Table of Contents
UNITED
STATES
|
SECURITIES AND EXCHANGE COMMISSION
|
Washington, D.C. 20549
|
|
SCHEDULE 14A
|
|
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
|
|
Filed by the Registrant
x
|
|
Filed by a Party other than the
Registrant
o
|
|
Check the appropriate box:
|
x
|
Preliminary Proxy Statement
|
o
|
Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|
o
|
Definitive Proxy Statement
|
o
|
Definitive Additional Materials
|
o
|
Soliciting Material Pursuant to
§240.14a-12
|
|
NU
HORIZONS ELECTRONICS CORP.
|
(Name
of Registrant as Specified In Its Charter)
|
|
(N/A)
|
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
|
|
Payment of Filing Fee (Check the
appropriate box):
|
o
|
No fee required.
|
x
|
Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
|
|
(1)
|
Title of each class of securities to
which transaction applies:
|
|
|
Common stock, par value $0.0066 per share,
of Nu Horizons Electronics Corp.
|
|
(2)
|
Aggregate number of securities to
which transaction applies:
|
|
|
18,525,911 shares of Nu Horizons
Electronics Corp. common stock outstanding as of October 4, 2010
1,877,500 options to purchase shares of
Nu Horizons Electronics Corp. common stock
|
|
(3)
|
Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it was determined):
$7.00 per share of Nu Horizons
Electronics Corp. common stock(a)
|
|
|
|
|
(4)
|
Proposed maximum aggregate value of
transaction:
|
|
|
$134,652,772 (a)
|
|
(a)
|
As of October 4, 2010, there were
(i) 18,525,911 shares of common stock, par value $0.0066 per share
(Common Stock) of Nu Horizons Electronics Corp. (Nu Horizons)
outstanding and owned by stockholders and (ii) options to purchase
1,877,500 shares of Common Stock with an exercise price less than $7.00 per
share. The filing fee was determined by
adding (x) the product of (i) the number of shares of Common Stock
that are proposed to be acquired in the merger and (ii) the merger
consideration of $7.00 in cash per share of Common Stock, plus (y) $7.00
(net of exercise price) expected to be paid to holders of stock options with
an exercise price of less than $7.00 per share granted by Nu Horizons to
purchase shares of Common Stock in exchange for cancellation of such options
((x) and (y) together, the Total Consideration). The payment of the filing fee, calculated
in accordance with Exchange Act Rule 0-11(c)(1), was calculated by
multiplying the Total Consideration by .00007130.
|
|
|
|
|
(5)
|
Total fee paid:
|
|
|
$9,601
|
o
|
Fee paid previously with preliminary
materials.
|
o
|
Check box if any part of the fee is
offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date
of its filing.
|
|
(1)
|
Amount Previously Paid:
|
|
|
|
|
(2)
|
Form, Schedule or Registration
Statement No.:
|
|
|
|
|
(3)
|
Filing Party:
|
|
|
|
|
(4)
|
Date Filed:
|
|
|
|
|
|
|
|
Table of Contents
NU
HORIZONS ELECTRONICS CORP.
70 Maxess Road
Melville, New York 11747
[
·
] [
·
], 2010
MERGER
PROPOSAL - YOUR VOTE IS VERY IMPORTANT
Dear
Fellow Stockholders:
You are cordially
invited to attend a special meeting of stockholders of Nu Horizons Electronics
Corp. (Nu Horizons or the Company), to be held at [
·
] on [
·
], [
·
], at [
·
], New York City time.
At the special
meeting, you will be asked to consider and vote to approve and adopt the
Agreement and Plan of Merger, dated as of September 19, 2010, by and among
Arrow Electronics, Inc. (Arrow or Buyer), Neptune Acquisition Corporation, Inc.,
a newly-formed, wholly-owned subsidiary of Arrow, and Nu Horizons. If the merger agreement is adopted and the
merger becomes effective, each outstanding share of Nu Horizons common stock
will be converted into the right to receive $7.00 in cash, without interest (unless
the holder of such shares perfects its appraisal rights with respect to those
shares in accordance with Delaware law). Following the merger, Nu Horizons will
continue as the surviving corporation and a wholly-owned subsidiary of Arrow.
You are also being asked to approve a proposal to adjourn the special meeting,
if necessary, to solicit additional proxies if, at the time of the adjournment,
there are insufficient votes to approve the merger agreement.
After careful
consideration, the Nu Horizons board of directors has unanimously determined
that the merger agreement and the transactions contemplated thereby (including
the merger) are advisable and fair to, and in the best interests of, Nu Horizons
stockholders, and has approved the merger agreement and the transactions
contemplated thereby, including the merger.
Therefore
,
our board
of directors unanimously recommends that you vote
FOR
the adoption of
the merger agreement
.
The accompanying
proxy statement explains the proposed merger and provides specific information
concerning the special meeting and the parties involved.
Please read the proxy
statement carefully
. You
may also obtain more information about the Company from documents that we have
filed with the Securities and Exchange Commission.
Whether or not you
plan to attend the special meeting in person, please sign and return the
enclosed proxy card in the envelope provided or submit your proxy by telephone
or via the Internet in accordance with the instructions on the proxy card. If you attend the special meeting and desire
to vote in person, you may do so even though you have previously sent a
proxy. If your shares are held in street
name by your broker, your broker will be unable to vote your shares without
instructions from you. You should
instruct your broker to vote your shares, in accordance with the procedures
provided by your broker.
YOUR VOTE IS VERY
IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. Because adoption of the merger agreement
requires the affirmative vote of holders of a majority of the shares of Nu Horizons
common stock entitled to vote at the special meeting, your failure to vote your
shares (or instruct your broker to vote your shares) will have exactly the same
effect as if you voted against adoption of the merger agreement and approval of
the transactions contemplated thereby, including the merger.
|
Sincerely,
|
|
|
|
|
|
Arthur Nadata
|
|
Chairman of the Board
|
Neither
the Securities and Exchange Commission nor any state securities regulatory
agency has approved or disapproved the merger, passed upon the merits or
fairness of the merger or passed upon the adequacy or accuracy of the
disclosure in this document. Any
representation to the contrary is a criminal offense.
