You are cordially invited to attend a Special Meeting of
the shareholders of Measurement Specialties, Inc. (which we refer to as the “Company”) to be held on Tuesday,
August 26, 2014, starting at 8:30 A.M., Eastern time, at the Company’s headquarters located at 1000 Lucas Way in
Hampton, Virginia 23666.
On June 18, 2014, we entered into an Agreement and Plan of
Merger, which we refer to as the merger agreement, with TE Connectivity Ltd., a Swiss corporation, which we refer to as TE, and
Wolverine-Mars Acquisition, Inc., which we refer to as Merger Sub, providing for the merger of Merger Sub with and into the Company,
which we refer to as the merger, with the Company surviving the merger as an indirect wholly owned subsidiary of TE. At the Special
Meeting, you will be asked to consider and vote upon, among other things, a proposal to approve and adopt the merger agreement.
If the merger agreement is approved and adopted and the merger is completed, for each share of common stock, no par value, of
the Company, which we refer to as Company common stock, that you hold at the completion of the merger, you will be entitled to
receive $86.00 in cash, without interest, less any applicable withholding taxes.
Please vote by completing, signing and dating the enclosed
proxy card(s) for the Special Meeting and mailing the proxy card(s) to us, whether or not you plan to attend the Special Meeting.
If you sign, date and mail your proxy card without indicating how you want to vote, your proxy will be counted as a vote “
FOR”
each of the proposals presented at the Special Meeting. In addition, you may vote by proxy by calling the toll-free telephone
number or by using the Internet as described in the instructions included with the enclosed proxy card(s). If you do not return
your card, vote by telephone or by using the Internet, or if you do not specifically instruct your broker how to vote any shares
held for you in “street name,” your shares will not be voted at the Special Meeting.
If your shares of Company common stock are held in “street
name” by your bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee will be unable to vote your
shares of Company common stock without instructions from you. You should instruct your bank, brokerage firm or other nominee to
vote your shares of Company common stock in accordance with the procedures provided by your bank, brokerage firm or other nominee.
Only shareholders of record at the close of business on
July 21, 2014 are entitled to notice of and to vote at the Special Meeting and at any adjournment or postponement thereof.
The attached proxy statement provides you with detailed information
about the Special Meeting, the merger agreement and the merger. A copy of the merger agreement is attached as
Annex A
to
this proxy statement. We encourage you to read the attached proxy statement and the merger agreement carefully and in their entirety.
You may also obtain more information about the Company from documents we have filed with the U.S. Securities and Exchange Commission.
Thank you in advance for your continued support and your consideration
of this matter.
The proxy statement is dated July 24, 2014, and is first being
mailed to our shareholders on or about July 25, 2014.
PROPOSAL 1: APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT
THE MERGER
This discussion of the merger does not purport to be complete
and is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as
Annex A
and which is incorporated by reference into this proxy statement. You should read the entire merger agreement carefully as
it is the legal document that governs the merger.
Background to the Merger
As part of their ongoing efforts to enhance shareholder value,
the Board and management of the Company regularly review and evaluate the Company’s independent business plan and strategy,
as well as potential strategic alternatives. As a result of this review and evaluation process, and as a key driver of the Company’s
growth plans as an independent company, the Company consummated twenty-three acquisitions from June 2004 through May 2014. In
addition, the Company at various times executed confidentiality agreements, none of which contained a standstill provision, and
engaged in discussions with other industry participants regarding possible strategic and commercial initiatives. The Board and
management of the Company also consulted from time to time with outside financial and legal advisors regarding the relative benefits
and risks of remaining independent and engaging in potential strategic opportunities. The Board believes that its process of regularly
reviewing strategic opportunities, and the relative benefits and risks of remaining independent, provided it with significant
market knowledge about the potential opportunities available to the Company and the potential level of interest of third parties
in acquiring the Company.
During the period from January 2012 to February 2014, Frank
Guidone, the Company’s President and Chief Executive Officer, met from time to time with representatives of TE and other
industry participants, in connection with the Company’s practice of engaging in strategic and commercial discussions. Mr.
Guidone regularly reported on the substance of these discussions to the Board.
These meetings with industry participants included discussions
over the past several years with a strategic company with operations in the same industry as the Company, which is referred to
in this proxy statement as Company A. The Company’s discussions with Company A led to the execution of a non-disclosure
agreement on October 6, 2011, which later was extended on June 19, 2013. Pursuant to this non-disclosure agreement, the Company
and Company A exchanged high level financial information and discussed generally growth drivers and strategic options. These discussions
did not result in a proposal by Company A to acquire the Company or a preliminary indication of the valuation of the Company.
There were no further substantive discussions with Company A after November 2013.
These meetings with industry participants also included discussions
from June 2013 through February 2014 with a strategic company with operations in the same industry as the Company, which is referred
to in this proxy statement as Company B. The Company’s discussions with Company B led to the execution of a non-disclosure
agreement on February 21, 2014. Pursuant to this non-disclosure agreement, the Company and Company B exchanged high level financial
information and had preliminary discussions regarding a potential transaction involving a combination of cash and stock, and which
would not involve a significant premium to the Company’s then-current stock price. The discussions with Company B did not
result in a proposal by Company B to acquire the Company.
In July 2012, Mr. Guidone had an introductory meeting with
representatives of TE in Berwyn, Pennsylvania. During the meeting, the participants discussed, among other things, current trends
in the industry, the companies’ respective businesses, and potential opportunities for collaboration between, or transactions
involving, the two companies. Following that meeting, on or around August 6, 2012, the Company and TE executed a non-disclosure
agreement, which did not contain a standstill provision, and thereafter the Company delivered certain non-public financial information
to TE. The discussions at this time did not result in a proposal by either company or any indication of interest that expressed
a valuation of the Company.
In September 2012, as part of a general review of the Company’s
market position, representatives from Barclays were invited to present to the Board, and, at a meeting on September 12, 2012,
the Board discussed, various strategic alternatives potentially available to the Company, including remaining as an independent
company and continuing to pursue acquisitions to support the Company’s growth strategy, as well as the opportunity for potential
business combination transactions. The Board concluded, at that time, that the execution of the Company’s strategic plan
as an independent company would return greater value to the Company’s shareholders than other alternatives potentially available
to the Company.
During meetings of the Board on April 4 and 5, 2013, also as
part of the Board’s regular and ongoing analysis of strategic alternatives, the Board invited representatives from three
investment banks other than Barclays to present, and the Board reviewed and discussed various strategic alternatives potentially
available to the Company. The potential alternatives included remaining as an independent company and continuing to pursue acquisitions
to support the Company’s growth strategy, as well as potential business combination transactions. Following this discussion,
the Board concluded that while the Company should continue its practice of engaging with industry participants to assess opportunities,
consideration of strategic alternatives that may be available to the Company for a significant transaction should be deferred
until after at least the second quarter of the Company’s current fiscal year because the Company was forecasting a financial
performance that would improve over time and which should result in a higher stock price and better positioning for the Company
if it were to consider a transaction. The Board did not engage an investment bank at this time.
On April 8, 2013, at Company A’s request, Mr. Guidone
met with the President of the Sensor Division for Company A to discuss, among other things, general business conditions and growth
drivers.
On April 11 and 12, 2013, at TE’s request, Mr. Guidone
and other members of the Company’s management team met with Steve Merkt, TE’s President, Transportation Solutions,
and other representatives of TE’s management team at the Company’s offices Hampton, Virginia to discuss the business
of each of the companies and potential opportunities for the two companies to work together.
On June 3, 2013, Mr. Guidone met with representatives of TE
in Detroit, Michigan to further discuss the Company’s business generally and potential opportunities from growth in the
sensors market.
During a Board meeting held on June 18, 2013, representatives
from Barclays presented, and the Board reviewed and discussed, various strategic alternatives potentially available to the Company,
including potential acquisition candidates and the potential acquisition of an approximately $225 million sensor division of a
large company (“Company C’s Sensor Business”). Mr. Guidone also updated the Board on the status of discussions
with industry participants, including TE. At the conclusion of this presentation and discussion, the Board determined that the
consideration of any alternatives available to the Company for a possible significant acquisition, including Company C’s
Sensor Business, should be further assessed by management.
On June 19, 2013, at the request of Company A, the Company
executed an extension to the confidentiality agreement.
On June 26, 2013, Mr. Guidone, Mitch Thompson, the Company’s
Chief Technology Officer, and certain members of the Company’s Toulouse, France management team met with representatives of
TE at the Company’s plant in Toulouse, France to conduct a plant tour, review in greater depth the Company’s business
and discuss potential commercial partnership opportunities.
During a meeting of the Board held on September 18 and 19,
2013, representatives from Barclays presented an overview of the market and discussed their preliminary valuation of Company C’s
Sensor Business. Following this presentation and an update from management on its assessment of Company C’s Sensor Business,
the Board authorized the Company to submit a bid to acquire Company C’s Sensor Business. Mr. Guidone also updated the Board
on the status of discussions with industry participants, including TE. The Company pursued the acquisition of Company C’s
Sensor Business until October 8, 2013, when the Company learned that another bidder had been selected to acquire Company C’s
Sensor Business.
On October 1, 2013, Mr. Guidone met with Tom Lynch, TE’s
Chairman and Chief Executive Officer, and Mr. Merkt in Hampton, Virginia. Mr. Lynch indicated, among other things, that TE was
interested in the sensor market and might have an interest in exploring the potential acquisition of the Company. The participants
did not discuss specific terms concerning such an acquisition, such as a price per share that TE might be willing to pay, or the
structure of any transaction.
On November 11, 2013, Mr. Guidone made a presentation to representatives
of Company A concerning an overview of the Company, including a description of key growth drivers, and discussed general areas
of potential synergy. The participants did not discuss specific terms concerning an acquisition, such as a price per share that
Company A might be willing to pay, or the structure of any transaction.
While in New York for an investor’s conference on November
21, 2013, Mr. Guidone met with Mr. Lynch and Mr. Merkt and talked generally about, among other things, the industry and the companies’
respective businesses.
On December 16, 2013, Mr. Guidone met Mr. Merkt and other TE
representatives in Philadelphia and reviewed the Company’s financial and key growth programs.
On February 21, 2014, Mr. Guidone met with Mr. Lynch and Mr.
Merkt in Dallas, Texas. During that meeting, Mr. Lynch communicated that TE was prepared to make a non-binding offer to acquire
the Company, which offer would be subject to due diligence and customary conditions. Later that day, the Company and TE entered
into an amendment to extend the term of the non-disclosure agreement between the parties, which term had previously expired. The
non-disclosure agreement did not include a standstill provision.
On February 25, 2014, Mr. Lynch submitted a letter to Mr. Guidone
making a confidential, non-binding proposal to purchase 100% of the outstanding common stock of the Company for $71.00 per share
in cash, subject to diligence and other conditions. The proposal represented a premium of approximately 20.5% to the closing price
of Company common stock on February 24, 2014, the last trading day before receipt of TE’s proposal. The proposal noted TE’s
expectation that, were the companies to engage in discussions, they would enter into a period of exclusivity.
On February 27, 2014, the Board met telephonically,
together with representatives from Barclays and the Company’s outside counsel, DLA Piper, to review and discuss
TE’s proposal. During this meeting, the Board, management and the Company’s advisors reviewed the terms of
TE’s February 25, 2014 proposal. The Board, management and their advisors discussed a number of factors as the Board
considered TE’s offer, including the financial performance of the Company, various potential commercial programs which,
if consummated, potentially would add to the Company’s financial performance over the following two to three years, the
status of near term acquisition opportunities, including the Wema System AS (“Wema”) transaction, the overall
expectations for the Company’s short and long term value and stock price, the merits and considerations of the
Company’s stand-alone business plan and the potential value to be added to the Company from potential near-term
acquisition opportunities and trends in the industry. Following this discussion, the Board concluded that TE’s proposal
undervalued the Company, that the execution of the Company’s strategic plan as an independent company would return
greater value than suggested by TE’s proposal and that it was in the best interests of the Company to reject the TE
proposal. The Board directed Mr. Guidone to communicate the Board’s position to TE, which he did by delivering a letter
to TE later on February 27, 2014. During a telephone conversation with Mr. Lynch on March 3, 2014, Mr. Guidone reiterated the
Board’s position.
During the week of March 10, 2014, Mr. Merkt contacted Mr.
Guidone and inquired whether the Board might be willing to explore a potential transaction with TE if TE increased the price per
share at which it proposed to acquire the Company. During their conversation, Mr. Guidone communicated that, while he did not
know what the Board’s reaction would be to any particular proposal, he believed that, based on the Board’s discussions,
there might be greater interest in exploring a potential transaction if TE proposed a price per share in the $80s.
On March 21, 2014, TE submitted a letter to the Company indicating
that, subject to due diligence, it might be interested in acquiring the Company at a price of $81.00 per share in cash and subject
to a period of exclusivity. An $81.00 per share proposal represented a premium of approximately 21.5% to the closing price of
Company common stock on March 20, 2014, the last trading day prior to receipt of TE’s proposal. Mr. Guidone promptly advised
the Board of TE’s revised proposal, and the Board concluded that it would consider the proposal at its next regularly scheduled
Board meeting on April 3, 2014. Mr. Guidone informed TE of this timing.
On April 3, 2014, the Board met, together with representatives
from Barclays and DLA Piper. At this meeting, Barclays reviewed with the Board various strategic alternatives potentially available
to the Company including (i) continuing to operate as a standalone business, (ii) continuing to operate as a standalone business
but pursuing significant acquisitions and (iii) selling the Company. Representatives from DLA Piper also presented to the Board
and discussed with the Board its duties in the context of a potential business combination. Mr. Guidone briefed the Board on his
recent discussions with TE, noting that, among other things, he did not believe TE’s most recent offer fully took into account
the value of certain acquisitions the Company currently was pursuing or the potential value of various new commercial programs.
The Board asked Mr. Guidone to discuss the incremental value of the acquisitions and the new commercial programs with TE and explore
whether TE would be willing to take these matters into consideration and increase its proposal to a higher level. While the
Board did not make a decision concerning the potential sale of the Company, it concluded that it was in the best interests of
the Company and its shareholders to enter into a reasonable and limited period of exclusive negotiations with TE, provided that
TE first increase its proposal to an acceptable level and agree to enter into a standstill. In particular, the Board noted that
it only would be interested in a transaction that fully valued all of the Company’s business and opportunities, and concluded
that TE represented the Company’s best opportunity to realize that value in a sale transaction and that absent a transaction
with TE, the Company would pursue its independent business strategies. While the Board did not decide upon a price level at which
it would be willing to agree to sell the Company, it agreed that a price per share in the mid- to high-$80s would be an acceptable
level at which to enter into a period of exclusivity. The Board confirmed that it had not decided to sell the Company and that
it retained the flexibility to terminate discussions with TE at any time. At this meeting, the Board also authorized the Company
to acquire Wema.
Following the Board meeting, representatives of TE and the
Company engaged in discussions concerning the issues raised during the Board meeting. Representatives of TE and the Company exchanged
and discussed additional information concerning the Company, its business plan and the potential acquisition of Wema. During these
discussions, and consistent with instructions from the Board, Mr. Guidone sought to convince TE that the value for the Company
was in the mid- to high-$80s.
On April 25, 2014, TE sent a letter to Mr. Guidone proposing
to acquire 100% of the Company for $86.00 per share, to enter into a period of exclusivity until June 15, 2014, and to subject
TE to a customary standstill until April 30, 2015. The indicated price remained non-binding and subject to various conditions,
including diligence, and assumed the successful completion of the Wema acquisition on financial terms previously discussed. The
letter also noted that the proposal was expressly conditioned on entry by the companies into an exclusivity period and that the
price level was conditioned on demonstration by the Company that it would be able to achieve certain value through contemplated
acquisitions and commercial arrangements. The $86.00 per share proposal represented a premium of approximately 31.6% to the closing
price of Company common stock on April 24, 2014, the last trading day prior to receipt of TE’s proposal.
Mr. Guidone promptly advised the Board of these developments
and, consistent with the Board’s discussion at its meeting on April 3, 2014, received the Board’s approval to grant
exclusivity to TE on the terms described above.
On April 25, 2014, TE and the Company entered into an amendment
to the pre-existing non-disclosure agreement providing for a standstill as well as an exclusivity agreement, with the period of
exclusive negotiations to terminate on June 15, 2014.
On April 29, 2014, the Company engaged Barclays on an exclusive
basis to provide financial advisory service to the Company with respect to its potential strategic alternatives. The Company selected
Barclays based on its expertise and experience in the industrial and sensor markets, its knowledge of the Company, and its prior
assistance to the Company in considering its strategic alternatives including the potential purchase of Company C’s Sensor
Business.
Beginning on May 5, 2014, representatives of TE were provided
access to an electronic due diligence data room containing documents related to the Company.
On May 19, 2014, Davis Polk & Wardwell LLP, outside counsel
to TE, sent an initial draft of the merger agreement to DLA Piper. The draft proposed a termination fee of approximately 4.0%
of the equity value of the potential transaction and a no-shop clause requiring that the Company not solicit potential alternative
bids.
During the period through June 18, 2014, the parties and their
representatives engaged in negotiations concerning the terms of the proposed transaction, including whether the transaction would
be conducted as a tender offer followed by a merger or as a merger transaction only, whether all outstanding equity awards would
vest upon consummation of the merger, the terms of the no-shop clause and whether the merger agreement would include a go-shop
clause, the amount of any termination fee payable in the event the Company accepted a superior offer, terms associated with required
regulatory approvals, and other business and contractual terms. Each of the revised drafts of the merger agreement that the Company
delivered to TE prior to June 17, 2014 included a go-shop provision and termination fees ranging from 1.5% to 3.0% depending on
the circumstances. Throughout these discussions, TE and its advisors reiterated that TE’s proposals, and its willingness
to continue discussions concerning a potential transaction, were conditioned on exclusivity and TE’s unwillingness to participate
in an auction process, including a go-shop. During the same period, TE conducted significant due diligence, including review of
all information in the data room and multiple meetings with management of the Company on various topics. Mr. Guidone briefed Board
members regarding significant developments in the agreement negotiations and diligence process.
At a telephonic meeting of the Board on May 27, 2014, which
representatives of Barclays and DLA Piper attended, Mr. Guidone updated the Board on the status of TE’s due diligence investigation
into the Company and of the deal points that continued to be under discussion. In particular, it was noted that there was not
agreement on the size of the termination fee or whether the agreement would include a go-shop clause, as well as other matters
relating to closing conditions and the vesting of equity incentive awards. It also was noted that TE expressed its desire to enter
into retention or employment agreements with certain members of the management team at the time of execution of the merger agreement.
There was significant discussion on these matters and other proposed terms of the merger agreement also were discussed.
On June 2, 2014, the Company announced that it had acquired
Wema on May 30, 2014 for approximately $114.5 million and announced its first quarter earnings. Thereafter, representatives of
TE continued their due diligence investigation of the Company, including additional in-person and telephonic meetings with management
of the Company.
On June 13, 2014, counsel for TE confirmed to the Company’s
counsel TE’s preference to conclude the transaction as a cash merger and not through a tender offer followed by a merger
and reiterated its position that a go-shop clause would not be accepted given the price being offered by TE. TE’s counsel
again conveyed TE’s position that it was unwilling to proceed with a transaction with the Company at $86.00 per share if
the Company insisted on a go-shop.
On June 14, 2014, a representative of TE confirmed in a telephone
conversation with Mr. Guidone that TE had completed its diligence and subject to Board approval was prepared to move forward with
the transaction at a price of $86.00 per share in cash, but only if the agreement did not contain a go-shop clause and the other
outstanding terms were agreed upon to TE’s satisfaction. This message was reiterated in discussions between counsel. TE
noted that $86.00 was a full price and its “best and final” proposal.
In its first draft of the merger agreement and during
discussions with Mr. Guidone thereafter, TE had indicated that its offer would be conditioned on TE entering into employment
or retention agreements with five to ten Company executives. Later in the day on June 14, 2014, TE initiated discussion with
Mr. Guidone regarding the potential terms of retention agreements for certain members of the Company’s senior
management, which TE indicated it desired in order to maximize the likelihood that certain key employees would continue their
employment with the Company after consummation of the merger. Among others, TE proposed terms of a retention agreement with
Mitch Thompson, the Company’s Chief Technology Officer, Glen MacGibbon, the Company’s Executive Vice President,
and Joe Gleeson, the Company’s Chief Operating Officer. TE did not at that time offer a retention agreement to Mr.
Guidone or Mark Thomson, the Company’s Chief Financial Officer but did discuss with Mr. Guidone the possibility of a
consulting services agreement whereby his services would be available to support the business following the closing. TE
entered into a retention agreement with each of Mr. Mitch Thompson and Mr. Gleeson on June 18, 2014, but no agreement with
any of the other executives was reached prior to the execution of the merger agreement. Discussion with the other executives
continued following the execution of the merger agreement and TE entered into a retention agreement with Mr. MacGibbon on
July 23, 2014. On July 23, 2014, Tyco Electronics Corporation (a subsidiary of TE) entered into a one-year consulting
services agreement with Mr. Guidone, conditioned on the closing of the merger, which includes a covenant not to compete that
expires two years after the consulting period ends and one year after the non-compete in his current employment agreement
expires. In addition, TE discussed
a retention incentive agreement with Mr. Thomson. No such agreement with Mr. Thomson has been entered into as of the date
of this proxy statement, and there can be no certainty that agreement on the terms of any such agreement will be reached
with Mr. Thomson in the future.
On June 17, 2014, the Board met with representatives of DLA
Piper and Barclays to consider the proposed transaction with TE. Representatives of DLA Piper again advised the Board of its fiduciary
duties, reviewed the terms of the draft merger agreement with the Board, and answered questions from the members of the Board.
A representative of Barclays presented Barclays’ financial analysis of the proposed transaction and confirmed that Barclays
was prepared to deliver a fairness opinion if the Board determined that it was in the best interests of the Company’s shareholders
to proceed with the transaction. Mr. Guidone confirmed that he expected TE to be able to conclude retention agreements with the
members of management designated by TE. There was significant discussion concerning the valuation being offered by TE, with Board
members noting the risk inherent in the Company’s independent business plan, the high multiple to both historical and prospective
EBITDA being offered by TE and the fact that the Company’s current stock price was at an all-time high and the current market
multiple was above historical averages, with risk that the price could decline and the multiples could contract. The Board also
discussed the Company’s prior requests that the merger agreement include a go-shop clause. The Board considered the fact
that TE had repeatedly insisted that its $86.00 per share proposal and willingness to enter into a merger agreement were conditioned
on the absence of an auction, that the price offered by TE was, in the Board’s view, highly attractive and likely to deliver
more value to the Company’s shareholders than the Company’s risk-factored prospects as an independent company, and
that, based on the Board’s views and discussions with management and Barclays, no third party likely would have interest
and financial ability to offer more than TE had proposed. The Board also considered that under the merger agreement it would be
able to consider a superior offer if one materialized and the Board concluded that it would be comfortable accepting TE’s
position provided that the termination fee was limited to 1.5% of the value of the merger consideration so as not to impede an
interested third party from making such a proposal. Other open issues on the merger agreement also were discussed.
At the conclusion of the meeting, the Board indicated unanimously
that it was prepared to move forward and approve the transaction if all issues were resolved and without a go-shop provision provided
that the merger agreement included customary terms permitting consideration of a superior offer and the termination fee was reduced
to 1.5% of the value of the consideration to be paid in the merger. In reaching this conclusion, the Board relied on input from
Barclays and management supporting the Board’s view that $86.00 per share was a compelling price, that TE was not prepared
to offer more, and that this represented the best price likely to be available to the Company’s shareholders.
On June 18, 2014, at 2:30 pm, the Board met again
telephonically with representatives of DLA Piper and Barclays to consider the proposed transaction with TE. Representatives
of DLA Piper confirmed to the Board that negotiations with TE had concluded and that the merger agreement was substantially
ready for execution subject to the Board’s approval, and answered questions from members of the Board. In particular,
it was noted that the agreement included a no-shop clause with an appropriate fiduciary out to consider a superior proposal
and a 1.5% termination fee. At this meeting, Barclays rendered its opinion to the Board to the effect that, as of June 18,
2014 and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the merger
consideration to be paid to the shareholders of the Company in the merger was fair, from a financial point of view, to such
shareholders.
After considering the proposed terms of the merger
agreement with TE and the various presentations of its legal and financial advisors, and taking into consideration of various
factors, including those described under “The Merger — Reasons for the Merger” beginning on page 26, the
Board unanimously (i) determined that the merger agreement and the merger are substantially and procedurally fair to and in
the best interests of the Company and its shareholders, (ii) authorized, approved, and declared advisable the merger
agreement and merger, and (iii) resolved to recommend adoption and approval of the merger agreement and the merger by the
shareholders of the Company. Promptly following the vote of the members of the Board, Barclays delivered its written fairness
opinion, dated June 18, 2014, a copy of which is attached hereto as
Annex B
.
Between 3:00 pm and 4:00 pm on June 18, 2014, the merger agreement
was finalized, and, at 4:00 pm, the Company and TE entered into the merger agreement and issued a press release announcing the
transaction.
Reasons for the Merger
After careful consideration, the Board unanimously (i)
determined that the merger agreement and the merger are fair to and in the best interests of the Company and its
shareholders, (ii) authorized, approved and declared advisable the merger agreement and the merger, and (iii) resolved to
recommend adoption and approval of the merger agreement and the merger by the shareholders of the Company. In the course of
reaching its determination, the Board consulted with the Company’s senior management, as well as its financial and
legal advisors, and considered a number of factors including, but not limited to, the following, each of which the Board
believed supported its recommendation:
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The Company’s
Business and Financial Condition and Prospects.
The Board’s familiarity with
the business, operations, prospects, business strategy, properties, assets and financial
condition of the Company, and the certainty of realizing in cash a compelling value for
the shares of Company common stock in the merger, compared to the risks and uncertainties
associated with operating the Company’s business, particularly in a volatile and
unpredictable economic environment.
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Review of
Strategic Alternatives.
The Board’s ongoing review over an extended period
of time of its strategic alternatives, the Company’s prior discussions with Company
A and Company B, and general knowledge through management and banker presentations of
the opportunities potentially available to the Company from possible acquisition and
sale transactions in comparison to the opportunity as an independent company, and its
conclusion that the merger consideration of $86.00 per share offered certain value to
the shareholders of the Company in the merger that was more favorable to the shareholders
than the potential value that might have resulted from any other strategic opportunity
reasonably available to the Company, including remaining an independent company.
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Risks of
Remaining Independent.
The Board’s assessment, after discussions with the Company’s
management and advisors, of the risks of remaining an independent company and pursuing
the Company’s strategic plan, including risks related to the:
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o
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future
impact of any acquisitions, reorganizations or divestitures the Company may make, including
any outcome of the Company’s exploration of strategic alternatives;
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instability
or a downturn in the sensor markets served by the Company that could adversely affect
the demand for the Company’s products and services;
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o
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competitiveness
and fragmented nature of the market for the Company’s products and services;
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o
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risks
from the Company’s substantial operations outside of the United States, including
its operations in China and Europe;
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ability
of the Company to sustain its growth and perform consistent with the financial forecast
provided to TE and not suffer a disruption in its performance due to market conditions
or other factors;
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potential
contraction of the Company’s share price trading multiple from present high levels;
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ability
of the Company to develop and introduce new sensor products and product line extensions;
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ability
of the Company to consummate future acquisitions or successfully integrate acquisitions
into its business, including the recent acquisition of Wema;
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ability
to maintain and protect its intellectual property and avoid claims of infringement or
misuse of third party intellectual property; and
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o
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ability
to attract, hire or retain the necessary technical and managerial personnel.
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Negotiations
with TE.
The course of discussions and negotiations between the Company and TE, resulting
in a significant increase of $15.00 in the price per share to be paid to shareholders
over the initial offer from TE and changes to the terms of the merger agreement originally
proposed by TE, and the belief of the Board based on these negotiations that this was
the highest price TE was willing to pay for each share of Company common stock and that
these were the most favorable terms to the Company to which TE was willing to agree.
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EBITDA Multiple
.
The fact that the merger consideration of $86.00 per share of Company common stock represented
a multiple of 21.8 times the Company’s EBITDA for the 12-month period ended March
31, 2014.
|
|
·
|
Premium
to Market Price.
The fact that the merger consideration of $86.00 per share of Company
common stock represented approximately a 23.0% premium over $69.92, the average closing
price of Company common stock on the NASDAQ during the 30-day trading period ended
on June 18, 2014, the day the merger agreement was publicly announced, and a 35.1% premium
over $63.64, the closing price of Company common stock on the NASDAQ on June 2, 2014,
the last trading day before the Company announced its acquisition of Wema. In addition,
the merger consideration of $86.00 per share represented an 11% premium over $77.75,
the closing price of Company common stock on the NASDAQ on June 17, 2014 and the then all-time
high closing price.
|
|
·
|
Opinion
of Barclays.
The opinion of Barclays rendered on June 18, 2014 to the Board to the
effect that, as of that date and based upon and subject to the qualifications, limitations
and assumptions stated in its opinion, the merger consideration to be paid to the shareholders
of the Company in the merger was fair, from a financial point of view, to such shareholders,
as more fully described below under the caption “The Merger — Opinion of
Financial Advisor” beginning on page 30.
|
|
·
|
Likelihood
of Completion.
The belief of the Board that the merger will likely be completed,
if approved by the Company’s shareholders, which is based on, among other things,
the absence of a financing condition, TE’s representation that it has sufficient
resources to enable it to consummate the merger pursuant to the terms of the merger agreement,
the limited number of conditions to the merger, the relative likelihood of obtaining
required regulatory approvals for the merger, and the terms of the merger agreement regarding
the obligations of both companies to pursue such approvals.
|
|
·
|
Cash Consideration.
The form of consideration to be paid to holders of shares of Company common stock in the
merger is cash, which will provide certainty of value and immediate liquidity to the
Company’s shareholders.
|
|
·
|
Shareholder
Approval
. The closing conditions that the shareholders of the Company must approve
the merger and that shareholders are free to reject the merger.
|
|
·
|
Terms of
the Merger Agreement.
Other terms of the merger agreement, including the ability
of the Company, under certain circumstances and subject to certain conditions specified
in the merger agreement and prior to receiving the approval of the Company’s shareholders
at the Special Meeting, to furnish information to and engage in discussions or negotiations
with a third party that makes an unsolicited bona fide written proposal for an acquisition
transaction.
|
|
·
|
Ability
to Withdraw or Change Recommendation.
The Board’s ability to withdraw or modify
its recommendation in favor of the merger under certain circumstances and subject to
certain conditions, including its ability to terminate the merger agreement to accept
a superior offer, subject to the payment of a $22.9 million termination fee.
|
|
·
|
Reasonableness
of Termination Fee.
The Board’s belief that the termination fee payable by
the Company to TE in the event of certain termination events under the merger agreement,
which represents 1.5% of the merger consideration, is very reasonable in the context
of termination fees payable in other comparable transactions and would not preclude another
party with the strategic interest and financial capability of acquiring the Company from
making a competing proposal.
|
The Board also considered a variety of uncertainties
and risks in its deliberations concerning the merger agreement and the merger, including the following:
|
·
|
No Shareholder
Participation in Future Growth or Earnings.
The fact that the Company’s forecasts
reflected continued growth opportunities and the nature of the transaction as a cash
transaction will prevent shareholders from being able to participate in any future earnings
or growth of the Company, or the combined company, and shareholders will not benefit
from any potential future appreciation in the value of shares of Company common stock.
|
|
·
|
Taxable
Consideration.
The fact that the receipt of the merger consideration in exchange
for shares of Company common stock pursuant to the merger will be a taxable transaction
for U.S. federal income tax purposes.
|
|
·
|
Effect of
Public Announcement.
The effect of a public announcement of the merger agreement
on the Company’s operations, stock price, customers, suppliers, business partners
and employees and its ability to attract and retain key management, technical, research
and sales personnel.
|
|
·
|
Effect of Failure
to Complete Transactions.
The fact that if the merger is not consummated, the trading
price of Company common stock could be adversely affected, the Company will have incurred
significant transaction and opportunity costs attempting to consummate the merger, the
Company may have lost customers, suppliers, business partners and employees after the
announcement of the merger agreement, the Company’s business may be subject to
disruption, the market’s perceptions of the Company’s prospects could be
adversely affected, and the Company’s directors, officers and other employees would
have expended considerable time and effort to consummate the merger.
|
|
·
|
Interim Restrictions
on Business.
The fact that the restrictions in the merger agreement on the conduct
of the Company’s business prior to the consummation of the merger require the Company
to operate its business in the ordinary course of business and may delay or prevent the
Company from undertaking business opportunities that could arise prior to the consummation
of the merger.
|
|
·
|
Restrictions
on Soliciting Proposals; Termination Fee.
While the Board was comfortable that the
merger consideration represented a compelling price that would not likely be exceeded
by any other potential buyer and further negotiated a favorable termination fee for the
acceptance of a superior proposal, the Company granted exclusivity to TE on April 25,
2014 and did not engage in an auction or otherwise actively solicit competing proposals
in connection with consideration of the proposal from TE. The merger agreement includes
restrictions on the active solicitation of competing proposals and includes a requirement
that the Company pay a termination fee if the merger agreement is terminated in certain
circumstances or if, in certain circumstances and subject to certain conditions, the
Company engages in another transaction during the one-year period thereafter.
|
|
·
|
Interests
of Directors and Officers.
The fact that the executive officers and directors of the Company may have interests
in the merger that are different from, or in addition to, those of the Company’s
shareholders. (see “The Merger — Interests of Company Directors and Executive
Officers in the Merger” beginning on page 39).
|
|
·
|
Litigation Risk
.
An increased risk of litigation, including potential shareholder litigation in connection
with the execution of the merger agreement and the consummation of the transaction.
|
The foregoing discussion of information and factors considered
by the Board is not intended to be exhaustive. In light of the variety of factors considered in connection with its evaluation
of the merger agreement 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 determinations and recommendations. Rather, the Board viewed its determinations
and recommendations as being based on the totality of information and factors presented to and considered by the Board. Moreover,
each member of the Board applied his own personal business judgment to the process and may have given different weight to different
factors.
Recommendation of the Board
The Board of Directors of the Company (referred to as the “Board”)
has unanimously (i) determined that the merger Agreement and the merger are fair to and in the best interests of the Company and
its shareholders, (ii) authorized, approved and declared advisable the merger agreement and the merger, and (iii) resolved to
recommend adoption and approval of the merger agreement and the merger by the shareholders of the Company. The Board unanimously
recommends that the Company’s shareholders vote:
|
·
|
“
FOR
”
the approval and adoption of the merger agreement.
|
Opinion of Financial Advisor
The Company engaged Barclays to act as its financial advisor
with respect to the consideration of its strategic alternatives, including a possible sale of the Company or a majority of its
assets. On June 18, 2014, Barclays rendered its opinion to the Board to the effect that, as of that date and based upon and subject
to the qualifications, limitations and assumptions stated in its opinion, the merger consideration to be paid to the shareholders
of the Company in the merger was fair, from a financial point of view, to such shareholders.
The
full text of Barclays’ written opinion, dated as of June 18, 2014, is attached as Annex B to this proxy statement. Barclays’
written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations
upon the review undertaken by Barclays in rendering its opinion. The Company encourages you to read the opinion carefully in its
entirety. The following is a summary of Barclays’ opinion and the methodology that Barclays used to render its opinion.
This summary is qualified in its entirety by reference to the full text of the opinion.
Barclays’
opinion, the issuance of which was approved by Barclays’ Fairness Opinion Committee, was addressed to the Board, addresses
only the fairness, from a financial point of view, of the merger consideration to be paid to the shareholders of the Company and
does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote with respect to
the merger. The terms of the merger were determined through arm’s-length negotiations between the Company and TE and were
unanimously approved by the Board. Barclays did not recommend any specific form of merger consideration to the Company or that
any specific form of merger consideration constituted the only appropriate consideration for the merger. Barclays was not requested
to opine as to, and its opinion does not in any manner address, the Company’s underlying business decision to proceed with
or effect the merger or the likelihood of the consummation of the merger. In addition, Barclays expressed no opinion on, and its
opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors
or employees of any parties to the merger, or any class of such persons, relative to the merger consideration to be paid to the
shareholders of the Company in the merger. No limitations were imposed by the Board upon Barclays with respect to the investigations
made or procedures followed by it in rendering its opinion.
In arriving at its opinion,
Barclays, among other things:
|
·
|
reviewed and
analyzed a draft of the merger agreement, dated as of June 18, 2014, and the specific
terms of the merger;
|
|
·
|
reviewed and
analyzed publicly available information concerning the Company that Barclays believed
to be relevant to its analysis, including the Company’s Annual Report on Form 10-K
for the fiscal year ended March 31, 2014;
|
|
·
|
reviewed and
analyzed financial and operating information with respect to the business, operations
and prospects of the Company furnished to Barclays by the Company, including financial
projections of the Company prepared by management of the Company;
|
|
·
|
reviewed and
analyzed a trading history of Company common stock from June 17, 2011 to June 17, 2014
and a comparison of that trading history with those of other companies that Barclays
deemed relevant;
|
|
·
|
reviewed and
analyzed a comparison of the historical financial results and present financial condition
of the Company with those of other companies that Barclays deemed relevant;
|
|
·
|
reviewed and
analyzed a comparison of the financial terms of the merger with the financial terms of
certain other transactions that Barclays deemed relevant;
|
|
·
|
had discussions
with the management of the Company concerning its business, operations, assets, liabilities,
financial condition and prospects; and
|
|
·
|
undertook such
other studies, analyses and investigations as Barclays deemed appropriate.
|
In arriving at its opinion, Barclays assumed and relied upon
the accuracy and completeness of the financial and other information used by Barclays without any independent verification of
such information (and did not assume responsibility or liability for any independent verification of such information). Barclays
also relied upon the assurances of the management of the Company that they were not aware of any facts or circumstances that would
make such information provided by the Company inaccurate or misleading. With respect to the financial projections of the Company,
upon the advice of the Company, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as to the future financial performance of the Company
and that the Company would perform in accordance with such projections. Barclays assumed no responsibility for and expressed no
view as to any such projections or estimates or the assumptions on which they were based. In arriving at its opinion, Barclays
did not conduct a physical inspection of the properties and facilities of the Company and did not make or obtain any evaluations
or appraisals of the assets or liabilities of the Company. Barclays was not authorized to solicit, and did not solicit, any indications
of interest from any third party with respect to the purchase of all or a part of the Company’s business. Barclays’
opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the
date of its opinion. Barclays assumed no responsibility for updating or revising its opinion based on events or circumstances
that may have occurred after June 18, 2014.
In arriving at its opinion, Barclays assumed that the executed
merger agreement would conform in all material respects to the last draft reviewed by Barclays. In addition, Barclays assumed
the accuracy of the representations and warranties contained in the merger agreement and all agreements related thereto. Barclays
also assumed, upon the advice of the Company, that all material governmental, regulatory, and third party approvals, consents
and releases for the merger will be obtained within the constraints contemplated by the merger agreement and that the merger will
be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any material
term, condition or agreement thereof. Barclays did not express any opinion as to any tax or other consequences that might result
from the merger, nor did its opinion address any legal, tax, regulatory or accounting matters, as to which Barclays understood
that the Company had obtained such advice as the Company deemed necessary from qualified professionals.
In connection with rendering its opinion, Barclays performed
certain financial, comparative and other analyses as summarized below. In arriving at its opinion, Barclays did not ascribe a
specific range of values to the shares of Company common stock but rather made its determination as to fairness, from a financial
point of view, to the Company’s shareholders of the merger consideration to be paid to such shareholders in the merger on
the basis of various financial and comparative analyses. The preparation of a fairness opinion is a complex process and involves
various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application
of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.
In arriving at its opinion, Barclays did not attribute any
particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance
and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the
context of the circumstances of the particular transaction. Accordingly, Barclays believes that its analyses must be considered
as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole,
could create a misleading or incomplete view of the process underlying its opinion.
The following is a summary of the material
financial analyses used by Barclays in preparing its opinion to the Board. Certain financial analyses summarized below include
information presented in tabular format. In order to fully understand the financial analyses used by Barclays, the tables must
be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial
analyses. In performing its analyses, Barclays made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the merger.
None of the Company, TE, Merger Sub, Barclays or any other person assumes responsibility if future results are materially different
from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive
of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses
relating to the value of the businesses do not purport to be appraisals or reflect the prices at which the businesses may actually
be sold.
In performing its financial analyses
summarized below and in arriving at its opinion, Barclays utilized and relied upon the Updated Base Case Projections. In
addition, for informational purposes, Barclays also performed a selected comparable company analysis and a discounted cash
flow analysis (as described below) utilizing the Upside Case Projections. For further information regarding these financial
projections, see the section of this proxy statement entitled “The Merger — Selected Unaudited Prospective
Financial Information” beginning on page 46.
Selected Comparable
Company Analysis
In order to
assess how the public market values shares of similar publicly traded companies, Barclays reviewed and compared specific financial
and operating data relating to the Company with selected companies that Barclays, based on its experience with sensor and industrial
technology companies, deemed relevant. The selected comparable companies used in this analysis were the sensor and industrial
technology companies listed below, which are collectively referred to below as the Industrial Technology Companies, and the diversified
industrial companies listed below, which are collectively referred to below as the Diversified Industrial Companies:
Industrial
Technology Companies
|
·
|
MTS Systems Corporation
|
|
·
|
Sensata Technologies
B.V.
|
|
·
|
Teledyne Technologies
Incorporated
|
Diversified Industrial Companies
|
·
|
Honeywell International
Inc.
|
Barclays calculated
and compared various financial multiples and ratios of the Company and the selected comparable companies listed above. As part
of its selected comparable company analysis, Barclays calculated and analyzed the ratio of the Company’s and each selected
comparable company’s enterprise value to estimated earnings before interest, taxes, depreciation and amortization, or EBITDA,
for calendar years ending 2014 and 2015 (which were calendarized as appropriate to correspond to fiscal years ending December
31, 2014 and 2015). The enterprise value of each selected comparable company was calculated as the market value of such company’s
common equity plus its net debt. The Company’s enterprise value was calculated as the market value of its common equity
plus its net debt as of March 31, 2014, its capital lease obligations and the cash purchase price of approximately $114.5 million
paid by the Company to acquire Wema System AS in May 2014, or the Wema Purchase Price. All of these calculations were performed,
and based on publicly available financial data (including FactSet), closing prices as of June 17, 2014 and, with respect to the
Company, the Updated Base Case Projections. The results of this selected comparable company analysis are summarized below:
Enterprise Value
as a Multiple of Calendar Year 2014 Estimated EBITDA
Selected Comparable Companies
|
|
Low
|
|
Median
|
|
Mean
|
|
High
|
Industrial Technology Companies
|
|
|
9.4x
|
|
|
13.7x
|
|
|
12.7x
|
|
|
15.1x
|
Diversified Industrial Companies
|
|
|
9.7x
|
|
|
11.7x
|
|
|
11.8x
|
|
|
14.0x
|
The Company based on FactSet Consensus
estimates
|
16.1x
|
The Company based on the Updated Base Case
Projections
|
15.6x
|
Enterprise Value
as a Multiple of Calendar Year 2015 Estimated EBITDA
Selected Comparable Companies
|
|
Low
|
|
Median
|
|
Mean
|
|
High
|
Industrial Technology Companies
|
|
|
8.1x
|
|
|
11.7x
|
|
|
11.5x
|
|
|
13.3x
|
Diversified Industrial Companies
|
|
|
9.1x
|
|
|
10.8x
|
|
|
10.9x
|
|
|
13.0x
|
The Company based on FactSet Consensus
estimates
|
13.0x
|
The Company based on the Updated Base Case
Projections
|
12.1x
|
Barclays selected
the comparable companies listed above because of similarities in their business or operating characteristics with the Company.
However, because no selected comparable company is exactly the same as the Company, Barclays believed that it was inappropriate
to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, Barclays
also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects
of the Company and the selected comparable companies that could affect the public trading values of each in order to provide a
context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing
sizes, growth prospects, profitability levels and degree of operational risk between the Company and the companies included in
the selected company analysis.
Based upon
these judgments, Barclays selected a range of 11.0x to 14.0x the Company’s fiscal year ending March 31, 2015 estimated Adjusted
EBITDA based on the Updated Base Case Projections to calculate a range of implied enterprise values for the Company. Barclays
then deducted the Company’s net debt as of March 31, 2014 (including the Wema Purchase Price), to determine a range of implied
equity values of the Company. This analysis yielded an implied valuation range for Company common stock of $55.00 to $72.00 per
share (per share values were rounded to the nearest $1.00 increment), compared to the merger consideration of $86.00 per share
of Company common stock.
In addition,
Barclays selected a range of 11.0x to 13.0x the Company’s fiscal year ending March 31, 2016 estimated Adjusted EBITDA based
on the Updated Base Case Projections to calculate a range of implied enterprise values for the Company. Barclays then deducted
the Company’s net debt as of March 31, 2014 (including the Wema Purchase Price), to determine a range of implied equity
values of the Company. This analysis yielded an implied undiscounted valuation range for Company common stock one year later of
$75.00 to $90.00 per share (per share values were rounded to the nearest $1.00 increment), compared to the merger consideration
of $86.00 per share of Company common stock.
In addition,
for informational purposes, Barclays also used the range of 11.0x to 13.0x the Company’s fiscal year ending March 31, 2016
estimated Adjusted EBITDA based on the Upside Case Projections to calculate a range of implied enterprise values for the Company.
Barclays then deducted the Company’s net debt as of March 31, 2014 (including the Wema Purchase Price), to determine a range
of implied equity values of the Company. This analysis yielded an implied undiscounted valuation range for Company common stock
one year later of $83.00 to $100.00 per share (per share values were rounded to the nearest $1.00 increment), compared to the
merger consideration of $86.00 per share of Company common stock.
