<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------
AYDIN CORPORATION
(NAME OF SUBJECT COMPANY)
AYDIN CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
---------------
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
054681191
(CUSIP NUMBER OF CLASS OF SECURITIES)
---------------
GENE S. SCHNEYER, GENERAL COUNSEL
AYDIN CORPORATION
700 DRESHER ROAD
HORSHAM, PENNSYLVANIA 19044
(215) 657-7510
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
---------------
With a copy to:
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 753-7200
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Aydin Corporation, a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 700 Dresher Road, Horsham, Pennsylvania 19044. The title of
the class of equity securities to which this Schedule 14D-9 relates is the
common stock, par value $1.00 per share (the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE PURCHASER
This Schedule 14D-9 relates to the tender offer by Angel Acquisition
Corporation., a Delaware corporation ("Purchaser") and wholly owned subsidiary
of L-3 Communications Corporation, a Delaware corporation ("Parent"), which is
a wholly owned subsidiary of L-3 Communications Holdings Inc., a Delaware
corporation ("Holdings"), disclosed in a Tender Offer Statement on Schedule
14D-1, dated March 5, 1999 (the "Schedule 14D-1"), to purchase all of the
issued and outstanding Shares at $13.50 per Share net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated March 5, 1999 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with the Offer to Purchase, as
amended or supplemented from time to time, constitute the "Offer").
As set forth in the Schedule 14D-1, the principal executive offices of
Purchaser and Parent are located at 600 Third Avenue, New York, NY 10016.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the
Company, there are no material contracts, agreements, arrangements or
understandings and no actual or potential conflicts of interest between the
Company or its affiliates and (i) the Company's executive officers, directors
or affiliates, or (ii) Parent or Purchaser or their respective executive
officers, directors or affiliates.
AGREEMENTS WITH PARENT OR THE PURCHASER
Confidentiality Agreement
The following is a summary of certain material provisions of the
Confidentiality Agreement, dated as of October 8, 1998, between the Company and
Parent (the "Confidentiality Agreement"). This summary does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Confidentiality Agreement, a copy of which is filed as Exhibit 99.1 hereto
and incorporated herein by reference.
The Confidentiality Agreement contains certain standstill covenants and
other customary provisions pursuant to which, among other things, Parent has
agreed to keep confidential all non-public, confidential or proprietary
information relating to the Company furnished to it by the Company, subject to
certain customary exceptions (the "Confidential Information"), and to use the
Confidential Information solely for the purpose of evaluating a possible
transaction involving the Company and Parent.
The Merger Agreement
The following is a summary of certain material provisions of the Agreement
and Plan of Merger, dated March 1, 1999, by and among Parent, Purchaser and the
Company (the "Merger Agreement"). This summary does not purport to be complete
and is qualified in its entirety by reference to the complete text of the
Merger Agreement, a copy of which is filed as Exhibit 99.2 hereto and
incorporated herein by reference. Capitalized terms used and not otherwise
defined below have the meanings set forth in the Merger Agreement.
The Offer. The Merger Agreement provides for commencement of the Offer as
promptly as practicable, but no later than the fifth business day from the
public announcement of the execution of the
1
<PAGE>
Merger Agreement. Purchaser will, on the terms and subject to the prior
satisfaction or waiver (except that the Minimum Condition, as defined below,
may not be waived without the consent of the Company) of the conditions of the
Offer, accept for payment and pay for Shares tendered and not withdrawn
pursuant to the Offer as soon as possible after the expiration thereof. The
Merger Agreement also provides that Purchaser expressly reserves the right, in
its sole discretion, to waive any such condition and make any other changes in
the terms and conditions of the Offer, provided that Purchaser cannot amend or
waive the Minimum Condition, decrease the Offer Price or the number of Shares
sought, or amend any other condition of the Offer in any manner adverse to the
holders of Shares without the prior written consent of the Company.
Notwithstanding the foregoing, Purchaser has agreed to extend the Offer at any
time up to May 10, 1999 for one or more periods of not more than ten business
days or, if longer, 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, if, at the initial
expiration date of the Offer or any extension thereof, any condition to the
Offer is not satisfied or waived. In addition, the Offer Price may be increased
and the Offer may be extended to the extent required by law in connection with
such increase, in each case without the consent of the Company.
Conditions to the Offer. The obligations of Purchaser to accept for
payment and pay for Shares tendered pursuant to the Offer is subject to the
condition that there will be validly tendered and not withdrawn a number of
Shares which, together with any Shares owned by Parent or Purchaser, represent
at least a majority of the Shares outstanding on a fully diluted basis (the
"Minimum Condition"). In addition, Purchaser is not required to accept for
payment or, subject to applicable legal requirements, pay for any tendered
Shares, and may delay acceptance for payment of, or, subject to applicable
legal requirements, delay payment for, any tendered Shares, and may terminate
the Offer, if (a) the Minimum Condition has not been satisfied, (b) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") has not expired or terminated prior to
the expiration of the Offer, or (c) at any time on or after March 1, 1999 and
before Shares are accepted for payment pursuant to the Offer, any of the
following occur: (i) there shall have been any action or proceeding taken or
instituted and pending, or any statute, rule, regulation, judgment, order or
injunction promulgated, entered, enforced, enacted, issued or deemed applicable
to the Offer or the Merger (as defined below) or any other action taken,
proposed or threatened, by any domestic or foreign federal or state
governmental regulatory or administrative agency, authority, court or
legislative body or commission which does or could be reasonably expected to
(A) prohibit or impose any material limitations on, Parent's or Purchaser's
ownership or operation of all or a material portion of the Company's or its
Subsidiaries' businesses or assets, (B) prohibit or make illegal the acceptance
for payment, payment for or purchase of Shares or the consummation of the Offer
or the Merger, (C) result in a material delay in or restrict the ability of
Purchaser, or render Purchaser unable, to accept for payment, pay for or
purchase some or all of the Shares, or (D) impose material limitations on the
ability of Purchaser or Parent effectively to acquire or exercise full rights
of ownership of the Shares, including, without limitation, the right to vote
the Shares purchased by it on all matters properly presented to the Company's
stockholders; provided, that Parent will have used all reasonable efforts to
cause any such judgment, order or injunction to be vacated or lifted; (ii) the
representations and warranties of the Company set forth in the Merger Agreement
shall not be true and accurate as of the date of consummation of the Offer as
though made on or as of such date or the Company shall have breached or failed
to perform or comply with any material obligation, agreement or covenant
required by the Merger Agreement to be performed or complied with by it except,
in each case (A) for changes specifically permitted by the Merger Agreement and
(B) those representations and warranties that address matters only as of a
particular date which need only be true and accurate as of such date; (iii) the
Merger Agreement shall have been terminated in accordance with its terms; (iv)
(A) the Board of Directors of the Company (the "Company Board") shall have
withdrawn, or modified or changed in a manner adverse to Parent or Purchaser,
its recommendation of the Offer, the Merger Agreement or the Merger, shall have
recommended another proposal or offer, or shall have resolved to do any of the
foregoing or (B) any such corporation, partnership, person or other entity or
group shall have entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer for
any Shares or a merger, consolidation or other business combination with or
involving the Company or any of its Subsidiaries; (v) there shall have
2
<PAGE>
occurred any fact that had or could reasonably be expected to result in a
Company MAE (as defined below); (vi) there shall have occurred (A) any general
suspension of funding, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United States, (B)
a decline of at least 25% in either the Dow Jones Average of Industrial Stocks
or the Standard & Poor's 500 index from the date of the Merger Agreement, (C)
any material adverse change or any existing or threatened condition, event or
development involving a prospective material adverse change in United States or
other material international currency exchange rates or a suspension of, or
limitation on, the markets therefor, (D) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States, (E) any
limitation (whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on, or
any other event that, in the reasonable judgment of Purchaser, could reasonably
be expected to materially adversely affect the extension of credit by banks or
other lending institutions, (F) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving the
United States (except for any such event involving Iraq or Bosnia) or
materially adversely affecting (or materially delaying) the consummation of the
Offer or (G) in the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or worsening thereof; which
in the reasonable judgment of Parent or Purchaser, in any such case, and
regardless of the circumstances giving rise to such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment
or payments; or (vii) any applicable waitinig periods under any material
foreign statutes or regulations shall not have expired or been terminated, or
any material approval, permit, authorization or consent of any domestic or
foreign governmental, administrative, or regulatory agency shall not have been
obtained on terms satisfactory to Parent in its reasonable discretion.
A "Company MAE" means any fact, circumstance, condition or effect which is
(i) materially adverse to the business, operations, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole, other than any change, circumstance or effect
relating to the economy or securities markets in general or the industries in
which the Company operates and not specifically relating to the Company, or
(ii) materially adverse to the ability of the Company to perform any of its
material obligations under this Agreement. A "Company MAE" will be deemed to
exist if net cash of the Company and its Subsidiaries is less than $10 million
(without giving effect to any transaction-related fees and expenses of the
Financial Advisor, financial printers and outside counsel not exceeding $1.35
million in the aggregate) as of the close of business on the date of expiration
of the Offer. Notwithstanding the foregoing, no "Company MAE" will be deemed to
exist solely by reason of certain liabilities identified to Parent.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions set forth therein and the provisions of the Delaware General
Corporation Law, Purchaser shall be merged with and into the Company in
accordance with the DGCL (the "Merger") and the separate existence of Purchaser
shall cease and the Company shall continue as the Surviving Corporation, and
each issued and outstanding Share (other than shares to be canceled in
accordance with the Merger Agreement and any Dissenting Shares), shall be
converted into and become the right to receive, the Offer Price, payable to the
holder thereof, without interest (the "Merger Consideration"), upon surrender
of the certificate formerly representing such share of Company Common Stock in
the manner provided in the Merger Agreement, less any required withholding
taxes. As of the Effective Time (as defined below and in the Merger Agreement)
by virtue of the Merger and without any action on the part of any holder, all
such Shares shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with the Merger Agreement, or to
perfect any appraisal rights that such holder may have pursuant to Section 262
of the DGCL (the "DGCL"). The Merger Agreement also provides that (i) the
directors and officers of Purchaser at the effective time of the Merger (the
"Effective Time") will be the initial directors and officers, respectively, of
the Surviving Corporation, until their successors have been duly elected,
appointed or qualified in accordance with the Surviving Corporation's
Certificate of Incorporation and By-laws, and (ii) the Certificate of
Incorporation and By-laws of Purchaser will be the Certificate of Incorporation
and By-laws, respectively, of the Surviving Corporation.
3
<PAGE>
Treatment of Options. The Merger Agreement provides that as of the
Effective Time, the Company's employee and non-employee director stock options
outstanding (the "Options") will become fully exercisable and vested and the
Options will be canceled. Unless otherwise agreed upon, the holders of such
canceled Options will receive the excess, if any, of the Offer Price over the
exercise price of such Options. See "Arrangements with Executive Officers,
Directors or Affiliates of the Company."
Directors. The Merger Agreement provides that, promptly upon Parent's
purchase of and payment for Shares which represent at least a majority of the
outstanding Shares (on a fully diluted basis), Purchaser will be entitled to
designate such number of directors, rounded up to the next whole number, on the
Company Board as shall give Purchaser, subject to compliance with Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder, representation on
the Company Board equal to the product of the total number of directors on the
Company Board (giving effect to the directors designated by Parent) multiplied
by the percentage that the aggregate number of Shares beneficially owned by
Parent, Purchaser and any of their affiliates bears to the total number of
Shares then outstanding (such number being the "Board Percentage"). The Company
will, upon request of Purchaser, cause Parent's designees to satisfy the Board
Percentage, including without limitation increasing the size of the Company
Board and securing the resignations of incumbent directors. Notwithstanding the
foregoing, until the Effective Time, the Company will retain on the Company
Board at least two directors who were directors of the Company on the date of
the Merger Agreement; provided, that subsequent to the purchase of and payment
for Shares pursuant to the Offer, Parent will always have its designees
represent at least a majority of the entire Company Board. However, if at any
time prior to the Effective Time there are less than two Company Designees on
the Company Board, Parent, Purchaser and the Company shall either (i) use their
reasonable efforts to appoint successors who are not affiliated with Parent or
Purchaser or (ii) permit the resigning Company Designee to appoint his or her
successors in his or her reasonable discretion. The Company will use its
reasonable best efforts to cause persons designated by Purchaser to constitute
the same percentage as is on the Company Board of (i) each Committee of the
Company Board, (ii) each board of directors of each Subsidiary of the Company
and (iii) each committee of each such board, in each case only to the extent
permitted by law.
The Merger Agreement also provides that from and after the time, if any,
that Parent's designees constitute a majority of the Company Board, any
amendment of the Merger Agreement, termination of the Merger Agreement by the
Company, extension of time for performance of any of the obligations of Parent
or Purchaser or waiver of any condition or any of the Company's rights
thereunder may be effected only by the action of a majority of the directors of
the Company then in office who were directors on the date of the Merger
Agreement, which action shall be deemed to constitute the action of the full
Company Board; provided, that if there are no such directors, such actions may
be effected by unanimous vote of the entire Company Board.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, duly call,
give notice of, convene and hold a special meeting of its stockholders (the
"Special Meeting") as soon as practicable following the acceptance for payment
and purchase of Shares by Purchaser pursuant to the Offer for the purpose of
considering and taking action upon the approval of the Merger and adoption of
the Merger Agreement.
The Merger Agreement also provides that the Company will, if required by
applicable law in order to consummate the Merger, (i) prepare and file with the
SEC a preliminary proxy or information statement relating to the Merger and the
Merger Agreement and will use its best efforts (A) to obtain and furnish the
information required by the SEC to be included in the Proxy Statement (as
defined below) and, after consultation with Parent, to respond promptly to any
comments made by the SEC with respect to the preliminary proxy or information
statement and cause a definitive proxy or information statement (the "Proxy
Statement") to be mailed to its stockholders and (B) to obtain the necessary
approvals of the Merger and the Merger Agreement by its stockholders and (ii)
subject to the fiduciary obligations of the Company Board under applicable law
as advised by independent counsel, include in the Proxy Statement the
recommendation of the Company Board that stockholders of the Company vote in
favor of the approval of the Merger and adoption of the Merger Agreement.
Parent has agreed to vote all Shares then owned by it or any of its other
subsidiaries and affiliates in favor of the approval of the Merger and the
4
<PAGE>
adoption of the Merger Agreement. In the event that Parent, Purchaser or any
other subsidiary of Parent acquires, together with the Shares owned by them
collectively, at least 90% of the outstanding Shares pursuant to the Offer or
otherwise, the parties will take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after such acquisition,
without a meeting of the Company's stockholders, in accordance with Section 253
of the DGCL (a "Short-Form Merger").
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of the Company and Parent with respect to, among
other things, (i) organization, (ii) authority to execute and deliver the
Merger Agreement, (iii) no conflict with any agreement, governmental
authorization or charter document, and (iv) accuracy of information to be
supplied for inclusion in Schedule 14D-1 or Schedule 14D-9, as the case may be.
Additional representations of the Company relate to, among other things, (i)
capitalization, (ii) accuracy of documents and reports filed with the SEC,
including financial statements, (iii) absence of undisclosed liabilities,
litigation and material adverse changes, (iv) employee benefit plans/ERISA, (v)
compliance with applicable laws, (vi) taxes, (vii), environmental matters,
(viii) state takeover laws, (ix) absence of changes, (x) real property, (xi)
voting requirements, and (xii) year 2000 problem. Additional representations of
Parent and the Purchaser relate to, among other things, (i) financing, (ii)
operations of Purchaser and (iii) limitation of liability for information
supplied.
Interim Operations. In the Merger Agreement, the Company has agreed that,
among other things, between the date of the Merger Agreement and prior to the
time Purchaser's designees have been elected to, and constitute a majority of,
the Company Board, unless Parent otherwise agrees in writing and except as
otherwise contemplated by the Merger Agreement, (a) the Company and its
Subsidiaries will conduct business only in the ordinary and usual course in a
manner consistent with past practice and in compliance with applicable laws and
the Company and its Subsidiaries shall each use its reasonable best efforts to
(i) preserve substantially intact the business organization and assets of the
Company and its Subsidiaries, (ii) keep available the services of the present
key officers, employees and consultants of the Company and its Subsidiaries,
(iii) preserve the present relationships of the Company and its Subsidiaries
with customers, suppliers and other persons with which the Company or any of
its Subsidiaries has significant business relations, and (iv) maintain net cash
of the Company and its Subsidiaries of at least $10 million (without giving
effect to any transaction-related fees and expenses of the Financial Advisor,
financial printers and outside counsel not exceeding $1.35 million in the
aggregate) as of the close of business on the date of the expiration of the
Offer; and (b) the Company will not, directly or indirectly, (i) sell, transfer
or pledge or agree to sell, transfer or pledge any Shares or capital stock of
any of its Subsidiaries beneficially owned by it, either directly or
indirectly; (ii) amend its Certificate of Incorporation or By-laws or similar
organizational documents; or (iii) split, combine or reclassify the outstanding
Shares or any outstanding capital stock of any of its Subsidiaries.
In addition, neither the Company nor any of its Subsidiaries will (i)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock; (ii) issue, deliver, sell,
pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class of
the Company or its Subsidiaries, other than Shares reserved for issuance on the
date of the Merger Agreement or issuances pursuant to the exercise of Options
outstanding on the date of the Merger Agreement; (iii) transfer, lease,
license, sell, mortgage, pledge, dispose of or encumber any material assets
other than in the ordinary and usual course of business and consistent with
past practice; (iv) incur or modify any indebtedness or liability or issue any
debt security; (v) redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock; (vi) modify, amend or terminate any of
its material agreements or waive, release or assign any material rights or
claims, except in the ordinary course of business and consistent with past
practice; (vii) permit any material insurance policy naming the Company as a
beneficiary or a loss payable payee to be canceled or terminated without
replacement with a policy with coverage no less favorable to the Company and
its Subsidiaries on terms and conditions no less favorable to the Company and
its Subsidiaries; (viii) (A) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
material obligations of any other person (other than wholly owned Subsidiaries
of the Company), except in the ordinary and
5
<PAGE>
usual course of business; (B) make any material loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned Subsidiaries of the Company in the ordinary and usual course of
business); (C) make any bid or proposal, or enter into or amend in any material
respect any contract or agreement other than in ordinary course of business
consistent with past practice, which in any event would either (i) involve
aggregate consideration under such bid, proposal, contract or agreement in
excess of $2 million or (ii) be a bid, proposal or renewal in an amount at
which the Company would expect such bid, proposal or renewal to result in a
loss to the Company; (D) authorize any single capital expenditure which is in
excess of $250,000 or capital expenditures which are, in the aggregate, in
excess of $1.0 million for the Company and its Subsidiaries taken as a whole;
(E) enter into any transaction, contract or commitment with any affiliate of
the Company; or (F) enter into any material commitment or transaction with
respect to any of the foregoing (including, but not limited to, any borrowing,
capital expenditure or purchase, sale or lease of assets); (ix) change any of
the accounting methods used by the Company unless required by GAAP; (x) except
as permitted in connection with the termination of the Merger Agreement, adopt
a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any
of its Subsidiaries; (xi) except to the extent required under existing employee
and director benefit plans, agreements or arrangements as in effect on the date
of the Merger Agreement and disclosed to Parent, increase the compensation or
fringe benefits of any of its directors, officers or employees, except for
increases in salary or wages of employees of the Company or its Subsidiaries
who are not officers of the Company in the ordinary course of business in
accordance with past practice, or grant any retention, severance or termination
pay not currently required to be paid under existing severance plans to or
enter into any employment, consulting or severance agreement or arrangement
with any present or former director, officer or other employee of the Company
or any of its Subsidiaries, or establish, adopt enter into or amend or
terminate any collective bargaining agreement or Company Plan, including, but
not limited to, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employers; (xii) make
or change any Tax election, make or change any method or accounting with
respect to Taxes, file any amended Tax Return or settle or compromise any
material Tax liability; (xiii) settle or compromise any pending or threatened
suit, action or claim against the Company or any Subsidiary for an aggregate
amount in excess of $50,000 or which is material or which relates to the
transactions contemplated hereby; (xiv) make any change in the key management
structure of the Company or any of its Subsidiaries, including, without
limitation, the hiring of additional officers or the termination of existing
officers; (xv) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent of otherwise), other
than the payment, discharge or satisfaction in the ordinary course of business
in accordance with the terms of such obligation or liability and consistent
with past practice of liabilities reflected or reserved against in the
financial statements of the Company or incurred in the ordinary course of
business and consistent with past practice; (xvi) acquire (by merger,
consolidation, acquisition or stock or assets or otherwise) any corporation,
partnership or other business organization or division thereof or any material
assets; (xvii) take, or agree to commit to take, any action that would make any
representation or warranty of the Company contained in the Merger Agreement
inaccurate in any material respect at, or as of any time prior to, the
Effective Time (except for representations made as of a specific date); or
(xviii) authorize or enter into an agreement to do any of the foregoing.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that it and all of its Subsidiaries or affiliates, officers, directors,
employees, representatives and agents, will cease any existing discussions or
negotiations, if any, with any parties conducted heretofore with respect to any
acquisition or exchange of all or any material portion of the assets or equity
in the Company or any of its Subsidiaries or any business combination with the
Company or any of its Subsidiaries. Furthermore, neither the Company, any of
its Subsidiaries or affiliates nor their respective officers, directors,
employees, representatives or agents, shall directly or indirectly solicit,
participate in or initiate discussions or negotiations with, or provide any
information to any third party concerning any merger, consolidation, tender
offer, exchange offer, sale of all or substantially all of the Company's direct
and indirect assets, sale of shares of capital stock or similar business
combination transactions involving the Company or any
6
<PAGE>
Subsidiary or principal operating or business unit of the Company ("Acquisition
Proposal"); provided, however, that if, at any time prior to the purchase of
Shares by Purchaser in the Offer, the Company Board by majority vote determines
in good faith, after receiving advice from its financial advisor and outside
counsel, that failing to take such action would constitute a breach of the
fiduciary duties of the Company Board under applicable law, the Company may, in
response to a bona fide written Acquisition Proposal which did not result from
a breach of the foregoing and which the Company Board determines in good faith
is superior to the Offer (any such bona fide written Acquisition Proposal being
referred to as a "Superior Proposal"), (i) furnish information or provide
access with respect to the Company and each of its Subsidiaries to such Person
pursuant to a customary confidentiality agreement (as determined by the Company
after consultation with its outside counsel) and (ii) participate in
discussions and negotiations regarding such Acquisition Proposal. The Company
Board agrees that it will keep Parent informed, on a current basis, of the
status and terms of any such proposals.
In the event that prior to the completion of the Offer, the Company Board
determines in good faith, after the Company has received a Superior Proposal
and receipt of formal advice from its financial advisor and outside counsel
that failing to take such action would constitute a breach of its fiduciary
duties under applicable law, the Company Board may withdraw or modify its
approval or recommendation of the Offer, the Merger or the Merger Agreement,
approve or recommend a Superior Proposal or terminate the Merger Agreement
pursuant to the terms of that agreement, provided that prior to any such
action, the Company (i) gives Parent at least two business days' notice of the
effectiveness of such action and (ii) simultaneously with such action, pays to
Parent the $3 million termination fee (see "--Termination Fee"). The foregoing
provisions will not prohibit the Company or the Company Board from taking and
disclosing to the Company's stockholders a position with respect to a tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such disclosure to the
Company's stockholders or otherwise which, in the judgment of the Company Board
with the advice of independent legal counsel, is required under applicable law
or the rules of any stock exchange. The Company agrees not to release any third
party from, or waive any provisions of, (i) any standstill agreement to which
the Company is a party (other than for the limited purpose of discussions and
negotiations permitted by the foregoing) and (ii) any confidentiality agreement
to which the Company is a party.
Employee Benefits. The Merger Agreement provides that Parent shall or
cause the Surviving Corporation to, until at least December 31, 1999, maintain
employee benefit plans, programs and arrangements (other than stock-based
plans) which are, in the aggregate, for the employees who were active full-time
employees of the Company or any Subsidiary immediately prior to the Effective
Time and continue to be active full-time employees of Purchaser, the Surviving
Corporation, any Subsidiary or any other affiliate of Purchaser, no less
favorable than those provided by the Company and any Subsidiary immediately
prior to the Effective Time. From and after the Effective Time, for purposes of
determining eligibility, vesting and entitlement to vacation and severance and
other benefits for employees actively employed full-time by the Company or any
Subsidiary immediately prior to the Effective Time and who continue in the
employ of the Company following the Effective Time under any compensation,
severance, welfare, pension, benefit, savings or other Plan of Parent or any of
its Subsidiaries in which active full-time employees of the Company and any
Subsidiary become eligible to participate (whether pursuant to the foregoing or
otherwise), service with the Company or any Subsidiary (whether before or after
the Effective Time) shall be credited as if such service had been rendered to
Parent or such Subsidiary (except to the extent necessary to prevent
duplication of benefits). Parent will, and will cause the Surviving Corporation
to, observe all employment, severance agreements or arrangements which provide
for the acceleration of benefits to employees of the Company upon a change of
control, plans or policies of the Company and its Subsidiaries.
Directors' and Officers' Insurance and Indemnification. The Merger
Agreement provides that (a) from and after the consummation of the Offer
through the sixth anniversary of the date the Effective Time occurs, Parent
shall, and shall cause the Surviving Corporation to, indemnify, defend and hold
harmless any person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, an officer or director (the
"Indemnified Party") of the Company and its Subsidiaries
7
<PAGE>
against all losses, claims, damages, liabilities, costs and expenses (including
reasonable attorneys' fees and expenses), judgments, fines, and amounts paid in
settlement in connection with any actual or threatened action, suit, claim,
proceeding or investigation (each a "Claim") to the extent that any such Claim
is based on, or arises out of, (i) the fact that such person is or was a
director, officer, employee or agent of the Company or any Subsidiaries or is
or was serving at the request of the Company or any of its Subsidiaries as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (ii) the Merger Agreement, or any of the
transactions contemplated thereby, in each case to the extent that any such
Claim pertains to any matter or fact arising, existing, or occurring prior to
or at the Effective Time, regardless of whether such Claim is asserted or
claimed prior to, at or after the Effective Time, to the full extent permitted
under Delaware law or the Company's Certificate of Incorporation, By-laws or
indemnification agreements in effect at the date hereof, including provisions
relating to advancement of expenses incurred in the defense of any action or
suit; provided that in the event any Indemnified Party becomes involved in any
capacity in any Claim, then from and after consummation of the Offer, the
Company (or the Surviving Corporation if after the Effective Time) shall,
periodically advance to such Indemnified Party its legal and other expenses
(including the cost of any investigation and preparation incurred in connection
therewith), subject to the provision by such Indemnified Party of an
undertaking to reimburse the amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Indemnified Party is not entitled thereto; (b) no Indemnified Party may settle
any such claim without the prior approval of Parent or the Surviving
Corporation (such consent not to be unreasonably withheld); (c) in the event
that any claim, action, suit, proceeding or investigation is brought against
more than one Indemnified Party (whether arising before or after the Effective
Time), the Indemnified Parties as a group shall retain one counsel (plus
appropriate local counsel) reasonably satisfactory to Parent or the Surviving
Corporation; (d) Parent and the Company have agreed that all rights to
indemnification and all limitations of liability existing in favor of the
Indemnified Party as provided in the Company's Certificate of Incorporation and
By-laws as in effect as of the date hereof shall survive the Merger and shall
continue in full force and effect, without any amendment thereto, for a period
of six years from the Effective Time to the extent such rights are consistent
with the DGCL; 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; provided further, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under Delaware law, the Company's Certificate of Incorporation or
By-laws or such agreements, as the case may be, shall be made by independent
legal counsel selected by the Indemnified Party and reasonably acceptable to
Parent; and provided further, that nothing in the Merger Agreement shall impair
any rights or obligations of any present or former directors or officers of the
Company; (e) in the event Parent or Purchaser or any of their successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, proper provision shall
be made so that the successors and assigns of Parent and Purchaser assume the
obligations set forth above and none of the actions described in clauses (i) or
(ii) shall be taken until such provision is made; and (f) Parent or the
Surviving Corporation shall maintain the Company's existing directors' and
officers' liability insurance policy ("D&O Insurance") for a period of not less
than six years after the Effective Date; provided, that (i) Parent may
substitute therefor policies of substantially similar coverage and amounts
containing terms no less advantageous to such former directors or officers;
(ii) if the existing D&O Insurance expires or is canceled during such period,
Parent or the Surviving Corporation will use their reasonable best efforts to
obtain substantially similar D&O Insurance, (iii) in no event shall Parent or
the Surviving Corporation be required to expend more than an amount per year in
excess of 175% of current annual premiums paid by the Company to maintain or
procure insurance coverage described above; and (iv) if the annual premiums of
such insurance coverage would exceed 175% of current annual premiums, Parent or
the Surviving Corporation shall obtain a policy with the greatest coverage
available for a cost not exceeding 175% of current annual premiums.
Conditions to the Merger. The Merger Agreement provides that the
respective obligations of each party to effect the Merger are subject to the
satisfaction, on or prior to the Closing Date, of the following
8
<PAGE>
conditions: (a) if required by the DGCL, the Merger Agreement will have been
approved and adopted by the requisite vote of the Company's stockholders in
order to consummate the Merger; (b) no statute, rule, order, decree or
regulation will have been enacted or promulgated by any foreign or domestic
Governmental Entity or authority of competent jurisdiction which prohibits
consummation of the Merger and all governmental consents, orders and approvals
required for the consummation of the Merger and the transactions contemplated
by the Merger Agreement will have been obtained and be in effect at the
Effective Time; (c) there will be no order or injunction (whether temporary,
preliminary or permanent) of a foreign or United States federal or state court
or other governmental authority of competent jurisdiction in effect precluding,
restraining, enjoining or prohibiting consummation of the Merger which order or
injunction is final and non-appealable; (d) the applicable time period under
the HSR Act shall have expired or been terminated; and (e) Parent, Purchaser or
their affiliates shall have purchased Shares pursuant to the Offer.
Termination. The Merger Agreement provides that it may be terminated and
the Merger abandoned at any time prior to the Effective Time, whether before or
after stockholder approval thereof: (a) by mutual consent of the Board of
Directors of Parent and the Company Board; (b) by either of the Company Board
or the Board of Directors of Parent (i) if Parent or Purchaser shall have
terminated the Offer or if Shares shall not have been purchased pursuant to the
Offer on or prior to May 10, 1999; provided, however, that in the event of a
delay in Purchaser's purchase of the Shares pursuant to the Offer resulting
from an inquiry for additional materials made by a Governmental Entity relating
to the HSR Act or Federal antitrust laws, the right to terminate the Merger
Agreement under this clause (i) shall be extended until June 23, 1999;
provided, further, that the right to terminate this Agreement under this clause
(i) shall not be available to any party whose failure to fulfill any obligation
under the Merger Agreement has been the cause of, or resulted in, the failure
of Parent or Purchaser, as the case may be, to purchase Shares pursuant to the
Offer on or prior to such date or (ii) if any Governmental Entity of competent
jurisdiction has issued an order, decree or ruling or taken any other action
(which the parties will use their reasonable best efforts to lift) permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by the Merger Agreement, and such order, decree, ruling or other action has
become final and non-appealable and, with respect to any court or governmental
body located outside the United States, such order, decree, ruling or other
action would, either individually or in the aggregate, have a Company MAE or a
material adverse effect on the business, operations, assets, condition
(financial or otherwise) or results of operations of Parent and its
Subsidiaries taken as a whole; (c) by the Company Board (i) if, prior to the
purchase of Shares pursuant to the Offer, the Company Board has (A) received a
bona fide offer which the Company Board determines in good faith is a Superior
Proposal, and (B) determined in good faith, as a result of such Superior
Proposal, after receiving advice from its financial advisor and outside counsel
to the Company, that the failure to terminate the Merger Agreement would
violate its fiduciary duties to the Company's stockholders under applicable law
(provided that such termination under the foregoing shall not be effective
until the Company has made payment of the fee required simultaneously with such
termination pursuant to the terms of the Merger Agreement); (ii) if, prior to
the purchase of Shares pursuant to the Offer, Parent or Purchaser breaches or
fails in any material respect to perform or comply with any of its material
covenants and agreements or breaches its representations and warranties in any
material respect, and such breach is not cured within fifteen (15) business
days of written notice; (iii) if Parent or Purchaser has terminated the Offer,
or the Offer has expired, without Parent or Purchaser purchasing any Shares;
provided, that the Company may not terminate the Merger Agreement pursuant to
this clause (iii) if the Company is in material breach of the Merger Agreement;
or (iv) if Purchaser shall have failed to commence the Offer on or prior to
five business days following the date of the initial public announcement of the
Offer; provided that the Company may not terminate the Merger Agreement
pursuant to this clause (iv) if the Company is in material breach of the Merger
Agreement; or (d) by the Board of Directors of Parent if (i) Purchaser shall
have failed to commence the Offer on or prior to five business days following
the date of the initial public announcement of the Offer; provided that Parent
may not terminate the Merger Agreement pursuant to this clause (i) if Parent is
in material breach of the Merger Agreement; (ii) prior to the purchase of
Shares pursuant to the Offer, the Company Board has withdrawn, or modified or
changed in a manner adverse to Parent or Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the
9
<PAGE>
Merger, or has recommended an Acquisition Proposal or has executed an agreement
in principle or definitive agreement relating to an Acquisition Proposal or
similar business combination with a person or entity other than Parent,
Purchaser or their affiliates (or the Company Board resolves to do any of the
foregoing); (iii) following any negotiations by the Company with any person
(other than Parent or Purchaser) of an Acquisition Proposal, there shall have
been a breach of any covenant or agreement on the part of the Company contained
in the Merger Agreement such that the conditions set forth in clause (b) of
Annex A of the Merger Agreement would not be satisfied; (iv) prior to the
purchase of Shares pursuant to the Offer, Company breaches or fails in any
material respect to perform or comply with any of its material covenants and
agreements contained in the Merger Agreement or breaches its representations
and warranties therein in any material respect, and such breach is not cured
within fifteen (15) business days of written notice; or (v) the Minimum
Condition shall not have been satisfied by the expiration date of the Offer and
on or prior to such date (A) any person (other than Parent or Purchaser) shall
have made and not withdrawn a bona fide proposal or public announcement or
communication to the Company with respect to an Acquisition Proposal or (B) any
person (including the Company or any of its affiliates or Subsidiaries), other
than Parent, Purchaser or any of their affiliates shall have become the
beneficial owner of more than 25% of the Shares.