The accompanying
proxy statement is dated [
·
] [
·
], 2010, and is first being mailed to
stockholders on or about [
·
], [
·
], 2010.
Table of Contents
NU
HORIZONS ELECTRONICS CORP.
70 Maxess Road
Melville, New York 11747
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [
·
] [
·
], 2010
TO
OUR STOCKHOLDERS:
A special meeting of
stockholders of Nu Horizons Electronics Corp., a Delaware corporation (Nu Horizons
or the Company), will be held on [
·
], [
·
] [
·
], 2010, at [
·
], New York City time at [
·
] for the following purposes:
1.
To consider and vote upon a proposal to
adopt the merger agreement, dated as of September 19, 2010 (the merger
agreement) by and among Nu Horizons Electronics Corp., a Delaware corporation,
Arrow Electronics, Inc., a New York corporation (Buyer) and Neptune
Acquisition Corporation, Inc., a Delaware corporation and a wholly-owned
subsidiary of Buyer (Merger Sub).
Pursuant to the merger agreement, Merger Sub will be merged with and
into Nu Horizons, with Nu Horizons surviving the merger. Upon completion of the merger, each share of
Nu Horizons common stock (Company common stock) not held by Buyer, Merger
Sub, or any other subsidiary of Buyer, Nu Horizons or any subsidiary of Nu Horizons
or a holder of Company common stock who perfects appraisal rights in accordance
with Delaware law, will be converted into the right to receive $7.00 in cash,
without interest (merger consideration).
Holders of options will also receive the excess, if any, of $7.00 over
the applicable per share exercise price for each option. A copy of the merger agreement is attached as
Annex A to the accompanying proxy statement.
2.
To approve the adjournment of the special
meeting for, among other reasons, the solicitation of additional proxies in the
event that there are not sufficient votes at the time of the special meeting to
approve the proposal to adopt the merger agreement.
3.
To transact any other business that may
properly come before the special meeting or any adjournment thereof.
Our board of
directors has fixed the close of business on [
·
], [
·
] [
·
], 2010, as the record date for the purpose
of determining the holders of Company common stock entitled to receive notice
of and to vote at the special meeting or any adjournment or adjournments
thereof. The affirmative vote of holders
of a majority of the shares of Company common stock outstanding and entitled to
vote at the special meeting is necessary to adopt the merger proposal.
On September 19,
2010, our board of directors unanimously determined that the merger and the
merger agreement are advisable and fair to, and in the best interests of, Nu Horizons
stockholders and approved the merger agreement and the transactions
contemplated thereby, including the merger.
Therefore
,
our board
of directors unanimously recommends that you vote
FOR
the adoption of
the merger agreement
.
The enclosed proxy
statement provides you with a summary of the merger agreement and the merger,
and provides additional information about the parties involved. The closing of the merger will occur as
promptly as practicable following the adoption of the merger agreement at the
special meeting by Nu Horizons stockholders, subject to the satisfaction or
waiver of the other conditions to the closing of the merger, as described in
the enclosed proxy statement.
YOUR VOTE IS VERY
IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. Whether or not you plan to attend the special
meeting in person, please sign and return the enclosed proxy card in the
envelope provided or otherwise vote your shares. If you attend the special meeting and desire
to vote in person,
Table
of Contents
you may do so even
though you have previously sent a proxy.
Because adoption of the merger agreement requires the affirmative vote
of holders of a majority of the shares of Company common stock entitled to vote
at the special meeting, your failure to vote will have exactly the same effect
as if you voted
AGAINST
the merger proposal.
Under Delaware law,
holders of Company common stock can exercise appraisal rights in connection
with the merger. A stockholder that does
not vote in favor of the merger proposal and complies with all of the other
necessary requirements will have the right to dissent from the merger and to
seek appraisal of the fair value of their shares of Company common stock,
exclusive of any element of value arising from the expectation or
accomplishment of the merger. For a
description of appraisal rights and the procedures to be followed to assert
them, stockholders should review the provisions of Section 262 of the Delaware
General Corporation Law, a copy of which is included as Annex C to the
accompanying proxy statement.
|
By Order of the
Board of Directors,
|
|
|
|
|
|
Richard Schuster
|
|
Secretary
|
Melville,
New York
[
·
], 2010
Table of Contents
SUMMARY TERM SHEET
This
summary highlights important information from this proxy statement and does not
contain all of the information that may be important to you. To understand fully the merger described in
this proxy statement, you should carefully read the entire proxy statement and
its annexes. We have included section
references to direct you to a more complete description of the topics contained
in this summary.
You
should also review Questions and Answers About the Special Meeting and the
Merger for the brief answers to some questions that you may have as a
holder of Company common
stock
.
In
this proxy statement, the terms Nu Horizons, Company, We, Our, Ours,
and Us refer to Nu Horizons Electronics Corp. and its subsidiaries,
taken together.
·
The Parties to the Merger
(page 16)
Nu
Horizons Electronics Corp.
70 Maxess Road
Melville, New York 11747
Nu Horizons,
headquartered in Melville, New York, and its wholly-and majority-owned
subsidiaries, are engaged in the distribution of, and supply chain services
for, high technology active and passive electronic components. The active and passive components distributed
by the Company are utilized by the electronics industry and other industries in
the manufacture of sophisticated electronic products including: industrial instrumentation, computers and
peripheral equipment, consumer electronics, telephone and telecommunications
equipment, satellite communications equipment, cellular communications
equipment, medical equipment, automotive electronics, and audio and video
electronic equipment.
Arrow
Electronics, Inc.
