirectly, any interest in (except stock
holdings of publicly held and traded companies solely for investment purposes
and not in excess of 1% of the outstanding shares of any such class of
securities) or is an officer, director, employee or consultant of any person
which is a competitor, lessor, lessee, customer or supplier of the Company and
(ii) no officer or director of the Company or any Company Subsidiary (A) owns,
directly or indirectly, in whole or in part, any Intellectual Property which the
Company or any Company Subsidiary is using or the use of which is necessary for
the business of the Company or the Company Subsidiaries; (B) has any claim,
charge, action or cause of action against the Company or any Company Subsidiary,
except for claims for accrued vacation pay, accrued benefits under the employee
benefit plans maintained by the Company or a Company Subsidiary and similar
matters and agreements existing on the date hereof; (C) has made, on behalf of
the Company or any Company Subsidiary, any payment or commitment to pay any
commission, fee or other amount to, or to purchase or obtain or otherwise
contract to purchase or obtain any
<PAGE>
34
goods or services from, any other person of which any officer or director of the
Company or any Company Subsidiary, or, to the Company's knowledge, a relative of
any of the foregoing, is a partner or shareholder (except stock holdings solely
for investment purposes in securities of publicly held and traded companies); or
(D) owes any money to the Company or any Company Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub, jointly and severally, represent and warrant
to the Company as follows:
SECTION 4.01. ORGANIZATION, STANDING AND POWER. Each of Parent
and Sub is duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has all requisite corporate
power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to own, lease or
otherwise hold its properties and assets and to conduct its businesses as
presently conducted, other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually and in the
aggregate, has not had and would not reasonably be expected to have a material
adverse effect on the ability of Parent or Sub to perform their obligations
under the Transaction Agreements or a material adverse effect on the ability of
Parent or Sub to consummate the Offer, the Merger and the other Transactions (a
"PARENT MATERIAL ADVERSE EFFECT").
SECTION 4.02. SUB. (a) Since the date of its incorporation,
Sub has not carried on any business or conducted any operations other than the
execution of the Transaction Agreements, the performance of its obligations
hereunder and matters ancillary thereto.
(b) The authorized capital stock of Sub consists of 1,000
shares of common stock, par value $0.01 per share, all of which have been
validly issued, are fully paid and nonassessable and are owned by Parent free
and clear of any Lien.
SECTION 4.03. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. Each of Parent and Sub has all requisite corporate power and
authority to execute and deliver each Transaction Agreement to which it is a
party and to consummate the Transactions. The execution and delivery by each of
Parent and Sub of each Transaction Agreement to which it is a party
<PAGE>
35
and the consummation by it of the Transactions have been duly authorized by all
necessary corporate action on the part of Parent and Sub. Parent, as sole
shareholder of Sub, has approved the Transaction Agreements. Each of Parent and
Sub has duly executed and delivered each Transaction Agreement to which it is a
party and, assuming due and valid authorization, execution and delivery thereof
by the Company, each such Transaction Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws, now or hereafter in effect,
affecting creditor rights generally and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
SECTION 4.04. NO CONFLICTS; CONSENTS. (a) The execution and
delivery by each of Parent and Sub of each Transaction Agreement to which it is
a party do not, and the consummation of the Offer, the Merger and the other
Transactions and compliance with the terms of each Transaction Agreement to
which it is a party will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, any provision
of (i) the charter or organizational documents of Parent or any of its
subsidiaries, (ii) any Contract to which Parent or any of its subsidiaries is a
party or by which any of their respective properties or assets is bound or (iii)
subject to the filings and other matters referred to in Section 4.04(b), any
Judgment or Law applicable to Parent or any of its subsidiaries or their
respective properties or assets, except in the case of clause (ii) and (iii)
where such conflicts, violations and defaults, individually and in the
aggregate, would not reasonably be expected to have a Parent Material Adverse
Effect.
(b) No Consent of, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by or with
respect to Parent or any of its subsidiaries in connection with the execution,
delivery and performance of any Transaction Agreement to which Parent or Sub is
a party or the consummation of the Transactions, other than (i) compliance with
and filings under the HSR Act, (ii) the filing of a joint
<PAGE>
36
notification pursuant to the Exon-Florio Act, (iii) the filing with the SEC of
(A) the Offer Documents and (B) such reports under Sections 13 and 16 of the
Exchange Act as may be required in connection with the Transaction Agreements,
the Offer, the Merger and the other Transactions, (iv) the filing of the
Articles of Merger with the Secretary of State of the State of Texas, (v)
compliance with and such filings as may be required under applicable
Environmental Laws, (vi) such filings as may be required in connection with the
Taxes described in Section 6.08, (vii) such of the foregoing as may be required
in connection with the financing required to consummate the Offer and the
Merger, and to pay related fees and expenses (the "FINANCING"), and (viii) such
other consents and filings (the "OTHER PARENT FILINGS", and together with the
Other Company Filings, the "OTHER FILINGS") the failure of which to obtain or
make, individually and in the aggregate, would not reasonably be expected to
have a Parent Material Adverse Effect or in any manner impede, frustrate,
prevent, delay or nullify the consummation of the Transactions.
SECTION 4.05. INFORMATION SUPPLIED. None of the information
supplied or to be supplied by Parent or Sub for inclusion or incorporation by
reference in (i) the Offer Documents, the Schedule 14D-9, the Other Filings or
the Information Statement will, at the time such document is filed with the SEC
or other Governmental Entity, at any time it is amended or supplemented or at
the time it is first published, sent or given to the Company's shareholders,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) the Proxy Statement will, at the date it is first mailed
to the Company's shareholders or at the time of the Company Shareholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by Parent or Sub with respect
to statements made or incorporated by reference therein based on information
supplied by the Company for inclusion or incorporation by reference therein. The
Offer Documents will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder.
SECTION 4.06. BROKERS. No broker, investment banker, financial
advisor or other person is entitled to
<PAGE>
37
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the Offer, the Merger and the other Transactions based upon
arrangements made by or on behalf of Parent.
SECTION 4.07. FINANCING. Parent and Sub will have available
all the funds necessary for the acquisition of all shares of Company Common
Stock pursuant to the Offer and the Merger, as and when needed, and to perform
their respective obligations under the Transaction Agreements.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY
THE COMPANY. Except for matters set forth in the Company Disclosure Letter or
otherwise expressly permitted by this Agreement or agreed to in writing by
Parent, from the date of this Agreement to the Effective Time, the Company
shall, and shall cause each Company Subsidiary to, conduct its business
diligently and in the usual, regular and ordinary course of business and in
substantially the same manner as previously conducted and use all reasonable
efforts to preserve intact its current business organization, keep available the
services of its current officers and employees and keep its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them to the end that its goodwill and ongoing business
shall be unimpaired at the Effective Time. The Company and each Company
Subsidiary shall maintain its assets and all parts thereof in as good working
order and condition as at present, ordinary wear and tear excepted, consistent
with past practices, and shall maintain in full force and effect current
insurance policies or other comparable insurance coverage with respect to the
assets and potential liabilities thereof. In addition, and without limiting the
generality of the foregoing, except for matters set forth in the Company
Disclosure Letter or otherwise expressly permitted by this Agreement or agreed
to in writing by Parent, from the date of this Agreement to the Effective Time,
the Company shall not, and shall not permit any Company Subsidiary to, make any
material change in personnel, operations or finance, or do any of the following
without the prior written consent of Parent:
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38
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other
than dividends and distri butions by a direct or indirect wholly owned
subsidiary of the Company to its parent, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (C) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any Company
Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities other than
pursuant to the provisions of Section 6.04 hereof including any payment
of cash pursuant thereto;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber
or subject to any Lien (A) any shares of its capital stock, (B) any
Voting Company Debt or other voting securities, (C) any securities
convertible into or exchangeable for, or any options, warrants or
rights to acquire, any such shares, Voting Company Debt, voting
securities or convertible or exchangeable securities or (D) any
"phantom" stock, "phantom" stock rights, stock appreciation rights or
stock-based performance units, other than the issuance of Company
Common Stock upon the exercise of Company Stock Options outstanding on
the date of this Agreement and in accordance with their present terms.
(iii) amend the Company Charter, the Company By-laws or other
comparable charter or organizational documents other than pursuant to
Section 1.07 hereof;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing the assets of, or by any other
manner, any equity interest in or business or any corporation,
partnership, company, limited liability company, joint venture,
association or other business organization or division thereof or (B)
any assets that, individually, are in excess of $100,000 or, in the
aggregate, are in excess of $300,000, except purchases of inventory in
the ordinary course of business consistent with past practice;
(v) (A) grant to any officer or director of the Company or any
Company Subsidiary any increase in
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39
compensation, except in the ordinary course of business consistent with
past practice or to the extent required under employment agreements
filed as exhibits to the Filed Company SEC Documents, (B) grant to any
employee, officer or director of the Company or any Company Subsidiary
any increase in severance or termination pay, except to the extent
required under any agreement filed as an exhibit to the Filed Company
SEC Documents, (C) establish, adopt, enter into or amend any Company
Benefit Agreement, (D) establish, adopt, enter into or amend in any
material respect any collective bargaining agreement or Company Benefit
Plan or (E) take any action to accelerate any rights or benefits, or
make any material determinations not in the ordinary course of business
consistent with past practice, under any collective bargaining
agreement or Company Benefit Plan or Company Benefit Agreement, other
than pursuant to the provisions of Section 6.04 hereof including any
payment of cash pursuant thereto;
(vi) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets,
liabilities or results of operations of the Company, except insofar as
may have been required by a change in GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of
or subject to any Lien any properties or assets that are material,
individually or in the aggregate, to the Company and the Company
Subsidiaries, taken as a whole, except (A) sales of inventory and
excess or obsolete assets in the ordinary course of business consistent
with past practice and (B) the sale of Vertex Satcom Systems, Inc. on
terms, and pursuant to a definitive agreement, approved in writing by
Parent (the "SATCOM SALE");
(viii) (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any Company Subsidiary, guarantee any debt
securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, except for short-term borrowings incurred in the
ordinary
<PAGE>
40
course of business consistent with past practice, or (B) make any
loans, advances or capital contributions to, or investments in, any
other person, other than to or in the Company or any direct or indirect
wholly owned subsidiary of the Company;
(ix) make or agree to make any new capital expendi ture or
expenditures that, individually, is in excess of $100,000 or, in the
aggregate, are in excess of $300,000 in any calendar quarter;
(x) make or change any material Tax election or settle or
compromise any material Tax liability or refund;
(xi) (A) pay, discharge, settle or satisfy any claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated
by, the 1999 Company Financial Statements or incurred since the date of
such financial statements in the ordinary course of business consistent
with past practice, (B) cancel any indebtedness that is material,
individually or in the aggregate, to the Company and the Company
Subsidiaries taken as a whole, or waive any claims or rights of
substantial value or (C) waive the benefits of, or agree to modify in
any manner, any confidentiality, standstill or similar agreement to
which the Company or any Company Subsidiary is a party;
(xii) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing a liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization other than for the liquidation of any Company Subsidiary
into the Company;
(xiii) make or renew, extend, amend, modify, or waive any
material provisions of any Contract or commitment or relinquish or
waive any material Contract rights or agree to the termination of any
material Contract, except in the ordinary course of business consistent
with prior practice;
<PAGE>
41
(xiv) institute, settle, or agree to settle any action or
proceeding pending before any court or other Governmental Entity; or
(xv) authorize, or commit or agree to take, any of the
foregoing actions.
(b) OTHER ACTIONS. The Company and Parent shall not, and shall
not permit any of their respective subsidiaries to, take any action that would,
or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in any Transaction
Agreement to which it is a party that is qualified as to materiality becoming
untrue, (ii) any of such representations and warranties that is not so qualified
becoming untrue in any material respect or (iii) except as otherwise permitted
by Section 5.02, any Tender Offer Condition, or any condition to the Merger set
forth in Article VII, not being satisfied.
(c) ADVICE OF CHANGES. The Company shall promptly advise
Parent orally and in writing of any change or event that has had or would
reasonably be expected to have a Company Material Adverse Effect other than any
change or event in (i) the economy or the securities markets in general or (ii)
the Company's industry in general, and not specifically relating to the Company
or the Company Subsidiaries.