Barclays also
noted, for informational purposes, that using the range of 11.0x the Company’s fiscal year ending March 31, 2016 estimated
Adjusted EBITDA based on the Updated Base Case Projections to 13.0x the Company’s fiscal year ending March 31, 2016 estimated
Adjusted EBITDA based on the Upside Case Projections, and discounting the implied prices per share by one year to present value
using a discount rate of 13%, which was based on the Company’s estimated cost of equity, yielded an implied discounted valuation
range for Company common stock of $66.00 to $88.00 per share (per share values were rounded to the nearest $1.00 increment).
Selected
Precedent Transactions Analysis
Barclays reviewed
and compared the purchase prices and financial multiples paid in selected other transactions involving target companies that are
sensor and industrial technology companies that Barclays, based on its experience with merger and acquisition transactions, deemed
relevant. Barclays chose such transactions based on, among other things, the similarity of the applicable target companies in
the transactions to the Company with respect to the size, mix, historical and expected growth rates, margins and/or other characteristics
of their businesses. The following table sets forth the transactions analyzed and the month and year each transaction was announced:
Announcement
Date
|
|
Acquiror
|
|
Target
|
May 2014
|
|
Measurement Specialties, Inc.
|
|
Wema System AS
|
May 2014
|
|
The Carlyle Group / PAI Partners / Schneider Electric SA
|
|
Custom Sensors & Technologies*
|
November 2013
|
|
Amphenol Corporation
|
|
General Electric Company (Advance Sensors Business)*
|
April 2013
|
|
Honeywell International Inc.
|
|
RAE Systems Inc.*
|
March 2012
|
|
Madison Dearborn Partners, LLC
|
|
Schrader International, Inc.
|
November 2011
|
|
TE Connectivity Ltd.
|
|
Deutsch Group SAS
|
August 2011
|
|
Spectris plc
|
|
Omega Engineering, Inc.*
|
June 2011
|
|
Sensata Technologies B.V.
|
|
Sensor-NITE Group
|
May 2011
|
|
Esterline Technologies Corporation
|
|
Souriau Group*
|
January 2011
|
|
Meggitt PLC
|
|
Danaher Corporation (Pacific Scientific Aerospace)
|
October 2010
|
|
Sensata Technologies B.V.
|
|
Honeywell International Inc. (Automotive On Board)
|
September 2010
|
|
Danaher Corporation
|
|
Keithley Instruments, Inc.
|
October 2008
|
|
Spectris plc
|
|
SPX Corporation (LDS Test & Measurement Division)*
|
December 2007
|
|
Cooper Industries, Ltd.
|
|
MTL Instruments Group plc
|
October 2007
|
|
Danaher Corporation
|
|
Tektronix, Inc.
|
June 2007
|
|
Sensata Technologies B.V.
|
|
Airpax Holdings, Inc.*
|
February 2007
|
|
Esterline Technologies Corporation
|
|
CMC Electronics Inc.
|
November 2006
|
|
Sensata Technologies B.V.
|
|
Honeywell International Inc. (First Technology Automotive and Special Products)
|
April 2006
|
|
WENDEL Investissement
|
|
Deutsch Group
|
March 2006
|
|
Emerson Electric Co.
|
|
Bristol Babcock
|
January 2006
|
|
Bain Capital, LLC
|
|
Texas Instruments Incorporated (Sensors & Controls)
|
July 2005
|
|
Schneider Electric SA
|
|
BEI Technologies, Inc.
|
May 2005
|
|
Cognex Corporation
|
|
DVT Corporation
|
July 2004
|
|
Esterline Technologies Corporation
|
|
Leach Holding Corporation
|
June 2004
|
|
AMETEK, Inc.
|
|
Taylor Hobson Holdings Ltd.
|
March 2004
|
|
Schneider Electric SA
|
|
Kavlico Corporation*
|
August 2003
|
|
Moog Inc.
|
|
Northrop Grumman Corporation (Poly-Scientific Division)
|
August 2002
|
|
Honeywell International Inc.
|
|
Invensys plc (Sensor Systems Division)
|
June 2002
|
|
Goodrich Corporation
|
|
TRW Inc. (Aeronautical Systems)
|
May 2002
|
|
General Electric Company
|
|
Druck Holdings plc
|
May 2002
|
|
General Dynamics Corporation
|
|
Advanced Technical Products, Inc.
|
August 2000
|
|
Schneider Electric SA
|
|
Thomson-CSF (Crouzet Automatismes)*
|
* Transactions excluded
from the low, median, mean and high multiples summarized below because multiples were not publicly available for those transactions.
Barclays calculated
and compared various financial multiples and ratios of the Company and the target company in each of the selected precedent transactions
listed above. As part of its selected precedent transactions analysis, Barclays calculated, among other things, the ratio of the
target company’s enterprise value to its last twelve months, or LTM, EBITDA as of the announcement date of such transaction,
which is referred to below as EV/LTM EBITDA. The results of this selected precedent transactions company analysis are summarized
below:
Metric
|
|
Low
|
|
Median
|
|
Mean
|
|
High
|
EV/LTM EBITDA
|
|
|
6.6x
|
|
|
10.0x
|
|
|
11.1x
|
|
|
16.9x
|
The reasons
for and the circumstances surrounding each of the selected precedent transactions analyzed were diverse and there are inherent
differences in the business, operations, financial conditions and prospects of the Company and the companies included in the selected
precedent transaction analysis. Accordingly, Barclays believed that a purely quantitative selected precedent transaction analysis
would not be particularly meaningful in the context of considering the merger consideration of $86.00 per share of Company common
stock in the merger. Barclays therefore made qualitative judgments concerning differences between the characteristics of the selected
precedent transactions and the merger which would affect the acquisition values of the selected target companies and the Company.
Based upon
these judgments, Barclays selected a range of 10.0x to 14.0x the Company’s Adjusted EBITDA for fiscal year ending March
31, 2014 (adjusted to include approximately $4.7 million of EBITDA attributable to Wema System AS, which was acquired by the Company
in May 2014) to calculate a range of implied enterprise values for the Company. Barclays then deducted the Company’s net
debt as of March 31, 2014 (including the Wema Purchase Price), to determine a range of implied equity values of the Company. This
analysis yielded an implied valuation range for Company common stock of $39.00 to $58.00 per share (per share values were rounded
to the nearest $1.00 increment), compared to the merger consideration of $86.00 per share of Company common stock.
In addition, Barclays selected
a range of 10.0x to 14.0x the Company’s fiscal year ending March 31, 2015 estimated Adjusted EBITDA based on the Updated
Base Case Projections to calculate a range of implied enterprise values for the Company. Barclays then deducted the Company’s
net debt as of March 31, 2014 (including the Wema Purchase Price), to determine a range of implied equity values of the Company.
This analysis yielded an implied undiscounted valuation range for Company common stock one year later of $49.00 to $72.00 per
share, and, using a discount rate of 13%, which was based on the Company’s estimated cost of equity, an implied valuation
range for Company common stock discounted by one year of $44.00 to $64.00 per share (per share values were rounded to the nearest
$1.00 increment), in each case, compared to the merger consideration of $86.00 per share of Company common stock.
Discounted Cash Flow
Analysis
In order to
estimate the present value of Company common stock, Barclays performed a discounted cash flow analysis of the Company. A discounted
cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present
value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash
flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account
macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.
To calculate
the estimated enterprise value of the Company using the discounted cash flow method, Barclays added (i) the Company’s
projected after-tax unlevered free cash flows for fiscal years ending March 31, 2015 through March 31, 2019 based on the Updated
Base Case Projections to (ii) the “terminal value” of the Company as of March 31, 2019, and discounted such amount
to its present value using a range of selected discount rates. The residual value of the Company at the end of the forecast period,
or “terminal value,” was estimated by selecting a range of terminal value multiples based on the Company’s estimated
Adjusted EBITDA for fiscal year ending March 31, 2020 of 10.0x to 13.0x, and applying such range to the Updated Base Case Projections.
A range of after-tax discount rates of 10% to 12% was selected based on an analysis of the weighted average cost of capital of
the Company and the Industrial Technology Companies.
Combining
the total present value of the estimated after-tax unlevered free cash flows and the present value of the terminal values resulted
in a range of implied enterprise values for the Company. Barclays then deducted the Company’s net debt as of March 31, 2014
(including the Wema Purchase Price) to determine a range of implied equity values of the Company as of that date, which Barclays
discounted to present value as of March 31, 2014 using the same range of discount rates summarized above. The discounted cash
flow analysis yielded an implied valuation range for Company common stock of $72.00 to $101.00 per share (per share values were
rounded to the nearest $1.00 increment), compared to the merger consideration of $86.00 per share of Company common stock.
In addition, for informational
purposes, Barclays also performed a discounted cash flow analysis using the range of discount rates and terminal value multiples
described above based on the Upside Case Projections. This discounted cash flow analysis yielded an implied valuation range for
Company common stock of $79.00 to $110.00 per share (per share values were rounded to the nearest $1.00 increment), compared to
the merger consideration of $86.00 per share of Company common stock.
Transaction Premiums
Analysis
In order to
assess the premium paid to the shareholders of the Company in the merger relative to the premiums paid to shareholders in other
transactions, Barclays reviewed the premiums paid in selected cash consideration transactions of public U.S. companies valued
between $500 million and $2 billion from January 1, 2010 to June 17, 2014 as compiled by MergerStat. For each calendar year, Barclays
calculated the median percentage premium per share paid by the acquiror by comparing the announced transaction value per share
to the target company’s (i) closing share price as of one trading day prior to announcement, (ii) closing share price as
of 30 trading days prior to announcement, and (iii) high closing share price during the 52-week period immediately preceding announcement.
The results of this transaction premium analysis are summarized below:
|
|
Median Premiums Paid in Cash
Consideration Transactions
Valued Between $500 million and $2 billion (2010-2014)
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014*
|
|
|
Overall
|
|
1-Trading Day Median Premium
|
|
|
29.6%
|
|
|
|
27.6%
|
|
|
|
30.3%
|
|
|
|
22.7%
|
|
|
|
26.3%
|
|
|
|
26.7%
|
|
30-Trading Day Median Premium
|
|
|
39.8%
|
|
|
|
36.5%
|
|
|
|
33.4%
|
|
|
|
32.8%
|
|
|
|
32.8%
|
|
|
|
35.0%
|
|
52-Week High Median Premium
|
|
|
13.4%
|
|
|
|
6.5%
|
|
|
|
11.7%
|
|
|
|
11.1%
|
|
|
|
12.3%
|
|
|
|
11.1%
|
|
Number of Transactions
|
|
|
38
|
|
|
|
32
|
|
|
|
44
|
|
|
|
38
|
|
|
|
14
|
|
|
|
166
|
|
*Includes completed and
pending transactions as of June 17, 2014.
The reasons
for and the circumstances surrounding each of the transactions analyzed in the transaction premium analysis were diverse and there
are inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included
in the transaction premium analysis. Accordingly, Barclays believed that a purely quantitative transaction premium analysis would
not be particularly meaningful in the context of considering the merger. Barclays therefore made qualitative judgments concerning
the differences between the characteristics of the selected transactions and the merger which would affect the acquisition values
of the target companies and the Company. Based upon these judgments, Barclays selected the premium reference ranges to the Company’s
historical prices per share for the time periods set forth below to calculate a range of implied prices per share of the Company.
This transaction premium analysis yielded the implied valuation ranges for Company common stock set forth in the table below (per
share values were rounded to the nearest $1.00 increment), compared to the merger consideration of $86.00 per share of Company
common stock:
Time Period
(Closing Price)
|
|
Premium
Reference
Range
|
|
Implied Valuation Range
for
Company Common Stock
|
June 17, 2014 ($77.75)
|
|
10% - 30%
|
|
$86.00 - $101.00
|
30-Trading Days Prior to June 17, 2014 ($62.71)
|
|
20% - 40%
|
|
$75.00 - $88.00
|
52-Week High ($79.00)
|
|
5% - 15%
|
|
$83.00 - $91.00
|
Analyst Price Targets
Barclays reviewed the public market trading
price targets for Company common stock published by three securities research analysts (Sidoti & Company, Needham &
Co. and CJS Securities) as of June 17, 2014. These targets reflected each analyst’s undiscounted estimate of the future
public market trading price for Company common stock. The public market trading price targets published by securities research
analysts do not necessarily reflect current market trading prices for the shares and these estimates are subject to uncertainties,
including future financial performance of the Company and future financial market conditions. The securities research analyst
price targets for Company common stock ranged from $70.00 to $80.00 and the mean and median price target was $75.00, compared
to the merger consideration of $86.00 per share of Company common stock.
In addition to the foregoing analyses, for informational purposes,
Barclays also considered the following analyses:
Analysis of Implied Premiums and Multiples
Barclays analyzed the implied
premiums based on the merger consideration of $86.00 per share of Company common stock as compared to the following:
·
the
closing price of Company common stock on June 17, 2014, the last trading date prior to the delivery of Barclays’ opinion;
·
the
high closing price of Company common stock during the 52-week period ending on June 17, 2014, which is referred to below as 52-Week
High;
·
the
average closing price of Company common stock for the 30-trading day period ended on June 17, 2014, which is referred to below
as 30-Day Average;
·
the
average closing price of Company common stock for the 90-trading day period ended on June 17, 2014, which is referred to below
as 90-Day Average; and
·
the
initial non-binding proposal to purchase 100% of the outstanding common stock of the Company submitted by TE to the Company on
February 25, 2014, which is referred to below as the Initial Proposal.
The results of this analysis are summarized
in the following table:
Time Period/Event
|
|
Share Price
|
|
|
Implied Premium
|
|
June 17, 2014
|
|
|
$77.75
|
|
|
|
10.6%
|
|
52-Week High
|
|
|
$79.00
|
|
|
|
8.9%
|
|
30-Day Average
|
|
|
$67.44
|
|
|
|
27.5%
|
|
90-Day Average
|
|
|
$64.73
|
|
|
|
32.9%
|
|
Initial Proposal
|
|
|
$71.00
|
|
|
|
21.1%
|
|
Barclays also analyzed the implied multiple
of the Company’s enterprise value to EBITDA and Adjusted EBITDA, based on the merger consideration. For purposes of its
analyses, Barclays used the Company’s EBITDA and Adjusted EBITDA for fiscal year ending March 31, 2014 (adjusted to include
approximately $4.7 million of EBITDA attributable to Wema System AS, which was acquired by the Company in May 2014) and the Company’s
estimated EBITDA and Adjusted EBITDA for fiscal year ending March 31, 2015 based on the Updated Base Case Projections. Barclays
also calculated the implied projected earnings per share multiples (commonly referred to as a price earnings ratio) based on the
merger consideration using the Company’s estimated earnings per share for fiscal years ending March 31, 2015 and March 31,
2016 based on the Updated Base Case Projections. The results of this analysis are summarized below:
Multiple Analysis
|
|
Merger Consideration
of $86.00 Per Share
of Company Common Stock
|
|
Enterprise Value/2014 Adjusted EBITDA
|
|
|
20.0x
|
|
Enterprise Value/2015 Estimated Adjusted EBITDA
|
|
|
16.3x
|
|
|
|
|
|
|
Enterprise Value/2014 EBITDA
|
|
|
21.8x
|
|
Enterprise Value/2015 Estimated EBITDA
|
|
|
17.8x
|
|
|
|
|
|
|
Estimated 2015 Price/Earnings Ratio
|
|
|
32.1x
|
|
Estimated 2016 Price/Earnings Ratio
|
|
|
22.9x
|
|
Historical Share
Price Analysis
To illustrate
the trend in the historical trading prices of shares of Company common stock, Barclays considered historical data with regard
to shares of Company common stock for the period from June 17, 2011 to June 17, 2014, and compared such data with the relative
stock price performances during the same periods of (i) Sensata Technologies B.V., a publicly traded sensor company, which is
referred to below as Sensata, (ii) a composite index comprised of the Industrial Technology Companies excluding MTS Systems Corporation
and Sensata, which is referred to below as the Industrial Technology Index, (iii) a composite index comprised of the Diversified
Industrial Companies, which is referred to below as the Diversified Industrial Index, and (iv) the Standard & Poor’s
500 Index, which is referred to below as the S&P 500.
Barclays noted that
from June 17, 2011 to June 17, 2014, the closing price per share of Company common stock increased 139% while the closing price
per share of common stock of Sensata increased 33%, the Industrial Technology Index increased 77%, the Diversified Industrial
Index increased 54%, and the S&P 500 increased 53%.
Illustrative Future Share Price Analysis
Barclays performed an illustrative future share price analysis
of the Company. A future share price analysis is used to provide insight into the potential future equity value of a company as
a function of its future earnings. Barclays applied the range of multiples of enterprise value to EBITDA, or EV/EBITDA, set forth
in the table below to the Company’s fiscal year ending March 31, 2016 estimated Adjusted EBITDA based on the Updated Base
Case Projections to calculate the implied enterprise value of the Company. Barclays deducted the Company’s estimated net
debt as of March 31, 2015 to determine the estimated undiscounted future equity values per share of Company common stock one
year later. This analysis yielded the following implied undiscounted values per share of Company common stock (per share values
were rounded to the nearest $1.00 increment), compared to the merger consideration of $86.00 per share of Company common stock:
EV/EBITDA Multiple to March
31, 2016
Estimated Adjusted EBITDA
|
|
|
Implied Undiscounted
Value
Per Share
|
|
|
11.0x
|
|
|
|
$77.00
|
|
|
12.5x
|
|
|
|
$89.00
|
|
|
14.9x*
|
|
|
|
$107.00
|
|
|
*
|
Multiple represents the Company’s EV/EBITDA multiple based
on the Company’s fiscal year ending March 31, 2015 estimated Adjusted EBITDA as
of June 17, 2014.
|
In addition, Barclays applied the range of EV/EBITDA multiples
set forth in the table below to the Company’s fiscal year ending March 31, 2017 estimated Adjusted EBITDA based on the Updated
Base Case Projections to calculate the implied enterprise value of the Company. Barclays deducted the Company’s estimated
net debt as of March 31, 2016 to determine the estimated undiscounted future equity values per share of Company common stock
two years later. Barclays then discounted these future equity values per share by two years to present value using a discount
rate of 13%, which was based on the Company’s estimated cost of equity. This analysis yielded the following implied undiscounted
and discounted values per share of Company common stock (per share values were rounded to the nearest $1.00 increment), compared
to the merger consideration of $86.00 per share of Company common stock:
EV/EBITDA Multiple to March
31,
2017 Adjusted Estimated EBITDA
|
|
|
Implied Undiscounted
Value
Per Share
|
|
|
Implied Discounted
Value
Per Share
|
|
|
9.5x*
|
|
|
|
$86.00
|
|
|
|
$68.00
|
|
|
11.0x
|
|
|
|
$100.00
|
|
|
|
$78.00
|
|
|
14.9x**
|
|
|
|
$136.00
|
|
|
|
$107.00
|
|
* Multiple based on the Company’s historical
3-year average EV/EBITDA multiple based on the Company’s next twelve months estimated Adjusted EBITDA as of June 17, 2014
of 9.4x.
** Multiple represents the Company’s EV/EBITDA
multiple based on the Company’s fiscal year ending March 31, 2015 estimated Adjusted EBITDA as of June 17, 2014.
General
Barclays is
an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged
in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. The Board selected Barclays because of its familiarity with the Company
and its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and
acquisitions generally, as well as substantial experience in transactions comparable to the merger.
Barclays is
acting as financial advisor to the Company in connection with the merger. As compensation for its services in connection with
the merger, the Company agreed to pay Barclays a fee of $1.5 million upon the delivery of Barclays’ opinion. The Company
has also agreed to pay Barclays a fee of $12.5 million upon consummation of the merger, against which the $1.5 million paid to
Barclays in connection with its opinion will be credited. In addition, the Company has agreed to reimburse Barclays for its expenses
under certain circumstances and to indemnify Barclays for certain liabilities that may arise out of its engagement. Barclays has
performed various investment banking and financial services for the Company and TE, and its affiliates, in the past and has received
customary compensation for a portion of such services. Specifically, since January 1, 2012, Barclays has performed the following
investment banking and financial services for TE, and its affiliates, for which Barclays has received aggregate fees of approximately
$1.5 million: (i) acted as an underwriter on the senior notes offering for Tyco Electronics Group S.A., which was fully and unconditionally
guaranteed by TE, and (ii) provided certain risk management and derivatives services for TE and its affiliates. In addition, Barclays
may perform various investment banking and financial services for TE and its affiliates in the future for which Barclays would
expect to receive customary compensation for such services. Since January 1, 2012, Barclays has not received any fees from the
Company or its affiliates in connection with any investment banking or financial services.
Barclays and
its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other
financial and non-financial services. In the ordinary course of its business, Barclays and affiliates may actively trade
and effect transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments (including
loans and other obligations) of the Company and TE and their respective affiliates for its own account and for the accounts of
its customers and, accordingly, may at any time hold long or short positions and investments in such securities and financial
instruments.
Interests of Company Directors and Executive Officers
in the Merger
In considering the recommendation of the Board that you vote
to approve and adopt the merger agreement, you should be aware that aside from their interests as shareholders of the Company,
the Board and executive officers have interests in the merger that may be different from, or in addition to, those of other shareholders
of the Company generally. The members of the Board were aware of and considered these interests, among other matters, in evaluating
and negotiating the merger agreement and the merger, and in recommending to the shareholders of the Company that they approve
and adopt the merger agreement.
See the sections entitled “The Merger — Background
of the Merger” beginning on page 21 and “The Merger — Reasons for the Merger” beginning on page 26.
Shareholders of the Company should take these interests into account in deciding whether to vote “
FOR
” the
adoption of the merger agreement. These interests are described and quantified below.
Equity-Based Awards
The Company’s directors and executive officers hold
stock options and RSUs that, pursuant to the terms of the applicable award agreements as in effect on the date of the merger
agreement, will be vested at the effective time of the merger (either because the awards will have already vested prior to
the effective time of the merger or because the vesting of the awards will accelerate at such time). Joseph Gleeson, the
Company’s Chief Operating Officer, also holds certain RSUs that will be unvested at the effective time of the merger
(because the awards will not yet have vested prior to the effective time of the merger, and the vesting of the awards will
not accelerate at such time).
Each equity award held by the Company’s
directors and executive officers as of immediately prior to the effective time of the merger will be canceled at the
effective time of the merger in consideration of a cash payment in an aggregate amount equal to the product of (i) the merger
consideration of $86.00 per share of Company common stock (less the applicable exercise price, in the case of a stock option)
multiplied by (ii) the total number of shares of Company common stock subject to such award. Each of these amounts (other
than the amounts for Mr. Gleeson’s unvested RSUs that do not vest as a result of the merger) will be paid in a lump sum at or
promptly after the effective time of the merger.
The amounts for Mr. Gleeson’s unvested RSUs that do
not vest as a result of the merger will be paid on or within 30 days after the date(s) on which such awards were scheduled to
become vested pursuant to the terms of the applicable award agreement as in effect as of the date of the merger agreement,
subject to Mr. Gleeson’s continued employment with the Company or any of its affiliates through the scheduled vesting
dates. Mr. Gleeson holds certain RSUs that will be unvested at the effective time of the merger, but the vesting of such
awards will, pursuant to the terms of Mr. Gleeson’s employment agreement, fully accelerate upon the termination of his
employment within two years after a “change in control” by the Company without “cause” or by the
executive with “good reason.” The closing of the merger would constitute a “change in control” for
purposes of these agreements. See the section entitled “Potential Termination Payments and Benefits to Executive
Officers” below for the definitions of “cause” and “good reason” for purposes of these
executives’ employment agreements, including Mr. Gleeson’s employment agreement.
The following table sets forth the number of stock options
and RSUs held by each of the Company’s directors and executive officers that, pursuant to the terms of the applicable
award agreements as in effect on the date of the merger agreement, will be vested at the effective time of the merger (either
because the awards will have already vested prior to the effective time of the merger or because the vesting of the awards
will accelerate at such time or upon a qualifying termination of employment following the merger), assuming that
the effective time of the merger occurs on October 1, 2014, as well as values of such awards based on the $86.00 per share
merger consideration (minus the applicable exercise price for the options). This table assumes that our directors and
executive officers will not sell or acquire any shares of Company common stock and will not exercise any stock options before
October 1, 2014.
Name
|
|
Options
(#) (1)
|
|
|
Options
($)
|
|
|
RSUs
(#)
|
|
|
RSUs
($)
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satish Rishi
|
|
|
28,000
|
|
|
|
1,704,855
|
|
|
|
1,500
|
|
|
|
129,000
|
|
Kenneth E. Thompson
|
|
|
28,000
|
|
|
|
1,704,855
|
|
|
|
1,500
|
|
|
|
129,000
|
|
Morton L. Topfer
|
|
|
—
|
|
|
|
—
|
|
|
|
1,500
|
|
|
|
129,000
|
|
Name
|
|
Options
(#) (1)
|
|
|
Options
($)
|
|
|
RSUs
(#)
|
|
|
RSUs
($)
|
|
R. Barry Uber
|
|
|
18,000
|
|
|
|
923,805
|
|
|
|
1,500
|
|
|
|
129,000
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank Guidone
|
|
|
401,744
|
|
|
|
25,357,558
|
|
|
|
61,500
|
|
|
|
5,289,000
|
|
Mark Thomson
|
|
|
76,791
|
|
|
|
5,229,421
|
|
|
|
35,000
|
|
|
|
3,010,000
|
|
Glen MacGibbon
|
|
|
93,266
|
|
|
|
6,701,065
|
|
|
|
21,250
|
|
|
|
1,827,500
|
|
Mitch Thompson
|
|
|
43,334
|
|
|
|
2,935,299
|
|
|
|
26,500
|
|
|
|
2,279,000
|
|
Joseph Gleeson
|
|
|
—
|
|
|
|
—
|
|
|
|
13,651
|
|
|
|
1,173,986
|
|
Jeffrey Kostelni
|
|
|
13,000
|
|
|
|
923,620
|
|
|
|
4,250
|
|
|
|
365,500
|
|
|
(1)
|
All
outstanding stock options are already fully vested as of the date of this proxy statement
other than options to purchase 6,000 shares held by Mr. Kostelni that will become vested
upon the effective time of the merger.
|
Potential Termination Payments and Benefits to Executive
Officers
Pursuant to the terms of their employment agreements with the
Company, Frank Guidone, President and Chief Executive Officer; Mark Thomson, Chief Financial Officer; Mitchell Thompson, Chief
Technology Officer; Glen MacGibbon, Executive Vice President; and Mr. Gleeson are entitled to the payments and benefits described
below on termination of their employment within two years after a “change in control” by the Company without “cause”
or by the executive with “good reason.” The closing of the merger would constitute a “change in control”
for purposes of these agreements. See below for the definitions of “cause” and “good reason” applicable
under these agreements.
On such termination, each executive would receive the following
payments and benefits (subject to the executive’s execution and non-revocation of a release of claims in favor of the Company):
|
·
|
an amount equal
to 150% (200% for Mr. Guidone) of the sum of (i) his base salary in effect as of the
date of such termination and (ii) his target annual bonus for the fiscal year in which
such termination occurs, payable in equal installments over 18 months (or for Mr. Guidone,
in a lump sum within 20 days) following the effective date of the release;
|
|
·
|
a pro rata
portion of his target annual bonus for the fiscal year in which such termination occurs;
|
|
·
|
reimbursement
of the employer portion of the applicable premium for 18 months of continued health and
dental coverage (except for Mr. Gleeson); and
|
|
·
|
full vesting
of all outstanding unvested equity awards.
|
If such payments and benefits would result in the executive’s
being subject to the 20% excise tax imposed on “excess” transaction-related payments and benefits under Section 4999
of the Internal Revenue Code of 1986, as amended (the “Code”), the total amount of such payments and benefits will
be reduced if and to the extent that such reduction would result in a greater after-tax payment to the executive.
Pursuant to the terms of the employment agreement between Jeffrey
Kostelni, Vice President, and the Company, if his employment is terminated by the Company without “cause” or by him
for “good reason,” he is entitled to (i) an amount equal to four months of his base salary in effect as of the date
of such termination, payable in equal monthly installments, and (ii) continued health benefits at no cost to him for the four month
severance period.
For estimates of the amounts of such payments and benefits
for each named executive officer, see below under “Quantification of Payments and Benefits to Company Named Executive Officers.”
Assuming the effective time of the merger occurs on October 1, 2014 and Mr. Gleeson (who is not one of our named executive officers
under the applicable SEC rules) experiences a qualifying termination of employment in connection with the closing of the merger,
he would be entitled to $322,472 in cash severance and $1,173,986 in value associated with accelerated vesting of RSUs under the
terms of his employment agreement. If Mr. Kostelni (who is not one of our named executive officers under the applicable SEC rules)
experiences a qualifying termination of employment on October 1, 2014, he would be entitled to $60,296 under the terms of his
employment agreement, which includes the cash severance and an estimate of the cost of continued health benefits.
“Cause” is defined as follows in each executive’s
employment agreement:
|
·
|
any act or
omission that constitutes a material breach by the executive of any of his obligations
under the agreement or any material written policy of the Company or any of its affiliates,
assuming such obligations are lawful;
|
|
·
|
the failure
by the executive to follow any lawful reasonable direction of the Board (or the Chief
Executive Officer, for each executive other than Mr. Guidone) that is material and is
consistent with the executive’s obligations under his employment agreement;
|
|
·
|
except for
Mr. Kostelni, the executive’s refusal to discharge his duties pursuant to the agreement,
assuming such duties are lawful;
|
|
·
|
the conviction
of the executive of a felony or a crime involving fraud, moral turpitude (except for
Mr. Kostelni), misappropriation or dishonesty (or, for Mr. Gleeson, the conviction of
any criminal offense other than a traffic offense); or
|
|
·
|
for Mr. Gleeson,
any conduct that in the reasonable opinion of the Board may affect his position in, or
the reputation of, the Company, or his becoming subject to the disqualification or restriction
provisions contained in Part VII of Ireland’s Companies Act, 1990 or similar legislation.
|
In each case (other than in the case of conviction of a felony
or a crime described above), the executive has the right to cure the event alleged to constitute cause for 30 days (20 days for
Mr. Kostelni) after he receives written notice from the Board (or the Chief Executive Officer, in the case of each executive other
than Mr. Guidone).
“Good Reason” is defined as follows in each executive’s
employment agreement:
|
·
|
the Company
is in default of any material obligations under the agreement (for Mr. Kostelni, any
obligations under the agreement);
|
|
·
|
any material
diminution in title, job responsibilities, power, authority, or duties of the executive
(other than a change in the executive’s reporting structure);
|
|
·
|
without the
executive’s consent, the executive’s principal place of employment is relocated
beyond 40 miles (50 miles for Mr. Gleeson or 25 miles for Mr. Kostelni) from his current
office location; or
|
|
·
|
any reduction
of the executive’s target annual bonus percentage (for Mr. Kostelni, any material
reduction thereof).
|
In each case other than Mr. Kostelni (i) the executive must
provide written notice to the Company of such action, (ii) such action must exist for 30 days after the executive provides
notice, (iii) the executive must provide the Company at least ten days to cure such action after the Company’s receipt of
notice and (iv) the executive must resign within 30 days following the occurrence of such action.
Indemnification Insurance
Pursuant to the terms of the merger agreement, directors and
executive officers of the Company will be entitled to certain ongoing indemnification and coverage under directors’ and officers’
liability insurance policies from the Surviving Corporation. Such indemnification is further described in the section entitled
“The Merger Agreement — Indemnification and Insurance” beginning on page 65.
Non-Qualified Deferred Compensation Plan
Amounts deferred under our Non-Qualified Deferred Compensation
Plan may be distributable to participants under the plan upon a change in control if the participant elected a distribution upon
such an event. As of the date of this proxy statement, of the executive officers, only Mr. Kostelni had a balance under the plan
that would be distributable upon the consummation of the merger. The amount of his distribution is approximately $3,218, subject
to adjustment for investment earnings and losses.
New Management Arrangements
As
of the date of this proxy statement, the Company has not entered into or amended any agreements with the Company’s executive
officers in connection with the merger. However, as summarized below, Mr. Thompson, Mr. MacGibbon and Mr. Gleeson have each entered
into a retention incentive agreement with TE, and Mr. Guidone has entered into a consulting
services
agreement
with
Tyco Electronics Corporation, a subsidiary of TE (“TEC”). Each of these agreements
is
conditioned upon the closing of the merger. Mr. Guidone’s agreement is also conditioned on his execution and non-revocation
of a separation agreement with the Company in connection with the termination of his employment and his employment agreement with
the Company, effective as of the closing date of the merger. TE also discussed a retention incentive agreement with Mr. Thomson.
No such agreement has been entered into as of the date of this proxy statement, and there can be no certainty that agreement on
the terms of any such agreement will be reached with Mr. Thomson in the future.
Retention Incentive Agreements with Mr. Thompson, Mr. MacGibbon
and Mr. Gleeson
The retention incentive agreement entered into between TE and
each of Mr. Thompson, Mr. MacGibbon and Mr. Gleeson provides for the following payments:
|
·
|
Retention incentive bonus
: Mr. Thompson, Mr. MacGibbon and Mr. Gleeson
will receive a lump sum cash payment ($200,000 for Mr. Thompson, $130,000 for Mr.
MacGibbon and €150,000 for Mr. Gleeson), on or within 30 days after the second
anniversary (the first anniversary for Mr. MacGibbon) of the closing date of the merger, if the executive remains employed
with the Company or another TE entity through such anniversary date. However,
if the executive’s employment is terminated by the Company or another TE entity without
“cause” (as defined in his current employment agreement with the Company
and summarized above), he will receive the payment on or within 30 days after such termination.
|
|
·
|
Sign-on
equity grant
: Mr. Thompson and Mr. Gleeson will receive a special one-time award
of restricted share units with respect to TE common stock shortly after the closing of
the merger with a specified grant date value ($350,000 for Mr. Thompson and $300,000
for Mr. Gleeson). The award will vest annually over a four-year period, subject to the
executive’s continued employment with the Company or another TE entity through
each vesting date.
|
|
·
|
Sign-on cash bonus
: Mr. Thompson and Mr. MacGibbon will receive a sign-on
cash bonus ($465,000 for Mr. Thompson and $195,000 for Mr.
MacGibbon). If Mr. Thompson voluntarily terminates
his employment (other than due to his death or “permanent disability”
(as defined in his current employment agreement with the Company)), or if the
Company terminates his employment for “cause” (as defined in his current
employment agreement with the Company), in either case before the second anniversary
of the closing date of the merger, he will be required to repay a pro rata portion
of the sign-on cash bonus based on the portion of such two-year period that he was
not employed.
|
Consulting Services Agreement with Mr. Guidone
Pursuant to his consulting services agreement with TEC, Mr.
Guidone will provide specified consulting services to TEC for a period of one year following the closing date of the merger, not
to exceed 30 hours per month. In consideration of such consulting services, Mr. Guidone will receive a fee of $41,166 per month.
The agreement contains restrictions against competition, solicitation of customers and solicitation or hiring of employees or consultants,
which will remain in effect during the consulting period and for two years thereafter. In consideration of such restrictions, Mr.
Guidone will receive a payment of $208,333 for each of the first 12 months following the closing date of the merger. If Mr. Guidone
breaches any of the restrictions, TEC’s obligation to make such restrictive covenant payments to Mr. Guidone will terminate,
and he will be required to pay to TEC, promptly following written notice, an amount equal to all such payments that he previously
received.
Quantification of Payments and Benefits to Company Named
Executive Officers
The table below sets forth for each of the
Company’s named executive officers estimates of the amounts of compensation that are based on or otherwise relate to
the merger and that may become payable to the named executive officer upon the closing of the merger, either with or without
a qualifying termination of employment. The estimates in the table assume that the merger will become effective on October 1,
2014 and, if applicable, a qualifying termination of employment will occur immediately thereafter. These payments and
benefits payable by the Company to the Company’s named executive officers (other than payments included in the
“Other” column below because they relate to an arrangement between TE (or its subsidiary) and three of our named
executive officers) are subject to an advisory vote of the Company’s shareholders as described in the section entitled
“Advisory Vote Regarding Named Executive Officer Merger Related Compensation” beginning on page 72.
Name
|
|
Cash
($)(2)
|
|
|
Equity
($)(3)
|
|
|
Perquisites/
Benefits
($)(4)
|
|
|
Other
($)
|
|
|
Total
($)(5)
|
|
Frank Guidone (President and Chief Executive Officer)
|
|
|
2,475,753
|
|
|
|
5,289,000
|
|
|
|
38,854
|
|
|
|
2,999,988
|
(6)
|
|
|
10,803,595
|
|
Mark Thomson (Chief Financial Officer)
|
|
|
832,241
|
|
|
|
3,010,000
|
|
|
|
38,707
|
|
|
|
—
|
|
|
|
3,880,948
|
|
Steve Smith (Former Chief Operating Officer) (1)
|
|
|
28,846
|
|
|
|
666,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
695,346
|
|
Glen MacGibbon (Executive Vice President)
|
|
|
676,196
|
|
|
|
1,827,500
|
|
|
|
38,707
|
|
|
|
325,000
|
(7)
|
|
|
2,867,403
|
|
Mitch Thompson (Chief Technology Officer)
|
|
|
594,163
|
|
|
|
2,279,000
|
|
|
|
38,854
|
|
|
|
1,015,000
|
(7)
|
|
|
3,958,025
|
|
|
(1)
|
Mr. Smith announced his retirement as our Chief Operating
Officer, effective as of April 1, 2014, and therefore, ceased to be an executive officer
of the Company as of that date and his employment agreement with the Company terminated
as of that date. The Company entered into an employment agreement with Joseph Gleeson
for his services as Chief Operating Officer on April 3, 2014, and he became an executive
officer of the Company. Mr. Gleeson is not a “named executive
officer” for purposes of the disclosure required under SEC rules.
|
|
(2)
|
For each named executive officer (other than Mr. Smith, whose
employment agreement with us terminated as of April 1, 2014), the amounts in this column
reflect the cash severance due under the named executive officer’s employment agreement
if his employment is terminated by us for any reason other than for “cause”
or by him for “good reason” (as those terms are defined in the applicable agreement
and summarized above) in either case within two years after a change in control of the
Company (which will occur upon the closing of the merger) and subject to the named executive
officer’s execution and non-revocation of a release of claims in favor of the Company.
The table below provides a breakdown of cash severance for each named executive officer
(other than Mr. Smith):
|
Name
|
|
Base Salary x
Applicable
Percentage
($)(a)
|
|
|
Target Annual
Bonus
x Applicable
Percentage ($)(a)
|
|
|
Pro-rata Portion of
the Target Bonus
($)(b)
|
|
Frank Guidone
|
|
|
1,100,000
|
|
|
|
1,100,000
|
|
|
|
275,753
|
|
Mark Thomson
|
|
|
480,000
|
|
|
|
264,000
|
|
|
|
88,241
|
|
Glen MacGibbon
|
|
|
390,000
|
|
|
|
214,500
|
|
|
|
71,696
|
|
Mitch Thompson
|
|
|
356,400
|
|
|
|
178,200
|
|
|
|
59,563
|
|
|
(a)
|
These amounts are payable in equal installments over 18 months
(or for Mr. Guidone, in a lump sum within 20 days) following the effective date of the
release.
|
|
(b)
|
These amounts are payable in a lump sum within 20 days following
the effective date of the release.
|
For additional details, see “The Merger —
Interests of Company Directors and Executive Officers in the Merger— Potential Termination Payments and Benefits to Executive
Officers” beginning on page 41
.
Because Mr. Smith does not have an employment agreement
with the Company, he would receive severance under the Company’s discretionary severance policy. Mr. Smith’s
cash severance amount assumes six weeks of base salary based on eight years of service.
|
(3)
|
The amounts in this column reflect the values of RSUs that will vest upon the closing of the
merger. The value of the accelerated vesting of each RSU award is calculated based on the merger consideration of $86.00 per
share multiplied by the number of shares subject to the RSU award. Values associated with stock options are not included in
this column since all stock options held by named executive officers are vested as of the date of this proxy statement. For
additional details, including a breakdown of RSU awards held by each named executive officer (other than Mr. Smith), see the
section entitled “The Merger — Interests of Company Directors and Executive Officers in the
Merger—Equity-Based Awards” beginning on page 40. For Mr. Smith, the amount in this column relates to
7,750 shares of our common stock underlying his RSUs.
|
|
(4)
|
The amounts in this column reflect the cost to the
Company of continuing health benefits for the applicable severance period as required under the named executive officer’s
employment agreement (see “The Merger — Interests of Company Directors and Executive Officers in the Merger—
Potential Termination Payments and Benefits to Executive Officers” beginning on page 41).
|
|
(5)
|
Of the amounts payable to the named executive officers,
the amounts set forth in the column entitled “Equity” are attributable to single-trigger arrangements (payable upon
the change in control alone, without regard to termination of employment), the amounts set forth in the column entitled “Other”
are attributable to modified single-trigger arrangements (payable on a date certain following the change in control or, if earlier,
upon a qualifying termination of employment following the change in control), and the amounts set forth in the remaining columns
are attributable to double-trigger arrangements (requiring a qualifying termination of employment as well as the change in control).
|
|
(6)
|
The table below sets forth the cash amounts payable to Mr. Guidone pursuant to his consulting
services agreement with TEC (see “The Merger — Interests of Company Directors and Executive Officers in the Merger—
New Management Arrangements” beginning on page 43):
|
Name
|
|
Consulting Fee ($)(a)
|
|
|
Payment for Restrictive Covenants ($)(b)
|
|
|
Total ($)
|
|
Frank Guidone
|
|
|
499,992
|
|
|
|
2,499,996
|
|
|
|
2,999,988
|
|
|
(a)
|
This consulting fee is payable in monthly installments
of $41,666 during
the one-year consulting period
.
|
|
(b)
|
This payment in consideration of the restrictive covenants
in the consulting services agreement is payable in monthly installments of $208,333 during the first 12 months following the closing
date of the merger.
|
|
(7)
|
The table below sets forth the cash amounts payable to Mr. Thompson and Mr. MacGibbon pursuant
to their retention incentive agreements with
TE (see “The Merger — Interests of Company Directors and Executive Officers
in the Merger— New Management
Arrangements” beginning on page 43):
|
Name
|
|
Retention
Incentive
Bonus
($)(a)
|
|
|
Sign-on Equity
Grant
($)(b)
|
|
|
Sign-On Cash
Bonus
($)(c)
|
|
|
Total
($)
|
|
Mitch Thompson
|
|
|
200,000
|
|
|
|
350,000
|
|
|
|
465,000
|
|
|
|
1,015,000
|
|
Glen MacGibbon
|
|
|
130,000
|
|
|
|
—
|
|
|
|
195,000
|
|
|
|
325,000
|
|
|
(a)
|
This retention incentive bonus is payable in a lump sum in
cash on or within 30 days after the second anniversary of the closing date of the merger,
if the executive remains employed with the Company or another TE entity through the applicable
anniversary date. However, if the executive’s employment is terminated by the Company
or another TE entity without “cause” (as defined in his current employment
agreement with the Company and summarized above), he will receive the payment on or within
30 days after such termination.
|
|
(b)
|
This special one-time award of restricted share units with
respect to TE common stock will be granted shortly after the closing of the merger and
will vest annually over a four-year period, subject to the executive’s continued
employment with the Company or another TE entity through each vesting date.
|
|
(c)
|
This sign-on cash bonus will become payable in a lump sum on or within 30 days of the closing of the merger. If the
executive voluntarily terminates his employment (other than due to his death or “permanent
disability” (as defined in his current employment agreement with the Company)),
or if the Company terminates his employment for “cause” (as defined in his
current employment agreement with the Company), in either case before the second anniversary
of the closing date of the merger, he will be required to repay a pro rata portion of
the sign-on cash bonus based on the portion of such two-year period that he was not employed.
|
Selected Unaudited Prospective Financial Information
The Company as a matter of course prepares limited forecasts
as to future financial performance over a three-year period coincident with the operations of its business and business planning,
but the Company does not disclose such forecasts because, among other reasons, of the inherent uncertainty of the underlying assumptions
and estimates. The Company’s management extended the period of such limited forecasts by preparing financial projections
in April of 2014 for the Company’s fiscal years ending on March 31, 2014 through 2020 (referred to as the “Original
Base Case Projections”) and shared such Original Base Case Projections with TE in connection with discussions concerning
the possible transaction and TE’s due diligence of the Company. The Company also shared financial projections related specifically
to the Company’s acquisition of Wema System AS (“Wema”) with TE (the “Wema Projections”).
As of June 14, 2014, the Original Base Case Projections were
updated to incorporate, among other things, actual results for the fiscal year ended March 31, 2014 and the months ended April
30, 2014 and May 31, 2014, and management’s then current assessment of the Company’s future performance taking into
account the financial performance from the Company’s acquisition of Wema (the “Updated Base Case Projections”).
As of this time, the Company also prepared speculative “upside” projections of the Company’s potential financial
performance related to a possible new commercial opportunity that had not yet resulted in a contract or any product sales (referred
to as the “Upside Case Projections” and collectively with the Original Base Case Projections, the Wema Projections
and the Updated Base Case Projections, referred to as the “Prospective Financial Information”). The Updated Base Case
Projections were management’s best current estimate of future financial performance of the Company, but included significant
execution and other risks. The Upside Case Projections were speculative estimates that assumed considerable success of a very
contingent future commercial opportunity. The Company made the Prospective Financial Information available to (i) the Board in
connection with its evaluation of potential strategic alternatives available to the Company and its evaluation of the merger and
(ii) Barclays for purposes of its analysis described above in the section entitled “The Merger — Opinion of Financial
Advisor” beginning on page 30 and the opinion delivered by Barclays to the Board.
The Company is not including the Prospective Financial Information
in this proxy statement to influence a shareholder’s decision or for any other purpose, but is including such information
to provide its shareholders access to certain non-public unaudited Prospective Financial Information that was made available to
TE, the Board, and Barclays. The inclusion of the Prospective Financial Information in this proxy statement should not be regarded
as an indication that the Company or any other recipient of the Prospective Financial Information considered, or now considers,
it to be necessarily predictive of actual future results or indicative of guidance the Company would provide as a stand-alone
company should the merger not be consummated.