Effect of Termination; Termination Fee. In the event of the termination of
the Merger Agreement, written notice thereof shall forthwith be given to the
other party or parties specifying the provision thereof pursuant to which such
termination is made, and the Merger Agreement shall forthwith become null and
void (except for the section pertaining to the termination fee), and there
shall be no liability on the part of Parent or the Company except for fraud or
for willful breach of the Merger Agreement. If the Merger Agreement is
terminated by the Company pursuant to the provision described in clause (c)(i)
or terminated by Parent pursuant to the provision described in clause (d)(ii)
or (d)(v) under "Termination" above (provided that at the time of such
termination by Parent, Parent and Purchaser were not in material breach of the
Merger Agreement), the Company will concurrently with such termination pay
Parent the $3.0 million termination fee.
The Tender Agreement. Concurrently with the execution of the Merger
Agreement, Parent, Purchaser, and each of Steel Partners II, L.P., Sandera
Partners, L.P., and Newcastle Partners, L.P. (collectively, the "Stockholders")
entered into a Tender Agreement (the "Tender Agreement"). The following is a
summary of certain provisions of the Tender Agreement and does not purport to
be complete and is qualified in its entirety by reference to the complete text
of the Tender Agreement, a copy of which is filed as Exhibit 99.3 hereto and is
incorporated by reference.
Pursuant to the Tender Agreement, the Stockholders agreed to validly
tender all of their shares pursuant to the Offer and not withdraw any shares
therefrom.
Each Stockholder agreed pursuant to the Tender Agreement that it would (a)
vote the Shares owned by it in favor of the Merger Agreement; (b) vote the
Shares against any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement; and (c) vote
the Shares against any action or agreement (other than the Merger Agreement or
the transactions contemplated thereby) that would impede, interfere with,
delay, postpone or attempt to discourage the Merger or Offer. As of and
following the date of the Tender Agreement, each Stockholder agreed not to vote
such Shares or grant any other proxy or power of attorney with respect to any
Shares, deposit any Shares into a voting trust or enter into any agreement,
arrangement or understanding with any person, directly or indirectly, to vote,
grant any proxy or give instructions with respect to the voting of such Shares.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY
Change in Control Agreements. On September 16, 1998, the Company entered
into executive retention agreements (the "Executive Retention Agreements") with
the following key employees: James Henderson; Gene Schneyer; Daniel Saginario;
Jim Tomkins; Hal Gilje; and Walter Estulin. The Executive Retention Agreements
provide, among other things, (i) for the payment of a retention bonus if in the
absence of a change in status transaction the executive remains continuously
employed by the Company for a period of one year from the date of the Executive
Retention Agreement or for a period of six months
10
<PAGE>
from the date of a change in status transaction occurring during such one year
period and (ii) for the payment of certain severance benefits if the
executive's employment is terminated by the Company without cause or by the
executive for good reason within the two year period following the date of the
Executive Retention Agreement. The amount of the retention bonus payable under
the Executive Retention Agreements is equal to twenty-five percent (25%) of the
executive's annual base salary. The severance benefits an executive will
receive under the Retention Agreements include the executive's full base salary
for the one year period subsequent to the date of his termination, the full
exercisability for one year of all options to purchase shares of the Company's
Common Stock granted to the executive, and the continuance of all life
insurance and medical plans until the end of the one year period subsequent to
the date of the executive's termination or, if sooner, until his commencement
of full-time employment with a new employer. A Form of Executive Retention
Agreement is filed as Exhibit 99.4 hereto and is incorporated herein by
reference.
On September 29, 1998, the Company entered into executive retention
agreements (the "Turkish Officer Retention Agreements") with the following key
employees who are located in Turkey: Kursat Yahyabeyoglu; Taner Oztek; Erodogan
Over; and Serdar Akkor. The Turkish Officer Retention Agreements, provide,
among other things, (i) for the payment of a retention bonus if in the absence
of a change in status transaction the executive remains continuously employed
by the Company for a period of one year from the date of the Turkish Officer
Retention Agreement or for a period of six months from the date of a change in
status transaction occurring during such one year period and (ii) for the
payment of certain severance benefits if the executive's employment is
terminated by the Company without cause or by the executive for good reason
within the two year period following the date of the Turkish Officer Retention
Agreement. The amount of the retention bonus payable under the Turkish Officer
Retention Agreements is equal to twenty-five percent (25%) of the executive's
annual base salary. The severance benefits an executive will receive under the
Turkish Officer Retention Agreements include the executive's full base salary
for the six month period subsequent to the date of his termination, the full
exercisability for one year of all options to purchase shares of the Company's
Common Stock granted to the executive, and the continuance of all life
insurance and medical plans until the end of the six month period subsequent to
the date of the executive's termination or, if sooner, until his commencement
of full-time employment with a new employer. A Form of Turkish Officer
Retention Agreement is filed as Exhibit 99.5 hereto and is incorporated herein
by reference.
On November 20, 1998, the Company entered into executive retention
agreements (the "Financial Officer Retention Agreements") with the following
key finance employees: Louis Belardi; Alan Boone; and Brian McMullin. The
Financial Officer Retention Agreements, provide, among other things, (i) for
the payment of certain severance benefits if the executive's employment is
terminated by the Company without cause or by the executive for good reason
within the two year period following the date of the Financial Officer
Retention Agreement. The severance benefits an executive will receive under the
Financial Officer Retention Agreements include the executive's full base salary
for the six month period subsequent to the date of his termination, the full
exercisability for six months of all options to purchase shares of the
Company's Common Stock granted to the executive, and the continuance of all
life insurance and medical plans until the end of the six month period
subsequent to the date of the executive's termination or, if sooner, until his
commencement of full-time employment with a new employer. A Form of Financial
Officer Retention Agreement is filed as Exhibit 99.6 hereto and is incorporated
herein by reference.
Certain Provisions in the Merger Agreement. As described above, the Merger
Agreement provides that, until at least December 31, 1999, full-time employees
of the Company who continue to be full-time employees of the surviving company
will receive employee benefits that are no less favorable in the aggregate than
those provided to such employees immediately prior to the Merger. With respect
to such benefits, service accrued with the Company and its subsidiaries by such
employees will be recognized for all purposes except to the extent necessary to
prevent duplication of benefits. The Merger Agreement further provides that
Parent will honor all employment and severance agreements with employees and
former employees of the Company.
11
<PAGE>
The Merger Agreement also provides for Parent to, and to cause the Company
(or the Surviving Corporation if after the Effective Time) to, indemnify,
defend and hold harmless, among other persons, the Company's officers and
directors against claims, losses, and liability arising out of, among other
things, (i) the fact that such person was a director or officer of the Company
or (ii) the Merger Agreement or any of the transactions contemplated thereby,
in each case, to the full extent permitted under Delaware law or the Company's
Certificate of Incorporation or By-laws or existing indemnification agreements.
Parent also agreed in the Merger Agreement that all rights to indemnification
and all limitations on liability provided to directors and officers in the
Company's Certificate of Incorporation or By-laws as in effect as of the date
of the Merger Agreement will survive the Merger and continue in full force and
effect, without any amendment thereto, for six years from the Effective Time to
the extent such rights are consistent with the DGCL. Additionally, Parent has
agreed that either it or the Surviving Corporation will maintain the Company's
existing officers' and directors' liability insurance policy for a period of
not less than six years after the Effective Date; provided, that the aggregate
annual premiums for such insurance at any time during such period will not
exceed 175% of the per annum rate of premiums paid by the Company and its
Subsidiaries on the date of the Merger Agreement. See "The Merger
Agreement--Directors' and Officers' Insurance and Indemnification."
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Company Board. The Company Board has unanimously
approved the Merger Agreement, the Offer and the Merger, has determined that
the Offer and the Merger are fair to and in the best interests of the Company's
stockholders, and recommends that the Company's stockholders accept the Offer
and tender their Shares in the Offer.
A letter to the Company's stockholders communicating the Company Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits 99.9 and 99.10, respectively, and are
incorporated herein by reference.
(b) Background; Reasons for the Board's Recommendation. On August 20,
1998, the Company engaged PricewaterhouseCoopers Securities, LLC ("PwCS") as
its financial advisor to evaluate strategic alternatives available to the
Company, including a possible sale transaction. As part of this engagement,
PwCS solicited interest from a select group of potential purchasers.
In early October 1998, PwCS and representatives of the Company contacted
Parent to inquire whether Parent had an interest in acquiring the Company. On
October 8, 1998, Parent executed a customary confidentiality agreement with
respect to the exchange of non-public information between the Company and
Parent.
On November 9, 1998, Parent was provided with a copy of the Confidential
Offering Memorandum prepared by PwCS.
On November 19, 1998, Parent submitted a letter to the Company Board
indicating that it was potentially interested in acquiring 100% of the common
stock of the Company. On November 23, 1998, Frank C. Lanza, the Chairman and
Chief Executive Officer of Parent, met with Warren Lichtenstein, Chairman of
the Board of the Company, regarding Parent's, interest in the Company. In a
subsequent telephonic conversation, Mr. Lichtenstein and James Henderson
(President and Chief Operating Officer of the Company) had discussions with
representatives of Parent regarding the Company's projected 1998 financial
performance.
On November 24, 1998, Parent submitted a revised indication of interest
pursuant to which Parent would acquire 100% of the common stock of the Company
at $13.25 per share. Parent's revised proposal contemplated that 40% of the
price would be payable in cash and the remaining 60% would be payable in shares
of the common stock of Holdings. Parent also requested a 30 day exclusive
negotiation period during which it intended to complete its due diligence
review. On November 24, 1998, the Company Board held a meeting at which it
reviewed Parent's proposal with members of the Company's senior management,
PwCS and Olshan Grundman Frome Rosenzweig & Wolosky LLP, special counsel to the
Company ("OGFR&W"). Following discussions, the Company Board determined that
the best means for providing value to its stockholders was to continue
soliciting other interested parties while continuing discussions with Parent.
12
<PAGE>
In December 1998, Parent commenced its due diligence review of the
Company. In mid-December 1998, representatives of the Company and Parent
discussed the general terms of a possible transaction.
On December 23, 1998, legal counsel for Parent, delivered to OGFR&W
comments on the form of the merger agreement previously provided to Parent.
In late December 1998, Mr. Lanza informed representatives of PwCS that,
subject to confirmatory due diligence, Parent might be willing to propose an
all cash acquisition of the Company's outstanding shares for up to $14.00 per
share. Shortly thereafter, representatives of Parent commenced a due diligence
investigation of the Company and held discussions with members of the Company's
senior management. During this period of time, representatives of PwCS and
OGFR&W continued to negotiate with Parent and its legal counsel regarding the
terms of the transaction.
At a telephonic meeting of the Company Board on December 29, 1998, which
was adjourned and completed on December 30, 1998, the Company Board met to
review with the Company's financial and legal advisors, the terms and
conditions of the proposed merger agreement with Parent. The Board reviewed
various legal and business issues raised by Parent's representatives comments
to the merger agreement.
In early January 1999, the Company was advised that Parent was not willing
to proceed with the proposed acquisition of the Company at the present time.
Discussions with representatives of Parent and Parent's due diligence review of
the Company were discontinued at that time, negotiations with Parent were
suspended.
During January and early February 1999, PwCS continued to solicit bids
from other prospective acquirers. The Company delivered management
presentations to three other potential buyers. The Company eventually decided
not to pursue a transaction with such parties for various reasons.
On February 10, 1999, representatives of the Company contacted Parent to
inquire as to whether Parent was interested in restarting discussions regarding
the acquisition of the Company. In the course of such discussions, Mr. Lanza
indicated that it was likely that Parent's proposed offering price would be
decreased. On February 11 and 12, 1999, James Henderson and representatives of
PwCS met with representatives of Parent in New York to further discuss the
Company's valuation.
On February 17, 1999, Parent submitted a revised offer of $13.00 per
share, in cash, for 100% of the outstanding common stock of the Company. Later
that day representatives of PwCS contacted Mr. Lanza to discuss the valuation
of the Company. During such conversation, Mr. Lanza orally agreed to an upward
revision in price to $13.25 per share. Subsequently, on February 22, 1999, Mr.
Lichtenstein negotiated a further upward revision in price to $13.50 per share.
On February 23, 1999, the Company Board commenced a meeting whereby they
had detailed discussions regarding the terms of the proposed Merger Agreement.
The Board meeting was adjourned and reconvened on March 1, 1999. At such
meeting, PwCS presented its financial analyses of the Company's valuation and
Parent's proposal and rendered an oral fairness opinion to the Company Board,
which was confirmed in writing on March 1, 1999. Following the Company Board's
review of the final terms of the Offer and the Merger, the Company Board
unanimously determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair and in the
best interests of the Company's stockholders, approved the Merger Agreement and
the transactions contemplated thereby, and recommended that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer and
approve and adopt the Merger Agreement and the transactions contemplated
thereby.
Following the meeting of the Company Board, Parent, Purchaser and the
Company executed and delivered the Merger Agreement. Early in the afternoon on
March 1, 1999, the Company issued a press release announcing the execution of
the Merger Agreement.
Reasons for the Transaction; Factors Considered by the Board. In
approving the Merger Agreement, the Offer, the Merger and the other
transactions contemplated by the Merger Agreement, and recommending that the
Company's stockholders accept the Offer and tender their Shares, the Company
Board considered a variety of factors, including:
13
<PAGE>
1. The financial condition, results of operations, cash flows, business
opportunities, current strategies, business plans, competitive position
and prospects of the Company (and the risks involved in achieving such
prospects), and current economic and market conditions.
2. The presentations of PwCS at the meetings of the Company Board held on
December 29, 1998 (which was adjourned and completed on December 30,
1998) and February 23, 1999 (which was adjourned and completed on March
1, 1999) with respect to, among other things, the Offer and the Merger,
and the opinion of PwCS orally delivered at the February 23, 1999 meeting
and confirmed in writing on March 1, 1999 to the effect that as of such
date the $13.50 per share in cash to be received by the Company's
stockholders pursuant to the Offer and the Merger was fair from a
financial point of view to the Company's stockholders. The full text of
the PwCS opinion dated March 1, 1999, which sets forth the assumptions
made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Annex B and filed
herewith as Exhibit 99.10 and is hereby incorporated herein by reference.
Stockholders of the Company are urged to read the opinion carefully in
its entirety.
3. The fact that in August 1998 the Company issued a press release stating
that the Company Board had engaged PwCS to assist the Company in
evaluating potential strategic alternatives to enhance stockholder value,
and that since such time PwCS and senior management of the Company had
engaged in discussions with a substantial number of parties interested in
a possible transaction involving all or part of the Company. Based on
such discussions and the views of members of senior management of the
Company, the Company Board believed that it was unlikely that any party
would propose an acquisition or strategic business combination involving
the entire Company that would be more favorable to the Company and its
stockholders than the Offer and the Merger. In addition, while PwCS and
senior management of the Company had also identified a significant number
of parties interested in transactions involving certain of the Company's
existing businesses and assets, the Company Board determined that such
transactions, if successfully carried to completion, were not likely to
provide value to the Company's stockholders greater than that provided by
the Offer and the Merger.
4. The Board's review of strategic alternatives to the Offer and the Merger
not involving a sale of the Company to a third party, including a
recapitalization, share repurchases, acquisitions and dispositions of
certain assets, and the Company Board's belief, based on numerous
factors, including presentations by PwCS and senior management of the
Company, that none of such alternatives, if successfully carried to
completion, was likely to provide greater value to the Company's
stockholders than that provided by the Offer and the Merger.
5. Historical market prices and trading data relating to the Company's
shares of common stock, including the fact that the consideration of
$13.50 per share to be received by the Company's stockholders pursuant to
the Offer and the Merger represents (a) a premium of approximately 39%
over the reported closing price of $9.69 per share on the New York Stock
Exchange ("NYSE") on February 26, 1999, the last full trading day
preceding the date of the meeting held on March 1, 1999.
6. The arms-length negotiations between representatives of the Company and
Parent with respect to the consideration and other terms of the Merger
Agreement, and the Company Board's belief that $13.50 per share
represents the highest per share consideration that could be negotiated
with Parent.
7. The fact that the structure of the Offer and the Merger provides for a
cash tender offer for all shares to be followed by a second-step merger
for the same consideration, thereby enabling the Company's stockholders
to obtain cash for their shares at the earliest possible time.
8. The fact that the Merger Agreement permits the Company to provide access
and furnish information to, and participate in discussions or
negotiations with, third parties in response to a Superior Proposal if
the Company Board determines in good faith, after receiving formal advice
from its financial advisor and outside counsel, that taking such action
is reasonably necessary for the Company Board to comply with its
fiduciary duties to the Company's stockholders under applicable law.
14
<PAGE>
9. The fact that the Company Board is permitted, upon payment to Parent of
a $3 million termination fee, to terminate the Merger Agreement if prior
to the purchase of shares pursuant to the Offer, the Company Board has
(a) withdrawn, modified or changed in a manner adverse to Parent, its
approval or recommendation of the Offer, the Merger Agreement or the
Merger in order to approve and permit the Company to execute an agreement
relating to a Superior Proposal and (b) determined in good faith, after
consultation with independent legal counsel, that the failure to take
such action would be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law. The Company Board noted that
termination fees are customary in transactions of this type and the
Company Board did not believe that the termination fee provision would
deter a more attractive offer for the Company in the event another third
party was interested in acquiring the Company, especially in view of the
process conducted by the Company in exploring strategic alternatives.
10. The other terms and conditions of the Merger Agreement, including the
fact that the obligations of Parent and Purchaser to consummate the
Offer and the Merger are not conditioned upon financing and are subject
to relatively few conditions.
11. The Company Board was aware that, pursuant to the Merger Agreement,
Parent and Purchaser are required to honor all employment and severance
agreements and arrangements with employees and former employees of the
Company, and to provide the Company's employees who continue in the full
time employment of the surviving corporation with employee benefits that
are no less favorable in the aggregate than those provided to such
employees prior to the date of execution of the Merger Agreement.
The foregoing discussion of the information and factors considered by the
Company Board is not intended to be exhaustive, but includes the material
factors considered by the Company Board. In view of the variety of factors
considered in connection with its evaluation of the Offer and the Merger, the
Board did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination and recommendation. In addition, individual directors may have
given differing weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
PwCS was retained, pursuant to the terms of a letter agreement, dated as
of August 20, 1998 (the "Letter Agreement"), to serve as the Company's
financial advisor in connection with its assessment of options available to the
Company to increase stockholder value and engage in a potential Transaction
(defined as a sale of all or any part of the Company or its divisions or
affiliated companies by means of a merger, consolidation, reorganization,
spin-off, recapitalization or restructuring, joint venture, tender or exchange
offer, purchase or sale of stock or assets, or other similar transaction or
series of transactions). PwCS also agreed to render an opinion as to the
fairness of the financial consideration to be received by stockholders of the
Company or the Company, as the case may be, in a Transaction.
The Company agreed to pay PwCS a fee of $200,000 in cash as compensation
for their fairness opinion, of which $50,000 was payable to PwCS upon the
Company's providing PwCS with a written request for the opinion, and an
additional $50,000 was payable at the time PwCS informed the Company that they
were prepared to render the opinion and the balance payable when the opinion
was delivered to the Company in writing. The Company also agreed to pay PwCS a
fee ("Advisory Fee"), in connection with a Transaction equal to 1% of the
Aggregate Consideration (as defined below) up to $70,000,000 plus 2% of the
Aggregate Consideration above $70,000,000; provided, however, that if such
Transaction involves the disposition (or other form of transaction within the
definition of Transaction) only of the Company's Telemetry Division, the
Advisory Fee shall equal 1% of the Aggregate Consideration up to $45,000,000
plus 2% of the Aggregate Consideration above $45,000,000. The minimum Advisory
Fee paid to PwCS upon the closing of a Transaction will be $500,000.
"Aggregate Consideration" includes:
(i) The total consideration received or to be received by the Company,
its stockholders and its holders of equity-linked securities, cash,
loans, securities (valued as set forth in
15
<PAGE>
subparagraph (iv) below), real and personal property (at its fair
market value) any distributions from the date of the Letter
Agreement to the closing of the Transaction and the total amount of
funded debt (including capital leases) assumed or taken subject to.
(ii) If a portion of such consideration includes future contingent
payments, whether pursuant to earn-outs, hold-backs or otherwise,
Aggregate Consideration will include the maximum amount of such
payments which, in any event, will be valued immediately prior to
the closing and included in Aggregate Consideration. If there is no
maximum or if the parties cannot agree on a value, Aggregate
Consideration will be determined in accordance with the last
sentence of subparagraph (iv) below.
(iii) The value of any contracts for property or services entered into
by the Company with the other party to the Transaction, including,
without limitation, any management, consulting and non-compete
agreements, determined, if necessary, in accordance with the last
sentence of subparagraph (iv) below, it being understood that such
value shall be determined at the closing but take into account
reasonable costs incurred by the Company in meeting its affirmative
obligations under such agreements.
(iv) If the Aggregate Consideration for the Transaction includes
securities, the value of such securities (whether debt or equity)
will be (if there is a public trading market therefor) the average
of the last sales prices for the five trading days immediately
preceding the closing of the Transaction and the five trading days
immediately following the closing of the Transaction (or if the
securities are not traded until the closing of the Transaction, for
the twenty trading days following the date of such closing), or (in
the absence of a public trading market therefor) the fair market
value thereof as the Company and PwCS agree on the day prior to the
closing. However, if the parties are unable to agree upon a fair
market value for such securities (or any other consideration valued
pursuant to subparagraphs (i) through (iv)), then the parties
together will select an investment banking firm respected in the
merger and acquisition field to determine a value.
Based on the value of the transactions contemplated by the Offer and the
Merger, the fees payable to PwCS upon consummation of the Offer will amount to
approximately $946,000 (which amount includes $50,000 paid to PwCS as a
retainer fee and $200,000 paid in connection with the compensation for PwCS's
written fairness opinion).
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person
to make solicitations or recommendations to security holders on its behalf
concerning the offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the extent currently known to the Company, no transactions in the
Shares have been effected during the past 60 days by the Company or, to the
best of the Company's knowledge, by any executive officer, director, affiliate
or Subsidiary of the Company.
(b) To the extent currently known to the Company, each executive officer,
director, affiliate or subsidiary of the Company currently intends to tender,
pursuant to the Offer, all Shares which are held of record or beneficially
owned by such person (other than options which are subject to cash-out pursuant
to the Merger Agreement).
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 negotiations 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.
16
<PAGE>
(b) Except as described in Item 3(b) or 4 above (the provisions of which
are hereby incorporated herein by reference), 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 Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Section 203 of the Delaware General Corporation Law. Section 203 of the
DGCL regulates certain business combinations, including mergers, of a Delaware
corporation, such as the Company, with a person that has, individually or with
or through its affiliates or associates, acquired, or obtained the right to
acquire, beneficial ownership of 20% or more of the outstanding voting stock of
such corporation. Since the Company Board has approved the Merger Agreement,
the Offer and the Merger, Section 203 of the DGCL will not apply to the Offer
and the Merger.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 99.1 Confidentiality Agreement, dated as of October 8, 1998 by and
among Parent and the Company.
Exhibit 99.2 Agreement and Plan of Merger, dated as of March 1, 1998, by
and among Parent, Purchaser and the Company.
Exhibit 99.3 Tender Agreement, dated as of March 1, 1999, among Parent,
Purchaser, Steel Partners II, Sandera Partners, L.P. and
Newcastle Partners, L.P.
Exhibit 99.4 Form of Retention Agreement between the Company and certain
key employees.
Exhibit 99.5 Form of Retention Agreement between the Company and certain
key employees employed in Turkey.
Exhibit 99.6 Form of Retention Agreement between the Company and certain
key financial employees.
Exhibit 99.7 The Company's Information Statement pursuant to Section 14(f)
of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder(Annex A hereto).*
Exhibit 99.8 Copy of Letter to Stockholders, dated March 5, 1999.*
Exhibit 99.9 Text of Press Release issued by the Company, dated March 1,
1999 (incorporated herein by reference to Exhibit 2 to the
Company's Current Report on Form 8-K dated March 1, 1999 filed
by the Company with the Commission on March 2, 1999).
Exhibit 99.10 Opinion of PricewaterhouseCoopers Securities, LLC dated March
1, 1999 (Annex B hereto).*
- ----------
* Included in materials being distributed to stockholders of the Company
with this Schedule 14D-9.
17
<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.
AYDIN CORPORATION
By: /s/ Gene S. Schneyer
-------------------------------
Gene S. Schneyer
Vice President, Secretary and
General Counsel
Dated: March 5, 1999
18
<PAGE>
AYDIN CORPORATION
700 Dresher Road
P.O. Box 349
Horsham, Pennsylvania 19044
PERSONAL AND CONFIDENTIAL
October 8, 1998
L-3 Communications Corporation
600 Third Avenue
New York, NY 10016
Gentlemen:
1. In connection with your consideration of a possible transaction with Aydin
Corporation (the "Company"), you have requested information concerning the
Company. As a condition to you being furnished such information, you agree to
treat any information (whether written or oral) concerning the Company (whether
prepared by the Company, its advisors or otherwise) which is furnished to you
by or on behalf of the Company or its subsidiaries or by its or their
directors, officers, employees, representatives (including financial advisors,
attorneys or accountants) or agents (collectively, "Representatives") to you
and your Representatives (herein collectively referred to as the "Evaluation
Material") in accordance with the provisions of this letter and to take or
abstain from taking certain other actions herein set forth. As used herein, the
term "your Representatives" means those of your and your subsidiaries'
directors, officers, employees, representatives (including financial advisors,
attorneys and accountants) or agents who are provided or informed of the
contents of Evaluation Material on your behalf or otherwise act on your behalf
in connection with a possible transaction between you and the Company, and, in
the case of your or your subsidiaries' representatives (including financial
advisors, attorneys and accountants) or agents, means solely the individual
directors, partners, officers or employees actually provided or informed of the
contents of Evaluation Material or acting in connection with the possible
transaction. The term "Evaluation Material" does not include information which
(i) is already in your possession (other than information provided to you or
your Representatives by the
-1-
<PAGE>
Company or its Representatives) provided that such information is not known by
you to be subject to another confidentiality agreement with or other obligation
of secrecy to the Company or another party, or (ii) becomes generally available
to the public other than as a result of a disclosure by you or your
Representatives (but only with respect to the period after which such
information becomes publicly available), or (iii) becomes available to you on a
non-confidential basis from a source other than the Company or its
Representatives, provided that such source is not known by you, after due
inquiry, to be bound by a confidentiality agreement with or other obligation of
secrecy to the Company or its Representatives.
2. You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible transaction between the Company and you.
Except as required by law, you agree that such information will be kept
confidential by you and your Representatives, and that you and your
Representatives will not disclose in any manner whatsoever such information or
the fact that you have received such information; provided, however, that (i)
any of such information may be disclosed to your directors, officers and
employees and Representatives who need to know such information for the purpose
of evaluating any such possible transaction between the Company and you (it
being understood that such directors, officers, employees and Representatives
shall be informed by you of the confidential nature of such information and
shall agree to treat such information confidentially), and (ii) any disclosure
of such information may be made to which the Company consents in writing. You
agree that you will be responsible for any breach of this letter by any of your
Representatives, except that you will not be responsible for any such breach
arising from (1) a director, officer or employee of Lehman Brothers Holdings
Inc. or any of its subsidiaries or affiliates conveying information to or
instigating action by Lehman Brothers Holdings Inc. or any of its subsidiaries
or affiliates, (2) a director, officer or employee of Lockheed Martin
Corporation conveying information to or instigating action by Lockheed Martin
Corporation or any of its subsidiaries or affiliates, or (3) any director,
partner, officer or employee of any of your Representatives (including
financial advisors, attorneys or accountants) or agents conveying information
to or instigating action by their employer or their employer's subsidiaries or
affiliates.
3. You hereby acknowledge that you are aware, and that you will advise such
directors, officers, employees and representatives who are informed as to the
matters which are the subject of this letter, that the United States securities
laws prohibit any person who has received from an issuer material, non-public
information concerning the matters which are the subject of this letter from
purchasing or selling securities of such issuer or from communicating such
information to any other person under
-2-
<PAGE>
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
4. You hereby agree that at no time shall you or your Representatives contact
any officers or employees of the Company in connection with the possible
transaction with the Company other than the officers and employees of the
Company designated by the Company for that purpose.
5. In addition, without the prior written consent of the Company, except as
required by law, you will not, and will direct your Representatives not to,
disclose to any person either the fact that discussions or negotiations are
taking place concerning a possible transaction between the Company and you or
any of the terms, conditions or other facts with respect to any such possible
transaction, including the status thereof.
6. In the event that you or any of your Representatives are requested or
required (by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or any informal or formal
investigation by any government or governmental agency or authority) to
disclose any of the Evaluation Material or any of the other information
referred to in this letter, you will notify the Company promptly in writing so
that the Company may seek a protective order or other appropriate remedy or, in
the Company's sole discretion, waive compliance with the terms of this letter.
You agree not to oppose any action by the Company to obtain such protective
order or other remedy. Irrespective of whether such protective order or other
remedy is obtained or the Company waives compliance with the terms of this
letter, you agree that you and your Representatives will furnish only that
portion of the Evaluation Material or other information which you are advised
by counsel is legally required to be furnished.
7. You hereby acknowledge that the Evaluation Material is being furnished to
you in consideration of the agreement that prior to the earlier of (i) the
second anniversary of the date of this letter and (ii) the execution by you and
the Company of a definitive and binding agreement relating to a possible
transaction (the "Period"), neither you nor any of your Representatives,
without the prior written consent of the Company, will, in any manner, whether
publicly or otherwise, directly or indirectly (nor will you or any of your
Representatives in any way assist, finance, influence or encourage any other
person or entity, whether publicly or otherwise, directly or indirectly to),
initiate, make, effect, cause or seek, offer or propose to initiate or
participate in or take a position with respect to: (i) any acquisition of any
securities or assets of the Company or any of its affiliates or beneficial
ownership (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) thereof; (ii) any tender or exchange offer, merger or
-3-
<PAGE>
other business combination involving the Company or any of its affiliates;
(iii) any sale of assets, recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or
any of its affiliates; (iv) any "solicitation" of "proxies" (as such terms are
used in the rules of the Securities and Exchange Commission) or consents which
relates in any way to any shares of Common Stock or other securities of the
Company, whether before or after the formal commencement of any such
solicitation; (v) advising or influencing any person or entity with respect to
the voting of, or the giving or withholding of any consents with respect to,
any shares of Common Stock or other securities of the Company; (vi) calling, or
seeking to call, a meeting of the Company's shareholders or executing any
written consent or initiating or continuing any shareholder proposal for action
by shareholders of the Company; (vii) otherwise acting, alone or in concert
with others, to seek to acquire control of the Company or influence the Board,
management or policies of the Company; (viii) bringing any action or otherwise
acting to contest the validity of this letter or seeking a release of the
restrictions contained herein; (ix) any formation of a "group" within the
meaning of Section 13(d)(3) or Section 14(d)(2) of, or Rule 13d-5 under, the
1934 Act, with respect to securities of the Company or its affiliates; (x) any
action which would at any time require the Company or any of its affiliates to
make a public announcement regarding any of the foregoing; (xi) any disclosure
of any intention, plan or arrangement inconsistent with any of the foregoing or
(xii) any discussions, arrangements, understandings, agreements or proposals
with any person or entity with respect to any of the foregoing. You also agree
that, during the Period, neither you nor any of your Representatives will
request the Company or any of its Representatives, directly or indirectly, to
amend or waive any provision of this paragraph (including this sentence). If at
the time of this letter you are engaged in any of the foregoing, you agree to
promptly cease or withdraw from any such action.