SECTION 5.02. NO SOLICITATION. (a) The Company shall, and
shall cause its Representatives (as defined below) to, cease immediately all
current discussions and negotiations regarding any proposal that constitutes, or
may reasonably be expected to lead to, a Company Takeover Proposal (as defined
in Section 5.02(e)). The Company shall not, nor shall it authorize or permit any
Company Subsidiary to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, financial advisor, attorney, accountant
or other advisor or representative (collectively, "REPRESENTATIVES") of, the
Company or any Company Subsidiary to, (i) directly or indirectly solicit,
initiate or encourage the submission of any Company Takeover Proposal, (ii)
enter into any agreement with respect to any Company Takeover Proposal or (iii)
directly or indirectly participate in any discussions or negotiations regarding,
or furnish to any person any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Company Takeover
Proposal; PROVIDED,
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42
HOWEVER, that prior to the earlier to occur of acceptance for payment of shares
of Company Common Stock pursuant to the Offer and approval of this Agreement by
the shareholders of the Company, the Company may, to the extent that a failure
to do so would violate the fiduciary obligations of the Company Board under
applicable Law, as determined in good faith by a majority of the Disinterested
Directors based on the advice of outside counsel, in response to a Superior
Company Proposal (as defined in Section 5.02(e)) that was not solicited by the
Company or its Representatives and that did not otherwise result from a breach
or a deemed breach of this Section 5.02(a), and subject to compliance with
Section 5.02(c), (x) furnish information with respect to the Company to the
person making such Superior Company Proposal pursuant to a confidentiality
agreement not less restrictive of the other party than the Confidentiality
Agreement (as defined in Section 6.02) and (y) participate in discussions or
negotiations regarding such Superior Company Proposal. "DISINTERESTED DIRECTOR"
means, with respect to any Company Takeover Proposal, any member of the Company
Board that is not an affiliate or Representative of the person making such
Company Takeover Proposal. Without limiting the foregoing, any violation of the
restrictions set forth in the preceding sentence by any Representative or
affiliate of the Company or any Company Subsidiary, whether or not such person
is purporting to act on behalf of the Company or any Company Subsidiary or
otherwise, shall be deemed to be a breach of this Section 5.02(a) by the
Company.
(b) Neither the Company, nor the Company Board nor any
committee thereof shall (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Parent or Sub, the approval or recommendation
by the Company Board or any such committee of the Transaction Agreements, the
Offer or the Merger, (ii) approve or cause the Company or any Company Subsidiary
to enter into any letter of intent, agreement in principle, acquisition
agreement or similar agreement (each, an "ACQUISITION AGREEMENT") relating to
any Company Takeover Proposal or (iii) approve or recommend, or propose publicly
to approve or recommend, any Company Takeover Proposal. Notwithstanding the
foregoing, if, prior to the earlier to occur of acceptance for payment of shares
of Company Common Stock pursuant to the Offer and approval of this Agreement by
the shareholders of the Company, the Company Board receives a Superior Company
Proposal which was not solicited by the Company and which did not otherwise
result from a breach of Section 5.02(a), and the Company Board determines in
good faith,
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43
based on the advice of outside counsel, that the failure to do so
would violate its fiduciary obligations under applicable Law, the Company Board
may withdraw or modify its approval or recommendation of the Transaction
Agreements, the Offer or the Merger; PROVIDED that such determination shall be
made at a time that is after the third business day following the receipt by
Parent of written notice advising Parent that the Company Board is prepared to
accept a Superior Company Proposal, specifying the material terms and conditions
of such Superior Company Proposal and identifying the person making such
Superior Company Proposal.
(c) The Company promptly shall advise Parent orally and in
writing of any Company Takeover Proposal or any inquiry with respect to, or that
could reasonably be expected to lead to, any Company Takeover Proposal
(including any change to the terms of any such Company Takeover Proposal or
inquiry) and the identity of the person making any such Company Takeover
Proposal or inquiry. The Company shall (i) keep Parent fully informed of the
status of any such Company Takeover Proposal or inquiry (including any change to
the terms of any such Company Takeover Proposal or inquiry) and (ii) provide to
Parent copies of all correspondence and other written material sent or provided
by any third party to the Company, or by the Company to any third party, in
connection with any Company Takeover Proposal, as soon as practicable after
receipt or delivery thereof.
(d) Nothing contained in Section 5.02(a) or 5.02(b) shall
prohibit the Company from (x) taking and disclosing to its shareholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or (y)
making any disclosure to the Company's shareholders if, in the good faith
judgment of the Company Board, based on the advice of outside counsel, failure
so to disclose would constitute a violation of applicable Law; PROVIDED,
HOWEVER, that neither the Company, nor the Company Board nor any committee
thereof shall withdraw or modify, or propose publicly to withdraw or modify, its
position with respect to the Transaction Agreements, the Offer or the Merger
(unless it is permitted to do so under Section 5.02(b)) or approve or recommend,
or propose publicly to approve or recommend, a Company Takeover Proposal.
(e) For purposes of this Agreement:
"COMPANY TAKEOVER PROPOSAL" means any inquiry, proposal or
offer for (i) a merger, consolidation, dissolution, recapitalization,
liquidation or other
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44
business combination involving the Company or any Company Subsidiary,
(ii) the acquisition by any person in any manner, directly or
indirectly, of a number of shares of any class of equity securities of
the Company or any Company Subsidiary equal to or greater than 20% of
the number of such shares outstanding before such acquisition or (iii)
the acquisition by any person in any manner, directly or indirectly, of
assets that constitute 20% or more of the net revenues, net income or
assets of the Company or any Company Subsidiary, in each case other
than the Transactions or the Satcom Sale (the transactions referred to
in clauses (i), (ii) and (iii) being referred to herein as "COMPANY
TAKEOVER TRANSACTIONS").
"SUPERIOR COMPANY PROPOSAL" means any bona fide proposal made
by a third party to acquire substantially all the equity securities or
assets of the Company, pursuant to a tender or exchange offer, merger,
consolidation, liquidation or dissolution, recapitalization, sale of
all or substantially all its assets or otherwise, (i) on terms which
the Company Board determines in its good faith judgment to be superior
from a financial point of view to the holders of Company Common Stock
than the Transactions (based on the written opinion, with only
customary qualifications, of the Company's independent financial
advisor, which has been provided to Parent), taking into account all
the terms and conditions of such proposal, the Transaction Agreements
and any proposal by Parent to amend the terms of the Transactions, (ii)
for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Company Board, is reasonably
capable of being obtained by such third party and (iii) for which, in
the good faith judgment of the Company Board, no regulatory approvals
are required, including antitrust approvals, that could not reasonably
be expected to be obtained.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. PREPARATION OF PROXY STATEMENT; SHAREHOLDERS'
MEETING. (a) If the approval of this Agreement by the Company's shareholders is
required by Law, the Company shall, as soon as practicable following the
acceptance for payment and purchase of the shares of
<PAGE>
45
Company Common Stock by Sub pursuant to the Offer, prepare and file with the SEC
the Proxy Statement in preliminary form, and each of the Company and Parent
shall use its reasonable efforts to respond as promptly as practicable to any
comments of the SEC with respect thereto. The Company shall notify Parent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and shall supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement. If at any time prior to receipt of the Company Shareholder Approval
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company shall promptly prepare and mail
to its shareholders such an amendment or supplement. No filing of, or amendment
to, the Proxy Statement will be made by the Company without providing Parent the
opportunity to review and comment thereon. The Company shall not mail any Proxy
Statement, or any amendment or supplement thereto, to which Parent reasonably
objects. The Company shall use its reasonable efforts to cause the Proxy
Statement to be mailed to the Company's shareholders as promptly as practicable
after filing with the SEC.
(b) If the approval of this Agreement by the Company's
shareholders is required by Law, the Company shall, as soon as practicable
following the acceptance for payment and purchase of the shares of Company
Common Stock by Sub pursuant to the Offer, duly call, give notice of, convene
and hold a meeting of its shareholders (the "COMPANY SHAREHOLDERS' MEETING") for
the purpose of seeking the Company Shareholder Approval. The Company shall,
through the Company Board, recommend to its shareholders that they vote in favor
of the approval of this Agreement and the Company Board shall not condition its
submission to the shareholders of this Agreement on any basis; PROVIDED,
HOWEVER, that the Company Board may withdraw such recommendation if it is
permitted to do so under Section 5.02(b). Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to the first
sentence of this Section 6.01(b) shall not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
Company Takeover Proposal. Notwithstanding the foregoing, if Sub or any other
subsidiary of Parent shall acquire at least 90% of the outstanding shares of
Company Common Stock, the parties
<PAGE>
46
shall, at the request of Parent, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after the expiration
of the Offer without a shareholders' meeting in accordance with Article 5.16 of
the TBCA.
(c) Parent shall cause all shares of Company Common Stock
purchased pursuant to the Offer and all other shares of Company Common Stock
owned by Sub or any other subsidiary of Parent to be voted in favor of the
approval of this Agreement.
SECTION 6.02. ACCESS TO INFORMATION; CONFIDENTIALITY. From the
date hereof until the earlier of the Effective Time or the termination of this
Agreement, upon reasonable notice the Company shall, and shall cause each
Company Subsidiary to, afford to Parent, and to Parent's officers, employees,
accountants, counsel, financial advisors and other representatives, reasonable
access during reasonable business hours to (i) all their respective properties,
books, contracts, commitments, personnel and records and other information and
business documents, (ii) customers of the Company or any Company Subsidiary as
may reasonably be designated by Parent and (iii) the premises of the Company and
the Company Subsidiaries for the purpose of inspecting the assets and facilities
of any such entity and the condition thereof, provided that access to the
premises shall be permitted only with the prior consent of the Company (which
consent shall not be unreasonably withheld). During the period prior to the
Effective Time, the Company shall, and shall cause each Company Subsidiary to,
furnish promptly to Parent (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of Federal or state securities laws and (b) consistent with its
legal obligations, all other information concerning its business, properties and
personnel as Parent may reasonably request. Without limiting the generality of
the foregoing, the Company shall, within two business days of request therefor,
provide to Parent the information described in Rule 14a-7(a)(2)(ii) under the
Exchange Act and any information to which a shareholder of the Company would be
entitled under Article 2.44 of the TBCA (assuming such holder met the
requirements of such section). During the period prior to the Effective Time,
Parent will have the reasonable cooperation of the Company in confirming the
nature of the relationships between the Company or any Company Subsidiary and
their respective customers and suppliers, including whether or not such
relationships are satisfactory and whether or not such relationships
<PAGE>
47
are expected to continue after the Merger. The Company shall have the right to
have a representative present at all times of any such inspections, interviews
and communications conducted by Parent or its representatives. Neither any
investigation conducted by Parent or its representatives pursuant to this
Section 6.02 nor the results thereof shall affect any representation or warranty
of the Company contained in this Agreement or the ability of Parent to rely
thereon. All information exchanged pursuant to this Section 6.02 shall be
subject to the confidentiality agreement dated September 28, 1999, between the
Company and Parent (the "CONFIDENTIALITY AGREEMENT").
SECTION 6.03. REASONABLE EFFORTS; NOTIFICATION. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of the
parties shall use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Offer, the
Merger and the other Transactions, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging the Transaction Agreements or the consummation of the Transactions,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (iv) the execution
and delivery of any additional instruments necessary to consummate the
Transactions and to fully carry out the purposes of the Transaction Agreements;
PROVIDED, HOWEVER, that Parent shall not be required to consent to any action
described in paragraph (a) of Exhibit A to this Agreement. In connection with
and without limiting the foregoing, the Company and the Company Board shall (i)
take all action necessary to ensure that no state takeover statute or similar
statute or regulation is or becomes applicable to any Transaction or the
Transaction Agreements, (ii) if any state takeover statute or similar statute or
<PAGE>
48
regulation becomes applicable to the Transaction Agreements, take all action
necessary to ensure that the Offer, the Merger and the other Transactions may be
consummated as promptly as practicable on the terms contemplated by the
Transaction Agreements and otherwise to minimize the effect of such statute or
regulation on the Offer, the Merger and the other Transactions and (iii)
cooperate with Parent and Sub in the arrangements for obtaining the Financing.
Nothing in this Agreement shall be deemed to require Parent to waive any
substantial rights or agree to any substantial limitation on its operations or
to dispose of any asset or collection of assets of the Company, Parent or any of
their respective subsidiaries or affiliates. Notwithstanding the foregoing, the
Company shall not be prohibited under this Section 6.03(a) from taking any
action permitted by Section 5.02.
(b) The Company shall give prompt notice to Parent, and Parent
or Sub shall give prompt notice to the Company, of (i) any representation or
warranty made by it contained in any Transaction Agreement that is qualified as
to materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under any Transaction Agreement; PROVIDED,
HOWEVER, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under the Transaction Agreements.