The selected unaudited Prospective Financial Information
was prepared for internal planning and evaluation purposes and was not prepared with a view toward public disclosure and is
subjective in many respects. In addition, the selected unaudited Prospective Financial Information reflects numerous
judgments, estimates and assumptions with respect to industry performance, general business, economic, regulatory,
litigation, market and financial conditions, as well as matters specific to the Company’s business, which matters are
difficult to predict. For a description of some of these factors, shareholders are urged to review the Company’s most
recent SEC filings (including the information under “Risk Factors” in the Company’s Annual Report on Form
10-K for the fiscal year ended March 31, 2014 filed on June 3, 2014) as well as the section in this proxy statement entitled
“Cautionary Statement Regarding Forward-Looking Information” beginning on page 15. Many of the assumptions made
in the preparation of the Prospective Financial Information are beyond the control of management, may not prove to be
accurate, are not necessarily indicative of future performance and should not be regarded as a representation by the Company
that such assumptions will be achieved. Accordingly, there is no assurance that the prospective results will be realized or
that actual results will not vary, even materially, from this information.
Since the selected unaudited Prospective Financial Information
covers multiple years, such information by its nature becomes less predictive with each successive year. Neither the Company nor
any of its representatives, officers or directors has made or makes any representation to any shareholder or other person regarding
the Company’s ultimate performance compared to the results contained in the selected unaudited Prospective Financial Information
or that the results therein will be achieved. The Company has made no representation to TE, in the merger agreement or otherwise,
concerning this financial information or any other financial forecast. Readers of this proxy statement are cautioned not to place
undue reliance on this information and should not consider the selected unaudited Prospective Financial Information as necessarily
predictive of actual future operating results.
The Prospective Financial Information should be read
together with the historical financial statements of the Company contained in our Annual Report on Form 10-K for the
fiscal year ended March 31, 2014 (filed on June 3, 2014), which are incorporated by reference into this proxy statement.
The Prospective Financial Information was not prepared with a view toward public disclosure and, accordingly, does not
comply with published guidelines of the SEC, the Public Company Accounting and Oversight Board or the American Institute
of Certified Public Accountants. Neither our independent registered public accounting firm nor any other independent
accountant has compiled, examined or performed any procedures with respect to the Prospective Financial Information nor have
they expressed any opinion or given any form of assurance on the Prospective Financial Information or its achievability
and accordingly, assume no responsibility for, and disclaim any association with, the selected unaudited Prospective
Financial Information. Furthermore, the selected unaudited Prospective Financial Information does not take into account
any circumstances or events occurring after the date of its preparation.
The following tables present a summary of the Original
Base Case Projections and the Wema Projections as prepared by the Company’s management and provided to the Board,
Barclays and TE:
Management’s Original Base Case Projections: ($ Amount
in Millions except share data)
FY ending Mar. 31st
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
413
|
|
|
$
|
443
|
|
|
$
|
497
|
|
|
$
|
557
|
|
|
$
|
593
|
|
|
$
|
638
|
|
|
$
|
686
|
|
Gross Profit
|
|
$
|
172
|
|
|
$
|
191
|
|
|
$
|
217
|
|
|
$
|
247
|
|
|
$
|
266
|
|
|
$
|
289
|
|
|
$
|
311
|
|
EBITA
|
|
$
|
60
|
|
|
$
|
68
|
|
|
$
|
83
|
|
|
$
|
102
|
|
|
$
|
113
|
|
|
$
|
126
|
|
|
$
|
141
|
|
Profit Before Taxes
|
|
$
|
48
|
|
|
$
|
58
|
|
|
$
|
74
|
|
|
$
|
94
|
|
|
$
|
106
|
|
|
$
|
121
|
|
|
$
|
136
|
|
Tax Accrual
|
|
$
|
10
|
|
|
$
|
14
|
|
|
$
|
19
|
|
|
$
|
24
|
|
|
$
|
28
|
|
|
$
|
31
|
|
|
$
|
35
|
|
Net Income
|
|
$
|
38
|
|
|
$
|
43
|
|
|
$
|
55
|
|
|
$
|
69
|
|
|
$
|
79
|
|
|
$
|
89
|
|
|
$
|
101
|
|
Company Shares outstanding
|
|
|
16.7
|
|
|
|
17.1
|
|
|
|
17.4
|
|
|
|
17.8
|
|
|
|
18.1
|
|
|
|
18.5
|
|
|
|
18.8
|
|
EPS
|
|
$
|
2.26
|
|
|
$
|
2.53
|
|
|
$
|
3.13
|
|
|
$
|
3.90
|
|
|
$
|
4.34
|
|
|
$
|
4.83
|
|
|
$
|
5.35
|
|
EBITDA
|
|
$
|
74
|
|
|
$
|
84
|
|
|
$
|
100
|
|
|
$
|
121
|
|
|
$
|
133
|
|
|
$
|
147
|
|
|
$
|
164
|
|
EBITDA (excluding F123 Expense)
|
|
$
|
81
|
|
|
$
|
93
|
|
|
$
|
110
|
|
|
$
|
132
|
|
|
$
|
144
|
|
|
$
|
160
|
|
|
$
|
173
|
|
Management’s Wema Projections:
($ Amount in Millions)
FY ending Mar. 31st
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
109
|
|
|
$
|
125
|
|
|
$
|
143
|
|
|
$
|
158
|
|
|
$
|
166
|
|
|
$
|
174
|
|
|
$
|
183
|
|
Gross Profit
|
|
$
|
26
|
|
|
$
|
34
|
|
|
$
|
42
|
|
|
$
|
49
|
|
|
$
|
51
|
|
|
$
|
54
|
|
|
$
|
57
|
|
EBITA
|
|
$
|
2
|
|
|
$
|
10
|
|
|
$
|
23
|
|
|
$
|
31
|
|
|
$
|
33
|
|
|
$
|
35
|
|
|
$
|
37
|
|
Profit Before Taxes
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
15
|
|
|
$
|
24
|
|
|
$
|
26
|
|
|
$
|
29
|
|
|
$
|
31
|
|
Tax Accrual
|
|
$
|
0
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
8
|
|
|
$
|
8
|
|
Net Income
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
11
|
|
|
$
|
18
|
|
|
$
|
19
|
|
|
$
|
21
|
|
|
$
|
23
|
|
EBITDA
|
|
$
|
5
|
|
|
$
|
13
|
|
|
$
|
27
|
|
|
$
|
35
|
|
|
$
|
37
|
|
|
$
|
39
|
|
|
$
|
41
|
|
EBITDA (excluding F123 Expense)
|
|
$
|
5
|
|
|
$
|
12
|
|
|
$
|
27
|
|
|
$
|
35
|
|
|
$
|
37
|
|
|
$
|
39
|
|
|
$
|
41
|
|
% Sales
|
|
|
4.3
|
%
|
|
|
10.0
|
%
|
|
|
19.0
|
%
|
|
|
22.3
|
%
|
|
|
22.4
|
%
|
|
|
22.4
|
%
|
|
|
22.5
|
%
|
The following tables present a summary of the Updated Base
Case Projections and the Upside Case Projections as prepared by the Company’s management and provided to the Board and Barclays:
Management’s Updated Base Case Projections: (as of
June 14, 2014) ($ Amount in Millions)
FY ending Mar. 31st
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2014-2019
CAGR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
521
|
|
|
$
|
549
|
|
|
$
|
641
|
|
|
$
|
716
|
|
|
$
|
759
|
|
|
$
|
813
|
|
|
|
9.3
|
%
|
Adjusted EBITDA (excluding F123 Expense)
|
|
$
|
86
|
|
|
$
|
105
|
|
|
$
|
137
|
|
|
$
|
168
|
|
|
$
|
182
|
|
|
$
|
199
|
|
|
|
18.3
|
%
|
EBITDA (including F123 Expense)
|
|
$
|
79
|
|
|
$
|
96
|
|
|
$
|
127
|
|
|
$
|
157
|
|
|
$
|
171
|
|
|
$
|
187
|
|
|
|
18.9
|
%
|
Less: Depreciation and Amortization
|
|
$
|
(23
|
)
|
|
$
|
(30
|
)
|
|
$
|
(34
|
)
|
|
$
|
(35
|
)
|
|
$
|
(35
|
)
|
|
$
|
(35
|
)
|
|
|
|
|
EBIT
|
|
$
|
54
|
|
|
$
|
56
|
|
|
$
|
93
|
|
|
$
|
122
|
|
|
$
|
136
|
|
|
$
|
152
|
|
|
|
|
|
Tax effect (at a 26% rate)
|
|
|
(14
|
)
|
|
|
(15
|
)
|
|
|
(24
|
)
|
|
|
(32
|
)
|
|
|
(36
|
)
|
|
|
(40
|
)
|
|
|
|
|
Unlevered Net Income
|
|
$
|
40
|
|
|
$
|
41
|
|
|
$
|
69
|
|
|
$
|
90
|
|
|
$
|
100
|
|
|
$
|
112
|
|
|
|
23.2
|
%
|
Plus: Depreciation and Amortization
|
|
|
|
|
|
$
|
30
|
|
|
$
|
34
|
|
|
$
|
35
|
|
|
$
|
35
|
|
|
$
|
35
|
|
|
|
|
|
Less: Capex
|
|
|
|
|
|
|
(25
|
)
|
|
|
(24
|
)
|
|
|
(26
|
)
|
|
|
(28
|
)
|
|
|
(30
|
)
|
|
|
|
|
Less: Increase in Working Capital
|
|
|
|
|
|
|
(46
|
)
|
|
|
(11
|
)
|
|
|
(14
|
)
|
|
|
(8
|
)
|
|
|
(11
|
)
|
|
|
|
|
Unlevered Free Cash Flow
|
|
|
|
|
|
($
|
0
|
)
|
|
$
|
67
|
|
|
$
|
84
|
|
|
$
|
100
|
|
|
$
|
107
|
|
|
|
|
|
Management’s Upside Case Projections: ($ Amount in
Millions)
FY ending Mar. 31st
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2014-2019
CAGR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
521
|
|
|
$
|
557
|
|
|
$
|
670
|
|
|
$
|
750
|
|
|
$
|
793
|
|
|
$
|
847
|
|
|
|
10.2
|
%
|
Adjusted EBITDA (excluding F123 Expense)
|
|
$
|
86
|
|
|
$
|
112
|
|
|
$
|
152
|
|
|
$
|
184
|
|
|
$
|
199
|
|
|
$
|
216
|
|
|
|
20.2
|
%
|
EBITDA (including F123 Expense)
|
|
$
|
79
|
|
|
$
|
103
|
|
|
$
|
141
|
|
|
$
|
173
|
|
|
$
|
187
|
|
|
$
|
204
|
|
|
|
21.0
|
%
|
Less: Depreciation and Amortization
|
|
$
|
(23
|
)
|
|
$
|
(30
|
)
|
|
$
|
(34
|
)
|
|
$
|
(35
|
)
|
|
$
|
(35
|
)
|
|
$
|
(35
|
)
|
|
|
|
|
EBIT
|
|
$
|
54
|
|
|
$
|
63
|
|
|
$
|
108
|
|
|
$
|
139
|
|
|
$
|
152
|
|
|
$
|
169
|
|
|
|
|
|
Tax effect (at a 26% rate)
|
|
|
(14
|
)
|
|
|
(16
|
)
|
|
|
(28
|
)
|
|
|
(36
|
)
|
|
|
(40
|
)
|
|
|
(44
|
)
|
|
|
|
|
Unlevered Net Income
|
|
$
|
40
|
|
|
$
|
46
|
|
|
$
|
80
|
|
|
$
|
102
|
|
|
$
|
113
|
|
|
$
|
124
|
|
|
|
25.7
|
%
|
Plus: Depreciation and Amortization
|
|
|
|
|
|
$
|
30
|
|
|
$
|
34
|
|
|
$
|
35
|
|
|
$
|
35
|
|
|
$
|
35
|
|
|
|
|
|
Less: Capex
|
|
|
|
|
|
|
(25
|
)
|
|
|
(24
|
)
|
|
|
(26
|
)
|
|
|
(28
|
)
|
|
|
(30
|
)
|
|
|
|
|
Less: Increase in Working Capital
|
|
|
|
|
|
|
(48
|
)
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
(8
|
)
|
|
|
(11
|
)
|
|
|
|
|
Unlevered Free Cash Flow
|
|
|
|
|
|
$
|
3
|
|
|
$
|
73
|
|
|
$
|
95
|
|
|
$
|
112
|
|
|
$
|
119
|
|
|
|
|
|
The Prospective Financial Information reflect various estimates
and assumptions made by the Company’s management, all of which are difficult to predict and many of which are beyond the
Company’s control, including, among others, the following material estimates and assumptions made by management at the time
it prepared such projections:
Revenue:
Base case revenue in fiscal 2015 was forecasted
based on orders already in backlog, forecasts received from customers or discrete projections by management based on historical
run rates and new programs being introduced in fiscal 2015. Projected revenue for fiscal 2016 through fiscal 2020 was based on
product line annual growth expectations driven by continued traction on existing business and expanded new business based on new
product introductions. Upside case revenue projections assume the financial benefit related to a possible new commercial opportunity
that had not yet resulted in a contract or any product sales.
Adjusted EBITDA
. Adjusted EBITDA in fiscal 2015 and
beyond was forecasted based on improvements in margin from:
|
·
|
Revenue expansion
and associated margin expansion from leveraging fixed manufacturing overhead and SG&A
expenses; and
|
|
·
|
Improvements
in contribution and gross margin due to:
|
|
o
|
improved
sales mix (lower Sensata sales year over year, which carry lower contribution margin
relative to other product line averages);
|
|
o
|
higher
margins due to facility consolidation efforts and transfer of production from higher
cost facilities to lower cost facilities; and
|
|
o
|
execution
on contribution margin initiatives, including but not limited to, improvements in production
yield and lower scrap expenses.
|
Adjusted EBITDA is derived by adding
interest, taxes, depreciation, amortization, foreign currency transaction losses, non-cash equity based compensation, professional
fees related to acquisitions, certain restructuring and overlapping costs related to site consolidation, and deducting foreign
currency gains to the Company’s Net Income. EBITDA reflects Adjusted EBITDA, but excludes the add-back of non-cash equity
based compensation.
Earnings Before Interest and Taxes
(EBIT); Earnings Before Taxes (EBT); Earnings Before Interest, Taxes and Amortization (EBITA))
. EBIT, EBT and EBITA forecast
for fiscal 2015 and beyond was based on improved gross margin and forecast of operating expenses at historical run rates, increased
by inflationary effects, incentive compensation and other variable costs associated with additional volume. For purposes of the
financial forecasts described above, EBIT is calculated as net earnings before interest and taxes, EBT is calculated as net earnings
before taxes, and EBITA is calculated as net earnings before interest, taxes and amortization.
Net Income
. Net Income reflects
all forecast assumptions noted to derive Adjusted EBITDA, but takes into consideration discrete projections for interest expense,
amortization expense and income tax expense.
Unlevered Free Cash Flow
. The
forecast of unlevered free cash flow for fiscal 2015 was based upon working capital metrics and capital expenditures based on
historical levels. Fiscal 2015 capital expenditures also include discrete projections for the completion of the Chengdu, China
and Andover, MN Greenfield facilities. Free cash flow beyond fiscal 2015 was based on maintaining similar working capital metrics
and capital expenditures at approximately 24% and 4% of revenues, respectively. For purposes of the financial forecasts described
above, unlevered free cash flow is calculated as EBIT less taxes and capital expenditures, plus depreciation, amortization and
share-based compensation, plus or minus change in working capital for the applicable period.
EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LAWS, THE COMPANY
DOES NOT INTEND TO UPDATE, OR OTHERWISE REVISE THE SELECTED UNAUDITED PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES
EXISTING AFTER THE DATE WHEN PREPARED OR TO REFLECT THE OCCURRENCE OF INTERVENING OR FUTURE EVENTS, EVEN IN THE EVENT THAT ANY
OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH PROSPECTIVE FINANCIAL INFORMATION ARE NO LONGER APPROPRIATE.
Material U.S. Federal Income Tax Consequences of the Merger
The following is a summary of the material U.S. federal income
tax consequences of the merger to U.S. Holders (as defined below) who receive cash for their shares of Company common stock in
the merger. For purposes of this discussion, we use the term “U.S. Holder” to mean a beneficial owner of shares of
Company common stock that is, for U.S. federal income tax purposes:
|
·
|
a citizen or
resident of the United States;
|
|
·
|
a corporation
created or organized under the laws of the United States, any state thereof or the District
of Columbia;
|
|
·
|
an estate that
is subject to U.S. federal income tax on its income regardless of its source.
|
If a partnership (including an entity treated as a partnership
for U.S. federal income tax purposes) holds Company common stock, the tax treatment of a partner generally will depend on the
status of the partners and the activities of the partnership. A partner in a partnership holding Company common stock should consult
its tax advisor.
Due to the individual nature of tax consequences, each shareholder
is urged to consult the shareholder’s tax advisor as to the specific tax consequences to the shareholder of the exchange
of shares of Company common stock for cash in the merger, including the effects of applicable state, local, foreign and other
tax laws. The following discussion applies only if a shareholder holds the shareholder’s shares of Company common stock
as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion is
based on current law, which is subject to change, possibly with retroactive effect. This discussion does not purport to consider
all aspects of U.S. federal income taxation that might be relevant to shareholders of the Company in light of their particular
circumstances and does not apply to holders subject to special treatment under the U.S. federal income tax laws (such as, for
example, dealers in securities, commodities or foreign currency, traders in securities who elect to apply a mark-to-market method
of accounting, insurance companies, banks and certain other financial institutions, tax-exempt organizations, U.S. expatriates,
shareholders that are pass-through entities or the investors in such pass-through entities, regulated investment companies, real
estate investment trusts, shareholders whose “functional currency” is not the U.S. dollar, investors liable for the
alternative minimum tax, persons who hold shares as part of a hedge, straddle, constructive sale or conversion transaction, persons
who acquired their shares of Company common stock through the exercise of employee stock options or otherwise as compensation.
This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax or any state,
local or foreign tax consequences, nor does it address any U.S. federal tax considerations other than those pertaining to U.S.
federal income tax.
A U.S. Holder’s receipt of cash for shares of Company
common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder
who receives cash for such U.S. Holder’s shares of Company common stock in the merger will recognize gain or loss in an
amount equal to the difference, if any, between the cash received in the merger and the U.S. Holder’s adjusted tax basis
in the U.S. Holder’s shares of Company common stock. Gain or loss will be determined separately for each block of shares
of Company common stock (i.e., shares of Company common stock acquired for the same cost in a single transaction). Such gain or
loss generally will be capital gain or loss and generally will be long-term capital gain or loss if the U.S. Holder’s holding
period for the shares of Company common stock is more than one year as of the date of the merger. Long-term capital gains of individual
U.S. Holders generally are subject to U.S. federal income tax at preferential rates. The deduction of capital losses is subject
to limitations.
Cash proceeds received pursuant to the merger generally are
subject to information reporting, and may be subject to backup withholding at the applicable statutory rate (currently 28%) if
the U.S. Holder fails to provide a valid taxpayer identification number and comply with certain certification procedures or otherwise
establish an exemption from backup withholding. Backup withholding is not an additional U.S. federal income tax. Rather, the U.S.
federal income tax liability of the person subject to backup withholding generally will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely
furnished to the Internal Revenue Service.
This summary of the material U.S. federal income tax
consequences of the merger is for general information only and is not tax advice. Holders are urged to consult their tax advisors
with respect to the application of U.S. federal income tax laws to their particular situations as well as any tax consequences
arising under the U.S. federal estate or gift tax rules, or under the laws of any state, local, foreign or other taxing jurisdiction
or under any applicable tax treaty.
Regulatory Approvals
The transactions contemplated by the merger agreement require
the clearance, consent or approval of antitrust authorities in the United States, Germany and Austria, the Committee on Foreign
Investment in the United States (“CFIUS”), the French Ministry for Economy and Finance (“MINEFI”) and
the U.S. Department of State’s Directorate of Defense Trade Controls (“DDTC”).
United States Antitrust Approval
Under the HSR Act and the rules and
regulations promulgated thereunder by the Federal Trade Commission (referred to as the “FTC”), certain
transactions, including the merger, may not be consummated unless certain waiting period requirements have expired or been
terminated. Pursuant to the requirements of the HSR Act, the required Notification and Report Forms with respect to the
merger have been filed with the United States Department of Justice, Antitrust Division (referred to as the “Antitrust
Division”) and the FTC. Pursuant to the requirements of the HSR Act, the merger may be closed following the expiration
of a 30-calendar day waiting period (if the thirtieth day falls on a weekend or holiday, the waiting period will expire on
the next business day) following such filings with the Antitrust Division and the FTC unless the federal government
terminates the waiting period early or issues a request for additional information and documentary material. The 30-calendar
day waiting period commenced on June 27, 2014 and will expire at 11:59 P.M., New York City time, on July 28, 2014, unless
earlier terminated or extended by a request for additional information and documentary material as discussed below.
If, within the initial 30-day waiting period, either the Antitrust
Division or the FTC requests additional information and documentary material concerning the merger, the waiting period will be
extended and will expire at 11:59 P.M., New York City time, on the thirtieth calendar day after the date of substantial compliance
with that request. If the thirtieth day falls on a weekend or holiday, the waiting period will expire on the next business day.
After that time, the Company and TE may close the merger, unless the Company and TE agree with the Antitrust Division or the FTC
to delay closing the merger or the Antitrust Division or the FTC obtains a court order staying the merger. In practice, complying
with a request for additional information or documentary material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raise substantive issues in connection with a proposed merger, the parties will engage in negotiations with
the relevant governmental agency concerning possible means of addressing those issues and may agree to delay completion of the
merger while those negotiations continue.
Private parties (including individual states) may also bring
legal actions under the antitrust laws. The Company and TE do not believe that the closing of the merger will result in a violation
of any applicable antitrust laws. However, there can be no assurance that a challenge to the merger on antitrust grounds will
not be made, or if such a challenge is made, what the result will be.
Austrian Antitrust Approval
Under the provisions of the Austrian Cartel Act 2005
(“ACA”), the merger may only be completed in Phase I if the Federal Competition Authority (“FCA”) and
the Federal Cartel Prosecutor (“FCP”) waive their right to request an in-depth review or if the four-week
standstill period lapses without the FCA and FCP requesting an in-depth review (Phase II) before the Cartel Court. The
four-week standstill period was triggered by the submission of the merger control filing on June 27, 2014 and thus, absent a
request for Phase II review, will end on July 25, 2014. If the waiting period ends on July 25, 2014, the clearance
certificate will be issued on the next working day, i.e. July 28, 2014. The initiation of a Phase II investigation extends
the review period for a further five months. After the Phase II review period, the Cartel Court may prohibit the transaction
if the consummation of the transaction absent proposed remedies and corresponding obligations would lead to the creation or
strengthening of a dominant position.
German Antitrust Approval
Under applicable German law, the merger may only be completed
if it is approved by the German Federal Cartel Office. The parties filed a notification with the German Federal Cartel Office
(“FCO”) on June 26, 2014. The statutory Phase I review period ends on July 28, 2014. Where the FCO is able to ascertain
during the Phase I review period that the notified transaction does not raise substantive competition concerns in Germany, it
issues an informal clearance letter, sometimes before final expiry of the period. The FCO may conduct an in-depth Phase II review
that extends the review period to a total of four months (i.e., until October 27, 2014). After a Phase II review, the FCO may
prohibit the transaction if the consummation of the transaction absent proposed conditions and/or obligations would lead to a
significant impediment of effective competition, in particular due to the creation or strengthening of a dominant market position.
CFIUS Clearance
Pursuant to Section 721 of Title VII of the Defense Production
Act of 1950, as amended, 50 U.S.C. app. § 2170 et seq. (“Section 721”), and 31 C.F.R. Part 800, the CFIUS may
conduct a national-security review or investigation of a transaction by or with a foreign person that could result in control
of any person engaged in interstate commerce in the United States.
Section 721 does not require the parties to a transaction to
submit a joint notice to the CFIUS in order to initiate a review, but Section 721 encourages parties to do so. Absent clearance
by the CFIUS, the President retains the statutory authority to suspend a transaction that has not yet been consummated and to
prohibit a transaction that has been consummated, thereby triggering a divestment. The CFIUS may also unilaterally review a
transaction, should it wish to review a transaction that the parties have declined to notify voluntarily. Section 721 establishes
strict timeframes, with an initial 30-day review period. If a transaction would present national security considerations that
cannot be mitigated within the initial 30-day review period or that could result in control of an existing U.S. business by a
foreign government, the CFIUS must conduct a further 45-day investigation of the transaction. At the end of the investigation,
the CFIUS may refer a transaction to the President for action within a subsequent 15-day period. At any stage, the CFIUS may propose
a mitigation agreement with conditions to address national security concerns. In total, the process should not take more than
90 days, although in extraordinary circumstances, the parties may withdraw a joint notice and resubmit it in order to provide
the CFIUS with additional time to negotiate a mitigation agreement. The CFIUS may also reject a filing or restart the clock in
the event that the parties do not provide timely responses to CFIUS information requests during a review or investigation.
TE and the Company have decided that it is in their
mutual best interest to submit a joint voluntary notice to the CFIUS and obtain CFIUS clearance for the transaction. As is
standard practice, and to maximize the chances of a review without a subsequent 45-day investigation, TE and the Company
“pre-filed” a draft notice with the CFIUS staff on July 1, 2014, and filed the notice with CFIUS staff on July
18, 2014. TE and the Company do not believe that the transactions contemplated
by the merger present national security considerations requiring mitigation. Nevertheless, the Company cannot provide
assurances that there will not be an issue in the CFIUS process, that the parties will avoid an investigation, or that the
CFIUS will clear the transaction without mitigation or conditions.
DDTC Advance Notice
Pursuant to the Arms Export Control Act, 22 U.S.C. Chapter
39, and the International Traffic in Arms Regulations (“ITAR”), 22 C.F.R. Parts 120-29, the DDTC requires manufacturers
of defense articles and providers of defense services and related technical data to register with DDTC, regardless of whether
or not they export such articles, services, or technical data. ITAR Section 122.4(b) requires that a registrant notify DDTC at
least 60 days prior to the consummation of any transaction that would result in “the sale or transfer to a foreign person
of ownership or control” of a registrant. The ITAR does not provide for DDTC to grant consent for a transaction that would
result in foreign ownership or control, although DDTC retains the right to invalidate a registration or revoke licenses issued
or manufacturing license agreements or technical assistance agreements approved thereunder. As the U.S. Department of State is
also a CFIUS member agency, it could also raise any issues or concerns about a transaction in the CFIUS process.
The Company is currently registered with DDTC as a manufacturer
of defense articles. TE and the Company notified DDTC of the transaction on July 1, 2014, and the prior notice period will therefore
expire on August 30, 2014, absent a waiver of that period by the DDTC. TE and the Company are not aware of any circumstances that
would lead DDTC to invalidate the Company’s registration, revoke licenses or agreements issued thereunder, or seek redress
in the CFIUS process. Nevertheless, the Company cannot provide assurances that there will not be an issue in the DDTC review.
MINEFI Approval
Under the French Monetary and Financial Code, foreign investments
in France in certain defined strategic sectors are subject to the prior authorization of the French Ministry for Economy and Finance.
Such strategic sectors include activities pertaining to public safety and national defense interests and the research, production
and trade of arms and war equipment, including components of arms and war equipment.
Due to the military activities of the French subsidiary of
the Company, MEAS France S.A.S., the merger cannot be consummated unless (i) the French Ministry for Economy and Finance has approved
the indirect acquisition of the Company, and therefore, MEAS France S.A.S., by TE or (ii) the French Ministry for Economy and
Finance's approval is deemed granted following the expiration of a 2-month review period following a complete filing. The required
filing with respect to the merger was made by TE on July 2, 2014 with the French Ministry for Economy and Finance, Direction Générale
du Trésor. However, the French Ministry for Economy and Finance may determine at any time that the filing made by TE was
not complete and, therefore, that the 2-month review period has not started. The French Ministry for Economy and Finance may either
deny approval, or grant approval without any conditions, or grant approval with a number of conditions attached, if such conditions
are likely to preserve the national interest.
See “The Merger Agreement — Conditions to the Merger”
beginning on page 68 for additional information.
Litigation Related to the Merger
Since the announcement of the Company’s proposed merger with TE, three putative class action complaints
have been in filed in state court in New Jersey against the Company, its directors, TE and Merger Sub. Two complaints have
been filed in Essex County and are captioned
Ridley v. Measurement Specialties, Inc. et al.
, No. C-129-14 and
Rosenheim
v. Measurement Specialties, Inc. et al.
, No. C-144-14. One complaint has been filed in Mercer County and is captioned
Schulz v. Measurement Specialties, Inc.
, No. L-1505-14. The complaints in these class actions allege that the members
of the Board breached their fiduciary duties to the Company’s shareholders in connection with
the merger and that the Company, TE, and Merger Sub aided and abetted such breaches. In support of these claims, the complaints
allege, among other things, that the merger is the result of an inadequate sales process, that the price to be paid in the merger
transaction is inadequate, and that the merger agreement includes deal-protection provisions that preclude a potential topping
bid and unduly favor TE. In addition, one of the complaints alleges that the preliminary proxy statement filed by the Company with
the SEC on July 10, 2014 omits certain material information. The complaints request that the merger be enjoined, or, in the
event it is consummated, that it be rescinded or that the class be awarded rescissory damages. The defendants believe the complaints
are without merit and intend to defend themselves vigorously.
THE MERGER AGREEMENT
The following is a summary of the material terms and conditions
of the merger agreement. This summary does not purport to be complete and may not contain all of the information about the merger
agreement that is important to you. This summary, and information regarding the merger agreement elsewhere in this proxy statement,
is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached to this proxy
statement as
Annex A
, and which is incorporated by reference into this proxy statement. We encourage you to read the merger
agreement carefully and in its entirety because it is the legal document that governs the merger.
Explanatory Note Regarding the Merger Agreement
The following summary of the merger
agreement, a copy of which is attached hereto as
Annex A
, is intended to provide information regarding the terms of the
merger agreement and is not intended to modify or supplement any factual disclosures about the Company in its public reports filed
with the SEC. In particular, the merger agreement and the related summary are not intended to be, and should not be relied upon
as, disclosures regarding any facts and circumstances relating to the Company or any of its subsidiaries or affiliates. The representations,
warranties and covenants in the merger agreement were made solely for the benefit of the parties to the merger agreement. The
assertions embodied in those representations and warranties are qualified by information in a confidential disclosure schedule
delivered in connection with the signing of the merger agreement. The disclosure schedule contains information that has been included
in the Company’s general prior public disclosures, as well as potential additional non-public information. While the Company
does not believe that the disclosure schedule contains information required to be publicly disclosed under the securities laws
other than information that has already been so disclosed, the disclosure schedule contains information that modifies, qualifies
and creates exceptions to the representations, warranties and conduct of business covenants set forth in the merger agreement.
Moreover, certain representations and warranties in the merger agreement were made as of a specified date, may be subject to a
contractual standard of materiality or material adverse effect different from what might be viewed as material to shareholders,
or may have been used for the purpose of allocating risk between the Company, on the one hand, and TE and Merger Sub, on the other
hand, instead of establishing these matters as facts. Accordingly, the representations and warranties of the Company contained
in the merger agreement should not be read alone, but instead should be read together with the information provided elsewhere
in this proxy statement and reports, statements and filings that the Company publicly files with the SEC from time to time. In
addition, information concerning the subject matter of the representations, warranties and covenants may change after the date
of the merger agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Additional information about the Company may be found elsewhere
in this proxy statement and the Company’s other public filings. See "Where You Can Find More Information," beginning
on page 75 of this proxy statement.
Structure of the Merger
The merger agreement provides that, subject to the terms and
conditions of the merger agreement, and in accordance with the General Corporation Law of the State of Delaware (referred to as
the “DGCL”) and the New Jersey Business Corporation Act (referred to as the “NJBCA”), at the effective
time of the merger, Merger Sub will be merged with and into the Company, and, as a result of the merger, the separate corporate
existence of Merger Sub will cease. The Company will continue its corporate existence under the NJBCA as the Surviving Corporation
and become an indirect wholly owned subsidiary of TE.
The closing of the merger will occur no later than the
second business day after all of the conditions set forth in the merger agreement and described under “The Merger
Agreement — Conditions to the Merger” beginning on page 68 are satisfied or waived, or on such other date
as agreed to by the parties. The merger will become effective when certificates of merger and any other filings required
by applicable law have been duly filed with the Delaware Secretary of State and the Department of Treasury of the State of
New Jersey or at a later time as may be specified in the certificates of merger.
Effects of the Merger; Directors and Officers; Certificate
of Incorporation; Bylaws
At the effective time of the merger, TE will become the sole
owner of the Company and its business. Therefore, current shareholders of the Company will cease to have direct or indirect ownership
interests in the Company or rights as shareholders of the Company, will not participate in any future earnings or growth of the
Company, will not benefit from any appreciation in value of the Company and will not bear the future risks of the Company’s
operations.
Following completion of the merger, Company common stock will
be delisted from the NASDAQ and deregistered under the Exchange Act. As a result, the Company will be a privately held corporation,
and there will be no public market for shares of Company common stock. This will make certain provisions of the Exchange Act,
such as the requirement of furnishing a proxy statement in connection with shareholders’ meetings and the
filing of periodic reports with the SEC on account of shares of Company common stock, no longer applicable to the Company.
At the effective time of the merger, the certificate of incorporation
of the Company will be amended and restated as set forth in Annex I to the merger agreement, and, as so amended and restated,
will be the amended and restated certificate of incorporation of the Surviving Corporation. The bylaws of Merger Sub immediately
prior to the effective time of the merger will be the bylaws of the Surviving Corporation.
The directors of Merger Sub immediately prior to the effective
time of the merger will be the directors of the Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation. The officers of the Company immediately prior to the effective time
of the merger will be the initial officers of the Surviving Corporation, each to hold office in accordance with and subject to
the certificate of incorporation and bylaws of the Surviving Corporation.
The Merger Consideration; Conversion of Company Common
Stock
At the effective time of the merger, by virtue of the merger,
each share of Company common stock issued and outstanding immediately prior to the effective time of the merger will be converted
into the right to receive $86.00 in cash, without interest, except that:
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each share
of Company common stock held by the Company as treasury stock or owned by TE or Merger
Sub immediately prior to the effective time of the merger shall be canceled, and no payment
shall be made with respect thereto; and
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each share
of Company common stock held by any subsidiary of either the Company or TE (other than
Merger Sub) immediately prior to the effective time of the merger shall be converted
into such number of shares of stock of the Surviving Corporation such that each such
subsidiary owns the same percentage of the outstanding capital stock of the Surviving
Corporation immediately following the effective time of the merger as such subsidiary
owned in the Company immediately prior to the effective time of the merger.
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The merger agreement prohibits the Company from effecting any
reclassification, recapitalization, stock split (including a reverse stock split) or combination, exchange or readjustment of
shares, or any stock dividend or stock redistribution with a record date during the period between the date of the merger agreement
and the effective time of the merger. If, during such period, the outstanding shares of Company common stock (or securities convertible
or exchangeable into, or exercisable for, Company common stock) are nevertheless changed into a different number of shares or
a different class by reason of any reclassification, recapitalization, stock split (including reverse stock split) or combination,
exchange or readjustment of shares of Company common stock, or stock dividend thereon with a record date during such period or
otherwise (excluding any change that results from the issuance of certain shares of Company common stock permitted by the merger
agreement), the merger consideration and any other amounts payable pursuant to the merger agreement will be appropriately adjusted
to reflect such change.
Each share of common stock of Merger Sub outstanding immediately
prior to the effective time of the merger will be converted into and become one share of common stock of the Surviving Corporation
and, subject to certain agreed upon exceptions, will constitute the only outstanding shares of capital stock of the Surviving
Corporation.
Payment Procedures
TE will make cash available
to the paying agent for the merger at the times and in the amounts necessary for the paying agent to make the payments to the
holders of shares of Company common stock that are contemplated by the merger agreement. Each holder of shares of Company common
stock that are converted into the right to receive the per share merger consideration will be entitled to receive the per share
merger consideration upon receipt by the paying agent of (i) a certificate representing shares of Company common stock together
with a properly completed letter of transmittal, or (ii) an “agent’s message,” for book-entry transfer of uncertificated
shares of Company common stock. Until so surrendered or transferred, each such certificate or uncertificated share will represent
after the effective time of the merger for all purposes only the right to receive the per share merger consideration. No interest
will be paid or accrued on the cash payable upon the surrender or transfer of such shares.
Treatment of Options, Restricted Share Units and Other
Equity-Based Awards
The directors, executive officers
and certain employees of the Company hold equity awards with respect to Company common stock, including stock options and restricted
share units (“RSUs”), that, pursuant to the terms of the applicable award agreements as in effect on the date of the
merger agreement, will be either vested or unvested at the effective time of the merger, as follows:
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certain of
the awards either will have already vested prior to the effective time of the merger
or will not yet have vested prior to the effective time of the merger but the vesting
of such awards will fully accelerate at such time (such awards are referred to as “vested”
awards); and
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the remaining
awards will not yet have vested prior to the effective time of the merger and the vesting
of such awards will not accelerate at such time (such awards are referred to as “unvested”
awards).
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Vested Stock Options and Restricted
Share Units
Each option to acquire Company common
stock that is outstanding, vested and exercisable as of the effective time of the merger will be canceled and, at or promptly
after the effective time of the merger, the Company will pay each holder of any such canceled vested option an amount in cash
determined by multiplying (i) the excess, if any, of the merger consideration of $86.00 per share of Company common stock over
the applicable exercise price of such canceled vested option by (ii) the number of shares of Company common stock such holder
could have purchased had such holder exercised such vested option in full immediately prior to the effective time of the merger.
Each award of RSUs that is outstanding
immediately prior to the effective time of the merger and that is vested as of the effective time of the merger will automatically
convert into the right to receive, at or promptly after the effective time of the merger, an amount in cash equal to the product
of (i) the merger consideration of $86.00 per share of Company common stock multiplied by (ii) the total number of shares of Company
common stock subject to such vested RSUs.
Unvested Stock Options and Restricted
Share Units
Each option to acquire Company common
stock that is outstanding but not vested or exercisable as of the effective time of the merger will be canceled in exchange for
the opportunity to receive an aggregate amount in cash determined by multiplying (i) the excess, if any, of the merger consideration
of $86.00 per share of Company common stock over the applicable exercise price of such unvested option by (ii) the number of shares
of Company common stock such holder could have purchased had such holder exercised such unvested option (assuming it was fully
exercisable) in full immediately prior to the effective time of the merger.
Each award of RSUs that is outstanding
immediately prior to the effective time of the merger and that is not vested will be canceled in exchange for the opportunity
to receive an aggregate amount in cash equal to the product of (i) the merger consideration of $86.00 per share of Company common
stock multiplied by (ii) the total number of shares of Company common stock subject to such unvested RSUs.
The cash amount for each unvested option or RSU award will
be payable to the applicable holder on or within 30 days after the date(s) on which the portion of such award was scheduled to
become vested pursuant to the terms of the applicable award agreement as in effect as of the date of the merger agreement, subject
to the applicable holder’s continued employment with the Company or any of its affiliates until such award becomes vested.
However, if at any time prior to the final scheduled vesting date of such award the employment of such holder is terminated by
the Company or any of its affiliates without “cause” (as defined in the merger agreement), the remaining unpaid cash
amount will be paid to such holder within 30 days after such termination. If the employment of such holder terminates for any
other reason prior to such final scheduled vesting date, any unpaid portion of such amount will be forfeited.
Employee Stock Purchase Plan
Under the Company’s Amended
and Restated 2006 Employee Stock Purchase Plan (referred to as the “ESPP”), participants are permitted to purchase
shares of common stock at a discount on certain dates using accumulated payroll deductions. Executive officers of the Company
are eligible to participate in the ESPP. Pursuant to the merger agreement, the Company has agreed to limit participation in the
ESPP to those employees who were participants as of the date of the merger agreement and prohibit any increase in the rate of
payroll deductions or purchase elections by participants in the ESPP after that date. The ESPP will be terminated on the tenth
business day prior to the effective time of the merger, with such termination date being the last day of the offering period under
the ESPP and the date on which participants will be deemed to exercise their right to purchase shares (to the extent such date
is prior to the date on which such offering period would otherwise expire). All amounts allocated to each participant’s
account under the ESPP at the end of such offering period will be used to purchase whole shares of Company common stock at the
applicable price under the ESPP for such offering period. Any shares of Company common stock purchased through the ESPP will receive
the same $86.00 per share in the merger as all other shares of Company common stock.
For more information about the treatment of equity awards in
the merger, see “The Merger — Interests of Company Directors and Executive Officers in the Merger” beginning
on page 39.
Shareholders’ Meeting
The Company has agreed that it will (i) as promptly as reasonably
practicable (and in any event within 15 business days) following the date of the merger agreement, prepare and file the proxy
statement with the SEC, (ii) use its reasonable best efforts to cause the proxy statement to be cleared by the SEC as soon as
reasonably practicable after the date of the merger agreement and to be mailed to its shareholders as promptly as practicable
thereafter, (iii) cause a meeting of its shareholders to be duly called and held as soon as reasonably practicable after the SEC
or its staff advises that it has no further comments on the proxy statement or that the Company may commence mailing of the proxy
statement for the purpose of voting on the approval and adoption of the merger agreement and the merger, and (iv) comply with
all applicable laws with respect to such meeting and the solicitation of proxies in connection therewith.
Representations and Warranties
In the merger agreement, the Company has made customary representations
and warranties to TE and Merger Sub with respect to, among other things:
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the due organization,
valid existence, good standing, power and authority of the Company and its subsidiaries;
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the required
vote by the shareholders of the Company;
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its authority
to enter into the merger agreement and to complete the transactions contemplated by the
merger agreement and the enforceability of the merger agreement against the Company;
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the consents,
filings and approvals of governmental entities required in connection with the transactions
contemplated by the merger agreement;
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the absence
of conflicts with, violations of, or creation of defaults under the Company’s governing
documents, certain agreements or applicable laws as a result of entering into the merger
agreement and the consummation of the transactions contemplated thereby;
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the absence
of any obligations that would create or impose any liens on the Company’s assets
as a result of entering into the merger agreement and the consummation of the transactions
contemplated thereby;
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its capitalization,
including the number of shares of capital stock issued and outstanding and the number
of shares of Company common stock underlying outstanding options and other stock-based
awards;
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the ownership
of its subsidiaries;
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the absence
of any rights to acquire any capital stock or other voting securities of the Company
or any of its subsidiaries;
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its SEC filings
since March 31, 2011, including the financial statements contained therein;
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its internal
controls and compliance with the Sarbanes-Oxley Act;
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the conformity
of its financial statements with applicable accounting requirements and that its financial
statements fairly present, in all material respects, the consolidated financial position
of the Company;
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the accuracy
of the information supplied by the Company in this proxy statement;
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since March
31, 2014, the conduct of the business of the Company and the absence of events, occurrences,
developments, state of circumstances, or facts that have had or would reasonably be expected
to have, individually or in the aggregate, a Company material adverse effect;
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the absence
of undisclosed liabilities;
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compliance
with laws, permits and court orders;
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compliance
with the Foreign Corrupt Practices Act, The Bribery Act of 2010 of the United Kingdom,
and other anti-corruption and anti-bribery laws;
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the absence
of certain litigation or investigations;
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title to, or
valid leasehold interests in, property and assets;
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intellectual
property matters;
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employee benefit
plans and labor and employment matters;
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matters with
respect to the Company’s material contracts;
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the absence
of undisclosed brokers’ fees and expenses;
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receipt by
the Board of a fairness opinion from Barclays;
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takeover laws
and the absence of appraisal rights; and
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Many of the representations and warranties in the merger agreement
made by the Company are qualified by a “materiality” or “material adverse effect” standard (that is, they
will not be deemed to be untrue or incorrect unless their failure to be true or correct, individually or in the aggregate, would,
as the case may be, be material or have a material adverse effect on the Company). Under the merger agreement, a material adverse
effect with respect to the Company (referred to as a “Company material adverse effect”) means a material adverse effect
on:
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the financial
condition, business, assets or results of operations of the Company and its subsidiaries,
taken as a whole, excluding any such effect to the extent resulting from:
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changes
in the financial or securities markets or general economic or political conditions in
the United States or any other country in which the Company and its subsidiaries, taken
as a whole, conduct a substantial portion of their business;
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changes
(including changes in applicable law or generally accepted accounting principles) generally
affecting the industry in which the Company and its subsidiaries operate;
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acts
of war, sabotage or terrorism or natural disasters;
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the
announcement or pendency of the transactions contemplated by the merger agreement;
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any
decline in the market price or trading volume of the shares of Company common stock on
the Nasdaq;
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any
failure of the Company to meet any internal, external or public projections, forecasts,
estimates of earnings or revenues; or
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any
action by the Company made pursuant to the express terms of the merger agreement or otherwise
upon the written direction of TE, except:
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in the case
of the first three bullet points above, to the extent such changes or events have a disproportionate
effect on the Company and its subsidiaries, taken as a whole, relative to other participants
in the industry in which the Company and its subsidiaries operate (in which case the
incremental disproportionate impact or impacts may be taken into account in determining
whether there has been a material adverse effect with respect to the Company); and
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the exceptions
set forth in the fourth and fifth bullet points above will not prevent or otherwise affect
a determination that any fact, change, event, occurrence or effect underlying or that
contributed to such decline or failure has resulted in or contributed to a material adverse
effect with respect to the Company; or
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the Company’s
ability to perform its obligations under, or consummate the transactions contemplated
by, the merger agreement.