8. You also agree that the Company shall be entitled to specific performance or
other equitable relief, including injunction, in the event of any breach or
threatened breach of the provisions of this letter and that you shall not
oppose the granting of such relief. Such remedy shall not be deemed to be the
exclusive remedy for a breach of this letter but shall be in addition to all
other remedies at law or in equity.
9. You understand that (a) the Company shall be free to conduct the process
relating to the consideration of a possible transaction (including, without
limitation, by negotiation with any prospective buyer and entering into a
definitive agreement relating to a possible transaction without prior notice to
you or any other person) and (b) any procedures established with respect to
such possible transaction may be changed at any time without notice to you or
any other person and you agree to be bound by
-4-
<PAGE>
such procedures.
10. Although the Company has endeavored to include in the Evaluation Material
information known to it which it believes to be relevant for the purpose of
your investigation, you understand that neither the Company nor any of its
Representatives has made or makes any representation or warranty as to the
accuracy or completeness of the Evaluation Material. You agree that neither the
Company nor its Representatives shall have any liability to you or any of your
Representatives resulting from the use of the Evaluation Material.
11. Immediately upon the Company's request, you shall promptly redeliver to the
Company all written Evaluation Material and any other written material
containing or reflecting any information in the Evaluation Material, including
any summaries, analyses or extracts thereof (whether prepared by the Company,
its advisors or otherwise), and will not retain any copies, extracts or other
reproductions in whole or in part of such written material. All documents,
memoranda, notes and other writings whatsoever prepared by you or your
Representatives based on the information in the Evaluation Material shall be
destroyed, and such destruction shall be certified in writing to the Company by
your authorized officer supervising such destruction. All information contained
in any documents returned to the Company or destroyed, and any oral information
provided to you or your Representatives hereunder, will continue to be subject
to this letter.
12. You agree that unless and until a definitive agreement between the Company
and you with respect to any transaction referred to in the first paragraph of
this letter has been executed and delivered, neither the Company nor you will
be under any legal obligation of any kind whatsoever with respect to such a
transaction by virtue of this or any written or oral expression with respect to
such a transaction by the Company or any of its Representatives except, in the
case of this letter, for the matters specifically agreed to herein.
13. Unless the term of an obligation is otherwise specifically stated herein,
all of the obligations hereunder shall terminate two years following the date
first set forth above.
14. This letter shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Pennsylvania, City of Philadelphia, without regard
to the principles of conflicts of laws thereof. It is further agreed that any
suit, action or proceeding arising under or relating to this letter shall be
brought either in the United States District Court located in, or a state court
located in, the State of Delaware and you hereby (a) consent to the
jurisdiction of any such court, (b) agree to service of process in any such
suit and agree that service of any process, summons, notice or document by U.S.
registered or
-5-
<PAGE>
certified mail to the address set forth above shall be effective service of
process for any suit, action or proceeding brought against you in such court,
and (c) agree that any such court will be the proper and convenient forum for
any such suit, action or proceeding.
15. No modifications of this letter or waiver of the terms and conditions
hereof will be binding upon you or the Company, unless executed in writing by
each of you and the Company.
This letter shall inure to the benefit of and be binding upon our respective
successors and assigns; provided, however, that neither this letter nor any of
the rights, interests or obligations hereunder shall be assigned by either you
or the Company without the prior written consent of the other party.
Very truly yours,
Aydin Corporation
By: /s/ I. Gary Bard
---------------------------------
Name: I. Gary Bard
Title: Chief Executive Officer
Confirmed and Agreed to:
L-3 Communications Corporation
By: /s/ Christopher C. Cambria
---------------------------------
Name:Christopher C. Cambria
Title:Vice President, Secretary and
General Counsel
Date: 10/9/98
-------------------------------
-6-
<PAGE>
AGREEMENT AND PLAN OF MERGER
by and among
L-3 COMMUNICATIONS CORPORATION,
ANGEL ACQUISITION CORPORATION
and
AYDIN CORPORATION
March 1, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER AND MERGER..................................................1
Section 1.1 The Offer................................................1
Section 1.2 Company Actions..........................................3
Section 1.3 Directors................................................4
Section 1.4 The Merger...............................................5
Section 1.5 Effective Time...........................................6
Section 1.6 Closing..................................................6
Section 1.7 Directors and Officers of the Surviving Corporation......7
Section 1.8 Stockholders' Meeting....................................7
Section 1.9 Merger Without Meeting of Stockholders...................7
ARTICLE II
CONVERSION OF SECURITIES..............................................8
Section 2.1 Conversion of Capital Stock..............................8
Section 2.2 Exchange of Certificates.................................8
Section 2.3 Lost Certificates.......................................10
Section 2.4 Dissenting Shares.......................................10
Section 2.5 Company Option Plans....................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................11
Section 3.1 Organization............................................11
Section 3.2 Capitalization..........................................11
Section 3.3 Authorization; Validity of Agreement; Company Action....12
Section 3.4 Consents and Approvals; No Violations...................13
Section 3.5 SEC Reports and Financial Statements....................14
Section 3.6 No Undisclosed Liabilities..............................14
Section 3.7 Absence of Certain Changes..............................14
Section 3.8 Employee Benefit Plans; ERISA...........................15
Section 3.9 Litigation..............................................17
Section 3.10 No Default; Compliance with Applicable Laws............17
Section 3.11 Taxes..................................................17
Section 3.12 Real Property..........................................18
Section 3.13 Environmental Matters..................................18
Section 3.14 Information in Schedule 14D-1..........................19
i
<PAGE>
Section 3.15 State Takeover Laws....................................19
Section 3.16 Voting Requirements....................................19
Section 3.17 Year 2000..............................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE PURCHASER...........................................20
Section 4.1 Organization............................................20
Section 4.2 Authorization; Validity of Agreement; Necessary Action..20
Section 4.3 Consents and Approvals; No Violations...................21
Section 4.4 Information in Proxy Statement; Schedule 14D-9..........22
Section 4.5 Financing...............................................22
Section 4.6 Purchaser's Operations..................................22
Section 4.7 No Recourse.............................................22
ARTICLE V
COVENANTS............................................................22
Section 5.1 Interim Operations of the Company.......................22
Section 5.2 Approvals and Consents; Cooperation.....................25
Section 5.3 Access to Information...................................26
Section 5.4 Employee Benefits.......................................26
Section 5.5 No Solicitation.........................................27
Section 5.6 Brokers or Finders......................................28
Section 5.7 Publicity...............................................28
Section 5.8 Notification of Certain Matters.........................28
Section 5.9 Directors' and Officers' Insurance and Indemnification..29
Section 5.10 Stockholder Litigation.................................30
Section 5.11 Further Assurances.....................................30
Section 5.12 State Takeover Statutes................................31
ARTICLE VI
CONDITIONS...........................................................31
Section 6.1 Conditions to Each Party's
Obligation To Effect the Merger.........................31
ARTICLE VII
TERMINATION..........................................................32
Section 7.1 Termination.............................................32
Section 7.2 Effect of Termination...................................34
Section 7.3 Termination Fee.........................................34
ii
<PAGE>
ARTICLE VIII
MISCELLANEOUS........................................................35
Section 8.1 Amendment and Modification..............................35
Section 8.2 Nonsurvival of Representations and Warranties...........35
Section 8.3 Notices.................................................35
Section 8.5 Interpretation..........................................37
Section 8.6 Counterparts............................................37
Section 8.7 Entire Agreement; Third Party Beneficiaries.............37
Section 8.8 Severability............................................37
Section 8.9 Governing Law...........................................38
Section 8.10 Jurisdiction...........................................38
Section 8.11 Assignment.............................................38
Section 8.12 Guarantee..............................................38
ANNEX A
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 1, 1999 (the
"Agreement"), by and among L-3 Communications Corporation, a Delaware
corporation ("Parent"), Angel Acquisition Corporation, a Delaware corporation
and a direct, wholly owned subsidiary of Parent (the "Purchaser"), and Aydin
Corporation, a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, the
Purchaser and the Company each approved the acquisition of the Company on the
terms and subject to the conditions set forth herein;
WHEREAS, as a first step in the acquisition, the
Company and Parent each desire that Parent cause Purchaser to commence an offer
(the "Offer") to purchase all of the issued and outstanding shares of common
stock, $1.00 par value, of the Company (the "Shares"), on the terms and subject
to the conditions set forth in this Agreement and the Offer Documents (as
defined below) and the Board of Directors of the Company (the "Company Board")
has unanimously approved the Offer and has determined to recommend that the
Company's stockholders accept the Offer and tender their Shares pursuant
thereto;
WHEREAS, to complete the acquisition, the respective
Boards of Directors of Parent, Purchaser and the Company have approved the
merger of Purchaser with and into the Company, wherein each issued and
outstanding Share not owned directly or indirectly by Parent, Purchaser or the
Company will be converted into the right to receive the Merger Consideration (as
defined below) on the terms and subject to the conditions of this Agreement (the
"Merger"); and
WHEREAS, the parties desire to make certain
representations, warranties and covenants in connection with the Merger and the
Offer and also to prescribe various conditions to the Merger and the Offer.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. (a) Subject to the terms and conditions
of this Agreement, as promptly as practicable (but in no event later than five
business days after the public announcement of the execution hereof), the
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) the Offer to purchase for
cash all of the issued and outstanding Shares, at a price of $13.50 per Share,
net to the seller in cash (such price, or such higher price per Share as may be
paid in the Offer, being referred to herein as
<PAGE>
the "Offer Price"). The Offer shall be subject to there being validly tendered
and not withdrawn prior to the expiration of the Offer, at least a majority of
the Shares outstanding on a fully diluted basis as of the expiration of the
Offer (the "Minimum Condition") and to the other conditions set forth in Annex A
hereto (including the Minimum Condition, herein referred to as the "Offer
Conditions"). The Purchaser shall, subject to the terms of this Agreement,
including the prior satisfaction or waiver (except that the Minimum Condition
may not be waived without the consent of the Company) of the Offer Conditions,
accept for payment and pay for any Shares tendered and not withdrawn pursuant to
the Offer as soon as possible after the expiration thereof. The Offer shall be
made by means of an offer to purchase (the "Offer to Purchase") containing the
Offer terms set forth in this Agreement. The Purchaser expressly reserves the
right, in its sole discretion, to waive any such condition and make any other
changes in the terms and conditions of the Offer not inconsistent with the
provisions of this Agreement, provided that, the Purchaser shall not amend or
waive the Minimum Condition and shall not decrease the Offer Price or decrease
the number of Shares sought, or amend any other condition of the Offer in any
manner adverse to the holders of the Shares without the prior written consent of
the Company (such consent to be authorized by the Company Board or a duly
authorized committee thereof). Notwithstanding the foregoing, the Purchaser
shall, and Parent agrees to cause the Purchaser to, extend the Offer at any time
up to May 10, 1999 for one or more periods of not more than 10 business days,
or, if longer, 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, if at the initial expiration date of the Offer,
or any extension thereof, any condition to the Offer (other than the Minimum
Condition) is not satisfied or waived. In addition, the Offer Price may be
increased and the Offer may be extended to the extent required by law in
connection with such increase in each case without the consent of the Company.
Subject to the foregoing, it is agreed that the Offer Conditions are for the
benefit of the Purchaser and may be asserted by the Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by the Purchaser or Parent not inconsistent with the terms hereof) or,
except with respect to the Minimum Condition, may be waived by the Purchaser, in
whole or in part at any time and from time to time, in its sole discretion.
(b) As soon as reasonably practicable on the date the
Offer is commenced, Parent and the Purchaser shall file with the Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
and summary advertisement (collectively, together with any amendments and
supplements thereto, the "Offer Documents"). The Offer Documents will comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, shall not 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 were made, not misleading, except that no
representation is made by Parent or the Purchaser with respect to information
supplied by the Company for inclusion in the Offer Documents. Each of Parent and
the Purchaser further agrees to take all steps necessary to cause the Offer
Documents to be filed with the SEC and to be
-2-
<PAGE>
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of Parent and the Purchaser, on the one
hand, and the Company, on the other hand, agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false and misleading in any material respect and the
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given the
opportunity to review the initial Schedule 14D-1 before it is filed with the
SEC. In addition, Parent and the Purchaser agree to provide the Company and its
counsel in writing with any comments or other communications that Parent, the
Purchaser or their counsel may receive from time to time from the SEC or its
staff with respect to the Offer Documents promptly after the receipt of such
comments or other communications.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to
the Offer and represents that (i) the Company Board, at a meeting duly called
and held, has, subject to the terms and conditions set forth herein, unanimously
(A) determined this Agreement and the transactions contemplated hereby,
including the Offer and the Merger (collectively, the "Transactions") are fair
to and in the best interests of the holders of the Shares and approved the
Transactions, and (B) declared this Agreement and the Merger advisable and
resolved to recommend that the stockholders of the Company accept the Offer,
tender their Shares thereunder to the Purchaser and approve and adopt this
Agreement and the Merger and (ii) PricewaterhouseCoopers Securities LLC (the
"Financial Advisor") has delivered to the Company Board its written opinion (or
oral opinion to be confirmed in writing) that the consideration to be received
by holders of Shares pursuant to the Offer and the Merger is fair from a
financial point of view. The Company has been authorized by the Financial
Advisor to permit, subject to prior review and consent by such Financial Advisor
(such consent not to be unreasonably withheld), the inclusion of such fairness
opinion (or a reference thereto) in the Offer Documents and in the Schedule
14D-9 referred to below and the Proxy Statement referred to in Section 1.8. The
Company hereby consents to the inclusion in the Offer Documents of the
recommendations of the Company Board described in this Section 1.2(a). The
Company represents that the actions set forth in this Section 1.2(a) and all
other actions it has taken in connection therewith are, assuming that Parent and
its affiliates do not own any Shares, sufficient to render the relevant
provisions of Section 203 of the Delaware General Corporation Law (the "DGCL")
inapplicable to the Offer, the Merger and the Tender Agreements (as defined in
Section 8.4(b)).
(b) Concurrently with the commencement of the Offer,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-9") which shall contain the
recommendation referred to in clause (B) of Section 1.2(a) hereof, provided,
that in the event of a Superior Proposal (as defined in Section 5.5) prior to
such filing, the Company shall not be required to make such filing with such
recommendations if a majority of the Company
-3-
<PAGE>
Board determines in good faith, after receiving advice from its financial
advisor and outside counsel, that making such filing would constitute a breach
of the fiduciary duties of the Company Board under applicable law. The Schedule
14D-9 will comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, shall not 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 were made, not
misleading, except that no representation is made by the Company with respect to
information supplied by Parent or the Purchaser in writing for inclusion in the
Offer Documents. The Company further agrees to take all steps necessary to cause
the Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Each of the Company, on the one hand, and Parent and the
Purchaser, on the other hand, agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall
have become false and misleading in any material respect and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and to be disseminated to holders of the Shares, in
each case as and to the extent required by applicable federal securities laws.
Parent and its counsel shall be given the opportunity to review the initial
Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees
to provide Parent, the Purchaser and their counsel in writing with any comments
or other communications that the Company or its counsel may receive from time to
time from the SEC or its staff with respect to the Schedule 14D-9 promptly after
the receipt of such comments or other communications.
(c) In connection with the Offer, the Company will
promptly furnish or cause to be furnished to the Purchaser mailing labels,
security position listings and any available listing or computer file containing
the names and addresses of the record holders of the Shares as of a recent date,
and shall furnish the Purchaser with such information and assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to the
stockholders of the Company. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and the Purchaser shall hold in
confidence the information contained in any of such labels and lists and the
additional information referred to in the preceding sentence, will use such
information only in connection with the Offer, and, if this Agreement is
terminated, will upon request of the Company, deliver or cause to be delivered
to the Company all copies of such information then in its possession or the
possession of its agents or representatives.
Section 1.3 Directors.
(a) Promptly upon the purchase of and payment for
Shares by Parent or any of its subsidiaries which represent at least a majority
of the outstanding Shares (on a fully diluted basis), and from time to time
thereafter, the Purchaser shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as is equal
to the product of the total number of directors on such Board (giving effect to
the directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares
-4-
<PAGE>
beneficially owned by the Purchaser, Parent and any of their affiliates bears to
the total number of Shares then outstanding (such number being the "Board
Percentage"). The Company shall, upon request of the Purchaser, cause
Purchaser's designees to satisfy the Board Percentage, including without
limitation increasing the size of the Company Board and securing resignations of
such number of its incumbent directors as is necessary to enable Parent's
designees to be so elected to the Company Board, and shall cause Parent's
designees to be so elected. Notwithstanding the foregoing, until the Effective
Time (as defined in Section 1.5 hereof), the Company shall retain as members of
the Company Board at least two directors who are directors of the Company on the
date hereof (the "Company Designees"); provided, that subsequent to the purchase
of and payment for Shares pursuant to the Offer, Parent shall always have its
designees represent at least a majority of the entire Company Board. If at any
time prior to the Effective Time there are less than two Company Designees on
the Company Board, Parent, Purchaser and the Company shall either (i) use their
reasonable efforts to appoint successors who are not affiliated with Parent or
the Purchaser or (ii) permit the resigning Company Designee to appoint his or
her successors in his or her reasonable discretion. The Company will use its
reasonable best efforts to cause persons designated by Purchaser to constitute
the same percentage as is on the Company Board of (i) each Committee of the
Company Board, (ii) each board of directors of each Subsidiary of the Company
and (iii) each committee of each such board, in each case only to the extent
permitted by law. The Company's obligations under this Section 1.3(a) shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Parent or the Purchaser will supply the Company any information with
respect to either of them and their nominees, officers, directors and affiliates
required by Section 14(f) and Rule 14f-1. Upon receipt of such information from
Parent or the Purchaser, the Company shall include in the Schedule 14D-9 (as an
annex or otherwise) the information required by Section 14(f) and Rule 14f-1 as
is necessary to enable Parent's designees to be elected to the Company Board.
(b) From and after the time, if any, that Parent's
designees constitute a majority of the Company Board, any amendment of this
Agreement, any termination of this Agreement by the Company, any extension of
time for performance of any of the obligations of Parent or the Purchaser
hereunder, any waiver of any condition or any of the Company's rights hereunder
or other action by the Company hereunder may be effected only by the action of a
majority of the directors of the Company then in office who either were
directors of the Company on the date hereof or are not affiliated with Parent or
the Purchaser, which action shall be deemed to constitute the action of the full
Company Board; provided, that if there shall be no such directors, such actions
may be effected by unanimous vote of the entire Company Board.
Section 1.4 The Merger. Subject to the terms and conditions of
this Agreement, and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.5 hereof), the Company and the Purchaser shall consummate
the Merger pursuant to which (a) the Purchaser shall be merged with and into the
Company and the separate corporate existence of the Purchaser shall thereupon
cease, (b) the Company shall be the successor or surviving corporation in the
Merger (the "Surviving Corporation"). The Surviving Corporation shall possess
all the rights, privileges, powers and franchises and shall be subject to all of
the restrictions, disabilities, duties, debts and obligations of
-5-
<PAGE>
the Company and the Purchaser, all as provided in the DGCL. At Parent's election
(provided that such election shall not adversely affect the ability of the
Company to consummate the transactions contemplated hereby, or cause a delay in
the transactions contemplated hereby, and provided, further, that the Company
shall not be deemed to have breached any of its representations or warranties
herein if and to the extent such breach results from such election), the Merger
may alternatively be structured so that (i) the Company and/or its Subsidiaries
are merged with and into Parent, the Purchaser or any other direct or indirect
subsidiary of Parent or (ii) any direct or indirect subsidiary of Parent other
than Purchaser is merged with and into the Company. In the event of such an
election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election. Pursuant to the Merger, and without
any further action on the part of the Company and the Purchaser, (x) the
Certificate of Incorporation of the Purchaser, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation; provided, however, that Article FIRST of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows: "FIRST: The name of the corporation is L-3 Communications
Aydin Corporation." and, as so amended shall be the Certificate of Incorporation
of the Surviving Corporation until thereafter amended as provided by law and
such Certificate of Incorporation, and (y) the By-laws of the Purchaser, as in
effect immediately prior to the Effective Time, shall be the By-laws of the
Surviving Corporation until thereafter amended as provided by law and such
By-laws. The Merger shall have the effects set forth in the DGCL. Without
limiting the generality of the foregoing and subject thereto, at the Effective
Time all the property, rights, privileges, immunities, powers and franchises of
the Company and the Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and the Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.5 Effective Time. As soon as practicable after
satisfaction of the conditions in Article VI, Parent, the Purchaser and the
Company will cause a certificate of merger in the form required by the DGCL (the
"Certificate of Merger") to be executed and filed on the date of the Closing (as
defined in Section 1.6 hereof) (or on such other date as Parent and the Company
may agree) with the Secretary of State of the State of Delaware (the "Secretary
of State"). The Merger shall become effective on the date on which the
Certificate of Merger has been duly filed with the Secretary of State or such
time as is agreed upon by the parties and specified in the Certificate of
Merger, and such time is hereinafter referred to as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing")
will take place at 10:00 a.m., on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VI hereof (the "Closing Date"), at
the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York, unless another date or place is agreed to in writing by the parties
hereto. The parties realize that time is of the essence to the transactions
contemplated by this Agreement. Each of the parties thus undertakes to use its
reasonable best efforts, either alone or in cooperation with the other parties,
to ensure that the Merger occurs as soon as practicable following the date on
which the Purchaser consummates the Offer.
-6-
<PAGE>
Section 1.7 Directors and Officers of the Surviving
Corporation. The directors and officers of the Purchaser at the Effective Time
shall, from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-laws.
Section 1.8 Stockholders' Meeting.
(a) If required by applicable law in order to
consummate the Merger, the Company, acting through its Board of Directors,
shall, in accordance with applicable law:
(i) duly call, give notice of, convene and
hold a special meeting of its stockholders (the "Special Meeting") as
soon as practicable following the acceptance for payment and purchase
of Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon the approval of the Merger and the
adoption of this Agreement;
(ii) prepare and file with the SEC under the
Exchange Act and the rules and regulations promulgated thereunder a
preliminary proxy or information statement relating to the Merger and
this Agreement and use its reasonable efforts to obtain and furnish the
information required to be included in the Proxy Statement (as
hereinafter defined) and, after consultation with Parent, to respond
promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and to have the Proxy
Statement cleared by the SEC and cause a definitive proxy or
information statement (the "Proxy Statement") to be mailed to its
stockholders;
(iii) use its reasonable efforts to obtain
the necessary approvals of the Merger and this Agreement by its
stockholders; and
(iv) subject to the fiduciary obligations of
the Company Board under applicable law as advised by independent
counsel, include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement and, subject
to the approval of the Financial Advisor, the written opinion of the
Financial Advisor that the consideration to be received by the
stockholders of the Company pursuant to the Offer and the Merger is
fair from a financial point of view.
(b) Parent agrees that it will vote, or cause to be
voted, all of the Shares then owned by it, the Purchaser or any of its other
subsidiaries and affiliates in favor of the approval of the Merger and the
adoption of this Agreement.
Section 1.9 Merger Without Meeting of Stockholders.
Notwithstanding Section 1.8 hereof, in the event that Parent, the Purchaser or
any other subsidiary of Parent shall acquire, together
-7-
<PAGE>
with the Shares owned by Parent, the Purchaser or any other subsidiary of
Parent, at least 90% of the outstanding shares of each class of capital stock of
the Company, pursuant to the Offer or otherwise, the parties hereto agree to
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition, without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Shares or shares of common stock, par value $.01 per share, of the
Purchaser (the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and
outstanding share of Purchaser Common Stock shall be converted into and become
one fully paid and nonassessable share of common stock of the Surviving
Corporation with the result that the Surviving Corporation will be a wholly
owned subsidiary of Parent.
(b) Cancellation of Treasury Stock and Parent-Owned
Stock. All Shares that are owned by the Company as treasury stock and any Shares
owned by Parent, the Purchaser or any other wholly owned Subsidiary (as defined
in Section 8.4 hereof) of Parent shall be canceled and retired and shall cease
to exist and no consideration shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding
Share (other than Shares to be canceled in accordance with Section 2.1(b) and
any Dissenting Shares (if applicable and as defined in Section 2.4 hereof)),
shall be converted into and become the right to receive, the Offer Price,
payable to the holder thereof, without interest (the "Merger Consideration"),
upon surrender of the certificate formerly representing such Share in the manner
provided in Section 2.2, less any required withholding taxes. As of the
Effective Time by virtue of the Merger and without any action on the part of any
holder, all such Shares shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration therefor
upon the surrender of such certificate in accordance with Section 2.2, or to
perfect any appraisal rights that such holder may have pursuant to Section 262
of the DGCL.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or
trust company reasonably acceptable to the Company to act as agent for the
holders of Shares in connection with the Merger (the "Paying Agent") to receive
the funds to which holders of Shares shall become entitled pursuant to Section
2.1(c). Such funds shall be invested by the Paying Agent as directed by Parent
or the Surviving Corporation. Any net profit resulting from, or interest or
income produced
-8-
<PAGE>
by, such investments will be payable to the Surviving Corporation or Parent, as
Parent directs from time to time.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, with the Company using its reasonable best
efforts to cause the paying Agent to do so within three business days
thereafter, the Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"), whose Shares were converted
pursuant to Section 2.1 into the right to receive the Merger Consideration, (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 as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed, and such other documents as may be required pursuant to
the instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate and the Certificate so surrendered shall
forthwith be canceled. If payment of the Merger Consideration is to be made to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Article II, each Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive the
Merger Consideration as contemplated by this Article II. No interest shall be
paid or accrued for the benefit of holders of the Certificates on the Merger
Consideration payable upon the surrender of the Certificates.
(c) Transfer Books; No Further Ownership Rights in
Shares. At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
Shares on the records of the Company. From and after the Effective Time, the
holders of Certificates evidencing ownership of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided for herein or by applicable law. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time
following one year after the Effective Time, the Surviving Corporation shall be
entitled to require the Paying Agent to deliver to it any funds (including any
interest received with respect thereto) which had been made available to the
Paying Agent and which have not been disbursed to holders of Certificates, and
-9-
<PAGE>
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate has not been surrendered prior to the expiration
of the applicable statute of limitations after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration payable
to the holder of such Certificate representing Shares pursuant to this Article
II would otherwise escheat to or become the property of any Governmental Entity
(as hereinafter defined)), any such Merger Consideration in respect of such
Certificate will become the property of the Surviving Corporation, free and
clear of all claims or interest of any individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity (a "Person") previously entitled thereto.
Section 2.3 Lost Certificates. If any Certificate is lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration, in accordance with the provisions of this
Agreement.
Section 2.4 Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such Shares in
accordance with Section 262 of the DGCL (the "Dissenting Shares") shall not be
converted into a right to receive the Merger Consideration, unless such holder
fails to perfect or withdraws or otherwise loses his right to receive payment
for such Dissenting Shares according to the DGCL. If, after the Effective Time,
such holder fails to perfect or withdraws or loses his right to exercise
dissenters' rights, such Shares shall be treated as if they had been converted
as of the Effective Time into a right to receive the Merger Consideration,
without interest thereon.
Section 2.5 Company Option Plans. Parent and the Company shall
take all actions necessary to provide that, effective as of the Effective Time,
(i) each outstanding stock option to purchase Shares (collectively, "Options")
granted under the Company's 1996 Equity Incentive Plan, 1994 Incentive Stock
Option Plan, and 1984 Non-Qualified Stock Option Plan and those non-plan options
referenced in subsection 3.2(iv) of this Agreement, whether or not then
exercisable or vested, shall become fully exercisable and vested, (ii) each
Option that is then outstanding shall be canceled and (iii) in consideration of
such cancellation, and except to the extent that Parent or the Purchaser and the
holder of any such Option otherwise agree, the Company (or at Parent's option,
the Purchaser) shall pay to such holders of Options an amount in respect thereof
equal to the product of (A) the excess, if any, of the Merger Consideration over
the exercise price of each such Option and
-10-
<PAGE>
(B) the number of Shares subject to such Option (such payment to be net of
applicable withholding taxes).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the
Purchaser as follows:
Section 3.1 Organization. Each of the Company and its
Subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate or other power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to have such governmental approvals would not, either individually or in
the aggregate, have a "Company MAE" (as defined in Section 8.4(b). The Company
and each of its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not, either individually or in
the aggregate, have a Company MAE. The Company has delivered to Parent prior to
the execution of this Agreement complete and correct copies of its certificate
of incorporation and by-laws and has made available to Parent the certificate of
incorporation and by-laws (or comparable organizational documents) of each of
its Subsidiaries, in each case as amended to date. Neither the Company nor any
of its Subsidiaries is in violation of any material provision of its Certificate
of Incorporation or by-laws (or comparable organizational documents). Exhibit 21
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997 sets forth a complete list of the Company's active Subsidiaries.
Section 3.2 Capitalization. (a) The authorized capital stock
of the Company consists of 7,500,000 Shares. As of the date hereof, (i)
5,220,936 Shares are issued and outstanding, (ii) 0 Shares are issued and held
in the treasury of the Company, (iii) 421,550 Shares are reserved for issuance
upon exercise of outstanding Options granted under the Company Option Plans (as
hereinafter defined) (iv) 11,000 Shares are reserved for issuance upon exercise
of certain individual stock options granted to employees and directors of the
Company, and (v) 200,000 Shares are reserved for issuance upon exercise of
outstanding warrants to purchase common stock. All the outstanding Shares are,
and all shares which may be issued pursuant to the exercise of outstanding
Options when issued in accordance with the respective terms thereof will be,
duly authorized, validly issued, fully paid and nonassessable. There are no
bonds, debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding. Except (a) as disclosed on
Schedule 3.2, (b) as set forth above, and (c) for the transactions contemplated
by this Agreement, as of the date hereof, (i) there are no shares of capital
stock of the Company authorized, issued or outstanding, (ii) there are no
existing options, warrants, calls, preemptive rights, subscriptions or other
rights,
-11-
<PAGE>
agreements, arrangements or commitments of any character, relating to the issued
or unissued capital stock of the Company or any of its Subsidiaries, obligating
the Company or any of its Subsidiaries to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests, or
obligating the Company or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment, (iii) there are no outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Shares, or capital stock of the Company or any subsidiary
or affiliate of the Company or to provide funds to make any investment (in the
form of a loan, capital contribution or otherwise) in any such subsidiary, other
than those required in the ordinary course of business of such subsidiaries, or
any other entity and (iv) there are no equity equivalents, interests in the
ownership or earnings of the Company or other similar rights.
(b) All the outstanding shares of capital stock of
each Subsidiary have been validly issued and are fully paid and nonassessable
and, except as disclosed on Schedule 3.2, are owned directly or indirectly by
the Company free and clear of all security interests, liens, claims, pledges,
agreements, limitations in voting rights, charges or other encumbrances of any
nature whatsoever ("Liens"). Except as disclosed on Schedule 3.2, no entity in
which the Company owns, directly or indirectly, less than a 50% equity interest
is, individually or when taken together with all such other entities, material
to the business of the Company and its subsidiaries taken as a whole.
(c) There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of the capital stock of the Company or any of the
Subsidiaries. None of the Company or its Subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock of the Company, or any
of its Subsidiaries, respectively, as a result of the transactions contemplated
by this Agreement.
Section 3.3 Authorization; Validity of Agreement; Company
Action. (a) The Company has full corporate power and authority to execute and
deliver this Agreement and, subject, in the case of the Merger, to obtaining the
necessary approval of its stockholders, to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Company of
this Agreement, and the consummation by it of the transactions contemplated
hereby, have been duly authorized by the Company Board and, except for those
actions obtaining the approval of the Merger from its stockholders as
contemplated in Section 1.8, no other corporate action on the part of the
Company is necessary to authorize the execution and delivery by the Company of
this Agreement and the consummation by it of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company, and
assuming due and valid authorization, execution and delivery hereof by the
Parent and the Purchaser), is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
-12-
<PAGE>
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
proceeding therefor may be brought.