(Arrow or Buyer)
50 Marcus Drive
Melville, New York 11747
Arrow is a global
provider of products, services, and solutions to industrial and commercial
users of electronic components and enterprise computing solutions. Arrow
maintains over 200 sales facilities and 22 distribution and
value-added centers in 51 countries and territories, serving over
70 countries and territories, over 900 suppliers and over 125,000 original
equipment manufacturers, contract manufacturers, and commercial customers. As a supply chain partner, Arrow offers both
a wide spectrum of products and a broad range of services and solutions,
including materials planning, design services, programming and assembly services,
inventory management, and a variety of online supply chain tools. Customers include manufacturers of consumer
and industrial equipment (including machine tools, factory automation, and
robotic equipment), telecommunications products, automotive and transportation,
aerospace and defense, scientific and medical devices, and computer and office
products, as well as value-added resellers of enterprise computing solutions.
Neptune Acquisition Corporation, Inc.
(Merger Sub)
c/o Arrow Electronics, Inc.
50 Marcus Drive
Melville, New York 11747
Merger Sub is a
Delaware corporation and a wholly-owned subsidiary of Buyer. Merger Sub was formed solely for the purpose
of entering into the merger agreement and consummating the transactions
contemplated by the merger agreement. It
has not conducted any activities to date other than activities incidental to
its formation and in connection with the transactions contemplated by the
merger agreement.
1
Table of Contents
·
The Merger Agreement
(page 49)
The merger agreement
provides that, at the effective time of the merger, Merger Sub will merge with
and into the Company. In the merger,
each share of Company common stock that is outstanding immediately prior to the
effective time of the merger (other than shares owned by Buyer, Merger Sub or
any other subsidiary of Buyer, shares owned by the Company or any subsidiary of
the Company and shares owned by stockholders who have perfected and not
withdrawn a demand for appraisal rights in connection with the merger under
Delaware law) will be converted into the right to receive $7.00 per share in
cash, without interest and less any applicable withholding tax. Following the merger, Nu Horizons will
continue as a wholly-owned subsidiary of Arrow.
·
Merger Consideration
(page 49)
If the merger is
completed, you will be entitled to receive $7.00 in cash, without interest and
less any applicable withholding taxes, for each share of Company common stock
that you own (unless you choose to dissent by exercising and perfecting your
appraisal rights under Delaware law with respect to your shares).
·
Procedures for Receiving the Merger Consideration
(page 50)
If the merger is
completed, each holder of Company common stock will receive materials from the
paying agent, American Stock Transfer & Trust Company. As soon as reasonably practicable after the
completion of the merger, the paying agent will provide instructions to each
holder of record of Company common stock that will explain how to surrender
stock certificates in exchange for merger consideration. Each holder of Company common stock will
receive cash for his, her or its shares from the paying agent after complying
with these instructions. If your shares
of Company common stock are held in street name by your broker, bank or other
nominee, you will receive instructions from your broker, bank or other nominee
as to how to surrender your street name shares and receive merger
consideration for those shares. Please
do not return your stock certificates with the enclosed proxy or send your
stock certificates without a properly completed letter of transmittal (which
will be provided to you at a later date by the paying agent).
·
Treatment of Options and Restricted Stock
(page 50)
Stock
Options
Upon
completion of the merger, each then-outstanding stock option that was granted by
the Company will be cancelled, and option holders will receive from Buyer or
the surviving corporation an amount in cash equal to the product of
(x) the number of shares of Company common stock covered by such option,
whether or not vested, multiplied by (y) the excess, if any, of the $7.00
per share merger consideration over the per share exercise price for such
option, less any applicable withholding taxes.
No amounts will be paid with respect to options that have an exercise
price equal to or greater than $7.00 per share.
Restricted
Stock Awards
Upon
completion of the merger, each then-outstanding restricted stock award that was
granted under our equity incentive plans shall become vested and shall be
treated in the same manner as ownership of Company common stock. Accordingly, any holder of restricted stock
will be entitled to receive $7.00 in cash, without interest and less any
applicable withholding taxes, for each share of restricted stock owned.
2
Table of Contents
·
The Special Meeting
Time,
Place and Purpose
(page 17)
The special
meeting will be held on
,
2010 starting at 10:00 a.m., New York City time, at
.
At the
special meeting, you will be asked to consider and vote upon a proposal to
adopt the merger agreement and approve the transactions contemplated thereby,
including the merger, to approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies, and to transact such
other business as may properly come before the special meeting.
Record
Date
,
Shares Entitled to Vote; Quorum
(page 17)
You are
entitled to vote at the special meeting if you owned shares of Company common
stock at the close of business on
,
2010, the record date for the special meeting.
The presence at the meeting, in person or by proxy, of a majority of the
shares of Company common stock issued and outstanding as of the close of
business on the record date will constitute a quorum. On the record date, there were
[18,525,911]
shares of Company common stock outstanding.
Required
Vote
(page 17)
The adoption
of the merger agreement requires the affirmative vote of the holders of a
majority of the shares of Company common stock outstanding that are entitled to
vote at the special meeting. Each
outstanding share of Company common stock on the record date entitles the
holder to one vote at the special meeting.
A failure to vote your shares of Company common stock or an abstention
will have the same effect as a vote against adoption of the merger
agreement. Approval of the proposal to
adjourn the special meeting, if necessary or appropriate, for the purpose of
soliciting additional proxies, requires the affirmative vote of a majority of
the votes cast by the holders of all Company common stock present in person or
by proxy at the special meeting and entitled to vote on the matter. Failure to vote your shares of Company common
stock or an abstention will have no effect on the approval of the proposal to
adjourn the special meeting.