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In the merger agreement, TE and Merger Sub have made customary
representations and warranties to the Company with respect to, among other things:
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the due organization,
valid existence, good standing, power and authority of the TE and Merger Sub;
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the capitalization
of Merger Sub;
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the authority
of each of TE and Merger Sub to enter into the merger agreement and to complete the transactions
contemplated by the merger agreement and the enforceability of the merger agreement against
each of TE and Merger Sub;
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the consents,
filings and approvals of governmental entities required in connection with the transactions
contemplated by the merger agreement;
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the absence
of conflicts with, violations of, or creation of liens or defaults under TE’s and
Merger Sub’s governing documents, certain agreements or applicable laws as a result
of entering into the merger agreement and the consummation of the transactions contemplated
thereby;
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the accuracy
of the information supplied by TE or any of its subsidiaries specifically for use in
this proxy statement;
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the absence
of undisclosed brokers’ fees and expenses;
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the absence
of certain litigation;
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ownership of
Company common stock by TE or any of its subsidiaries including Merger Sub;
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the sufficiency
of funds to satisfy TE’s obligations under the merger agreement including payment
of the aggregate consideration to be paid to holders of shares of Company common stock;
and
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the limitation
of TE’s and Merger Sub’s representations and warranties to those expressly
made by TE and Merger Sub in the merger agreement.
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Certain representations and warranties in the merger agreement
made by TE are qualified by a “materiality” or “material adverse effect” standard. Under the merger agreement,
a material adverse effect with respect to TE means a material adverse effect on TE’s ability to perform its obligations
under, or consummate the transactions contemplated by, the merger agreement.
The representations and warranties contained in the merger
agreement and in any certificate or other writing delivered pursuant to the merger agreement will not survive the effective time
of the merger.
Conduct of Business by the Company Pending the Merger
From the date of the merger agreement until the effective time
of the merger, except as expressly required by the merger agreement, as disclosed in the Company’s disclosure schedule,
as required by applicable law or any applicable collective bargaining agreement made available to TE prior to the date of the
merger agreement, or with the prior written consent of TE (which consent cannot be unreasonably withheld, delayed or conditioned),
the Company has agreed to, and agreed to cause each of its subsidiaries to, use its commercially reasonable efforts to conduct
its business in the ordinary course consistent with past practice and to use its commercially reasonable efforts to preserve intact
its present business organization, maintain in effect all of its permits required to carry on the business as currently conducted,
keep available the services of its directors, officers, and key employees, maintain satisfactory relationships with its customers,
lenders, suppliers and others having significant business relationships with it, and maintain existing insurance policies or materially
comparable replacement policies. The Company has further agreed that except as expressly required by the merger agreement, as
disclosed in the Company’s disclosure schedule, as required by applicable law, or with the prior written consent of TE (which
consent, subject to certain exceptions, cannot be unreasonably withheld, delayed or conditioned), the Company will not, and will
not permit any of its subsidiaries to, among other things and with certain exceptions:
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amend its organizational
documents;
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split, combine
or reclassify any shares of its capital stock;
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declare, set
aside or pay any dividend or other distribution in respect of its capital stock;
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redeem, repurchase
or otherwise acquire any securities of the Company or of any subsidiary of the Company,
or offer to do the same;
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issue or otherwise
deliver any securities of the Company or of any subsidiary of the Company, other than
the issuance of (i) any shares of Company common stock upon the exercise of stock options
or purchase rights under the ESPP, in each case that are outstanding on the date of the
merger agreement, (ii) any shares of Company common stock upon the vesting of restricted
stock units that are outstanding on the date of the merger agreement, and (iii) any securities
of any subsidiary of the Company to the Company or any other wholly owned subsidiary
of the Company;
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amend any term
of any securities of the Company or of any subsidiary of the Company;
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incur any capital
expenditures or any obligations or liabilities in respect thereof, except for any unbudgeted
capital expenditures not to exceed $250,000 individually or $1,000,000 in the aggregate;
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merge or consolidate
with any other person;
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acquire, directly
or indirectly, any assets, interests or businesses, other than supplies or inventory
in the ordinary course of business and as required by certain Company contracts;
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adopt a plan
of complete or partial liquidation, dissolution, recapitalization or restructuring;
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sell, lease,
license or otherwise transfer, create any lien (other than certain permitted liens) on,
or otherwise fail to maintain any of the Company’s or its subsidiaries’ assets,
securities, interests or businesses, other than (i) sales of inventory or obsolete equipment
in the ordinary course of business consistent with past practice, (ii) sales, leases,
licenses or other dispositions of assets in the ordinary course of business consistent
with past practice with a fair market value not in excess of $1,000,000 in the aggregate,
and that are not otherwise material to the business of the Company or its subsidiaries
as currently conducted or as proposed to be conducted, or (iii) contracts that are disclosed
on specific sections of the Company’s disclosure schedule;
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make any loans
or investments in, any other person, other than (i) loans or investments in, wholly owned
subsidiaries of the Company, or (ii) advances to its employees in respect of business
related expenses;
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create or otherwise
become liable with respect to any indebtedness for borrowed money or issue or sell any
debt securities or other rights to acquire any debt securities of the Company or any
of its subsidiaries, other than indebtedness for borrowed money (i) to finance working
capital needs in the ordinary course of business in an aggregate amount not to exceed
$2,500,000, and (ii) among the Company and its wholly owned subsidiaries, or among the
Company’s wholly owned subsidiaries, in the ordinary course of business consistent
with past practice;
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enter into,
modify in any material respect, or renew any material contract;
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waive or fail
to pursue any material rights or claims of the Company or any of its subsidiaries under
any material contract;
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voluntarily
accelerate, terminate or cancel any material contract;
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except as required
by the terms of an employee plan of the Company as in effect on the date of the merger
agreement, (i) grant any severance, retention or termination pay to, or enter into or
amend any severance, retention, termination, employment, consulting, bonus, or change
in control severance agreement with, any current or former service provider, (ii) increase
the compensation or benefits provided to any current or former service provider (other
than reasonable, market-based increases in base compensation in the ordinary course of
business consistent with past practice for employees who are not “key employees”
(i.e., employees whose annual base compensation is $150,000 or more or who have the title
of Vice President or above); however, the Company may increase the base compensation
of employees based on its annual merit cycle in an aggregate amount not to exceed $3,272,000
(subject to specified individual limits for certain key employees), (iii) grant any equity
or equity-based awards to, or discretionarily accelerate the vesting or payment of any
such awards held by, any current or former service provider, (iv) establish, adopt, enter
into or amend in any material respect any employee plan or collective bargaining agreement,
(v) establish, adopt or enter into any plan, agreement or arrangement, or otherwise commit,
to gross-up, indemnify or otherwise reimburse any current or former service provider
for any tax incurred by such service provider, (vi) hire any employees who would be key
employees except to fill a vacancy, or (vii) terminate the employment of any key employee
other than for cause;
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change the
Company’s methods of accounting, except as required by concurrent changes in generally
accepted accounting principles or by securities laws as agreed to by the Company’s
independent public accountants;
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settle or satisfy,
or offer to settle or satisfy (i) any shareholder litigation or dispute against the Company,
any of its subsidiaries or any of their officers or directors, (ii) any proceeding (except
immaterial matters in the ordinary course of business), or (iii) any other liabilities
other than, with respect to (iii), the settlement or satisfaction in the ordinary course
of business consistent with past practice, or as required by their terms as in effect
on the date of the merger agreement, of claims, liabilities or obligations reserved against
in the Company’s most recent financial statements (including the notes thereto)
included in documents the Company has filed with the SEC (for amounts not in excess of
such reserves) as of the date of the merger agreement, incurred since the date of such
financial statements in the ordinary course of business consistent with past practice
(other than the fees and expenses of Barclays and other transaction costs related to
the merger agreement and the transactions contemplated thereunder), or in an amount less
than $200,000 in the aggregate;
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make or change
any material tax election, change any annual tax accounting period, adopt or change any
method of tax accounting, amend any material tax return, claim any material tax refund,
enter into any closing agreement relating to any material tax, settle or compromise any
material tax claim, audit or assessment, surrender any right to claim a material tax
refund, offset or other reduction in tax liability, or consent to any extension or waiver
of the statute of limitations period applicable to any material tax claim or assessment;
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knowingly take
any action that would result in the closing conditions related to the truth and correctness
of the Company’s representations and warranties and the performance of the Company’s
obligations under the merger agreement not being satisfied as of the effective time of
the merger; or
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agree, resolve
by action of the Board, or commit to do any of the foregoing.
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No Solicitation; Other Offers
The Company has agreed that it will, and will cause its subsidiaries
and its and their representatives to, cease immediately and terminate any and all existing activities, discussions or negotiations,
if any, with any third party and their representatives conducted prior to the date of the merger agreement with respect to any
acquisition proposal. The Company has also agreed that it will use its reasonable best efforts to cause any such third party and
its representatives that executed a confidentiality agreement within the 24-month period prior to the date of the merger agreement
and that is in possession of confidential information of the Company or any of its subsidiaries to return or destroy all such
information as promptly as practicable.
In addition, the Company agreed that neither it nor any of
its subsidiaries will, and will not authorize or permit any of its or their respective officers, directors, employees, investment
bankers, attorneys or other representatives to, directly or indirectly:
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solicit, initiate
or knowingly take any action to facilitate or encourage the submission of any acquisition
proposal (as defined below);
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enter into
or participate in any discussions or negotiations with, furnish any information relating
to the Company or any of its subsidiaries or afford access to the business, properties,
assets, books or records of the Company or any of its subsidiaries to, knowingly assist,
participate in, facilitate or encourage any effort by any third party that has made,
is seeking to make or could be reasonably expected to make an acquisition proposal;
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fail to make,
withdraw or modify in a manner adverse to TE the Board recommendation (as defined below);
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recommend an
acquisition proposal or knowingly take any action or make any statement inconsistent
with the Board recommendation;
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fail to enforce
or grant any waiver or release under any standstill or similar agreement with respect
to any class of equity securities of the Company or any of its subsidiaries;
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approve any
business combination under the New Jersey Shareholders’ Protection Act; or
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enter into
any agreement in principle, letter of intent, term sheet, merger agreement, acquisition
agreement, option agreement or other similar instrument relating to an acquisition proposal.
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Notwithstanding the restrictions described above, at any time
prior to the receipt of the affirmative vote of the holders of a majority of the votes cast in connection with the merger at the
Special Meeting, if the Board determines in good faith, after consultation with outside legal counsel, that the failure to take
the following actions would be inconsistent with its fiduciary duties under the NJBCA, the Company, directly or indirectly through
its representatives, may:
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engage in negotiations
or discussions with any third party and its representatives that, subject to the Company’s
compliance with the above prohibitions, has made a bona fide, written acquisition proposal
after the date of the merger agreement that the Board reasonably believes is or is reasonably
likely to lead to a superior proposal; and
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furnish to
the third party that made the bona fide, written acquisition proposal non-public information
relating to the Company or any of its subsidiaries pursuant to a confidentiality agreement
with terms in all material respects no less favorable to the Company than those contained
in the confidentiality agreement entered into by the Company and TE;
provided
that all such information, to the extent not previously provided or made available to
TE, must also be provided or made available to TE prior to or substantially concurrently
with the time it is provided or made available to such third party.
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The Company is required to notify TE promptly (but in no event
later than 48 hours) after the Company or any of its representatives receives any acquisition proposal, any meaningful indication
that a third party is considering making an acquisition proposal, or any request for information relating to the Company or any
of its subsidiaries or for access to the business, properties, assets, books or records of the Company or any of its subsidiaries
by any third party that has made, is seeking to make or could reasonably be expected to make an acquisition proposal. The Board
is prohibited from engaging in negotiations or discussions with, or furnishing any non-public information relating to the Company
or any of its subsidiaries to, any third party or their representatives unless the Company has delivered to TE a prior written
notice advising TE that it intends to take such action.
The Company is required to keep TE reasonably informed, on
a reasonably prompt and timely basis, of the status and material details of any acquisition proposal, indication or request, including
by identifying the third party making, and the terms and conditions of, any acquisition proposal. Any material amendment to any
acquisition proposal will be deemed to be a new acquisition proposal.
The term “
acquisition proposal
” means, other
than the transactions contemplated by the merger agreement, any third party offer or proposal relating to (i) any acquisition
or purchase, directly or indirectly, of 25% or more of the consolidated assets of the Company and its subsidiaries, (ii) any tender
offer or exchange offer that, if consummated, would result in such third party beneficially owning 25% or more of any class of
equity or voting securities of the Company, (iii) a sale or other disposition, directly or indirectly, of assets (including by
way of merger, consolidation or sale of capital stock), liquidation, dissolution or other similar transaction involving the Company
or any of its subsidiaries whose assets, individually or in the aggregate, constitute 25% or more of the consolidated assets of
the Company, or (iv) a merger, consolidation, share exchange, business combination, reorganization, recapitalization or other
similar transaction involving the Company or any of its subsidiaries as a result of which the current shareholders of the Company
directly or indirectly beneficially own less than 75% of the successor’s capital stock.
The term “
superior proposal
” means
a bona fide, unsolicited written acquisition proposal (replacing references to “25%” in the definition
of acquisition proposal with “more than 50%”) on terms that the Board determines in good faith, after
considering the advice of an outside financial advisor of nationally recognized reputation and outside legal counsel, and
taking into account all the terms and conditions of the acquisition proposal is more favorable and provides greater value to
the Company’s shareholders than is provided under the merger agreement (taking into account any proposal by TE to amend
the terms of the merger agreement), and which the Board determines is reasonably likely to be consummated in a timely manner
and for which financing, if a cash transaction (whether in whole or in part), is then fully committed by reputable financing
sources or reasonably determined to be available by the Board.
Recommendation of the Board
Subject to the provisions of the merger agreement, the Board
determined to recommend approval and adoption of the merger agreement by the shareholders of the Company (referred to as the “Board
recommendation”) and agreed to include the Board recommendation in this proxy statement.
The Company has also agreed that the Board will not fail to
make, withdraw or modify in a manner adverse to TE the Board recommendation, or recommend an acquisition proposal or knowingly
take any action or make any statement inconsistent with the Board recommendation (referred to as an “adverse recommendation
change”). However, notwithstanding the foregoing, at any time prior to the receipt of the affirmative vote of the holders
of a majority of the votes cast in connection with the merger at the Special Meeting, and after complying with the obligations
described in the following paragraph, the Board may make an adverse recommendation change if (i) an intervening event (defined
below) has occurred or (ii) in response to a superior proposal, in each case if the Board determines in good faith, after consultation
with outside legal counsel, that the failure to take the actions below would be inconsistent with its fiduciary duties under the
NJBCA.
The Board cannot make an adverse recommendation change unless:
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if the Board
has determined that an acquisition proposal constitutes a superior proposal or upon the
occurrence or an intervening event, the Company promptly provides written notice to TE
at least five business days (or two business days, in the case of an amended, supplemented
or modified acquisition proposal) before taking such action of its intention to do so,
including a description of (i) the material terms of such acquisition proposal, the most
current version of the proposed agreement under which such acquisition proposal is proposed
to be consummated, and the identity of the third party making the acquisition proposal,
or (ii) the intervening event, as applicable; and
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five business
days (or two business days, as applicable) has passed after TE received the above notice
and TE has not made a written proposal to amend the terms of the merger agreement to
cause the intervening event to no longer form a valid basis for the Board to effect an
adverse recommendation change or to be at least as favorable to the shareholders of the
Company as such acquisition proposal, as applicable.
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In the case of any action to be taken relating to an acquisition
proposal, any amendment to the financial terms or other material terms of such acquisition proposal requires a new written notification
from the Company and any material change to an intervening event will be a new intervening event and result in a new notice period.
During the notice period, the Company and its representatives must negotiate in good faith with TE and its representatives regarding
any revisions proposed by TE to the terms of the merger agreement.
The merger agreement does not prevent the Board from complying
with Rule 14e-2(a) under the Exchange Act with regard to an acquisition proposal so long as any action taken or statement made
to so comply is consistent with the provisions described above. However, any such action taken or statement made that relates
to an acquisition proposal will be deemed to be an adverse recommendation change unless the Board reaffirms the Board recommendation
in such statement or in connection with such action. Any factually accurate public statement by the Company that merely describes
the Company’s receipt of an acquisition proposal and the operation of the merger agreement with respect thereto and contains
a “stop, look and listen” communication (including pursuant to Rule 14d-9(f) promulgated under the Exchange Act) shall
not constitute an adverse recommendation change. In addition, the engagement in discussion and negotiation or furnishing of information
in accordance with the provisions of the merger agreement will not, in themselves, constitute an adverse recommendation change.
The term “
intervening event
” means a material
event, fact, circumstance or development relating to the Company or its subsidiaries, unknown and not reasonably foreseeable as
of the date of the merger agreement, which arises after the date of the merger agreement and becomes known by the Board prior
to receipt of the affirmative vote of the holders of a majority of the votes cast at the Special Meeting. However, none of the
following events or circumstances will be deemed to either constitute or contribute to an intervening event: (i) the receipt of
any acquisition proposal, any inquiry related thereto or any event or development in connection therewith, (ii) any event, fact,
circumstance or development to the extent not having a disproportionate effect on the Company and its subsidiaries, taken as a
whole, relative to other participants in the industry in which the Company and its subsidiaries operate, (iii) any actual or potential
acquisition, divestiture or other business combination transaction, or other partnership or strategic alliance, involving the
Company or any of its subsidiaries, (iv) actions taken by either party in order to satisfy or waive specific closing conditions
in accordance with the terms and conditions of the merger agreement or the receipt of any consent or approval from any governmental
authority, (v) any increase in the market price or trading volume of the shares of Company common stock on NASDAQ, (vi) the fact
that the Company meets or exceeds any internal, external or public projections, forecasts, estimates of earnings or revenues,
(vii) any event, fact, circumstance or development relating to TE or any of its subsidiaries, (viii) any consequence of the
foregoing. The exceptions described in clauses (v) and (vi) above will not prevent or otherwise affect a determination that a
material event, fact, circumstance or development underlying or that contributed to such increase has resulted in or contributed
to an intervening event.
Indemnification and Insurance
For a period of six years from the effective time of the merger,
the certificate of incorporation and bylaws of the Surviving Corporation will, subject to any limitation imposed under applicable
law, contain provisions regarding elimination of liability, indemnification and advancement of expenses for acts or omissions
occurring at or prior to the effective time of the merger in favor of the present and former officers and directors of the Company
that are no less advantageous to such persons than the corresponding provisions in existence on the date of the merger agreement.
For a period of six years after the effective time of the merger
(and until the final resolution of any matter for which indemnification is first sought prior to the end of such period), the
present and former officers and directors of the Company will be indemnified and held harmless against any costs or expenses (including
reasonable attorneys’ fees), judgments, fines, penalties, losses, claims, damages or liabilities, including amounts paid
in settlement or compromise incurred in connection with any proceeding arising out of or pertaining to matters relating to such
present and former officers’ and directors’ service as a director or officer of the Company existing or occurring
at or prior to the effective date of the merger, whether asserted or claimed prior to, at or after the effective date of the merger,
to the fullest extent permitted under applicable law. TE or the Surviving Corporation is required to advance such expenses as
incurred to the fullest extent permitted under applicable law as long as the officers and directors to whom expenses are advanced
agree to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
For a period of six years from the effective time of the merger,
the Company’s directors’ and officers’ insurance will continue to be maintained in effect with terms, conditions,
retentions and limits of liability that are at least as favorable as those in effect as of the date of the merger agreement. Alternatively,
the Surviving Corporation can purchase comparable directors’ and officers’ insurance for such six year period or cause
the Company to obtain, on or prior to the closing date of the merger, a prepaid (or “tail”) directors’ and officers’
liability insurance policy at TE’s expense, in each case with terms, conditions, retentions and limits of liability that
are at least as favorable as those contained in the directors’ and officers’ insurance in effect as of the date of
the merger agreement (subject to a limit on the amount of the annual premium).
Employee Benefits and Service Credit
TE has agreed that until (i) December 31, 2015 for employees
of the Company located in the United States, and (ii) December 31, 2014 for employees of the Company located outside of the United
States, it will provide such employees that continue employment with the Surviving Corporation or any of its affiliates a level
of base compensation and employee benefits (excluding cash incentive or equity or equity-based compensation) that is substantially
similar in the aggregate to the level of base compensation and employee benefits (excluding cash incentive or equity or equity-based
compensation) provided to such employees immediately prior to the effective time of the merger. Nothing in the merger agreement
creates any obligation on the part of TE or the Surviving Corporation or any of its affiliates to employ or engage any director,
officer, employee or individual independent contractor of the Company for any period following the effective time of the merger.
Following the effective time of the merger, TE will provide
the employees of the Company that continue employment with the Surviving Corporation or any of its affiliates full credit for
prior service with the Company for purposes of vesting and eligibility to participate in employee benefit plans maintained by
TE for which such employees are otherwise eligible to participate (but such service credit will not be provided for benefit accrual
purposes, except for vacation and severance and employer contributions under 401(k) savings plans, as applicable, except, in the
case of any employee outside of the United States to the extent that such service credit is required by applicable law or an applicable
collective bargaining agreement). However, such credit must not result in any duplication of benefits for the same period of service.
In addition, TE has agreed to use commercially reasonable efforts to (i) waive any limitations on benefits relating to preexisting
conditions to the same extent such limitations are waived under any comparable plan of the Company, and (ii) recognize for purposes
of annual deductible and out-of-pocket limits under its medical and dental plans, deductible and out-of-pocket expenses paid by
employees of the Company that continue employment with the Surviving Corporation or any of its affiliates in the calendar year
in which the effective time of the merger occurs.
The Company has agreed to take all actions necessary to cause
each employee plan of the Company that provides for annual cash bonuses for the performance period that is scheduled to end on
March 31, 2015 to provide instead that (i) contingent on the occurrence of the closing of the merger, such performance period
will end on the later of September 30, 2014 and the date of the closing of the merger, and (ii) as soon as practicable following
the later of September 30, 2014 and the effective time of the merger, TE will pay to each employee of the Company who continues
employment with the Surviving Corporation a cash bonus for such shortened performance period. The aggregate amount of the cash
bonuses payable to all such continuing employees for such shortened performance period will equal the sum of (x) the product of
$375,000 multiplied by the number of months during the period beginning on April 1, 2014 and ending on September 30, 2014 (or,
if earlier, the date of the closing of the merger) (prorated for any partial month based on the number of calendar days in such
partial month that occur during such period), plus (y) $458,333 multiplied by the number of months, if any, during the period
beginning on October 1, 2014 and ending on the date of the closing of the merger (prorated for any partial month based on the
number of calendar days in such partial month that occur during such period). TE will allocate such aggregate bonus amount among
the continuing employees in accordance with the terms of the Company’s applicable bonus plans as in effect on the date of
the merger agreement. The foregoing will apply in the case of employees located outside of the United States only to the extent
allowable by applicable law or an applicable collective bargaining agreement.
Reasonable Best Efforts
Subject to the terms and conditions of the merger agreement,
the Company and TE agreed to use their 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 under applicable law to consummate the transactions contemplated by the
merger agreement, including:
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preparing and
filing as promptly as practicable with any governmental authority all documentation to
effect all necessary filings; and
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obtaining and
maintaining all licenses, authorizations, permits, consents, approvals, clearances, variances,
exemptions and other confirmations required to be obtained from any governmental authority
or other third party to consummate the transactions contemplated by the merger agreement
(including receipt of the required regulatory approvals).
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In connection with seeking expiration or termination of any
applicable waiting period under the HSR Act or clearance under the competition laws of Germany and Austria relating to the merger,
TE and Merger Sub are not required to:
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divest or otherwise
hold separate (including by establishing a trust), or take, cause to be taken or refrain
from taking any other action (or otherwise agreeing to do any of the foregoing) with
respect to, any of its or the Surviving Corporation’s or any of their respective
affiliates’ businesses, assets or properties;
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enter into
any settlement, undertaking, consent decree, stipulation or agreement with any governmental
authority in connection with the transactions contemplated by the merger agreement; or
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agree to do
any of the foregoing.
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In connection with seeking any other required regulatory approval,
TE and Merger Sub are not required to:
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divest or otherwise
hold separate (including by establishing a trust) any of its or the Surviving Corporation’s
or any of their respective affiliates’ businesses, assets or properties;
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take any actions
that would reasonably be expected to (i) have an adverse and material effect on control
of any of TE’s or the Company’s subsidiaries in the relevant jurisdiction,
or (ii) result in costs or losses to Parent, the Surviving Corporation or any of their
respective affiliates in the aggregate in excess of $10,000,000; or
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agree to do
any of the foregoing.
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Neither the Company nor any of its subsidiaries will be required
to (unless such action is binding on the Company or any of its subsidiaries only in the event that the merger is completed), or
shall without TE’s prior written consent, take any of the actions described in the second paragraph or the first and third
bullet points in the third paragraph above.
The Company and TE agreed that reasonable best efforts includes
litigating or defending against any proceeding by any governmental authority challenging the merger agreement or the consummation
of the merger.
The Company and TE also agreed that, to the extent permitted
by applicable law, they will use their reasonable best efforts to:
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cooperate in
all respects with each other in connection with any filing and in connection with any
investigation or other inquiry, including any proceeding initiated by a private party;
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promptly inform
the other party of any filing or communication received from, or intended to be given
to, any governmental authority and of any material communication received or intended
to be given in connection with any proceeding by a private party, in each case regarding
any of the transactions contemplated by the merger agreement;
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·
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prior to submitting
any filing, substantive written communication, correspondence or other information or
response to any governmental authority (or members of their staff) or in connection with
any proceeding by a private party, the submitting party shall permit the other party
and its counsel the opportunity to review as reasonably in advance as practicable under
the circumstances, and consider in good faith the comments of the other party in connection
with any such filing, communication or inquiry;
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furnish each
other with a copy of any filing, communication or, if in written form, inquiry, it or
any of its affiliates makes to or receives from any governmental authority or in connection
with any proceeding by a private party, in each case regarding any of the transactions
contemplated by the merger agreement; and
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consult with
each other in advance of any meeting or conference with any governmental authority or,
in connection with any proceeding by a private party, with any other person, and to the
extent reasonably practicable, give the other party the opportunity to attend and participate
in such meetings and conferences.
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Other Covenants and Agreements
TE and the Company made certain additional covenants to and
agreements with each other regarding various other matters including:
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the Company
reasonably cooperating with TE and its financing sources in connection with the arrangement
of financing related to the transactions contemplated by the merger agreement;
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cooperating
in determining whether any action by or in respect of, or filings with, any governmental
authority is required and, subject to provisions described under the heading “The
Merger Agreement — Reasonable Best Efforts” above and in taking such actions or
making any such filings, furnishing information required, and timely seeking any such
actions, consents, approvals or waivers;
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the Company
causing a meeting of its shareholders to be duly called and held as soon as reasonably
practicable after the SEC or its staff advises that it has no further comments on the
proxy statement or that the Company may commence mailing of the proxy statement for the
purpose of voting on the approval and adoption of the merger agreement and the merger;
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the Company
complying with all applicable laws with respect to such meeting and the solicitation
of proxies in connection therewith;
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subject to
certain limitations, consulting with each other before issuing any press release or making
other public statements or comments relating to the merger agreement or the transactions
contemplated by the merger agreement;
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TE’s
access to the Company’s information;
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the Company
taking certain actions to render any anti-takeover laws inapplicable to the transactions
contemplated by the merger agreement;
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legal proceedings
commenced or threatened against the any party to the merger agreement, or its respective
directors or executive officers, relating to the merger agreement, the merger, and/or
the transactions contemplated by the merger agreement and the participation and settlement
of any such litigation.
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Conditions to the Merger
Each party’s obligation to consummate the merger is subject
to the satisfaction or waiver of the following conditions:
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adoption of
the merger agreement by the affirmative vote of the holders of a majority of the votes
cast at the Special Meeting; and
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absence of
any applicable law that prohibits or makes the consummation of the merger illegal (other
than in connection with the expiration, termination or receipt of certain governmental
approvals).
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The obligations of TE and Merger Sub to consummate the merger
are subject to the satisfaction or waiver of the following conditions:
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the truth and
correctness of the representations and warranties of the Company as of and at the effective
time of the merger (or in the case of representations and warranties that are made as
of another time, as of such other time) concerning:
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o
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the
capitalization of the Company (excluding certain representations and warranties related
to equity grants) in all but
de minimis
respects;
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o
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the
(i) organization and qualification of the Company, (ii) authority to enter into the merger
agreement and certain actions by the Board, (ii) subsidiaries of the Company, (iv) financial
statements of the Company, (v) payment of fees or commissions related to the transactions
contemplated by the merger agreement, (vi) delivery of a fairness opinion by Barclays,
(vii) inapplicability of anti-takeover statutes to the merger, and (viii) absence of
appraisal rights in connection with the merger and the transactions contemplated by the
merger agreement, in each case in all respects if qualified as to materiality or a Company
material adverse effect (as described in the section entitled “The Merger Agreement
— Representations and Warranties” beginning on page 58) and in all
material respects if not so qualified;
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o
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the
absence of a Company material adverse effect in all respects; and
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o
|
the
other representations and warranties of the Company contained in the merger agreement
(disregarding all materiality and Company material adverse effect qualifications)
with only such exceptions as have not had, and would not reasonably be expected
to have, individually or in the aggregate, a Company material adverse effect.
|
|
·
|
the Company’s
performance, in all material respects, at or prior to the effective time of the merger,
of all of its obligations required to be performed by it;
|
|
·
|
the receipt
by TE of a certificate signed by an executive officer of the Company certifying
to the effect that the foregoing conditions have been satisfied;
|
|
·
|
the termination
or expiration of any applicable waiting periods under the HSR Act and the clearance of
the merger by antitrust authorities in Germany and Austria, the Committee on Foreign
Investment in the United States, the French Ministry for Economy and Finance, and the
United States Department of State’s Directorate of Defense Trade Controls without
any of the foregoing expiring, terminating, or being received subject to or conditioned
upon (i) any limitation on the ownership of the capital stock of the Company by TE or
any of its affiliates, or (ii) any requirement that TE, the Surviving Corporation or
the Company or any of their respective affiliates taking any action that is not required
to be taken (or permitted to be taken without TE’s consent) pursuant to the terms
of the merger agreement;
|
|
·
|
the absence
of any proceedings by any governmental authority (unless dismissed or otherwise resolved)
seeking to make illegal or otherwise restrain or prohibit the consummation
of the merger; and
|
|
·
|
the absence
of any event, occurrence or development of a state of circumstances or facts which
has had or would reasonably be expected to have, individually or in the aggregate,
a Company material adverse effect.
|
The obligations of the Company to consummate the merger are
subject to the satisfaction or waiver of the following conditions:
|
·
|
the truth and
correctness, in all material respects, at and as of immediately prior to the effective
time of the merger (or in the case of representations and warranties that are made as
of another time, as of such other time), of TE’s representations and warranties
concerning the (i) organization and qualification of TE and Merger Sub, and (ii) authority
for TE and Merger Sub to enter into the merger agreement;
|
|
·
|
the truth and
correctness, at and as of immediately prior to the effective time of the merger
(or in the case of representations and warranties that are made as of another time, as
of such other time), of the other representations and warranties of TE contained in the
merger agreement (disregarding all materiality and TE material adverse effect qualifications
(as described in the section entitled “The Merger Agreement — Representations
and Warranties” beginning on page 58), with only such exceptions as have
not and would not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on TE’s ability to perform its obligations under, or consummate
the transactions contemplated by, the merger agreement;
|
|
·
|
TE and Merger
Sub’s performance, in all material respects, at or prior to the effective time
of the merger, of all of the obligations required to be performed by them;
|
|
·
|
the receipt
by the Company of a certificate signed by an executive officer of TE certifying
to the effect that the foregoing three conditions have been satisfied; and
|
|
·
|
the termination
or expiration of any applicable waiting periods under the HSR Act and the clearance of
the merger by antitrust authorities in Germany and Austria, the Committee on Foreign
Investment in the United States, the French Ministry for Economy and Finance, and the
United States Department of State’s Directorate of Defense Trade Controls.
|
Termination of the Merger Agreement
The Company and TE may terminate the merger agreement by mutual
written consent at any time before the effective time of the merger. In addition, either the Company or TE may terminate the merger
agreement at any time before the effective time of the merger if:
|
·
|
the merger
has not been consummated on or before January 15, 2015 (provided that this termination
right is not available to a party whose breach of any provision of the merger agreement
results in the failure of the merger to be consummated by such date);
|
|
·
|
there is a
final and nonappealable applicable law that prohibits or makes illegal the consummation
of the merger or enjoins the Company, TE or Merger Sub from consummating the merger (provided
that this termination right is not available to a party whose breach of any provision
of the merger agreement results in the existence of any fact or occurrence described
in the foregoing); or
|
|
·
|
the merger
agreement is not adopted by the Company’s shareholders with the requisite vote
at the Special Meeting (including any adjournment or postponement thereof).
|
TE may also terminate the merger agreement if:
|
·
|
an adverse
recommendation change has occurred;
|
|
·
|
at any time
after public announcement of another acquisition proposal the Board fails to publicly
reaffirm the Board recommendation as promptly as practicable (but in any event within
five business days) after receipt of TE’s written request to do so;
|
|
·
|
the Company
intentionally and materially breaches certain obligations relating to (i) holding the
Special Meeting, (ii) obtaining the requisite vote at the Special Meeting, (iii) soliciting
or initiating discussions with third parties regarding other proposals to acquire the
Company, and (iv) limitations on its ability to respond to other acquisition proposals
(subject to the fulfillment of certain fiduciary duties of the Board) (with respect to
(iii) and (iv), as further described under “The Merger Agreement — No Solicitation;
Other Offers” beginning on page 62); or
|
|
·
|
the Company
has breached any representation or warranty, or failed to perform any covenant or agreement
in the merger agreement, which breach or failure would give rise to the failure of a
condition to TE’s and Merger Sub’s obligations to consummate the merger and
such breach or failure cannot be cured by January 15, 2015 or, if curable by January
15, 2015, is not cured within 30 days of the Company’s receipt of written notice
of such breach or failure.
|
The Company may also terminate the merger agreement:
|
·
|
if TE or
Merger Sub has breached any representation or warranty, or failed to perform any covenant
or agreement in the merger agreement, which breach or failure would give rise to the
failure of a condition to the Company’s obligations to consummate the merger and
such breach or failure cannot be cured by January 15, 2015 or, if curable by January
15, 2015, is not cured within 30 days of TE’s receipt of written notice of such
breach or failure; or
|
|
·
|
in response
to a superior proposal, following an adverse recommendation change in accordance with
the terms of the merger agreement, in order to concurrently with or immediately after
such termination, enter into a definitive agreement providing for such superior proposal
if the affirmative vote of the holders of a majority of the votes cast in connection
with the merger at the Special Meeting has not been received.
|
However, the Company is prohibited from exercising its termination
rights in response to a superior proposal unless:
|
·
|
if the Board
determined that an acquisition proposal constitutes a superior proposal, the Company
promptly provides written notice to TE at least five business days (or two business days,
in the case of an amended, supplemented or modified acquisition proposal) before taking
such action of its intention to do so with a description of the material terms of such
acquisition proposal, the most current version of the proposed agreement under which
such acquisition proposal is proposed to be consummated, and the identity of the third
party making the acquisition proposal; and
|
|
·
|
five business
days (or two business days, as applicable) has passed after TE received the above notice
and TE has not made a written proposal to amend the terms of the merger agreement to
be at least as favorable to the shareholders of the Company as such acquisition proposal.
|
In the case of any action to be taken relating to an acquisition
proposal, any amendment to the financial terms or other material terms of such acquisition proposal requires a new written notification
from the Company and will result in a new notice period. During the notice period, the Company and its representatives must negotiate
in good faith with TE and its representatives regarding any revisions proposed by TE to the terms of the merger agreement.
Termination Fees
The Company has agreed to pay TE a termination fee of $22.9
million if:
|
·
|
the merger agreement
is terminated by TE if:
|
|
o
|
an
adverse recommendation change has occurred;
|
|
o
|
at
any time after public announcement of another acquisition proposal, the Board fails to
publicly reaffirm the Board recommendation (as promptly as practicable but within five
business days) after receipt of TE’s written request to do so; or
|
|
o
|
the
Company intentionally and materially breaches certain obligations relating to (i) holding
the Special Meeting, (ii) obtaining the requisite vote at the Special Meeting, (iii)
soliciting or initiating discussions with third parties regarding other acquisition proposals
to acquire the Company, and (iv) limitations on its ability to respond to other acquisition
proposals (subject to the fulfillment of certain fiduciary duties of the Board) (with
respect to (iii) and (iv), as further described under “The Merger Agreement —
No Solicitation; Other Offers” beginning on page 62); or
|
|
·
|
the merger
agreement is terminated by the Company in order to enter into a definitive agreement
providing for a superior proposal in accordance with the terms and conditions of the
merger agreement; or
|
|
o
|
the
merger agreement is terminated (i) by TE or the Company because (x) the merger has not
been consummated by January 15, 2015 (unless the merger agreement has been adopted by
the Company shareholders at the Special Meeting prior to such termination), or (y) the
merger agreement has not been adopted by the Company shareholders with the requisite
vote at the Special Meeting or at any adjournment or postponement of the Special Meeting;
or (ii) by TE because the Company breached its representations and warranties, or failed
to perform its covenants and agreements, in either case, in a manner that gave rise to
the termination right described under “The Merger Agreement — Termination
of the Merger Agreement” above;
|
|
o
|
after
the date of the merger agreement and before such termination, an acquisition proposal
is publicly announced or otherwise communicated to the Board or its shareholders; and
|
|
o
|
within
12 months following the date of such termination, the Company enters into a definitive
agreement with respect to or recommends to its shareholders an acquisition proposal or
an acquisition proposal shall have been consummated.
|
Specific Performance; Enforcement
The Company, TE and Merger Sub are each entitled to an injunction
or injunctions to prevent breaches of the merger agreement or to enforce specifically the performance of the terms and provisions
of the merger agreement in the Delaware Court of Chancery, or in the event such court does not have jurisdiction, in any federal
court located in the State of Delaware or other Delaware state court (except any such action arising out of or relating to TE’s
financing sources shall be brought only in the Supreme Court of the State of New York, County of New York, Borough of Manhattan,
or, if under applicable laws exclusive jurisdiction is vested in the federal courts, the United States District Court for the
Southern District of New York (and appellate courts thereof)). Specific performance is in addition to any other remedy to which
the parties are entitled at law or in equity.
Appraisal Rights
The shareholders of the Company are not entitled to appraisal
rights in connection with the merger.
Delisting and Deregistration of
Company Common Stock
If the merger is completed, Company
common stock will no longer be traded on the NASDAQ Global Select Market and will be deregistered under the Exchange Act, and
we will no longer be required to file periodic reports with the SEC in respect of Company common stock.
Effects on the Company if the Merger is Not Completed
If the merger agreement is not adopted by the Company’s
shareholders or if the merger is not completed for any other reason, the Company’s shareholders will not receive any payment
for their shares of Company common stock in connection with the merger. Instead, the Company will remain an independent public
company, and Company common stock will continue to be quoted on the NASDAQ Global Select Market.
If the merger is not consummated, the Company expects that
management will operate the business in a manner similar to that in which it is being operated today and that shareholders will
be subject to the same risks and opportunities to which the Company is currently subject, but there can be no assurance as to
the effect of these risks and opportunities on the future value of shares of Company common stock. In the event the merger
is not completed, the Board will continue to evaluate and review the Company’s business operations, projects and capitalization,
make such changes as are deemed appropriate and seek to identify acquisitions, joint ventures or strategic alternatives to enhance
shareholder value. If the merger agreement is not adopted by the Company’s shareholders or if the merger is not consummated
for any other reason, there can be no assurance that any other transaction acceptable to the Company will be offered or that the
Company’s business, prospects or results of operations will not be adversely impacted.
If the merger agreement is terminated under certain circumstances,
the Company may be obligated to pay TE a termination fee. See “The Merger Agreement
— Termination Fees” beginning on page 70.
Financing of the Merger
TE and Merger Sub have acknowledged and agreed that their obligations
under the merger agreement are not subject to any conditions regarding TE’s, Merger Sub’s or any other person’s
ability to obtain financing for the consummation of the transactions contemplated by the merger agreement. TE has represented
in the merger agreement that it has, or will have prior to the closing of the merger, sufficient cash, available lines of credit
or other sources of immediately available funds to enable it to consummate the merger pursuant to the terms of the merger agreement
and to pay all related fees and expenses of TE and Merger Sub pursuant to the merger agreement.
OTHER MATTERS
The Board knows of no other business to be transacted at the
Special Meeting, but if any other matters do come before the meeting, it is the intention of the persons named in the accompanying
proxy to vote or act with respect to them in accordance with their best judgment.
Manner and Cost of Proxy Solicitation
The Company pays the cost of soliciting proxies. In addition
to mailing proxies, officers, directors and regular employees of the Company, acting on its behalf, may solicit proxies by telephone,
personal interview or other electronic means. You may also be solicited by means of press releases issued by the Company and advertisements
in periodicals. Also, the Company has retained Innisfree M&A Incorporated to assist in the solicitation of proxies for the
Special Meeting for an estimated fee of $25,000, plus reimbursement of reasonable out-of-pocket expenses. The Company will, at
its expense, request banks, brokers and other custodians, nominees and fiduciaries to forward proxy soliciting material to the
beneficial owners of shares held of record by such persons.
Reduce Duplicate Proxy Materials
The SEC rules permit companies and intermediaries (e.g., brokers)
to satisfy the delivery requirements for proxy statements with respect to two or more security holders sharing the same address
by delivering a single annual report or proxy statement, as applicable, addressed to those security holders. This process, which
is commonly referred to as “householding,” potentially provides extra convenience for security holders and cost savings
for companies. A number of brokers with accountholders who are the Company’s shareholders will be “householding” to
reduce duplicate mailings of our proxy materials. As indicated in the notice provided by these brokers to the Company’s shareholders,
a single set of proxy materials will be delivered to multiple shareholders sharing an address unless contrary instructions have
been received from an affected shareholder. Once you have received notice from your broker that they will be “householding”
communications to your address, “householding” will continue until you are notified otherwise or until you revoke
your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate
proxy statement, please notify your broker or call 1-800-542-1061, email: sendmaterials@proxyvote.com or contact us at Secretary,
Measurement Specialties, Inc., 1000 Lucas Way, Hampton, VA 23666, telephone (757) 766-1500.
Shareholders of the Company who currently receive multiple
copies of the proxy statement at their address and would like to request to receive only one should contact their broker.
EXECUTION
VERSION
AGREEMENT AND PLAN OF MERGER
dated as of
June 18, 2014
among
MEASUREMENT SPECIALTIES, INC.
TE CONNECTIVITY LTD.
and
WOLVERINE-MARS ACQUISITION, INC.
TABLE OF CONTENTS
|
PAGE
|
|
|
ARTICLE 1
|
Definitions
|
|
|
Section 1.01.
Definitions
|
A-1
|
Section 1.02.
Other Definitional and Interpretative Provisions
|
A-11
|
|
|
ARTICLE 2
|
The Merger
|
|
|
Section 2.01.
The Merger
|
A-12
|
Section 2.02.
Conversion of Shares
|
A-13
|
Section 2.03.
Surrender and Payment
|
A-13
|
Section 2.04.
Company Stock Options and Company RSUs
|
A-15
|
Section 2.05.
Employee Stock Purchase Plan
|
A-17
|
Section 2.06.
Adjustments
|
A-17
|
Section 2.07.
Withholding Rights
|
A-18
|
Section 2.08.
Lost Certificates
|
A-18
|
|
|
ARTICLE 3
|
The Surviving Corporation
|
|
|
Section 3.01.
Certificate of Incorporation
|
A-18
|
Section 3.02.
Bylaws
|
A-18
|
Section 3.03.
Directors and Officers
|
A-18
|
|
|
ARTICLE 4
|
Representations and Warranties of the Company
|
|
|
Section 4.01.
Corporate Existence and Power
|
A-19
|
Section 4.02.
Corporate Authorization
|
A-19
|
Section 4.03.
Governmental Authorization
|
A-20
|
Section 4.04.
Noncontravention
|
A-20
|
Section 4.05.
Capitalization
|
A-20
|
Section 4.06.
Subsidiaries
|
A-22
|
Section 4.07.
SEC Filings and the Sarbanes-Oxley Act
|
A-
23
|
Section 4.08.
Financial Statements
|
A-25
|
Section 4.09.
Company Proxy Statement
|
A-25
|
Section 4.10.
Absence of Certain Changes
|
A-25
|
Section 4.11.
No Undisclosed Material Liabilities
|
A-26
|
Section 4.12.
Compliance with Laws and Court Orders
|
A-26
|
Section 4.13.
Litigation
|
A-28
|
Section 4.14.
Properties
|
A-28
|
Section 4.15.
Intellectual Property
|
A-28
|
Section 4.16.
Taxes
|
A-31
|
Section 4.17.
Employee Benefit Plans
|
A-34
|
Section 4.18.
Labor Matters
|
A-36
|
Section 4.19.
Environmental Matters
|
A-37
|
Section 4.20.
Material Contracts
|
A-38
|
Section 4.21.
Finders’ Fees
|
A-41
|
Section 4.22.
Opinion of Financial Advisor
|
A-41
|
Section 4.23.
Antitakeover Statutes
|
A-42
|
Section 4.24.
No Appraisal Rights
|
A-42
|
Section 4.25.
Insurance
|
A-42
|
Section 4.26.
No Other Representations and Warranties
|
A-42
|
|
|
ARTICLE 5
|
Representations and Warranties of Parent
|
|
|
Section 5.01.
Corporate Existence and Power
|
A-43
|
Section 5.02.
Corporate Authorization
|
A-43
|
Section 5.03.
Governmental Authorization
|
A-44
|
Section 5.04.
Noncontravention
|
A-44
|
Section 5.05.
Disclosure Documents
|
A-44
|
Section 5.06.
Finders’ Fees
|
A-45
|
Section 5.07.
Litigation
|
A-45
|
Section 5.08.
Ownership of Shares
|
A-45
|
Section 5.09.
Financing
|
A-45
|
Section 5.10.