(b) The Company Board has approved and taken all
corporate action required to be taken by the Company Board for the consummation
of the transactions contemplated by this Agreement, including the Transactions.
The Company Board has also approved the transactions contemplated by this
Agreement, including the Transactions, for the purposes of rendering the
provisions of Section 203 of the DGCL inapplicable to such transactions and the
Tender Agreements.
Section 3.4 Consents and Approvals; No Violations. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, breach 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, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, (i) the
certificate of incorporation or by-laws of the Company or the comparable
organizational documents of any of its Subsidiaries, (ii) except as disclosed on
Schedule 3.4, any loan or credit agreement, note, bond, mortgage, indenture,
lease or other contract, agreement, instrument, permit, concession, franchise or
license applicable to the Company or any of its Subsidiaries or their respective
properties or assets ("Contracts"), or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any judgment, order or
decree ("Order"), or statute, law, ordinance, rule or regulation ("Law")
applicable to the Company or any of its Subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that,
either individually or in the aggregate, would not have a Company MAE or prevent
or materially delay the consummation of the Offer or the Merger. No Order,
consent, approval, authorization or permit of, or registration, declaration or
filing with, any federal, state, local or foreign government or any court,
administrative or regulatory agency or commission or other governmental
authority, agency or instrumentality (a "Governmental Entity") is required by or
with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby except for (1) the filing of
a premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (2) the filing with the SEC of (A) the Proxy Statement relating to the
Special Meeting as contemplated by Section 1.8 hereof, (B) the Schedule 14D-9,
and (C) such reports under the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated hereby; (3) the filing of
the Certificate of Merger with the Secretary of State and appropriate documents
with the Pennsylvania Securities Commission required to comply with an exemption
from the Pennsylvania Takeover Disclosure Law; and (4) such filings, consents,
approvals, Orders or authorizations the failure of which to be made or obtained
would not, either individually or in the aggregate, have a Company MAE or
prevent or materially delay the consummation of the Offer or the Merger.
-13-
<PAGE>
Section 3.5 SEC Reports and Financial Statements. The Company
has filed with the SEC, and has heretofore made available to Parent true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since December 31, 1996 under the Exchange
Act (as such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents"), each of which (except to the extent
revised or superceded by a subsequently filed Company SEC Document) complied as
to form in all material respects with the requirements of the Exchange Act. As
of their respective dates or, if amended, as of the date of the last such
amendment, the Company SEC Documents, including, without limitation, any
financial statements or schedules included therein did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any forms, reports or other documents with the
SEC pursuant to Section 12 or 15 of the Exchange Act. The financial statements
of the Company (the "Company Financial Statements") included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997
(including the related notes thereto) (the "Company Form 10-K") and in the
quarterly reports on Form 10-Q for the three fiscal quarters occurring since the
Company Form 10-K have been prepared from, and are in accordance with, the books
and records of the Company and its consolidated subsidiaries, comply in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto and subject, in the case of unaudited interim
financial statements, to normal year end adjustments) and fairly present the
consolidated financial position and the consolidated results of operations and
cash flows of the Company and its consolidated Subsidiaries as at the dates
thereof or for the periods presented therein.
Section 3.6 No Undisclosed Liabilities. Except (a) as
disclosed in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "Pre-Signing Company SEC Documents") or on Schedule
3.6 hereto, and (b) for liabilities incurred in the ordinary course of business
and consistent with past practice since September 30, 1998 which would not,
either individually or in the aggregate, have a Company MAE, neither the Company
nor any of its Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) which would be required by
GAAP to be reflected on a consolidated balance sheet of the Company and its
Subsidiaries (including the notes thereto) and could, either individually or in
the aggregate, be reasonably expected to have a Company MAE.
Section 3.7 Absence of Certain Changes. Except as disclosed in
the Pre-Signing Company SEC Documents or on Schedule 3.7 hereto, since September
30, 1998, the Company and its Subsidiaries have conducted their respective
businesses in the ordinary course of business in a manner consistent with past
practice and there has not been (i) any changes in the financial condition,
results of operations, assets, business or operations of the Company or any of
its Subsidiaries that would reasonably likely materially delay or impair the
ability of the Company to effect the closing of the transactions contemplated
hereby or would reasonably be likely to cause a Company MAE,
-14-
<PAGE>
(ii) any condition, event or occurrence, other than such conditions, events or
occurrences which, either individually or in the aggregate, have not had and
would not have a Company MAE, (iii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of the Company or of any of its Subsidiaries;
(iv) any change by the Company or any of its Subsidiaries in accounting
principles or methods, except insofar as may be required by a change in GAAP;
(v) any split, combination or reclassification of any of the Company's 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 the
Company's capital stock; (vi) any change by the Company or any of its
Subsidiaries of any actuarial or other assumption used to calculate funding
obligations with respect to any Company pension plans, or change in the manner
in which contributions to any Company pension plans are made or the basis on
which such contributions are determined; (vii) any damage, destruction or loss
(whether or not covered by insurance) with respect to any assets of the Company
or any of it Subsidiaries, either individually or in the aggregate, in excess of
$1.0 million; (viii) any labor dispute or any labor union organizing activity,
or any actual or threatened strike, work stoppage, slowdown or lockout, or any
material change in its relationship with employees, customers, distributors or
suppliers; (ix) any revaluation by the Company of any of its material assets,
including but not limited to writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business; (x)
any entry by the Company or any of its Subsidiaries into any commitment or
transactions material to the Company and its Subsidiaries taken as a whole other
than in the ordinary course of business; (xi) receipt of any notice of
termination or the occurrence of a default or the breach of any material
Contract; and (xii) any other action which, if it had been taken after the date
hereof, would have required the consent of Parent under Section 5.1 hereof.
Section 3.8 Employee Benefit Plans; ERISA.
(a) Schedule 3.8 hereto sets forth a list of all
employee benefit plans, (including but not limited to plans described in section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or severance, stock, bonus, option, profit sharing or change of
control plans maintained by the Company, any of its Subsidiaries or any trade or
business, whether or not incorporated (an "ERISA Affiliate"), which together
with the Company would be deemed a "single employer" within the meaning of
section 4001(b)(15) of ERISA ("Benefit Plans") and all material employment and
severance agreements with employees of the Company ("Employee Agreements"). True
and complete copies of all Employee Agreements have been delivered to Parent by
the Company.
(b) With respect to each Benefit Plan, the Company
has delivered to Parent a current, accurate and complete copy (or, to the extent
no such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by the Company or its Subsidiaries to their employees concerning
the extent of the benefits provided under a Benefit Plan; and (iv) for the two
most recent years (A) the Form 5500 and attached schedules, (B) audited
-15-
<PAGE>
financial statements, (C) actuarial valuation reports and (D) attorney's
response to an auditor's request for information.
(c) With respect to each Benefit Plan, except as
otherwise disclosed to Parent: (i) if intended to qualify under section 401(a)
or 401(k) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code"), such plan has received a
determination letter from the Internal Revenue Service stating that it so
qualifies and that its trust is exempt from taxation under section 501(a) of the
Code; (ii) such plan has been administered in all material respects in
accordance with its terms and applicable law; (iii) no breaches of fiduciary
duty have occurred which might reasonably be expected to give rise to material
liability on the part of the Company; (iv) no disputes are pending, or, to the
knowledge of the Company, threatened that might reasonably be expected to give
rise to material liability on the part of the Company; (v) no prohibited
transaction (within the meaning of Section 406 of ERISA) or "reportable event"
(as defined in Section 4043 of ERISA) has occurred that might reasonably be
expected to give rise to material liability on the part of the Company; (vi) all
contributions required to be made to such plan as of the date hereof (taking
into account any extensions for the making of such contributions) have been made
in full; and (vii) for each Benefit Plan with respect to which a Form 5500 has
been filed, no material change has occurred with respect to the matters covered
by the most recent Form since the date thereof.
(d) Except as disclosed on Schedule 3.8, no Benefit
Plan is a "multiemployer pension plan," as defined in section 3(37) of ERISA,
nor is any Benefit Plan a plan described in section 4063(a) of ERISA.
(e) Except as disclosed on Schedule 3.8, no liability
under Title IV of ERISA has been incurred by the Company or any ERISA Affiliate
that has not been satisfied in full, and no condition exists that presents a
material risk to the Company or any ERISA Affiliate of incurring a material
liability under such Title. No Benefit Plan has incurred an accumulated funding
deficiency, as defined in section 302 of ERISA or section 312 of the Code,
whether or not waived.
(f) With respect to each Benefit Plan that is a
"welfare plan" (as defined in section 3(1) of ERISA), no such plan provides
medical or death benefits with respect to current or former employees of the
Company or any of its Subsidiaries beyond their termination of employment (other
than to the extent required by applicable law).
(g) Except as set forth in Section 2.5 or as
disclosed on Schedule 3.8, no Benefit Plan exists that would result in the
payment to any present or former employee of the Company or any of its
Subsidiaries of any money or other property or accelerate or provide any other
rights or benefits to any present or former employee of the Company or its
Subsidiaries as a result of the transactions contemplated by this Agreement,
whether or not such payment would constitute a parachute payment within the
meaning of Code section 280G.
-16-
<PAGE>
Section 3.9 Litigation. Except as disclosed in the Pre-Signing
Company SEC Documents with reasonable specificity or on Schedule 3.9 hereto,
there is no suit, action, claim, investigation or proceeding ("Litigation
Matters") pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries or any of their properties or assets, (i)
except for such Litigation Matters as would not, either individually or in the
aggregate, have a Company MAE or (ii) which seeks to delay or prevent the
consummation of the transactions contemplated hereby. Except as disclosed on
Schedule 3.9, neither the Company nor any of its Subsidiaries nor any of their
respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award ("Orders") except for Orders which
have not had and would not have, either individually or in the aggregate, a
Company MAE or prevent or materially delay the consummation of the transactions
contemplated hereby.
Section 3.10 No Default; Compliance with Applicable Laws.
Except as set forth on Schedule 3.10 hereto, the business of the Company and
each of its Subsidiaries is not in conflict with, or in default or violation of,
any term, condition or provision of (i) its respective certificate of
incorporation or bylaws or similar organizational documents, (ii) any Contract
or (iii) any federal, state, local or foreign statute, Law, Order, concession,
grant, franchise, permit or license or other governmental authorization or
approval applicable to the Company or any of its Subsidiaries, excluding from
the foregoing clauses (ii) and (iii), defaults or violations which would not,
either individually or in the aggregate, have a Company MAE. The Company and its
Subsidiaries have all permits, licenses, authorizations, exemptions, orders,
consents, approvals and franchises from governmental and regulatory agencies
required to conduct their respective businesses as now being conducted, except
for such permits, licenses, authorizations, exemptions, orders, consents,
approvals and franchises the absence of which would not, either individually or
in the aggregate, have a Company MAE.
Section 3.11 Taxes. (a) The Company and its Subsidiaries have
(i) duly and timely filed (or there has been filed on their behalf) with the
appropriate governmental authorities all Tax Returns (as defined in Section
3.11(e)) required to be filed by them on or prior to the date hereof, other than
those Tax Returns the failure of which to file would not, either individually or
in the aggregate, have a Company MAE, and such Tax Returns are true, correct and
complete in all material respects, and (ii) duly and timely paid in full or made
provision in accordance with generally accepted accounting principles (or there
has been paid or provision has been made on their behalf) for the payment of all
Taxes (as defined in Section 3.11(e)) shown to be due on such Tax Returns.
(b) Except as set forth on Schedule 3.11 hereto,
there are no ongoing federal, state, local or foreign audits or examinations of
any Tax Return of the Company or its Subsidiaries.
(c) Except as set forth on Schedule 3.11 hereto,
there are no outstanding requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment of any Taxes or
deficiencies against the Company or any of its Subsidiaries, and no power of
attorney granted by either the Company or any of its Subsidiaries with respect
to any Taxes is currently in force.
-17-
<PAGE>
(d) Except as set forth on Schedule 3.11, neither the
Company nor any of its Subsidiaries is a party to any agreement providing for
the allocation or sharing of Taxes.
(e) "Taxes" shall mean any and all taxes, charges,
fees, levies or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding, social
security, occupation, use, service, service use, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States Internal Revenue Service or any taxing authority (domestic or foreign),
including, without limitation, any state, county, local or foreign government or
any subdivision or taxing agency thereof (including a United States possession),
whether computed on a separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (domestic or foreign) with respect to
Taxes.
Section 3.12 Real Property. Except as disclosed on Schedule
3.12, the Company and the Subsidiaries, as the case may be, have good and
marketable title or valid leasehold rights to all real property purported to be
owned by them or used in the conduct of their respective businesses as currently
conducted free and clear of all Liens with only such exceptions as, either
individually or in the aggregate, would not have a Company MAE.
Section 3.13 Environmental Matters. (a) Except as set forth
in the Company SEC Documents or in Schedule 3.13:
(i) the Company has not received any written
communication from any person or entity (including any Governmental
Entity) stating or alleging that it may be a potentially responsible
party under Environmental Law (as defined in Section 3.13(b)) with
respect to any actual or alleged environmental contamination; neither
the Company nor, to the Company's knowledge, any Governmental Entity is
conducting or has conducted any environmental remediation or
environmental investigation which could reasonably be expected to
result in liability for the Company under Environmental Law; and the
Company has not received any request for information under
Environmental Law from any Governmental Entity with respect to any
actual or alleged environmental contamination, except, in each case,
for communications, environmental remediation and investigations and
requests for information which would not, either individually or in the
aggregate, have a Company MAE;
(ii) none of the soil or groundwater beneath
the real property now or formerly (to the Company's knowledge) owned or
operated by the Company or its Subsidiaries contains any Hazardous
Substance (as defined by Environmental Law) in quantities or
concentrations requiring investigation or remediation pursuant to
Environmental
-18-
<PAGE>
Law, except where the presence of any such Hazardous Substance would
not, either individually or in the aggregate, have a Company MAE.
(iii) the Company has not received any
written communication from any person or entity (including any
Governmental Entity) stating or alleging that the Company may have
violated any Environmental Law, or that the Company has caused or
contributed to any environmental contamination that has caused any
property damage or personal injury under Environmental Law, except, in
each case, for statements and allegations of violations and statements
and allegations of responsibility for property damage and personal
injury which would not, either individually or in the aggregate, have a
Company MAE; and
(iv) all underground storage tanks ("UST's")
on property currently owned by the Company comply with applicable
Environmental Law, except for UST's which would not, either
individually or in the aggregate, have a Company MAE.
(b) For purposes of this Section 3.13,
"Environmental Law" means all applicable state, federal and local laws,
regulations and rules, including common law, judgments, decrees and orders
relating to pollution, the preservation of the environment, and the release of
materials into the environment.
Section 3.14 Information in Schedule 14D-1. None of the
information supplied or to be supplied by the Company specifically for inclusion
in the Schedule 14D-1, at the time such document is first published, sent or
given, at the date it is first mailed to the Company's stockholders, will
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.
Section 3.15 State Takeover Laws. The Company has taken all
action to exempt the transactions contemplated by this Agreement from all
applicable "moratorium," "control share," "fair price," "business combination,"
or other anti-takeover laws and regulations of the State of Delaware and,
subject to the last sentence of this Section 3.15, the State of Pennsylvania.
The Pennsylvania Takeover Disclosure Law (the "PTDL") also purports to be
applicable to the transactions contemplated by this Agreement since the Company
has its principal place of business and substantial assets located in
Pennsylvania. To qualify for an exemption under the PTDL, the Purchaser shall be
required to make a Section 8(a) filing with the Pennsylvania Securities
Commission and pay the appropriate filing fee in accordance with the PDTL.
Section 3.16 Voting Requirements. The affirmative vote of the
holders of a majority of the voting power of all outstanding Shares, voting as a
single class, at the Special Meeting to adopt this Agreement is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve and adopt this Agreement and the transactions contemplated hereby in
order to effect the Merger.
-19-
<PAGE>
Section 3.17 Year 2000. All the computer-based systems of the
Company and its Subsidiaries, including its information data bases, accounting
systems and data processing systems, will not be materially adversely affected
by, and will continue to operate in the same manner as such systems currently
operate notwithstanding Year 2000, except where the failure to so operate would
not, either individually or in the aggregate, have a Company MAE. None of the
Intellectual Property or, other assets of the Company and its Subsidiaries used
in their current products will be materially adversely affected by, and each
thereof will continue to operate in the same manner as it currently operates,
notwithstanding Year 2000, except where the failure to so operate would not,
either individually or in the aggregate, have a Company MAE. Notwithstanding the
foregoing, the Company does not represent and warrant that the databases and
systems of its material suppliers will continue to operate in the same manner as
it currently operates notwithstanding Year 2000. As used herein, the term "Year
2000" means the occurrence of or calculation involving the Year 2000 A.D., or
other calendar dates occurring after December 31, 1999.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser jointly and severally represent and
warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and the Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate or
other power and authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not be reasonably
expected to have a material adverse effect on the business, operations, assets,
condition (financial or otherwise) or results of operations of Parent and its
Subsidiaries, taken as a whole, or on the ability of Parent and Purchaser to
perform their respective obligations under this Agreement (any such effect, a
"Parent MAE"). Parent and the Purchaser are duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not, either individually
or in the aggregate, have a Parent MAE.
Section 4.2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent and the Purchaser has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Parent and the
Purchaser of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly authorized by their Boards of Directors and
no corporate action on the part
-20-
<PAGE>
of Parent and the Purchaser is necessary to authorize the execution and delivery
by Parent and the Purchaser of this Agreement and the consummation by them of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and the Purchaser, as the case may be, and, assuming due and
valid authorization, execution and delivery hereof by the Company, is a valid
and binding obligation of each of Parent and the Purchaser, as the case may be,
enforceable against them in accordance with its respective terms, except that
(i) such enforcement may be subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' 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 proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated thereby and compliance with the provisions thereof
will not, (i) conflict with or result in any breach of any provision of the
respective certificate of incorporation or bylaws or similar organizational
documents of Parent, any of its subsidiaries or the Purchaser, (ii) require on
the part of Parent or the Purchaser any filing with, or permit, authorization,
consent or approval of, any Governmental Entity, except as set forth below and
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse effect on
Parent and its Subsidiaries taken as a whole, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent, any of its Subsidiaries or the Purchaser is a party or by which
any of them or any of their properties or assets may be bound or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Parent, any of its Subsidiaries or the Purchaser or any of their properties or
assets, excluding from the foregoing clauses (iii) or (iv) such violations,
breaches or defaults which would not, either individually or in the aggregate,
have a material adverse effect on Parent, its Subsidiaries or the Purchaser
taken as a whole and will not materially impair the ability of Parent or the
Purchaser to consummate the transactions contemplated hereby. No consent,
approval, Order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Parent or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by Parent and Purchaser or the consummation by Parent and Purchaser of the
transactions contemplated hereby, except for (1) the filing of a premerger
notification and report form by Parent under the HSR Act; (2) the filing with
the SEC of (A) the Schedule 14D-1 and (B) such reports under the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby; (3) the filing of the Certificate of Merger with the
Secretary of State and appropriate documents with the relevant authorities of
other states in which Parent is qualified to do business and such filings with
Governmental Entities to satisfy the applicable requirements of state securities
or corporate or "blue sky" laws; (4) such other filings and consents as may be
required under any Environmental Law pertaining to any notification, disclosure
or required approval necessitated by the Merger or the transactions contemplated
by this Agreement; and (5) such
-21-
<PAGE>
consents, approvals, Orders or authorizations the failure of which to be made or
obtained would not, either individually or in the aggregate, have a material
adverse effect on Parent and its Subsidiaries taken as a whole.
Section 4.4 Information in Proxy Statement; Schedule 14D-9.
None of the information supplied by Parent or the Purchaser for inclusion in the
Proxy Statement will, at the date mailed to stockholders and at the time of the
meeting of stockholders to be held in connection with the Merger, or for
inclusion in the Schedule 14D-9 will, at the time first sent or given to the
Company's stockholders 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.
Section 4.5 Financing. Either Parent or the Purchaser has
sufficient funds available (through cash on hand and existing credit
arrangements or otherwise) to purchase all of the Shares to be purchased in the
Offer and to pay all fees and expenses related to the transactions permitted by
this Agreement.
Section 4.6 Purchaser's Operations. The Purchaser has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
Section 4.7 No Recourse. Each of Parent and the Purchaser
agrees, to the fullest extent permitted by law (except with respect to claims of
fraud), that none of the Company, its Subsidiaries or any of their respective
directors, officers, employees, stockholders, affiliates, agents or
representatives shall have any liability or responsibility whatsoever to Parent
or the Purchaser on any basis (including without limitation in contract, tort or
otherwise) based upon any information provided or made available, or statements
made, to Parent or the Purchaser prior to the execution of this Agreement.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company
covenants and agrees that, except (i) as permitted by this Agreement, (ii) as
indicated on Schedule 5.1, or (iii) as agreed in writing by Parent, after the
date hereof, and prior to the time the directors of the Purchaser have been
elected to, and shall constitute a majority of, the Company Board pursuant to
Section 1.3 (the "Appointment Date"):
(a) the business of the Company and its Subsidiaries
shall be conducted only in the ordinary and usual course of business in a manner
consistent with past practice (including payment of accounts payable, collection
of accounts receivable and inventory purchases) and in compliance with
applicable laws and the Company and its Subsidiaries shall each use its
reasonable
-22-
<PAGE>
best efforts to (i) preserve substantially intact the business organization and
assets of the Company and its Subsidiaries, (ii) keep available the services of
the present key officers, employees and consultants of the Company and its
Subsidiaries, (iii) preserve the present relationships of the Company and its
Subsidiaries with customers, suppliers and other persons with which the Company
or any of its Subsidiaries has significant business relations, and (iv) maintain
net cash of the Company and its Subsidiaries of at least $10 million (without
giving effect to any transaction-related fees and expenses of the Financial
Advisor, financial printers and outside counsel not exceeding $1.35 million in
the aggregate) as of the close of business on the date of the expiration of the
Offer;
(b) the Company will not, directly or indirectly,
(i) sell, transfer or pledge or agree to sell, transfer or pledge any Shares or
capital stock of any of its Subsidiaries beneficially owned by it, either
directly or indirectly; (ii) amend its Certificate of Incorporation or By-laws
or similar organizational documents; or (iii) split, combine or reclassify the
outstanding Shares or any outstanding capital stock of any of the Subsidiaries
of the Company;
(c) except as disclosed on Schedule 5.1(c), neither
the Company nor any of its Subsidiaries shall: (i) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to its capital stock; (ii) issue, deliver, sell, pledge, dispose of or encumber
any additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or its Subsidiaries, or
other ownership interest (including stock appreciation rights and phantom
stock), other than shares of Common Stock reserved for issuance on the date
hereof upon the exercise of outstanding Options; (iii) transfer, lease, license,
sell, mortgage, pledge, dispose of, or encumber any material assets, whether
tangible or intangible, other than sales of products in the ordinary and usual
course of business and consistent with past practice; (iv) incur or modify any
indebtedness or other material liability or issue any debt securities; or (v)
redeem, purchase or otherwise acquire directly or indirectly any of its capital
stock or rights in respect thereof;
(d) except as disclosed on Schedule 5.1(d), neither
the Company nor any of its Subsidiaries shall modify, amend or terminate any of
its Contracts or waive, release or assign any material rights or claims, except
in the ordinary course of business and consistent with past practice;
(e) neither the Company nor any of its Subsidiaries
shall permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated except that any such policy may be
replaced with a policy with coverage and on terms and conditions no less
favorable to the Company and its Subsidiaries;
(f) neither the Company nor any of its Subsidiaries
shall (i)acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization or
division thereof or any material assets, assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the material obligations of any other person, other than guarantees of
obligations of wholly-owned
-23-
<PAGE>
Subsidiaries of the Company in the ordinary course of business; (ii) make any
loans, advances or capital contributions to, or investments in, any other
person, other than to wholly owned Subsidiaries of the Company in the ordinary
course of business and consistent with past practice; (iii) make any bid or
proposal, or enter into or amend in any material respect any contract or
agreement other than in ordinary course of business consistent with past
practice, which in any event would either (a) involve aggregate consideration
under such bid, proposal, contract or agreement in excess of $2 million or (b)
be a bid, proposal or renewal at an amount of which the Company would expect
such bid, proposal or renewal to result in a loss thereunder to the Company,
(iv) authorize any single capital expenditure which is in excess of $250,000 or
capital expenditures which are, in the aggregate, in excess of $1.0 million for
the Company and its Subsidiaries taken as a whole, (v) enter into any
transaction, contract or commitment with any affiliate of the Company; or (vi)
enter into any material commitment or transaction with respect to any of the
foregoing (including, but not limited to, any borrowing, capital expenditure or
purchase, sale or lease of assets);
(g) neither the Company nor any of its Subsidiaries
shall change any of the accounting methods used by it unless required by GAAP;
(h) neither the Company nor any of its Subsidiaries
will adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries (other than the Merger);
(i) except to the extent required under existing
employee and director benefit plans, agreements or arrangements as in effect on
the date of this Agreement and disclosed to Parent, increase the compensation or
fringe benefits of any of its directors, officers or employees, except for
increases in salary or wages of employees of the Company or its Subsidiaries who
are not officers of the Company in the ordinary course of business in accordance
with past practice, or grant any retention, severance or termination pay not
currently required to be paid under existing severance plans to or enter into
any employment, consulting or severance agreement or arrangement with any
present or former director, officer or other employee of the Company or any of
its Subsidiaries, or establish, adopt enter into or amend or terminate any
collective bargaining agreement or Company Plan, including, but not limited to,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any directors, officers or employers;
(j) make or change any Tax election, make or change
any method or accounting with respect to Taxes, file any amended Tax Return or
settle or compromise any material Tax liability;
(k) settle or compromise any pending or threatened
suit, action or claim against the Company or any Subsidiary for an aggregate
amount in excess of $50,000 or which is material or which relates to the
transactions contemplated hereby;
-24-
<PAGE>
(l) make any change in the key management structure
of the Company or any of its Subsidiaries, including, without limitation, the
hiring of additional officers or the termination of existing officers;
(m) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent of otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business in accordance with the terms of such obligation
or liability and consistent with past practice of liabilities reflected or
reserved against in the financial statements of the Company or incurred in the
ordinary course of business and consistent with past practice;
(n) neither the Company nor any of its Subsidiaries
will take, or agree to commit to take, any action that would make any
representation or warranty of the Company contained herein inaccurate in any
material respect at, or as of any time prior to, the Effective Time (except for
representations made as of a specific date); or
(o) neither the Company nor any of its Subsidiaries
will authorize or enter into an agreement to do any of the foregoing.
Section 5.2 Approvals and Consents; Cooperation. (a) The
parties hereto shall use their reasonable best efforts, and cooperate with each
other, to obtain all governmental and third party authorizations, approvals,
consents or waivers required in order to consummate the Offer and the Merger.
Each of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate the Offer and the Merger. The
Company further agrees to use its reasonable best efforts to seek to obtain, in
connection with Parent and without cost to the Company, Parent, or the
Purchaser, any consent of a third party on Schedule 3.4 required to avoid a
default or breach of any such contract resulting from this Agreement, the Offer
or the Merger.
(b) The Company and the Parent shall take all
reasonable actions necessary to file as soon as practicable notifications under
the HSR Act and to respond as promptly as practicable to any inquiries received
from the Federal Trade Commission and the Antitrust Division of the Department
of Justice for additional information or documentation and to respond as soon as
practicable to all inquiries and requests received from any Governmental Entity
in connection with antitrust matters. Notwithstanding anything to the contrary
herein (including the other provisions of this Section 5.2), Parent, the
Purchaser and its affiliates shall not be required to divest, or agree to any
restrictions with respect to, any of its businesses or assets or the businesses
or assets to be acquired in connection with the transactions contemplated
hereby. Nothing herein shall prevent the Purchaser, on not more than one
occasion, from withdrawing a notification under the HSR Act if the Purchaser
intends to refile such notification thereafter in accordance with the terms
hereof.
-25-
<PAGE>
(c) In furtherance and not in limitation of the
covenants of the parties contained in Sections 5.2(a) and 5.2(b), if any
administrative or judicial action or proceeding, including any proceeding by a
private party, is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement, each of Parent and the Company shall
cooperate in all respects with each other and use its respective reasonable best
efforts to contest and resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transactions contemplated
by this Agreement.
(d) If any objections are asserted with respect to
the transactions contemplated hereby or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any regulatory law, each of Parent and the
Company shall use its reasonable best efforts to resolve any such objections or
challenge as such Governmental Entity or private party may have to such
transactions under such regulatory law so as to permit consummation of the
transactions contemplated by this Agreement.
Section 5.3 Access to Information. Upon reasonable notice, the
Company shall (and shall cause its respective Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of the Parent, access, during normal business hours during the
period prior to the Effective Time, to all their respective officers, employees,
agents, properties, offices, plants and other facilities and books, contracts,
commitments and records and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to the Parent (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal or
state securities laws and (b) all other information concerning its business,
financial condition, properties and personnel as Parent may reasonably request.
Unless otherwise required by law and until the Appointment Date, Parent will
hold any such information which is nonpublic in confidence in accordance with
the provisions of the Confidentiality Agreement between the Company and Parent,
dated October 8, 1998 (the "Parent Confidentiality Agreement").
Section 5.4 Employee Benefits.
The Parent shall, or shall cause the Surviving
Corporation to, until at least December 31, 1999, maintain employee benefit
plans, programs and arrangements (other than stock-based plans) which are, in
the aggregate, for the employees who were active full-time employees of the
Company or any Subsidiary immediately prior to the Effective Time and continue
to be active full-time employees of the Purchaser, the Surviving Corporation,
any Subsidiary or any other affiliate of the Purchaser, no less favorable than
those provided by the Company and any Subsidiary immediately prior to the
Effective Time. From and after the Effective Time, for purposes of determining
eligibility, vesting and entitlement to vacation and severance and other
benefits for employees actively employed full-time by the Company or any
Subsidiary immediately prior to the Effective Time and who continue in the
employ of the Company following the Effective Time under any compensation,
severance, welfare, pension, benefit, savings or other Plan of the Parent or any
-26-
<PAGE>
of its Subsidiaries in which active full-time employees of the Company and any
Subsidiary become eligible to participate (whether pursuant to this Section 5.4
or otherwise), service with the Company or any Subsidiary (whether before or
after the Effective Time) shall be credited as if such service had been rendered
to the Parent or such Subsidiary (except to the extent necessary to prevent
duplication of benefits). Parent will, and will cause the Surviving Corporation
to, observe all employment, severance agreements or arrangements which provide
for the acceleration of benefits to employees of the Company upon a change of
control, plans or policies of the Company and its Subsidiaries, copies of which
have been made available to Parent pursuant to Section 3.8, in accordance with
their terms.
Section 5.5 No Solicitation. The Company, its Subsidiaries,
its affiliates and their respective officers, directors, employees,
representatives and agents shall immediately cease any existing discussions or
negotiations, if any, with any parties conducted heretofore with respect to any
acquisition or exchange of all or any material portion of the assets of, or any
equity interest in, the Company or any of its Subsidiaries or any business
combination with the Company or any of its Subsidiaries. Neither the Company,
any of its Subsidiaries or affiliates nor their respective officers, directors,
employees, representatives or agents, shall directly or indirectly, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent, any of its affiliates or representatives) concerning any
merger, consolidation, tender offer, exchange offer, sale of all or
substantially all of the Company's direct and indirect assets, sale of shares of
capital stock or similar business combination transactions involving the Company
or any Subsidiary or principal operating or business unit of the Company (an
"Acquisition Proposal"); provided, however, that if, at any time prior to the
purchase of Shares by Purchaser in the Offer, the Company Board by majority vote
determines in good faith, after receiving advice from its financial advisor and
outside counsel, that failing to take such action would constitute a breach of
the fiduciary duties of the Company Board under applicable law, the Company may,
in response to a bona fide written Acquisition Proposal which did not result
from a breach of this Section 5.5 and which the Board determines in good faith
is superior to the Offer (any such bona fide written Acquisition Proposal being
referred to as a "Superior Proposal"), (i) furnish information or provide access
with respect to the Company and each of its Subsidiaries to such Person pursuant
to a customary confidentiality agreement (as determined by the Company after
consultation with its outside counsel) and (ii) participate in discussions and
negotiations regarding such Acquisition Proposal. The Company Board agrees that
it will keep the Parent informed, on a current basis, of the status and terms of
any such proposals. In the event that prior to the completion of the Offer, the
Company Board determines in good faith, after the Company has received a
Superior Proposal and receipt of formal advice from its financial advisor and
outside counsel, that failing to take such action would constitute a breach of
its fiduciary duties under applicable law, the Company Board may withdraw or
modify its approval or recommendation of the Offer, the Merger or this
Agreement, approve or recommend a Superior Proposal or terminate this Agreement
in accordance with Section 7.1(c)(i), provided that prior to any such action,
the Company shall (i) have given Parent at least two business days notice of the
effectiveness of such action, and (ii) simultaneously with such action, pay to
Parent the fee referred to in Section 7.3 hereof. Furthermore, nothing contained
in this Section 5.5 shall prohibit the Company or the Company Board from taking
-27-
<PAGE>
and disclosing to the Company's stockholders a position with respect to a tender
or exchange offer by a third party pursuant to Rules l4d-9 and l4e-2(a)
promulgated under the Exchange Act or from making such disclosure to the
Company's stockholders or otherwise which, in the judgment of the Company Board
with the advice of independent legal counsel, is required under applicable law
(in accordance with Section 7.1(c)(i)) or rules of any stock exchange. The
Company agrees not to release any third party from, or waive any provisions of,
(i) any standstill agreement to which the Company is a party (other than for the
limited purpose of discussions and negotiations permitted by this Section 5.5)
and (ii) any confidentiality agreement to which the Company is a party.