·
Shares Held by Directors and Executive Officers
(page 18)
As of the record
date, the directors and executive officers of the Company held and are entitled
to vote, in the aggregate,
[1,016,931]
shares of Company common stock (excluding options), representing approximately
[5.5%]
of the aggregate Company common stock outstanding as
of the record date. Those directors of
the Company beneficially owning shares on September 19, 2010, have entered
into voting agreements pursuant to which they have agreed to vote their shares
FOR
the proposal to adopt the
merger agreement and
FOR
the
proposal to adjourn the special meeting, if necessary or appropriate, to
solicit additional proxies.
·
Voting of Proxies
(page 18)
Any holder of
Company common stock entitled to vote whose shares are registered in his, her
or its name may submit a proxy by telephone by calling 1-800-PROXIES
(1-800-776-9437) or via the Internet at www.voteproxy.com, in accordance with
the instructions provided on the enclosed proxy card, or by returning the
enclosed proxy card by mail, or may vote in person by appearing at the special
meeting.
If your shares are
held in street name by your broker, bank or other nominee, you should
instruct your broker, bank or other nominee on how to vote your shares using
the instructions provided by your broker, bank or other nominee. If you do not provide your broker, bank or
other nominee with instructions, your shares will not be voted and that will
have the same effect as a vote against the proposal to adopt the merger
agreement.
3
Table of Contents
·
Revocability of Proxies
(page 19)
Any stockholder who
executes and returns a proxy card (or submits a proxy via telephone or the
Internet) may revoke the proxy at any time before it is voted at the special
meeting:
·
by delivering a written notice to our
Corporate Secretary, at 70 Maxess Road, Melville, New York 11747,
bearing a date later than the proxy previously delivered, stating that you
would like to revoke your proxy;
·
by attending the special meeting and voting
in person (your attendance at the special meeting will not, by itself, revoke
your proxy; you must vote in person at the special meeting);
·
by submitting a later-dated proxy card for
the same shares; or
·
by voting a second time by telephone or
Internet, provided that the new proxy is received by 5:00 p.m.,
New York City time, on
, 2010.
Please note that if
you hold your shares in street name through a broker, bank or other nominee
and you have instructed your broker, bank or other nominee to vote your shares,
the above-described options for changing your vote do not apply, and instead
you must follow the instructions received from your broker, bank or other
nominee to change your vote.
·
Recommendation of the Board of Directors
(page 28)
The board of
directors has unanimously (i) determined that the merger agreement and the
transactions contemplated thereby, including the merger, are advisable and fair
to and in the best interests of the Company and its stockholders,
(ii) approved the merger agreement, the merger and the other transactions
contemplated by the merger agreement and (iii) resolved to recommend that
the stockholders of the Company adopt the merger agreement and approve the
transactions contemplated thereby, including the merger, at a special meeting
of the stockholders.
The board of directors recommends that you vote
FOR
the proposal
to adopt the merger agreement and
FOR
the proposal to adjourn the
special meeting
,
if necessary or
appropriate
,
to solicit additional
proxies.
In reaching its
decision, the board of directors evaluated a variety of business, financial and
market factors and consulted with management and financial and legal advisors.
·
Opinion of Nu Horizons Financial Advisor
(page 31 and Annex B)
On
September 19, 2010, Houlihan Lokey Capital, Inc., or Houlihan Lokey,
rendered an oral opinion to the board of directors (which was confirmed in
writing by delivery of Houlihan Lokeys written opinion dated
September 19, 2010), as to the fairness, from a financial point of view,
of the consideration to be received by the holders of Company common stock in
the merger, as of September 19, 2010, and based upon and subject to the
procedures followed, assumptions made, qualifications and limitations on the
review undertaken and other matters considered by Houlihan Lokey in preparing
its opinion.
Houlihan
Lokeys opinion was directed to the board of directors and only addressed the
fairness from a financial point of view of the consideration to be received by
the holders of Company common stock in the merger and does not address any
other aspect or implication of the merger. The summary of Houlihan Lokeys
opinion in this proxy statement is qualified in its entirety by reference to
the full text of its written opinion, which is included as Annex B to this
proxy statement and sets forth the procedures followed, assumptions made,
qualifications and limitations on the review undertaken and other matters considered
by Houlihan Lokey in preparing its opinion.
We encourage our stockholders to carefully read the full text of
Houlihan Lokeys written opinion. However, neither Houlihan Lokeys opinion nor
the summary of its opinion and the related analyses set forth in this proxy
statement are intended to be, and do not constitute, advice or a
4
Table
of Contents
recommendation
to the board of directors or any stockholder as to how to act or vote with
respect to the merger or related matters.
·
Interests of the Companys Directors and Executive
Officers in the Merger (page 43)
In considering the
recommendation of our board of directors with respect to the merger, you should
be aware that some of our directors and executive officers have interests in
the merger that are different from, or in addition to, the interests of holders
of Company common stock generally. These
interests include:
·
For each option then outstanding with an
exercise price of less than $7.00 (including those held by executive officers
and directors), whether or not vested, the entitlement to receive a cash
payment upon completion of the merger.
·
The vesting of restricted stock awards then
outstanding (including those held by executive officers and directors) will be
accelerated upon completion of the merger.
·
Each of our executive officers will be
entitled to receive severance benefits if such officers employment terminates
under specified circumstances after the merger.
·
Our executive officers and directors will
benefit from the indemnification and insurance provisions contained in the
merger agreement with respect to their acts or omissions as executive officers
and directors.
·
Several of our executive officers may have
roles with Buyer following the merger, although no agreements have been reached
with Buyer regarding the terms thereof.
·
Appraisal Rights
(page 70 and Annex C)
Stockholders who
oppose the merger may exercise appraisal rights, but only if they do not vote
in favor of the merger proposal and otherwise comply with the procedures of
Section 262 of the Delaware General Corporation Law, which is Delawares
appraisal statute. A copy of
Section 262 is included as Annex C to this proxy statement.
·
Financing for the Merger
(page 31)
There is no
financing condition to the merger. Buyer
is expected to pay the merger consideration from its cash on hand or borrowings
under its existing credit facilities.