No Other Representations and Warranties
|
A-45
|
|
|
ARTICLE 6
|
Covenants of the Company
|
|
|
Section 6.01.
Conduct of the Company
.
|
A-45
|
Section 6.02.
Stockholder Meeting; Proxy Material
|
A-49
|
Section 6.03.
Access to Information
|
A-50
|
Section 6.04.
No
Solicitation; Other Offers
|
A-50
|
Section 6.05.
Section 16 Matters
|
A-54
|
Section 6.06.
Stock Exchange Delisting; 1934 Act Deregistration
|
A-54
|
Section 6.07.
Takeover Statutes
|
A-54
|
Section 6.08.
Stockholder Litigation
|
A-55
|
|
|
ARTICLE 7
|
Covenants of Parent
|
|
|
Section 7.01.
Obligations of Merger Subsidiary
|
A-55
|
Section 7.02.
Approval by Sole Stockholder of Merger Subsidiary
|
A-55
|
Section 7.03.
Voting of Shares
|
A-55
|
Section 7.04.
Indemnification; Directors’ and Officers’ Insurance
|
A-55
|
Section 7.05.
Employee Matters
|
A-57
|
ARTICLE 8
|
Covenants of Parent and the Company
|
|
|
Section 8.01.
Reasonable Best Efforts
|
A-59
|
Section 8.02.
Certain Filings
|
A-63
|
Section 8.03.
Company Proxy Statement
|
A-64
|
Section 8.04.
Public Announcements
|
A-65
|
Section 8.05.
Further Assurances
|
A-65
|
Section 8.06.
Notices of Certain Events
|
A-65
|
|
|
ARTICLE 9
|
Conditions to the Merger
|
|
|
Section 9.01.
Conditions to the Obligations of Each Party
|
A-66
|
Section 9.02.
Conditions to the Obligations of Parent and Merger Subsidiary
|
A-66
|
Section 9.03.
Conditions to the Obligations of the Company
|
A-68
|
|
|
ARTICLE 10
|
Termination
|
|
|
Section 10.01.
Termination
|
A-68
|
Section 10.02.
Effect of Termination
|
A-70
|
|
|
ARTICLE 11
|
Miscellaneous
|
|
|
Section 11.01.
Notices
|
A-70
|
Section 11.02.
Survival of Representations and Warranties
|
A-71
|
Section 11.03.
Amendments and Waivers
|
A-71
|
Section 11.04.
Expenses
|
A-71
|
Section 11.05.
Company Disclosure Schedule, Company 10-K and Parent 10-K
|
A-73
|
Section 11.06.
Binding Effect; Benefit; Assignment
|
A-73
|
Section 11.07.
Governing Law
|
A-73
|
Section 11.08.
Jurisdiction
|
A-74
|
Section 11.09.
Waiver of Jury Trial
|
A-74
|
Section 11.10.
Counterparts; Effectiveness
|
A-
75
|
Section 11.11.
Entire Agreement
|
A-75
|
Section 11.12.
Severability
|
A-75
|
Section 11.13.
Specific Performance
|
A-75
|
Section 11.14.
Joint and Several Liability; Obligation of Parent
|
A-75
|
Section 11.15.
Financing Sources
|
A-76
|
Annex I
Amended Charter
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this “
Agreement
”)
dated as of June 18, 2014 among Measurement Specialties, Inc., a New Jersey corporation (the “
Company
”), TE
Connectivity Ltd., a Swiss corporation (“
Parent
”), and Wolverine-Mars Acquisition, Inc., a Delaware corporation
and a wholly owned indirect subsidiary of Parent (“
Merger Subsidiary
”).
WITNESSETH:
WHEREAS, the respective boards of directors
of the Company, Parent and Merger Subsidiary have approved and declared advisable this Agreement pursuant to which, among other
things, Parent would acquire the Company by means of a merger of Merger Subsidiary with and into the Company on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, Parent has agreed to cause the
sole stockholder of Merger Subsidiary, in its capacity as such, to approve and adopt this Agreement and the Merger by unanimous
written consent in accordance with the requirements of the General Corporation Law of the State of Delaware (the “
DGCL
”)
immediately after the execution of this Agreement; and
WHEREAS, as a condition and inducement to
Parent’s willingness to enter into this Agreement, simultaneously herewith certain employees are entering into an employment,
retention or consulting term sheet or agreement as of the date hereof and effective as of and contingent on the Closing.
NOW, THEREFORE, in consideration of the
foregoing and the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE
1
Definitions
Section 1.01.
Definitions
. (a) As
used herein, the following terms have the following meanings:
“
Acquisition Proposal
”
means, other than the transactions contemplated by this Agreement, any Third Party offer or proposal relating to (i) any acquisition
or purchase, directly or indirectly, of 25% or more of the consolidated assets of the Company and its Subsidiaries, (ii) any tender
offer or exchange offer that, if consummated, would result in such Third Party beneficially owning 25% or more of any class of
equity or voting securities of the Company, (iii) a sale or other disposition, directly or indirectly, of assets (including by
way of merger, consolidation or sale of capital stock), liquidation, dissolution or other similar transaction involving the Company
or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 25% or more of the consolidated assets of
the Company or (iv) a merger, consolidation, share exchange, business combination, reorganization, recapitalization or other similar
transaction involving the Company or any of its Subsidiaries as a result of which the current stockholders of the Company directly
or indirectly beneficially own less than 75% of the successor’s capital stock.
“
Affiliate
” means, with
respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person.
“
Applicable Law
” means,
with respect to any Person, any transnational, domestic or foreign federal, state or local law (statutory, common or otherwise),
constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar
requirement enacted, adopted, promulgated, applied or enforced by a Governmental Authority that is binding upon or applicable to
such Person, as amended unless expressly specified otherwise.
“
Business Day
” means
a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York, are authorized or required by
Applicable Law to close.
“
Cause
” means (i) a material
violation of any fiduciary duty owed to Parent or any of its Affiliates (including the Company), (ii) conviction of, or entry of
a plea of
nolo contendere
with respect to, a felony or misdemeanor, (iii) dishonesty, (iv) theft or (v) other egregious
conduct, including without limitation, a material breach of Parent’s Code of Ethical Conduct, that is likely to have a materially
detrimental impact on Parent or any of its Affiliates (including the Company) and its employees.
“
CFIUS
” means the Committee
on Foreign Investment in the United States.
“
CFIUS Condition
” means
that written notice has been received by respective counsel for Merger Subsidiary and the Company from CFIUS stating that the review
or investigation of the transaction under Section 721 has been concluded and that CFIUS has made a determination that the transactions
contemplated under this Agreement do not present any unresolved national security concerns, or the President of the United States
has announced his decision not to suspend or prohibit the transactions contemplated under this Agreement.
“
Code
” means the Internal
Revenue Code of 1986.
“
Collective Bargaining Agreement
”
means any written or oral agreement, memorandum of understanding or other contractual obligation between the Company or any of
its Subsidiaries and any labor organizations or other authorized representative representing Service Providers.
“
Company Balance Sheet
”
means the audited consolidated balance sheet of the Company as of March 31, 2014 and the notes thereto set forth in the Company
10-K.
“
Company Balance Sheet Date
”
means March 31, 2014.
“
Company Disclosure Schedule
”
means the disclosure schedule dated the date hereof related to this Agreement that has been provided by the Company to Parent and
Merger Subsidiary prior to the execution hereof.
“
Company
Material Adverse
Effect
” means a material adverse effect on (i) the financial condition, business, assets or results of operations of
the Company and its Subsidiaries, taken as a whole, excluding any such effect to the extent resulting from (A) changes in the financial
or securities markets or general economic or political conditions in the United States or any other country in which the Company
and its Subsidiaries, taken as a whole, conduct a substantial portion of their business, (B) changes (including changes in Applicable
Law or GAAP) generally affecting the industry in which the Company and its Subsidiaries operate, (C) acts of war, sabotage or terrorism
or natural disasters, (D) the announcement or pendency of the transactions contemplated by this Agreement, (E) any decline
in the market price or trading volume of the Shares on Nasdaq, (F) any failure of the Company to meet any internal, external or
public projections, forecasts, estimates of earnings or revenues or (G) any action by the Company made pursuant to the express
terms of this Agreement or otherwise upon the written direction of Parent, except (1) in the case of clauses (A), (B) and (C) to
the extent such changes or events have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, relative
to other participants in the industry in which the Company and its Subsidiaries operate (in which case the incremental disproportionate
impact or impacts may be taken into account in determining whether there has been a Company Material Adverse Effect) and (2) the
exceptions set forth in clauses (E) and (F) shall not prevent or otherwise affect a determination that any fact, change, event,
occurrence or effect underlying or that contributed to such decline or failure has resulted in or contributed to a Company Material
Adverse Effect, or (ii) the Company’s ability to perform its obligations under, or consummate the transactions contemplated
by, this Agreement.
“
Company 10-K
” means
the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2014 (as filed on June 3, 2014).
“
Competition Law
” means
Applicable Law designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization, restraint
of trade or lessening of competition through merger or acquisition.
“
Confidentiality Agreement
”
means the confidentiality letter dated August 6, 2012 (as amended on February 25, 2014 and April 25, 2014) between the Company
and Parent.
“
Contract
” means, with
respect to any Person, any legally binding contract, agreement, lease, sublease, license, commitment, sale or purchase order, indenture,
note, bond, loan, mortgage, deed of trust, instrument or other arrangement, whether written or oral, to which such Person is a
party or by which such Person or such Person’s properties or assets are bound.
“
DDTC
” means the U.S.
Department of State’s Directorate of Defense Trade Controls.
“
DDTC Condition
” means
that any applicable prior notice period under ITAR relating to the transactions contemplated hereby shall have expired or otherwise
been waived by DDTC.
“
Deferred Compensation Account
”
has the meaning assigned to it in the Deferred Compensation Plan.
“
Deferred Compensation Plan
”
means the Measurement Specialties, Inc. Nonqualified Deferred Compensation Plan adopted by the Company Board on February 12, 2014,
effective as of April 1, 2014.
“
DGA
” means the
Direction
Générale de l’Armement
.
“
Employee Plan
” means
any (i) “employee benefit plan” as defined in Section 3(3) of ERISA, (ii) compensation, employment, consulting, severance,
termination protection, change in control, transaction bonus, retention or similar plan, agreement, arrangement, program or policy
or (iii) other plan, agreement, arrangement, program or policy providing for compensation, bonuses, profit-sharing, equity or equity-based
compensation or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangement),
medical, dental, vision, prescription or fringe benefits, life insurance, relocation or expatriate benefits, perquisites, disability
or sick leave benefits, employee assistance program, workers’ compensation, supplemental unemployment benefits or post-employment
or retirement benefits (including compensation, pension, health, medical or insurance benefits), in each case whether or not written
(x) that is sponsored, maintained, administered, contributed to or entered into by the Company or any of its Affiliates for the
current or future benefit of any current or former Service Provider or (y) for which the Company or any of its Subsidiaries has
any direct or indirect liability.
“
Employer Credits
” means,
collectively, Employer Discretionary Credits and Other Employer Credits.
“
Employer Discretionary Credits
”
has the meaning assigned to it in the Deferred Compensation Plan.
“
Environmental Laws
”
means any Applicable Law or any agreement with any Person relating to human health or safety in respect of Hazardous Substances,
the environment or any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise
hazardous substance or material.
“
Environmental
Permits
”
means all Permits relating to or required by Environmental Law.
“
ERISA
” means the Employee
Retirement Income Security Act of 1974.
“
ERISA Affiliate
” of
any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414
of the Code.
“
FDA
” means the U.S.
Food and Drug Administration.
“
FDA Permits
” means all
Permits (including, for the avoidance of doubt, all establishment registrations, device listings and 510(k) clearances) required
by the FDA (or any other Health Authority).
“
Filing
” means any registration,
petition, statement, application, schedule, form, declaration, notice, notification, report, submission or information or other
filing.
“
GAAP
” means generally
accepted accounting principles in the United States.
“
Governmental Authority
”
means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department,
court, agency or official, including any political subdivision thereof.
“
Hazardous Substance
”
means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substance or material, or any substance or material having any constituent elements displaying any of the foregoing characteristics,
including any petroleum product, derivative or byproduct, asbestos, asbestos-containing materials, lead, polychlorinated biphenyls
or any substance or material regulated under any Environmental Law due to its hazardous or toxic effect on human health or the
environment.
“
Health Authority
” means
the Governmental Authorities that administer Health Laws, including the FDA and the European Medicines Agency.
“
Health Law
” means any
Applicable Law the purpose of which is to ensure the safety, efficacy and quality of medical products by regulating the research,
development, manufacturing and distribution of these products, including Applicable Law relating to good laboratory practices,
good clinical practices, investigational use, product marketing authorization, manufacturing facilities compliance and approval,
good manufacturing practices, labeling, advertising, promotional practices, safety surveillance, record keeping and filing of required
reports, including the Food, Drug and Cosmetic Act of 1938 and the Public Health Service Act.
“
HSR Act
” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
“
Intellectual Property Rights
”
means any and all intellectual property rights throughout the world, including any and all (i) trademarks, service marks, brand
names, certification marks, trade dress, domain names and other indications of origin, the goodwill associated with the foregoing
and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application (“
Trademarks
”), (ii) national and multinational
statutory invention registrations, patents and patent applications issued or applied for in any jurisdiction, including all certificates
of invention, provisionals, nonprovisionals, substitutions, divisionals, continuations, continuations-in-part, reissues, extensions,
supplementary protection certificates, reexaminations and the equivalents of any of the foregoing in any jurisdiction, and all
inventions disclosed in each such registration, patent or patent application (“
Patents
”), (iii) trade secrets,
know-how, confidential information, confidential data, proprietary processes, proprietary methods, (iv) writings and other
works, whether copyrightable or not, in any jurisdiction, and any and all copyright rights, whether registered or not, and registrations
or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof (“
Copyrights
”),
and (v) moral rights, database rights, design rights, industrial property rights, publicity rights and privacy rights.
“
International Plan
”
means any Employee Plan that is not a US Plan.
“
Intervening Event
” means
a material event, fact, circumstance or development relating to the Company or its Subsidiaries, unknown and not reasonably foreseeable
as of the date hereof, which arises after the date hereof and becomes known by the Company Board prior to receipt of the Company
Stockholder Approval;
provided, however
that in no event shall any of the following be deemed to either constitute or contribute
to an Intervening Event: (i) the receipt of any Acquisition Proposal, any inquiry related thereto or any event or development in
connection therewith, (ii) any event, fact, circumstance or development to the extent not having a disproportionate effect on the
Company and its Subsidiaries, taken as a whole, relative to other participants in the industry in which the Company and its Subsidiaries
operate, (iii) any actual or potential acquisition, divestiture or other business combination transaction, or other partnership
or strategic alliance, involving the Company or any of its Subsidiaries, (iv) actions taken by either party in compliance with
Section 9.01 or the receipt of any consent or approval from any Governmental Authority, (v) any increase in the market price or
trading volume of the Shares on Nasdaq, (vi) the fact that the Company meets or exceeds any internal, external or public projections,
forecasts, estimates of earnings or revenues, (vii) any event, fact, circumstance or development relating to Parent or any
of its Subsidiaries, or (viii) any consequence of the foregoing;
provided
,
further
, that the exceptions set forth
in clauses (v) and (vi) shall not prevent or otherwise affect a determination that a material event, fact, circumstance
or development underlying or that contributed to such increase has resulted in or contributed to an Intervening Event.
“
ITAR
” means the U.S.
Department of State’s International Traffic In Arms Regulations, codified at 22 C.F.R. parts 120-130.
“
IT Assets
” means computers,
computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines and all other
information technology equipment, and all associated documentation owned by the Company or its Subsidiaries or licensed or leased
by the Company or its Subsidiaries.
“
Key Employee
” means
an employee of the Company or any of its Subsidiaries whose annual base compensation is $150,000 or more or who has the title of
Vice President or above.
“
knowledge of the Company
”
or “
Company’s Knowledge
” means the actual knowledge after reasonable inquiry of the individuals listed
in Section 1.01(a) of the Company Disclosure Schedule.
“
Licensed Intellectual Property
Rights
” means all Intellectual Property Rights owned by a Third Party and licensed or sublicensed to the Company or any
of its Subsidiaries or for which the Company or any of its Subsidiaries has obtained a covenant not to be sued.
“
Lien
” means, with respect
to any property or asset, any mortgage, lien, license, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For purposes of this Agreement, a Person shall be deemed to own, subject to a Lien,
any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such property or asset.
“
MEAS France
” means MEAS
France SAS, a
société par actions simplifiée
organized under the laws of France.
“
MINEFI
” means the French
Ministry for Economy and Finance.
“
MINEFI Condition
” means
that MINEFI shall have (i) notified Parent and/or Merger Subsidiary and, as the case may be, the Company and/or MEAS France that
it has approved the indirect acquisition of the Company by Parent, or (ii) MINEFI’s approval shall be deemed granted following
notification pursuant to Articles L. 151-3 and R. 153-1
et seq
. of the French Monetary and Financial Code.
“
Nasdaq
” means the NASDAQ
Stock Market LLC.
“
1933 Act
” means the
Securities Act of 1933.
“
1934 Act
” means the
Securities Exchange Act of 1934.
“
NJBCA
” means the New
Jersey Business Corporation Act.
“
Other
Employer Credits
”
has the meaning assigned to it in the Deferred Compensation Plan.
“
Owned Intellectual Property Rights
”
means all Intellectual Property Rights owned or purported to be owned by the Company or any of its Subsidiaries.
“
Parent Material Adverse Effect
”
means a material adverse effect on Parent’s ability to perform its obligations under, or consummate the transactions contemplated
by, this Agreement.
“
Parent 10-K
” means the
Parent’s annual report on Form 10-K for the fiscal year ended September 27, 2013 (as filed on November 15, 2013).
“
Participant
” has the
meaning assigned to it in the Deferred Compensation Plan.
“
Permits
” means governmental
licenses, franchises, permits, certificates, approvals, registrations, concessions or other similar authorizations of Governmental
Authorities applicable to the assets or business of the Company or its Subsidiaries.
“
Permitted Liens
” means
(i) any Liens for Taxes not yet due and payable or which are being contested in good faith by appropriate proceedings and for
which adequate reserves have been recorded in accordance with GAAP, (ii) landlords’, carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s or other similar Liens incurred in the ordinary course of business consistent
with past practice, in each case for sums not yet due and payable or due but not delinquent or being contested in good faith by
appropriate proceedings, (iii) Liens incurred in the ordinary course of business consistent with past practice in connection with
pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation,
and (iv) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that,
in the aggregate, are not material in amount and that do not, in any case, materially detract from the value or use of the property
subject thereto.
“
Person
” means an individual,
corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental
Authority or an agency or instrumentality thereof.
“
Proceeding
” means any
claim, audit, action, suit, proceeding, arbitral action or investigation.
“
Sarbanes-Oxley Act
”
means the Sarbanes-Oxley Act of 2002.
“
SEC
” means the Securities
and Exchange Commission.
“
Section 721
” means Section
721 of Title VII of the Defense Production Act of 1950, codified at 50 U.S.C. app. 2170
et seq.
, and the U.S. Department
of the Treasury implementing regulations, codified at 31 C.F.R. Part 800.
“
Service Provider
” means
any director, officer, employee or individual independent contractor of the Company or any of its Subsidiaries.
“
Shares
” means shares
of common stock, no par value per share, of the Company.
“
Subsidiary
” means, with
respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person
and, with respect to the Company, shall include Nikkiso-Therm Co., Ltd.
“
Third Party
” means any
Person, including as defined in Section 13(d) of the 1934 Act, other than Parent or any of its Affiliates.
“
Trust
” has the meaning
assigned to it in the Trust Agreement.
“
Trust Asset
”
means
(i) any asset held in the Trust, and the value of such asset determined in accordance with GAAP, including Company Securities and
instruments linked to the value of Company Securities, (ii) any right the Trust has to receive any asset in the future, including
by the Trust being the (a) owner or beneficiary of any insurance policy or similar instrument or (b) beneficiary of a letter of
credit, bank guaranty, surety bond or similar instrument, and (iii) any instrument by which the Trust may or will receive any of
(i) and (ii) as the result of, or in connection with, a future event, including a Change in Control Event (as defined in the Deferred
Compensation Plan).
“
Trust Agreement
” means
the Non-Qualified Plan Trust Agreement entered into as of April 1, 2014 by and between the Company and Bank of America, N.A.
“
US Plan
” means any Employee
Plan that covers Service Providers located primarily within the United States.
“
WARN
” means the Worker
Adjustment and Retraining Notification Act and any comparable Applicable Law.
(b) Each of the following terms is defined
in the Section set forth opposite such term:
Term
|
|
Section
|
Adverse Recommendation Change
|
|
6.04(a)(i)
|
Agreement
|
|
Preamble
|
Certificates
|
|
2.03(a)
|
Closing
|
|
2.01(b)
|
Closing Date
|
|
2.01(b)
|
Collaboration Partner
|
|
4.12(e)
|
Company
|
|
Preamble
|
Company Board
|
|
4.02(b)
|
Company Board Recommendation
|
|
4.02(b)
|
Company Financial Advisor
|
|
4.21
|
Company Proxy Statement
|
|
4.09(a)
|
Company RSUs
|
|
2.04(d)
|
Company SEC Documents
|
|
4.07(a)
|
Company Securities
|
|
4.05(c)
|
Company Stock Options
|
|
2.04(b)
|
Company Stockholder Approval
|
|
4.02(a)
|
Company Stockholder Meeting
|
|
6.02(a)
|
Company Subsidiary Securities
|
|
4.06(b)
|
Continuing Employees
|
|
7.05(a)
|
Conversion Ratio
|
|
2.04(b)
|
Costs
|
|
7.04(a)(ii)
|
D&O Insurance
|
|
7.04(a)(iii)
|
Deferred Compensation Plan Liability
|
|
4.17(h)
|
DGCL
|
|
Recitals
|
Draft Notice
|
|
8.01(c)
|
EAR
|
|
4.12(d)
|
Effective Time
|
|
2.01(c)
|
End Date
|
|
10.01(c)
|
ESPP
|
|
2.05
|
Exchange Fund
|
|
2.03(a)
|
FCPA
|
|
4.12(b)
|
Government Contract
|
|
4.20(c)
|
Indemnified Person
|
|
7.04(a)
|
Intervening Event Notice
|
|
6.04(a)(iv)
|
Material Contract
|
|
4.20(a)
|
Merger
|
|
2.01(a)
|
Merger Consideration
|
|
2.02(a)
|
Merger Subsidiary
|
|
Preamble
|
New Jersey Shareholders’ Protection Act
|
|
4.23
|
Non-U.S. Employee
|
|
7.05(a)
|
Term
|
|
Section
|
Notice Period
|
|
6.04(a)(iv)
|
OFAC
|
|
4.12(c)
|
Option Amount
|
|
2.04(b)
|
Parent
|
|
Preamble
|
Paying Agent
|
|
2.03(a)
|
Representatives
|
|
6.04(a)(i)
|
Required Approvals
|
|
9.02(b)
|
Retention Amount
|
|
2.04(e)
|
RSU Amount
|
|
2.04(d)
|
Sanctions
|
|
4.12(c)
|
Superior Proposal
|
|
6.04(b)
|
Superior Proposal Notice
|
|
6.04(a)(iv)
|
Surviving Corporation
|
|
2.01(a)
|
Tax
|
|
4.16(q)
|
Taxing Authority
|
|
4.16(q)
|
Tax Return
|
|
4.16(q)
|
Tax Sharing Agreement
|
|
4.16(q)
|
Termination Fee
|
|
11.04(b)
|
UK Bribery Act
|
|
4.12(b)
|
Uncertificated Shares
|
|
2.03(a)
|
Unvested Options
|
|
2.04(b)
|
Unvested RSUs
|
|
2.04(d)
|
U.S. Employee
|
|
7.05(a)
|
Vested Options
|
|
2.04(a)
|
Vested RSUs
|
|
2.04(c)
|
Vesting Date
|
|
2.04(e)
|
Section 1.02.
Other Definitional and
Interpretative Provisions.
The words “hereof,” “herein” and “hereunder” and words of like
import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The
captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.
References to Articles, Sections, Exhibits, Annexes and Schedules are to Articles, Sections, Exhibits, Annexes and Schedules of
this Agreement unless otherwise specified. All Exhibits, Annexes and Schedules annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized term used in any Exhibit, Annex
or Schedule but not otherwise defined therein shall have the meaning as defined in this Agreement. Any singular term in this Agreement
shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes”
or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,”
whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and
comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.
References to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended from time
to time and to any rules or regulations promulgated thereunder. References to any Contract are to that Contract as amended, modified
or supplemented from time to time in accordance with the terms hereof and thereof;
provided
that with respect to any Contract
listed on any schedules hereto, any amendments, modifications or supplements must also be listed in the appropriate schedule. References
to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise
specified, from and including or through and including, respectively. References to anything having been “made available”
to Parent shall include posting of such information or material, prior to the date hereof, in an electronic data room to which
Parent has been provided access.
ARTICLE
2
The
Merger
Section 2.01.
The Merger.
(a) At
the Effective Time, Merger Subsidiary shall be merged (the “
Merger
”) with and into the Company in accordance
with the NJBCA and the DGCL, whereupon the separate existence of Merger Subsidiary shall cease, and the Company shall be the surviving
corporation (the “
Surviving Corporation
”).
(b) The closing of the Merger (the “
Closing
”)
shall take place in New York City at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York 10017
as soon as possible, but in any event no later than two Business Days after the date the conditions set forth in ARTICLE 8
(other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent
permissible under Applicable Law, waiver of those conditions by the party or parties entitled to the benefit thereof at the Closing)
have been satisfied or, to the extent permissible under Applicable Law, waived by the party or parties entitled to the benefit
of such conditions, or at such other place or time as Parent and the Company may mutually agree (the date on which the Closing
occurs, the “
Closing Date
”).
(c) At the Closing, the Company and Merger
Subsidiary shall (a) file a certificate of merger with (i) the Department of Treasury of the State of New Jersey and (ii)
the Delaware Secretary of State and (b) make all other filings or recordings required by the NJBCA or the DGCL in connection with
the Merger in such form as required by the NJBCA or the DGCL, as applicable. The Merger shall become effective at such time (the
“
Effective Time
”) as such certificates of merger are duly filed with the Department of Treasury of the State
of New Jersey and the Delaware Secretary of State (or at such later time as may be specified in such certificates of merger).
(d) The Merger shall have the effects
specified in this Agreement and the NJBCA, including Section 14A:10-6 thereof, and the DGCL.
Section 2.02.
Conversion of Shares.
At
the Effective Time:
(a) Except as otherwise provided in Section
2.02(b) or Section 2.02(c), each Share outstanding immediately prior to the Effective Time shall be converted into the right
to receive $86.00 in cash, without interest (the “
Merger Consideration
”). As of the Effective Time, all such
Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and shall thereafter
represent only the right to receive the Merger Consideration to be paid in accordance with Section 2.03, without interest.
(b) Each Share held by the Company as
treasury stock or owned by Parent or Merger Subsidiary immediately prior to the Effective Time shall be canceled, and no payment
shall be made with respect thereto.
(c) Each Share held by any Subsidiary
of either the Company or Parent (other than the Merger Subsidiary) immediately prior to the Effective Time shall be converted into
such number of shares of stock of the Surviving Corporation such that each such Subsidiary owns the same percentage of the outstanding
capital stock of the Surviving Corporation immediately following the Effective Time as such Subsidiary owned in the Company immediately
prior to the Effective Time.
(d) Each share of common stock of Merger
Subsidiary outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable
share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving Corporation (except for any such shares resulting from
the conversion of Shares pursuant to Section 2.02(c)).
Section 2.03.
Surrender and Payment.
(a) Prior to the Effective Time, Parent shall appoint a bank or trust reasonably acceptable to the Company (the “
Paying
Agent
”) for the purpose of exchanging for the Merger Consideration (i) certificates representing Shares (the “
Certificates
”)
or (ii) uncertificated Shares (the “
Uncertificated Shares
”), and Parent or one of its Affiliates shall make
available to the Paying Agent, for the benefit of the holders of Shares, cash in immediately available dollar-denominated funds
in the amounts and at the times necessary for the Paying Agent to make the payments contemplated by Section 2.02(a) (such
cash, the “
Exchange Fund
”). The Paying Agent shall invest the Exchange Fund as dictated by Parent;
provided
that such investment shall only be made in (i) direct obligations of the United States of America, (ii) obligations for which the
full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, (iii) commercial
paper rated the highest quality by either Moody’s Investor Services, Inc. or Standard and Poor’s Rating Services, or
(iv) money market funds investing solely in a combination of the foregoing. Any interest or income earned on the Exchange Fund,
and any amounts in the Exchange Fund in excess of the amounts payable under Section 2.02(a), shall be promptly paid to Parent
or as Parent otherwise directs.
(b) Promptly (and in any event within
three Business Days) after the Effective Time, Parent shall send, or shall cause the Paying Agent to send, to each holder of Shares
at the Effective Time a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk
of loss and title shall pass, only upon proper delivery of the Certificates or transfer of the Uncertificated Shares to the Paying
Agent) for use in such exchange. Each holder of Shares that have been converted into the right to receive the Merger Consideration
shall be entitled to receive, upon (i) surrender to the Paying Agent of a Certificate, together with a properly completed letter
of transmittal, or (ii) receipt of an “agent’s message” by the Paying Agent (or such other evidence, if any,
of transfer as the Paying Agent may reasonably request) in the case of a book-entry transfer of Uncertificated Shares, the Merger
Consideration payable for each Share represented by a Certificate or for each Uncertificated Share. Until so surrendered or transferred,
as the case may be, each such Certificate or Uncertificated Share shall represent after the Effective Time for all purposes only
the right to receive the Merger Consideration.
(c) If any portion of the Merger Consideration
is to be paid to a Person other than the Person in whose name the surrendered Certificate or the transferred Uncertificated Share
is registered, it shall be a condition to such payment that (i) either such Certificate shall be properly endorsed or shall otherwise
be in proper form for transfer or such Uncertificated Share shall be properly transferred and (ii) the Person requesting such payment
shall pay to the Paying Agent any transfer or other Taxes required as a result of such payment to a Person other than the registered
holder of such Certificate or Uncertificated Share or establish to the satisfaction of the Paying Agent that such Tax has been
paid or is not payable.
(d) The Merger
Consideration paid in accordance with the terms of this ARTICLE 2 shall be deemed to have been paid in full satisfaction
of all rights pertaining to the Shares formerly represented by the applicable Certificates or Uncertificated Shares. After the
Effective Time, there shall be no further registration of transfers of Shares. If, after the Effective Time, Certificates or Uncertificated
Shares are presented to the Surviving Corporation or the Paying Agent, they shall be canceled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth, in this ARTICLE 2.
(e) Any portion of the Exchange Fund
(and any interest or other income earned thereon) that remains unclaimed by the holders of Shares 12 months after the Effective
Time shall be returned to Parent or one of its Affiliates, upon demand, and any such holder who has not exchanged its Shares for
the Merger Consideration in accordance with this Section 2.03 prior to that time shall thereafter look only to the Surviving
Corporation for payment of the Merger Consideration in respect of such Shares without any interest thereon. Any amounts remaining
unclaimed by holders of Shares two years after the Effective Time (or such earlier date immediately prior to such time when the
amounts would otherwise escheat to or become property of any Governmental Authority) shall become, to the extent permitted by Applicable
Law, the property of Parent, free and clear of any claims or interest of any Person previously entitled thereto. None of Parent,
Merger Subsidiary, the Company, the Surviving Corporation or the Paying Agent shall be liable to any person for any Merger Consideration
delivered to a public official pursuant to any abandoned property, escheat or other similar Applicable Law.
Section 2.04.
Company Stock Options
and Company RSUs.
(a) At or immediately prior to the Effective
Time, each option (or portion thereof) to acquire Shares granted or issued pursuant to any Employee Plan that is outstanding immediately
prior to the Effective Time and that became vested and exercisable prior to, or the vesting and exercisability of which will accelerate
at, the Effective Time, in either case as required by the terms of the applicable award agreement as in effect on the date hereof
(collectively, the “
Vested Options
”), shall be canceled, and, at or promptly after the Effective Time (subject
to Applicable Law, if the holder of such canceled Vested Option is a Non-US Employee), the Company shall pay each holder of any
such canceled Vested Option an amount in cash determined by multiplying (i) the excess, if any, of the Merger Consideration over
the applicable exercise price of such canceled Vested Option by (ii) the number of Shares such holder could have purchased had
such holder exercised such Vested Option in full immediately prior to the Effective Time.
(b) At or immediately prior to the Effective
Time, each option (or portion thereof) to acquire Shares granted or issued pursuant to any Employee Plan that is outstanding immediately
prior to the Effective Time and that is not a Vested Option (collectively, the “
Unvested Options
” and, together
with the Vested Options, the “
Company Stock Options
”) will be canceled in exchange for the opportunity to receive
solely an aggregate amount (an “
Option Amount
”) in cash determined by multiplying (i) the excess, if any, of
the Merger Consideration over the applicable exercise price of such canceled Unvested Option by (ii) the number of Shares such
holder could have purchased had such holder exercised such Unvested Option in full immediately prior to the Effective Time (assuming
that such Unvested Option were fully exercisable). Each Option Amount will be payable in accordance with, and subject to, Section
2.04(e).
(c) Prior to the Effective Time, the
Company shall take all actions necessary, if any, to provide that, at or immediately prior to the Effective Time, each restricted
Share unit granted or issued pursuant to any Employee Plan that is outstanding immediately prior to the Effective Time and that
became vested prior to, or the vesting of which will accelerate at, the Effective Time, in either case as required by the terms
of the applicable award agreement as in effect on the date hereof (collectively, the “
Vested RSUs
”) shall be
converted automatically into the right to receive from the Company at or promptly after the Effective Time (subject to Applicable
Law, if the holder of such Vested RSU is a Non-US Employee) solely an amount in cash equal to the product of (i) the Merger Consideration
and (ii) the total number of Shares subject to such Vested RSU;
provided
that for any such Vested RSU that constitutes deferred
compensation within the meaning of Section 409A of the Code, such amount shall be paid on the date(s) that it would be paid under
the applicable Employee Plan absent the application of this Section 2.04(c).
(d) Prior to the Effective Time, the
Company shall take all actions necessary, if any, to provide that, at or immediately prior to the Effective Time, each restricted
Share unit granted or issued pursuant to any Employee Plan that is outstanding immediately prior to the Effective Time and that
is not a Vested RSU (collectively, the “
Unvested RSUs
” and, together with the Vested RSUs, the “
Company
RSUs
”) will be canceled in exchange for the opportunity to receive solely an aggregate amount (an “
RSU Amount
”)
in cash equal to the product of (i) the Merger Consideration and (ii) the total number of Shares subject to such Unvested RSU.
Each RSU Amount shall be payable in accordance with, and subject to, Section 2.04(e).
(e) Each Option Amount and each RSU Amount
(each, a “
Retention Amount
”) shall be payable to the holder of the applicable corresponding Unvested Option
or Unvested RSU, as applicable, in substantially equal installments on or within 30 days after the date(s) (subject to Applicable
Law, if such holder is a Non-US Employee) on which such Unvested Option or Unvested RSU, as applicable, was scheduled to become
vested (each, a “
Vesting Date
”), in each case subject to such holder’s continued employment with the Company
or any of its Affiliates through the applicable Vesting Date;
provided
that, if the employment of such holder is terminated
by the Company or any of its Affiliates without Cause at any time prior to the final Vesting Date applicable to such Retention
Amount, the entire unpaid portion of such Retention Amount shall be paid to such holder on or within 30 days after such termination
(subject to Applicable Law, if such holder is a Non-US Employee) (and, for the avoidance of doubt, on termination of the employment
of such holder for any reason other than by the Company or any of its Affiliates without Cause at any time prior to such final
Vesting Date, the entire unpaid portion of such Retention Amount shall be forfeited without any payment to such holder);
provided
further
that, if such RSU Amount constitutes deferred compensation within the meaning of Section 409A of the Code, such RSU
Amount shall be paid on the date(s) that it would be paid under the applicable Employee Plan absent the application of this Section
2.04(e). Subject to the second proviso in the preceding sentence, the Retention Amounts shall be exempt from Section 409A of the
Code and shall be administered so as to retain such exemption.
(f) Prior to the Effective Time, the
Company shall (i) use its reasonable best efforts to obtain consents from holders of Company Stock Options and Company RSUs and
(ii) make any amendments to the terms of any Employee Plan, Company Stock Option or Company RSU that, in the case of either clauses
(i) or (ii), are necessary to give effect to the transactions contemplated by this Section 2.04;
provided
that the Company
shall not pay any amounts (other than any payments pursuant to this Section 2.04) for such consents without the prior written consent
of Parent. Notwithstanding any provision of this Section 2.04, payment may be withheld in respect of any Company Stock Option
or Company RSU until any such consent is obtained with respect to such Company Stock Option or Company RSU.
Section 2.05.
Employee Stock Purchase
Plan.
The Company shall take all actions necessary under the Company’s Amended and Restated 2006 Employee Stock Purchase
Plan (the “
ESPP
”) to ensure that (i) participants may not increase their payroll deductions or purchase
elections from those in effect on the date of this Agreement, (ii) except for the offering period under the ESPP that is in
effect on the date hereof, no offering period shall be authorized, continued or commenced following the date hereof, (iii) the
ESPP shall be terminated as of the tenth Business Day prior to the Effective Time, contingent upon the occurrence of the Effective
Time, and (iv) the rights of participants in the ESPP with respect to the offering period under the ESPP that is in effect on the
date hereof shall be determined by treating the tenth Business Day prior to the Effective Time as the last day of such offering
period (to the extent such date is prior to the date on which such offering period would otherwise expire) and by making such other
pro-rata adjustments as may be necessary to reflect any shortening of the offering period but otherwise treating such offering
period as a fully effective and completed offering period for all purposes under the ESPP;
provided
that (i) all amounts
allocated to each participant’s account under the ESPP at the end of such offering period shall thereupon be used to purchase
from the Company whole Shares at the applicable price under the ESPP for such offering period, which Shares shall be canceled at
the Effective Time in exchange for the right to receive the Merger Consideration in accordance with Section 2.02(a), and (ii)
as promptly as practicable following the purchase of Shares in accordance with the foregoing clause (i), return to each participant
the funds, if any, that remain in such participant’s account after such purchase.
Section 2.06.
Adjustments.
If, during
the period between the date of this Agreement and the Effective Time, the outstanding Shares (or securities convertible or exchangeable
into, or exercisable for, Shares) shall be changed into a different number of shares or a different class by reason of any reclassification,
recapitalization, stock split (including reverse stock split) or combination, exchange or readjustment of Shares, or stock dividend
thereon with a record date during such period or otherwise (excluding any change that results from any issuance of Shares permitted
by Section 6.01(c)), the Merger Consideration and any other amounts payable pursuant to this Agreement shall be appropriately adjusted.
Nothing in this Section 2.06 shall be construed to permit any party to take any action that is otherwise prohibited or restricted
by any other provision of this Agreement.
Section 2.07.
Withholding Rights.
Notwithstanding
any provision contained herein to the contrary, each of the Paying Agent, the Surviving Corporation and Parent shall be entitled
to deduct and withhold from the consideration otherwise payable to any Person pursuant to Article 2 such amounts as it is
required to deduct and withhold with respect to the making of such payment under any provision of Applicable Law. To the extent
that amounts are so withheld, such withheld amounts (a) shall be remitted to the applicable Governmental Authority in accordance
with Applicable Law and (b) shall be treated for all purposes of this Agreement as having been paid to the party entitled to receive
such payment.
Section 2.08.
Lost Certificates.
If
any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed 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 in accordance with the Paying Agent’s customary practices,
as indemnity against any claim that may be made against the Surviving Corporation with respect to such Certificate, the Paying
Agent shall pay, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration to be paid in respect of
the Shares represented by such Certificate, as contemplated by this Article 2.
ARTICLE
3
The
Surviving Corporation
Section 3.01.
Certificate of Incorporation.
At the Effective Time, the certificate of incorporation of the Company in effect immediately prior to the Effective Time shall,
subject to Section 7.04 hereof, be amended and restated to read in its entirety as set forth on
Annex I
hereto, and
as so amended and restated shall be the amended and restated certificate of incorporation of the Surviving Corporation until thereafter
amended in accordance with the NJBCA.
Section 3.02.
Bylaws.
At the Effective
Time, the bylaws of the Company as in effect immediately prior to the Effective Time shall be amended and restated to read in their
entirety as the bylaws of Merger Subsidiary in effect at the Effective Time (except that all references to the name of Merger Subsidiary
therein shall be changed to refer to the name of the Company), and as so amended and restated shall, subject to Section 7.04
hereof, be the amended and restated bylaws of the Surviving Corporation until thereafter amended in accordance with the NJBCA.
Section 3.03.
Directors and Officers.
From and after the Effective Time, until their respective successors are duly elected or appointed and qualified in accordance
with the NJBCA, (a) the directors of Merger Subsidiary at the Effective Time shall be the directors of the Surviving Corporation
and (b) the officers of the Company at the Effective Time shall be the officers of the Surviving Corporation.
ARTICLE
4
Representations
and Warranties of the Company
Subject to Section 11.05, except as set
forth in the Company Disclosure Schedule or the Company 10-K (excluding any disclosures set forth in the Company 10-K under the
heading “Safe Harbor Statement” or “Risk Factors,” or containing a description or explanation of “Forward-Looking
Statements,” or any similar section and any disclosures therein that are predictive, cautionary or forward-looking in nature),
the Company represents and warrants to Parent and Merger Subsidiary that:
Section 4.01.
Corporate Existence and
Power.
The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of
New Jersey and has all corporate powers and all Permits (including, for the avoidance of doubt, all Environmental Permits and FDA
Permits) required to carry on its business as currently conducted, other than any Permits the absence of which has not had and
would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company is duly
qualified to do business and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions
where failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Company Material
Adverse Effect. The Company has heretofore made available to Parent true and complete copies of the certificate of incorporation
and bylaws of the Company as currently in effect.
Section 4.02.
Corporate Authorization.
(a) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions
contemplated hereby are within the Company’s corporate powers and, except for the affirmative vote of the holders of a majority
of the votes cast in connection with the Merger at the Company Stockholder Meeting (the “
Company Stockholder Approval
”),
have been duly authorized by all necessary corporate action on the part of the Company. The Company Stockholder Approval is the
only vote of the holders of any of the Company’s capital stock necessary in connection with the consummation of the Merger.
This Agreement constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its
terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’
rights generally and general principles of equity).
(b) At a meeting duly called and held,
the board of directors of the Company (the “
Company Board
”) has unanimously (i) determined that this Agreement
and the transactions contemplated hereby, including the Merger, are fair to and in the best interests of the Company’s stockholders,
(ii) approved, adopted and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, in
accordance with the requirements of the NJBCA and (iii) resolved, subject to Section 6.04(a)(ii)(B), to recommend approval
and adoption of this Agreement by the stockholders of the Company (such recommendation, the “
Company Board Recommendation
”).
Section 4.03.
Governmental Authorization.
The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions
contemplated by this Agreement require no action by or in respect of, or filing with, any Governmental Authority other than (i)
the filing of a certificate of merger with respect to the Merger with the Department of Treasury of the State of New Jersey, (ii)
compliance with any applicable requirements of the HSR Act and Competition Law of Germany and Austria, (iii) compliance with any
applicable requirements of the 1933 Act, the 1934 Act and any other applicable U.S. state or federal securities laws, (iv) compliance
with any applicable requirements of Nasdaq, (v) clearance by CFIUS pursuant to Section 721, (vi) notification to DDTC pursuant
to Section 122.4(b) of ITAR, (vii) clearance pursuant to Articles L. 151-3 and R. 153-1
et seq.
of the French Monetary
and Financial Code, (viii) notification to the German Federal Ministry of Economic Affairs and Energy pursuant to Section 4 of
the Foreign Trade and Payments Act and Sections 55 through 59 of the Foreign Trade and Payments Ordinance and (ix) any actions
or Filings the absence of which would not reasonably be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
Section 4.04.
Noncontravention.
The
execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby
do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the certificate of
incorporation or bylaws of the Company, (ii) assuming compliance with the matters referred to in Section 4.03, contravene,
conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) assuming compliance with the matters
referred to in Section 4.03, require any payment to or consent or other action by any Person under, constitute a breach or
default, or an event that, with or without notice or lapse of time or both, would constitute a breach or default, under, or cause
or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to
which the Company or any of its Subsidiaries is entitled under any provision of any Contract binding on, or any Permit required
to carry on the business as currently conducted of, the Company or any of its Subsidiaries or adversely affecting the assets or
business of the Company and its Subsidiaries or (iv) result in the creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries, with only such exceptions, in the case of each of clauses (ii) through (iv), as would not reasonably
be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 4.05.
Capitalization.
(a)
The authorized capital stock of the Company consists of 26,200,000 shares of capital stock, comprised of (i) 25,000,000 Shares,
(ii) 100,000 shares of Series A Convertible Preferred Stock, $5.00 par value per share, (iii) 100,000 shares of Series B Convertible
Preferred Stock, $5.00 par value per share, (iv) 21,756 shares of Series C Convertible Preferred Stock, $1.75 par value per share,
and (v) 978,244 other authorized shares that may be divided and designated in accordance with the Company’s certificate
of incorporation.