Section 5.6 Brokers or Finders. (a) The Company represents, as
to itself, its Subsidiaries and its affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any brokers' or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement,
except PricewaterhouseCoopers Securities LLC, whose fees and expenses will be
paid by the Company in accordance with the Company's agreement with such firm
dated August 20, 1998; and the Company agrees to indemnify and hold Parent and
the Purchaser harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted by
any person on the basis of any act or statement alleged to have been made by
such party or its affiliates.
(b) Parent represents, as to itself, its Subsidiaries
and its affiliates, that no agent, broker, investment banker, financial advisor
or other firm or person is or will be entitled to any brokers' or finders' fee
or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement, and Parent agrees to indemnify and
hold the Company harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted by
any person on the basis of any act or statement alleged to have been made by
such party or its affiliates.
Section 5.7 Publicity. So long as this Agreement is in effect,
neither the Company nor Parent shall issue or cause the publication of any press
release or other announcement with respect to the Merger, this Agreement or the
other transactions contemplated hereby without the prior consultation of the
other party, except as may be required by law or by any listing agreement with a
national securities exchange.
Section 5.8 Notification of Certain Matters. The Company shall
give prompt notice to Parent and Parent shall give prompt notice to the Company,
of (i) the occurrence, or non-occurrence of any event the occurrence, or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.8 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
-28-
<PAGE>
Section 5.9 Directors' and Officers' Insurance and
Indemnification. (a) From and after the consummation of the Offer through the
sixth anniversary of the date the Effective Time occurs, Parent shall, and shall
cause the Surviving Corporation to, indemnify, defend and hold harmless any
person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer or director (the "Indemnified
Party") of the Company and its Subsidiaries against all losses, claims, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and
expenses), judgments, fines, and amounts paid in settlement in connection with
any actual or threatened action, suit, claim, proceeding or investigation (each
a "Claim") to the extent that any such Claim is based on, or arises out of, (i)
the fact that such person is or was a director, officer, employee or agent of
the Company or any Subsidiaries or is or was serving at the request of the
Company or any of its Subsidiaries as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
(ii) this Agreement, or any of the transactions contemplated hereby, in each
case to the extent that any such Claim pertains to any matter or fact arising,
existing, or occurring prior to or at the Effective Time, regardless of whether
such Claim is asserted or claimed prior to, at or after the Effective Time, to
the full extent permitted under Delaware law or the Company's Certificate of
Incorporation, By-laws or indemnification agreements in effect at the date
hereof, including provisions relating to advancement of expenses incurred in the
defense of any action or suit. Without limiting the foregoing, in the event any
Indemnified Party becomes involved in any capacity in any Claim, then from and
after consummation of the Offer, the Company (or the Surviving Corporation if
after the Effective Time) shall, periodically advance to such Indemnified Party
its legal and other expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to the provision by such
Indemnified Party of an undertaking to reimburse the amounts so advanced in the
event of a final nonappealable determination by a court of competent
jurisdiction that such Indemnified Party is not entitled thereto. No Indemnified
Party may settle any such claim without the prior approval of Parent or the
Surviving Corporation (such consent not to be unreasonably withheld). In the
event that any claim, action, suit, proceeding or investigation is brought
against more than one Indemnified Party (whether arising before or after the
Effective Time), the Indemnified Parties as a group shall retain one counsel
(plus appropriate local counsel) reasonably satisfactory to Parent or the
Surviving Corporation.
(b) Parent and the Company agree that all rights to
indemnification and all limitations of liability existing in favor of the
Indemnified Party as provided in the Company's Certificate of Incorporation and
By-laws as in effect as of the date hereof shall survive the Merger and shall
continue in full force and effect, without any amendment thereto, for a period
of six years from the Effective Time to the extent such rights are consistent
with the DGCL; 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; provided further, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under Delaware law, the Company's Certificate of Incorporation or
By-laws or such agreements, as the case may be, shall be made by independent
legal counsel selected by the Indemnified Party and reasonably acceptable to
Parent; and provided further, that nothing in this Section 5.9 shall impair any
rights or obligations of any present or former directors or officers of the
Company.
-29-
<PAGE>
(c) In the event Parent or the Purchaser or any of
their successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case, to
the extent necessary to effectuate the purposes of this Section 5.9, proper
provision shall be made so that the successors and assigns of Parent and the
Purchaser assume the obligations set forth in this Section 5.9 and none of the
actions described in clauses (i) or (ii) shall be taken until such provision is
made.
(d) Parent or the Surviving Corporation shall
maintain the Company's existing directors' and officers' liability insurance
policy ("D&O Insurance") for a period of not less than six years after the
Effective Date; provided, that (i) Parent may substitute therefor policies of
substantially similar coverage and amounts containing terms no less advantageous
to such former directors or officers; (ii) if the existing D&O Insurance expires
or is canceled during such period, Parent or the Surviving Corporation will use
their reasonable best efforts to obtain substantially similar D&O Insurance,
(iii) in no event shall Parent or the Surviving Corporation be required to
expend more than an amount per year in excess of 175% of current annual premiums
paid by the Company (which the Company represents and warrants to be not more
than $156,000) to maintain or procure insurance coverage pursuant hereto; (iv)
if the annual premiums of such insurance coverage would exceed 175% of current
annual premiums, Parent or the Surviving Corporation shall obtain a policy with
the greatest coverage available for a cost not exceeding 175% of current annual
premiums.
Section 5.10 Stockholder Litigation. (a) Each of the Company
and Parent will give the other the reasonable opportunity to participate in the
defense of any stockholder litigation against the Company, Parent or Purchaser,
as applicable, or their respective directors relating to the transactions
contemplated by this Agreement. The Company agrees that it will not settle any
litigation currently pending, or commenced after the date hereof, against the
Company or any of its directors by any stockholder of the Company relating to
the Offer or this Agreement, without prior written consent of Parent, which
shall not be unreasonably withheld.
(b) Except as permitted by Section 5.5 of this
Agreement, the Company will not voluntarily cooperate with any third party which
has sought or may hereafter seek to restrain or prohibit or otherwise oppose the
Offer or the Merger.
Section 5.11 Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement. If at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, the parties hereto shall take or cause to be taken all such necessary
action, including, without limitation, the execution and delivery of such
further
-30-
<PAGE>
instruments and documents as may be reasonably requested by the other party for
such purposes or otherwise to consummate and make effective the transactions
contemplated hereby.
Section 5.12 State Takeover Statutes. During the term of this
Agreement, except as permitted by Section 5.5, the Company Board shall not
repeal or otherwise alter the resolutions of the Company Board that render
Section 203 of the DGCL (or any similar provision) inapplicable to the Offer,
the Merger, this Agreement, the Tender Agreement, the other transactions
contemplated hereby and thereby.
Section 5.13 Stop Transfer Order. If requested by Parent, the
Company will instruct the Company's transfer agent that, there is a stop
transfer order with respect to all of the Shares covered by the Tender Agreement
and that the Tender Agreement places limits on the transfer of such Shares.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect
the Merger. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have
been approved and adopted by the requisite vote of the holders of Shares, if
required by the DGCL, in order to consummate the Merger;
(b) Statutes; Consents. No statute, rule, order,
decree or regulation shall have been enacted or promulgated by any foreign or
domestic Governmental Entity or authority of competent jurisdiction which
prohibits the consummation of the Merger and all foreign or domestic
governmental consents, orders and approvals required for the consummation of the
Merger and the transactions contemplated hereby shall have been obtained and
shall be in effect at the Effective Time;
(c) Injunctions. There shall be no order or
injunction (whether temporary, preliminary or permanent) of a foreign or United
States federal or state court or other governmental authority of competent
jurisdiction in effect precluding, restraining, enjoining or prohibiting
consummation of the Merger, which order or injunction is final and
nonappealable;
(d) HSR Act. The applicable time period under the HSR
Act shall have expired or been terminated; and
(e) Consummation of Offer. Parent, Purchaser or their
affiliates shall have purchased Shares pursuant to the Offer.
-31-
<PAGE>
ARTICLE VII
TERMINATION
Section 7.1 Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof:
(a) By the mutual consent of the Board of Directors
of Parent and the Company Board.
(b) By either of the Company Board or the Board of
Directors of Parent:
(i) if Parent or the Purchaser shall have
terminated the Offer or if Shares shall not have been purchased
pursuant to the Offer on or prior to May 10, 1999; provided, however,
that in the event of a delay in the Purchaser's purchase of the Shares
pursuant to the Offer resulting from an inquiry for additional
materials made by a Governmental Entity relating to the HSR Act or
Federal antitrust laws, the right to terminate this Agreement under
this Section 7(b)(i) shall be extended until June 23, 1999; provided,
further, that the right to terminate this Agreement under this Section
7.1(b)(i) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
in, the failure of Parent or the Purchaser, as the case may be, to
purchase Shares pursuant to the Offer on or prior to such date; or
(ii) if any Governmental Entity of competent
jurisdiction shall have issued an order, decree or ruling or taken any
other action (which order, decree, ruling or other action the parties
hereto shall use their reasonable best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and nonappealable and,
with respect to any court or governmental body located outside the
United States, such order, decree, ruling or other action would, either
individually or in the aggregate, have a Company MAE or a material
adverse effect on the business, operations, assets, condition
(financial or otherwise) or results of operations of Parent and its
Subsidiaries taken as a whole;
(c) By the Company Board:
(i) if, prior to the purchase of Shares
pursuant to the Offer, the Company Board shall have (A) received a bona
fide offer which the Company Board determines in good faith is a
Superior Proposal, and (B) determined in good faith, as a result
-32-
<PAGE>
of such Superior Proposal, based on the formal advice of outside
counsel to the Company, that the failure to terminate this Agreement
would violate its fiduciary duties to the Company's stockholders under
applicable law (provided that such termination under this clause (c)
shall not be effective until the Company has made payment of the fee
required simultaneous with such termination pursuant to Section 7.3
hereof); or
(ii) if, prior to the purchase of Shares
pursuant to the Offer, Parent or the Purchaser breaches or fails in any
material respect to perform or comply with any of its material
covenants and agreements contained herein or breaches its
representations and warranties in any material respect, and such breach
is not cured within fifteen (15) business days of written notice; or
(iii) if Parent or the Purchaser shall have
terminated the Offer, or the Offer shall have expired, without Parent
or the Purchaser, as the case may be, purchasing any Shares pursuant
thereto; provided that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(iii) if the Company is in material
breach of this Agreement; or
(iv) if Purchaser shall have failed to
commence the Offer on or prior to five business days following the date
of the initial public announcement of the Offer; provided, that the
Company may not terminate this Agreement pursuant to this Section
7.1(c)(iv) if the Company is in material breach of this Agreement.
(d) By the Board of Directors of Parent:
(i) if Purchaser shall have failed to
commence the Offer on or prior to five business days following the date
of the initial public announcement of the Offer; provided that Parent
may not terminate this Agreement pursuant to this Section 7.1(d)(i) if
Parent is in material breach of this Agreement;
(ii) if, prior to the purchase of Shares
pursuant to the Offer, the Company Board shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger
or shall have recommended an Acquisition Proposal or shall have
executed an agreement in principle (or similar agreement) or definitive
agreement relating to an Acquisition Proposal or similar business
combination with a person or entity other than Parent, the Purchaser or
their affiliates (or the Company Board resolves to do any of the
foregoing);
(iii) if following any negotiations by the
Company with any person (other than Parent or Purchaser) of an
Acquisition Proposal, there shall have been a breach of any covenant or
agreement on the part of the Company contained in this Agreement such
that the conditions set forth in clause (b) of Annex A would not be
satisfied;
-33-
<PAGE>
(iv) if, prior to the purchase of Shares
pursuant to the Offer, the Company breaches or fails in any material
respect to perform or comply with any of its material covenants and
agreements contained herein or breaches its representations and
warranties in any material respect, and such breach is not cured within
fifteen (15) business days of written notice; or
(v) the Minimum Condition shall not have
been satisfied by the expiration date of the Offer and on or prior to
such date (A) any person (other than Parent or Purchaser) shall have
made and not withdrawn a bona fide proposal or public announcement or
communication to the Company with respect to an Acquisition Proposal or
(B) any person (including the Company or any of its affiliates or
Subsidiaries), other than Parent, the Purchaser or any of their
affiliates shall have become the beneficial owner of more than 25% of
the Shares.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 7.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become null and void (except Section 7.3), and there shall be no
liability on the part of Parent or the Company except for fraud or for willful
breach of this Agreement.
Section 7.3 Termination Fee. In the event that the Company
Board terminates this Agreement pursuant to Section 7.1(c)(i) or the Board of
Directors of Parent terminates this Agreement pursuant to Section 7.1(d)(ii) or
(v) the Company shall concurrently (or on the following business day if
termination is by Parent) pay to Parent a termination fee of $3.0 million.
In the event that (x) the Company terminates this Agreement pursuant to
Section 7.1(b)(i) at a time when Parent had a right to terminate this Agreement
pursuant to Section 7.1(d)(iii) or Parent terminates this Agreement pursuant to
Section 7.1(d)(iii) and (y) the Company or any of its Subsidiaries enters into
an agreement with respect to a Third Party Acquisition (defined below) (an
"Acquisition Agreement") within 12 months of termination, the Company shall pay
Parent $3.0 million simultaneously with the signing of the Acquisition
Agreement.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger, tender offer or otherwise
by any person or group of persons acting in concert other than Parent, Purchaser
or any affiliate thereof (at a price greater than $13.50 per Share in the case
of an acquisition by a person or group of persons with whom or which the Company
did not have direct or indirect (through affiliates or otherwise) discussions
prior to the termination of the Merger Agreement) (a "Third Party"); (ii) the
acquisition by a Third Party of 35% or more of the assets of the Company and its
Subsidiaries, taken as a whole, in one transaction or a related series of
transactions; (iii) the acquisition by a Third Party or more than 35% of the
outstanding Shares, in one transaction or a related series of transactions; (iv)
the adoption by the Company of a plan of complete liquidation or the declaration
or payment of an extraordinary
-34-
<PAGE>
dividend; or (v) the repurchase by the Company or any of its Subsidiaries of 50%
or more of the outstanding Shares.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto, by action taken
by their respective Boards of Directors, at any time prior to the Closing Date
with respect to any of the terms contained herein; provided, however, that after
the approval of this Agreement by the stockholders of the Company, no such
amendment, modification or supplement shall reduce or change the Merger
Consideration or change the timing of the payment of such Merger Consideration.
Section 8.2 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time.
Section 8.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such
as Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
L-3 Communications Corporation
600 Third Avenue
New York, New York 10016
Attention: Christopher C. Cambria, Esq.
with an additional copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow, Esq.
and
-35-
<PAGE>
(b) if to the Company, to:
Aydin Corporation
47 Friends Lane
Newtown, PA 18940
Telephone No.: (215) 497-8288
Telecopy No.: (215) 497-8124
Attention: James Henderson, President
with copies to:
Warren Lichtenstein
Steel Partners
150 East 52nd Street, 21st Floor
New York, New York 10022
Telephone No.: (212) 813-1500
Telecopy No.: (212) 813-2198; and
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Telephone No.: (212) 753-7200
Telecopy No.: (212) 735-1787
Attention: Steven Wolosky, Esq.
Section 8.4 Certain Definitions. For purposes of this
Agreement:
(a) 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;
(b) a "Company MAE" means any fact, circumstance,
condition or effect which is (i) materially adverse to the business, operations,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole, other than any change,
circumstance or effect relating to the economy or securities markets in general
or the industries in which the Company operates and not specifically relating to
the Company, or (ii) materially adverse to the ability of the Company to perform
any of its material obligations under this Agreement. A "Company MAE" will be
deemed to exist if net cash of the Company and its Subsidiaries is less than $10
million (without giving effect to any transaction-related fees and expenses of
the Financial Advisor, financial printers and outside counsel not exceeding
$1.35 million in the aggregate) as of the close of business on the date of the
expiration of the Offer. Notwithstanding the foregoing, no "Company MAE" will be
deemed to exist solely by reason of the
-36-
<PAGE>
liabilities referred to in Schedule 3.6 or Schedule 3.7 (excluding in each case
any references to Schedule 3.9 contained therein).
(c) "Knowledge" of any Person which is not an
individual means the knowledge of any of such Person's executive officers and
directors after reasonable inquiry.
(d) "Person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(e) 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 a majority 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.
(f) "Tender Agreement" shall mean that certain
agreement entered into by Parent, Purchaser and Steel Partners II, L.P., Sandera
Partners, L.P., and Newcastle Partners, L.P. (collectively, the "Shareholders")
regarding, among other things, the voting of Shares held by the Shareholders.
Section 8.5 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available.
Section 8.6 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 8.7 Entire Agreement; Third Party Beneficiaries. This
Agreement and the Parent Confidentiality Agreement (including the documents and
the instruments referred to herein and therein): (a) 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 (b)
except as provided in Sections 4.7 and 5.9, are not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Section 8.8 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and
-37-
<PAGE>
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Section 8.9 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
Section 8.10 Jurisdiction. Any legal action or proceeding with
respect to this Agreement or any matters arising out of or in connection with
this Agreement or otherwise, and any action for enforcement of any judgement in
respect thereof shall be brought exclusively in the State of New York or of the
United States of America for the Southern District of New York and, by execution
and delivery of this Agreement, the Company, Parent and the Purchaser each
hereby accepts for itself and in respect of its property, generally and
unconditionally, the exclusive jurisdiction of the aforesaid courts and
appellate courts thereof. The Company, Parent and the Purchaser irrevocably
consent to service of process out of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, or by recognized international express carrier
or delivery service, to the Company, Parent or the Purchaser at their respective
addresses referred to in Section 8.3 hereof. The Company hereby designates
Olshan Grundman Frome Rosenzweig & Wolosky LLP as its representative agent for
the service of process, and service upon the Company shall be deemed to be
effective upon service of Olshan Grundman Frome Rosenzweig & Wolosky LLP.
Subsequent to the Effective Time, the Company may designate another corporate
agent or law firm reasonably acceptable to Parent and located in New York, New
York, as successor agent. The Company, Parent and the Purchaser each hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement or otherwise brought in the courts referred to
above and hereby further irrevocably waives and agrees, to the extent permitted
by applicable law, not to plead or claim in any such court that any such action
or proceeding brought in any such court has been brought in an inconvenient
forum. Nothing herein shall affect the right of any party hereto to serve
process in any other manner permitted by law.
Section 8.11 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the Purchaser may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned Subsidiary of
Parent. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 8.12 Guarantee. Parent guarantees performance by the
Purchaser of the obligations of Purchaser hereunder.
-38-
<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
AYDIN CORPORATION
By:/s/ Warren Lichtenstein
------------------------------
Name: Warren Lichtenstein
Title: Chairman
L-3 COMMUNICATIONS CORPORATION
By:/s/ Christopher C. Cambria
--------------------------------
Name: Christopher C. Cambria
Title: Vice President &
General Counsel
ANGEL ACQUISITION CORPORATION
By:/s/ Christopher C. Cambria
---------------------------------
Name: Christopher C. Cambria
Title: President & Secretary
-39-
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provisions of the Offer, and in
addition to (and not in limitation of) the Purchaser's rights to extend and
amend the Offer at any time in its sole discretion (subject to the provisions of
the Agreement), the Purchaser 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 the Purchaser's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer if (i) the Minimum Condition has not been satisfied, (ii)
any applicable waiting period under the HSR Act has not expired or terminated
prior to the expiration of the Offer, or (iii) at any time on or after March 1,
1999 and before the time of acceptance of Shares for payment pursuant to the
Offer, any of the following events shall occur:
(a) there shall have been any action or proceeding
taken or instituted and pending, or any statute, rule, regulation, judgment,
order or injunction promulgated, entered, enforced, enacted, issued or deemed
applicable to the Offer or the Merger, or any other action taken, proposed or
threatened, by any domestic or foreign federal or state governmental regulatory
or administrative agency or authority or court or legislative body or commission
which does or could reasonably be expected to (l) prohibit or impose any
material limitations on, Parent's or the Purchaser's ownership or operation of
all or a material portion of the Company's or its Subsidiaries' businesses or
assets compelling Parent, Purchaser or any of their affiliates to dispose of or
hold separate all or any material portion of the business or assets of the
Company or any of its Subsidiaries or Parent, or any of its affiliates, as a
result of the transactions contemplated by the Offer or the Merger Agreement,
(2) prohibit or make illegal the acceptance for payment, payment for or purchase
of Shares or the consummation of the Offer or the Merger, (3) result in a
material delay in or restrict the ability of the Purchaser, or render the
Purchaser unable, to accept for payment, pay for or purchase some or all of the
Shares, or (4) impose material limitations on the ability of the Purchaser or
Parent effectively to acquire or exercise full rights of ownership of the
Shares, including, without limitation, the right to vote the Shares purchased by
it on all matters properly presented to the Company's stockholders, provided
that Parent shall have used all reasonable efforts to cause any such judgment,
order or injunction to be vacated or lifted; provided further that the condition
specified in this paragraph (a) shall not be deemed to exist by reason of any
court proceeding pending on the date hereof and known to the Purchaser or
Parent, unless in the reasonable judgement of the Purchaser there is any
material adverse development in any such proceeding after the date hereof, or
before the date hereof if not known to the Purchaser or Parent on the date
hereof, which would result in any of the consequences referred to in clauses (1)
through (4) above;
(b) the representations and warranties of the Company
set forth in the Agreement shall not be true and correct in any respect as of
the date of consummation of the Offer
-40-
<PAGE>
as though made on or as of such date or the Company shall have breached or
failed in any material respect to perform or comply with any obligation,
agreement or covenant required by the Agreement to be performed or complied with
by it except, in each case, those representations and warranties that address
matters only as of a particular date which are true and correct as of such date;
(c) the Agreement shall have been terminated in
accordance with its terms;
(d) (i) the Company Board shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Agreement,
or the Merger, or recommended another proposal or offer, or shall have resolved
to do any of the foregoing or (ii) any such corporation, partnership, person or
other entity or group shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer or
exchange offer for any Shares or a merger, consolidation or other business
combination with or involving the Company or any of its Subsidiaries;
(e) there shall have occurred any fact that had or
could reasonably be expected to result in a Company MAE;
(f) there shall have occurred (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the counter market in the United
States, (ii) a decline of at least 25% in either the Dow Jones Average of
Industrial Stocks or the Standard & Poor's 500 index from the date hereof, (iii)
any material adverse change or any existing or threatened condition, event or
development involving a prospective material adverse change in United States or
other material international currency exchange rates or a suspension of, or
limitation on, the markets therefor, (iv) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States, (v) any
limitation (whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on, or
any other event that, in the reasonable judgment of the Purchaser, could
reasonably be expected to materially adversely affect the extension of credit by
banks or other lending institutions, (vi) a commencement of a war or armed
hostilities or other national or international calamity directly or indirectly
involving the United States (except for any such event involving Iraq or Bosnia)
or materially adversely affecting (or materially delaying) the consummation of
the Offer or (vii) in the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or worsening thereof; or
(g) any applicable waiting periods under any material
foreign statutes or regulations shall not have expired or been terminated, or
any material approval, permit, authorization or consent of any domestic or
foreign governmental, administrative, or regulatory agency (federal, state,
local, provincial or otherwise) shall not have been obtained on terms
satisfactory to the Parent in its reasonable discretion;
-41-
<PAGE>
which in the reasonable judgment of Purchaser with respect to each and every
matter referred to above and regardless of the circumstances (including any
action or inaction by Purchaser or any of its affiliates other than a breach of
the Merger Agreement) giving rise to any such condition, makes it inadvisable to
proceed with the Offer or with such acceptance for payment of or payment for
Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of the
Purchaser and Parent and may be waived by Parent or the Purchaser, in whole or
in part at any time and from time to time in the sole discretion of Parent or
the Purchaser. The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
-42-
<PAGE>
List of Schedules
Schedule 3.2 - Capitalization
Schedule 3.4 - Required Consents and Approvals
Schedule 3.5 - SEC Reports and Financial Statements
Schedule 3.6 - Liabilities
Schedule 3.7 - Absence of Changes
Schedule 3.8 - Employee Benefit Plans
Schedule 3.9 - Litigation
Schedule 3.10 - Defaults and Non-Compliance with Laws
Schedule 3.11 - Taxes
Schedule 3.12 - Real Property
Schedule 3.13 - Environmental Matters
Schedule 5.1(c) - Interim Operations
-43-
<PAGE>
TENDER AGREEMENT
TENDER AGREEMENT (this "Agreement"), dated as of March 1, 1999, among
L-3 Communications Corporation, a Delaware corporation ("Parent"), and the other
parties set forth on the signature page hereof (collectively, the
"Stockholders").
RECITALS
Concurrently herewith, Parent, Angel Acquisition Corp., a Delaware
corporation and a direct, wholly owned subsidiary of Parent ("Sub"), and Aydin
Corporation, a Delaware corporation (the "Company"), are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), pursuant to which Sub agrees to
make an offer (the "Offer") for all outstanding share of common stock, par value
$1.00 per share (the "Common Stock"), of the Company, at a price of $13.50 per
share (the "Offer Price"), net in cash, to be followed by a merger (the
"Merger") of Sub with and into the Company.
As a condition to their willingness to enter into the Merger Agreement
and make the Offer, Parent and Sub have required that the Stockholders agree,
and the Stockholders have agreed, among other things, to tender the number of
shares of Common Stock of each Stockholder set forth on Annex A hereto, together
with any additional shares when and if they are acquired (such shares, and any
additional shares when and if they are acquired, being referred to herein as the
"Shares") pursuant to the Offer and not withdraw any Shares therefrom on the
terms and conditions provided for herein.
The Board of Directors of the Company has exempted this Agreement, the
Merger Agreement and the transactions contemplated hereby and thereby so as to
render inapplicable Section 203 of the Delaware General Corporation Law ("DGCL")
to the transactions contemplated hereby and thereby.
AGREEMENT
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Agreement to Tender. The Stockholders hereby agree to validly tender
(or cause the record owner to validly tender) all of their Shares pursuant to
and in accordance with the terms of the Offer and not withdraw any Shares
therefrom.
2. Voting of Shares. Each Stockholder hereby agrees to (a) vote the Shares
in favor of the approval of the Merger Agreement; (b) vote the Shares against
any action or agreement that would result in a breach in any material respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (c) vote the Shares against any
action or agreement (other than the Merger Agreement or the transactions
contemplated thereby) that would impede, interfere with, delay, postpone or
attempt to
<PAGE>
discourage the Merger or the Offer. Each Stockholder shall not hereafter purport
to vote (or execute a consent with respect to) such Shares (other than in
accordance with the requirements of this Section 2) or grant any other proxy or
power of attorney with respect to any Shares, deposit any Shares into a voting
trust or enter into any agreement (other than this Agreement), arrangement or
understanding with any person, directly or indirectly, to vote, grant any proxy
or give instructions with respect to the voting of such Shares.
3. Representations and Warranties.
3.1. Representations and Warranties of Parent. Parent hereby represents and
warrants to the Stockholders as follows:
(a) Due Authorization. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Parent, and no other corporate
proceedings on the part of Parent are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Parent and constitutes a valid and binding
agreement of Parent, enforceable against Parent in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
(b) No Conflicts. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and the
Securities Act, (iii) the applicable requirements of state securities, takeover
or blue sky laws and (iv) such notifications, filings, authorizing actions,
orders and approvals as may be required under other laws, no filing with, and no
permit, authorization, consent or approval of any state, federal, foreign public
body or authority is necessary for the execution of this Agreement by Parent.
(c) Good Standing. Parent is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and has all requisite
corporate power and authority to execute and deliver this Agreement.
3.2. Representations and Warranties of Stockholders. Each Stockholder,
individually and solely as to itself hereby represents and warrants to Parent
as follows:
(a) Ownership of Shares. Each Stockholder is the record or beneficial
owner of the Shares set forth opposite its name on Annex A hereto and has the
power to vote and dispose of such Shares. To each Stockholder's knowledge, such
Shares are validly issued, fully paid and nonassessable, with no personal
liability attaching to the ownership thereof. Each Stockholder has good title to
the Shares, free and clear of any agreements, liens, adverse claims or
encumbrances whatsoever with respect to the ownership of or the right to vote
such Shares.
<PAGE>
(b) Power; Binding Agreement. Each Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by each
Stockholder will not violate any other agreement to which such Stockholder is a
party including, without limitation, any voting agreement, stockholders
agreement or voting trust. This Agreement has been duly and validly authorized,
executed and delivered by each Stockholder and constitutes a valid and binding
agreement of each Stockholder, enforceable against each Stockholder in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(c) No Conflicts. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and the
Securities Act, (iii) the applicable requirements of state securities, takeover
or blue sky laws and (iv) such notifications, filings, authorizing actions,
orders and approvals as may be required under other laws, (A) no filing with,
and no permit, authorization, consent or approval of, any state, federal or
foreign public body or authority is necessary for the execution of this
Agreement by each Stockholder and the consummation by each Stockholder of the
transactions contemplated hereby and (B) neither the execution and delivery of
this Agreement by each Stockholder nor the consummation by each Stockholder of
the transactions contemplated hereby nor compliance by each Stockholder with any
of the provisions hereof shall (1) conflict with or result in any breach of any
provision of the certificate of incorporation, by-laws, trust or charitable
instruments (or similar documents) of such Stockholder, (2) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which such Stockholder
is a party or by which they or any of their properties or assets may be bound or
(3) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to such Stockholder or any of his or its properties or assets, except
in the case of (2) or (3) for violations, breaches or defaults which would not
in the aggregate materially impair the ability of such Stockholder to perform
its obligations hereunder.
4. Certain Covenants of Stockholder. Each Stockholder hereby covenants and
agrees, individually and solely, as to itself as follows:
4.1. No Solicitation. No Stockholder nor any employee, representative or
agent of any Stockholder shall, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent and Sub, any affiliate or associate of Parent and Sub or any
designees of Parent or Sub) concerning any merger, sale of all or any material
portion of the assets, sale of shares of capital stock or similar transactions
(including an exchange of stock or assets) involving the Company or any
subsidiary or division of the Company. If any Stockholder, or any employee,
representative or agent of any Stockholder, receives an inquiry or proposal with
respect to the sale of Shares, then such Stockholder shall promptly inform
Parent
<PAGE>
of the terms and conditions, if any, of such inquiry or proposal and the
identity of the person making it. Each Stockholder shall, and shall cause his or
its employees, representatives and agents to, immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
4.2. Restriction on Transfer and NonInterference. Each Stockholder hereby
agrees, while this Agreement is in effect, and except as contemplated hereby,
not to (a) sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any Shares; provided that any Stockholder may transfer Shares to
any other Stockholder; provided further that as a condition to such transfer,
such other Stockholder agrees in writing on terms reasonably acceptable to
Parent to become a party to, and agrees to be bound by, to the same extent as
the transferring Stockholder, the terms of this Agreement or (b) take any action
that would make any representation or warranty of such Stockholder contained
herein untrue or incorrect or have the effect of preventing or disabling such
Stockholder from performing or its obligations under this Agreement.