·
Material U.S. Federal Income Tax Consequences of
the Merger
(page 46)
In general, your
receipt of the merger consideration will be a taxable transaction for U.S.
federal income tax purposes. For U.S.
federal income tax purposes, you will generally recognize capital gain or loss
equal to the difference, if any, between the amount of cash received pursuant
to the merger and your adjusted basis in the shares surrendered. However, the tax consequences of the merger
to you will depend upon your own particular circumstances. You should consult your own tax advisor in
order to fully understand how the merger will affect you.
·
Regulatory Approvals
(page 42)
The
Hart-Scott-Rodino Act (the HSR Act) prohibits us from completing the merger
until we have furnished certain information and materials to the Antitrust
Division of the U.S. Department of Justice and the Federal Trade Commission and
the required waiting period has expired or been terminated. The parties filed their respective
notification and report forms pursuant to the HSR Act with the Antitrust
Division of the U.S. Department of Justice and the Federal Trade Commission on
October 5, 2010. The parties also
derive revenues in other jurisdictions where merger control filings or
approvals are required; we expect to
5
Table
of Contents
make antitrust
filings in Germany, Austria and China. The closing of the merger is conditioned
upon the approval of the antitrust authorities in those jurisdictions (or the
termination or expiration of applicable waiting periods).
·
No Solicitation of Transactions
(page 55)
The merger agreement
restricts our ability to solicit or engage in discussions or negotiations with
a third party regarding specified transactions involving the Company. Notwithstanding these restrictions, under
certain limited circumstances required for our board of directors to comply
with its fiduciary duties, our board of directors may respond to an unsolicited
written bona fide proposal for an alternative acquisition or terminate the
merger agreement and enter into an agreement with respect to a superior
proposal after paying the termination fee and expenses specified in the merger
agreement.
·
Termination of the Merger Agreement
(page 61)
The Company and
Arrow may, by mutual written consent, terminate the merger agreement and
abandon the merger at any time prior to the effective time, whether before or
after the adoption of the merger agreement by the holders of Company common
stock.
Under certain
circumstances, the merger agreement may also be terminated and the merger
abandoned at any time prior to the effective time as follows:
·
by either Arrow or the Company, if:
·
the merger is not completed by
March 19, 2011, or, if certain conditions related to antitrust matters are
not satisfied by that date and no other conditions remain to be satisfied, then
June 19, 2011, which we refer to in this proxy statement as the end date,
except that neither Arrow nor Nu Horizons may terminate the merger
agreement on this basis if its breach of its obligations under the merger
agreement caused the failure of the merger to be completed by the end date;
·
any law or order has been enacted, issued,
promulgated, enforced or entered by a governmental entity that makes illegal,
permanently enjoins or otherwise permanently prohibits the completion of the
merger, and the law is final and nonappealable, except that neither Arrow nor
Nu Horizons may terminate the merger agreement on this basis if its breach
of its obligations under the merger agreement caused the issuance,
promulgation, enforcement or entry of such law or order;
·
the merger agreement is submitted to our
stockholders for approval at a meeting and they do not approve the merger
proposal at the meeting or at any adjournment or postponement thereof; or
·
the other party breaches any of its
representations, warranties, covenants or agreements contained in the merger
agreement, which breach would permit the terminating party to refuse to
complete the merger, except that neither Arrow nor Nu Horizons can
terminate the merger agreement on this basis if it is then in material breach
of any of its covenants or other agreements contained in the merger agreement
or has willfully breached its representations and warranties in the merger
agreement. However, if the breach in the
representations, warranties, covenants or agreements is curable prior to the
end date through the exercise of reasonable efforts and the breaching party
exercises reasonable efforts to cure such breach, then Arrow or
Nu Horizons, as the case may be, must provide a fifteen day period
following written notice to cure the breach.
Any breach by Arrow of its agreement to deposit with the paying agent
the payments to be
6
Table
of Contents
made to
stockholders and option holders prior to the effective time of the merger is
not capable of being cured and permits Nu Horizons to immediately
terminate the merger agreement.
·
by Arrow, if:
·
(1) our board of directors changes its
recommendation that our stockholders approve the merger proposal; (2) we
breach our obligations under the merger agreement relating to solicitation,
responding to other acquisition proposals and changing our board of directors
recommendation; (3) following a written request from Arrow, our board of
directors fails to reaffirm its recommendation that our stockholders approve
the merger proposal within ten business days after the date another acquisition
proposal is publicly disclosed; (4) a tender offer or exchange offer
relating to Company common stock is commenced by a person not affiliated with
Arrow and our board of directors fails to reaffirm its recommendation that our
stockholders approve the merger proposal and to recommend that our stockholders
not tender their shares in such tender or exchange offer within ten business
days; or (5) we or our board of directors publicly announces its
intentions to take any of these actions; or
·
by the Company, if:
·
before our stockholders approve the merger
proposal, our board of directors authorizes our management, in compliance with
our obligations under the merger agreement relating to non-solicitation and in
material compliance with our other obligations under the merger agreement, to
enter into an agreement in principle, letter of intent, term sheet, acquisition
agreement, merger agreement, option agreement, joint venture agreement,
partnership agreement or other agreement in respect of a superior proposal, as
long as we pay Arrows fees and expenses as described under Effect of
Termination; Termination Fee and Expenses below.
·
Effect of Termination; Termination Fee and
Expenses
(page 62)
In general, if the
merger agreement is terminated, neither we nor Buyer will have any liability to
each other under the merger agreement, except that, if we or Arrow terminate
the merger agreement under certain circumstances specified in the merger
agreement, we will be required to reimburse Arrow for up to $3,000,000 of its
fees and expenses and, in some cases, pay to Arrow a termination fee of 3% of
the total consideration payable, or approximately $4,039,800, plus expenses,
less any such fees and expenses we already paid.