(b) As of June 17, 2014, there were outstanding
(i) 15,969,944 Shares, (ii) no shares of Series A Convertible Preferred Stock, (iii) no shares of Series B Convertible Preferred
Stock, (iv) no shares of Series C Convertible Preferred Stock and (v) no other shares of capital stock of the Company. As
of June 17, 2014, there were 2,175,830 Shares reserved under the Employee Plans, of which there were outstanding 1,614,033 Shares
subject to issuance upon exercise of outstanding Company Stock Options (which have a weighted-average exercise price of $21.16
and 1,390,425 of which are currently exercisable) and 561,797 Shares subject to issuance upon settlement of the Company RSUs, as
well as rights to purchase 1,050 Shares pursuant to the ESPP. All outstanding shares of capital stock of the Company have been,
and all shares that may be issued pursuant to any Employee Plan or Company Security will be, when issued in accordance with the
respective terms thereof, duly authorized and validly issued, fully paid and nonassessable and free of preemptive rights. Section
4.05 of the Company Disclosure Schedule contains a complete and correct list of (1) each outstanding Company Stock Option, including
the holder, date of grant, exercise price, vesting schedule (including any performance-vesting criteria and whether vesting accelerates
on specified “change in control” transactions or involuntary terminations of employment) and number of Shares subject
thereto and (2) each outstanding Company RSU, including the holder, date of grant, vesting schedule (including any performance-vesting
criteria and whether vesting accelerates on specified “change in control” transactions or involuntary terminations
of employment) and number of Shares subject thereto. The exercise price of each Company Stock Option is no less than the fair market
value of a Share on the date of grant of such Company Stock Option.
(c) There are no outstanding bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth in this Section 4.05
and for changes since June 17, 2014 resulting from the exercise of Company Stock Options outstanding on such date, the issuance
of Shares pursuant to the vesting of Company RSUs outstanding on such date and the purchase of Shares pursuant to the ESPP in accordance
with its terms as in effect on the date hereof, in each case in accordance with this Agreement, there are no issued, reserved for
issuance or outstanding (i) shares of capital stock or other voting securities of or ownership interests in the Company, (ii) securities
of the Company convertible into or exchangeable for shares of capital stock or other voting securities of or ownership interests
in the Company, (iii) warrants, calls, options or other rights to acquire from the Company, or other obligation of the Company
to issue, any capital stock or other voting securities or ownership interests in or any securities convertible into or exchangeable
or exercisable for capital stock or other voting securities or ownership interests in the Company or (iv) restricted shares, restricted
stock units, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities
or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital
stock or voting securities of the Company (the items in clauses (i) through (iv) being referred to collectively as the “
Company
Securities
”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the Company Securities. Neither the Company nor any of its Subsidiaries is a party to any voting agreement
with respect to the voting of any Company Securities.
(d) No (i) Shares or (ii) Company Securities
are owned by any Subsidiary of the Company.
Section 4.06.
Subsidiaries.
(a) Each
Subsidiary of the Company has been duly organized, is validly existing and (where applicable) in good standing under the laws of
its jurisdiction of organization, has all organizational powers and all Permits (including, for the avoidance of doubt, all Environmental
Permits and FDA Permits) required to carry on its business as currently conducted, except for those Permits the absence of which
would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Each such Subsidiary
is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where failure to be so qualified would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. All Subsidiaries of the Company and their respective jurisdictions of organization
are identified in the Company 10-K.
(b) All of the outstanding capital stock
or other voting securities of, or ownership interests in, each Subsidiary of the Company is owned by the Company, directly or indirectly,
free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting securities or ownership interests). There are no issued, reserved for
issuance or outstanding (i) securities of the Company or any of its Subsidiaries convertible into, or exchangeable or exercisable
for, shares of capital stock or other voting securities of, or ownership interests in, any Subsidiary of the Company, (ii) warrants,
calls, options or other rights to acquire from the Company or any of its Subsidiaries, or other obligations of the Company or any
of its Subsidiaries to issue, any capital stock or other voting securities of, or ownership interests in, or any securities convertible
into, or exchangeable or exercisable for, any capital stock or other voting securities of, or ownership interests in, any Subsidiary
of the Company or (iii) restricted shares, restricted stock units, stock appreciation rights, performance units, contingent value
rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based
on, directly or indirectly, the value or price of any capital stock or other voting securities of, or ownership interests in, any
Subsidiary of the Company (the items in clauses (i) through (iii) being referred to collectively as the “
Company Subsidiary
Securities
”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the Company Subsidiary Securities. Except for the capital stock or other voting securities of, or ownership
interests in, its Subsidiaries, the Company does not own, directly or indirectly, any capital stock or other voting securities
of, or ownership interests in, any Person.
Section 4.07.
SEC Filings and the Sarbanes-Oxley
Act.
(a) The Company timely has filed with
or furnished to the SEC, and made available to Parent, all reports, schedules, forms, statements, prospectuses, registration statements
and other documents required to be filed with or furnished to the SEC by the Company since March 31, 2011 (collectively, together
with any exhibits and schedules thereto and other information incorporated therein, in each case, as amended, the “
Company
SEC Documents
”).
(b) As of its filing date (or, if amended
or superseded by a filing prior to the date hereof, on the date of such filing), each Company SEC Document complied (and each Company
SEC Document filed subsequent to the date hereof will comply) in all material respects with the applicable requirements of Nasdaq,
the 1933 Act, the 1934 Act and the Sarbanes-Oxley Act, as the case may be, and did not contain (and each Company SEC Document filed
subsequent to the date hereof will 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 made therein, in light of the circumstances under which they
were made, not misleading. To the knowledge of the Company, as of the date hereof, no Company SEC Document is the subject of ongoing
SEC review, comment or investigation and there are no outstanding or unresolved comments received from the SEC with respect to
any Company SEC Document. There has been no material correspondence between the SEC and the Company since March 31, 2011 through
the date hereof that is not available on the SEC’s Electronic Data Gathering, Analysis, and Retrieval system.
(c) The Company and its Subsidiaries
have established and maintained disclosure controls and procedures (as defined in Rule 13a-15(e) under the 1934 Act). Such disclosure
controls and procedures comply with Rule 13a-15 and Rule 15d-15 under the 1934 Act in all material respects and are designed to
ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the Company’s
principal executive officer and its principal financial officer by others within those entities, particularly during the periods
in which the periodic reports required under the 1934 Act are being prepared. For purposes of this Agreement, “principal
executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley
Act.
(d) Since March 31, 2011, the Company
and its Subsidiaries have established and maintained a system of internal controls over financial reporting (as defined in Rule
13a-15(f) under the 1934 Act) as required under Rule 13a-15 and Rule 15d-15 under the 1934 Act, which are designed to provide reasonable
assurance regarding the reliability of the Company’s financial reporting and the preparation of Company financial statements
for external purposes in accordance with GAAP. The principal executive officer and principal financial officer of the Company have
disclosed, based on their most recent evaluation of internal control over financial reporting prior to the date hereof, to the
Company’s auditors and audit committee (i) any significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record,
process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other
employees who have a significant role in internal control over financial reporting. The Company has made available to Parent prior
to the date of this Agreement a summary of any such disclosure made by such officers to the Company’s auditors and audit
committee since March 31, 2011.
(e) There
are no outstanding loans or other extensions of credit made by the Company or any of its Subsidiaries to any executive officer
(as defined in Rule 3b-7 under the 1934 Act) or director of the Company (except for advances to its executive officers in respect
of travel or other related business expenses, in each case in the ordinary course of business consistent with past practice).
The Company has not, since the enactment of the Sarbanes-Oxley Act, taken any action prohibited by Section 402 of the Sarbanes-Oxley
Act.
(f) Since March 31, 2011, the Company
has complied in all material respects with the applicable listing and corporate governance rules and regulations of the Nasdaq
and all applicable rules, regulations and requirements of the Sarbanes-Oxley Act.
(g) Each of the principal executive officer
and principal financial officer of the Company (or each former principal executive officer and principal financial officer of the
Company, as applicable) has made all certifications required by Rule 13a-14 and 15d-14 under the 1934 Act and Sections 302 and
906 of the Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC and the Nasdaq, and the statements contained
in any such certifications are true and complete.
(h) Section 4.07(h) of the Company Disclosure
Schedule describes, and the Company has made available to Parent copies of the documentation creating or governing, all securitization
transactions and other off-balance sheet arrangements (as defined in Item 303 of Regulation S-K of the SEC) that existed or were
effected by the Company or its Subsidiaries since March 31, 2011.
(i) Since March 31, 2011, there has been
no transaction, or series of similar transactions, agreements, arrangements or understandings, nor is there any proposed transaction
as of the date of this Agreement, or series of similar transactions, agreements, arrangements or understandings to which the Company
or any of its Subsidiaries was or is to be a party, that would be required to be disclosed under Item 404 of Regulation S-K promulgated
under the 1933 Act.
Section 4.08.
Financial Statements.
The
audited consolidated financial statements and unaudited consolidated interim financial statements of the Company (including the
notes thereto) included or incorporated by reference in the Company SEC Documents (a) complied at the time they were filed as to
form in all material respects with the then applicable accounting requirements and the then published rules and regulations of
the SEC with respect thereto and (b) fairly present in all material respects, in conformity with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto or in the case of unaudited statements as permitted by Form 10-Q of the SEC),
the consolidated financial position of the Company and its consolidated Subsidiaries as at the dates thereof and their consolidated
results of operations and cash flows for the periods then ended (subject to normal year-end audit adjustments in the case of any
unaudited interim financial statements).
Section 4.09.
Company Proxy Statement.
(a) At the time the proxy statement to be filed with the SEC in connection with the Merger (the “
Company
Proxy
Statement
”) or any amendment or supplement thereto is first mailed to stockholders of the Company, at the time such stockholders
vote on adoption of this Agreement and at the Effective Time, the Company Proxy Statement, as supplemented or amended, if applicable,
will 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.
(b) The Company has obtained all necessary
consents to include in its entirety the opinion of the Company Financial Advisor in the Company Proxy Statement, and the Company
Proxy Statement shall include such opinion in its entirety and a description of such opinion, the financial analyses relating thereto
and the information called for by Item 1015(b) of Regulation M-A under the 1934 Act.
(c) The representations and warranties
contained in this Section 4.09 will not apply to statements or omissions included or incorporated by reference in the Company
Proxy Statement based upon information supplied by Parent, Merger Subsidiary or any of their respective Representatives specifically
for use or incorporation by reference therein.
Section 4.10.
Absence of Certain Changes.
(a) Since the Company Balance Sheet Date, (i) the business of the Company and its Subsidiaries has been conducted in all material
respects in the ordinary course consistent with past practice and (ii) there has not been any event, occurrence, development or
state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(b) From the Company Balance Sheet Date
until the date hereof, neither the Company nor any of its Subsidiaries have taken any action that, if taken during the period from
the date hereof through the Effective Time without Parent’s prior written consent, would constitute a breach of Sections
6.01(b), (g), (h), (j), (k), (l) or (m) or, to the extent related to the foregoing, Section 6.01(o).
Section 4.11.
No Undisclosed Material
Liabilities.
There are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, known, unknown, determined, determinable or otherwise, other than: (i) liabilities or obligations
disclosed and reserved for in the Company Balance Sheet, (ii) liabilities or obligations incurred in the ordinary course of business
since the Company Balance Sheet Date or (iii) liabilities or obligations that would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
Section 4.12.
Compliance with Laws and
Court Orders.
(a) The Company and each of its Subsidiaries is, and since March 31, 2011 has been, in compliance with, has
not been charged with or given written notice by any Governmental Authority of any violation of and, to the knowledge of the Company,
is not under investigation with respect to and has not been threatened to be charged with any violation of, Applicable Law or
the terms of any of its Permits, except for failures to comply or violations that have not had and would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect. There is no judgment, decree, injunction, rule or
order of any arbitrator or Governmental Authority outstanding against the Company or any of its Subsidiaries, or any of their
respective assets or properties, that has had or would reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect or that prevents, enjoins, alters or materially delays the Merger or any of the other transactions contemplated
hereby.
(b) None of the Company, any of its Subsidiaries,
or any of their respective directors, officers or employees, or any of their respective consultants, agents or other Persons acting
for or on their behalf, has taken any action that would result in a violation in any material respect by such Person of the Foreign
Corrupt Practices Act (15 U.S.C. §§ 78m(b), 78dd-1, 78dd-2, 78ff) (the “
FCPA
”), The Bribery Act of
2010 of the United Kingdom (the “
UK Bribery Act
”) or any other anti-corruption or anti-bribery Applicable Law,
including taking any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment of
any money, property, gift or anything of value, directly or indirectly (i) to any “foreign official” (as such term
is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office to influence
official action, or (ii) to any person while knowing or having reason to know that all or any portion of the money or other thing
of value will be offered, promised or given to a foreign official in order to influence or reward official action or to any person
to influence such person to act improperly or reward the person for doing so. The Company has conducted its businesses in compliance
in all material respects with the FCPA, the UK Bribery Act and any other anti-corruption or anti-bribery Applicable Law, and the
Company has instituted and maintained policies and procedures designed to cause each such Person to comply with all such Applicable
Law (but, in each case, only to the extent such Applicable Law is applicable to the Company or such Persons).
(c) Neither the Company, any of its Subsidiaries
or any of their respective directors, officers or employees, or, to the knowledge of the Company as of the date hereof, any of
their respective consultants, agents or other Persons acting for or on their behalf, is, or is owned or controlled by a Person
that is (A) the subject of any sanctions administered by the U.S. Department of Treasury’s Office of Foreign Assets Control
(“
OFAC
”) or the U.S. Department of State, the United Nations Security Council, the European Union or other relevant
sanctions authority (collectively, “
Sanctions
”), or (B) located, organized, a citizen of, or resident in a country
or territory that is the subject of Sanctions (including Cuba, Iran, Myanmar, North Korea, Sudan and Syria). The Company and its
Affiliates (i) have not engaged in, and are not now engaged in, directly or indirectly, any dealings or transactions with
any Person, or in any country or territory, that, at the time of the dealing or transaction, is or was the subject of Sanctions
and (ii) have been in compliance with and has not been given notice of any violation of, and, to the Company’s knowledge,
is not under investigation with respect to and has not been threatened to be charged with any violation of, any applicable Sanctions,
except where the failure to be in compliance would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(d) The Company is registered with DDTC
as a manufacturer of “defense articles” as that term is defined under Section 120.6 of ITAR. The Company produces and
trades in U.S.-origin, dual-use goods and technology controlled under the Export Administration Regulations (“
EAR
”)
and regulated by the U.S. Department of Commerce’s Bureau of Industry and Security. The Company and its Subsidiaries have
been in compliance with and have not been given notice of any violation of and, to the Company’s knowledge, are not under
investigation with respect to and have not been threatened to be charged with any violation of, IT AR or EAR, except where the
failure to be in compliance would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(e) Except as would not reasonably be
expected to be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole, (i) each
product that is subject to any Health Law, that is developed, manufactured, tested or distributed or marketed by or on behalf of
the Company or its Subsidiaries, has been and is being developed, manufactured, tested, distributed or marketed in compliance with
all applicable requirements under the Health Laws, (ii) none of the Company, any of its Subsidiaries or, to the knowledge
of the Company, any Person that manufactures, co-develops or co-markets (or has a license to develop, market or sell) any such
product (or any component thereof) (each, a “
Collaboration Partner
”) has received written notice from any Health
Authority contesting the premarket clearance or approval of, the uses of or the labeling and promotion of any such product, or
otherwise alleging any material violation of any Health Law, (iii) since March 31, 2011, neither the Company nor any of its Subsidiaries
have received any notices of inspectional observations (including those reported on Form FDA 483), warning letters, action letters
or untitled letters, and (iv) none of the Company, any of its Subsidiaries or their respective officers, employees or agents or,
to the knowledge of the Company, any Collaboration Partner, (A) has made any untrue statement of material fact or fraudulent
statement to any Health Authority or failed to disclose a material fact required to be disclosed to any Health Authority, (B) has
committed any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for
the FDA to invoke its policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities”,
set forth in 56 Fed. Reg. 46191 (September 10, 1991) or for any other Governmental Authority to invoke any similar policy, (C)
has been convicted of any crime or engaged in any conduct for which debarment is mandated or authorized by Sec. 306 of the Food,
Drug and Cosmetic Act of 1938 (21 U.S.C. § 335a) or any other Health Law, or (D) has been convicted of any crime or engaged
in any conduct for which such Person or entity could be excluded from participating in the federal healthcare programs under Section
1128 of the Social Security Act of 1935 or any similar Applicable Law in any foreign jurisdiction.
Section 4.13.
Litigation.
There is
no Proceeding pending against, or, to the knowledge of the Company, threatened against, the Company, any of its Subsidiaries, any
of their respective assets or properties, any of their respective present or former officers, directors or employees or any Person
for whom the Company or any of its Subsidiaries may reasonably be liable before (or, in the case of threatened Proceedings, would
be before) or by any Governmental Authority or arbitrator that would reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
Section 4.14.
Properties.
Except
as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and
its Subsidiaries have good title to, or valid leasehold interests in, all property and assets reflected on the Company Balance
Sheet or acquired or leased after the Balance Sheet Date, except as have been disposed of since the Company Balance Sheet Date
in the ordinary course of business consistent with past practice. Except as would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect, no such property or assets are subject to any Lien except Permitted Liens.
Section 4.15.
Intellectual Property.
(a) Section 4.15(a) of the Company Disclosure Schedule sets forth a true and complete list of all registrations and applications
for registration included in the Owned Intellectual Property Rights specifying as to each such item, as applicable (i) the owner
thereof, (ii) the jurisdiction in which such item is issued or registered or in which any application for issuance or registration
has been filed, (iii) the respective issuance, registration, or application number of such item and (iv) the date of application
and issuance or registration of such item.
(b) Except as set forth in Section 4.15(b)
of the Company Disclosure Schedule, or as would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect:
(i) The Company and its Subsidiaries
are the sole and exclusive owners of all Owned Intellectual Property Rights and the Company and its Subsidiaries hold all right,
title and interest in and to all Owned Intellectual Property Rights and their interest under the Licensed Intellectual Property
Rights, free and clear of any Lien other than Permitted Liens. The Company and its Subsidiaries own, or have a valid and enforceable
license to use, all Intellectual Property Rights necessary to, or used or held for use in, the conduct of the business of the Company
and its Subsidiaries as currently conducted and as proposed to be conducted in the Company SEC Documents. There exist no restrictions
on the disclosure, use, license or transfer of the Owned Intellectual Property Rights. The consummation of the transactions contemplated
by this Agreement will not (A) alter, impair or extinguish or result in any Lien on any Owned Intellectual Property Right or Licensed
Intellectual Property Right or (B) impair the right of Parent to develop, use, sell, license or dispose of, or to bring any action
for the infringement of, any Owned Intellectual Property Right or Licensed Intellectual Property Right.
(ii) To the knowledge of the
Company, neither the Company nor any of its Subsidiaries has infringed, contributed to the infringement of, misappropriated or
otherwise violated any Intellectual Property Right of any Person. To the knowledge of the Company, the conduct of the business
of the Company and its Subsidiaries as currently conducted and as proposed to be conducted in the Company SEC Documents would not
infringe, contribute to the infringement of, misappropriate or otherwise violate any Intellectual Property Right of any Person.
There is no Proceeding pending against or, to the knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries (A) based upon, or challenging or seeking to deny or restrict, any right of the Company or any of its Subsidiaries
in any of the Owned Intellectual Property Rights or the Licensed Intellectual Property Rights, (B) alleging that any of the Owned
Intellectual Property Rights is invalid or unenforceable, (C) alleging that the use of any of the Owned Intellectual Property Rights
or Licensed Intellectual Property Rights or any services provided, processes used or products manufactured, used, imported, offered
for sale or sold by the Company or any of its Subsidiaries do or may conflict with, misappropriate, infringe, contribute to the
infringement of, or otherwise violate any Intellectual Property Right of any Person or (D) alleging that the Company or any of
its Subsidiaries have infringed, misappropriated or otherwise violated any Intellectual Property Right of any Person. Neither the
Company nor any of its Subsidiaries has received from any Person any offer to license any Intellectual Property Right of such Person
in connection with any actual or threatened claim of infringement, misappropriation or other violation of any such Intellectual
Property Right.
(iii) None of the Owned Intellectual
Property Rights or the Licensed Intellectual Property Rights have been adjudged invalid or unenforceable in whole or part. All
issued Patents, registered Trademarks and registered Copyrights included in the Owned Intellectual Property Rights are, to the
knowledge of the Company, valid, enforceable, in full force and effect and subsisting in all material respects and all registration,
maintenance and renewal fees applicable to such Owned Intellectual Property Rights that are currently due have been paid and all
documents and certificates related to such items have been filed with the relevant Governmental Authority or other authorities
in the applicable jurisdictions for the purposes of maintaining such items.
(iv) To the knowledge of the
Company, no Person has infringed, misappropriated or otherwise violated any Owned Intellectual Property Right where such infringement,
misappropriation or other violation has not ceased or otherwise been fully resolved by the Company. The Company and its Subsidiaries
have taken reasonable steps in accordance with normal industry practice to maintain the confidentiality of all Intellectual Property
Rights of the Company or any of its Subsidiaries, the value of which to the Company or any of its Subsidiaries is contingent upon
maintaining the confidentiality thereof, and, to the knowledge of the Company, no such Intellectual Property Rights have been disclosed
other than to the Representatives of the Company or any of its Subsidiaries, all of whom are bound by written confidentiality agreements
that protect such Intellectual Property Rights.
(v) The IT Assets operate and
perform in a manner that permits the Company and its Subsidiaries to conduct their respective businesses as currently conducted
in all respects and to the knowledge of the Company, no Person has gained unauthorized access to the IT Assets. The Company and
each of its Subsidiaries take commercially reasonable actions, consistent with current industry standards, to protect the confidentiality,
integrity and security of the IT Assets (and all information and transactions stored or contained therein or transmitted thereby)
against any unauthorized use, access, interruption, modification or corruption, including but not limited to the implementation
of commercially reasonable (A) data backup, (B) disaster avoidance and recovery procedures and (C) business continuity procedures.
Section 4.16.
Taxes.
(a) All material
Tax Returns required by Applicable Law to be filed with any Taxing Authority by, or on behalf of, the Company or any of its Subsidiaries
have been filed when due in accordance with all Applicable Law, and all such Tax Returns are true, correct and complete in all
material respects.
(b) The Company and each of its Subsidiaries
has paid (or has had paid on its behalf) all material Taxes due and payable (whether or not shown as due on any Tax Return), or,
where payment is not yet due, has established in accordance with GAAP an accrual for all material Taxes through the end of the
last period for which the Company and its Subsidiaries ordinarily record items on their respective books or, to the extent such
amounts are being contested in good faith by the Company or its Subsidiaries, has established adequate reserves on its books or
records in accordance with GAAP. Since the end of the last period for which the Company and its Subsidiaries ordinarily record
items on their respective books, neither the Company nor any of its Subsidiaries has engaged in any transaction, or taken any other
action, other than in the ordinary course of business, that would materially impact any Tax asset or Tax liability of the Company
or any of its Subsidiaries.
(c) The income and franchise Tax Returns
of the Company and its Subsidiaries through the Tax year ended March 31, 2010 have been examined and closed or are Tax
Returns with respect to which the applicable period for assessment under Applicable Law, after giving effect to extensions or waivers,
has expired. Neither the Company nor any of its Subsidiaries (or any member of any affiliated, consolidated, combined or unitary
group of which the Company or any of its Subsidiaries is or has been a member) has granted any extension or waiver of the limitation
period applicable to the assessment or collection of any Tax.
(d) There is no Proceeding pending or,
to the Company’s knowledge, threatened against or with respect to the Company or its Subsidiaries in respect of any material
amount of Taxes or material Tax asset.
(e) During the three-year period ending
on the date hereof, (i) neither the Company nor any of its Subsidiaries was a distributing corporation or a controlled corporation
in a transaction intended to be governed by Section 355 of the Code, and (ii) neither the Company nor any of its Subsidiaries has
made or changed any Tax election, changed any annual Tax accounting period, or adopted or changed any method of Tax accounting
(to the extent that any such action may materially affect the Company or any of its Subsidiaries), nor has the Company or any of
its Subsidiaries filed any amended Tax Return, entered into any closing agreement, settled any Tax claim or assessment, or surrendered
any right to claim a Tax refund, offset or other reduction in Tax liability.
(f) The Company and each of its Subsidiaries
has properly withheld, and paid over to the appropriate Taxing Authority, all Taxes that it was required to withhold from any payment
(including any dividend or interest payment) to any employee, independent contractor, creditor, shareholder, vendor or other Person,
other than any failure to do so which would not reasonably be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
(g) No jurisdiction where the Company
or any of its Subsidiaries does not file a Tax Return has made a claim that the Company or any of its Subsidiaries is required
to file a Tax Return for such jurisdiction.
(h) Neither the Company nor any of its
Subsidiaries has participated in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4.
The Company has disclosed on its United States federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of United States federal income Tax within the meaning of Section 6662 of the Code or any similar provision
of Applicable Law in any non-U.S. jurisdiction.
(i) There are no requests for rulings
or determinations in respect of any Tax or Tax asset pending between the Company or any of its Subsidiaries and any Taxing Authority.
(j) None of the Company or any of its
Affiliates has received a tax opinion with respect to any transaction relating to the Company or any of its Subsidiaries (other
than a transaction in the ordinary course of business).
(k) None of the Subsidiaries of the Company
owns any Shares.
(l) There is no adjustment that would
increase the Tax liability, or reduce any Tax asset, of the Company or any of its Subsidiaries that has been made, proposed or
threatened by a Taxing Authority during any audit or which could reasonably be expected to be made, proposed or threatened in an
audit of any subsequent period after the Effective Time.
(m) Neither the Company nor any of its
Subsidiaries is or has been (during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code) a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code and the applicable Treasury Regulations.
(n) (i) Neither the Company nor any of
its Subsidiaries has been a member of an affiliated, consolidated, combined or unitary group other than one of which the Company
was the common parent; (ii) neither the Company nor any of its Subsidiaries is party to any Tax Sharing Agreement; (iii) no amount
of the type described in clause (ii) or (iii) of the definition of “Tax” is currently payable by the Company or any
of its Subsidiaries, regardless of whether such Tax is imposed on the Company or any of its Subsidiaries; and (iv) neither the
Company nor any of its Subsidiaries has entered into any agreement, arrangement, tax ruling, tax holiday or has taken advantage,
or expects to take advantage, of any incentive regime which results in an effective tax rate lower than the statutory tax rate
with any Taxing Authority with regard to the Tax liability of the Company or any of its Subsidiaries affecting any Tax period for
which the applicable statute of limitations, after giving effect to extensions or waivers, has not expired.
(o) Neither the Company nor any of its
Subsidiaries will be required to include any item or amount of income in, or exclude any item or amount of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting
for a taxable period (or portion thereof) ending on or prior to the Closing Date, (ii) “closing agreement,” as described
in Section 7121 of the Code (or any similar provision of state, local or foreign income Tax law) entered into on or prior to the
Closing Date, (iii) intercompany transactions entered into on or prior to the Closing Date or any “excess loss account”
described in regulations promulgated under Section 1502 of the Code (or any similar provision of state or local income Tax law)
created on or prior to the Closing Date, (iv) prepaid amount received on or prior to the Closing Date, (v) installment sale or
open transaction disposition made on or prior to the Closing Date or (vi) election by the Company or any of its Subsidiaries under
Section 108(i) of the Code made on or prior to the Closing Date.
(p) The Tax attributes of the Company
and its Subsidiaries are not subject to limitation by virtue of the application of Sections 382-384 of the Code (or any similar
provision of state, local or foreign income Tax law) to any transaction that occurred prior to the date of this Agreement.
(q) “
Tax
” or “
Taxes
”
means (i) any and all taxes, assessments, levies, tariffs, imposts, duties or other charges or impositions in the nature of a tax
(including any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any
Governmental Authority (a “
Taxing Authority
”) responsible for the imposition of any such tax (domestic or foreign),
(ii) in the case of the Company or any of its Subsidiaries, liability for the payment of any amount of the type described in clause
(i) as a result of being or having been before the Effective Time a member of an affiliated, consolidated, combined or unitary
group, or a party to any agreement or arrangement, as a result of which liability of the Company or any of its Subsidiaries to
a Taxing Authority is determined or taken into account with reference to the Tax position of or actions or failure to take or delay
an action of any other Person, and (iii) liability of the Company or any of its Subsidiaries for the payment of any amount as a
result of being party to any Tax Sharing Agreement or with respect to the payment of any amount imposed on any Person of the type
described in clause (i) or (ii) as a result of any existing express or implied agreement or arrangement (including an indemnification
agreement or arrangement). “
Tax Return
” means any report, return, document, declaration or other information
or filing required to be supplied to any Taxing Authority with respect to Taxes, including information returns, any documents with
respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other information. “
Tax Sharing Agreement
” means
any agreement or arrangement (whether or not written) entered into prior to the Effective Time binding the Company or any of its
Subsidiaries that provide for the allocation, apportionment, sharing or assignment of any Tax liability or benefit, or the transfer
or assignment of income, revenues, receipts, or gains for the purpose of determining any Person’s Tax liability.
Section 4.17.
Employee Benefit Plans.
(a) Section 4.17(a) of the Company Disclosure Schedule sets forth a true and complete list of each material Employee Plan
(other than offer letters for at-will employment or employment agreements for Non-US Employees that do not contractually provide
for any termination payments or termination benefits above what is required by Applicable Law) and specifies whether such Employee
Plan is a US Plan or an International Plan. For each Employee Plan that is required to be listed in Section 4.17(a) of the
Company Disclosure Schedule, the Company has made available to Parent a copy of such plan (or a description, if such plan is not
written) and all amendments thereto, together with a copy of (as applicable) (i) each trust, insurance or other funding arrangement
and all amendments thereto, (ii) each current prospectus or summary plan description and summary of material modifications, (iii)
the two most recently filed annual returns/reports (Form 5500) and accompanying schedules and attachments (to the extent not publicly
available), (iv) the most recent favorable determination or opinion letter from the IRS, (v) the two most recently prepared actuarial
reports and financial statements, (vi) all material documents and correspondence relating thereto received from or provided to
any Governmental Authority during the past two years, (vii) all current administrative and other service contracts and all amendments
thereto, (viii) all current employee handbooks, manuals and policies and (ix) if such Employee Plan is an International Plan, documents
that are substantially comparable (taking into account differences in Applicable Law and practices) to the documents required to
be provided in clauses (i) through (viii).
(b) Neither the Company nor any of its
ERISA Affiliates (nor any predecessor of any such entity) sponsors, maintains, administers or contributes to (or has any obligation
to contribute to), or has in the past six years sponsored, maintained, administered or contributed to (or had any obligation to
contribute to), or has or is reasonably expected to have any direct or indirect liability with respect to, any plan subject to
Title IV of ERISA, including any multiemployer plan, as defined in Section 3(37) of ERISA.
(c) Each Employee Plan that is intended
to be qualified under Section 401(a) of the Code has received a favorable determination or opinion letter from the IRS or has applied
to the IRS for such a letter within the applicable remedial amendment period or such period has not expired and, to the Company’s
knowledge, no circumstances exist that would reasonably be expected to result in any such letter being revoked or not being issued
or reissued or being subject to a penalty under the IRS Closing Agreement Program if discovered during an IRS audit or investigation.
Each trust created under any such Employee Plan is exempt from Tax under Section 501(a) of the Code and has been so exempt since
its creation.
(d) Except as would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse Effect:
(i) the Company and its Subsidiaries
have complied with Applicable Law with respect to each plan, arrangement or policy mandated by Applicable Law (including plans
or programs maintained by a Governmental Authority requiring the payment of social insurance Taxes or similar contributions to
a fund of a Governmental Authority with respect to wages of an employee);
(ii) each Employee Plan has
been maintained in compliance with its terms and all Applicable Law, including ERISA and the Code; and
(iii) no Proceeding (other
than routine claims for benefits) is pending against or involves or, to the Company’s knowledge, is threatened against or
threatened to involve, any Employee Plan before any court or arbitrator or any Governmental Authority.
(e) With respect to any Employee Plan
covered by Subtitle B, Part 4 of Title I of ERISA or Section 4975 of the Code, no non-exempt prohibited transaction has occurred
that has caused or would reasonably be expected to cause the Company or any of its Subsidiaries to incur any material liability
under ERISA or the Code.
(f) Neither the Company nor any of its
Subsidiaries has any current or projected liability for, and no Employee Plan provides or promises, any post-employment or post-retirement
medical, dental, disability, hospitalization, life or similar benefits (whether insured or self-insured) to any current or former
Service Provider (other than coverage mandated by Applicable Law). To the Company’s knowledge, no events have occurred with
respect to any Employee Plan that would reasonably be expected to result in the assessment of any material excise Taxes or penalties
against the Company or any of its Subsidiaries.
(g) There has been no amendment to, written
interpretation of or announcement (whether or not written) by the Company or any of its Affiliates relating to, or change in employee
participation or coverage under, any Employee Plan that would reasonably be expected to materially increase the expense of maintaining
such plan above the level of expense incurred in respect thereof for the fiscal year ended on the Company Balance Sheet Date.
(h) Each Employee Plan, and any award
thereunder, that is or forms part of a “nonqualified deferred compensation plan” within the meaning of Section 409A
of the Code is in all material respects in documentary compliance with, and the Company and its Subsidiaries have complied in all
material respects in practice and operation with, all applicable requirements of Section 409A of the Code. The amount of the Trust
Assets, as determined in accordance with GAAP as of May 31, 2014, is $44,681, and as of the date hereof the Trust Assets consist
of the cash value of an insurance policy. The Company’s liability (the “
Deferred Compensation Plan Liability
”)
with respect to the Participants’ Deferred Compensation Accounts under the Deferred Compensation Plan, as determined in accordance
with GAAP as of the date hereof, is $45,533. Based upon the elections of Participants to defer the receipt of Compensation (as
defined in the Deferred Compensation Plan) and the amounts of the Participants’ Compensation, in each case as in effect as
of the date hereof (and disregarding any deemed investment gains earned or losses suffered after the date hereof with respect to
such deferred Compensation), the estimated Deferred Compensation Plan Liability as of December 31, 2014, rounded to the nearest
one million dollars, will be $200,000. As of the date hereof, no Participant has deferred any Company RSUs under the Deferred Compensation
Plan.
(i) Neither
the execution of this Agreement nor the consummation of the transactions contemplated hereby (either alone or together with any
other event, where such event would not alone have the effects described herein) will (i) entitle any current or former Service
Provider to any payment or benefit, including any bonus, retention, severance, retirement or job security payment or benefit, (ii)
accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation
or benefits under, or increase the amount payable or trigger any other obligation under, any Employee Plan, or (iii) limit or restrict
the right of the Company or any of its Subsidiaries or, after the Closing, Parent, to merge, amend or terminate any Employee Plan.
(j) No
Employee Plan, individually or collectively, would reasonably be expected to result in the payment of any amount that would not
be deductible under Section 162(m) or 280G of the Code. Neither the Company nor any of its Subsidiaries has any obligation to gross-up,
indemnify or otherwise reimburse any current or former Service Provider for any Tax incurred by such Service Provider, including
under Section 409A or 4999 of the Code.
(k) Each
International Plan (i) has been maintained in compliance with its terms and Applicable Law, except as would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect, (ii) if intended to qualify for special Tax treatment,
meets all the requirements for such treatment in all material respects, and (iii) if required, to any extent, to be funded, book-reserved
or secured by an insurance policy, is fully funded, book-reserved or secured by an insurance policy, as applicable, in all material
respects based on reasonable actuarial assumptions in accordance with applicable accounting principles.
Section 4.18.
Labor Matters
. (a)
The Company and its Subsidiaries are, and have been, in compliance with all Applicable Laws relating to labor and employment, including
those relating to labor management relations, wages, hours, overtime, employee classification, discrimination, sexual harassment,
civil rights, affirmative action, work authorization, immigration, safety and health, information privacy and security, workers
compensation, continuation coverage under group health plans, wage payment and the payment and withholding of Taxes, except as
would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) Neither
the Company nor any of its Subsidiaries is or has been a party to or subject to, or is currently negotiating in connection with
entering into, any Collective Bargaining Agreement, and, to the Company’s knowledge, there has not been any organizational
campaign, petition or other unionization activity seeking recognition of a collective bargaining unit relating to any Service Provider.
There are no unfair labor practice complaints pending or, to the Company’s knowledge, threatened against the Company or any
of its Subsidiaries before the National Labor Relations Board or any other Governmental Authority or any current union representation
questions involving Service Providers. There is no, and since March 31, 2011 there has not been any, labor strike, slowdown, stoppage,
picketing, interruption of work or lockout pending or, to the Company’s knowledge, threatened against or affecting the Company
or any of its Subsidiaries.
(c) The
consent or consultation of, or the rendering of formal advice by, any labor or trade union, works council or other employee representative
body is not required for the Company to enter into this Agreement or to consummate any of the transactions contemplated hereby.
(d) The
Company and each of its Subsidiaries is, and has been since March 31, 2011, in material compliance with WARN and has no material
liabilities or other obligations thereunder. Neither the Company nor any of its Subsidiaries has taken any action that would reasonably
be expected to cause Parent or any of its Affiliates to have any material liability or other obligation following the Closing Date
under WARN.
(e) The
Company has furnished to Parent a true and complete list that sets forth, with respect to each employee of the Company or any of
its Subsidiaries, such employee’s name, employer, title, location, base salary, most recent annual bonus received and current
annual bonus opportunity (including performance goals and target and maximum amounts). To the Company’s knowledge, no Key
Employee intends to resign or retire as a result of the transactions contemplated by this Agreement or otherwise within one year
after the Closing Date.
Section 4.19.
Environmental Matters.
(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect:
(i) no
notice, demand, request for information, citation, summons or complaint has been received, no judgment, decree, injunction, rule
or order has been issued or is otherwise in effect, no penalty has been assessed, and no Proceeding is pending or, to the knowledge
of the Company, is threatened with respect to the Company or any of its Subsidiaries (or any of their respective predecessors)
that relates to any Environmental Law or Environmental Permit as to which there remains any outstanding obligations, liabilities,
costs or conditions;
(ii) the
Company and its Subsidiaries (and their respective predecessors) are and at all times have been in compliance with all applicable
Environmental Laws and all Environmental Permits, which compliance includes obtaining and maintaining all Environmental Permits;
(iii) to
the knowledge of the Company, no Hazardous Substance has been discharged, disposed of, dumped, injected, pumped, deposited, spilled,
leaked, emitted or released at, on, under, to, in or from (A) any location by or on behalf of, (B) any property or facility now
or previously owned, leased or operated by, or (C) any property or facility to which any Hazardous Substance has been transported
for disposal, recycling or treatment by or on behalf of, in each case, the Company or any of its Subsidiaries (or any of their
respective predecessors) that would reasonably expect to result in any liability or obligation of the Company or its Subsidiaries.
(b) Except
as has been delivered to Parent at least five Business Days prior to the date hereof, or as otherwise does not identify any actual
or potential material violation of, material liability pursuant to or material expense to comply with any Environmental Law or
Environmental Permit, there is no environmental investigation, study, audit, test, or review in the possession, custody or reasonable
control of, or otherwise known to, the Company or any of its Subsidiaries that relates to the Company or any of its Subsidiaries
or any property or facility now or previously owned, leased or operated by the Company or any of its Subsidiaries (or any of their
respective predecessors).
(c) Neither
the execution of this Agreement nor the consummation of the Merger will require any investigation or remediation with respect to
any Hazardous Substance, or any notice to or consent of any Governmental Authority, pursuant to the New Jersey Industrial Site
Recovery Act and the Connecticut Property Transfer Law or, to the knowledge of the Company, any other transaction-triggered environmental
property transfer laws.
Section 4.20.
Material Contracts.
(a)
As of the date of this Agreement, neither the Company nor any of its Subsidiaries is party to or bound by:
(i) any
Contract that would reasonably be expected to result in aggregate payments by or to the Company and its Subsidiaries in excess
of (A) $3,000,000 in the current or any future calendar year or (B) $5,000,000 in the aggregate;
(ii) any
Contract under which the Company or any of its Subsidiaries leases, subleases or licenses any real property (as lessor or lessee)
involving annual rental payments in excess of $500,000;
(iii) any
Contract relating to indebtedness for borrowed money, any guarantees thereof or the granting of Liens over the property or assets
of the Company or any of its Subsidiaries, in each case, other than Contracts solely among the Company and its wholly owned Subsidiaries;
(iv) any
Contract relating to any loan or other extension of credit (other than trade credits and accounts receivable in the ordinary course
of business consistent with past practice) made by the Company or any of its Subsidiaries in excess of $200,000;
(v) each
acquisition or divestiture Contract contemplating future payments (including the maximum amount of any “earn-out” or
other contingent payment obligations) by or to the Company and its Subsidiaries in excess of $200,000 in the aggregate;
(vi) any
partnership, joint venture or similar agreement;
(vii) any
stockholders’, investors rights’, registration rights or similar agreement or arrangement;
(viii) any
Contract (A) relating to the employment of, or the performance of services by, any Key Employee, (B) the terms of which obligate
or may in the future obligate the Company or any of its Subsidiaries to make any severance, termination or similar payment to any
current or former Service Provider in excess of $100,000 in the aggregate or (C) pursuant to which the Company or any of its Subsidiaries
may be obligated to make any bonus or similar payment in excess of $100,000 to any current or former Service Provider;
(ix) any
Collective Bargaining Agreement;
(x) any
Contract with any (A) present or former officer or director the Company or any of its Subsidiaries, (B) beneficial owner (as defined
in Rule 13d-3 under the 1934 Act) of 5% or more of the outstanding Shares or (C) Affiliate or “associate” or any member
of the “immediate family” (as such terms are respectively defined in Rules 12b-2 and 16a-1 of the 1934 Act) of any
such officer, director, or beneficial owner;
(xi) any
Contract (A) with any sole-source suppliers of material tangible products or services or (B) that includes (x) any material “most
favored nations” terms and conditions (including, without limitation, with respect to pricing), (y) any material exclusive
dealing or (z) any minimum purchase arrangement (in the case of clause (z), in excess of $3,000,000 over any 12-month period);
(xii) any
Contract (x) that grants any material right of first refusal or first offer to any Person or, (y) that limits or restricts in any
material respect the ability of the Company or any of its Subsidiaries (or, after the Effective Time, the Surviving Corporation
or any of its Subsidiaries or that purports to so limit or restrict Parent or any of its Subsidiaries) to (A) sell any products
or services of or to any other Person or in any geographic region, or (B) engage or compete in any line of business, (C) obtain
products or services from any Person or (D) own, operate, sell, transfer, pledge or otherwise dispose of any material assets or
business;
(xiii) any
Contract that relates to any swap, forward, futures, warrant, option or other derivative transaction;
(xiv) any
Contract which contains any material license, right or immunity (including a covenant not to be sued or right to enforce or prosecute
any Intellectual Property Rights) with respect to any Intellectual Property Right, excluding (A) licenses granted to the Company
or any of its Subsidiaries for non-customized commercial off-the-shelf computer software that are generally available on nondiscriminatory
pricing terms and (B) non-exclusive licenses granted by the Company or any of its Subsidiaries in the ordinary course of business
consistent with past practice which do not contain (x) the transfer or assignment of any Intellectual Property Rights or (y) any
material restriction or condition on the Company’s or any of its Subsidiaries’ use or exploitation of any Intellectual
Property Rights;
(xv) any
other Contract which would prohibit or materially delay the consummation of the Merger or any other transaction contemplated by
this Agreement; or
(xvi) any
“material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) other than any Employee
Plan
(all Contracts of the type described in this Section 4.20(a)
being referred to herein as “
Material Contracts
” (which, for the avoidance of doubt, include any Contract entered
into after the date hereof that would be a Material Contract if it had been entered into as of the date hereof))
.
(b) The
Company has prior to the date of this Agreement made available to Parent a true and complete copy of each Material Contract (including
all amendments, modifications, extensions and renewals thereto and waivers thereunder) entered into as of the date hereof. Except
as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) each
Material Contract is valid, binding and in full force and effect and, to the knowledge of the Company, enforceable against the
other party or parties thereto in accordance with its terms (in each case, subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity)
and (ii) neither the Company nor any of its Subsidiaries, nor, to the Company’s knowledge any other party to a Material Contract,
has breached or violated any provision of, or taken or failed to take any act which, with or without notice, lapse of time, or
both, would constitute a default under the provisions of such Material Contract, or would give to any Third Party any right of
termination, amendment or cancellation of such Material Contract or create an additional license thereunder, and neither the Company
nor any of its Subsidiaries has received written notice that it has breached, violated or defaulted under any Material Contract.
(c) Except
as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the Company
and each of its Subsidiaries and, to the knowledge of the Company, each current or former Service Provider, is and has been in
compliance with all Applicable Law with respect to each Contract pursuant to which the Company or any of its Subsidiaries provides
services or has provided services directly (through prime contracts or orders under schedule agreements, grants or cooperative
agreements or otherwise) or indirectly (through subcontracts or as a vendor, sub-recipient, sub-grantee under grants, cooperative
agreements or otherwise) to any Governmental Authority (a “
Government Contract
”) and has not been suspended
or debarred from doing, or deemed ineligible to do, business with a Governmental Authority, and (ii) to the knowledge of the Company,
since March 31, 2011, there has been no Proceeding by any Governmental Authority with respect to any alleged irregularity, misstatement,
omission or breach relating to a Government Contract.
Section 4.21.
Finders’ Fees.
Except
for Barclays Capital Inc., financial advisor to the Company (the “
Company Financial Advisor
”), a copy of whose
engagement agreement has been provided to Parent prior to the date hereof, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of the Company or any of its Subsidiaries who might be
entitled to any fee or commission in connection with the transactions contemplated by this Agreement.
Section 4.22.
Opinion of Financial Advisor.
The Company Board has received the opinion of the Company Financial Advisor to the effect that, as of June 18, 2014 and based
upon and subject to the factors and assumptions set forth therein, from a financial point of view, the Merger Consideration to
be paid to the Company’s stockholders is fair to such stockholders. The Company shall deliver a correct and complete copy
of the written opinion of the Company Financial Advisor to Parent for informational purposes only promptly after receipt thereof
by the Company.
Section 4.23.
Antitakeover Statutes.