4.3. Legending of Certificates; Nominees Shares. If requested by Parent, the
Stockholders agree to submit to Parent contemporaneously with or promptly
following execution of this Agreement all certificates representing their Shares
so that Parent may note thereon a legend referring to the rights granted to it
by this Agreement. If any of the Shares beneficially owned by the Stockholders
are held of record by a brokerage firm in "street name" or in the name of any
other nominee (a "Nominee," and, as to such Shares, "Nominee Shares"), the
Stockholders agree that, upon written notice by Parent requesting it, the
Stockholders will within five days of the giving of such notice execute and
deliver to Parent a limited power of attorney in such form as shall be
reasonably satisfactory to Parent solely to enable Parent to require the Nominee
to (i) enter into an agreement to the same effect as Section 2 hereof with
respect to the Nominee Shares held by such Nominee, (ii) tender such Nominee
Shares in the Offer pursuant to Section 1 hereof and (iii) submit to Parent the
certificates representing such Nominee Shares for notation of the
above-referenced legend thereon.
4.4. Stop Transfer Order. In furtherance of this Agreement, concurrently
herewith, the Stockholders shall and hereby do authorize the Company's counsel
to notify the Company's transfer agent that, except as permitted pursuant to
Section 4.2 of this Agreement, there is a stop transfer order with respect to
all of the Shares (and that this Agreement places limits on the transfer of such
Shares).
5. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further action as may be necessary or
desirable to consummate the transactions contemplated by this Agreement.
6. Adjustments to Prevent Dilution. In the event of a stock dividend or
distribution, or any change in the Company's Common Stock by reason of any stock
dividend, split-up,
<PAGE>
reclassification, recapitalization, combination or the exchange of shares, the
term "Shares" shall be deemed to refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged. In such event, the
definitions of "Set Amount" and "Initial Amount" shall be proportionally
adjusted.
7. Miscellaneous.
7.1 Entire Agreement; Assignment. This Agreement (i) constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (ii)
shall not be assigned by operation of law or otherwise, provided that Parent
may assign its rights and obligations hereunder to any direct or indirect wholly
owned parent company or subsidiary of Parent, but no such assignment shall
relieve Parent of its obligations hereunder if such assignee does not perform
such obligations.
7.2. Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
7.3. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses:
If to the Stockholders: c/o Steel Partners II, L.P.
150 East 52nd Street
21st Floor
New York, New York 10022
Attention: Warren G. Lichtenstein
copy to: Olshan Grundman Frome Rosenzweig & Wolosky, LLP
505 Park Avenue
New York, New York 10022
Attention: Steven Wolosky, Esq.
If to Parent: L-3 Communications Corporation
600 Third Avenue
New York, New York 10016
Attention: Christopher Cambria, Esq.
copy to: Simpson Thacher & Bartlett
<PAGE>
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
7.4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
7.5. Termination. This Agreement shall terminate on the earlier of (i) the
Effective Time or (ii) the termination of the Merger Agreement in accordance
with its terms.
7.6. Waiver of Dissenter's and Appraisal Rights. The Stockholders agree
that they will not exercise any rights to dissent from the Merger or request
appraisal rights of their Shares pursuant to Section 262 of the DGCL or any
other similar provisions of law in connection with the transactions contemplated
hereby.
7.7. Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore, each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
7.8. Counterparts. This Agreement may be executed in any number of separate
counterparts, each of which shall be deemed to be an original, and all of which
shall constitute one and the same agreement.
7.9. Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
7.10. Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
<PAGE>
7.11. Duty of Directors. Nothing contained in Section 4.1 shall limit the
right of any officer, director, employee or representative of a Stockholder who
is a director of the Company from exercising his or her fiduciary responsibility
as a director, consistent with the terms of the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of
each of the parties hereto, all as of the date first above written.
L-3 COMMUNICATIONS CORPORATION
By: /s/ Christopher C. Cambria
--------------------------
Name: Christopher C. Cambria
Title: Vice President, Secretary-General Counsel
STEEL PARTNERS II, L.P.
By: Steel Partners, L.L.C., General Partner
By: /s/ Warren G. Lichtenstein
--------------------------
Warren G. Lichtenstein, Chief Executive Officer
SANDERA PARTNERS, L.P.
By: Sandera Capital Management L.P., General Partner
By: Sandera Capital L.L.C., General Partner
By: /s/ Mark E. Schwarz
-------------------
Mark E. Schwarz, Vice President and Managing
Member
NEWCASTLE PARTNERS, L.P.
By: /s/ Mark E. Schwarz
-------------------
Mark E. Schwarz, General Partner
<PAGE>
ANNEX A
Number of Shares
Name of Common Stock
- ---- ---------------
Steel Partners II, L.P. 492,600
Sandera Partners, L.P. 125,000
Newcastle Partners, L.P. 3,100
<PAGE>
RETENTION AGREEMENT
THIS IS AN AGREEMENT made on this 20th day of November, 1998 (the
"Date of this Agreement"), by and between Aydin Corporation, a Delaware
corporation (the "Company"), and [name] , who is the [title] of the Company
(the "Employee").
WHEREAS, the Company has announced publicly that it has engaged
PricewaterhouseCoopers Securities, L.L.C. to assist the Company in evaluating
potential strategic alternatives to enhance shareholder value; and
WHEREAS, such announcement has led to uncertainty regarding the future
path of the Company and the long-term prospects for employment with the
Company; and
WHEREAS, the Employee is an "employee at will," and as such the
Company is not legally obligated to continue his employment for any fixed
period of time; and
WHEREAS, the Company's Board of Directors (the "Board") believes it is
important to the enhancement of shareholder value that, notwithstanding such
uncertainty, the Employee continue his employment with the Company in order
that the Company can benefit from the continued availability of the Employee's
services, and consequently, the Board intends to provide the incentives set
forth herein for the Employee to remain in the Company's employ during such
period;
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Employee agree as follows:
1. Termination During the Severance Protection Period. The Employee
shall be entitled to the benefits provided in Section 4 hereof upon the
termination of the Employee's employment at any time during the period
commencing on the Date of this Agreement and ending on the second anniversary
of that date (the "Severance Protection Period"), unless such termination is
(a) because of the Employee's death or Retirement, (b) by the Company for Cause
or Disability or (c) by the Employee other than for Good Reason. If the
Employee's termination of employment is because of one of the reasons described
in (a), (b) or (c) in the preceding sentence, the Employee's rights under this
Agreement shall cease as of the date of such termination. For purposes of this
Agreement, the following definitions shall apply:
(i) Disability; Retirement.
(A) Termination by the Company of the Employee's employment
based on "Disability" shall mean termination because of the
Employee's absence from his duties with the Company on a
full-time basis for ninety (90) consecutive business days,
as a result of the Employee's incapacity due to physical or
mental illness, unless within thirty
<PAGE>
(30) days after a Notice of Termination (as hereinafter
defined) is given following such absence the Employee shall
have returned to the full-time performance of his duties. If
the Company terminates the Employee's employment by reason
of Disability, the Employee shall be entitled to the
benefits determined in accordance with the Company's
retirement and welfare benefit programs then in effect,
provided that in no event shall such retirement and welfare
benefits be materially less than those in effect immediately
prior to the change in status.
(B) Termination by the Employee of his employment based on
"Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement,
generally applicable to its salaried employees.
(ii) Cause. Termination by the Company of the Employee's employment
for "Cause" shall mean termination upon:
(A) the Employee's willful and continued failure to
substantially perform his duties with the Company (other
than any such failure resulting from the Employee's
incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to the
Employee by the Board, which specifically identifies the
manner in which the Board believes that the Employee has not
substantially performed his duties; or
(B) the Employee's admission or conviction of, or plea of nolo
contendere to, any felony that, in the judgement of the
Board, adversely affects the Company's reputation or the
Employee's ability to carry out his obligations as an
officer of the Company; or
(C) the Employee's willful engaging in misconduct which is
materially injurious to the Company, monetarily or
otherwise. For purposes of this paragraph, no act, or
failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, by the
Employee not in good faith and without reasonable belief
that the Employee's action or omission was in the best
interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed
to have been terminated for Cause unless and until there shall
have been delivered to the Employee a copy of a Notice of
Termination from the Board, after reasonable notice to the
Employee and an opportunity for the Employee to be heard before
the Compensation Committee of the Board (or, if there be no
such Committee or such Committee delivers the Notice of
Termination, the Board), finding that in the good faith opinion
of such Committee (or the Board) the Employee was guilty of
conduct set forth above in clauses
2
<PAGE>
(A), (B) or (C) of the first sentence of this paragraph and
specifying the particulars thereof in detail.
(iii) Good Reason. The Employee's termination of his employment for
"Good Reason" shall mean a termination on account of:
(A) the assignment, without the Employee's express written
consent, to the Employee of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company immediately prior to a change in status, or a
change in the Employee's reporting responsibilities, titles
or offices as in effect immediately prior to a change in
status, or any removal of the Employee from or any failure
to re-elect the Employee to any of such positions, except
in connection with the termination of the Employee's
employment for Cause, Disability or Retirement or as a
result of the Employee's death or by the Employee other
than for Good Reason;
(B) a reduction by the Company in the Employee's annual base
salary as in effect on the date hereof or as the same may
be increased from time to time, except for across-the-board
salary reductions similarly affecting all employees of the
Company and all executives of any Person in control of the
Company;
(C) a failure by the Company to continue any bonus plans in
which the Employee is presently entitled to participate
(the "Bonus Plans") as the same may be modified from time
to time, but substantially in the forms currently in
effect, or a failure by the Company to continue the
Employee as a participant in the Bonus Plans on at least
the same basis as the Employee presently participates in
accordance with the Bonus Plans;
(D) the Company's requiring the Employee, without his express
written consent, to be based anywhere other than within
twenty-five (25) miles of the Employee's present office
location, except for required travel on the Company's
business to an extent substantially consistent with the
Employee's present business travel obligations;
(E) the failure by the Company to continue in effect any benefit
or compensation plan, life insurance plan,
health-and-accident plan or disability plan in which the
Employee is participating at the time of a change in status
(or plans providing the Employee with substantially similar
benefits), the taking of any action by the Company which
would adversely affect the Employee's participation in or
materially reduce the Employee's benefits under any of such
plans or deprive the Employee of any material fringe benefit
enjoyed by the Employee at the time of the change in status,
3
<PAGE>
or the failure by the Company to provide the Employee with
the number of paid vacation days to which the Employee is
then entitled in accordance with the Company's normal
vacation policy in effect on the date hereof; provided,
however, that none of the foregoing provisions of this
subparagraph (E) shall apply to any stock ownership plan,
stock option plan or stock appreciation rights plan (or
plans providing the Employee with substantially similar
benefits);
(F) the failure by the Company to obtain the assumption of the
obligation to perform this Agreement by any successor as
contemplated in Section 9A hereof; or
(G) any purported termination of the Employee's employment which
is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (iv) below (and, if
applicable, paragraph (ii) above); and for purposes of this
Agreement, no such purported termination shall be effective.
(iv) Notice of Termination. Any purported termination by the
Company pursuant to paragraph (i) or (ii) above or by the
Employee pursuant to subparagraph (B) of paragraph (i) or
paragraph (iii) above shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so
indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if
the Employee's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that
the Employee shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day
period), (B) if the Employee's employment is terminated
pursuant to paragraph (ii) above, the date specified in the
Notice of Termination, and (C) if the Employee's employment is
terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days
after any Notice of Termination is given the party receiving
such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties,
by a binding and final arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction
entered upon such arbitration award (the time for appeal
therefrom having expired and no appeal having been perfected).
4
<PAGE>
2. Payment of Severance Benefits. No severance benefits shall be
payable hereunder unless the Employee's employment by the Company shall have
been terminated for a reason other than one of the reasons described in clauses
(a), (b) or (c) of the first sentence of Section 1 hereof during the Severance
Protection Period.
3. Definition of Change in Status. The term "change in status" shall
hereinafter be used to refer to either a change in control of the Company or a
workforce adjustment, as each is defined below. For purposes of this Agreement,
a transaction constituting a change in status shall be deemed to have occurred
upon the closing of such transaction.
A. For purposes of this Agreement, a "change in control of the
Company" shall mean the occurrence of any one of the following events:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by
any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than fifty
percent (50%) of the combined voting power of the Company's
then outstanding Voting Securities; provided, however, in
determining whether a change in control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition"
(as hereinafter defined) shall not constitute an acquisition
which would cause a change in control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained by
(1) the Company or (2) any corporation or other Person of which
a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the
Company (for purposes of this definition, a "Subsidiary"), (B)
the Company or its Subsidiaries, or (C) any Person in
connection with a "Non-Control Transaction" (as hereinafter
defined);
(ii) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization is
a "Non-Control Transaction." A "Non-Control Transaction" shall
mean a merger, consolidation or reorganization of the Company
where:
(1) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger,
consolidation or reorganization, at least fifty percent
(50%) of the combined voting power of the outstanding
voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as
their ownership of the Voting Securities immediately
before such merger, consolidation or reorganization, or
5
<PAGE>
(2) no Person other than (i) the Company, (ii) any Subsidiary,
(iii) any employee benefit plan (or any trust forming a
party thereof) maintained by the Company, the Surviving
Corporation, or any Subsidiary, or (iv) any Person who,
immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of more than fifty
percent (50%) or more of the then outstanding Voting
Securities), has Beneficial Ownership of more than fifty
percent (50%) or more of the combined voting power of the
Surviving Corporation's then outstanding voting
securities; or
(iii) The sale or other disposition of all or substantially all of
the assets of the Company to any Person (other than a
transfer to a Subsidiary).
B. Notwithstanding the foregoing, a change in control of the
Company shall not be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted amount of the
then outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Company which, by reducing the number of Voting Securities
then outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Person, provided that if a change in control would occur
(but for the operation of this sentence) as a result of the acquisition of
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Voting Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a change in control
shall occur.
C. For purposes of this Agreement, a "workforce adjustment"
shall mean the sale or other disposition of all or substantially all of the
assets of the Aydin Telemetry Division or any other division of the Company
that accounts for at least fifteen percent (15%) of the Company's gross
revenues to any Person (other than a transfer to a Subsidiary).
D. Notwithstanding the foregoing, a change in status will not be
deemed to have occurred with respect to the Employee if he, either directly or
indirectly, is financially involved as a principal or otherwise (1) of any
successor to the Company or of any Person who purchases all or substantially
all of the Company's assets, or (2) in the event of a workforce adjustment, of
any Person who purchases all or substantially all of the business or assets of
a division identified in Section 3C hereof.
4. Severance Benefits Upon Termination. If during the Severance
Protection Period, the Employee's employment by the Company shall be
terminated (a) by the Company other than for Cause, Disability or Retirement
or (b) by the Employee for Good Reason, then the Employee shall be entitled to
the benefits provided below:
(i) the Company shall pay the Employee his full base salary through
the Date of Termination at the rate in effect at the time
Notice of Termination is given plus credit for any vacation
earned but not taken and the amount, if
6
<PAGE>
any, of any bonus for a past performance period which has
been earned, but not yet paid to the Employee;
(ii) the Employee shall continue to receive as severance pay for the
six month period subsequent to the Date of Termination
payments of the Employee's base salary at the highest rate in
effect during the twelve (12) months immediately preceding
the Date of Termination, payable in the same manner as
salaries paid to other active employees of the Company;
(iii) any options to purchase shares of the Company's common stock
theretofore granted to the Employee by the Company shall
immediately become fully exercisable and shall remain
exercisable in accordance with their terms for at least six
months, regardless of any provision in the option grants to
the contrary; and
(iv) the Company shall maintain in full force and effect, for the
Employee's continued benefit until the earlier of (A) six
months after the Date of Termination or (B) the Employee's
commencement of full time employment with a new employer, all
life insurance, medical, health, dental and disability plans,
programs or arrangements in which the Employee was entitled
to participate immediately prior to the Date of Termination,
provided that the Employee's continued participation is
possible under the general terms and provisions of such plans
and programs. In the event that the Employee's participation
in any such plan or program is barred, the Company shall
arrange to provide the Employee with benefits substantially
similar to those which the Employee is entitled to receive
under such plans and programs.
5. Mitigation. The Employee shall not be required to mitigate the
amount of any payment provided for in Section 4 hereof by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Section 4 hereof be reduced by any compensation earned by the Employee as the
result of employment by another employer after the Date of Termination, or
otherwise.
6. Options. If as the result of a change in status or in anticipation
of a change in status, the Board determines that all options issued by the
Company to purchase shares of common stock of the Company are to be
terminated, then all of the options granted to the Employee by the Company
shall become fully exercisable, regardless of vesting, not less than thirty
(30) days prior to the date such options are to be terminated.
7. Certain Obligations.
7
<PAGE>
(i) Confidential Information. In consideration of the mutual terms
and agreements set forth herein the Employee hereby agrees to
hold in a fiduciary capacity for the benefit of the Company
and its subsidiaries all proprietary, secret or confidential
information, knowledge or data relating to the Company or its
subsidiaries, and their respective businesses, which shall
have been obtained by the Employee during his employment by
the Company or its subsidiaries and which shall not be or
become public knowledge (other than by acts by the Employee
or his representatives in violation of this Agreement). After
termination of the Employee's employment with the Company or
its subsidiaries, the Employee agrees that he will not,
without the prior written consent of the Company, communicate
or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The
Employee's undertakings set forth in this subsection (i)
hereof are in addition to, and not in substitution of, any
other obligation the Employee may have, whether by other
agreement or imposed by law, regarding confidentiality and
disclosure of information, knowledge or data relating to the
Company and its subsidiaries.
(ii) Non-Compete. In consideration of the mutual terms and
agreements set forth herein the Employee hereby agrees that
while employed by the Company, the Employee will not, unless
authorized in writing to do so by the Company, directly or
indirectly own, manage, operate, join, control or participate
in the ownership, management, operation or control of, or be
employed or otherwise connected in any substantial manner
with, any business in North America which directly or
indirectly competes with any line of business of the Company
or its subsidiaries; provided, that nothing in this
subsection (ii) shall prohibit the Employee from acquiring up
to five percent (5%) of any class of outstanding equity
securities of any corporation whose equity securities are
regularly traded on a national securities exchange or in the
"over-the-counter market." The Employee also agrees that
following the Employee's termination of employment and until
the first anniversary of the Employee's Date of Termination,
the Employee will not (x) recruit any employee of the Company
or its subsidiaries or solicit or induce, or attempt to
solicit or induce, any employee of the Company or its
subsidiaries to terminate his or her employment with, or
otherwise cease his or her relationship with, the Company or
its subsidiaries, provided that this will not preclude hiring
any person who contacts the Employee for employment and who
has not been employed by the Company or its subsidiaries at
any time during the preceding six months; or (y) solicit,
divert or take away, or attempt to solicit, divert or take
away, the business or patronage of any of the clients,
customers or accounts, or prospective clients, customers or
accounts, of the Company or its subsidiaries that were
contacted, solicited or served by the Employee while employed
by the Company or its subsidiaries.
8
<PAGE>
(iii) Remedies. The Company and the Employee confirm that the
restrictions contained in Sections 7(i) and 7(ii) hereof are,
in view of the nature of the business of the Company,
reasonable and necessary to protect the legitimate interests
of the Company and that any violation of any provision of
Section 7(i) or 7(ii) will result in irreparable injury to
the Company. The Employee hereby agrees that, in the event of
the Employee's breach or threatened breach of the terms or
conditions of Section 7(i) or 7(ii) of this Agreement, the
Company's remedies at law will be inadequate and, in any such
event, the Company shall be entitled to commence an action
for preliminary and permanent injunctive relief and other
equitable relief in any court of competent jurisdiction.
(iv) Modification of Terms. If any restriction in this Section 7 is
adjudicated to exceed the time, geographic, service or other
limitations permitted by applicable law in any jurisdiction,
the Employee agrees that such may be modified and narrowed,
either by a court or the Company, to the maximum time,
geographic, service or other limitations permitted by
applicable law so as to preserve and protect the Company's
legitimate business interest, without negating or impairing
any other restriction or undertaking set forth in this
Agreement.
8. Term of Agreement. This Agreement shall terminate at the end of
the Severance Protection Period, provided that if, at the end of the Severance
Protection Period, the Employee is still receiving salary continuation
payments in accordance with Section 4(ii) hereof, the term of this Agreement
shall be extended until the last payment due under such section has been made.
9. Successors; Binding Agreement.
A. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated his employment for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 9 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
B. This Agreement shall inure to the benefit of and be enforceable
by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die after a Notice of Termination has
9
<PAGE>
been delivered by the Employee or while any amount would still be payable to
the Employee hereunder if the Employee had continued to live, all amounts due
to the Employee under this Agreement, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Employee's
devisee, legatee or other designee or, if there be no such designee, to the
Employee's estate.
10. Notice. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally, when sent
by a nationally recognized overnight delivery service, when mailed by
certified or registered mail, return receipt requested, postage prepaid, or
when sent by telegram, fax or telecopy (confirmed by U.S. Mail), receipt
acknowledged, addressed as follows:
If to the Company:
Aydin Corporation
700 Dresher Road
Horsham, PA 19044
Attention: Chief Operating Officer
If to the Employee:
[ADDRESS]
The Employee or the Company may change the person or address to
which notices or other communications are to be sent by giving written notice
of such change to the other party in the manner provided herein for giving
notice.
11. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by the Employee and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement; provided, however, that this Agreement shall not supersede or
in any way limit the rights, duties or obligations the Employee may have under
any other written agreement with the Company. Moreover, the severance payments
provided herein following a change in status shall be in place of, and shall
not be in addition to, any and all other severance benefits to which the
Employee may be entitled. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania without giving effect to otherwise applicable
principles of conflicts of law. Finally, the Company shall withhold
10
<PAGE>
from all amounts payable under this Agreement such Federal, state and local
taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
12. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts; Headings. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument. The headings of
the Sections of this Agreement are for convenience of reference only and shall
not control or affect the meaning or construction or limit the scope or intent
of any of the provisions of this Agreement.
14. Arbitration. Except with respect to relief sought by the
Company pursuant to Section 7(iii) hereof, any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Philadelphia, Pennsylvania in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
IN WITNESS WHEREOF, the undersigned have signed this Agreement on the
date indicated above.
AYDIN CORPORATION
By:
--------------------------- ------------------------------------
Chief Operating Officer Employee
11
<PAGE>
EXECUTIVE RETENTION AGREEMENT
THIS IS AN AGREEMENT made on this 29th day of September, 1998 (the
"Date of this Agreement"), by and between Aydin Corporation, a Delaware
corporation (the "Company"), and [name] , who is the [title] of the Company's
Turkish Division (the "Executive").
WHEREAS, the Company recently announced publicly that it has engaged
PricewaterhouseCoopers Securities, L.L.C. to assist the Company in evaluating
potential strategic alternatives to enhance shareholder value; and
WHEREAS, such announcement has led to uncertainty regarding the future
path of the Company and the long-term prospects for executive employment with
the Company; and
WHEREAS, the Executive is an "employee at will," and as such the
Company is not legally obligated to continue his employment for any fixed period
of time; and
WHEREAS, the Company's Board of Directors (the "Board") believes it is
important to the enhancement of shareholder value that, notwithstanding such
uncertainty, the Executive continue his employment with the Company in order
that the Company can benefit from the continued availability of the Executive's
services, for a period continuing until after the Board has completed its
evaluation of strategic alternatives and, should the Board cause the Company to
engage in, or recommend to the shareholders that the Company engage in, any form
of transaction to increase shareholder value, continuing for a period of time
after such transaction has been consummated; and consequently, the Board intends
to provide the incentives set forth herein for the Executive to remain in the
Company's employ during such period; and
WHEREAS, as an additional inducement for the Executive to remain in the
employ of the Company both before and after a change in control transaction,
this agreement (the "Agreement") provides that certain severance benefits will
be paid to the Executive in the event the Executive's employment is terminated
by the Company without cause or by the Executive for good reason within two
years following the execution of this Agreement;
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive agree as follows:
1. Retention Bonus.
A. The Company agrees to pay to the Executive a retention bonus
under either of the following circumstances:
(i) In the absence of a change in status, as defined in Section 4
hereof, during the period of one (1) year following the Date
of this
<PAGE>
Agreement, the Executive shall have remained employed by the
Company continuously throughout that period; or
(ii) In the event a change in status does occur within one (1) year
after the Date of this Agreement, the Executive shall have
remained employed by the Company or its successor
continuously throughout the period of six (6) consecutive
months from the date of the change in status.
B. The amount of the retention bonus payable under this Section 1
shall be equal to twenty-five percent (25%) of the Executive's annual base
salary in effect upon the Date of this Agreement. The retention bonus shall be
paid to the Executive in cash within thirty (30) days after the date on which
the Executive satisfies the requirements of either A(i) or A(ii) above,
whichever is applicable (such date hereinafter referred to as the "Bonus Date").
2. Payment of Severance Benefits. No severance benefits shall be
payable hereunder unless the Executive's employment by the Company shall have
been terminated for one of the reasons set forth in Section 5 hereof during the
period commencing on the Date of this Agreement and ending on the second
anniversary of that date (the "Change in Status Period").
3. Termination During the Change in Status Period. The Executive shall
be entitled to the benefits provided in Section 5 hereof upon the termination of
the Executive's employment at any time during the Change in Status Period unless
such termination is (a) because of the Executive's death or Retirement, (b) by
the Company for Cause or Disability or (c) by the Executive other than for Good
Reason. If the Executive's termination of employment is because of one of the
reasons described in (a), (b) or (c) in the preceding sentence, the Executive's
rights under this Agreement shall cease as of the date of such termination. For
purposes of this Agreement, the following definitions shall apply:
(i) Disability; Retirement.
(A) Termination by the Company of the Executive's employment
based on "Disability" shall mean termination because of the
Executive's absence from his duties with the Company on a
full-time basis for ninety (90) consecutive business days,
as a result of the Executive's incapacity due to physical
or mental illness, unless within thirty (30) days after a
Notice of Termination (as hereinafter defined) is given
following such absence the Executive shall have returned to
the full-time performance of his duties. If the Company
terminates the Executive's employment by reason of
Disability, the Executive shall be entitled to the benefits
determined in accordance with the Company's retirement and
welfare benefit programs then in effect, provided that in
no event shall such retirement and welfare benefits be
materially less than those in effect immediately prior to
the change in status.
2
<PAGE>
(B) Termination by the Executive of his employment based on
"Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement,
generally applicable to its salaried employees.
(ii) Cause. Termination by the Company of the Executive's employment
for "Cause" shall mean termination upon:
(A) the Executive's willful and continued failure to
substantially perform his duties with the Company (other
than any such failure resulting from the Executive's
incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to the
Executive by the Board, which specifically identifies the
manner in which the Board believes that the Executive has
not substantially performed his duties; or
(B) the Executive's admission or conviction of, or plea of nolo
contendere to, any felony that, in the judgement of the
Board, adversely affects the Company's reputation or the
Executive's ability to carry out his obligations as an
officer of the Company; or
(C) the Executive's willful engaging in misconduct which is
materially injurious to the Company, monetarily or
otherwise. For purposes of this paragraph, no act, or
failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief
that the Executive's action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to
the Executive a copy of a Notice of Termination from the
Board, after reasonable notice to the Executive and an
opportunity for the Executive to be heard before the
Compensation Committee of the Board (or, if there be no
such Committee or such Committee delivers the Notice of
Termination, the Board), finding that in the good faith
opinion of such Committee (or the Board) the Executive was
guilty of conduct set forth above in clauses (A), (B) or
(C) of the first sentence of this paragraph and specifying
the particulars thereof in detail.
(iii) Good Reason. The Executive's termination of his employment for
"Good Reason" shall mean a termination on account of:
(A) the assignment, without the Executive's express written
consent, to the Executive of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company immediately prior to a change in status, or a
change in the Executive's reporting
3
<PAGE>
responsibilities, titles or offices as in effect
immediately prior to a change in status, or any removal of
the Executive from or any failure to re-elect the Executive
to any of such positions, except in connection with the
termination of the Executive's employment for Cause,
Disability or Retirement or as a result of the Executive's
death or by the Executive other than for Good Reason;
(B) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may
be increased from time to time, except for across-the-board
salary reductions similarly affecting all executives of the
Company and all executives of any Person in control of the
Company;
(C) a failure by the Company to continue any bonus plans in
which the Executive is presently entitled to participate
(the "Bonus Plans") as the same may be modified from time
to time, but substantially in the forms currently in
effect, or a failure by the Company to continue the
Executive as a participant in the Bonus Plans on at least
the same basis as the Executive presently participates in
accordance with the Bonus Plans;
(D) the Company's requiring the Executive, without his express
written consent, to be based anywhere other than within
twenty-five (25) miles of the Executive's present office
location, except for required travel on the Company's
business to an extent substantially consistent with the
Executive's present business travel obligations;
(E) the failure by the Company to continue in effect any
benefit or compensation plan, life insurance plan,
health-and-accident plan or disability plan in which the
Executive is participating at the time of a change in
status (or plans providing the Executive with substantially
similar benefits), the taking of any action by the Company
which would adversely affect the Executive's participation
in or materially reduce the Executive's benefits under any
of such plans or deprive the Executive of any material
fringe benefit enjoyed by the Executive at the time of the
change in status, or the failure by the Company to provide
the Executive with the number of paid vacation days to
which the Executive is then entitled in accordance with the
Company's normal vacation policy in effect on the date
hereof; provided, however, that none of the foregoing
provisions of this subparagraph (E) shall apply to any
stock ownership plan, stock option plan or stock
appreciation rights plan (or plans providing the Executive
with substantially similar benefits);
4
<PAGE>
(F) the failure by the Company to obtain the assumption of
the obligation to perform this Agreement by any successor
as contemplated in Section 10A hereof; or
(G) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (iv) below (and,
if applicable, paragraph (ii) above); and for purposes of
this Agreement, no such purported termination shall be
effective.
(iv) Notice of Termination. Any purported termination by the
Company pursuant to paragraph (i) or (ii) above or by the
Executive pursuant to subparagraph (B) of paragraph (i) or
paragraph (iii) above shall be communicated by written Notice
of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the
provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if
the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the
performance of his duties on a full-time basis during such
thirty (30) day period), (B) if the Executive's employment is
terminated pursuant to paragraph (ii) above, the date
specified in the Notice of Termination, and (C) if the
Executive's employment is terminated for any other reason, the
date on which a Notice of Termination is given; provided that
if within thirty (30) days after any Notice of Termination is
given the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding and final
arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction entered upon such arbitration
award (the time for appeal therefrom having expired and no
appeal having been perfected).
4. Definition of Change in Status. The term "change in status" shall
hereinafter be used to refer to either a change in control of the Company or a
workforce adjustment, as each is defined below. For purposes of this Agreement,
a transaction constituting a change in status shall be deemed to have occurred
upon the closing of such transaction.
A. For purposes of this Agreement, a "change in control of the
Company" shall mean the occurrence of any one of the following events:
5
<PAGE>
(i) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting
Securities") by any "Person" (as the term person is used
for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than fifty percent (50%) of
the combined voting power of the Company's then outstanding
Voting Securities; provided, however, in determining
whether a change in control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition
which would cause a change in control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained
by (1) the Company or (2) any corporation or other Person
of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or
indirectly, by the Company (for purposes of this
definition, a "Subsidiary"), (B) the Company or its
Subsidiaries, or (C) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(ii) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a merger,
consolidation or reorganization of the Company where:
(1) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own
directly or indirectly immediately following such
merger, consolidation or reorganization, at least
fifty percent (50%) of the combined voting power of
the outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership
of the Voting Securities immediately before such
merger, consolidation or reorganization, or
(2) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any
trust forming a party thereof) maintained by the
Company, the Surviving Corporation, or any Subsidiary,
or (iv) any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial
Ownership of more than fifty percent (50%) or more of
the then outstanding Voting Securities), has
Beneficial Ownership of more than fifty percent (50%)
or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities; or
(iii) The sale or other disposition of all or substantially all
of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
6
<PAGE>
B. Notwithstanding the foregoing, a change in control of the Company
shall not be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted amount
of the then outstanding Voting Securities as a result of the acquisition
of Voting Securities by the Company which, by reducing the number of
Voting Securities then outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Person, provided that if a change
in control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional Voting Securities which increases the
percentage of the then outstanding Voting Securities Beneficially Owned by
the Subject Person, then a change in control shall occur.
C. For purposes of this Agreement, a "workforce adjustment"
shall mean the sale or other disposition of all or substantially all of
the assets of the Aydin Telemetry Division or any other division of the
Company (other than the Displays Division) that accounts for at least
fifteen percent (15%) of the Company's gross revenues to any Person (other
than a transfer to a Subsidiary).
D. Notwithstanding the foregoing, a change in status will not
be deemed to have occurred with respect to the Executive if he, either directly
or indirectly, is financially involved as a principal or otherwise (1) of any
successor to the Company or of any Person who purchases all or substantially all
of the Company's assets, or (2) in the event of a workforce adjustment, of any
Person who purchases all or substantially all of the business or assets of a
division identified in Section 4C hereof.