·
Conditions to Completing the Merger
(page 58)
The respective
obligations of the Company, Arrow and Merger Sub to consummate the merger are
subject to the satisfaction or waiver of certain customary conditions,
including the adoption of the merger agreement by our stockholders, receipt of
required antitrust approvals (or termination or expiration of applicable
waiting periods), the accuracy of the representations and warranties of the
parties and compliance by the parties with their respective obligations under
the merger agreement.
·
Market Price of Company Common Stock
(page 66)
Shares of Company
common stock are listed on the NASDAQ Global Select Market under the symbol NUHC. On September 17, 2010, the last trading
day before the announcement of the merger, Company
7
Table
of Contents
common stock closed
at $3.41. On
,
2010, which was the last practicable trading day before this proxy statement
was printed, Company common stock closed at
$ per
share.
·
Additional Information
(page 73)
You can find more
information about Nu Horizons in the periodic reports and other
information we file with the SEC. The
information is available at the SECs public reference facilities and at the
website maintained by the SEC at
http://www.sec.gov
.
8
Table of Contents
QUESTIONS AND ANSWERS ABOUT
THE SPECIAL MEETING AND THE MERGER
The
following are some questions that you
,
as a stockholder of
Nu Horizons
,
may have regarding the
merger and the special meeting
,
and brief answers to
those questions. You are urged to read
carefully and in their entirety this proxy statement and the other documents
referred to in this proxy statement because this section may not provide all of
the information that is important to you with respect to the merger and the
special meeting. Additional important
information is contained in the annexes to this proxy statement.
Q: What am I being asked to vote on?
A: You are being asked to vote on
·
a proposal to adopt the merger agreement and
approve a merger whereby Nu Horizons would be acquired by Buyer. The acquisition will be accomplished by the
merger of Merger Sub, a wholly-owned subsidiary of Buyer, into
Nu Horizons, with Nu Horizons surviving as a wholly-owned subsidiary
of Buyer. See The Merger Agreement
beginning on page 49.
·
an adjournment, if necessary, of the special
meeting to permit the solicitation of additional proxies in the event that
there are not sufficient votes to adopt the merger agreement at the time of the
special meeting. See The Special
MeetingTime, Place and Purpose of the Special Meeting on page 17.
Q: What will I receive in the merger?
A: Upon completion of the merger, you will
receive, unless you properly exercise and perfect your appraisal rights under
Delaware law, $7.00 in cash, without interest and less any applicable
withholding taxes, for each share of Company common stock that you own. For example, if you own 100 shares of Company
common stock, you will receive $700, less any applicable withholding
taxes. You will not own shares in the
surviving corporation. See The Merger
AgreementMerger Consideration beginning on page 49.
Q: I am a holder of an equity award granted
under a Nu Horizons equity incentive plan.
What will happen to my outstanding equity award as a result of the
merger?
A: Upon completion of the merger, each
then-outstanding stock option that was granted by the Company will be
cancelled, and option holders will receive from Buyer or the surviving
corporation an amount in cash equal to the product of (x) the number of
shares of Company common stock covered by such option, whether or not vested,
multiplied by (y) the excess, if any, of the $7.00 per share merger
consideration over the per-share exercise price for such option, less any
applicable withholding taxes. No amounts will be paid with respect to options
that have an exercise price equal to or greater than $7.00 per share. See The Merger AgreementTreatment of
Options and Restricted Stock on page 50.
At the time the
merger becomes effective, all restricted stock awards will become fully vested,
and each share that is subject to a restricted stock award will be treated
identically to all other outstanding shares of Company common stock.
Consequently, you will receive an amount in cash equal to the number of shares
of Company common stock covered by your restricted stock award multiplied by
$7.00, less any applicable withholding taxes.
See The Merger AgreementTreatment of Options and Restricted Stock on
page 50.
Q: If shares of Nu Horizons common stock
are allocated to my account(s) under the Nu Horizons Employee Stock
Ownership Plan and Trust (ESOP), will I be allowed to vote the shares in
connection with the transaction?
A: Yes, under the terms of the ESOP, you may
vote the number of shares allocated to your account(s) under the ESOP on
the record date. We are going to appoint
an independent fiduciary. You may then vote
by giving instructions to the independent fiduciary in accordance with the
instructions accompanying the materials that the will be separately mailed to
plan participants.
9
Table of Contents
The deadline for submitting
your voting instructions may be earlier than the deadline generally applicable
to Nu Horizons stockholders. If you
do not properly or timely submit your directions to vote the shares allocated
to your account(s) under the ESOP, the independent fiduciary will vote
your shares in its discretion. ESOP
participants must vote through the independent fiduciary and may not vote the
shares allocated to their respective accounts in person at the special meeting.
Q: What will happen to Nu Horizons as a
result of the merger?
A: Upon completion of the merger,
Nu Horizons will become a wholly-owned subsidiary of Buyer, and shares of
Company common stock will no longer be listed on any stock exchange, including
the NASDAQ Global Select Market, or any quotation system. See The MergerCertain Effects of the Merger
on page 41 and The Merger AgreementStructure of Merger on page 49.
Q: What do I need to do now?
A: We urge you to read this proxy statement
carefully, including its annexes, and consider how the merger will affect
you. If you are a stockholder of record,
you can ensure your shares are voted at the special meeting by submitting your
proxy through the Internet or by telephone or completing, dating, signing and
returning the enclosed proxy card in the enclosed prepaid envelope. If you hold your shares in street name, you
can ensure that your shares are voted at the special meeting by instructing
your broker, bank or other nominee how to vote, as discussed below.
Do NOT return your stock
certificate(s) with your proxy card
. See The Special MeetingHow You Can Vote on
page 18.
Q: When and where is the special meeting?
A: The special meeting of stockholders of
Nu Horizons will be held in [
·
], on [
·
], [
·
] [
·
], 2010, at [
·
] New York City time. See The Special Meeting beginning on
page 17.