The Company has no “rights plan,” “rights agreement,” or “poison pill” in effect. The Company
has taken all action, to the extent permitted by Applicable Law, necessary to exempt the execution, delivery and performance of
this Agreement and the consummation of the Merger and the other transactions contemplated hereby from Sections 14A:10A-1 through
14A:10A-6 of the NJBCA (the “
New Jersey Shareholders’ Protection Act
”) and, accordingly, neither the New
Jersey Shareholders’ Protection Act nor any other “control share acquisition,” “fair price,” “moratorium”
or other antitakeover or similar Applicable Law enacted under U.S. state or federal laws apply to this Agreement or any of the
transactions contemplated hereby.
Section 4.24.
No Appraisal Rights.
No
appraisal, dissenters’ or similar rights shall be available under Applicable Law to the holders of Shares in connection with
the Merger or the other transactions contemplated by this Agreement.
Section 4.25.
Insurance.
The Company
has made available to Parent prior to the date hereof a copy of all material insurance policies and all material self-insurance
programs and arrangements relating to the business, assets and operations of the Company and its Subsidiaries in effect as of the
date hereof. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect,
(a) all such insurance policies are in full force and effect and all premiums thereon have been timely paid or, if not yet due,
accrued, (b) there is no claim pending under the Company’s or any of its Subsidiaries’ insurance policies or fidelity
bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds, (c) the
Company and its Subsidiaries are in compliance with the terms of such policies and bonds and (d) the Company has no knowledge as
of the date of this Agreement of any threatened termination of, or material premium increase with respect to, any of such policies
or bonds.
Section 4.26.
No Other Representations
and Warranties.
Subject to Section 11.02, (i) except for the representations and warranties of the Company contained in this
Agreement, the Company is not making and has not made, and no other Person is making or has made on behalf of the Company, any
express or implied representation or warranty in connection with this Agreement or the transactions contemplated hereby, and no
Person is authorized to make any such representations and warranties on behalf of the Company, and (ii) any estimates, projections,
predictions, data, financial information, memoranda, presentations or any other materials or information provided or addressed
to Parent, Merger Subsidiary or any of their Representatives are not and shall not be deemed to be or include representations or
warranties unless any such materials or information is the subject of any express representation or warranty set forth in this
ARTICLE 4.
ARTICLE
5
Representations and Warranties of Parent
Subject to Section 11.05, except as set
forth in the Parent 10-K (excluding any disclosures set forth in the Parent 10-K under the heading “Safe Harbor Statement”
or “Risk Factors,” or containing a description or explanation of “Forward-Looking Statements,” or any similar
section and any disclosures therein that are predictive, cautionary or forward-looking in nature), Parent represents and warrants
to the Company that:
Section 5.01.
Corporate Existence and
Power.
Each of Parent and Merger Subsidiary is duly organized, validly existing and (as applicable) in good standing under
the laws of its jurisdiction of organization and has all corporate or other powers and all material governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now conducted. Since the date of its incorporation, Merger
Subsidiary has not engaged in any activities other than in connection with or as contemplated by this Agreement or any financing
in connection with the transactions contemplated hereby. Merger Subsidiary was incorporated solely for the purpose of engaging
in and consummating the Merger and the transactions contemplated hereby. All of the outstanding shares of capital stock of Merger
Subsidiary have been validly issued, are fully paid and nonassessable and are owned, and at the Effective Time will be owned, directly
or indirectly, by Parent. Parent has heretofore made available to the Company true and complete copies of the certificates of incorporation
and bylaws of Parent and Merger Subsidiary as currently in effect.
Section 5.02.
Corporate Authorization.
The execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and the consummation by Parent and
Merger Subsidiary of the transactions contemplated hereby are within the corporate powers of Parent and Merger Subsidiary and,
except for the adoption of this Agreement by the sole stockholder of Merger Subsidiary, which will be obtained promptly after the
execution and delivery of this Agreement, have been duly authorized by all necessary corporate action. This Agreement constitutes
a valid and binding agreement of each of Parent and Merger Subsidiary, enforceable against Parent and Merger Subsidiary in accordance
with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting
creditors’ rights generally and general principles of equity).
Section 5.03.
Governmental Authorization.
The execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and the consummation by Parent and
Merger Subsidiary of the transactions contemplated by this Agreement require no action by or in respect of, or filing with, any
Governmental Authority, other than (i) the filing of a certificate of merger with respect to the Merger with the Department of
Treasury of the State of New Jersey, (ii) compliance with any applicable requirements of the HSR Act and Competition Law of Germany
and Austria, (iii) compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other U.S. state or federal
securities laws, (iv) compliance with any applicable requirements of Nasdaq or any other national securities exchange on which
the securities of Parent or any of its Affiliates are listed or any other applicable listing authority, (v) clearance by CFIUS
pursuant to Section 721, (vi) notification to DDTC pursuant to Section 122.4(b) of ITAR, (vii) clearance pursuant to Articles L.
151-3 and R. 153-1
et seq.
of the French Monetary and Financial Code, (viii) notification to the German Federal Ministry
of Economic Affairs and Energy pursuant to Section 4 of the Foreign Trade and Payments Act and Sections 55 through 59 of the Foreign
Trade and Payments Ordinance and (ix) any actions or Filings the absence of which would not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect.
Section 5.04.
Noncontravention.
The
execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and the consummation by Parent and Merger
Subsidiary of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation
or breach of any provision of the certificate of incorporation or bylaws of Parent or Merger Subsidiary, (ii) assuming compliance
with the matters referred to in Section 5.03, contravene, conflict with, or result in a violation or breach of any provision
of any Applicable Law, (iii) assuming compliance with the matters referred to in Section 5.03, require any consent or other
action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute
a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or
the loss of any benefit to which Parent or any of its Subsidiaries is entitled under any provision of any Contract binding upon
Parent or any of its Subsidiaries or any Contract, license, franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of Parent and its Subsidiaries or (iv) result in the creation or imposition
of any Lien on any asset of Parent or any of its Subsidiaries, with only such exceptions, in the case of each of clauses (ii) through
(iv), as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 5.05.
Disclosure Documents.
The
information with respect to Parent and any of its Subsidiaries that Parent supplies to the Company specifically for use or incorporation
by reference in the Company Proxy Statement (or any amendment or supplement thereto) will 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 at the time the Company Proxy Statement or any amendment
or supplement thereto is first mailed to stockholders of the Company, at the time such stockholders vote on adoption of this Agreement
and at the Effective Time. For the avoidance of doubt, the representations and warranties contained in this Section 5.05 will
not apply to any other statements or omissions included or incorporated by reference in the Company Proxy Statement or any amendment
or supplement thereto.
Section 5.06.
Finders’ Fees.
Except
for Citigroup Global Markets Inc., whose fees will be paid by Parent, there is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of Parent who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement.
Section 5.07.
Litigation.
Except
for matters which would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect,
as of the date hereof, there are no Proceedings pending against Parent or any of its Subsidiaries.
Section 5.08.
Ownership of Shares.
Except
as previously disclosed to the Company, neither Parent nor Merger Subsidiary or any of their Subsidiaries beneficially owns any
Company Securities as of the date hereof. Neither Parent, Merger Subsidiary, nor any of their “affiliates” or “associates”
is or has been an “interested shareholder,” as such terms are used in the New Jersey Shareholders’ Protection
Act, at any time within five years prior to the date of this Agreement.
Section 5.09.
Financing.
Parent has,
or will have prior to the Effective Time, sufficient cash, available lines of credit or other sources of immediately available
funds to enable it to consummate the Merger pursuant to the terms of this Agreement and to pay all related fees and expenses of
Parent and Merger Subsidiary pursuant to this Agreement.
Section 5.10.
No Other Representations
and Warranties.
Subject to Section 11.02, except for the representations and warranties of Parent and Merger Subsidiary contained
in this Agreement, neither Parent nor the Merger Subsidiary is making and has made, and no other Person is making or has made on
behalf of Parent or Merger Subsidiary, any express or implied representation or warranty in connection with this Agreement or the
transactions contemplated hereby, and no Person is authorized to make any such representations and warranties on behalf of Parent
or Merger Subsidiary.
ARTICLE
6
Covenants of the Company
The Company agrees that:
Section 6.01.
Conduct of the Company
.
From the date hereof until the Effective Time, except (w) as expressly required by this Agreement, (x) as set forth in Section
6.01 of the Company Disclosure Schedule, (y) as required by Applicable Law or any applicable Collective Bargaining Agreement made
available to Parent prior to the date hereof, or (z) with the prior written consent of Parent (which consent shall not be unreasonably
withheld, delayed or conditioned), the Company shall, and shall cause each of its Subsidiaries to, use its commercially reasonable
efforts to conduct its business in the ordinary course consistent with past practice. Without limiting the generality of the foregoing,
the Company shall, and shall cause each of its Subsidiaries to, use its commercially reasonable efforts to (i) preserve intact
its present business organization, (ii) maintain in effect all of its Permits required to carry on the business as currently conducted,
(iii) keep available the services of its directors, officers, and Key Employees, (iv) maintain satisfactory relationships
with its customers, lenders, suppliers and others having significant business relationships with it and (v) maintain existing insurance
policies or materially comparable replacement policies. Without limiting the generality of the foregoing, except (w) as expressly
required by this Agreement, (x) as set forth in Section 6.01 of the Company Disclosure Schedule, (y) as required by Applicable
Law or (z) with the prior written consent of Parent (which consent shall not be unreasonably withheld, delayed or conditioned,
except with respect to Sections 6.01(a), (b), (c), (e), (j), (l)(i) or (n)), the Company shall not, and shall not permit any of
its Subsidiaries to:
(a) amend
its certificate of incorporation, bylaws or other similar organizational documents (whether by merger, consolidation or otherwise);
(b) (i)
split, combine or reclassify any shares of its capital stock, (ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of its capital stock, except for dividends by any of
its wholly owned Subsidiaries or (iii) redeem, repurchase or otherwise acquire, or offer to redeem, repurchase or otherwise acquire,
any Company Securities or any Company Subsidiary Securities;
(c) (i)
issue, sell or otherwise deliver, or authorize the issuance, sale or other delivery of, any Company Securities or Company Subsidiary
Securities, other than the issuance of (A) any Shares upon the exercise of Company Stock Options or purchase rights under the ESPP,
in each case that are outstanding on the date hereof in accordance with their terms on the date hereof, (B) any Shares upon the
vesting of Company RSUs that are outstanding on the date hereof in accordance with their terms on the date hereof and (C) any Company
Subsidiary Securities to the Company or any other wholly owned Subsidiary of the Company, or (ii) amend any term of any Company
Security or any Company Subsidiary Security (in each case, whether by merger, consolidation or otherwise);
(d) incur
any capital expenditures or any obligations or liabilities in respect thereof, except for (i) those contemplated by the capital
expenditure budget set forth in Section 6.01(d) of the Company Disclosure Schedule and (ii) any unbudgeted capital expenditures
not to exceed $250,000 individually or $1,000,000 in the aggregate;
(e) (i)
merge or consolidate with any other Person, (ii) acquire (by merger, consolidation, acquisition of stock or assets or otherwise),
directly or indirectly, any assets, securities, properties, interests or businesses, other than, in the case of clause (ii), (A) supplies
or inventory in the ordinary course of business consistent with past practice and (B) as required by Contracts specifically disclosed
on Section 4.20(a)(i) or Section 4.20(a)(v) of the Company Disclosure Schedule, or (iii) adopt a plan of complete or partial liquidation,
dissolution, recapitalization or restructuring;
(f) sell,
lease, license or otherwise transfer or dispose of, create or incur any Lien (other than Permitted Liens) on, or otherwise abandon,
permit to lapse or fail to maintain any of the Company’s or its Subsidiaries’ assets, securities, properties, interests
or businesses (in each case, including the Owned Intellectual Property Rights and the Licensed Intellectual Property Rights), other
than (i) sales of inventory or obsolete equipment in the ordinary course of business consistent with past practice, (ii) sales,
leases, licenses or other dispositions of assets in the ordinary course of business consistent with past practice (x) with a fair
market value not in excess of $1,000,000 in the aggregate and (y) that are not otherwise material to the business of the Company
or its Subsidiaries as currently conducted or as proposed to be conducted, or (iii) Contracts specifically disclosed on Section
4.20(a)(i) or Section 4.20(a)(v) of the Company Disclosure Schedule;
(g) make
any loans, advances or capital contributions to, or investments in, any other Person, other than (i) loans, advances or capital
contributions to, or investments in, wholly owned Subsidiaries of the Company or (ii) advances to its employees in respect of travel
or other related business expenses, in each case in the ordinary course of business consistent with past practice;
(h) create,
incur, assume, suffer to exist or otherwise become liable with respect to any indebtedness for borrowed money or guarantees thereof
(including through borrowings under any of the Company’s existing credit facilities), or issue or sell any debt securities
or options, warrants, calls or other rights to acquire any debt securities of the Company or any of its Subsidiaries, other than
(i) indebtedness for borrowed money to finance working capital needs incurred in the ordinary course of business through borrowings
under the Company’s existing credit facilities as of the date hereof (and subject to prepayment without notice, premium or
penalty) in an aggregate amount not to exceed $2,500,000 and (ii) any indebtedness for borrowed money among the Company and its
wholly owned Subsidiaries, or among the Company’s wholly owned Subsidiaries, in the ordinary course of business consistent
with past practice;
(i) (i)
enter into (including by amendment of any Contract such that such Contract becomes a Material Contract), amend or modify in any
material respect, or renew any Material Contract, (ii) waive, release or assign, or fail to exercise or pursue, any material rights,
claims or benefits of the Company or any of its Subsidiaries under any Material Contract or (iii) voluntarily accelerate, terminate
or cancel any Material Contract.
(j) except
as required by the terms of an Employee Plan as in effect on the date hereof, (i) grant any severance, retention or termination
pay to, or enter into or amend any severance, retention, termination, employment, consulting, bonus, change in control or severance
agreement or arrangement with, any current or former Service Provider, (ii) increase the compensation or benefits provided to any
current or former Service Provider (other than reasonable, market-based increases in base compensation in the ordinary course of
business consistent with past practice for employees who are not Key Employees), (iii) grant any equity or equity-based awards
to, or discretionarily accelerate the vesting or payment of any such awards held by, any current or former Service Provider, (iv)
establish, adopt, enter into or amend in any material respect any Employee Plan or Collective Bargaining Agreement, (v) establish,
adopt or enter into any plan, agreement or arrangement, or otherwise commit, to gross-up, indemnify or otherwise reimburse any
current or former Service Provider for any Tax incurred by such Service Provider, including under Section 409A or 4999 of the Code,
(vi) hire any employees who would be Key Employees except to fill a vacancy or (vii) terminate the employment of any Key Employee
other than for cause;
(k) change
the Company’s methods of accounting, except as required by concurrent changes in GAAP or in Regulation S-X of the 1934 Act,
as agreed to by its independent public accountants;
(l) pay,
discharge, compromise, settle or satisfy (or cause any insurer to pay, discharge, compromise, settle or satisfy), or offer to pay,
discharge, compromise, settle or satisfy, (i) any stockholder litigation or dispute against the Company, any of its Subsidiaries
or any of their officers or directors (whether relating to this Agreement or otherwise), (ii) any Proceeding (except immaterial
matters in the ordinary course of business) or (iii) any other liabilities or obligations (whether accrued, contingent, absolute,
known, unknown, determined, determinable or otherwise) other than, in the case of this clause (iii), the payment, discharge,
settlement or satisfaction in the ordinary course of business consistent with past practice, or as required by their terms as in
effect on the date of this Agreement, of claims, liabilities or obligations (x) reserved against in the Company’s most recent
financial statements (including the notes thereto) included in the Company SEC Documents (for amounts not in excess of such reserves)
as of the date hereof, (y) incurred since the date of such financial statements in the ordinary course of business consistent with
past practice (other than the fees and expenses of the Company Financial Advisor and other transaction costs related to this Agreement
and the transactions contemplated hereunder)
or
(z) in an amount less than $200,000 in the
aggregate;
(m) make
or change any material Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, amend
any material Tax Return, claim any material Tax refund, enter into any closing agreement relating to any material Tax, settle or
compromise any material Tax claim, audit or assessment, surrender any right to claim a material Tax refund, offset or other reduction
in Tax liability, or consent to any extension of waiver of the statute of limitations period applicable to any material Tax claim
or assessment;
(n) knowingly
take any action that would result in any condition to closing set forth in Section 9.02(a)(i) not to be satisfied as of the Effective
Time; or
(o) agree,
resolve by action of the Company Board, or commit to do any of the foregoing.
Section 6.02.
Stockholder Meeting; Proxy
Material.
(a) The Company shall cause a meeting of its stockholders (the “
Company Stockholder Meeting
”)
to be duly called and held as soon as reasonably practicable after the SEC or its staff advises that it has no further comments
on the Company Proxy Statement or that the Company may commence mailing of the Company Proxy Statement for the purpose of voting
on the approval and adoption of this Agreement and the Merger and shall comply with all Applicable Law with respect to such meeting
and the solicitation of proxies in connection therewith. The Company Board shall, subject to Section 6.04(a)(ii)(B),
make the Company Board Recommendation and not effect an Adverse Recommendation Change.
(b) Subject
to Section 6.04(a)(ii)(B), the Company shall use its reasonable best efforts to obtain the Company Stockholder Approval.
(c) Any
adjournment, delay or postponement of the Company Stockholder Meeting shall require the prior written consent of the Parent;
provided,
however,
that the Company shall be permitted to adjourn, delay or postpone the Company Stockholder Meeting (i) for the absence
of a quorum, (ii) after consultation with Parent, solely to the extent necessary to ensure that any legally required supplement
or amendment to the Company Proxy Statement is provided to the stockholders of the Company with adequate time to review, or (iii) once
for a period not to exceed 20 calendar days (but prior to the date that is two Business Days prior to the End Date) to solicit
additional proxies necessary to obtain the Company Stockholder Approval. Parent may require the Company to adjourn, delay or postpone
the Company Stockholder Meeting once for a period not to exceed 20 calendar days (but prior to the date that is two Business Days
prior to the End Date) to solicit additional proxies necessary to obtain the Company Stockholder Approval. Once the Company has
established a record date for the Company Stockholder Meeting, the Company shall not change such record date or establish a different
record date for the Company Stockholder Meeting without the prior written consent of Parent, unless required to do so by Applicable
Law or the Company’s organizational documents. Without the prior written consent of Parent, the adoption of this Agreement
and the transactions contemplated hereby (including the Merger) shall be the only matter (other than matters of procedure and matters
required by Applicable Law to be voted on by the Company’s stockholders in connection with the approval of this Agreement
and the transactions contemplated hereby) that the Company shall propose to be acted on by the stockholders of the Company at the
Company Stockholder Meeting.
Section 6.03.
Access to Information.
From the date hereof until the earlier of the termination of this Agreement and the Effective Time, and subject to Applicable
Law and the Confidentiality Agreement, the Company shall (a) give Parent, its counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the offices, properties, assets, books and records of the Company
and its Subsidiaries upon reasonable prior notice, (b) furnish to Parent, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such Persons may reasonably request and (c) instruct
the employees, counsel, financial advisors, auditors and other authorized representatives of the Company and its Subsidiaries to
cooperate with Parent in its reasonable investigation of the Company and its Subsidiaries;
provided
,
however
, that
the Company may restrict the foregoing access and the disclosure of information pursuant to this Section 6.03 to the extent
that (A) any Applicable Law requires the Company or its Subsidiaries to restrict or prohibit access to any such properties or information
or (B) disclosure of any such information or document would result in the loss of attorney-client privilege;
provided
,
further
, that, with respect to clauses (A) and (B) of this Section 6.03, the Company shall use its commercially reasonable
efforts to (1) develop an alternative to providing such information that is reasonably acceptable to Parent or (2) enter into a
joint defense agreement or implement such other techniques if the parties determine that doing so would reasonably permit the disclosure
of such information without violating such privilege. Any investigation pursuant to this Section 6.03 shall be conducted in
such manner as not to interfere unreasonably with the conduct of the business of the Company and its Subsidiaries. No information
or knowledge obtained in any investigation pursuant to this Section 6.03 shall affect or be deemed to modify any representation
or warranty made by the Company hereunder.
Section 6.04.
No
Solicitation;
Other Offers
.
(a) (i)
General Prohibitions
. Neither the Company nor any of its Subsidiaries shall, nor shall the Company or any of its Subsidiaries
authorize or permit any of its or their officers, directors, employees, investment bankers, attorneys, accountants, consultants
or other agents or advisors (“
Representatives
”) to, directly or indirectly, (A) solicit, initiate or knowingly
take any action to facilitate or encourage the submission of any Acquisition Proposal, (B) enter into or participate in any discussions
or negotiations with, furnish any information relating to the Company or any of its Subsidiaries or afford access to the business,
properties, assets, books or records of the Company or any of its Subsidiaries to, knowingly assist, participate in, facilitate
or encourage any effort by any Third Party that has made, is seeking to make or could be reasonably expected to make an Acquisition
Proposal, (C) fail to make, withdraw or modify in a manner adverse to Parent the Company Board Recommendation (or recommend an
Acquisition Proposal or knowingly take any action or make any statement inconsistent with the Company Board Recommendation) (any
of the foregoing in this clause (C), an “
Adverse Recommendation Change
”), (D) fail to enforce or grant any waiver
or release under any standstill or similar agreement with respect to any class of equity securities of the Company or any of its
Subsidiaries, (E) approve any business combination under the New Jersey Shareholders’ Protection Act or (F) enter into any
agreement in principle, letter of intent, term sheet, merger agreement, acquisition agreement, option agreement or other similar
instrument relating to an Acquisition Proposal. It is agreed that any violation of the restrictions on the Company set forth in
this Section by any Representative of the Company or any of its Subsidiaries shall be a breach of this Section by the Company.
(ii)
Exceptions
.
Notwithstanding Section 6.04(a)(i), at any time prior to the receipt of the Company Stockholder Approval:
(A) the
Company, directly or indirectly through its Representatives, may (1) engage in negotiations or discussions with any Third Party
and its Representatives that, subject to the Company’s compliance with Section 6.04(a)(i), has made after the date of
this Agreement a bona fide, written Acquisition Proposal that the Company Board reasonably believes is or is reasonably likely
to lead to a Superior Proposal and (2) furnish to such Third Party or its Representatives non-public information relating to the
Company or any of its Subsidiaries pursuant to a confidentiality agreement with such Third Party with terms in all material respects
no less favorable to the Company than those contained in the Confidentiality Agreement (it being understood that, subject to the
provisions of the Confidentiality Agreement providing for automatic amendment of the Standstill (as defined therein), such confidentiality
agreement need not contain any “standstill” provisions);
provided
that all such information (to the extent that
such information has not been previously provided or made available to Parent) is provided or made available to Parent, as the
case may be, prior to or substantially concurrently with the time it is provided or made available to such Third Party; and
(B) subject
to compliance with Section 6.04(a)(iv), the Company Board may, (i) if an Intervening Event has occurred or in response to
a Superior Proposal, make an Adverse Recommendation Change or (ii) in response to a Superior Proposal, following an Adverse Recommendation
Change in accordance with this Agreement, cause the Company to terminate this Agreement in accordance with Section 10.01(d)(ii)
in order to concurrently with or immediately after such termination, enter into a definitive agreement providing for such Superior
Proposal;
provided
that concurrently with any such termination, the Company pays to Parent the Termination Fee required
by Section 11.04;
in each case referred to in the foregoing clauses
(A) and (B) only if the Company Board determines in good faith, after consultation with outside legal counsel, that the failure
to take such action would be inconsistent with its fiduciary duties under the NJBCA.
In addition, nothing contained herein shall
prevent the Company Board from complying with Rule 14e-2(a) under the 1934 Act with regard to an Acquisition Proposal so long as
any action taken or statement made to so comply is consistent with this Section 6.04;
provided
that any such action
taken or statement made that relates to an Acquisition Proposal shall be deemed to be an Adverse Recommendation Change unless the
Company Board reaffirms the Company Board Recommendation in such statement or in connection with such action. It is understood
and agreed that any factually accurate public statement by the Company that merely describes the Company’s receipt of an
Acquisition Proposal and the operation of this Agreement with respect thereto and contains a “stop, look and listen”
communication (including pursuant to Rule 14d-9(f) promulgated under the 1934 Act) shall not constitute an Adverse Recommendation
Change. The engagement in discussion and negotiation or furnishing of information in accordance with Section 6.04(a)(ii)(A)
shall not, in themselves, constitute an Adverse Recommendation Change.
(iii)
Required
Notices
. The Company shall notify Parent promptly (but in no event later than 48 hours) after receipt by the Company (or any
of its Representatives) of any Acquisition Proposal, any meaningful indication that a Third Party is considering making an Acquisition
Proposal or any request for information relating to the Company or any of its Subsidiaries or for access to the business, properties,
assets, books or records of the Company or any of its Subsidiaries by any Third Party that has made, is seeking to make or could
reasonably be expected to make an Acquisition Proposal, and the Company Board shall not take any of the actions referred to in
Section 6.04(a)(ii)(A) unless the Company shall have delivered to Parent a prior written notice advising Parent that it intends
to take such action. The Company shall keep Parent reasonably informed, on a reasonably prompt and timely basis, of the status
and material details of any such Acquisition Proposal, indication or request. The Company shall provide such notice orally and
in writing and shall identify the Third Party making, and the terms and conditions of, any Acquisition Proposal. Any material amendment
to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of the Company’s compliance with
this Section 6.04(a)(iii).
(iv)
“Last
Look”
. The Company Board shall not make an Adverse Recommendation Change pursuant to Section 6.04(a)(ii)(B) or exercise
its termination rights pursuant to Section 10.01(d)(ii) unless (A) (i) if Company Board has determined that an applicable
Acquisition Proposal constitutes a Superior Proposal, the Company promptly provides written notice to Parent at least five Business
Days (or two Business Days, in the case of an amended, supplemented or modified Acquisition Proposal) before taking such action
of its intention to do so with a description of the material terms of such Acquisition Proposal, including the most current version
of the proposed agreement under which such Acquisition Proposal is proposed to be consummated and the identity of the Third Party
making the Acquisition Proposal (such notice, the “
Superior Proposal Notice
”) or (ii) upon the occurrence of
an Intervening Event, the Company promptly provides written notice to Parent at least five Business Days before taking such action
of its intention to do so with a description of such Intervening Event (such notice, the “
Intervening Event Notice
”),
and (B) a period commencing on the date that the Intervening Event Notice or Superior Proposal Notice, as applicable, is deemed
received by Parent pursuant to Section 11.01 and ending at 5:00 p.m. Eastern time on the fifth Business Day or second Business
Day thereafter, as applicable (the “
Notice Period
”) has elapsed and Parent has not made a written proposal to
amend the terms of this Agreement to, as applicable, cause the Intervening Event to no longer form a valid basis for the Company
Board to effect an Adverse Recommendation Change pursuant to Section 6.04(a)(ii)(B) or to be at least as favorable to the
stockholders of the Company as such Acquisition Proposal, as applicable. It is understood that, in the case of any action intended
to be taken in circumstances involving or relating to an Acquisition Proposal, any amendment to the financial terms or other material
terms of such Acquisition Proposal shall require a new written notification from the Company under this Section 6.04(a)(iv)
and any material change to an Intervening Event shall be deemed to be a new Intervening Event and result in a new Notice Period.
The Company agrees that, during the Notice Period, the Company and its Representatives shall negotiate in good faith with Parent
and its Representatives regarding any revisions proposed by Parent to the terms of the transactions contemplated by this Agreement.
(b)
Definition
of Superior Proposal
. For purposes of this Agreement, “
Superior Proposal
” means a bona fide, unsolicited
written Acquisition Proposal (replacing references to “25%” in the definition of Acquisition Proposal with “more
than 50%”) on terms that the Company Board determines in good faith, after considering the advice of an outside financial
advisor of nationally recognized reputation and outside legal counsel, and taking into account all the terms and conditions of
the Acquisition Proposal is more favorable and provides greater value to the Company’s stockholders than is provided hereunder
(taking into account any proposal by Parent to amend the terms of this Agreement pursuant to Section 6.04(a)(iv)), and which
the Company Board determines is reasonably likely to be consummated in a timely manner and for which financing, if a cash transaction
(whether in whole or in part), is then fully committed by reputable financing sources or reasonably determined to be available
by the Company Board.
(c)
Obligation
of the Company to Terminate Discussions
. The Company shall, and shall cause its Subsidiaries and its and their Representatives
to, cease immediately and cause to be terminated any and all existing activities, discussions or negotiations, if any, with any
Third Party and its Representatives conducted prior to the date hereof with respect to any Acquisition Proposal and shall use its
reasonable best efforts to cause any such Third Party (together with its Representatives) that has executed a confidentiality agreement
within the 24-month period prior to the date hereof and that is in possession of confidential information heretofore furnished
by or on behalf of the Company or any of its Subsidiaries (and all analyses and other materials prepared by or on behalf of such
Person that contain, reflect or analyze that information) to return or destroy all such information as promptly as practicable.
The Company represents and warrants to Parent that, during the 24-month period prior to the date hereof, neither it nor any of
its Subsidiaries has granted any waiver or release under any standstill or similar agreement with respect to any class of equity
securities of the Company or any of its Subsidiaries.
Section 6.05.
Section 16 Matters.
Prior
to the Effective Time, the Company shall take all such steps as may be required to cause any dispositions of Shares (including
derivative securities with respect to such Shares) in connection with the transactions contemplated by this Agreement by each individual
who is subject to the reporting requirements of Section 16(a) of the 1934 Act with respect to the Company to be exempt under Rule
16b-3 promulgated under the 1934 Act.
Section 6.06.
Stock Exchange Delisting;
1934 Act Deregistration.
Prior to the Effective Time, the Company shall cooperate with Parent and use its reasonable best efforts
to take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on
its part under Applicable Law and rules and policies of Nasdaq to enable the delisting by the Surviving Corporation of the Shares
from Nasdaq and the deregistration of the Shares and other Company Securities under the 1934 Act as promptly as practicable after
the Effective Time, and in any event no more than ten days after the Closing Date.
Section 6.07.
Takeover Statutes.
The
Company shall, to the extent permitted by Applicable Law, use its reasonable best efforts (a) to take all actions necessary so
that no “control share acquisition,” “fair price,” “moratorium” or other antitakeover or similar
statute or regulation becomes applicable to the transactions contemplated by this Agreement and (b) if any such antitakeover or
similar statute or regulation becomes applicable to the transactions contemplated by this Agreement, to take all actions necessary
so that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated
herein and otherwise to take all such other actions as are reasonably necessary to eliminate or minimize the effects of any such
statute or regulation on the transactions contemplated hereby.
Section 6.08.
Stockholder Litigation.
From and after the date hereof, each party hereto shall promptly advise the other parties orally and in writing of any Proceedings
(including derivative claims) commenced or, to the knowledge of such party, threatened against such party and/or its directors
or executive officers relating to this Agreement, the Merger and/or the other transactions contemplated hereby and shall keep the
other party fully informed regarding any such Proceeding. The Company shall give Parent (at Parent’s expense) the opportunity
to participate in (but not control) the defense or settlement of any such Proceeding and shall give due consideration to Parent’s
views with respect thereto. The Company shall not agree to any settlement of any such Proceeding without Parent’s prior written
consent.
ARTICLE
7
Covenants of Parent
Parent agrees that:
Section 7.01.
Obligations of Merger Subsidiary.
Parent shall take all action necessary to cause Merger Subsidiary to perform its obligations under this Agreement and to consummate
the Merger on the terms and conditions set forth in this Agreement.
Section 7.02.
Approval by Sole Stockholder
of Merger Subsidiary.
Immediately following the execution of this Agreement by the parties, Parent shall cause the sole stockholder
of Merger Subsidiary, in its capacity as such, to adopt this Agreement and approve the Merger, in accordance with the DGCL.
Section 7.03.
Voting of Shares.
Parent
shall vote (or cause to be voted) any Shares beneficially owned by it or any of its Subsidiaries in favor of adoption of this Agreement
at the Company Stockholder Meeting.
Section 7.04.
Indemnification; Directors’
and Officers’ Insurance.
(a) Parent shall cause the Surviving Corporation, and the Surviving Corporation hereby agrees,
to do the following:
(i) for
six years after the Effective Time, subject to any limitation imposed from time to time under Applicable Law, maintain in effect
provisions in the Surviving Corporation’s certificate of incorporation and bylaws (or in such documents of any successor
to the business of the Surviving Corporation) regarding elimination of liability, indemnification and advancement of expenses for
acts or omissions occurring at or prior to the Effective Time in favor of the present and former officers and directors of the
Company (each, an “
Indemnified Person
”) that are no less advantageous to the Indemnified Persons than the corresponding
provisions in existence on the date of this Agreement; and
(ii) for
six years after the Effective Time (and until the final resolution of any matter for which indemnification is first sought hereunder
prior to the date which is six years after the Effective Time), indemnify and hold harmless each Indemnified Person against any
costs or expenses (including reasonable attorneys’ fees), judgments, fines, penalties, losses, claims, damages or liabilities,
including amounts paid in settlement or compromise (collectively, “
Costs
”) incurred in connection with any Proceeding
arising out of or pertaining to matters relating to such Indemnified Person’s service as a director or officer of the Company
existing or occurring at or prior to the Effective Date, whether asserted or claimed prior to, at or after the Effective Date,
to the fullest extent permitted under Applicable Law (and Parent or the Surviving Corporation shall also advance such expenses
as incurred to the fullest extent permitted under Applicable Law, provided that the Indemnified Person to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification);
and
(iii) continue
to maintain in effect for six years after the Effective Time the Company’s directors’ and officers’ insurance
(collectively, “
D&O Insurance
”) with terms, conditions, retentions and limits of liability that are at least
as favorable as those contained in the D&O Insurance in effect as of the date hereof;
provided
that the Surviving Corporation
may satisfy its obligation under this Section 7.04(a) by (A) purchasing comparable D&O Insurance for such six-year period
or (B) causing the Company to obtain, on or prior to the Closing Date, prepaid (or “tail”) directors’ and officers’
liability insurance policy at Parent’s expense, in each case with terms, conditions, retentions and limits of liability that
are at least as favorable as those contained in the D&O Insurance in effect as of the date hereof;
provided
that in
no event shall Parent or the Surviving Corporation be required to expend for such policies pursuant to this sentence an annual
premium amount (or, in the case of a prepaid policy described in clause (B), an aggregate amount) in excess of 300%
of
the annual premium the Company paid in its last full fiscal year, which amount is set forth in Section 7.04(a)(ii) of the
Company Disclosure Schedule; and
provided
,
further
, that if the aggregate premiums of such insurance coverage exceed
such amount, the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available, with respect
to matters occurring prior to the Effective Time, for a cost not exceeding such amount.
(b) If
Parent, the Surviving Corporation or any of their respective 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,
Parent shall make proper provision so that the successors and assigns of Parent or the Surviving Corporation, as the case may be,
shall assume the obligations set forth in this Section 7.04.
(c) The
rights of each Indemnified Person under this Section 7.04 shall be in addition to any rights such Indemnified Person may have
under the certificate of incorporation or bylaws of the Company or any of its Subsidiaries, the NJBCA or any other Applicable Law,
or any agreement of any Indemnified Person with the Company or any of its Subsidiaries. These rights shall survive consummation
of the Merger and are intended to benefit, and shall be enforceable by, each Indemnified Person.
(d) Notwithstanding
anything herein to the contrary, if any Proceeding (whether arising before, at or after the Effective Time) is made against any
Indemnified Person, on or prior to the sixth anniversary of the Effective time, the provisions of this Section 7.04 shall
continue in effect until the final disposition of such Proceeding.
(e) The
provisions of this Section 7.04 are (i) intended to be for the benefit of, and will be enforceable by, each Indemnified Person,
his or her heirs and his or her representatives and (ii) in addition to, and not in substitution for, any other rights to indemnification
or contribution that any such Person may have by Contract or otherwise. Parent shall pay all expenses, including reasonable attorneys’
fees, that may be incurred by the Persons referred to in this Section 7.04(e) in connection with their successful enforcement
of their rights provided in this Section 7.04.
Section 7.05.
Employee Matters.
(a)
Each employee of the Company or any of its Subsidiaries as of the Effective Time who continues employment with the Surviving Corporation
or any of its Affiliates is referred to herein as a “
Continuing Employee
,” each Continuing Employee who is located
primarily within the United States is referred to herein as a “
US Employee
,” and each Continuing Employee who
is not a US Continuing Employee is referred to herein as a “
Non-US Employee
”. For the period ending December
31, 2015 (or, if shorter, during the period of employment), Parent shall provide (or cause to be provided) to each US Employee
a level of base compensation and employee benefits (other than cash incentive or equity or equity-based compensation) that is substantially
similar in the aggregate to the level of base compensation and employee benefits (other than cash incentive or equity or equity-based
compensation) provided to such US Employee as of immediately prior to the Effective Time under the US Plans listed in Section 4.17(a)
of the Company Disclosure Schedule. For the period ending December 31, 2014 (or, if shorter, during the period of employment),
Parent shall provide (or cause to be provided) to each Non-US Employee a level of base compensation and employee benefits (other
than cash incentive or equity or equity-based compensation) that is substantially similar in the aggregate to the level of base
compensation and employee benefits (other than cash incentive or equity or equity-based compensation) provided to such Non-US Employee
as of immediately prior to the Effective Time under the International Plans listed in Section 4.17(a) of the Company Disclosure
Schedule.
(b) Following
the Effective Time, Parent shall provide (or cause to be provided) to each Continuing Employee full credit for prior service with
the Company and its Subsidiaries for purposes of vesting and eligibility to participate in employee benefit plans maintained by
Parent or its Subsidiaries for which the Continuing Employee is otherwise eligible to participate (but such service credit shall
not be provided for benefit accrual purposes, except for vacation and severance and employer contributions under 401(k) savings
plans, as applicable, except, in the case of any Non-US Employee, to the extent that such service credit is required by Applicable
Law or an applicable Collective Bargaining Agreement). In no event shall anything contained in this Section 7.05(b) result
in any duplication of benefits for the same period of service. In addition, Parent shall use commercially reasonable efforts to
(A) waive, or cause to be waived, any limitations on benefits relating to pre-existing conditions to the same extent such limitations
are waived under any comparable plan of the Company or its Subsidiaries applicable to such Continuing Employee prior to the Effective
Time and (B) recognize (or cause to be recognized), for purposes of annual deductible and out-of-pocket limits under its medical
and dental plans, deductible and out-of-pocket expenses paid by Continuing Employees in the calendar year in which the Effective
Time occurs.
(c) The
Company shall take all actions that are necessary to cause each Employee Plan that provides for annual cash bonuses for the performance
period that is scheduled to end on March 31, 2015 to provide instead that, contingent on the occurrence of the Closing, such performance
period shall end on the later of September 30, 2014 and the Closing Date, and as soon as practicable following the later of September
30, 2014 and the Effective Time, Parent shall pay to each Continuing Employee who is then employed with the Company or any of its
Subsidiaries a cash bonus for such shortened performance period in an amount determined in accordance with Section 7.05(c) of the
Company Disclosure Schedule;
provided
that the foregoing shall apply in the case of each Non-US Employee only to the extent
allowable by Applicable Law or an applicable Collective Bargaining Agreement.
(d) Unless
otherwise directed in writing by Parent at least five Business Days prior to the Effective Time, the Company shall take all actions
that are necessary to cause each Employee Plan set forth in Section 7.05(d) of the Company Disclosure Schedule to terminate
effective as of no later than immediately prior to the Effective Time. All resolutions, notices or other documents issued, adopted
or executed in connection with the implementation of this Section 7.05(d) shall be subject to Parent’s prior review
and approval. The Company shall promptly provide all information about the Continuing Employees’ participation in the Employee
Plans (including without limitation regarding elections) that Parent reasonably requests to permit Parent to meet its obligations
pursuant to this Section 7.05.
(e) Promptly
after the date hereof, the Company shall take all actions necessary to provide that: (i) no individual who is not a Participant
in the Deferred Compensation Plan as of immediately prior to the date hereof shall become a Participant in the Deferred Compensation
Plan on or after the date hereof;
provided
that such restriction shall not apply with respect to any individual who after
the date hereof is hired without violating the restriction set forth in Section 6.01(j)(v) to replace an individual who is
a Participant on the date thereof and whose employment terminates after the date hereof without violating the restriction set forth
in Section 6.01(j)(vi), (ii) no Participant shall defer any Company RSUs under the Deferred Compensation Plan, (iii) no Employer
Credits shall be credited to the Deferred Compensation Account of any Participant under the Deferred Compensation Plan on or after
the date hereof, (iv) no Trust Assets shall be contributed to the Trust on or after the date, hereof, (v) if any Trust Assets are
held in the Trust on the date hereof, the amount of such Trust Assets that exceeds the Deferred Compensation Plan Liability, in
each case as determined in accordance with GAAP as of such date, shall be promptly returned to the Company in accordance with Section
1(g) of the Trust Agreement and (vi) the Deferred Compensation Plan and the Trust Agreement shall not be materially amended on
or after the date hereof except as required to give effect to the terms set forth in this Section 7.05(e).
(f) Without
limiting the generality of Section 11.06(a), nothing in this Section 7.05, express or implied, (i) is intended to or
shall confer upon any Person other than the parties hereto, including any current or former Service Provider, any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement, (ii) shall establish, or constitute an amendment, termination
or modification of, or an undertaking to amend, establish, terminate or modify, any benefit plan, program, agreement or arrangement,
(iii) shall alter or limit the ability of Parent or any of its Subsidiaries (or, following the Effective Time, the Company or any
of its Subsidiaries) to amend, modify or terminate any benefit plan, program, agreement or arrangement at any time assumed, established,
sponsored or maintained by any of them or (iv) shall create any obligation on the part of Parent or its Subsidiaries (or, following
the Effective Time, the Company or any of its Subsidiaries) to employ or engage any Service Provider for any period following the
Effective Time.
ARTICLE
8
Covenants of Parent and the Company
The parties hereto agree that:
Section 8.01.
Reasonable Best Efforts
.
(a) Subject
to the terms and conditions of this Agreement, the Company and Parent shall use their 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 under Applicable Law to consummate
the transactions contemplated by this Agreement, including (i) preparing and filing as promptly as practicable with any Governmental
Authority all documentation to effect all necessary Filings and (ii) obtaining and maintaining all licenses, authorizations, permits,
consents, approvals, clearances, variances, exemptions and other confirmations required to be obtained from any Governmental Authority
or other Third Party to consummate the transactions contemplated by this Agreement (including receipt of the Required Approvals);
provided that
the parties hereto understand and agree that (A) in connection with seeking expiration or termination of any
applicable waiting period under the HSR Act or clearance under Competition Law of Germany and Austria relating to the Merger, Parent
and Merger Subsidiary shall not be required to (1) divest or otherwise hold separate (including by establishing a trust), or take,
cause to be taken or refrain from taking any other action (or otherwise agreeing to do any of the foregoing) with respect to, any
of its or the Surviving Corporation’s or any of their respective Affiliates’ businesses, assets or properties, (2)
enter into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection
with the transactions contemplated hereby, or (3) agree to do any of the foregoing, (B) in connection with seeking any other
Required Approval, Parent and Merger Subsidiary shall not be required to (1) divest or otherwise hold separate (including by establishing
a trust) any of its or the Surviving Corporation’s or any of their respective Affiliates’ businesses, assets or properties,
(2) take any actions that (x) would reasonably be expected to have an adverse and material effect on control of any of the Parent’s
or the Company’s Subsidiaries in the relevant jurisdiction or (y) would reasonably be expected to result in costs or losses
to Parent, the Surviving Corporation or any of their respective Affiliates in the aggregate in excess of $10,000,000, or (3) agree
to do any of the foregoing, and (C) neither the Company nor any of its Subsidiaries shall be required to (unless such action is
binding on the Company or any of its Subsidiaries only in the event the Effective Time occurs), and neither the Company nor any
of its Subsidiaries shall without Parent’s prior written consent, take any of the actions described in the foregoing clauses
(A)(1) through (3) or clauses (B)(1) and (3);
provided
,
further
, that the parties hereto agree that “reasonable
best efforts” as used in this Section 8.01(a) shall include litigating or defending against any Proceeding by any Governmental
Authority challenging this Agreement or the consummation of the Merger.
(b) In
furtherance and not in limitation of the foregoing, each of Parent and the Company shall, as promptly as practicable (and in any
event within seven Business Days) after the date hereof, (i) make an appropriate filing of a Notification and Report Form pursuant
to the HSR Act with respect to the transactions contemplated hereby and (ii) make all other Filings necessary or appropriate under
Competition Law of Germany and Austria in connection with the transactions contemplated hereby. Parent shall pay all administrative
filing fees associated with the Filings described in this Section 8.01(b). Subject to Section 8.01(a), each of Parent
and the Company shall use its reasonable best efforts to supply as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act or such Competition Law and to take all other actions necessary to cause
the expiration or termination of the applicable waiting periods under the HSR Act or such Competition Law, or the receipt of any
requisite clearances and approvals under such Competition Law, as soon as practicable.
(c) In
furtherance and not in limitation of the foregoing, Merger Subsidiary and the Company shall assemble all appropriate information
regarding the transactions contemplated by this Agreement and their respective business and ownership, in each case as necessary
to complete and submit (i) a draft joint notification to CFIUS (the “
Draft Notice
”) with respect to the transactions
contemplated hereby within ten Business Days of the date hereof (or such later date as mutually agreed by the parties, such agreement
not to be unreasonably withheld, conditioned or delayed) and (ii) a final joint notification to CFIUS (the “
Final Notice
”)
with respect to the transactions contemplated hereby within five Business Days of receipt of any comments from CFIUS on the Draft
Notice. Merger Subsidiary shall take the lead in preparing the Draft Notice and the Final Notice, provided that neither the Draft
Notice nor the Final Notice shall be submitted to CFIUS without the mutual written consent of the Merger Subsidiary and the Company.