SECTION 6.04. STOCK OPTIONS. (a) As soon as practicable
following the date of this Agreement, the Company Board (or, if appropriate, any
committee administering the Company Stock Plans) shall adopt such resolutions or
take such other actions as are required to adjust the terms of all outstanding
Company Stock Options and all outstanding Company SARs to provide that (i) each
outstanding Company Stock Option may be exercised, whether or not such Company
Stock Option is vested, immediately prior to the acceptance for payment of
shares of Company Common Stock pursuant to
<PAGE>
49
the Offer, contingent on and subject to the consummation of the Offer, PROVIDED
that the shares of Company Common Stock issued upon such exercise are tendered
into the Offer and not withdrawn and (ii) each Company Stock Option and Company
SAR outstanding that is not exercised prior to the acceptance for payment of
shares of Company Common Stock pursuant to the Offer shall be canceled effective
immediately prior to the acceptance for payment of shares of Company Common
Stock pursuant to the Offer with the holder thereof becoming entitled to receive
an amount of cash equal to the product of (x) the excess, if any, of (A) the Per
Share Merger Consideration over (B) the exercise price per share of Company
Common Stock subject to such Company Stock Option or Company SAR, multiplied by
(y) the number of shares of Company Common Stock issuable pursuant to the
unexercised portion of such Company Stock Option or Company SAR; PROVIDED,
HOWEVER, that no cash payment shall be made with respect to any Company SAR that
is related to a Company Stock Option in respect of which such a cash payment is
made. All amounts payable pursuant to this Section 6.04 shall be subject to any
required withholding of Taxes or proof of eligibility of exemption therefrom and
shall be paid at or as soon as practicable following the Effective Time, but in
any event within one business day following the Effective Time, without
interest.
(b) The Company shall use its best efforts to obtain all
consents of the holders of the Company Stock Options, if such consents are
determined to be necessary to effectuate the foregoing as mutually agreed by
Parent and the Company. The cancelation of a Company Stock Option in exchange
for the cash payment described in this Section 6.04 shall be deemed a release of
any and all rights the holder of such Company Stock Option had or may have had
in respect thereof, and any necessary consents from all such holders shall so
provide. Notwithstanding anything to the contrary contained in this Agreement,
payment shall, at Parent's request, be withheld in respect of any Company Stock
Option until all necessary consents are obtained.
(c) As soon as practicable following the date of this
Agreement, the Company Board (or, if appropriate, any committee administering
the Company Stock Plans) shall take or cause to be taken such actions as are
required to cause (x) the Company Stock Plans to terminate as of the Effective
Time and (y) the provisions in any other Company Benefit Plan providing for the
issuance, transfer or grant of any capital stock of the Company or any interest
in respect of any capital stock of the Company to be deleted as of the Effective
Time. The Company shall ensure that following the Effective Time no holder of a
Company Stock Option or Company SAR or any participant in any Company Stock Plan
or other Company Benefit Plan shall have any right thereunder to
<PAGE>
50
acquire any capital stock of the Company or the Surviving Corporation.
(d) The Company shall take or cause to be taken all actions
required to cause the TIW Systems, Inc. Stock Bonus Plan to be amended as of
immediately prior to the Effective Time to provide that, in the event the
Company Common Stock ceases to be readily tradable (within the meaning of
Q/A-2(d)(1)(iv)(A) of Treas. Reg. Section 1.411(d)-4), distributions of benefits
under such plan shall be in the form of cash; PROVIDED that the foregoing shall
not apply in the event that prior to the Effective Time (i) such plan has
received a favorable determination letter from the Internal Revenue Service in
respect of the termination of the plan, (ii) such plan has been terminated and
(iii) all benefits payable under such plan have been paid in full to each plan
participant and beneficiary entitled to receive benefits in respect of the
termination of such plan.
(e) In this Agreement:
"COMPANY STOCK OPTION" means any option to
purchase Company Common Stock granted under any Company
Stock Plan.
"COMPANY SAR" means any stock appreciation right linked to the
price of Company Common Stock and granted under any Company Stock Plan.
"COMPANY STOCK PLANS" means the Company's 1995 Stock
Compensation Plan, the Company's Stock Option Plan for Key Employees,
the Company's Non-Employee Directors Stock Option Plan and the
Company's Outside Directors Stock Option Plan, in each case as amended
from time to time.
SECTION 6.05. INDEMNIFICATION. (a) For six years after the
Effective Time, the Surviving Corporation (or any successor to the Surviving
Corporation) shall honor all the Company's obligations to indemnify, defend and
hold harmless the present and former officers and directors] of the Company and
the Company Subsidiaries and the other individual identified as an indemnified
party in the Company Disclosure Letter (each an "INDEMNIFIED PARTY") against
losses, claims, damages, liabilities, costs, fees and expenses (including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement PROVIDED that any such
settlement is effected with the written consent of Parent or the
<PAGE>
51
Surviving Corporation, which consent shall not unreasonably be withheld)
arising out of actions or omissions occurring at or prior to the Effective Time
("LOSSES") to the extent such obligations of the Company exist under the TBCA,
the terms of the Company Charter or the Company By-laws, in each case as in
effect on the date of this Agreement, or under any Indemnification Agreement
between the Company or any Company Subsidiary, as applicable, and the
Indemnified Party that has been filed as an exhibit to the Filed Company SEC
Documents or that has been previously delivered to Parent and is listed in the
Company Disclosure Letter; PROVIDED that in the event any claim or claims are
asserted or made within such six-year period, all rights to indemnification in
respect of any such claim or claims shall continue until disposition of any and
all such claims.
(b) (i) Promptly after the receipt by any Indemnified Party of
notice of any claim, the Indemnified Party will give the Surviving Corporation
written notice of such claim or the commencement of such action or proceeding
and shall permit the Surviving Corporation to assume the defense of any such
claim or any proceeding or litigation resulting from such claim, unless the
action or proceeding seeks an injunction or other similar relief against the
Indemnified Party or there is a conflict of interest (requiring separate
representation under applicable principles of professional responsibility)
between the Indemnified Party and the Surviving Corporation in the conduct of
the defense of such action. Failure by the Surviving Corporation to notify the
Indemnified Party of the Surviving Corporation's election to defend any such
proceeding or action within a reasonable time, but in no event more than 10 days
after written notice thereof shall have been given to the Surviving Corporation,
shall be deemed a waiver by the Surviving Corporation of its right to defend
such action. Failure by the Indemnified Party to notify the Surviving
Corporation of any claim for indemnification shall not relieve the Surviving
Corporation of any liability that the Surviving Corporation may have to the
Indemnified Party, except to the extent the Surviving Corporation demonstrates
that the defense of such claim or action has been prejudiced thereby.
(ii) If the Surviving Corporation assumes the defense of any
such claim or litigation resulting therefrom with counsel reasonably acceptable
to the Indemnified Party, the obligations of the Surviving Corporation as to
such claim shall be limited to the defense or settlement of such claim or
litigation
<PAGE>
52
resulting therefrom and to holding the Indemnified Party harmless against any
Losses to the extent required by this Section 6.05. The Indemnified Party may
participate, at the Indemnified Party's expense, in the defense of such claim or
litigation PROVIDED that the Surviving Corporation shall direct and control the
defense of such claim or litigation. The Indemnified Party shall cooperate and
make available all books and records reasonably necessary and useful in
connection with the defense. The Surviving Corporation shall not, in the defense
of such claim or any litigation resulting therefrom, consent to entry of any
judgment or enter into any settlement, unless the Indemnified Party shall be
fully released and discharged, except with the written consent of the
Indemnified Party.
(iii) If the Surviving Corporation shall not assume the
defense of any such claim or litigation resulting therefrom, the Indemnified
Party may defend against such claim or litigation in such manner as the
Indemnified Party may deem appropriate and reasonably satisfactory to the
Surviving Corporation. The Surviving Corporation shall promptly reimburse the
Indemnified Party for the amount of all reasonable expenses, legal or otherwise,
incurred by the Indemnified Party in connection with the defense against or
settlement of such claim or litigation; PROVIDED, HOWEVER, that the Surviving
Corporation shall be required to reimburse such amounts only after receiving an
undertaking from the Indemnified Party to repay such amounts if it is determined
that the Indemnified Party is not entitled to indemnification therefor. The
Surviving Corporation shall not be liable for any Losses resulting from any
settlement or compromise of, or offer to settle or compromise, any claim or
litigation or other action without the prior written consent of the Surviving
Corporation, which consent shall not be unreasonably withheld.
(c) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of the Surviving
Corporation shall expressly assume the obligations set forth in this Section
6.05.
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53
(d) The provisions of this Section 6.05 are (i) intended to be
for the benefit of, and to be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives and (ii) in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 6.06. FEES AND EXPENSES. (a) Except as provided below,
all fees and expenses incurred in connection with the Merger and the other
Transactions shall be paid by the party incurring such fees or expenses, whether
or not the Merger is consummated.
(b) In the event that (1) (A) a Company Takeover Proposal
shall have been made known to the Company or shall have been made directly to
its shareholders or any person shall have announced an intention (whether or not
conditional) to make a Company Takeover Proposal, (B) thereafter this Agreement
is terminated pursuant to Section 8.01(b)(ii), 8.01(b)(iii) or 8.01(c) and (C)
within 12 months after such termination a Company Takeover Transaction is
consummated or the Company (or one or more Company Subsidiaries representing in
the aggregate 20% or more of the net revenues, net income or the assets of the
Company and the Company Subsidiaries, taken as a whole) enters into an
Acquisition Agreement with respect to, approves or recommends a Company Takeover
Transaction or (2) this Agreement is terminated by the Company pursuant to
Section 8.01(e) or by Parent or Sub pursuant to Section 8.01(d), then the
Company shall promptly, but in no event later than, in the case of clause (1),
the date of the earliest to occur of such consummation, approval or
recommendation of a Company Takeover Transaction or the entering into of such
Acquisition Agreement, or in the case of clause (2), the date of such
termination, pay to Parent a fee equal to $3,840,000 (three million eight
hundred forty thousand dollars) (the "TERMINATION FEE"), payable by wire
transfer of same day funds.
(c) If the Company is required to pay to Parent a fee pursuant
to Section 6.06(b), the Company shall reimburse Parent and Sub for all their
out-of-pocket expenses actually incurred in connection with the Transaction
Agreements, the Offer, the Merger and the other Transactions in an amount not to
exceed $640,000 (six hundred forty thousand dollars). Such reimbursement shall
be paid upon demand following termination of this Agreement.
<PAGE>
54
(d) The Company acknowledges that the agreements contained in
this Section 6.06 are an integral part of the Transactions, and that, without
these agreements, Parent and Sub would not enter into the Transaction
Agreements. Accordingly, if the Company fails promptly to make a payment due
pursuant to this Section 6.06, and, in order to obtain such payment, Parent or
Sub commences a suit which results in a judgment against the Company, the
Company shall pay to Parent and Sub their reasonable costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amount set forth in this Section 6.06 at the prime rate of
First Union National Bank in effect on the date such payment was required to be
made. The Company acknowledges and agrees that the payment of any amounts due
pursuant to this Section 6.06 shall not constitute the exclusive remedy of
Parent and Sub under the Transaction Agreements. Without limiting the generality
of the foregoing, in the event of a breach or deemed breach by the Company of
Section 5.02, Parent and Sub shall be entitled to the remedies set forth in
Section 9.10, including an injunction, and all other remedies available at law
or in equity to which Parent and Sub are entitled.
SECTION 6.07. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one
hand, and the Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the Offer, the Merger
and the other Transactions and shall not issue any such press release or make
any such public statement prior to such consultation, except as may be required
by applicable Law, court process or by obligations pursuant to any listing
agreement with any national securities exchange. Within three business days
after the Announcement Date, the Company shall issue a press release, in the
form previously delivered to Parent, reporting its results for the fiscal year
ended September 30, 1999, and, as promptly as practicable but in no event later
than three business days after the Announcement Date, the Company shall file
such press release with the SEC as an exhibit to a Current Report on Form 8-K.
SECTION 6.08. TRANSFER TAXES. All stock transfer, real estate
transfer, documentary, stamp, recording and other similar Taxes (including
interest, penalties and additions to any such Taxes) ("TRANSFER TAXES") incurred
in connection with the Transactions shall be paid by either Sub or the Surviving
Corporation,
<PAGE>
55
and the Company shall cooperate with Sub and Parent in preparing, executing and
filing any Tax Returns with respect to such Transfer Taxes, including supplying
in a timely manner a complete list of all real property interests held by the
Company and any information with respect to such property that is reasonably
necessary to complete such Tax Returns.