Q: Who can vote at the special meeting?
A: You can vote at the special meeting if you
owned shares of Company common stock at the close of business on [
·
], [
·
] [
·
], 2010, the record date for stockholders
entitled to vote at the special meeting.
As of the close of business on that day, approximately
[18,525,911]
shares of Company common stock were
outstanding. See The Special Meeting
beginning on page 17.
Q: How are votes counted?
A: Votes will be counted by the inspector of
election appointed for the special meeting, who will separately count
FOR
and
Against
votes, abstentions and broker non-votes. A broker non-vote occurs when a nominee
holding shares for a beneficial owner does not receive instructions with
respect to the merger proposal from the beneficial owner. Because adoption of the merger agreement
requires the affirmative vote of holders of a majority of the outstanding
shares of Company common stock entitled to vote at the special meeting, the
failure to vote broker non-votes and abstentions will have exactly the same
effect as voting Against the merger proposal.
See The Special MeetingRecord Date, Quorum and Voting beginning on
page 17.
Q: How do I vote?
A: You may vote by:
·
Internet using the Internet voting
instructions printed on your proxy card;
·
telephone using the telephone number printed
on your proxy card;
·
signing and dating each proxy card you
receive and returning it in the enclosed prepaid envelope;
10
Table of Contents
·
if you hold your shares in street name,
following the procedures provided by your broker, bank or other nominee; or
·
attending the special meeting and voting in
person, as more fully described below.
If you return your
signed proxy card, but do not mark the boxes showing how you wish to vote, your
shares will be voted FOR the merger proposal and FOR the proposal to
adjourn the special meeting, if necessary or appropriate, to solicit additional
proxies. See The Special MeetingHow
You Can Vote on page 18.
Q: May I attend the special meeting and
vote in person?
A: Yes.
All stockholders at the close of business on the record date may attend
the special meeting and vote in person.
If your shares of Company common stock are held in street name, you
must obtain a legal proxy from your broker, bank or other nominee and bring
your statement evidencing your beneficial ownership of Company common stock in
order to attend the special meeting and vote in person. Whether or not you plan to attend the special
meeting, please submit your proxy through the Internet or by telephone or
complete, date, sign and return, as promptly as possible, the enclosed proxy
card in the enclosed prepaid envelope.
See The Special MeetingHow You Can Vote on page 18.
Q: How can I change or revoke my vote?
A: If you submit your proxy through the Internet
or by telephone or mail, you may revoke your proxy at any time before the vote
is taken at the special meeting in any of the following ways:
·
by granting a proxy through the Internet or
by telephone after the date of your original proxy and before the deadlines for
voting included on your proxy card;
·
by submitting a later-dated proxy card by
mail before your earlier-dated proxy is voted at the special meeting;
·
by giving written notice of the revocation
of your proxy to our Corporate Secretary at 70 Maxess Road, Melville,
New York 11747, that is dated later than the date of your
previously-delivered proxy and which is actually received by our Corporate
Secretary prior to the special meeting; or
·
by voting in person at the special meeting.
Your attendance at
the special meeting does not automatically revoke your proxy. If you have instructed your broker, bank or
other nominee to vote your shares, the above-described options for revoking
your proxy do not apply. Instead, you
must follow the directions provided by your broker, bank or other nominee to
change your vote. See The Special
MeetingHow You May Revoke or Change Your Vote on page 19.
Q: What factors did the board consider in making
its recommendation?
A: In making its recommendation, the board took
into account, among other things, the merger consideration to be received by
holders of Company common stock pursuant to the merger agreement, not only in
relation to the market price immediately prior to signing and historical market
prices of Company common stock, but also in relation to the boards assessment
of the business, competitive position and prospects of the Company, and the
terms and conditions of the merger agreement, including our ability to furnish
information to, and conduct negotiations with, a third party should we receive
an alternative proposal, and terminate the merger agreement to accept an
acquisition proposal that the board
determines to be a superior offer. See The
MergerReasons for the Merger; Recommendation of Nu Horizons Board of
Directors beginning on page 28.
Q: When do you expect the merger to be
completed?
A: We are working to complete the merger as
quickly as possible. We currently expect
to complete the merger during the fourth
calendar quarter of 2010 or the first calendar quarter of 2011, assuming
that all of the conditions
11
Table
of Contents
set forth in the
merger agreement have been satisfied or waived.
If our stockholders vote to approve the proposal to adopt the merger
agreement, the merger will become effective as promptly as practicable
following the satisfaction or waiver of the other conditions to the
merger. See The Merger AgreementConditions
to Completing the Merger beginning on page 58.
Q: What happens if the merger is not completed?
A: If the merger
agreement is not adopted, or if the merger is not completed for any other
reason, Merger Sub will not be merged with and into the Company and holders of
Company common stock, holders of stock options and holders of restricted stock
will not be entitled to receive any payment for their shares in connection with
the merger. Instead, the Company will
remain an independent entity. See The
MergerConduct of Company Business if Merger is Not Completed beginning on
page 41.
Q: How many votes are required to approve the
merger proposal?
A: The affirmative vote of holders of a majority
of outstanding shares of Company common stock entitled to vote at the special
meeting as of the close of business on the record date is required to adopt the
merger agreement. As of the close of
business on [
·
], [
·
] [
·
], 2010, the record date for stockholders
entitled to vote at the special meeting, there were
[18
,
525,911]
shares of Company common stock outstanding. This means that
[9
,
262,956]
shares or more must vote in favor of adopting the
merger agreement. See The Special
MeetingRecord Date, Quorum and Voting beginning on page 17.
Q: Have any stockholders already agreed to vote
in favor of the adoption of the merger agreement?