5. Severance Benefits Upon Termination. If during the Change in Status
Period, the Executive's employment by the Company shall be terminated (a) by the
Company other than for Cause, Disability or Retirement or (b) by the Executive
for Good Reason, then the Executive shall be entitled to the benefits provided
below:
(i) the Company shall pay the Executive his full base
salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given
plus credit for any vacation earned but not taken and
the amount, if any, of any bonus for a past
performance period which has been earned, but not yet
paid to the Executive;
(ii) the Executive shall continue to receive as severance
pay during the six month period subsequent to the
Date of Termination payments of the Executive's base
salary at the highest rate in effect during the
twelve (12) months immediately preceding the Date of
Termination, payable in the same manner as salaries
paid to other active executive employees of the
Company;
(iii) all options to purchase shares of the Company's
common stock granted to the Executive by the Company
shall immediately become fully exercisable
7
<PAGE>
and shall remain exercisable in accordance with
their terms for at least one year, regardless of any
provision in the option grants to the contrary; and
(iv) the Company shall maintain in full force and effect,
for the Executive's continued benefit until the
earlier of (A) six months after the Date of
Termination or (B) the Executive's commencement of
full time employment with a new employer, all life
insurance, medical, health, dental and disability
plans, programs or arrangements in which the
Executive was entitled to participate immediately
prior to the Date of Termination, provided that the
Executive's continued participation is possible
under the general terms and provisions of such plans
and programs. In the event that the Executive's
participation in any such plan or program is barred,
the Company shall arrange to provide the Executive
with benefits substantially similar to those which
the Executive is entitled to receive under such
plans and programs.
6. Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in Section 5 hereof by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Section 5 hereof be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
7. Options. If as the result of a change in status or in anticipation
of a change in status, the Board determines that all options issued by the
Company to purchase shares of common stock of the Company are to be terminated,
then all of the options granted to the Executive by the Company shall become
fully exercisable, regardless of vesting, not less than thirty (30) days prior
to the date such options are to be terminated.
8. Certain Obligations.
8
<PAGE>
(i) Confidential Information. In consideration of the mutual
terms and agreements set forth herein the Executive hereby
agrees to hold in a fiduciary capacity for the benefit of
the Company and its subsidiaries all proprietary, secret or
confidential information, knowledge or data relating to the
Company or its subsidiaries, and their respective
businesses, which shall have been obtained by the Executive
during his employment by the Company or its subsidiaries and
which shall not be or become public knowledge (other than by
acts by the Executive or his representatives in violation of
this Agreement). After termination of the Executive's
employment with the Company or its subsidiaries, the
Executive agrees that he will not, without the prior written
consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the
Company and those designated by it. The Executive's
undertakings set forth in this subsection (i) hereof are in
addition to, and not in substitution of, any other
obligation the Executive may have, whether by other
agreement or imposed by law, regarding confidentiality and
disclosure of information, knowledge or data relating to the
Company and its subsidiaries.
(ii) Non-Compete. In consideration of the mutual terms and
agreements set forth herein the Executive hereby agrees that
while employed by the Company, the Executive will not,
unless authorized in writing to do so by the Company,
directly or indirectly own, manage, operate, join, control
or participate in the ownership, management, operation or
control of, or be employed or otherwise connected in any
substantial manner with, any business in North America which
directly or indirectly competes with any line of business of
the Company or its subsidiaries; provided, that nothing in
this subsection (ii) shall prohibit the Executive from
acquiring up to five percent (5%) of any class of
outstanding equity securities of any corporation whose
equity securities are regularly traded on a national
securities exchange or in the "over-the-counter market." The
Executive also agrees that following the Executive's
termination of employment and until the first anniversary of
the Executive's Date of Termination, the Executive will not
(x) recruit any employee of the Company or its subsidiaries
or solicit or induce, or attempt to solicit or induce, any
employee of the Company or its subsidiaries to terminate his
or her employment with, or otherwise cease his or her
relationship with, the Company or its subsidiaries, provided
that this will not preclude hiring any person who contacts
the Executive for employment and who has not been employed
by the Company or its subsidiaries at any time during the
preceding six months; or (y) solicit, divert or take away,
or attempt to solicit, divert or take away, the business or
patronage of any of the clients, customers or accounts, or
prospective clients, customers or accounts, of the Company
or its subsidiaries that were contacted, solicited or served
by the Executive while employed by the Company or its
subsidiaries.
9
<PAGE>
(iii) Remedies. The Company and the Executive confirm that the
restrictions contained in Sections 8(i) and 8(ii) hereof
are, in view of the nature of the business of the Company,
reasonable and necessary to protect the legitimate interests
of the Company and that any violation of any provision of
Section 8(i) or 8(ii) will result in irreparable injury to
the Company. The Executive hereby agrees that, in the event
of the Executive's breach or threatened breach of the terms
or conditions of Section 8(i) or 8(ii) of this Agreement,
the Company's remedies at law will be inadequate and, in any
such event, the Company shall be entitled to commence an
action for preliminary and permanent injunctive relief and
other equitable relief in any court of competent
jurisdiction.
(iv) Modification of Terms. If any restriction in this Section 8
is adjudicated to exceed the time, geographic, service or
other limitations permitted by applicable law in any
jurisdiction, the Executive agrees that such may be modified
and narrowed, either by a court or the Company, to the
maximum time, geographic, service or other limitations
permitted by applicable law so as to preserve and protect
the Company's legitimate business interest, without negating
or impairing any other restriction or undertaking set forth
in this Agreement.
9. Term of Agreement. This Agreement shall terminate at the end of the
Change in Status Period, provided that if, at the end of the Change in Status
Period, the Executive is still receiving salary continuation payments in
accordance with Section 5(ii) hereof, the term of this Agreement shall be
extended until the last payment due under such section has been made.
10. Successors; Binding Agreement.
A. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled hereunder if the
Executive terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 10 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
B. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die after a Notice of Termination has
10
<PAGE>
been delivered by the Executive or while any amount would still be payable to
the Executive hereunder if the Executive had continued to live, all amounts due
to the Executive under this Agreement, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee or other designee or, if there be no such designee, to the
Executive's estate.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally, when sent by a
nationally recognized overnight delivery service, when mailed by certified or
registered mail, return receipt requested, postage prepaid, or when sent by
telegram, fax or telecopy (confirmed by U.S. Mail), receipt acknowledged,
addressed as follows:
If to the Company:
Aydin Corporation
700 Dresher Road
Horsham, PA 19044
Attention: Chief Executive Officer
If to the Executive:
[address]
The Executive or the Company may change the person or address
to which notices or other communications are to be sent by giving written notice
of such change to the other party in the manner provided herein for giving
notice.
12. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement; provided,
however, that this Agreement shall not supersede or in any way limit the rights,
duties or obligations the Executive may have under any other written agreement
with the Company. Moreover, the severance payments provided herein following a
change in status shall be in place of, and shall not be in addition to, any and
all other severance benefits to which the Executive may be entitled. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the Commonwealth of Pennsylvania without giving
effect to otherwise applicable principles of conflicts of law. Finally, the
Company shall withhold
11
<PAGE>
from all amounts payable under this Agreement such Federal, state and local
taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Counterparts; Headings. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument. The headings of the
Sections of this Agreement are for convenience of reference only and shall not
control or affect the meaning or construction or limit the scope or intent of
any of the provisions of this Agreement.
15. Arbitration. Except with respect to relief sought by the Company
pursuant to Section 8(iii) hereof, any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration in
Philadelphia, Pennsylvania in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
IN WITNESS WHEREOF, the undersigned have signed this Agreement on the
date indicated above.
AYDIN CORPORATION
By:
--------------------------- ------------------------------------
Chief Executive Officer Executive
<PAGE>
EXECUTIVE RETENTION AGREEMENT
-----------------------------
THIS IS AN AGREEMENT made on this 16th day of September, 1998 (the
"Date of this Agreement"), by and between Aydin Corporation, a Delaware
corporation (the "Company"), and [name] , who is the [title] of the Company
(the "Executive").
WHEREAS, the Company recently announced publicly that it has engaged
PricewaterhouseCoopers Securities, L.L.C. to assist the Company in evaluating
potential strategic alternatives to enhance shareholder value; and
WHEREAS, such announcement has led to uncertainty regarding the future
path of the Company and the long-term prospects for executive employment with
the Company; and
WHEREAS, the Executive is an "employee at will," and as such the
Company is not legally obligated to continue his employment for any fixed
period of time; and
WHEREAS, the Company's Board of Directors (the "Board") believes it is
important to the enhancement of shareholder value that, notwithstanding such
uncertainty, the Executive continue his employment with the Company in order
that the Company can benefit from the continued availability of the Executive's
services, for a period continuing until after the Board has completed its
evaluation of strategic alternatives and, should the Board cause the Company to
engage in, or recommend to the shareholders that the Company engage in, any
form of transaction to increase shareholder value, continuing for a period of
time after such transaction has been consummated; and consequently, the Board
intends to provide the incentives set forth herein for the Executive to remain
in the Company's employ during such period; and
WHEREAS, as an additional inducement for the Executive to remain in
the employ of the Company both before and after a change in control
transaction, this agreement (the "Agreement") provides that certain severance
benefits will be paid to the Executive in the event the Executive's employment
is terminated by the Company without cause or by the Executive for good reason
within two years following the execution of this Agreement;
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Executive agree as follows:
1. Retention Bonus.
A. The Company agrees to pay to the Executive a retention bonus
under either of the following circumstances:
(i) In the absence of a change in status, as defined in Section
4 hereof, during the period of one (1) year following the
Date of this
<PAGE>
Agreement, the Executive shall have remained employed by
the Company continuously throughout that period; or
(ii) In the event a change in status does occur within one (1)
year after the Date of this Agreement, the Executive shall
have remained employed by the Company or its successor
continuously throughout the period of six (6) consecutive
months from the date of the change in status.
B. The amount of the retention bonus payable under this Section 1
shall be equal to twenty-five percent (25%) of the Executive's annual base
salary in effect upon the Date of this Agreement. The retention bonus shall be
paid to the Executive in cash within thirty (30) days after the date on which
the Executive satisfies the requirements of either A(i) or A(ii) above,
whichever is applicable (such date hereinafter referred to as the "Bonus
Date").
2. Payment of Severance Benefits. No severance benefits shall be
payable hereunder unless the Executive's employment by the Company shall have
been terminated for one of the reasons set forth in Section 5 hereof during the
period commencing on the Date of this Agreement and ending on the second
anniversary of that date (the "Change in Status Period").
3. Termination During the Change in Status Period. The Executive shall
be entitled to the benefits provided in Section 5 hereof upon the termination
of the Executive's employment at any time during the Change in Status Period
unless such termination is (a) because of the Executive's death or Retirement,
(b) by the Company for Cause or Disability or (c) by the Executive other than
for Good Reason. If the Executive's termination of employment is because of one
of the reasons described in (a), (b) or (c) in the preceding sentence, the
Executive's rights under this Agreement shall cease as of the date of such
termination. For purposes of this Agreement, the following definitions shall
apply:
(i) Disability; Retirement.
(A) Termination by the Company of the Executive's
employment based on "Disability" shall mean
termination because of the Executive's absence from
his duties with the Company on a full-time basis for
ninety (90) consecutive business days, as a result of
the Executive's incapacity due to physical or mental
illness, unless within thirty (30) days after a Notice
of Termination (as hereinafter defined) is given
following such absence the Executive shall have
returned to the full-time performance of his duties.
If the Company terminates the Executive's employment
by reason of Disability, the Executive shall be
entitled to the benefits determined in accordance with
the Company's retirement and welfare benefit programs
then in effect, provided that in no event shall such
retirement and welfare benefits be materially less
than those in effect immediately prior to the change
in status.
2
<PAGE>
(B) Termination by the Executive of his employment based on
"Retirement" shall mean termination in accordance with
the Company's retirement policy, including early
retirement, generally applicable to its salaried
employees.
(ii) Cause. Termination by the Company of the Executive's
employment for "Cause" shall mean termination upon:
(A) the Executive's willful and continued failure to
substantially perform his duties with the Company
(other than any such failure resulting from the
Executive's incapacity due to physical or mental
illness), after a demand for substantial performance
is delivered to the Executive by the Board, which
specifically identifies the manner in which the Board
believes that the Executive has not substantially
performed his duties; or
(B) the Executive's admission or conviction of, or plea of
nolo contendere to, any felony that, in the judgement
of the Board, adversely affects the Company's
reputation or the Executive's ability to carry out his
obligations as an officer of the Company; or
(C) the Executive's willful engaging in misconduct which is
materially injurious to the Company, monetarily or
otherwise. For purposes of this paragraph, no act, or
failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be
done, by the Executive not in good faith and without
reasonable belief that the Executive's action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Executive
a copy of a Notice of Termination from the Board,
after reasonable notice to the Executive and an
opportunity for the Executive to be heard before the
Compensation Committee of the Board (or, if there be
no such Committee or such Committee delivers the
Notice of Termination, the Board), finding that in the
good faith opinion of such Committee (or the Board)
the Executive was guilty of conduct set forth above in
clauses (A), (B) or (C) of the first sentence of this
paragraph and specifying the particulars thereof in
detail.
(iii) Good Reason. The Executive's termination of his employment
for "Good Reason" shall mean a termination on account of:
(A) the assignment, without the Executive's express written
consent, to the Executive of any duties inconsistent
with his positions, duties, responsibilities and
status with the Company immediately prior to a change
in status, or a change in the Executive's reporting
3
<PAGE>
responsibilities, titles or offices as in effect
immediately prior to a change in status, or any
removal of the Executive from or any failure to
re-elect the Executive to any of such positions,
except in connection with the termination of the
Executive's employment for Cause, Disability or
Retirement or as a result of the Executive's death or
by the Executive other than for Good Reason;
(B) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the
same may be increased from time to time, except for
across-the-board salary reductions similarly affecting
all executives of the Company and all executives of
any Person in control of the Company;
(C) a failure by the Company to continue any bonus plans in
which the Executive is presently entitled to
participate (the "Bonus Plans") as the same may be
modified from time to time, but substantially in the
forms currently in effect, or a failure by the Company
to continue the Executive as a participant in the
Bonus Plans on at least the same basis as the
Executive presently participates in accordance with
the Bonus Plans;
(D) the Company's requiring the Executive, without his
express written consent, to be based anywhere other
than within twenty-five (25) miles of the Executive's
present office location, except for required travel on
the Company's business to an extent substantially
consistent with the Executive's present business
travel obligations;
(E) the failure by the Company to continue in effect any
benefit or compensation plan, life insurance plan,
health-and-accident plan or disability plan in which
the Executive is participating at the time of a change
in status (or plans providing the Executive with
substantially similar benefits), the taking of any
action by the Company which would adversely affect the
Executive's participation in or materially reduce the
Executive's benefits under any of such plans or
deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the change in
status, or the failure by the Company to provide the
Executive with the number of paid vacation days to
which the Executive is then entitled in accordance
with the Company's normal vacation policy in effect on
the date hereof; provided, however, that none of the
foregoing provisions of this subparagraph (E) shall
apply to any stock ownership plan, stock option plan
or stock appreciation rights plan (or plans providing
the Executive with substantially similar benefits);
4
<PAGE>
(F) the failure by the Company to obtain the assumption of
the obligation to perform this Agreement by any
successor as contemplated in Section 10A hereof; or
(G) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of
Termination satisfying the requirements of paragraph
(iv) below (and, if applicable, paragraph (ii) above);
and for purposes of this Agreement, no such purported
termination shall be effective.
(iv) Notice of Termination. Any purported termination by the
Company pursuant to paragraph (i) or (ii) above or by the
Executive pursuant to subparagraph (B) of paragraph (i) or
paragraph (iii) above shall be communicated by written
Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's
employment under the provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A)
if the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the
performance of his duties on a full-time basis during such
thirty (30) day period), (B) if the Executive's employment
is terminated pursuant to paragraph (ii) above, the date
specified in the Notice of Termination, and (C) if the
Executive's employment is terminated for any other reason,
the date on which a Notice of Termination is given;
provided that if within thirty (30) days after any Notice
of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction
entered upon such arbitration award (the time for appeal
therefrom having expired and no appeal having been
perfected).
4. Definition of Change in Status. The term "change in status" shall
hereinafter be used to refer to either a change in control of the Company or a
workforce adjustment, as each is defined below. For purposes of this Agreement,
a transaction constituting a change in status shall be deemed to have occurred
upon the closing of such transaction.
A. For purposes of this Agreement, a "change in control of the
Company" shall mean the occurrence of any one of the following events:
5
<PAGE>
(i) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting
Securities") by any "Person" (as the term person is used
for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than fifty percent (50%)
of the combined voting power of the Company's then
outstanding Voting Securities; provided, however, in
determining whether a change in control has occurred,
Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute
an acquisition which would cause a change in control. A
"Non-Control Acquisition" shall mean an acquisition by (A)
an employee benefit plan (or a trust forming a part
thereof) maintained by (1) the Company or (2) any
corporation or other Person of which a majority of its
voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by the Company
(for purposes of this definition, a "Subsidiary"), (B) the
Company or its Subsidiaries, or (C) any Person in
connection with a "Non-Control Transaction" (as
hereinafter defined);
(ii) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a merger,
consolidation or reorganization of the Company where:
(1) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own
directly or indirectly immediately following such
merger, consolidation or reorganization, at least
fifty percent (50%) of the combined voting power of
the outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership
of the Voting Securities immediately before such
merger, consolidation or reorganization, or
(2) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any
trust forming a party thereof) maintained by the
Company, the Surviving Corporation, or any Subsidiary,
or (iv) any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial
Ownership of more than fifty percent (50%) or more of
the then outstanding Voting Securities), has
Beneficial Ownership of more than fifty percent (50%)
or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities; or
(iii) The sale or other disposition of all or substantially all
of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
6
<PAGE>
B. Notwithstanding the foregoing, a change in control of the
Company shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than the permitted
amount of the then outstanding Voting Securities as a result of the
acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities then outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person, provided that
if a change in control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional Voting Securities
which increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a change in control shall
occur.
C. For purposes of this Agreement, a "workforce adjustment"
shall mean the sale or other disposition of all or substantially all of
the assets of the Aydin Telemetry Division or any other division of the
Company (other than the Displays Division) that accounts for at least
fifteen percent (15%) of the Company's gross revenues to any Person (other
than a transfer to a Subsidiary).
D. Notwithstanding the foregoing, a change in status will not
be deemed to have occurred with respect to the Executive if he, either
directly or indirectly, is financially involved as a principal or
otherwise (1) of any successor to the Company or of any Person who
purchases all or substantially all of the Company's assets, or (2) in the
event of a workforce adjustment, of any Person who purchases all or
substantially all of the business or assets of a division identified in
Section 4C hereof.
5. Severance Benefits Upon Termination. If during the Change in Status
Period, the Executive's employment by the Company shall be terminated (a) by
the Company other than for Cause, Disability or Retirement or (b) by the
Executive for Good Reason, then the Executive shall be entitled to the benefits
provided below:
(i) the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at
the time Notice of Termination is given plus credit for any
vacation earned but not taken and the amount, if any, of
any bonus for a past performance period which has been
earned, but not yet paid to the Executive;
(ii) the Executive shall continue to receive as severance pay
during the one year period subsequent to the Date of
Termination payments of the Executive's base salary at the
highest rate in effect during the twelve (12) months
immediately preceding the Date of Termination, payable in
the same manner as salaries paid to other active executive
employees of the Company;
(iii) all options to purchase shares of the Company's common
stock granted to the Executive by the Company shall
immediately become fully exercisable
7
<PAGE>
and shall remain exercisable in accordance with their
terms for at least one year, regardless of any
provision in the option grants to the contrary; and
(iv) the Company shall maintain in full force and effect, for
the Executive's continued benefit until the earlier of (A)
one (1) year after the Date of Termination or (B) the
Executive's commencement of full time employment with a new
employer, all life insurance, medical, health, dental and
disability plans, programs or arrangements in which the
Executive was entitled to participate immediately prior to
the Date of Termination, provided that the Executive's
continued participation is possible under the general terms
and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or
program is barred, the Company shall arrange to provide the
Executive with benefits substantially similar to those
which the Executive is entitled to receive under such plans
and programs.
6. Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in Section 5 hereof by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Section 5 hereof be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
7. Options. If as the result of a change in status or in anticipation
of a change in status, the Board determines that all options issued by the
Company to purchase shares of common stock of the Company are to be terminated,
then all of the options granted to the Executive by the Company shall become
fully exercisable, regardless of vesting, not less than thirty (30) days prior
to the date such options are to be terminated.
8. Certain Obligations.
8
<PAGE>
(i) Confidential Information. In consideration of the mutual
terms and agreements set forth herein the Executive hereby
agrees to hold in a fiduciary capacity for the benefit of
the Company and its subsidiaries all proprietary, secret or
confidential information, knowledge or data relating to the
Company or its subsidiaries, and their respective
businesses, which shall have been obtained by the Executive
during his employment by the Company or its subsidiaries
and which shall not be or become public knowledge (other
than by acts by the Executive or his representatives in
violation of this Agreement). After termination of the
Executive's employment with the Company or its
subsidiaries, the Executive agrees that he will not,
without the prior written consent of the Company,
communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated
by it. The Executive's undertakings set forth in this
subsection (i) hereof are in addition to, and not in
substitution of, any other obligation the Executive may
have, whether by other agreement or imposed by law,
regarding confidentiality and disclosure of information,
knowledge or data relating to the Company and its
subsidiaries.
(ii) Non-Compete. In consideration of the mutual terms and
agreements set forth herein the Executive hereby agrees
that while employed by the Company, the Executive will not,
unless authorized in writing to do so by the Company,
directly or indirectly own, manage, operate, join, control
or participate in the ownership, management, operation or
control of, or be employed or otherwise connected in any
substantial manner with, any business in North America
which directly or indirectly competes with any line of
business of the Company or its subsidiaries; provided, that
nothing in this subsection (ii) shall prohibit the
Executive from acquiring up to five percent (5%) of any
class of outstanding equity securities of any corporation
whose equity securities are regularly traded on a national
securities exchange or in the "over-the-counter market."
The Executive also agrees that following the Executive's
termination of employment and until the first anniversary
of the Executive's Date of Termination, the Executive will
not (x) recruit any employee of the Company or its
subsidiaries or solicit or induce, or attempt to solicit or
induce, any employee of the Company or its subsidiaries to
terminate his or her employment with, or otherwise cease
his or her relationship with, the Company or its
subsidiaries, provided that this will not preclude hiring
any person who contacts the Executive for employment and
who has not been employed by the Company or its
subsidiaries at any time during the preceding six months;
or (y) solicit, divert or take away, or attempt to solicit,
divert or take away, the business or patronage of any of
the clients, customers or accounts, or prospective clients,
customers or accounts, of the Company or its subsidiaries
that were contacted, solicited or served by the Executive
while employed by the Company or its subsidiaries.
9
<PAGE>
(iii) Remedies. The Company and the Executive confirm that the
restrictions contained in Sections 8(i) and 8(ii) hereof
are, in view of the nature of the business of the Company,
reasonable and necessary to protect the legitimate
interests of the Company and that any violation of any
provision of Section 8(i) or 8(ii) will result in
irreparable injury to the Company. The Executive hereby
agrees that, in the event of the Executive's breach or
threatened breach of the terms or conditions of Section
8(i) or 8(ii) of this Agreement, the Company's remedies at
law will be inadequate and, in any such event, the Company
shall be entitled to commence an action for preliminary and
permanent injunctive relief and other equitable relief in
any court of competent jurisdiction.
(iv) Modification of Terms. If any restriction in this Section 8
is adjudicated to exceed the time, geographic, service or
other limitations permitted by applicable law in any
jurisdiction, the Executive agrees that such may be
modified and narrowed, either by a court or the Company, to
the maximum time, geographic, service or other limitations
permitted by applicable law so as to preserve and protect
the Company's legitimate business interest, without
negating or impairing any other restriction or undertaking
set forth in this Agreement.
9. Term of Agreement. This Agreement shall terminate at the end of the
Change in Status Period, provided that if, at the end of the Change in Status
Period, the Executive is still receiving salary continuation payments in
accordance with Section 5(ii) hereof, the term of this Agreement shall be
extended until the last payment due under such section has been made.
10. Successors; Binding Agreement.
A. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled hereunder if the
Executive terminated his employment for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 10 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
B. This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die after a Notice of Termination has
10
<PAGE>
been delivered by the Executive or while any amount would still be payable to
the Executive hereunder if the Executive had continued to live, all amounts due
to the Executive under this Agreement, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee or other designee or, if there be no such designee, to the
Executive's estate.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally, when sent by a
nationally recognized overnight delivery service, when mailed by certified or
registered mail, return receipt requested, postage prepaid, or when sent by
telegram, fax or telecopy (confirmed by U.S. Mail), receipt acknowledged,
addressed as follows:
If to the Company:
Aydin Corporation
700 Dresher Road
Horsham, PA 19044
Attention: Chief Executive Officer
If to the Executive:
[ADDRESS]
The Executive or the Company may change the person or address
to which notices or other communications are to be sent by giving written
notice of such change to the other party in the manner provided herein for
giving notice.
12. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement;
provided, however, that this Agreement shall not supersede or in any way limit
the rights, duties or obligations the Executive may have under any other
written agreement with the Company. Moreover, the severance payments provided
herein following a change in status shall be in place of, and shall not be in
addition to, any and all other severance benefits to which the Executive may be
entitled. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Pennsylvania
without giving effect to otherwise applicable principles of conflicts of law.
Finally, the Company shall withhold
11
<PAGE>
from all amounts payable under this Agreement such Federal, state and local
taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Counterparts; Headings. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument. The headings of the
Sections of this Agreement are for convenience of reference only and shall not
control or affect the meaning or construction or limit the scope or intent of
any of the provisions of this Agreement.
15. Arbitration. Except with respect to relief sought by the Company
pursuant to Section 8(iii) hereof, any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration
in Philadelphia, Pennsylvania in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
IN WITNESS WHEREOF, the undersigned have signed this Agreement on the
date indicated above.
AYDIN CORPORATION
By:
--------------------------- ------------------------------------
Chief Executive Officer Executive
<PAGE>
ANNEX A
AYDIN CORPORATION
700 DRESHER ROAD
PO BOX 349
HORSHAM, PA 19044
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about March 5, 1999 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Aydin Corporation, a Delaware Corporation (the "Company"),
to the holders of record of shares of common stock, par value $1.00 per share,
of the Company (the "Shares"). You are receiving this Information Statement in
connection with the possible election of persons designated by L-3
Communications Corporation, a Delaware corporation ("Parent"), to a majority of
the seats on the Board of Directors of the Company (the "Board" or "Board of
Directors").
Pursuant to an Agreement and Plan of Merger, dated as of March 1, 1999, by
and among Parent, Angel Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of L-3 ("Purchaser"), and the Company, Purchaser has commenced
a tender offer (the "Offer") for all of the issued and outstanding Shares at a
price of $13.50 per Share, net to the seller in cash, and following
consummation of the Offer, Purchaser will be merged with and into the Company
(the "Merger"), with the Company surviving as a wholly owned subsidiary of L-3.
The Merger Agreement provides that, promptly after the purchase of and
payment for a majority of the outstanding Shares pursuant to the Offer, Parent
will be entitled to designate such number of directors as will give Parent
representation on the Board proportionate to its ownership interest in the
Shares, rounded up to the next whole number. The Merger Agreement requires the
Company to use its best efforts to cause the Parent designees (the "Parent
Designees") to be elected to the Board under the circumstances described
therein. This Information Statement is being mailed to stockholders of the
Company pursuant to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Schedule 14D-9.
The information contained in this Information Statement concerning Parent,
Purchaser and the Parent Designees has been furnished to the Company by Parent.
The Company assumes no responsibility for the accuracy or completeness of such
information.
CERTAIN INFORMATION REGARDING THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each issued and outstanding Share is entitled to one vote. As of
March 1, 1999, 5,220,936 Shares were issued and outstanding and 632,550 Shares
were reserved for issuance upon the exercise of certain options and warrants
outstanding.
RIGHT TO DESIGNATE DIRECTORS; THE PARENT DESIGNEES
The Merger Agreement provides that, subject to compliance with applicable
law, promptly upon the purchase of and payment by Purchaser for Shares pursuant
to the Offer which represent at least a majority of the outstanding Shares (on
a fully diluted basis), Purchaser will be entitled to designate such number of
directors on the Board as is equal to the product of the total number of
directors on the Board (after giving effect to the directors designated by
Purchaser pursuant to this sentence) multiplied by the
A-1
<PAGE>
percentage that the aggregate number of Shares beneficially owned by Purchaser,
Parent and any of their affiliates bears to the total number of Shares then
outstanding (such number being the "Board Percentage"). The Company shall, upon
request of Purchaser, cause Purchaser's designees to satisfy the Board
Percentage, including without limitation increasing the size of the Board and
securing resignations of such number of its incumbent directors as is necessary
to enable Parent's Designees to be so elected to the Company Board, and shall
cause Parent's Designees to be so elected. Notwithstanding the foregoing, until
the Effective Time (as defined in the Merger Agreement), the Company shall
retain as members of the Company Board at least two directors who are directors
of the Company on the date hereof (the "Company Designees"); provided, that
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Company Board. If at any time prior to the Effective Time there are less
than two Company Designees on the Board, Parent, Purchaser and the Company
shall either (i) use their reasonable efforts to appoint successors who are not
affiliated with Parent or Purchaser or (ii) permit the resigning Company
Designee to appoint his or her successors in his or her reasonable discretion.
The Company will use its reasonable best efforts to cause persons designated by
Purchaser to constitute the same percentage as is on the Board of (i) each
Committee of the Board, (ii) each board of directors of each Subsidiary of the
Company and (iii) each committee of each such board, in each case only to the
extent permitted by law. The Company's obligations under the foregoing shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Parent or Purchaser will supply the Company any information with
respect to either of them and their nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1. Upon receipt of such
information from Parent or Purchaser, the Company shall include in the Schedule
14D-9 (as an annex or otherwise) the information required by Section 14(f) and
Rule 14f-1 as is necessary to enable Parent's Designees to be elected to the
Board.
Parent has informed the Company that it will choose the Parent Designees
from the directors and executive officers of Parent listed in Schedule I
attached hereto. Parent has advised the Company that each of the initial Parent
Designees has consented to serve on the Board of Directors of the Company and
that, to the best of its knowledge, none of the Parent Designees (i) has a
family relationship with any of the directors or executive officers of the
Company, (ii) beneficially owns any securities (or rights to acquire
securities) of the Company or (iii) has been involved in any transactions, or
has any business relationships with the Company or any of its directors,
executive officers or affiliates, of the type required to be disclosed pursuant
to Rule 14f-1 under the Exchange Act.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Certain information concerning the current Directors and executive
officers of the Company as of March 1, 1999 is set forth below:
<TABLE>
<CAPTION>
DIRECTOR OR
NAME OF DIRECTOR OR EXECUTIVE OFFICER AGE OFFICER SINCE POSITION WITH THE COMPANY
- --------------------------------------- ----- --------------- -----------------------------------
<S> <C> <C> <C>
Warren G. Lichtenstein ................ 33 1998 Chairman of the Board
James R. Henderson .................... 41 1996 President and Chief Operating
Officer
Herbert Welber ........................ 63 1986 Controller and Assistant Treasurer
Mark E. Schwarz ....................... 38 1998 Director
Keith Lane-Zucker ..................... 35 1998 Director
Harry D. Train, II .................... 71 1984 Director
I. Gary Bard .......................... 61 1994 Director
</TABLE>
Warren Lichtenstein has been Chairman of the Board of the Company since
October 1998. Mr. Lichtenstein is Secretary and the Managing Member of Steel
Partners, L.L.C., the general partner of Steel Partners II, L.P. ("Steel")
since January 1, 1996. Prior to such time, Mr. Lichtenstein was the Chairman
and a Director of Steel Partners, Ltd., the general partner of Steel Partners
Associates, L.P., which was the general partner of Steel since 1993 and prior
to January 1, 1996. Mr. Lichtenstein was the acquisition/risk arbitrage analyst
at Ballantrae Partners, L.P., a private investment partnership formed to invest
in risk arbitrage, special situations and undervalued companies, from 1988 to
1990. Mr. Lichtenstein
A-2
<PAGE>
is a Director of the following publicly held companies: Gateway Industries,
Inc., Rose's Holdings, Inc. and Saratoga Beverage Group, Inc. The business
address of Mr. Lichtenstein is 150 E. 52nd Street, 21st Floor, New York, New
York 10022.