Merger Subsidiary shall provide a timely response to any post-filing requests from CFIUS or any Governmental Authority for additional
information relating to its or its Affiliates’ businesses or ownership, as well as representations or proposed agreements
by the Merger Subsidiary or Parent. The Company shall provide a timely response to any post-filing requests from CFIUS or any Governmental
Authority for additional information relating to its businesses or ownership, as well as representations by the Company. Subject
to Section 8.01(a), each of Parent, Merger Subsidiary and the Company shall use their respective reasonable best efforts to
take all other actions necessary to cause the satisfaction of the CFIUS Condition, the DDTC Condition and the MINEFI Condition.
In furtherance and not in limitation of the foregoing, Merger Subsidiary and the Company shall, in compliance with the relevant
provisions of ITAR, 22 C.F.R. §122.4(a)(2), cause Tyco Electronics Corporation and the Company, respectively, each to notify
DDTC of the transactions contemplated herein within five days of the Closing.
(d) Parent
shall notify the transaction to MINEFI pursuant to Articles L. 151-3 and R. 153-1 et seq. of the French Monetary and Financial
Code. The Company shall cooperate with Parent and/or Merger Subsidiary in all reasonable respects in connection with such notification.
In furtherance and not in limitation of the foregoing, subject to Section 8.01(a), the Company and/or MEAS France shall use
reasonable best efforts (i) to provide to Parent, Merger Subsidiary and/or Parent’s advisors in a timely manner such documents,
assistance and information as is necessary for Parent and/or Merger Subsidiary to make the relevant filings and respond to any
follow-up requests made by MINEFI and/or DGA, (ii) to prepare and attend meetings with MINEFI and/or DGA, as deemed advisable by
Parent, and (iii) to review and assist in the negotiation of the conditions or undertakings, if any, that may be requested by MINEFI
and/or DGA in order to satisfy the MINEFI Condition;
provided
that (A) the filing shall not be submitted by Parent to MINEFI
without prior review by, and consent of, the Company (such consent not be unreasonably withheld, conditioned or delayed) and (B)
Parent shall inform MINEFI in writing (and orally) that any additional information requests regarding MEAS France must be directed
to the individual set forth on Section 8.01(d) of the Company Disclosure Schedule or such other employee of the Company and MEAS
France determined by the Company in its sole discretion, with a copy to Parent;
provided
,
further
, that Parent shall
coordinate any and all communications with MINEFI and/or DGA and therefore any such communications made by Company, MEAS France
or any of their Representatives shall be subject to Parent’s prior written approval.
(e) In
furtherance and not in limitation of the foregoing, Parent shall submit a written notification to the German Federal Ministry of
Economic Affairs and Energy pursuant to Section 4 of the Foreign Trade and Payments Act and Sections 55 through 59 of the Foreign
Trade and Payments Ordinance regarding the transactions contemplated by this Agreement within ten Business Days of the date hereof
(or such later date as mutually agreed by the parties, such agreement not to be unreasonably withheld, conditioned or delayed);
provided
that the notification shall not be submitted by Parent to the German Federal Ministry of Economic Affairs and Energy
without prior review by, and consent of, the Company (such consent not be unreasonably withheld, conditioned or delayed). The Company
shall reasonably cooperate with Parent in connection with such notification.
(f) To
the extent permitted by Applicable Law, each of Parent and the Company shall use its reasonable best efforts to (i) cooperate in
all respects with each other in connection with any Filing and in connection with any investigation or other inquiry, including
any Proceeding initiated by a private party, (ii) promptly inform the other party of any Filing or communication received from,
or intended to be given to, any Governmental Authority and of any material communication received or intended to be given in connection
with any Proceeding by a private party, in each case regarding any of the transactions contemplated hereby, and prior to submitting
any Filing, substantive written communication, correspondence or other information or response by such party to any Governmental
Authority (or members of the staff of any Governmental Authority) or in connection with any Proceeding by a private party, the
submitting party shall permit the other party and its counsel the opportunity to review as reasonably in advance as practicable
under the circumstances, and consider in good faith the comments of the other party in connection with any such Filing, communication
or inquiry and further each of the Company and Parent shall furnish each other with a copy of any Filing, communication or, if
in written form, inquiry, it or any of its Affiliates makes to or receives from any Governmental Authority or in connection with
any Proceeding by a private party, in each case regarding any of the transactions contemplated hereby, and (iii) consult with each
other in advance of any meeting or conference with any such Governmental Authority or, in connection with any Proceeding by a private
party, with any other Person, and to the extent reasonably practicable, give the other party the opportunity to attend and participate
in such meetings and conferences.
(g) The
Company shall reasonably cooperate with, and use its commercially reasonable efforts to cause its Representatives to reasonably
cooperate with, Parent and its financing sources in connection with the arrangement of financing related to the transactions contemplated
by this Agreement. Such cooperation shall include, to the extent both reasonably requested by Parent and reasonably required in
connection with such financing, (a) furnishing Parent and its financing sources with financial and other pertinent information
regarding the Company and its Subsidiaries, (b) providing direct contact between prospective financing sources and the officers
of the Company and its Subsidiaries, (c) providing assistance in preparation of confidential information memoranda, preliminary
offering memoranda, financial information and other materials to be used in connection with obtaining such financing, (d) cooperation
with the marketing efforts of Parent and its financing sources for such financing, (e) providing assistance in extinguishing existing
indebtedness of the Company and its Subsidiaries and releasing liens securing such indebtedness, in each case to take effect at
the Effective Time, (f) cooperation with respect to matters relating to pledges of collateral to take effect at the Effective Time
in connection with such financing, (g) assisting Parent in obtaining legal opinions to be delivered in connection with such financing
and (h) assisting Parent in securing the cooperation of the independent accountants of the Company and its Subsidiaries;
provided
that (i) such requested cooperation shall not unreasonably interfere with or disrupt the ongoing operations of the Company and
its Subsidiaries, (ii) neither the Company nor any of its Subsidiaries shall be required to take any action that would subject
them to any liability or to pay any commitment or other similar fee in connection with such financing prior to the Effective Time
unless reimbursed or indemnified by Parent to the reasonable satisfaction of the Company and (iii) neither the Company nor any
of its Subsidiaries shall be required to enter into any credit agreement, security agreement or other agreement in connection with
the arrangement of financing related to the transactions contemplated by this Agreement or take any action that would encumber
any of its assets that would be effective prior to the Effective Time.
Section 8.02.
Certain Filings.
The
Company and Parent shall cooperate with one another (a) in determining whether any action by or in respect of, or Filing with,
any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties
to any Contracts in connection with the consummation of the transactions contemplated by this Agreement and (b) subject to Section
8.01(a), in taking such actions or making any such Filings, furnishing information required in connection therewith and seeking
timely to obtain any such actions, consents, approvals or waivers.
Section 8.03.
Company Proxy Statement.
(a) As promptly as reasonably practicable (and in any event within 15 Business Days after the date hereof), the Company
shall prepare and file the Company Proxy Statement with the SEC. The Company shall use its reasonable best efforts to
cause the Company Proxy Statement to be cleared by the SEC as soon as reasonably practicable after the date hereof and to
be mailed to its shareholders as promptly as practicable thereafter. The Company shall cause the Company Proxy Statement,
and any amendments or supplements thereto, to comply in all material respects with the rules and regulations promulgated
by the SEC under the 1934 Act;
provided
that no covenant is made by the Company with respect to information provided by
Parent or Merger Subsidiary or any of their Representatives specifically for use or incorporation by reference in the Company Proxy
Statement. The Company shall include in the Company Proxy Statement (i) subject to the consent of the Company Financial Advisor,
the written opinion of the Financial Advisor referred to in Section 4.22, and (ii) unless an Adverse Recommendation
Change shall have occurred, the Company Board Recommendation.
(b) Parent
and its counsel shall be given a reasonable opportunity to review and comment on the Company Proxy Statement (including the
preliminary and definitive versions thereof) before the Company Proxy Statement (or any amendment thereto) is filed with
the SEC, and the Company shall give reasonable and good faith consideration to any comments made by Parent and its counsel.
The Company shall provide Parent and its counsel with (i) any comments or other communications, whether written or oral,
that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Company Proxy
Statement promptly after receipt of those comments or other communications and (ii) a reasonable opportunity to participate
in the Company’s response to those comments and to provide comments on such response (to which reasonable and good
faith consideration shall be given), including by participating with the Company or its counsel in any substantive discussions
or meetings with the SEC.
(c) Each
of the Company and Parent will advise the other party, promptly after it receives notice thereof, of any request by the SEC
for amendment of the Company Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional
information. If, at any time prior to the Effective Time, any information relating to the Company or Parent, or any of their
respective Affiliates, officers or directors should be discovered by the Company or Parent that should be set forth in an
amendment or supplement to the Company Proxy Statement so that such documents would not include any misstatement of a
material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party hereto that discovers such information shall promptly notify the other
parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC
and, to the extent required by Applicable Law, disseminated to the stockholders of the Company.
(d) Notwithstanding
(x) any Adverse Recommendation Change, (y) the public proposal or announcement or other submission to the Company or any of
its Representatives of an Acquisition Proposal or (z) anything in this Agreement to the contrary, unless this Agreement
is terminated in accordance with its terms, the obligations of the Company under this Section 8.03 shall continue in
full force and effect.
Section 8.04.
Public Announcements.
The
initial press release announcing the execution of this Agreement and the transactions contemplated hereby shall be a joint press
release to be issued promptly following the execution and delivery hereof, the form of which has been agreed upon by the Company
and Parent. Following such initial press release, Parent and the Company (a) shall consult with each other before issuing
any press release, having any communication with the press (which or not for attribution), making any other public statement, or
scheduling any press conference or conference call with investors or analysts with respect to this Agreement or the transactions
contemplated hereby and (b) shall not issue any such press release, make any such other public statement or schedule any such press
conference or conference call without such consultation;
provided
,
however
, that the restrictions set forth in this
Section 8.04 shall not apply to any release or public statement (i) required by Applicable Law or any applicable listing authority
(in which case the parties shall use commercially reasonable efforts to (x) consult with each other prior to making any such disclosure
and (y) cooperate (at the other party’s expense) in connection with the other party’s efforts to obtain a protective
order), (ii) made or proposed to be made by the Company in compliance with Section 6.04 with respect to the matters contemplated
by Section 6.04 (or by Parent in response thereto) or (iii) in connection with any dispute between the parties regarding this
Agreement, the Merger or the other transactions contemplated hereby.
Section 8.05.
Further Assurances.
At
and after the Effective Time, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver,
in the name and on behalf of the Company or Merger Subsidiary, any deeds, bills of sale, assignments or assurances and to take
and do, in the name and on behalf of the Company or Merger Subsidiary, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties
or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.
Section 8.06.
Notices of Certain Events.
Each of the Company and Parent shall promptly notify the other of:
(a) any
notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement;
(b) any
notice or other communication received by the Company or any of its Affiliates or Parent or any of its Affiliates from any Governmental
Authority in connection with the transactions contemplated by this Agreement;
(c) any
Proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting the Company or
any of its Subsidiaries or Parent and any of its Subsidiaries, as the case may be, (i) that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to any Section of this Agreement or (ii) that relate to this Agreement
or the consummation of the transactions contemplated hereby;
(d) any
(i) inaccuracy of any representation or warranty of such party contained in this Agreement at any time during the term hereof or
(ii) failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it
hereunder, in each case that would reasonably be expected to cause any of the conditions set forth in Article 9 to which the
other party is entitled to the benefit not to be satisfied;
(e) any
event, condition, fact or circumstance that has a materially adverse impact on the likelihood that any of the conditions set forth
in Article 9 to which the other party is entitled to the benefit will be satisfied prior to the End Date;
provided
that the delivery of any notice pursuant to
this Section 8.06 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice.
ARTICLE
9
Conditions to the Merger
Section 9.01.
Conditions to the Obligations
of Each Party.
The obligations of the Company, Parent and Merger Subsidiary to consummate the Merger are subject to the satisfaction
or (to the extent permissible under Applicable Law) waiver of the following conditions:
(a) the
Company Stockholder Approval shall have been obtained in accordance with the NJBCA; and
(b) no
Applicable Law shall prohibit or make illegal the consummation of the Merger, other than in connection with the expiration, termination
or receipt of any Required Approval.
Section 9.02.
Conditions to the Obligations
of Parent and Merger Subsidiary.
The obligations of Parent and Merger Subsidiary to consummate the Merger are subject
to the satisfaction or (to the extent permissible under Applicable Law) waiver of the following further conditions:
(a) (i)
(A) the representations and warranties of the Company contained in Section 4.05 (other than the last sentence of Section 4.05(b)
and the information set forth on Section 4.05 of the Company Disclosure Schedule with respect to the holder and date of grant)
shall be true and correct in all but
de minimis
respects, (B) any of the representations and warranties of the Company contained
in any of Sections 4.01, 4.02, 4.06, 4.08, 4.21, 4.22, 4.23 or 4.24 that are qualified
as to materiality or Company Material Adverse Effect shall be true and correct in all respects and any such representations and
warranties that are not so qualified shall be true and correct in all material respects, (C) the representation and warranties
of the Company contained in Section 4.10(a)(ii) shall be true and correct in all respects, and (D) any of the
other representations and warranties of the Company contained in this Agreement (disregarding all materiality and Company
Material Adverse Effect qualifications contained therein) shall be true and correct with, in the case of this clause
(D) only, only such exceptions as have not had and would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect, in each case at and as of immediately prior to the Effective Time as if made at and as
of such time (other than any such representation and warranty that by its terms addresses matters only as of another
specified time, which shall be true and correct only as of such time), (ii) the Company shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time and (iii)
Parent shall have received a certificate dated as of the Closing Date signed by an executive officer of the Company to the
foregoing effect;
(b) (i)
any applicable waiting periods under the HSR Act shall have expired or been terminated, (ii) any required clearances, approvals
and consents under Competition Law of Germany and Austria relating to the Merger shall have been received, (iii) the CFIUS Condition
shall have been met, (iv) the DDTC Condition shall have been met and (v) the MINEFI Condition shall have been met (clauses (i)
through (v) collectively, the “
Required Approvals
”), and no such Required Approval shall have expired, terminated
or been received subject to, or conditioned upon, (x) any limitation on the ownership of the capital stock of the Company by Parent
or any of its Affiliates or (y) any requirement that Parent, the Surviving Corporation or the Company or any of their respective
Affiliates take any action that is not required to be taken (or permitted to be taken without Parent’s consent) pursuant
to the terms of this Agreement, including Section 8.01(a); and
(c) there
shall not have been instituted any action, suit or proceeding by any Governmental Authority (that has not been dismissed or
otherwise been resolved) seeking to make illegal or otherwise directly or indirectly to restrain or prohibit the consummation
of the Merger (including Parent’s direct or indirect ownership of all of the Company’s and its Subsidiaries’
outstanding capital stock);
(d) there
shall not have occurred following the date of this Agreement any event, occurrence or development of a state of circumstances
or facts which has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
Section 9.03.
Conditions to the Obligations
of the Company.
The obligations of the Company to consummate the Merger are subject to the satisfaction or (to the extent
permissible under Applicable Law) waiver of the following further conditions:
(a) (i)
(A) the representations and warranties of Parent contained in Sections 5.01 and 5.02 shall be true and correct
in all material respects and (B) any of the other representations and warranties of Parent contained in this Agreement
(disregarding all materiality and Parent Material Adverse Effect qualifications contained therein) shall be true and correct
with, in the case of this clause (B) only, only such exceptions as have not had and would not reasonably be expected
to have, individually or in the aggregate, a Parent Material Adverse Effect, in each case at and as of immediately prior
to the Effective Time as if made at and as of such time (other than any such representation and warranty that by its terms
addresses matters only as of another specified time, which shall be true and correct only as of such time), (ii) each
of Parent and Merger Subsidiary shall have performed in all material respects all of its obligations hereunder required to
be performed by it at or prior to the Effective Time, and (iii) the Company shall have received a certificate
signed by an executive officer of Parent to the foregoing effect; and
(b) the
Required Approvals shall have expired, been terminated or been received, as applicable.
ARTICLE
10
Termination
Section 10.01.
Termination.
This
Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by the stockholders of the Company):
(a) by
mutual written agreement of the Company and Parent;
(b) by
either the Company or Parent if:
(i) the
Merger has not been consummated on or before January 15, 2015 (the “
End Date
”);
provided
that the right
to terminate this Agreement pursuant to this Section 10.01(b)(i) shall not be available to any party whose breach of any provision
of this Agreement results in the failure of the Merger to be consummated by such time; or
(ii) there
shall be any Applicable Law that (A) prohibits or makes illegal the consummation of the Merger or (B) enjoins the Company, Parent
or Merger Subsidiary from consummating the Merger, and in each case such Applicable Law shall have become final and nonappealable;
provided
that the right to terminate this Agreement pursuant to this Section 10.01(b)(ii) shall not be available to
any party whose breach of any provision of this Agreement results in the existence of any fact or occurrence described in the foregoing
clause (A) or (B); or
(iii) at
the Company Stockholder Meeting (including any adjournment or postponement thereof), the Company Stockholder Approval shall
not have been obtained;
(c) by
Parent if:
(i) (A)
an Adverse Recommendation Change shall have occurred or (B) at any time after public announcement of an Acquisition Proposal, the
Company Board shall have failed to publicly reaffirm the Company Board Recommendation as promptly as practicable (but in any event
within five Business Days) after receipt of any written request from Parent to do so;
(ii) there
shall have been an intentional and material breach of Section 6.02 or Section 6.04; or
(iii) a
breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Company set forth in
this Agreement shall have occurred that would cause any condition set forth in Section 9.02(a)(i) or (ii) not to be satisfied,
and such breach or failure is incapable of being cured by the End Date or, if curable by the End Date, shall not have been cured
by the Company within 30 days of receipt by the Company of written notice of such breach or failure.
(d) by
the Company:
(i) if
a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Parent or Merger Subsidiary
set forth in this Agreement shall have occurred that would cause any condition set forth in Section 9.03(a)(i) or (ii) not
to be satisfied, and such breach or failure is incapable of being cured by the End Date or, if curable by the End Date, shall not
have been cured within 30 days of receipt by Parent of written notice of such breach or failure; or
(ii) in
order to enter into a definitive agreement providing for a Superior Proposal in accordance with this Agreement, including Section
6.04(a)(ii)(B) (
provided
that, concurrently with any such termination, the Company pays to Parent the Termination Fee as
required by Section 11.04).
The party desiring to terminate this Agreement pursuant to this
Section 10.01 (other than pursuant to Section 11.01(a)) shall give written notice of such termination to the other party.
Section 10.02.
Effect of Termination.
If this Agreement is terminated pursuant to Section 10.01, this Agreement shall become void and of no effect without liability
of any party (or any stockholder or Representative of such party) to the other party hereto;
provided
that the termination
of this Agreement shall not relieve or release any party from any liability arising out of or resulting from such party’s
fraud or willful breach of this Agreement. The provisions of the Confidentiality Agreement, this Section 10.02 and Sections
11.01, 11.04, 11.07, 11.08 and 11.09 shall survive any termination hereof pursuant to Section 10.01.
ARTICLE
11
Miscellaneous
Section 11.01.
Notices.
All notices,
requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given,
(a) if
to Parent or Merger Subsidiary, to:
TE Connectivity Ltd.
Rheinstrasse 20
CH-8200 Schaffhausen, Switzerland
Attention: General Counsel
Facsimile No.: +41 (0) 52 633 6699
with a copy to:
Tyco Electronics Corporation
1050 Westlakes Drive
Berwyn, PA 19312
Attention: General Counsel
Facsimile No.: (610) 893-9602
with a copy (which shall not constitute notice) to:
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
Attention: William H. Aaronson
Facsimile No.: (212) 701-5800
if to the Company, to:
Measurement Specialties, Inc.
1000 Lucas Way
Hampton, VA 23666
Attention: Frank Guidone, CEO
Facsimile No.: (757) 766-4297
with a copy (which shall not constitute notice) to:
DLA Piper LLP (US)
1201 West Peachtree Street
Suite 2800
Atlanta, Georgia 30309
Attention: Joseph B. Alexander, Jr.
Facsimile No.: (404) 682-7990
or to such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall
be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place
of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business
Day in the place of receipt.
Section 11.02.
Survival of Representations
and Warranties.
The representations and warranties contained herein and in any certificate or other writing delivered pursuant
hereto shall not survive the Effective Time.
Section 11.03.
Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived prior to the Effective Time if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by
each party against whom the waiver is to be effective;
provided
that after the Company Stockholder Approval has been obtained
there shall be no amendment or waiver that would require the further approval of the stockholders of the Company under Applicable
Law without such approval having first been obtained.
(b) No
failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided
by Applicable Law.
Section 11.04.
Expenses.
(a)
General
.
Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
(b) Termination
Fee.
(i) If
this Agreement is terminated by Parent pursuant to Section 10.01(c)(i) or Section 10.01(c)(ii) or by the Company pursuant
to Section 10.01(d)(ii), then the Company shall pay to Parent in immediately available funds $22,900,000 (the “
Termination
Fee
”), which Termination Fee shall be, in the case of a termination by Parent, payable within two Business Days after
such termination and, in the case of a termination by the Company, payable concurrently with and as a condition to such termination.
(ii) If
(A) this Agreement is terminated by Parent or the Company pursuant to Section 10.01(b)(i) (unless the Company Stockholder Approval
has been obtained prior to such termination), Section 10.01(b)(iii) or by Parent pursuant to Section 10.01(c)(iii), (B)
after the date of this Agreement and prior to such termination, an Acquisition Proposal shall have been publicly announced or otherwise
communicated to the Company Board or its stockholders and (C) within 12 months following the date of such termination, the Company
shall have entered into a definitive agreement with respect to or recommended to its stockholders an Acquisition Proposal or an
Acquisition Proposal shall have been consummated, then the Company shall pay to Parent in immediately available funds, concurrently
with the occurrence of the applicable event described in clause (C), the Termination Fee.
(c)
Other
Costs and Expenses
. The Company acknowledges that the agreements contained in this Section 11.04 are an integral part
of the transactions contemplated by this Agreement and that, without these agreements, Parent and Merger Subsidiary would not enter
into this Agreement. Accordingly, if the Company fails promptly to pay any amount due to Parent pursuant to this Section 11.04,
it shall also pay any costs and expenses incurred by Parent and its Affiliates in connection with a legal action to enforce this
Agreement that results in a judgment against the Company for such amount, together with interest on the amount of any unpaid fee,
cost or expense at the publicly announced prime rate of Citibank, N.A. from the date such fee, cost or expense was required to
be paid to (but excluding) the payment date.
(d) Parent
agrees that, unless there has been an intentional and material breach of Section 6.04 or in the case of fraud, payment of the Termination
Fee as provided in Section 11.04(b) shall be the sole and exclusive remedy of Parent upon termination of this Agreement under circumstances
giving rise to an obligation of the Company to pay the Termination Fee and such remedy shall be limited to the Termination Fee.
In no circumstances shall the Company be required to pay more than one termination fee pursuant to Section 11.04(b).
Section 11.05.
Company Disclosure Schedule,
Company 10-K and Parent 10-K.
(a) The parties hereto agree that any reference in a particular Section of the Company Disclosure
Schedule shall only be deemed to be an exception to (or, as applicable, a disclosure for purposes of) (i) the representations and
warranties (or covenants, as applicable) of the relevant party that are contained in the corresponding Section of this Agreement
and (ii) other than with respect to any reference in Section 4.20(a) of the Company Disclosure Schedule, any other representations
and warranties of such party that are contained in this Agreement, but only if the relevance of that reference as an exception
to (or, as applicable, a disclosure for purposes of) such representations and warranties would be readily apparent to a reasonable
person who has read that reference and such representations and warranties, without any independent knowledge on the part of the
reader regarding the matter(s) so disclosed.
(b) The
parties hereto agree that any information contained in the Company 10-K (with respect to Article 4) or the Parent 10-K (with respect
to Article 5) shall only be deemed to be an exception to (or, as applicable, a disclosure for purposes of) the Company’s
or Parent’s representations and warranties, as the case may be, if the relevance of that information as an exception to (or,
as applicable, a disclosure for purposes of) such representations and warranties would be readily apparent to a reasonable person
who has read that reference and such representations and warranties, without any independent knowledge on the part of the reader
regarding the matter(s) so disclosed.
Section 11.06.
Binding Effect; Benefit;
Assignment.
(a) The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns. Except as provided in Section 7.04, no provision of this Agreement is intended
to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and
their respective successors and assigns.
(b) No
party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each
other party hereto, except that Parent or Merger Subsidiary may transfer or assign its rights and obligations under this Agreement,
in whole or from time to time in part, (i) to one or more of its Affiliates at any time and (ii) after the Effective Time, to any
Person;
provided
that such transfer or assignment shall not relieve Parent or Merger Subsidiary of its obligations hereunder
or enlarge, alter or change any obligation of any other party hereto or due to Parent or Merger Subsidiary.
Section 11.07.
Governing Law.
Except
to the extent the provisions of the NJBCA are mandatorily applicable to the Merger, this Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.
Section 11.08.
Jurisdiction.
(a)
The parties hereto agree that any Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against
any party or any of its Affiliates) shall be brought in the Delaware Court of Chancery or, if such court shall not have jurisdiction,
any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents
to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such
Proceeding in any such court or that any such Proceeding brought in any such court has been brought in an inconvenient forum;
provided
that, notwithstanding the foregoing, each of the parties hereto irrevocably consents and agrees that any such action arising out
of or relating to Parent’s financing sources shall be brought only in the Supreme Court of the State of New York, County
of New York, Borough of Manhattan, or, if under applicable laws exclusive jurisdiction is vested in the federal courts, the United
States District Court for the Southern District of New York (and appellate courts thereof). Process in any such Proceeding may
be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided in Section 11.01 shall be deemed effective
service of process on such party.
(b) EACH
OF PARENT, MERGER SUB AND THE COMPANY HEREBY IRREVOCABLY DESIGNATES THE CORPORATION TRUST COMPANY (IN SUCH CAPACITY, THE “
PROCESS
AGENT
”), WITH AN OFFICE AT 1209 ORANGE STREET, WILMINGTON, DELAWARE 19801, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE,
FOR AND ON ITS BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENT
EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND SUCH SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT;
PROVIDED
THAT IN THE CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY EFFECTING SUCH SERVICE SHALL ALSO DELIVER
A COPY THEREOF TO EACH OTHER SUCH PARTY IN THE MANNER PROVIDED IN
Section 11.01
OF THIS AGREEMENT. EACH PARTY SHALL TAKE ALL SUCH ACTION AS MAY BE NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT
OR TO APPOINT ANOTHER AGENT SO THAT SUCH PARTY WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF PROCESS FOR THE ABOVE PURPOSES IN
WILMINGTON, DELAWARE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE
LAW. EACH PARTY EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING WAIVER IS INTENDED TO BE IRREVOCABLE UNDER THE LAWS OF THE STATE OF DELAWARE
AND OF THE UNITED STATES OF AMERICA.
Section 11.09.
Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING THE ARRANGEMENT OF FINANCING RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT).
Section 11.10.
Counterparts; Effectiveness.
This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by all of the other parties hereto. Until and unless each party has received a counterpart
hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder
(whether by virtue of any other oral or written agreement or other communication).
Section 11.11.
Entire Agreement.
This
Agreement and the Confidentiality Agreement constitute the entire agreement between the parties with respect to the subject matter
of this Agreement and supersede all prior agreements and understandings, both oral and written, between the parties with respect
to the subject matter of this Agreement.
Section 11.12.
Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority
to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination,
the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely
as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated
to the fullest extent possible.
Section 11.13.
Specific Performance.
The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance
with the terms hereof and that, except where this Agreement is terminated in accordance with Section 10.01, the parties shall
be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of
the terms and provisions hereof in the courts referred to in Section 11.08(a), without proof of actual damages (and each party
further agrees to waive any requirement for the securing or posting of any bond in connection with such remedy), in addition to
any other remedy to which they are entitled at law or in equity.
Section 11.14.
Joint and Several Liability;
Obligation of Parent.
Parent and Merger Subsidiary hereby agree that they will be jointly and severally liable for all covenants,
agreements, obligations and representations and warranties made by either of them in the Agreement. Whenever this Agreement requires
Merger Subsidiary to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause
Merger Subsidiary to take such action and a guarantee of the payment and performance thereof.
Section 11.15.
Financing Sources.
The
parties acknowledge and agree that (a) no party shall have any right or claim (whether based in contract, tort, strict liability
or any other theory of liability) against Parent’s financing sources in connection with this Agreement, the arrangement of
financing related to the transactions contemplated by this Agreement or any other transaction contemplated by this Agreement and
(b) notwithstanding anything to the contract set forth in this Agreement, Parent’s financing sources are intended beneficiaries
of, and shall be entitled to enforce, Sections 11.08(a), 11.09 and this Section 11.15.
[
Remainder of page intentionally blank
]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed by their respective authorized officers as of the date set forth on the cover page of
this Agreement.
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MEASUREMENT SPECIALTIES, INC.
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By:
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/s/ Frank Guidone
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Name:
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Frank Guidone
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Title:
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Chief Executive Officer
|
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TE CONNECTIVITY LTD.
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By:
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/s/ Thomas J. Lynch
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Name:
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Thomas J. Lynch
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Title:
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Chairman Chief Executive Officer
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WOLVERINE-MARS ACQUISITION, INC.
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By:
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/s/ Thomas J. Lynch
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Name:
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Thomas J. Lynch
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Title:
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President and Chief Executive Officer
|
[Signature Page - Agreement and
Plan of Merger]
ANNEX I
THIRD AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION
OF
MEASUREMENT SPECIALTIES, INC.
[__], 2014
FIRST: The name of the corporation is Measurement
Specialties, Inc. (the “
Corporation
”).
SECOND: The name of the registered agent
of the Corporation is Corporation Service Corporation. The address of the initial registered agent is 830 Bear Tavern Road, Suite
305, West Trenton, New Jersey 08628.
THIRD: The purpose of the Corporation is
to engage in any lawful act or activity for which corporations may be organized under the New Jersey Business Corporation Act,
N.J.S.A. 14A:1-1 et seq. as the same exists or may hereafter be amended (the “
NJBCA
”).
FOURTH: The aggregate number of shares of
stock which the Corporation shall have authority to issue is 1,000, and the par value of each such share is $0.01, amounting in
the aggregate to $10.00.
FIFTH: The Board of Directors shall have
the power to adopt, amend or repeal the bylaws of the Corporation.
SIXTH: Election of directors need not be
by written ballot unless the bylaws of the Corporation so provide.
SEVENTH:
Indemnifications of Officers,
Directors and Employees.
(1)
Limitation of Liability; Indemnification
.
(a) For purposes of this ARTICLE SEVENTH,
the following definitions shall apply:
(i) “
Expenses
” shall
mean all reasonable costs, disbursements, fees of attorneys, accountants and other professionals, expert fees, investigative fees
and all other similar expenses.
ANNEX I
(ii) “
Indemnitee
” shall
mean a director, officer, employee, or trustee of the Corporation, or of any employee benefit plan adopted or sponsored by the
Corporation, or director, officer, employee, trustee or other fiduciary, member, partner of, or persons in a similar capacity with
any other corporation, partnership, limited liability company, joint venture, sole proprietorship, trust, ANNEX I employee benefit
plan, or other enterprise which such person is serving at the request of the Corporation. Any person serving simultaneously as
a director, officer or employee of the Corporation and as a director, officer, employee, trustee or other fiduciary, member, partner
of, or in a similar capacity with (i) any enterprise in which the Corporation owns at least 20% of the equity interests of such
enterprise or (ii) any employee benefit plan adopted or sponsored by such an enterprise, shall be conclusively presumed to be serving
in such capacity at the request of the Corporation.
(iii) “
Liabilities
” shall
mean all Expenses and any and all amounts paid or incurred in satisfaction of settlements, judgments, fines, and penalties (including,
without limitation, any excise taxes imposed in connection with service as a fiduciary of an employee benefit plan).
(iv) “
Proceeding
” shall
mean any civil, criminal, administrative, investigative or arbitration action (or other form of alternative dispute resolution),
suit, or proceeding, including, without limitation, any proceeding by or in the right of the Corporation, or any appeal therein,
or any inquiry or investigation which could lead to such action, suit, or proceeding.
(b) To the fullest extent permitted by the
NJBCA as the same exists or may hereafter be amended, no officer or director of the Corporation shall be liable to the Corporation
or its shareholders for damages for breach of any duty, except that nothing contained herein shall relieve an officer or a director
from liability for breach of a duty based upon an act or omission (a) in breach of such person's duty of loyalty to the Corporation
or its shareholders, (b) not in good faith or involving a knowing violation of law, or (c) resulting in receipt by such person
of an improper personal benefit. Any amendment or modification of the foregoing provision or the applicable provisions of the NJBCA
shall not adversely affect any right or protection of an officer or a director of the Corporation existing at the time of such
amendment or modification, and such right or protection shall continue as to a person who has ceased to be an officer or a director
and shall inure to the benefit of the heirs, executor and administrators of such a person.
(c) Each person who was or is made a party,
or is threatened to be made a party to, or is otherwise involved (including as a witness) in any pending, threatened, or completed
(by judgment, settlement or otherwise) Proceeding by reason of his or her being or having been an Indemnitee shall be indemnified
and held harmless by the Corporation to the fullest extent not prohibited by the NJBCA, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader
indemnification rights than the NJBCA permitted prior to such amendment), from and against any and all Liabilities incurred or
suffered in connection with any such Proceeding, and such indemnification shall continue as to a person who has ceased to be an
Indemnitee and shall inure to the benefit of his or her heirs, executors, administrators, and assigns. Notwithstanding the foregoing
and except as set forth in paragraph (2) below of this ARTICLE ANNEX I SEVENTH the Corporation shall indemnify any person seeking
indemnification in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof)
was specifically authorized by the Board of Directors of the Corporation.
ANNEX I
(d) The right to indemnification conferred
in this ARTICLE SEVENTH: (i) shall be a contract right (and any subsequent repeal of, or amendment to, this ARTICLE SEVENTH shall
not affect the right to indemnification based upon any act or omission while this ARTICLE SEVENTH is in effect), (ii) is intended
to be retroactive to events occurring prior to the adoption of this ARTICLE SEVENTH to the fullest extent permitted by applicable
law, and (iii) shall include the right to be paid by the Corporation the expenses incurred in connection with any Proceeding in
advance of the final disposition of such Proceeding as authorized by the Board of Directors; provided that if the NJBCA or the
Board of Directors so requires, the payment of such expenses in advance of the final disposition of a Proceeding shall be made
only upon receipt by the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if
it shall ultimately be determined that such Indemnitee is not entitled to be indemnified under this ARTICLE SEVENTH or otherwise.
(2)
Right of Claimant to Bring Suit
.
If a claim under subsection 1 of this ARTICLE SEVENTH is not paid in full by the Corporation within thirty (30) days after a written
request has been received by the Corporation, the claimant may, at any time thereafter, apply to a court for an award of indemnification
by the Corporation for the unpaid amount of the claim, and, if successful on the merits or otherwise in connection with any such
Proceeding, or in the defense of any claim, issue, or matter therein, the claimant shall be entitled also to be paid by the Corporation
any and all expenses incurred or suffered in connection with such Proceeding. It shall be a defense to any such action (other than
an action brought to enforce a claim for the advancement of expenses incurred in connection with any Proceeding where the required
undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it
permissible under the NJBCA for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent
legal counsel, or its shareholders) to have made a determination prior to the commencement of such Proceeding that indemnification
of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the NJBCA,
nor an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, or its shareholders)
that the claimant has not met such applicable standard of conduct, nor the termination of any Proceeding by judgment, order, settlement,
or conviction, or upon a plea of nolo contendere or its equivalent, shall be a defense to the action or create a presumption that
the claimant has not met the applicable standard of conduct.
ANNEX I
(3)
Non-Exclusivity of Rights
. The
right to indemnification and advancement of expenses provided by or granted pursuant to this ARTICLE SEVENTH shall not exclude
or be exclusive of any other rights to which any person (including agents) may be entitled under this Certificate of Incorporation,
the By-Laws of the Corporation, agreement, vote of shareholders, statute or otherwise; provided that no indemnification shall be
made to or on behalf of such person if a judgment or other final adjudication adverse to such person establishes that such person's
acts or omissions (a) were in breach of his duty of loyalty to the Corporation or its shareholders, (b) were not in good faith
or involved a knowing violation of law, or (c) resulted in such person's receipt of an improper personal benefit.
(4)
Insurance
. The Corporation may
purchase and maintain insurance on behalf of any Indemnitee against any Liabilities incurred or asserted against him in any Proceeding
by reason of such person's being or having been such an Indemnitee, whether or not the Corporation would have the power to indemnify
such person against such expenses and Liabilities under the provisions of this ARTICLE SEVENTH or otherwise.
(5)
Reliance
. Persons who after the
date of the adoption of this provision become or remain Indemnitees or who, while an Indemnitee, become or remain a director, officer,
employee or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnity, advancement of expenses
and other rights contained in this ARTICLE SEVENTH in entering into or continuing such service. The rights to indemnification and
to the advance of expenses conferred in this ARTICLE SEVENTH shall apply to claims made against an Indemnitee arising out of acts
or omissions which occurred or occur both prior and subsequent to the adoption hereof.
(6)
Merger or Consolidation
. For
purposes of this ARTICLE SEVENTH, references to the “
Corporation
” shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under this ARTICLE SEVENTH with respect to the resulting
or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.”
EIGHTH: The Corporation reserves the right
to amend this Certificate of Incorporation in any manner permitted by the NJBCA and all rights and powers conferred herein on shareholders,
directors and officers, if any, are subject to this reserved power.
ANNEX I
IN WITNESS WHEREOF, the undersigned has
executed this Certificate of Incorporation as of the date first set forth above.
|
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745 Seventh
Avenue
New York, NY 10019
United States
|
June 18, 2014
Board of Directors
Measurement Specialties, Inc.
1000 Lucas Way
Hampton, VA 23666
Members of the Board of Directors:
We understand that Measurement Specialties,
Inc. (the “Company”) intends to enter into a transaction with TE Connectivity Ltd. (“Parent”) pursuant
to which (i) Wolverine-Mars Acquisition, Inc., a wholly-owned subsidiary of Parent (“Merger Sub”), will be merged with
and into the Company with the Company surviving the merger (the “Merger”), and (ii) upon the effectiveness of the Merger,
each issued and outstanding share of common stock of the Company (the “Company Common Stock”) other than shares to
be cancelled pursuant to the Agreement (as defined below) will be converted into the right to receive $86.00 in cash (the “Consideration”).
The terms and conditions of the Proposed Transaction are set forth in more detail in the Agreement and Plan of Merger, dated June
18, 2014, by and among Parent, Merger Sub and the Company (the “Agreement”). The summary of the Proposed Transaction
set forth above is qualified in its entirety by the terms of the Agreement.
We have been requested by the Board of Directors
of the Company to render our opinion with respect to the fairness, from a financial point of view, to the Company’s stockholders
of the Consideration to be paid to such stockholders in the Proposed Transaction. We have not been requested to opine as to, and
our opinion does not in any manner address, the Company’s underlying business decision to proceed with or effect the Proposed
Transaction or the likelihood of consummation of the Proposed Transaction. In addition, we express no opinion on, and our opinion
does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees
of any parties to the Proposed Transaction, or any class of such persons, relative to the Consideration to be paid to the stockholders
of the Company in the Proposed Transaction.
In arriving at our opinion, we reviewed
and analyzed: (1) a draft of the Agreement, dated as of June 18, 2014, and the specific terms of the Proposed Transaction; (2)
publicly available information concerning the Company that we believe to be relevant to our analysis, including its Annual Report
on Form 10-K for the fiscal year ended March 31, 2014; (3) financial and operating information with respect to the business, operations
and prospects of the Company furnished to us by the Company, including financial projections of the Company prepared by management
of the Company; (4) a trading history of the Company Common Stock from June 17, 2011 to June 17, 2014 and a comparison of that
trading history with those of other companies that we deemed relevant; (5) a comparison of the historical financial results and
present financial condition of the Company with those of other companies that we deemed relevant; and (6) a comparison of the financial
terms of the Proposed Transaction with the financial terms of certain other transactions that we deemed relevant. In addition,
we have had discussions with the management of the Company concerning its business, operations, assets, liabilities, financial
condition and prospects and have undertaken such other studies, analyses and investigations as we deemed appropriate.
Page
2 of 3
In arriving
at our opinion, we have assumed and relied upon the accuracy and completeness of the financial and other information used by us
without any independent verification of such information (and have not assumed responsibility or liability for any independent
verification of such information) and have further relied upon the assurances of the management of the Company that they are not
aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections
of the Company, upon the advice of the Company, we have assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance
of the Company and that the Company will perform in accordance with such projections.
We assume no responsibility for and
we express no view as to any such projections or estimates or the assumptions on which they are based. In arriving at our opinion,
we have not conducted a physical inspection of the properties and facilities of the Company and have not made or obtained any evaluations
or appraisals of the assets or liabilities of the Company. In addition, you have not authorized us to solicit, and we have not
solicited, any indications of interest from any third party with respect to the purchase of all or a part of the Company’s
business.
Our opinion necessarily is based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of this letter. We assume no responsibility for updating or revising our opinion
based on events or circumstances that may occur after the date of this letter.
We have assumed that the executed Agreement
will conform in all material respects to the last draft reviewed by us. In addition, we have assumed the accuracy of the representations
and warranties contained in the Agreement and all agreements related thereto. We have also assumed, upon the advice of the Company,
that all material governmental, regulatory and third party approvals, consents and releases for the Proposed Transaction will be
obtained within the constraints contemplated by the Agreement and that the Proposed Transaction will be consummated in accordance
with the terms of the Agreement without waiver, modification or amendment of any material term, condition or agreement thereof.
We do not express any opinion as to any tax or other consequences that might result from the Proposed Transaction, nor does our
opinion address any legal, tax, regulatory or accounting matters, as to which we understand that the Company has obtained such
advice as it deemed necessary from qualified professionals.
Based upon and subject to the foregoing,
we are of the opinion as of the date hereof that, from a financial point of view, the Consideration to be paid to the stockholders
of the Company in the Proposed Transaction is fair to such stockholders.
We have acted as financial advisor to the
Company in connection with the Proposed Transaction and will receive a fee for our services, a portion of which is payable upon
rendering this opinion and a substantial portion of which is contingent upon the consummation of the Proposed Transaction. In addition,
the Company has agreed to reimburse our expenses under certain circumstances and indemnify us for certain liabilities that may
arise out of our engagement. We have performed various investment banking and financial services for the Company and Parent, and
its affiliates, in the past and have received customary compensation for a portion of such services. Specifically, in the past
we have performed the following investment banking and financial services for Parent, and its affiliates, for which we have received
customary compensation: (i) acted as an underwriter on the senior notes offering for Tyco Electronics Group S.A., which was fully
and unconditionally guaranteed by Parent and (ii) provided certain risk management and derivatives services for Parent and its
affiliates. In addition, we may perform various investment banking and financial services for Parent and its affiliates in the
future for which we would expect to receive customary compensation.
Barclays Capital Inc. and its affiliates
engage in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and
non-financial services. In the ordinary course of our business, we and our affiliates may actively trade and effect transactions
in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments (including loans and other
obligations) of the Company and Parent and their respective affiliates for our own account and for the accounts of our customers
and, accordingly, may at any time hold long or short positions and investments in such securities and financial instruments.
Page 3
of 3
This opinion, the issuance of which has
been approved by our Fairness Opinion Committee, is for the use and benefit of the Board of Directors of the Company and is rendered
to the Board of Directors in connection with its consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect
to the Proposed Transaction.
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Very truly yours,
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/s/
BARCLAYS CAPITAL INC.
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BARCLAYS CAPITAL INC.
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Measurement Specialties, Inc.
1000 Lucas Way
Hampton, VA 23666
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our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using
the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then
follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it
in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
Please promptly mail your proxy card to ensure that it is received prior to the closing of the polls at the special meeting.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION
FOR YOUR
RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH
AND RETURN THIS PORTION
ONLY
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The Board of Directors recommends you
vote FOR proposals 1, 2 and 3.
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For
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Against
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Abstain
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1 To approve and adopt the Agreement and Plan of Merger, dated as of June 18, 2014 (as it may be amended from time to time, the “merger agreement”), by and among Measurement Specialties, Inc., TE Connectivity Ltd. and Wolverine-Mars Acquisition, Inc.
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2 To
approve, by a non-binding, advisory vote, certain compensation arrangements for Measurement Specialties, Inc.’s named
executive officers in connection with the merger.
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3 To adjourn the special meeting to a later date or time, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve and adopt the merger agreement.
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NOTE
: THE PROXIES ARE AUTHORIZED TO VOTE IN ACCORDANCE WITH THEIR BEST JUDGMENT UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
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For address change/comments, mark here.
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(see reverse for instructions)
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Yes
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No
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Please indicate if you plan to attend this meeting
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
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Signature (PLEASE SIGN WITHIN BOX)
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability
of Proxy Materials for the Special Meeting
: The Notice & Proxy Statement is/are available at
www.proxyvote.com
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MEASUREMENT SPECIALTIES, INC.
Special Meeting of Shareholders
August 26, 2014, 8:30 A.M.
This proxy is solicited on behalf
of the Board of Directors
The undersigned hereby revokes all prior proxies
and appoints Mr. Frank Guidone and Mr. Mark Thomson or other designee, and each of them acting singly, with full power
of substitution to each, and hereby authorizes them to represent and to vote, as designated on the reverse side of this
ballot, all of the shares of Common Stock of Measurement Specialties, Inc. held of record by the undersigned on June 21, 2014
at the Special Meeting of Shareholders to be held on Tuesday August 26, 2014 at 8:30 A.M. Eastern time at the Company’s
headquarters located at 1000 Lucas Way, Hampton, Virginia 23666 or any adjournment or postponement of the meeting.
This proxy, when properly executed, will be voted in
the manner directed herein by the undersigned shareholder(s). If no such direction is made, the proxy will be voted “FOR”
Proposals 1, 2 and 3.
(If you noted any
address changes and/or comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse
side