SECTION 6.09. DIRECTORS. Promptly upon the acceptance for
payment of, and payment by Sub for, any shares of Company Common Stock pursuant
to the Offer, Sub shall be entitled to designate such number of directors on the
Company Board as will give Sub, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Company Board equal to at least that number
of directors, rounded up to the next whole number, which is the product of (a)
the total number of directors on the Company Board (giving effect to the
directors elected pursuant to this sentence) multiplied by (b) the percentage
that (i) such number of shares of Company Common Stock so accepted for payment
and paid for by Sub plus the number of shares of Company Common Stock otherwise
owned by Sub or any other subsidiary of Parent bears to (ii) the number of such
shares outstanding, and the Company shall, at such time, cause Sub's designees
to be so elected; PROVIDED that in the event that Sub's designees are appointed
or elected to the Company Board, until the Effective Time the Company Board
shall have at least two directors who are Directors on the date of this
Agreement and who are not officers of the Company (the "INDEPENDENT DIRECTORS");
and PROVIDED FURTHER that in such event, if the number of Independent Directors
shall be reduced below two for any reason whatsoever, the remaining Independent
Director shall be entitled to designate a person to fill such vacancy who shall
be deemed to be an Independent Director for purposes of this Agreement or, if no
Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who are not current or former officers,
shareholders or affiliates of the Company, Parent or Sub, and such persons shall
be deemed to be Independent Directors for purposes of this Agreement. Subject to
applicable Law, the Company shall take all action requested by Parent necessary
to effect any such election, including mailing to its shareholders the
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company shall
make such mailing with the mailing of the Schedule 14D-9 (PROVIDED that Sub
shall have provided to the Company on a timely basis all information required to
be included in the
<PAGE>
56
Information Statement with respect to Sub's designees). In connection with the
foregoing, the Company shall promptly, at the option of Sub, either increase the
size of the Company Board or obtain the resignation of such number of its
current directors as is necessary to enable Sub's designees to be elected or
appointed to the Company Board as provided above. Notwithstanding anything in
this Agreement to the contrary, in the event Sub's designees are elected to the
Company Board, after such election and prior to the Effective Time, (i) the
affirmative vote of a majority of the Independent Directors shall be required in
addition to any required approval by the full Company Board to (A) amend or
terminate this Agreement on behalf of the Company, (B) waive any of the
Company's rights, benefits or remedies under this Agreement or (C) extend the
time for performance of Sub's obligations hereunder and (ii) the Independent
Directors shall have the power, acting together, to exercise any right of the
Company under this Agreement that the Company otherwise fails to exercise to the
extent that the failure to exercise such right would materially adversely affect
the holders of shares of Company Common Stock other than Parent, Sub and their
respective subsidiaries and affiliates.
SECTION 6.10. SHAREHOLDER LITIGATION. The Company shall give
Parent the opportunity to participate in the defense or settlement of any
shareholder litigation against the Company and its directors relating to any
Transaction and the Company shall not agree to any such settlement without
Parent's consent.
SECTION 6.11. COMPLIANCE OF SUB. Parent shall cause Sub to
comply with all of Sub's obligations under the Transaction Agreements. Parent
hereby guarantees the performance of Sub's obligations under the Transaction
Agreements.
ARTICLE VII
Conditions Precedent
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger is
subject
<PAGE>
57
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
<PAGE>
58
(a) SHAREHOLDER APPROVAL. If required by
Law, the Company shall have obtained the Company
Shareholder Approval.
(b) ANTITRUST. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been
terminated or shall have expired, and the period of time for any
applicable review process by the Committee on Foreign Investment in the
United States ("CFIUS") under the Exon-Florio Act shall have expired
and CFIUS shall not have taken any action or made any recommendation to
the President of the United States to block or prevent the consummation
of the Offer or the Merger. Any consents, approvals and filings under
any foreign antitrust Law, the absence of which would prohibit the
consummation of the Merger, shall have been obtained or made.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Merger shall be in
effect; PROVIDED, HOWEVER, that prior to asserting this condition,
subject to Section 6.03, the party asserting such condition shall have
used all reasonable efforts to prevent the entry of any such injunction
or other order and to appeal as promptly as possible any such
injunction or other order that may be entered.
(d) PURCHASE OF COMMON STOCK. Sub shall have
previously accepted for payment and paid for all shares of Company Common Stock
validly tendered and not withdrawn pursuant to the Offer; provided that this
condition shall be deemed satisfied with respect to the obligation of Parent and
Sub to effect the Merger if Sub fails to accept for payment or pay for shares of
Company Common Stock pursuant to the Offer in violation of this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after receipt of Company
Shareholder Approval PROVIDED that if shares of Company Common Stock
<PAGE>
59
are accepted for payment pursuant to the Offer, neither Parent nor Sub may
terminate this Agreement or abandon the Merger except pursuant to clause (a),
(b)(i) or (b)(iii) below:
(a) by mutual written consent of Parent, Sub
and the Company;
(b) by either Parent or the Company:
(i) if any court of competent jurisdiction
or other Governmental Entity issues an order, decree or ruling
or takes any other action permanently enjoining, restraining
or otherwise prohibiting the Merger, and such order, decree,
ruling or other action shall have become final and
nonappealable;
(ii) if (A) as a result of the failure of
any of the Tender Offer Conditions, (1) Sub shall have failed
to commence the Offer within 20 days following the date of
this Agreement or (2) the Offer shall have terminated or
expired in accordance with its terms without Sub having
purchased any shares of Company Common Stock pursuant to the
Offer or (B) Sub shall not have accepted for payment any
shares of Company Common Stock pursuant to the Offer prior to
March 11, 2000; PROVIDED, HOWEVER, that the right to terminate
this Agreement pursuant to this clause (ii) shall not be
available (x) to the Company as a result of the occurrence of
any event set forth in paragraph (d) of Exhibit A to this
Agreement or (y) to any party whose failure to fulfill any of
its obligations under the Transaction Agreements results in
the failure of any Tender Offer Condition or if the failure of
such condition results from facts or circumstances that
constitute a breach of any representation or warranty of such
party contained in any Transaction Agreement; or
(iii) if, upon a vote at a duly held meeting
to obtain the Company Shareholder Approval, the Company
Shareholder Approval is not obtained; PROVIDED, HOWEVER, that
this Agreement may not be terminated by Parent pursuant to
this clause (iii) if Parent or Sub is in breach of Section
6.01(c);
<PAGE>
60
(c) by Parent, if the Company breaches or fails to
perform in any material respect any of its representations, warranties
or covenants contained in any Transaction Agreement, which breach or
failure to perform (i) would give rise to the failure of a Tender Offer
Condition and (ii) cannot be or has not been cured within 30 days after
the giving of written notice to the Company of such breach;
(d) by Parent or Sub if either Parent or Sub is
entitled to terminate the Offer as a result of the occurrence of any
event set forth in paragraph (d) of Exhibit A to this Agreement; or
(e) by the Company if the Company Board withdraws or
modifies its approval or recommendation of the Transaction Agreements,
the Offer or the Merger in accordance with Section 5.02(b); PROVIDED
that, in order for the termination of this Agreement pursuant to this
paragraph (e) to be deemed effective, the Company shall have complied
with all the provisions of Section 5.02, including the notice
provisions therein, and with all applicable requirements, including
payment of the Termination Fee, of Section 6.06.
SECTION 8.02. EFFECT OF TERMINATION. In the event of
termination of this Agreement by either the Company or Parent as provided in
Section 8.01, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Sub or the Company or
their respective officers or directors, other than Section 3.19, Section 4.06,
the last two sentences of Section 6.02, Section 6.06, this Section 8.02 and
Article IX, which provisions shall survive such termination, and except to the
extent that such termination results from the material breach by a party of any
representation, warranty or covenant set forth in any Transaction Agreement.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the
parties at any time before or after receipt of the Company Shareholder Approval;
PROVIDED, HOWEVER, that after receipt of the Company Shareholder Approval, there
shall be made no amendment that by Law requires further approval by the
shareholders of the Company without the further approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
<PAGE>
61
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.03 and except as otherwise specifically provided in this
Agreement, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
SECTION 8.05. PROCEDURE FOR TERMINATION, AMEND MENT, EXTENSION
OR WAIVER. Except as otherwise provided in Section 6.09 hereof, termination of
this Agreement pursuant to Section 8.01, an amendment of this Agreement pursuant
to Section 8.03 or an extension or waiver pursuant to Section 8.04 shall, in
order to be effective, require in the case of Parent, Sub or the Company, action
by its Board of Directors or the duly authorized designee of its Board of
Directors.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time. Without
limiting the generality of the foregoing, the covenants and agreements set forth
in Section 2.01(d) (Dissent Rights), Section 2.02 (Exchange of Certificates) and
Section 6.05 (Indemnification) shall survive the Effective Time to the extent
specified therein).
SECTION 9.02. NOTICES. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given upon receipt by the parties at the following addresses
<PAGE>
62
(or at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
TriPoint Global Communications Inc.
565 Fifth Avenue
New York, New York 10017
Attention: Jack Haegele
Telephone: (212) 850-8500
Facsimile: (212) 850-8503
with a copy to:
TriPoint Global Communications Inc.
565 Fifth Avenue
New York, New York 10017
Attention: Stephen Green, Esq.
Telephone: (212) 850-8500
Facsimile: (212) 850-8503
and to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: Faiza J. Saeed, Esq.
Telephone: (212) 474-1454
Facsimile: (212) 765-0995
(b) if to the Company, to:
Vertex Communications Corporation
2600 N. Longview Street
Kilgore, Texas 75662
Attention: J. Rex Vardeman
Telephone: (903) 984-0555
Facsimile: (903) 984-2090
with a copy to:
Thompson & Knight L.L.P.
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
Attention: William F. Pyne, Esq.
Telephone: (214) 969-1771
Facsimile: (214) 969-1751
<PAGE>
63
SECTION 9.03. DEFINITIONS. For purposes of this
Agreement:
An "AFFILIATE" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person.
"IN THE ORDINARY COURSE OF BUSINESS", with respect to any
action, means such action is:
(a) consistent with the past practices of such person and is
taken in the ordinary course of the normal day-to-day operations of
such person;
(b) not required to be authorized by the Board of Directors of
such person; and
(c) similar in nature and magnitude to actions customarily
taken, without any authorization by the Board of Directors, in the
ordinary course of the normal day-to-day operations of other persons
that are in the same line of business as such person.
A "PERSON" means any individual, firm, corporation,
partnership, company, limited liability company, trust, joint venture,
association, Governmental Entity or other entity.
A "SUBSIDIARY" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least 50% of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
SECTION 9.04. INTERPRETATION; DISCLOSURE LETTERS. When a
reference is made in this Agreement to a Section, such reference shall be to a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "INCLUDE", "INCLUDES" or "INCLUDING" are used in this Agreement, they
shall be deemed to be followed by the words "WITHOUT LIMITATION". Any matter
disclosed in any section of the Company Disclosure Letter shall be deemed
disclosed only for the purposes of the specific Section of this Agreement to
which such section
<PAGE>
64
relates. If the same item is required to be disclosed in more than one section
of the Company Disclosure Letter, such item may be fully described in the
principal section to which such item relates and incorporated into another
section by a specific cross reference in such other section to the section in
which such item is fully described. Nothing in the Company Disclosure Letter
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the Company Disclosure Letter identifies the
exception with reasonable particularity. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty concerns the
existence of the document or other item itself or the copy adequately describes
the matter at issue).
SECTION 9.05. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule or
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 is not affected in any manner materially
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 are fulfilled to the extent possible.
SECTION 9.06. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 9.07. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement, taken together with the Company Disclosure Letter, (a)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
Transactions and (b) except for the provisions of Article II, and Section 6.05,
is not intended to confer upon any person other than the parties any rights or
remedies.
<PAGE>
65
SECTION 9.08. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof, except to the extent the laws of Texas are
mandatorily applicable to the Merger and to the rights of dissenting Company
shareholders, if any.
SECTION 9.09. ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by opera tion of law or otherwise by any of the parties
without the prior written consent of the other parties, except that (i) Sub may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or any assignee of Parent pursuant to
clause (ii) of this sentence, or to any direct or indirect wholly owned
subsidiary of Parent or such assignee, but no such assignment shall relieve Sub
of any of its obligations under this Agreement and (ii) Parent may assign, upon
notice to the Company prior to or immediately following such assignment, its
rights and obligations hereunder to any of its corporate affiliates, but no such
assignment shall relieve Parent of its obligations hereunder if its assignee
does not perform such obligations. Any purported assignment without such consent
shall be void. Subject to the preceding sentences, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 9.10. ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of any Transaction Agreement in any New
York state court or any Federal court located in the State of New York, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any New York state court or any Federal court
located in the State of New York in the event any dispute arises out of this
Agreement or any Transaction, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for
<PAGE>
66
leave from any such court, (c) agrees that it will not bring any action relating
to this Agreement or any Transaction in any court other than any New York state
court or any Federal court sitting in the State of New York and (d) waives any
right to trial by jury with respect to any action related to or arising out of
any Transaction Agreement or any Transaction.