James R. Henderson has been the President and Chief Operating Officer of
the Company since October, 1998. Mr. Henderson previously served as the Vice
President, Treasurer and Chief Financial Officer of the Company from July 1996
to October 1998. Prior to joining the Company, he held various accounting and
financial positions with Unisys Corporation (services and computer
manufacturing): Director of Financial Planning and Accounting (1989-1991),
Controller of Defense Operations (1991-1993), Executive Assistant to the
President of the Defense Group (1993-1994), Director of Operations for Unisys
Services Division (1994-1995), and Controller of Unisys Outsourcing Division
(1995-1996).
Herbert Welber has been the Controller and Assistant Treasurer of the
Company since August 1986. Previously Mr. Welber was Controller and Vice
President of the Displays Division since August 1981.
Mark E. Schwarz has been a Director of the Company since October 1998. Mr.
Schwarz has served as the Vice President and Manager of Sandera Capital,
L.L.C., a private investment firm, since 1995. Prior to such time, Mr. Schwarz
was a securities analyst and portfolio manager for SCM Advisors, L.L.C., a
registered investment advisor, from 1993 to 1996. Mr. Schwarz has also served
as the sole general partner of Newcastle Partners, L.P., a private investment
firm, since 1993. The business address of Mr. Schwarz is 1601 Elm Street, Suite
4000, Dallas, Texas 75201.
Keith Lane-Zucker has been a Director of the Company since October 1998.
Mr. Lane-Zucker has served as the Senior Securities Analyst for Societe
Generale Asset Management Corp., investment advisor to SoGen International
Fund, a portfolio of SoGen Funds, Inc., since December 1996. Mr. Lane-Zucker is
responsible for managing investments in domestic and international
corporations. Mr. Lane-Zucker began his career in 1987 at Merrill Lynch Capital
Markets in the Mergers and Acquisitions Group. In 1992, Mr. Lane-Zucker joined
Booz-Allen & Hamilton as a management consultant. From January 1995 to December
1996, Mr. Lane-Zucker was a research analyst and portfolio manager for a
domestic small-cap fund with ABB Investment Management. The business address of
Mr. Lane-Zucker is 1221 Avenue of the Americas, 8th Floor, New York, NY 10020.
Harry D. Train, II has been a Director of the Company since 1984. Mr.
Train has served as Manager, Hampton Roads Operations (defense studies and
analysis) of Science Applications International Corporation (SAIC), Norfolk,
Virginia, since October 1986.
I. Gary Bard has been a Director of the Company since July 1994. Mr. Bard
served as the Company's Chairman of the Board of Directors and Chief Executive
Officer from May 1996 to October 1998 and as its President from October 1996 to
October 1997. Prior to such time, Mr. Bard served as Vice President and
General Manager, Federal Systems Solutions Integration Division of Unisys
Corporation, providing integration solutions to the federal, state and local
government marketplace, since October 1995. Mr. Bard served as a Consultant on
software development from February 1993 to October 1995, Chief Operating
Officer of Open Software Foundation from November 1992 to February 1993, and
President of Integrated Systems Division of Computer Sciences Corporation from
July 1984 to November 1992.
There are no family relationships between any of the Directors or
executive officers of the Company. The regular term of office for all Directors
and executive officers is one year. Except as provided in the Standstill and
Settlement Agreement dated September 18, 1998 (a copy of which is on file at
the offices of the Company) relating to the elections of Messrs. Lichtenstein,
Schwarz and Lane-Zucker to the Board, there are no arrangements or
understandings between any Director or executive officer and any other person
pursuant to which such director or officer was elected to be a Director or
officer.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has had an Audit Committee since September 1978; and Directors
Train, Lane-Zucker and Schwarz are its current members. Its powers and duties
include the following: (1) sole authority to
A-3
<PAGE>
retain and dismiss both internal and independent auditors; (2) approval before
dissemination of any report which contains financial data; and (3) consultation
with the independent auditors quarterly and before the Company decides any
material accounting policy. The Audit Committee met 5 times in 1998.
The Company established the Executive Compensation Committee in May 1996,
which in 1998 was comprised of Directors Bard and Train and former Directors
Brind and Gokcen. The Executive Compensation Committee consulted generally with
management on matters concerning executive and outside director compensation
and incentive plans and made recommendations to the Board of Directors on
compensation generally, including individual salary rates and bonus awards.
This Executive Compensation Committee met one time in 1998. Director Bard was
an officer and employee of the Company until October 1998. In November 1998,
the Executive Compensation Committee was terminated and the entire Board of
Directors assumed the responsibilities of the Executive Compensation Committee.
There is no nominating committee of the Board of Directors.
BOARD MEETINGS
The Board conducted 15 meetings in person or telephonically during 1998.
During 1998, all of the Directors attended, in person or by teleconference, at
least 75% of the total number of meetings of the Board and of the Committees on
which they serve.
COMPENSATION OF DIRECTORS
Each Director who is not also an employee of the Company presently
receives an annual Director's fee of $12,000, plus $1,500 for each meeting
which he personally attends ($500 for each meeting in which he participates by
means of conference telephone). In addition, non-employee Directors serving on
Committees receive a meeting fee of $1,000 ($500 for each meeting in which he
participates by means of conference telephone), except that if a Director
attends meetings of more than one Committee on a single day, only one Committee
meeting fee is paid for that day, and the Chairman of each Committee receives
an annual fee of $1,500. Mr. Lichtenstein was also paid $250,000 in 1999 for
services rendered as Chairman. Mr. Lichtenstein has been Chairman since October
19, 1998. Directors are eligible to receive annual grants of stock options to
purchase 2,000 shares of the Company's Common Stock, subject to an upward or
downward 50% adjustment based upon the Chairman's assessment of Board
performance; and annual grants of up to 1,000 shares of restricted stock, based
on performance goals, with the shares remaining restricted until the Director
leaves the Board.
In addition, in 1998 the Board of Directors approved the grant of 1,100
Retirement Shares to each of the non-employee Directors of the Company under
the Company's Director Retirement Plan.
The Company carries insurance providing indemnification, under certain
circumstances, to all the Directors and officers of the Company for claims
against them by reason of, among other things, any act or failure to act in
their capacities as Directors or officers. No sums have been paid to any past
or present Director or officer of the Company under this or any prior
indemnification insurance policy.
A-4
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table sets forth, as of the dates indicated, the name and
address of each person known by the Company to be the beneficial owner of more
than 5% of the Company's outstanding voting securities and the percentage of
the shares so owned:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) SHARES(1)
- ------------------ ----------------------------------------- ------------------------- -----------
<S> <C> <C> <C>
Common Stock, Steel Partners II, L.P. 492,600(2) 9.5%
$1.00 par value 150 East 52nd Street
21st Floor
New York, NY 10022
Common Stock, Franklin Resources, Inc. 480,000(3) 9.3%
$1.00 par value 777 Mariners Island Blvd.
San Mateo, CA 94404
Common Stock, Societe Generale Asset Management Corp. 372,100(4) 7.2%
$1.00 par value 1221 Avenue of the Americas
New York, NY 10020
Common Stock, Dimensional Fund Advisors, Inc. 300,650(5) 5.8%
$1.00 par value 1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Common Stock, The TCW Group, Inc. 267,400(6) 5.1%
$1.00 par value 865 South Figueroa Street
Los Angeles, CA 90017
</TABLE>
- ----------
(1) Based on information furnished by the stockholder except as otherwise
provided.
(2) As of March 3, 1999. Sole voting and dispositive power.
(3) As of January 22, 1999. According to the Schedule 13D/A filed by Franklin
Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin
Advisory Services, Inc., these shares are beneficially owned by one or
more investment companies or other managed accounts that are advised by
investment advisory subsidiaries of Franklin Resources, Inc. Sole voting
and dispositive power is held by Franklin Advisory Services, Inc.
(4) As of November 30, 1998. According to the Schedule 13D filed by Societe
Generale Asset Management Corp., investment advisor to SoGen
International Fund (the "Fund"), a portfolio of SoGen Funds, Inc., these
shares were acquired by the Fund as beneficial owner for investment only.
Shared voting and dispositive power.
(5) As of February 12, 1999. Dimensional Fund Advisors Inc. ("Dimensional"),
a registered investment advisor, is deemed to have beneficial ownership
of 300,650 shares of Aydin Corporation stock. Dimensional has sole voting
power as to all of such shares. Dimensional disclaims beneficial
ownership of all such shares.
(6) As of February 12, 1999. According to the Schedule 13G filed by the TCW
Group, Inc. and Robert Day, these shares were acquired for investment in
the ordinary course of business. Shared voting and dispositive power.
A-5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 1999, the amount and
percentage of the Company's outstanding Common Stock, $1.00 par value,
beneficially owned by each Director, the chief executive officer, the four
other most highly compensated executive officers, as identified in the Summary
Compensation Table herein, and all Directors and current executive officers as
a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) OF SHARES
- ----------------- ---------------------------------- ---------------------------- ----------
<S> <C> <C> <C>
Common Stock, Warren G. Lichtenstein ........... 492,600(3) 9.4%
$1.00 par value I. Gary Bard* .................... 205,064(4) 3.8%
Mark E. Schwarz .................. 128,100 2.5%
Harry D. Train, II ............... 1,825 (5)
James R. Henderson ............... 20,000 (5)
Keith Lane-Zucker ................ 0 (5)
All of the above and other current
executive officers as a group
(includes 7 persons) ............. 847,589 15.7%
</TABLE>
- ----------
* No longer an executive officer of the Company.
(1) Based on information furnished by the respective Directors and officers.
Each person has sole voting and investment power with respect to the
shares listed, except that Mr. Bard holds 36,700 shares jointly with his
wife.
(2) Includes shares which may be acquired upon the exercise of options
granted by the Company currently exercisable or that will become
exercisable within 60 days as follows: Bard - 10,000 shares, Train --
1,825 shares, Henderson -- 20,000 shares, and other executive officers in
the group -- 500 shares.
(3) Beneficially owned by Mr. Lichtenstein, but owned of record by Steel
Partners II, L.P.
(4) Includes a Warrant to purchase 133,334 shares: 66,667 shares at $12.10
and 66,667 shares at $13.20 per share.
(5) Less than 1%.
EXECUTIVE COMPENSATION
Until November 1998, the Company's executive compensation program was
administered by the Compensation Committee, which was empowered by the Company
Board to review the salaries paid to the Company's officers each year and
recommend to the Company Board any adjustments that it deemed appropriate. The
Compensation Committee also reviewed the nature and scope of the services
rendered each year by the participants in the 1994 Incentive Stock Option Plan
and 1996 Equity Incentive Plan of the Company and the corresponding benefits
derived by the Company from such services. Then, based on the review of
management recommendations, the Compensation Committee awarded bonuses to the
participants. Since November 1998, the entire Board of Directors has assumed
such responsibilities.
A-6
<PAGE>
SUMMARY COMPENSATION TABLE
The following table provides information on the compensation provided by
the Company to the Company's Chief Executive Officer and the next four most
highly paid executive officers who received compensation of at least $100,000
during 1998 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------
OTHER
ANNUAL
COMPENS-
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) ATION($)
- ----------------------------- ------ ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
James R. Henderson 1998 178,785 123,000 --
President and Chief 1997 146,285 79,750 --
Operating Officer 1996 62,328 66,516(3) --
I. Gary Bard 1998 276,637 -- (4) --
Former Chairman of the 1997 290,666 255,200 16,500(5)
Board and Chief 1996 195,638(7) 249,400(8) 44,105(5)
Executive Officer
John F. Vanderslice 1998 192,331 -- --
Former President and 1997 205,005 157,850 --
Chief Operating Officer 1996 157,406 138,764 8,250(5)
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
-----------------------------------
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION AWARD($) OPTIONS(#) ($)
- ----------------------------- ---------------- ------------------ ------------------
<S> <C> <C> <C>
James R. Henderson -- 65,000 --
President and Chief -- 10,000 3,432(2)
Operating Officer -- 35,000 42,468(2)
I. Gary Bard -- 15,000 88,985(4)
Former Chairman of the -- 25,000 23,585(6)
Board and Chief 200,000(9) 150,000 23,585(6)
Executive Officer
John F. Vanderslice -- 15,000(10) 11,825(11)
Former President and -- 25,000 --
Chief Operating Officer -- 40,000 --
</TABLE>
- ----------
(1) Includes any sums deferred for the individual under the Company's 401(k)
plan.
(2) Relocation expenses paid by the Company.
(3) Of this total, $12,094 was awarded for 1996 and paid in 1997.
(4) On October 19, 1998, Mr. Bard was removed by the Board of Directors as
Chairman of the Board and Chief Executive Officer of the Company. There
is currently a dispute between Mr. Bard and the Company regarding the
nature and amount of compensation and other benefits to which Mr. Bard is
entitled pursuant to his employment agreement. The salary reflected for
1998 includes a payment of $10,675 for accrued vacation upon Mr. Bard's
termination. The $88,985 of All Other Compensation for 1998 includes (1)
$29,205 of loan forgiven by the Board of Directors for Mr. Bard, (2)
$55,000 of severance payments made to Mr. Bard with respect to the period
from October 19, 1998 through December 31, 1998, and (3) $4,780 of
non-employee Director fees or payable paid to Mr. Bard with respect to
the period from October 19, 1998 through December 31, 1998.
(5) The dollar value of the difference ($1.65 per share for both 1996 and
1997) between (i) the discounted market value ($9.33 for 1996 and $9.36
for 1997) at which the Named Executive Officer elected to receive a
portion or all of his bonus awards in shares of the Company's Common
Stock and (ii) the average fair market value of such shares on the 20
trading days immediately preceding the date the Board of Directors
determined the dollar amount of the bonus award under the Company's Stock
Bonus Plan.
(6) Dollar amount of loan forgiven by the Board of Directors for Mr. Bard.
(7) Includes $5,750 Mr. Bard received as an outside Director before being
elected Chairman of the Board and Chief Executive Officer on May 6, 1996.
(8) Of this total, $83,133 was awarded for 1996 and paid in 1997.
(9) An award of 20,000 shares, valued at date of issue, fully vested,
pursuant to the terms of the Employment Agreement dated as of May 6,
1996.
(10) The option to purchase 15,000 shares of Common Stock terminated upon Mr.
Vanderslice's resignation as an officer of the Company.
(11) Dollar amount of consulting fees paid to Mr. Vanderslice for consulting
work subsequent to his resignation as an officer of the Company.
A-7
<PAGE>
STOCK OPTION GRANTS 1998
Shown below is further information on grants of stock options pursuant to
the Company's 1994 Incentive and 1996 Equity Incentive Stock Option Plans
during the year ended December 31, 1998 to the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------------
NAME GRANTED (#) 1998 ($/SH) DATE 5% ($) 10%($)
- ----------------------------- --------------- -------------- ---------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James R. Henderson .......... 15,000(1) 3.4% 10.44 2-5-08 $255,085 $ 406,180
50,000(1) 11.4% 8.00 11-5-08 $651,558 $1,037,497
I. Gary Bard ................ 15,000(2) 3.4% 10.44 (2) (4) (4)
John F. Vanderslice ......... 15,000(3) 3.4% 10.44 (3) (4) (4)
</TABLE>
- ----------
(1) Options expire ten years from the date of grant. Twenty-five percent of
the option shares become exercisable one year from date of grant and an
additional 25% each year thereafter for three years on a cumulative
basis.
(2) The option was terminated on October 19, 1998
(3) The option was terminated on September 4, 1998.
(4) Not meaningful, as option was terminated before becoming exercisable.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FOR YEAR-END OPTION/SAR VALUES
No options were executed during 1998 by the Named Executive Officers.
Shown below is information with respect to the year-end value of unexercised
options to purchase the Company's Common Stock granted in prior years under the
Company's 1994 Incentive or 1996 Equity Incentive Stock Option Plans, or an
Individual Non-Qualified Stock Option to the Named Executive Officers and held
by them at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS HELD AT OPTIONS
DECEMBER 31, 1998 DECEMBER 31, 1998(1)
--------------------------------------- --------------------------------------
NAME EXERCISABLE (#) UNEXERCISABLE (#) EXERCISABLE ($) UNEXERCISABLE ($)
- ----------------------------- ----------------- ------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
James R. Henderson .......... 20,000 90,000 $0 $109,375
I. Gary Bard ................ 10,000 0 0 0
John F. Vanderslice ......... 0 0 0 0
</TABLE>
- ----------
(1) Based on the closing price on December 31, 1998, on the New York Stock
Exchange of $10.1875 per share.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL AGREEMENTS
The Company entered into an employment agreement with Mr. Bard dated as of
May 6, 1996, pursuant to which Mr. Bard served as Chairman of the Board and
Chief Executive Officer of the Company until his termination on October 19,
1998. The term of the agreement was originally for five years and was
subsequently extended for an additional two years. The Company had the right to
terminate the agreement during its term but only for "Cause" (as defined in the
Agreement), and Mr. Bard had the right to terminate his employment during its
term for "Good Reason" (e.g., a change of his position as Chairman and Chief
Executive Officer) or in the event of a "Change in Control" (e.g., merger,
consolidation, reorganization, sale, lease, exchange or other disposition of
the Company assets or capital stock of more than 50%). The agreement provided
for a base salary of $290,000, which was reviewed annually by the Company
Board.
A-8
<PAGE>
The Company has received notice from Mr. Bard that it is currently in
default under his employment agreement resulting from his termination as
Chairman of the Board and Chief Executive Officer of the Company on October 19,
1998. The Company is currently in discussions with Mr. Bard with respect to its
obligations to him under the agreement. In the event that his agreement was
terminated by the Company other than for "Cause," the Company would be
obligated to pay his base salary for the shorter of three years or until the
initial term of the agreement expires.
The Company entered into executive retention agreements (collectively, the
"Retention Agreements") with certain key officers of the Company. Except for
Mr. Henderson, the Company has not entered into a Retention Agreement with any
other Named Executive Officer. The Retention Agreements, effective as of
September 16, 1998, provide, among other things, (i) for the payment of a
retention bonus if in the absence of a Change in Status Transaction (as defined
in the Retention Agreements) the executive remains continuously employed by the
Company for a period of one year from the date of the Retention Agreement or
for a period of six months following the date of a Change in Status Transaction
occurring during such one year period and (ii) for the payment of certain
severance benefits if the executive's employment is terminated by the Company
without Cause (as defined in the Retention Agreements) or by the executive for
Good Reason (as defined in the Retention Agreements) within the two year period
following the date of the Retention Agreement. The amount of the retention
bonus payable under the Retention Agreements is equal to twenty-five percent
(25%) of the executive's annual base salary. The severance benefits an
executive will receive under the Retention Agreements include the executive's
full base salary for the one year period subsequent to the date of his
termination, the full exercisability for one year of all options to purchase
shares of the Company's Common Stock granted to the executive, and the
continuance of all life insurance and medical plans until the end of the one
year period subsequent to the date of the executive's termination or, if
sooner, until his commencement of full-time employment with a new employer.
COMMON STOCK PERFORMANCE
Set forth below is a line graph comparing the five-year cumulative total
shareholder return on the Company's Common Stock against the cumulative total
return of the S&P 500 Stock Index and the S&P High Technology Composite Index.
The comparison of total return on investment (change in year-end stock price
plus reinvested dividends) for the period assumes that $100 was invested on
December 31, 1993 in each of the Company, the S&P 500 Stock Index and the S&P
High Technology Composite Index.
A-9
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AYDIN COMMON, S&P 500 STOCK &
S&P HIGH TECHNOLOGY COMPOSITE INDICES
[GRAPHIC OMITTED--DATA POINTS PRESENTED IMMEDIATELY BELOW]
TOTAL RETURN ANALYSIS
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/30/95 12/29/96 12/31/97 12/31/98
------------ ------------ ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Aydin Corporation .............. $ 100.00 $ 102.08 $ 126.04 $ 78.13 $ 98.44 $ 84.90
S&P Hi-Tech Composite .......... $ 100.00 $ 116.41 $ 167.55 $ 233.65 $ 299.09 $ 500.73
S&P 500 ........................ $ 100.00 $ 101.28 $ 138.88 $ 170.38 $ 226.78 $ 291.04
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own more than 10% of the issued and
outstanding Shares, to file with the SEC and the New York Stock Exchange
initial reports of ownership and reports of changes in beneficial ownership of
Common Stock and other equity securities of the Company. Officers, Directors
and greater than 10% stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to the
officers, directors and greater than 10% beneficial owners were complied with
during 1998.
A-10
<PAGE>
SCHEDULE I TO ANNEX A
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT, PURCHASER AND HOLDINGS
As of the date of this Information Statement, Parent has not determined
who will be Parent Designees. However, such Parent Designees will be selected
from the following list of directors and executive officers of Parent and its
parent, L-3 Communications Holdings Inc., a Delaware corporation ("Holdings"),
upon the purchase by Purchaser pursuant to the Offer of Shares representing not
less than a majority of the outstanding shares of Common Stock on a fully
diluted basis. The information contained herein concerning Parent, Holdings and
Purchaser and their respective directors and executive officers has been
furnished by Parent, Holdings and Purchaser. The Company assumes no
responsibility for the accuracy or completeness of such information.
The name, present principal occupation or employment and five-year
employment history of each Director and executive officer of Parent and
Holdings and certain other information is set forth below. The business address
of each Director and executive officer is 600 Third Avenue, New York, New York
10016. Unless otherwise indicated, each occupation described below refers to
employment with Parent and Holdings. Except as noted, none of the persons
listed below owns any Shares or has engaged in any transactions with respect to
Shares during the past 60 days. During the last five years, neither Parent nor
Holdings, nor any Director or executive officer thereof indicated has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) nor was such person a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction, and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws. Unless otherwise
indicated, all Directors and executive officers listed below are citizens of
the United States.
Directors and Executive Officers of the Purchaser. The name and position
with the Purchaser of each Director and executive officer of the Purchaser are
set forth below. The other required information with respect to each such
person is set forth under "Directors and Executive Officers of the Parent"
below. All Directors and executive officers listed below are citizens of the
United States.
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------- ----------------------------------
<S> <C>
Christopher C. Cambria .......... President, Secretary and Director
Lawrence W. O'Brien ............. Vice President and Treasurer
</TABLE>
Directors and Executive Officers of Parent and Holdings. The name,
business address, present principal occupation or employment and material
occupations, positions, offices or employments during the last five years of
each Director and executive officer of Parent and Holdings and certain other
information are set forth below. The business address of each such Director and
executive officer is: c/o L-3 Communications Corporation, 600 Third Avenue, New
York, New York 10016. Unless otherwise indicated, each occupation set forth
opposite an individual's name refers to employment with Parent and Holdings.
All Directors and executive officers listed below are citizens of the United
States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- ------------------------ ------------------------------------------------------------
<S> <C>
DIRECTORS
David J. Brand ......... Director (since 4/97); Managing Director of Lehman Brothers
(since 1996); Senior Vice President of Lehman Brothers
(1994-1996); Vice President of Lehman Brothers (1991-1994).
</TABLE>
A-11
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- ------------------------------- -------------------------------------------------------------------
<S> <C>
Thomas A. Corcoran ............ Director (since 7/97); President and Chief Operating Officer of
the Space Sector of Lockheed Martin (since 8/98); President and
Chief Operating Officer of the Electronics Systems Sector of
Lockheed Martin (3/95-8/98); President of Electronics Group of
Martin Marietta Corporation (1993-1995).
Alberto M. Finali ............. Director (since 4/97); Managing Director of Lehman Brothers
(since 1997); Senior Vice President of Lehman Brothers
(1993-1997); Vice President of Lehman Brothers (1989-1993).
Eliot M. Fried ................ Director (since 4/97); Managing Director of Lehman Brothers
(since 1986).
Frank C. Lanza ................ Director; Chairman and Chief Executive Officer (since 4/97);
Executive Vice President of Lockheed Martin and President and
Chief Operating Officer of Lockheed Martin's C(3)I and
Systems Integration Sector (4/96-4/97); President and Chief
Operating Officer of Loral (since 1981).
Robert V. LaPenta ............. Director; President and Chief Financial Officer (since 4/97); Vice
President of Lockheed Martin and Vice President and Chief
Financial Officer of Lockheed Martin's C(3)I and Systems
Integration Sector (4/96-4/97); Senior Vice President and
Controller of Loral (1981-4/96).
Frank H. Menaker, Jr. ......... Director (since 4/97); Senior Vice President and General
Counsel of Lockheed Martin (since 7/96); Vice President and
General Counsel of Lockheed Martin (3/95-7/96); Vice President
of Martin Marietta Corporation (1982-1995); General Counsel of
Martin Marietta (1981-1995).
Robert B. Millard ............. Director (since 4/97); Managing Director of Lehman Brothers
(since 1983).
John E. Montague .............. Director (since 4/97); Vice President and Chief Financial Officer
of Lockheed Martin Global Telecommunications, Inc. (since
8/98); Vice President of Financial Strategies at Lockheed Martin
(since 3/95); Vice President of Corporate Development and
Investor Relations at Martin Marietta Corporation (1991-1995).
John M. Shalikashvili ......... Director (since 8/98); Senior Officer of the United States
Military and Principal Military Advisor to the President of the
United States, the Secretary of Defense and National Security
Council (1993-1997).
Alan H. Washkowitz ............ Director (since 4/97); Managing Director of Lehman Brothers
(since 1978).
OFFICERS
Jimmie V. Adams ............... Vice President -- Washington D.C. Operations (since 4/97); Vice
President of Lockheed Martin's Washington Operations for
C(3)I and Systems Integration Sector (4/96-4/97); Vice President
of Loral's Washington Operations for C(3)I and Systems
Integration Sector (since 1993).
</TABLE>
A-12
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- -------------------------------- -----------------------------------------------------------------
<S> <C>
Christopher C. Cambria ......... Vice President -- General Counsel and Secretary (since 6/97);
Associate at Fried, Frank, Harris, Shriver, and Jacobson
(1994-1997); Associate at Cravath, Swaine and Moore
( 1981-1993).
Frank C. Lanza ................. Chairman and Chief Executive Officer.
Robert V. LaPenta .............. President and Chief Financial Officer.
Robert F. Mehmel ............... Vice President -- Planning and Assistant Secretary (since 4/97);
Director of Financial Planning and Capital Review for Lockheed
Martin's C(3)I and Systems Integration Sector (4/96-4/97); held
several accounting and financial analysis positions at Loral
Electronic Systems (1984-1996).
Lawrence W. O'Brien ............ Vice President -- Treasurer (since 6/97); Vice President and
Treasurer of Pechiney Corporation (since 1981).
Joseph S. Paresi ............... Vice President -- Product Development (since 4/97); Corporate
Director of Technology for Lockheed Martin's C(3)I and
Systems Integration Sector (since 4/96); Corporate Director of
Technology for Loral (since 1993).
Robert Riscassi ................ Vice President -- Washington D.C. Operations (since 4/97); Vice
President of Land Systems for Lockheed Martin C(3)I and
Systems Integration Sector (4/96-4/97); Vice President of Land
Systems for Loral's C(3)I and Systems Integration Sector (since
1993).
Lawrence H. Schwartz ........... Vice President -- Business Development (since 5/97); Vice
President of Technology for Lockheed Martin's C(3)I and
Systems Integration Sector (4/96-5/97); Vice President of
Technology at Loral (since 1987).
Michael T. Strianese ........... Vice President -- Finance and Controller (since 4/97); Vice
President and Controller of Lockheed Martin's C(3)I and
Systems Integration Sector (4/96-4/97); Director of Special
Projects at Loral (1991-4/96).
Ownership of Shares by Directors and Executive Officers.
None.
</TABLE>
A-13
<PAGE>
[AYDIN CORPORATION LETTERHEAD]
March 5, 1999
Dear Stockholder:
I am pleased to inform you that on March 1, 1999, Aydin Corporation (the
"Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with L-3 Communications Corporation ("Parent") and Angel
Acquisition Corporation, a wholly owned subsidiary of Parent ("Purchaser").
Pursuant to the Merger Agreement, the Purchaser today commenced a tender offer
(the "Offer") to purchase all outstanding shares of the Company's common stock
for $13.50 per share in cash. Under the Merger Agreement, the tender offer will
be followed by a merger (the "Merger") of the Purchaser with and into the
Company and all shares of the Company's common stock not purchased in the
tender offer (other than shares held by Parent, Purchaser or the Company or
shares held by dissenting stockholders) will be converted into the right to
receive $13.50 per share in cash.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY,
THE BOARD RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
IN THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors, including, among other things, the
opinion of PricewaterhouseCoopers Securities, LLC, the Company's financial
advisor, that as of March 1, 1999, the $13.50 per share in cash to be received
by the Company's stockholders pursuant to the Offer and the Merger was fair
from a financial point of view to such stockholders.
Attached is a copy of the Schedule 14D-9 filed by the Company with the
Securities and Exchange Commission. The Schedule 14D-9 describes the reasons
for your Board of Directors' recommendation, includes as an exhibit the full
text of the March 1, 1999 opinion of PricewaterhouseCoopers Securities, LLC and
contains other important information relating to the Offer. Also enclosed is
the Offer to Purchase, dated March 5, 1999, of Purchaser, together with related
materials, including a Letter of Transmittal to be used for tendering your
shares. These documents set forth the terms and conditions of the Offer and
provide instructions on how to tender your shares. We urge you to read the
Schedule 14D-9 and the enclosed materials carefully.
Sincerely,
Warren Lichtenstein
Chairman
<PAGE>
CONFIDENTIAL
- ------------
Board of Directors
AYDIN Corporation
700 Dresher Road
P.O. Box 349
Horsham, PA 19044
March 1, 1999
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of AYDIN Corporation (the "Company") of the
consideration to be received by them in the proposed tender offer by L-3
Communications Corporation (the "Acquiror") (the "Transaction"). The Agreement
and Plan of Merger, dated as of March 1, 1999 (the "Agreement"), between the
Company and the Acquiror, sets forth the principal terms of the Transaction.
The Agreement provides, among other things, that the stockholders of the
Company will receive $13.50 in cash for each issued and outstanding share of
common stock, par value $1.00 per share, of the Company, plus a cancellation
fee (the "Cancellation Fee") for each outstanding option and warrant equal to
the difference between $13.50 and the strike price (below $13.50) of each
option and warrant.
In connection with our opinion, we have:
(a) reviewed the Agreement;
(b) reviewed certain financial and other information relating to the
Company that was publicly available or furnished to us by the Company,
including financial forecasts;
(c) met with members of the Company's management to discuss the business,
operations, historical financial results and future prospects of the
Company;
(d) considered certain financial and securities data of the Company and
compared that data with similar data for other publicly-held companies
in businesses similar to those of the Company;
<PAGE>
(e) considered the financial terms of certain recent acquisitions of
companies in businesses similar to those of the Company; and
(f) considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria as we
deemed relevant and appropriate for purposes of this opinion.
The opinion expressed below is subject to the following qualifications and
limitations:
(i) In arriving at our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all
financial and other information that was publicly available or
furnished to us by the Company. With respect to the financial
forecasts used by us, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates
and judgments of the Company's management as to the future financial
performance of the Company.
(ii) We have not made an independent evaluation or appraisal of the assets
of the Company, nor have we been furnished with any such appraisals.
(iii) Our services with respect to the Transaction do not constitute, nor
should they be construed to constitute in any way, a review or audit
of or any other procedures with respect to any financial information
nor should such services be relied upon by any person to disclose
weaknesses in internal controls or financial statement errors or
irregularities.
(iv) Our opinion does not address, and should not be construed to address,
either the underlying business decision to effect the Transaction or
whether the consideration to be received by the stockholders in the
Transaction represents the highest price obtainable. We express no
view as to the federal, state or local tax consequences of the
Transaction.
(v) Our opinion is based on business, economic, market and other
conditions as they exist as of the date hereof or as of the date of
the information provided to us.
(vi) This opinion is effective as of the date hereof. We have no obligation
to update the opinion unless requested by you in writing to do so and
expressly disclaim any responsibility to do so in the absence of any
such request.
Based upon and subject to the foregoing, it is our opinion that as of the date
hereof, the $13.50 per issued and outstanding common share cash consideration
and the Cancellation Fee for each outstanding option and warrant to be received
by the stockholders of the Company is fair to such stockholders from a
financial point of view.
<PAGE>
We will receive a fee as compensation for our services in rendering this
opinion. We have also acted as financial advisor to the Company in connection
with the Transaction and will receive a success fee for our financial advisory
services. We will also receive a fixed fee for rendering this opinion.
This letter is for the information of the Board of Directors in connection with
the Transaction described herein and does not constitute a recommendation to
any stockholder.
Very truly yours,
/s/ PricewaterhouseCoopers Securities LLC
PricewaterhouseCoopers Securities LLC