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have duly
executed this Agreement, all as of the date first written above.
TRIPOINT GLOBAL COMMUNICATIONS INC.,
by /s/ Jack Haegele
------------------------------
Name: Jack Haegele
Title: Chief Executive Officer
SIGNAL ACQUISITION CORPORATION,
by /s/ Jack Haegele
------------------------------
Name: Jack Haegele
Title: Chief Executive Officer
VERTEX COMMUNICATIONS CORPORATION,
by /s/ J. Rex Vardeman
------------------------------
Name: J. Rex Vardeman
Title: President and
Chief Executive Officer
<PAGE>
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement,
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered shares of Company
Common Stock promptly after the termination or withdrawal of the Offer), to pay
for any shares of Company Common Stock tendered pursuant to the Offer unless (i)
there shall have been validly tendered and not withdrawn prior to the expiration
of the Offer that number of shares of Company Common Stock which would represent
at least a majority of the Fully Diluted Shares (the "MINIMUM TENDER
CONDITION"), (ii) any waiting period under the HSR Act applicable to the
purchase of shares of Company Common Stock pursuant to the Offer shall have
expired or been terminated and (iii) the period of time for any applicable
review process by CFIUS under the Exon-Florio Act shall have expired and CFIUS
shall not have taken any action or made any recommendation to the President of
the United States to block or prevent the consummation of the Offer or the
Merger. The term "FULLY DILUTED SHARES" means all outstanding securities
entitled generally to vote in the election of directors of the Company on a
fully diluted basis, after giving effect to the exercise or conversion of all
options, rights and securities exercisable or convertible into such voting
securities. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Sub shall not be required to commence the Offer, accept for payment
or, subject as aforesaid, to pay for any shares of Company Common Stock not
theretofore accepted for payment or paid for, and may terminate or amend the
Offer, (x) with the consent of the Company or (y) without the consent of the
Company if, at any time on or after the date of this Agreement and before the
acceptance of such shares for payment or the payment therefor, any of the
following conditions exists:
(a) there shall be pending or threatened any suit,
action or proceeding by any Governmental Entity, or by any other person
that has a reasonable likelihood of success, (i) challenging the
acquisition by Parent or Sub of any Company Common Stock, seeking to
restrain or prohibit the making or consummation of the Offer or the
Merger or any other Transaction, or seeking to obtain from the Company,
Parent or Sub or any of their respective subsidiaries or affiliates any
damages that are
<PAGE>
2
material in relation to the Company and the Company Subsidiaries taken
as whole, (ii) seeking to prohibit or limit the ownership or operation
by the Company, Parent or any of their respective subsidiaries of any
material portion of the business or assets of the Company, Parent or
any of their respective subsidiaries or affiliates, or to compel the
Company, Parent or any of their respective subsidiaries or affiliates
to dispose of or hold separate any material portion of the business or
assets of the Company, Parent or any of their respective subsidiaries
or affiliates, as a result of the Offer, the Merger or any other
Transaction, (iii) seeking to impose limitations on the ability of
Parent or Sub to acquire or hold, or exercise full rights of ownership
of, any shares of Company Common Stock, including the right to vote the
Company Common Stock purchased by it on all matters properly presented
to the shareholders of the Company, or (iv) seeking to prohibit Parent
or any of its subsidiaries from effectively controlling in any material
respect the business or operations of the Company and the Company
Subsidiaries;
(b) any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction shall be enacted,
entered, enforced, promulgated, amended or issued with respect to, or
deemed applicable to, or any consent or approval withheld with respect
to, (i) Parent, the Company or any of their respective subsidiaries or
affiliates or (ii) the Offer, the Merger or any other Transaction, in
either such case by any Governmental Entity that is reasonably likely
to result, directly or indirectly, in any of the consequences referred
to in paragraph (a) above;
(c) since the date of execution of the Agreement,
there shall have been any event, change, effect or development that,
individually or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect, other than any
event, change, effect or development to the extent attributable to (i)
the economy or the securities markets in general, (ii) this Agreement
or the transactions contemplated hereby or the announcement thereof or
(iii) the Company's industry in general, and not specifically relating
to the Company or the Company Subsidiaries;
<PAGE>
3
(d)(i) it shall have been publicly disclosed or
Parent shall have otherwise learned that beneficial ownership
(determined for the purposes of this paragraph as set forth in Rule
13d-3 promulgated under the Exchange Act) of more than 35% of the
outstanding shares of the Company Common Stock has been acquired by
another person or (ii)(A) the Company or any of its directors or
officers shall have breached Section 5.02 of this Agreement (other than
an immaterial breach), (B) the Company Board shall have withdrawn or
modified its approval or recommendation of the Transaction Agreements,
the Offer or the Merger, (C) the Company or any of its directors or
officers shall have made any disclosure to the shareholders of the
Company permitted pursuant to Section 5.02(d) of this Agreement that
has the effect of (x) withdrawing, modifying or changing the approval
or recommendation of the Company Board or any committee thereof of the
Transaction Agreements, the Offer, the Merger or the other Transactions
in a manner adverse to Parent or Sub, (y) approving or recommending to
the shareholders of the Company a Company Takeover Proposal or (z)
approving or recommending that the shareholders of the Company tender
their shares of Company Common Stock into any tender offer or exchange
offer that is a Company Takeover Proposal or is related thereto, or (D)
the Company Board shall have failed to reaffirm publicly and
unconditionally its recommendation to the Company's shareholders that
they accept the Offer and give the Company Shareholder Approval by
midnight, New York City time, on the third business day following
Parent's written request to do so (which request may be made at any
time that a Company Takeover Proposal is pending), which public
reaffirmation must also include the unconditional rejection of such
Company Takeover Proposal;
(e) any representation or warranty of the Company in
any Transaction Agreement that is qualified as to materiality shall not
be true and correct or any such representation or warranty that is not
so qualified shall not be true and correct in any material respect, as
of the date of this Agreement and as of the scheduled or extended
expiration of the Offer, except to the extent such representation or
warranty expressly relates to an earlier date (in which case on and as
of such earlier date);
<PAGE>
4
(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 any Transaction Agreement; or
(g) this Agreement shall have been terminated in
accordance with its terms.
The foregoing conditions are for the sole benefit of Sub and
Parent and may be asserted by Sub or Parent regardless of the circumstances
giving rise to such condition or may be waived by Sub and Parent in whole or in
part at any time and from time to time in their sole discretion. The failure by
Parent, Sub or any other affiliate of Parent 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 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.
<PAGE>
CONFORMED COPY
COMPANY SHAREHOLDER AGREEMENT dated
as of November 11, 1999, among TRIPOINT GLOBAL
COMMUNICATIONS INC., a Delaware corporation
("PARENT"), SIGNAL ACQUISITION CORPORATION, a Texas
corporation ("SUB"), and the individuals and other
parties listed in Schedule A hereto (each, a
"SHAREHOLDER" and, collectively, the "SHAREHOLDERS").
WHEREAS Parent, Sub, and Signal Acquisition Corporation, a
Texas corporation (the "COMPANY"), propose to enter into an Agreement and Plan
of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "MERGER AGREEMENT"; capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement);
WHEREAS each Shareholder is the record and beneficial owner
(as defined in Rule 13d-3 under the Securities and Exchange Act of 1934, as
amended (the "EXCHANGE ACT") of the number of shares of Company Common Stock set
forth opposite such Shareholder's name in Schedule A hereto (such shares of
Company Common Stock, together with any other shares of capital stock of the
Company acquired by such Shareholder after the date hereof and during the term
of this Agreement or that such Shareholder has or will have the right to acquire
during the term of this Agreement upon the exercise of Company Stock Options,
being collectively referred to herein as the "SUBJECT SHARES" of such
Shareholder); and
WHEREAS, as a condition to its willingness to enter into the
Merger Agreement, Parent has requested that each Shareholder enter into this
Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER.
Each Shareholder hereby, severally and not jointly, represents and warrants to
Parent as of the date hereof in respect of himself, herself or itself as
follows:
(a) AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. The Shareholder has all requisite power and authority
to execute and deliver this
<PAGE>
2
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery by the Shareholder of this Agreement and
consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Shareholder. The
Shareholder has duly executed and delivered this Agreement, and this
Agreement constitutes the legal, valid and binding obligation of the
Shareholder, enforceable against the Shareholder in accordance with its
terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws, now
or hereafter in effect, affecting creditor rights generally and (ii)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be
brought. The execution and delivery by the Shareholder of this
Agreement do not, and the consummation of the transactions contemplated
hereby and compliance with the terms hereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse
of time, or both) under, any provision of any Contract to which the
Shareholder is a party or by which any properties or assets of the
Shareholder are bound or, subject to the filings and other matters
referred to in the next sentence, any provision of any Judgment or Law
applicable to the Shareholder or the properties or assets of the
Shareholder. No Consent of, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by or
with respect to the Shareholder in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, other than such reports under
Sections 13(d) and 16 of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated
hereby, compliance with and filings under the HSR Act, and the filing
of a joint notification pursuant to the Exon-Florio Act. The
Shareholder has complied with any applicable community property law and
no spousal signature or consent is required from any party other than
the signatories hereto with respect to the Shareholder in connection
with entering into this Agreement or performing the obligations of the
Shareholder hereunder. The Shareholder shall execute a power of
attorney in favor of at least two other Shareholders
<PAGE>
3
with respect to the matters covered by Sections 3(a) and 3(b) in the
event of incapacity of the Shareholder.
(b) THE SUBJECT SHARES. The Shareholder is the record
and beneficial owner of, or is the trustee of a trust that is the
record holder of, and whose beneficiaries are the beneficial owners of,
and has good and marketable title to, the Subject Shares set forth
opposite such Shareholder's name in Schedule A attached hereto, free
and clear of any Liens other than as set forth in Schedule A, which
Liens will be released upon payment for such Subject Shares pursuant to
the Offer or Section 4. The Shareholder does not own, of record or
beneficially, any shares of capital stock of the Company other than the
Subject Shares set forth opposite such Shareholder's name in Schedule A
attached hereto. The Shareholder has the sole right to vote such
Subject Shares, and none of such Subject Shares is subject to any
voting trust or other agreement, arrangement or restriction with
respect to the voting of such Subject Shares, except as contemplated by
this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent
hereby represents and warrants to each Shareholder as follows: Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery by Parent of this Agreement and consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of Parent. Parent has duly executed and delivered this Agreement, and this
Agreement constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws, now or hereafter in effect, affecting creditor
rights generally and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
The execution and delivery by Parent of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
terms hereof will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, any provision of (i)
the charter or organizational documents of Parent or
<PAGE>
4
any of its subsidiaries, (ii) any material Contract to which Parent or any of
its subsidiaries is a party or by which any of their respective properties or
assets is bound or (iii) subject to the filings and other matters referred to in
Section 4.04(b) of the Merger Agreement, any Judgment or Law applicable to
Parent or any of its subsidiaries or their respective properties or assets,
other than, in the case of clause (iii) above, any such items that, individually
and in the aggregate, have not had and would not reasonably be expected to have
a Parent Material Adverse Effect. No Consent of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to Parent in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, other than such reports under Sections 13(d) and 16 of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby, compliance with and filings under the HSR Act,
and the filing of a joint notification pursuant to the Exon-Florio Act.
SECTION 3. COVENANTS OF EACH SHAREHOLDER. Each Shareholder,
severally and not jointly, covenants and agrees as follows:
(a)(1) At any meeting of the shareholders of the Company
called to seek the Company Shareholder Approval or in any other
circumstances upon which a vote, consent or other approval (including
by written consent) with respect to the Merger Agreement, this
Agreement, the Offer, the Merger or any other Transaction is sought,
the Shareholder shall, including by executing a written consent
solicitation if requested by Parent, vote (or cause to be voted) the
Subject Shares of the Shareholder in favor of granting the Company
Shareholder Approval.
(2) IRREVOCABLE PROXY. Subject to the last sentence of this
paragraph, the Shareholder hereby irrevocably grants to, and appoints,
Parent, Stephen Green and Jack Haegele, or any of them, and any
individual designated in writing by any of them, and each of them
individually, as the Shareholder's proxy and attorney-in-fact (with
full power of substitution), for and in the name, place and stead of
the Shareholder, to vote the Subject Shares of the Shareholder, or
grant a consent or approval in respect of the Subject Shares of the
Shareholder prior to the Termination Date (i) in favor of
<PAGE>
5
granting the Company Shareholder Approval or the approval of this
Agreement, the Offer, the Merger or any other Transaction and (ii)
against (A) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company, (B) any Company
Takeover Proposal and (C) any amendment of the Company Charter or the
Company By-laws or other proposal or transaction involving the Company
or any Company Subsidiary, which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent, delay or
nullify any provision of the Merger Agreement or this Agreement, the
Offer, the Merger or any other Transaction or change in any manner the
voting rights of any class of Company capital stock. The Shareholder
understands and acknowledges that Parent is entering into the Merger
Agreement in reliance upon the Shareholder's execution and delivery of
this Agreement. The Shareholder hereby affirms that the irrevocable
proxy set forth in this Section 3(a) is given in connection with the
agreement of Parent to purchase the Subject Shares of the Shareholder,
and the agreement of the Shareholder to vote the Subject Shares of the
Shareholder, pursuant to this Agreement. The Shareholder hereby further
affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, except as otherwise provided in this
Agreement. The Shareholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
Such irrevocable proxy is executed and intended to be irrevocable prior
to the Termination Date in accordance with the provisions of Article
2.29.C of the TBCA. The irrevocable proxy granted hereunder shall
automatically terminate upon the termination of this Agreement.
(b) At any meeting of shareholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Shareholder's vote, consent or other approval is sought, the
Shareholder shall vote (or cause to be voted) the Subject Shares of the
Shareholder in the manner specified in Section 3(a)(2). The Shareholder
shall not commit or agree to take any action inconsistent with the
foregoing.
<PAGE>
6
(c)(1) The Shareholder shall tender all the Subject Shares of
the Shareholder pursuant to the Offer. Such tender shall be made
promptly, and in any event no later than the third business day
following commencement of the Offer. The Shareholder shall not withdraw
any Subject Shares tendered pursuant to the Offer prior to the
Termination Date (as defined below). The obligation of the Shareholder
to tender and not withdraw Shares is conditioned only upon lawful
commencement of the Offer and otherwise is unconditioned.
(2) Prior to the termination of this Agreement, except as
otherwise provided herein, the Shareholder shall not (A) sell,
transfer, pledge, assign or otherwise dispose of (including by gift)
(collectively, "TRANSFER"), or enter into any Contract, option or other
arrangement (including any profit sharing arrangement) with respect to
the Transfer of, any Subject Shares to any person other than pursuant
to the Offer and the Merger or (B) enter into any voting arrangement,
whether by proxy, voting agreement or otherwise, with respect to any
Subject Shares and shall not commit or agree to take any of the
foregoing actions.
(d) The Shareholder shall not, nor shall it authorize or
permit any officer, director or employee of, or any investment banker,
attorney or other adviser or representative of, the Shareholder to, (i)
directly or indirectly solicit, initiate or encourage the submission of
any Company Takeover Proposal, (ii) enter into any agreement with
respect to any Company Takeover Proposal or (iii) directly or
indirectly participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Company
Takeover Proposal; PROVIDED, HOWEVER, that the Shareholder may furnish
information with respect to the Company to a person and participate in
discussions or negotiations with such person regarding a Superior
Company Proposal if at such time the Company is permitted to furnish
information and engage in discussions or negotiations with, and is
actually furnishing information to and engaging in discussions or
negotiations with, such person regarding such Superior Company Proposal
pursuant to Section 5.02(a) of the Merger Agreement. The
<PAGE>
7
Shareholder promptly shall advise Parent orally and in writing of any
Company Takeover Proposal or inquiry made to the Shareholder with
respect to or that could reasonably be expected to lead to any Company
Takeover Proposal (including any change to the terms of any such
Company Takeover Proposal or inquiry), the identity of the person
making any such Company Takeover Proposal or inquiry, and the material
terms of any such Company Takeover Proposal or inquiry.
(e) The Shareholder shall use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Offer, the Merger and the
other Transactions, provided that in doing so the Shareholder shall not
be required to relinquish any right or benefit that the Shareholder may
have under any written employment agreement with the Company or any
Company Subsidiary that has been filed as an exhibit to the Filed
Company SEC Documents. The Shareholder shall not issue any press
release or make any other public statement with respect to any
Transaction Agreement, the Merger or any other Transaction without the
prior consent of Parent, except as may be required by applicable Law.
SECTION 4. OPTION. (a) Each Shareholder hereby severally
grants to Parent an irrevocable option (the "OPTION") to purchase any of or all
the Subject Shares of such Shareholder that have not been validly tendered prior
to the expiration of the Offer, or that have been withdrawn prior to the
expiration of the Offer, at a purchase price per share equal to the Offer Price
in cash. The Option shall become exercisable, in whole or in part, only when the
Offer has expired and Sub has accepted shares of Company Common Stock for
purchase pursuant to the Offer. If the Option becomes exercisable, the Option
may be exercised by giving the notice referred to in Section 4(b) any time
during the period commencing with the acceptance by Sub of shares of Company
Common Stock for purchase pursuant to the Offer and ending 30 days thereafter
(the "OPTION PERIOD"); PROVIDED, HOWEVER, that if, on the expiration of the
Option Period, (i) any waiting period under the HSR Act applicable to the
purchase of shares of Company Common Stock pursuant to the Option shall not have
expired or been terminated, (ii) the period of time for any
<PAGE>
8
applicable review process by CFIUS under the Exon-Florio Act shall not have
expired or (iii) there shall be in effect any preliminary or permanent
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Option pursuant to this Agreement, then the Option Period shall
be extended until five business days after the later of the date of expiration
or termination of any applicable waiting period under the HSR Act, the
expiration of the period of time for any applicable review process under the
Exon-Florio Act, and the date of removal or lifting of any such injunction or
order.
(b) If Parent wishes to exercise the Option, it may do so by
giving written notice (the date of such notice being herein called the "NOTICE
DATE") to each Shareholder specifying that the Subject Shares are to be
purchased and specifying the place, time and date (which shall not be earlier
than one trading day, nor later than 10 trading days, from the Notice Date) for
the closing of the Purchase by Parent pursuant to such exercise.
SECTION 5. TERMINATION. Notwithstanding any other provision
contained herein, this Agreement and all rights and obligations of the parties
hereunder shall terminate upon the Termination Date, other than with respect to
the liability of any party for breach hereof prior to such termination. As used
herein, the term "TERMINATION DATE" shall mean the earlier to occur of (i) the
Effective Time and (ii) the termination of the Merger Agreement in accordance
with its terms.
SECTION 6. ADDITIONAL MATTERS. (a) Each Shareholder shall,
from time to time, execute and deliver, or cause to be executed and delivered,
such additional or further consents, documents and other instruments as Parent
may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
(b) No person executing this Agreement who is or becomes
during the term hereof a director or officer of the Company makes any agreement
or understanding herein in his or her capacity as a director or officer of the
Company. Each Shareholder signs solely in such Shareholder's capacity as the
record holder and beneficial owner of, or the trustee of a trust whose
beneficiaries are the beneficial owners of, such Shareholder's Subject Shares
and nothing herein shall limit or affect any actions taken by any Shareholder in
his capacity as an officer, director or affiliate of the
<PAGE>
9
Company to the extent specifically permitted by the Merger Agreement.
SECTION 7. GENERAL PROVISIONS. (a) AMENDMENTS. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.
(b) NOTICE. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Parent in accordance with
Section 9.02 of the Merger Agreement and to the Shareholders at their respective
addresses set forth in Schedule A hereto (or at such other address for a party
as shall be specified by like notice).
(c) INTERPRETATION. When a reference is made in this Agreement
to Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "INCLUDE", "INCLUDES" and "INCLUDING" are
used in this Agreement, they shall be deemed to be followed by the words
"WITHOUT LIMITATION".
(d) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. 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 extent
possible.
(e) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement.
This Agreement shall become effective between Parent and any Shareholder when a
counterpart has been signed by Parent and delivered to such Shareholder and a
counterpart has been executed by such Shareholder and delivered to Parent. Each
party need not sign the same counterpart.
<PAGE>
10
(f) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(g) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof, except to the extent the laws of Texas are mandatorily applicable
to Section 3.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise, by Parent without the prior written
consent of each Shareholder or by any Shareholder without the prior written
consent of Parent, and any purported assignment without such consent shall be
void; PROVIDED, HOWEVER, that Parent may assign, upon notice to the Company
prior to or immediately following such assignment, its rights and obligations
hereunder to any of its corporate affiliates, but no such assignment shall
relieve Parent of its obligations hereunder if its assignee does not perform
such obligations. Subject to the preceding sentences, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
(i) ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any New York state court or any
Federal court located in the State of New York, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit itself to the personal jurisdiction
of any New York state court or any Federal court located in the State of New
York in the event any dispute arises out of this Agreement or any Transaction,
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (iii)
agrees that it will not
<PAGE>
11
bring any action relating to this Agreement or any Transaction in any court
other than a New York state court or any Federal court sitting in the State of
New York and (iv) waives any right to trial by jury with respect to any claim or
proceeding related to or arising out of this Agreement or any Transaction.
<PAGE>
IN WITNESS WHEREOF, each party has duly executed this
Agreement, all as of the date first written above.
TRIPOINT GLOBAL COMMUNICATIONS INC.,
by /s/ Jack Haegele
------------------------------
Name: Jack Haegele
Title: Chief Executive Officer
SIGNAL ACQUISITION CORPORATION,
by /s/ Jack Haegele
------------------------------
Name: Jack Haegele
Title: Chief Executive Officer
/s/ William L. Anton
-----------------------------------
WILLIAM L. ANTON
/s/ A. Don Branum
-----------------------------------
A. DON BRANUM
/s/ James D. Carter
-----------------------------------
JAMES D. CARTER
/s/ John G. Farmer
-----------------------------------
JOHN G. FARMER
/s/ Donald E. Heitzman, Sr.
-----------------------------------
DONALD E. HEITZMAN, SR.
/s/ Rein Luik
-----------------------------------
REIN LUIK
/s/ J. Rex Vardeman
-----------------------------------
J. REX VARDEMAN
<PAGE>
13
/s/ Bill R. Womble
-----------------------------------
BILL R. WOMBLE
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMPANY
NUMBER OF SHARES OF COMPANY COMMON STOCK SUBJECT TO
NAME AND ADDRESS OF SHAREHOLDER COMMON STOCK OWNED COMPANY STOCK OPTIONS* HELD
- ------------------------------- ------------------ ---------------------------
<S> <C> <C>
William L. Anton 90,930** 21,400
2600 Longview Street
Kilgore, Texas 75662
A. Don Branum 47,000** 65,000
2600 Longview Street
Kilgore, Texas 75662
James D. Carter 66,833** 60,000
2600 Longview Street
Kilgore, Texas 75662
John G. Farmer 0 13,000
300 Crescent Court, 5th Floor
Dallas, Texas 75201
Donald E. Heitzman, Sr. 5,000 19,000
1309 Cartwright Drive
Cedar Hill, Texas 75104
Rein Luik 69,630 0
10439 Lone Oak Lane
Los Altos Hills, California 94024
J. Rex Vardeman 152,570 65,000
2600 Longview Street
Kilgore, Texas 75662
Bill R. Womble 15,550** 15,000
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
Total 447,513 258,400
======= =======
</TABLE>
- -----------------------
*No representations or warranties regarding the Shareholders' record ownership
of and/or title to the Company Stock Options held are made hereby.
**Includes 87,930 shares, 32,000 shares, 11,000 shares and 6,000 shares held by
brokers in margin accounts for the benefit of Messrs. Anton, Branum, Carter and
Womble, respectively.
<PAGE>
CONFIDENTIALITY AGREEMENT
THIS CONFIDENTIALITY AGREEMENT ("Agreement") is made and entered into on
this the 28th day of September, 1999, by and between TRIPOINT GLOBAL
COMMUNICATIONS INC., a Delaware corporation ("Recipient"), and VERTEX
COMMUNICATIONS CORPORATION, a Texas corporation ("Vertex").
WITNESSETH:
WHEREAS, Recipient and Vertex desire to enter into negotiations relating
to a possible business combination or acquisition (a "Transaction") involving
Recipient and Vertex;
WHEREAS, in connection with Recipient's evaluation of the Transaction,
Recipient requires access to certain information of Vertex concerning the
business and affairs of Vertex that is either nonpublic, confidential or
proprietary in nature;
WHEREAS, Vertex is willing to provide limited access to the Evaluation
Material (as hereinafter defined) to Recipient and Recipient's authorized
agents, subject to the restrictions hereinafter set forth pertaining to the
protection and preservation of the Evaluation Material, in order to enable
Recipient to determine whether Recipient desires to pursue further negotiations
with Vertex; and
WHEREAS, the parties desire to set forth the terms and conditions upon
which the Evaluation Material is to be disclosed to Recipient and the rights and
obligations of the parties with respect to such Evaluation Material;
NOW, THEREFORE, for and in consideration of the above stated premises, the
mutual covenants set forth herein, and other good and valuable consideration,
the recipient and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1. Evaluation Material. As used herein, the term "Evaluation Material"
means all information that Vertex has furnished or is furnishing to Recipient
in connection with a Transaction, whether furnished before or after the date
of this Agreement, whether tangible or intangible, and whether verbally, in
writing, on computer disk or otherwise, including the customer list,
documents identifying past, present and future customers, the financial books
and records of Vertex and related financial statements and tax returns of
Vertex, and documents or other information pertaining to the assets,
liabilities and business operations of Vertex and its subsidiaries, as well
as all information generated by Recipient or by Recipient's Representatives
(as defined below) that contains, reflects, or is derived from the foregoing
furnished information, including all analyses, compilations, data, studies,
notes, interpretations, memoranda or other
- 1 -
<PAGE>
documents prepared by Recipient or Recipient's Representatives. Notwithstanding
the preceding, the term "Evaluation Material" shall not be construed to include,
and the confidentiality and use provisions of this Agreement shall not apply to:
(a) information that is or becomes generally available to the public other than
as a result of disclosure by Recipient or any of Recipient's Representatives,
(b) information known to Recipient prior to the time of disclosure by Vertex;
and (c) information that is obtained by Recipient from any other source than
Vertex or its affiliates, but only if such disclosure of information to
Recipient does not, to Recipient's knowledge, violate any contractual or legal
obligation to Vertex on the part of such source or does not, to Recipient's
knowledge, breach a confidential relationship of such source to Vertex.
2. Confidentiality of Evaluation Material. The Evaluation Material is
disclosed and delivered to Recipient in the strictest confidence and Recipient
agrees to receive and hold the Evaluation Material in the strictest confidence
and in accordance with the provisions and intentions of this Agreement. This
Agreement shall apply to all of the Evaluation Material disclosed to Recipient
by Vertex or its agents, without regard to whether such disclosure is by means
of written documents or otherwise. Recipient acknowledges that the Evaluation
Material is proprietary to Vertex and that Recipient has no rights or interest
in the Evaluation Material and shall not use any part of the Evaluation Material
for Recipient's own benefit except as specifically set forth in this Agreement.
3. Terms of Disclosure. Initially, the Evaluation Material shall be
disclosed by Vertex to Recipient for the sole purpose of evaluating the
feasibility of Recipient negotiating and executing an agreement with Vertex or
its shareholders to acquire, directly or indirectly, the assets or outstanding
shares of capital stock of Vertex or otherwise enter into a Transaction with
Vertex. Subject to the terms of this Agreement, Recipient may distribute or
otherwise disclose the Evaluation Material to a reasonable number of persons,
including Recipient's directors, officers, employees, lenders, prospective
lenders, attorneys, financial advisors, accountants and other experts
(collectively, "Recipient's Representatives"), on a need to know basis required
to enable Recipient to evaluate the Evaluation Material and the business of
Vertex in order to permit Recipient to determine whether and on what terms
Recipient desires to enter into a Transaction with Vertex (the "Permitted Use"),
provided such individuals are informed by Recipient of the confidential nature
of the Evaluation Material. Notwithstanding the preceding, Recipient
acknowledges and agrees that the sales or production personnel of Recipient
shall not be permitted access to the Evaluation Material without the prior
written consent of Vertex. In addition, Recipient agrees that it will not use
any part of the Evaluation Material for the purposes of marketing or product
development.
4. Restriction of Further Disclosure. Recipient shall notify Vertex in
advance in writing of any individual other than Recipient's Representatives to
whom Recipient desires to disclose any part of the Evaluation Material. If
Vertex notifies Recipient that Vertex objects to
- 2 -
<PAGE>
the dissemination of the Evaluation Material to such other individual, Recipient
shall not disseminate any part of the Evaluation Material to such other
individual. Neither party shall, without the prior written consent of the other
party, subject only to the exceptions expressly set forth in this Agreement: (a)
disclose to any third party the fact that Vertex has provided any of the
Evaluation Material to Recipient; (b) disclose to any third party that any
investigations, discussions or negotiations are taking place concerning a
Transaction involving Vertex and Recipient; or (c) disclose any of the terms,
conditions, status or other facts with respect to any such Transaction.
Notwithstanding anything to the contrary contained herein, each party may issue
any press release or make any public statement without approval of the other
party as may be required by law, provided the party issuing the press release or
making such statement shall give prior notice thereof to the other party and
consult with the other party as to the contents thereof. Recipient shall not,
without the prior written consent of Vertex, subject only to the exceptions
expressly set forth in this Agreement, (a) disclose to any third party any or
all of the Evaluation Material; (b) permit any third party to have access to the
Evaluation Material; or (c) use the Evaluation Material for any purpose other
than the Permitted Use.
5. Protection of Information. Recipient shall use commercially reasonable
efforts, including efforts commensurate with those used by Recipient for the
protection of its own confidential and proprietary information, to protect the
Evaluation Material disclosed to Recipient and Recipient's agents pursuant to
this Agreement; provided, however, Recipient shall have no obligation or
authority to initiate litigation or incur costs or other expenses on behalf of,
or for the benefit of, Vertex. Recipient shall be responsible to Vertex for all
authorized and unauthorized disclosures of the Evaluation Material by Recipient
or Recipient's Representatives or agents. Such responsibility of Recipient shall
be in addition to and not by way of limitation of any right or remedy Vertex
may have against Recipient's Representatives with respect to any such breach.
6. Compelled Disclosure. Recipient agrees that in the event that it or any
of Recipient's Representatives are requested or required (by law, deposition,
interrogatory, request for documents, subpoena, civil investigative demand or
similar process) to disclose any of the Evaluation Material, Recipient will
provide Vertex with prompt prior written notice of such request or requirement
so that Vertex may seek a protective order or other appropriate remedy and/or
consent in writing to such disclosure. In the event that such protective order
or other remedy is not obtained and Vertex has not consented in writing to such
disclosure, and Recipient or Recipient's Representatives are nonetheless,
advised in writing by Recipient's outside legal counsel, that they are legally
required to disclose the Evaluation Material, Recipient and Recipient's
Representatives may furnish only that portion of the Evaluation Material that
Recipient and Recipient's Representatives are advised in writing by outside
legal counsel is legally required; provided that Recipient will exercise
commercially reasonable efforts to assist Vertex in obtaining an order or
reasonable assurance that the confidential treatment will be
-3-
<PAGE>
accorded such Evaluation Material.
7. Return of Evaluation Material. In the event that Vertex requests in
writing the return of the Evaluation Material, Recipient shall deliver to the
President of Vertex all of the Evaluation Material theretofore disclosed to
Recipient in the form of documents and tangible items, and all copies,
summaries, records, and descriptions thereof and all other written information
which constitutes Evaluation Material, including all such written information in
the possession of Recipient's Representatives and agents. Notwithstanding the
preceding, that portion of the Evaluation Material that was generated by
Recipient or Recipient's Representatives may be destroyed by Recipient or
Recipient's Representatives (rather than being returned to Vertex); provided,
however, that Recipient shall promptly deliver to Vertex a certificate signed by
the President of Recipient certifying that such Evaluation Material has been
destroyed. Notwithstanding the return or destruction of the Evaluation Material
in accordance with this Section, Recipient and Recipient's Representations shall
continue to be bound by the other provisions of this Agreement.
8. No Representation as to Completeness. Each of Vertex and Recipient
acknowledges that neither Vertex nor any of its representatives makes any
express or implied representation or warranty as to the accuracy or completeness
of the Evaluation Material and that each of Vertex and its representatives
expressly disclaims any and all liability that may be based on the Evaluation
Material, errors therein, or omissions therefrom. Recipient acknowledges (i)
that Recipient is not entitled to rely on the accuracy or completeness of the
Evaluation Material, (ii) that neither Vertex nor any of its representatives
shall have any liability whatsoever to Recipient or any other entity based on
the Evaluation Material, and (iii) that Recipient instead shall be entitled to
rely solely on the representations and warranties, if any, made to Recipient in
any definitive agreement regarding the Transaction (a "Definitive Agreement").
The term "Definitive Agreement" does not include an executed letter of intent or
any other preliminary written agreement that the parties thereto state is not
intended to be legally binding, except in accordance with the terms of any such
letter of intent or other preliminary written agreement. In addition, a
Definitive Agreement does not include any written or oral acceptance of any
offer or bid submitted by Recipient or Vertex.
9. No Obligation. Each of Vertex and Recipient understands and agrees that
no contract or agreement providing for a Transaction shall be deemed to exist
until a Definitive Agreement has been executed and delivered, and each of Vertex
and Recipient hereby waives, in advance, any claims (including breach of
contract) in connection with a Transaction unless and until Recipient and Vertex
shall have entered into a Definitive Agreement. Each of Vertex and Recipient
also agrees that unless and until a Definitive Agreement between Recipient and
Vertex with respect to a Transaction has been executed and delivered, neither
Vertex nor Recipient nor any of their respective shareholders or affiliates have
any legal obligation of any kind whatsoever with respect to such Transaction by
virtue of this Agreement or any other written or oral
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<PAGE>
expression with respect to such Transaction except, in the case of this
Agreement, for the matters specifically agreed to herein. Recipient understands
that (i) Vertex and its financial advisors shall be free to conduct any process
for any Transaction as they in their sole discretion shall determine (including
negotiating with any of the prospective parties to such Transaction and entering
into a Definitive Agreement without prior notice to Recipient or any other
person) and (ii) any procedures relating so such Transaction may be changed at
any time without notice to Recipient or any other person.
10. Right to Terminate Negotiations. Each of Vertex and Recipient reserves
the right, in such party's sole discretion, to reject any and all proposals made
regarding a Transaction and to terminate negotiations and discussions with the
other party at any time.
11. Securities Laws. Recipient acknowledges that (i) Recipient is aware
that, under certain circumstances, the United States securities laws prohibit a
person who has material, nonpublic information about a company from purchasing
or selling securities of that company, or from communicating that information to
any other person under circumstances in which it is reasonably foreseeable that
such person is likely to purchase or sell those securities and (ii) Recipient is
familiar with the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations promulgated thereunder, and agrees that Recipient will
neither use, nor cause any third party to use, any Evaluation Material in
contravention of the Exchange Act or any such rules and regulations, including
Rules 10b-5 and 14e-3.
12. Standstill. Recipient agrees that, prior to one year after the date
hereof, Recipient will not (and will ensure that its affiliates that control,
are controlled by or are under common control with it (as defined in the rules
under the Exchange Act) and any person acting on behalf of or in concert with
Recipient or any controlled affiliate will not), alone or with others, directly
or indirectly, take any of the following actions unless Recipient is first
invited in writing by the Board of Directors of Vertex to make such action:
a. Purchase or otherwise acquire (or enter into any agreement or
make any proposal to purchase or otherwise acquire) record or beneficial
ownership of any securities (which, for purposes of this Agreement,
includes, without limitation, indebtedness) of Vertex, any warrant or
option to purchase such securities, any security convertible into or
exchangeable for any such securities or any other right to acquire such
securities;
b. Propose to Vertex or its security holders, or make any
announcement with respect to, any Transaction between Recipient, any of
its affiliates or Recipient and any other person, on the one hand, and
Vertex or any of its security holders, on the other hand, or involving
Vertex or any of its securities or security holders;
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<PAGE>
c. Effect or seek, offer or propose (whether publicly or otherwise)
to effect or participate in (i) any acquisition of the assets of Vertex or
any of its subsidiaries, (ii) any tender or exchange offer, merger or
other business combination involving Vertex or any of its subsidiaries, or
(iii) any recapitalization, restructuring, liquidation, dissolution or
other extraordinary transaction with respect to Vertex or any of its
subsidiaries;
d. Seek to control or influence Vertex, its management, Board of
Directors (including without limitation by affecting the composition of
the Board of Directors) or policies through the solicitation of proxies,
consents, or otherwise or make or in any participate in any solicitation
of proxies to vote, or seek to advise or influence any person with respect
to the voting of securities of Vertex;
e. Seek to advise or influence any person with respect to the voting
of securities of Vertex;
f. Assist, advise, encourage, or provide any information or
financing to any other persons seeking to acquire, directly or indirectly,
control of Vertex, its management, Board of Directors, policies,
securities, business or assets;
g. Make any request to waive, amend or terminate any provision of
this Agreement or to permit Recipient to take any action prohibited
herein; or
h. Take any initiative with respect to Vertex or its subsidiaries
which could require Vertex to make a public announcement regarding any
such prohibited initiative or action referred to in this Section.
Notwithstanding the foregoing, (i) if any third party that is not an
affiliate of Recipient publicly makes (x) a tender or exchange offer or other
bona fide offer (including an offer for a privately negotiated transaction) to
acquire directly or indirectly securities of Vertex under circumstances such
that, immediately after such acquisition, such third party would beneficially
own more than 15% of any class of such securities, or (y) a proposal or offer
for a merger, consolidation or other business combination directly or indirectly
involving Vertex or a proposal or offer to acquire directly or indirectly all or
substantially all of the assets of Vertex (any proposal or offer referred to in
clauses (x) or (y) being herein called a "Business Combination Proposal"), which
Business Combination Proposal is either (A) not withdrawn or terminated within
five days after such Business Combination Proposal is made or (B) accepted by
the Board of Directors of Vertex, the restrictions set forth in this Section
shall not be deemed to preclude Recipient from making a Business Combination
Proposal; provided that the restrictions set forth in this Section shall again
be applicable in accordance with their terms upon the withdrawal or termination
of the original Business Combination Proposal or the rejection thereof by the
Board of Directors of Vertex, except to the extent Recipient has previously
publicly announced a
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<PAGE>
Business Combination Proposal as permitted by this sentence.
13. Remedies. Recipient acknowledges and agrees that, in the event of any
breach of this Agreement, Vertex would be irreparably and immediately harmed and
could not be made whole by monetary damages. Accordingly, Recipient agrees that,
in addition to any other remedy to which Vertex may be entitled at law or in
equity, Vertex shall be entitled to an injunction or injunctions (without the
posting of any bond or security and without proof of actual damages) to prevent
breaches of this Agreement and/or to compel specific performance of the
Agreement, and that neither Recipient nor Recipient's Representatives will
oppose the granting of such relief.
14. Fees and Expenses. Except as otherwise provided herein or as may
otherwise be agreed upon by the parties in writing, the parties shall each pay
all of their own fees and expenses incident to the negotiation, preparation,
execution and performance of this Agreement and the transactions contemplated
hereby, including without limitation the fees and expenses of their respective
counsel, accountants, and other experts and representatives, whether or not the
transactions contemplated by this Agreement are consummated.
15. Legal Fees and Costs. In the event any party must incur legal expenses
to enforce any provision of this Agreement, the prevailing party will be
entitled to recover such legal expenses, including without limitation,
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which such party shall be entitled.
16. Vertex Representatives. All contacts by Recipient or Recipient's
Representatives with Vertex, regarding the Evaluation Material or a Transaction
shall be made through either J. Rex Vardeman, the President and Chief Executive
Officer of Vertex, or James D. Carter, the Vice President and Chief Financial
Officer of Vertex, or such other person as Recipient is notified in writing to
contact.
17. Amendment. This Agreement may not be modified, altered, amended or
terminated except by the written agreement of all of the parties.
18. Integrated Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous representations, understandings and
agreements, oral or written, made between the parties or their affiliates
concerning the subject matter hereof, and all such prior or contemporaneous
representations, understandings and agreements are hereby terminated.
19. Waiver. No failure or delay by Vertex or Recipient in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power, or privilege
preclude any other or further exercise thereof.
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<PAGE>
20. Invalid Provision. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. If
any of the provisions of this Agreement shall be deemed to be unenforceable by
reason of its extent, duration, scope or otherwise, then the parties contemplate
that the court making such determination shall enforce the remaining provisions
of this Agreement, shall reduce such extent, duration, scope or other provision
and shall enforce them in their reduced form for all purposes contemplated by
this Agreement.
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to its rules
governing conflicts of law.
22. Counterpart Execution. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
23. Termination. This Agreement shall terminate on the third anniversary
of the date hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first above written.
TRIPOINT GLOBAL COMMUNICATIONS, INC. VERTEX COMMUNICATIONS CORPORATION
/s/ J. E. Haegele /s/ J. Rex Vardeman
By: By:
JACK HAEGELE J. REX VARDEMAN
Chief Executive Officer President and Chief Executive Officer
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<PAGE>
[LOGO]
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VERTEX COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
November 18, 1999
To Our Shareholders:
We are pleased to inform you that on November 11, 1999, Vertex
Communications Corporation (the "Company") entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Tripoint Global Communications Inc.
("Tripoint") pursuant to which Signal Acquisition Corporation, a wholly owned
subsidiary of Tripoint, today commenced a cash tender offer to purchase all of
the outstanding shares of the Company's common stock, par value $0.10 per share,
for a cash price of $22.00 per share. The offer is conditioned upon, among other
things, the tender of at least a majority of the shares outstanding on a fully
diluted basis. The Merger Agreement provides that following consummation of the
offer, Signal Acquisition Corporation will be merged with and into the Company
and any shares not purchased in the offer (other than those held by dissenting
shareholders or by the Company, Tripoint, or any subsidiary of the Company or
Tripoint) will be converted into the right to receive $22.00 per share in cash.
Simultaneously with entering into the Merger Agreement, Tripoint entered
into a Company Shareholder Agreement (the "Shareholder Agreement") with certain
shareholders of the Company (collectively, the "Principal Shareholders"),
whereby each Principal Shareholder agreed to tender his shares of the Company's
common stock pursuant to the offer. The Principal Shareholders collectively own
approximately 13.1% of all outstanding shares of the Company's common stock
(assuming the exercise of all Company stock options held by the Principal
Shareholders).
The Board of Directors of the Company has unanimously approved the Merger
Agreement, the Shareholder Agreement, the offer and the merger and determined
that the terms of the offer and the merger are fair to, and in the best
interests of, the Company and its shareholders, and unanimously recommends that
the Company's shareholders accept the offer and tender their shares pursuant to
the offer. In arriving at its recommendation, the Board of Directors considered
the factors described in the attached Schedule 14D-9, including the opinion of
the Company's financial advisor, Frost Securities, Inc., to the effect that the
consideration to be received pursuant to the Merger Agreement is fair to the
holders of the Company's common stock from a financial point of view. The full
text of the written opinion of Frost Securities which sets forth assumptions
made, matters considered and limitations on the review undertaken in connection
with the opinion is attached to the Schedule 14D-9 and should be read carefully
in its entirety.
Accompanying this letter is the Tripoint Offer to Purchase, dated
November 18, 1999, 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 Tripoint offer and provide instructions as to how to
tender your shares. The attached Schedule 14D-9 sets forth additional
information regarding the offer and the merger relevant to making an informed
decision. The Company's Information Statement pursuant to Section 14(f) of the
Securities Exchange Act of 1934 is also attached. We urge you to read these
materials carefully and in their entirety.
/s/ J. Rex Vardeman
J. Rex Vardeman
President and Chief Executive Officer
2600 Longview Street P.O. Box 1277 Kilgore, Texas 75663
TEL: 903/984-0555 FAX: 903/984-1826
<PAGE>
[LOGO] VERTEX
Vertex Communications Corporation
2600 N. Longview Street
Kilgore, Texas 75662-6842
903/984-0555
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NEWS RELEASE
- --------------------------------------------------------------------------------
TriPoint Global Communications, Inc. to Acquire
Vertex Communications Corporation
for $22.00 per Share or $118,686,383
Gastonia, NC, and Kilgore, TX (November 12, 1999)--TriPoint Global
Communications, Inc., a leading supplier of satellite and wireless
communications products and services, and Vertex Communications Corporation
(NYSE - VTX), a leader in the design and manufacture of satellite
communications earth station products, today announced that they have entered
into a definitive agreement under which TriPoint Global Communications, Inc.
will acquire Vertex Communications Corporation for $22.00 per share, for an
aggregate consideration of $118,686,383.
Pursuant to the agreement, TriPoint Global Communications, Inc. will begin
a tender offer for all outstanding shares of Vertex Communications Corporation
for $22.00 per share. TriPoint Global Communications, Inc. expects to commence
the offer on November 18, 1999. The offer will remain open for a minimum of 20
business days. Any shares not purchased in the offer will be acquired for the
same price in cash in a second-step merger. Vertex will pay a termination fee if
the merger agreement is terminated under circumstances specified in the
agreement. In addition, certain members of the management and board of directors
of Vertex have entered into a shareholder agreement in which they have agreed to
tender their shares into the offer and to vote in favor of the merger.
The merger agreement and the shareholder agreement have been approved
by the boards of directors of TriPoint Global Communications, Inc. and Vertex
Communications Corporation. The offer and the merger are conditioned upon,
among other things, clearance under the Hart-Scott-Rodino Antitrust
Improvements Act and the Exon-Florio Act. Assuming the required regulatory
approvals and clearances are received, it is anticipated that the acquisition
of Vertex Communications Corporation will be completed in December of 1999.
TriPoint Global Communications, Inc. (www.tripointglobal.com) comprises
three groups--RSI, Prodelin, and CSA Wireless Communications. The company is a
leading global supplier of satellite and wireless communications products and
services.
Vertex Communications Corporation (www.vertexcomm.com) is a leader in the design
and manufacture of satellite communications earth station products for worldwide
commercial and government use, offering full service from engineering and design
to standard products, turnkey installations and site service and maintenance
around the world.
Vertex Communications Corporation, 2600 N. Longview Street
Kilgore, TX 75662-6842
<PAGE>
For more information call:
E. Scott Wood
TriPoint Global Communications, Inc.
at 770/689-2059
J. Rex Vardeman, President and CEO or
James D. Carter, Chief Financial Officer
Vertex Communications Corporation
at 903/984-0555
Vertex Communications Corporation, 2600 N. Longview Street
Kilgore, TX 75662-6842
####
<PAGE>
[LOGO]
November 11, 1999
Vertex Communications Corporation
2600 N. Longview Street
Kilgore, Texas 75662
Attention: Board of Directors
Gentlemen:
You have advised Frost Securities, Inc. ("FSI") that TriPoint Global
Communications ("TriPoint") has proposed to acquire 100% of the outstanding
common stock of Vertex Communications Corporation, ("Vertex" or the "Company")
at $22.00 for each share of Vertex common stock (the "Transaction"). You have
requested that FSI issue an opinion ("Opinion") as to the fairness, from a
financial point of view, to the common stockholders of Vertex of the
consideration to be received in the Transaction.
In arriving at our Opinion we have, among other things:
1. Reviewed the Agreement and Plan of Merger Among TriPoint and Vertex
dated November 11, 1999 (the "Agreement");
2. Reviewed Vertex's Annual Reports and Form 10-K reports for the fiscal
years ended September 30, 1997 and September 30, 1998;
3. Reviewed Vertex's Form 10-Q reports for the quarters ended July 2,
1999, April 2, 1999, January 1, 1999, July 3, 1998, April 3, 1998 and
January 2, 1998;
4. Reviewed other publicly available documents filed with the U.S.
Securities and Exchange Commission by Vertex;
5. Discussed with management of Vertex the outlook for future operating
results, the assets and liabilities of Vertex, material in the foregoing
documents, and other matters we considered relevant to our inquiry; and
6. Considered such other information, financial studies, analyses and
investigations as we deemed relevant under the circumstances.
In connection with our review and in arriving at our opinion, we have, with
your permission, (i) not independently verified any of the foregoing information
and have relied on its being complete and accurate in all material respects, and
(ii) not made an independent evaluation or appraisal of the specific assets of
the Company, nor have we been furnished with any such independent evaluations or
appraisals.
Our Opinion is necessarily based solely upon the information set forth
herein as reviewed by us and circumstances existing as of the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used both in preparing this opinion and in the documents reviewed by us.
This letter shall be for the use of the Board of Directors of the Company in
considering the Transaction. The Company may not publish or refer to this letter
(either in its entirety or through excerpt or summaries) or disclose the
existence of our engagement hereunder or describe or characterize the advice
provided by us without the prior approval of FSI, which approval shall not be
<PAGE>
unreasonably withheld. It is expressly understood that this letter may be
included in certain regulatory filings, including any proxy statement to be
mailed to the stockholders of the Company in connection with the Transaction, or
as otherwise required by law, rule or regulation of any governmental authority
or the rules of the New York Stock Exchange and that such approval hereby is
provided subject to FSI's prior review of disclosures relating to FSI's
engagement and the letter.
As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings and mergers and acquisitions. In the ordinary course of
business, FSI and its affiliates at any time may hold long or short positions,
and may trade or otherwise effect transactions as principal or for the accounts
of customers, in debt or equity securities or options on securities of the
Company.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our Opinion that, on the date hereof,
the proposed consideration of $22.00 per share to be received pursuant to the
Transaction is fair to the common stockholders of Vertex from a financial point
of view.
Very truly yours,
[LOGO]
FROST SECURITIES, INC.
2