A: Pursuant to the merger agreement, all of
Nu Horizons directors beneficially owning shares on September 19,
2010, entered into voting agreements pursuant to which they agreed to vote in
favor of the merger proposal. As of [
·
], [
·
] [
·
], 2010, the record date for stockholders
entitled to vote at the special meeting, these persons represented
[974,365]
shares of Company common stock, which is
equivalent to approximately
[5.3%]
of
outstanding Company common stock, excluding
[1,083,051]
shares issuable currently or issuable within 60 days upon exercise of
outstanding options. See The MergerInterests
of the Companys Executive Officers and Directors in the MergerAgreements and
Intent to Vote in Favor of the Merger on page 46.
Q: How many votes do I have?
A: You have one vote for each share of Company
common stock you own as of the record date.
See The Special MeetingRecord Date, Quorum and Voting on page 17.
Q: If my shares are held in street name by my
broker, will my broker vote my shares for me?
A: Your broker will vote your shares only if you
provide instructions to your broker on how to vote. You should instruct your broker to vote your
shares by following the directions provided to you by your broker. See The Special MeetingHow You Can Vote
beginning on page 18.
Q: What if I fail to instruct my broker?
A: Without instructions, your broker will not
vote any of your shares held in street name.
Broker non-votes will be counted for the purpose of determining the
presence or absence of a quorum, but will not be deemed votes cast and will
have exactly the same effect as a vote Against the merger proposal. See The Special MeetingRecord Date, Quorum
and Voting beginning on page 17 and The Special MeetingHow You Can Vote
on page 18.
Q: Will my shares held in street name or
another form of record ownership be combined for voting purposes with shares I
hold of record?
A: No. Because any shares you may hold in street
name will be deemed to be held by a different stockholder than any shares you
hold of record, any shares so held will not be combined for voting purposes
with shares you hold of record.
Similarly, if you own shares in various registered forms, such as
jointly with your spouse, as trustee of a trust or as custodian for a minor,
you will receive, and will need to sign and return, a separate proxy card for,
or
12
Table
of Contents
otherwise vote,
those shares because they are held in a different form of record
ownership. Shares held by a corporation
or business entity must be voted by an authorized officer of the entity. Shares held in an individual retirement
account must be voted under the rules governing the account.
Q: What happens if I do not vote?
A: Because the vote required is based on the
total number of shares of Company common stock outstanding on the record date,
and not just the shares that are voted, if you do not vote, it will have the
exact same effect as a vote Against the merger proposal. If the merger is completed, whether or not
you vote for the merger proposal, you will be paid the merger consideration for
your shares of Company common stock upon completion of the merger, unless you
properly exercise your appraisal rights.
See The Special MeetingRecord Date, Quorum and Voting beginning on
page 17 and Appraisal Rights beginning on page 70 and Annex C.
Q. Do I have the right to seek an appraisal of
my shares?
A. Yes.
If you wish, you may seek an appraisal of the fair value of your shares,
but only if you comply with the requirements of Section 262 of the
Delaware General Corporation Law as described in Appraisal Rights beginning
on page 70 and as provided in Annex C of this proxy statement. Based on the determination of the Delaware
Court of Chancery, the appraised value of your shares of Company common stock,
which will be paid to you if you seek an appraisal, could be greater than, the
same as, or less than the $7.00 merger consideration.
Q: When should I send in my stock certificates?
A: After the special meeting, you will receive a
letter of transmittal to complete and return to American Stock Transfer &
Trust Company, the paying agent. In
order to receive the merger consideration as soon as reasonably practicable
following the completion of the merger, you must send the paying agent your
validly completed letter of transmittal together with your Nu Horizons
stock certificates as instructed in the separate mailing.
You should not send your
stock certificates now
. See The
MergerProcedures for Receiving the Merger Consideration on page 41.
Q: When can I expect to receive the merger
consideration for my shares?
A: Once the merger is completed, you will be
sent in a separate mailing a letter of transmittal and other documents to be
delivered to the paying agent in order to receive the merger consideration. Once you have submitted your properly
completed letter of transmittal, Nu Horizons stock certificates and other
required documents to the paying agent, the paying agent will send you the
merger consideration. See The
MergerProcedures for Receiving the Merger Consideration on page 41.
Q: I do not know where my stock certificate
ishow will I get my cash?
A: The materials we will send you after
completion of the merger will include the procedures that you must follow if
you cannot locate your stock certificate.
This will include an affidavit that you will need to sign attesting to
the loss of your certificate. We may
also require that you provide a bond to Nu Horizons in order to cover any
potential loss. See The Merger
AgreementPayment for Shares and Exchange Procedures on page 50.
Q: What do I need to do now?
A: You should indicate your vote on your proxy
card and sign and mail your proxy card in the enclosed return envelope or
otherwise vote your shares as soon as possible so that your shares may be
represented at the special meeting. The
meeting will take place on [
·
], [
·
] [
·
], 2010.
See The Special Meeting beginning on page 17.
Q: What happens if I sell my shares of Company
common stock before the special meeting?
A: The record date for stockholders entitled to
vote at the special meeting is earlier than the expected date of the
merger. If you transfer your shares of
Company common stock after the record date but before the special meeting, you
will, unless special arrangements are made, retain your right to vote at the
special meeting but will transfer the
13
Table
of Contents
right to receive the
merger consideration to the person to whom you transfer your shares. If you transfer your shares of Company common
stock before the record date, you will transfer your right to vote at the
special meeting, as well as the right to receive the merger consideration, to
the person to whom you transfer your shares.
See The Special MeetingRecord Date, Quorum and Voting beginning on
page 17.
Q: What are the consequences of the merger to
members of Nu Horizons management and board of directors?
A: Following the merger, certain members of
Nu Horizons management may continue as management of the surviving
corporation. However, to our knowledge, no
agreements have been reached with any members of management. Nu Horizons current board of directors,
however, will be replaced by a new board of directors to be nominated by
Buyer. Like all other Nu Horizons
stockholders, members of Nu Horizons management and board of directors
will be entitled to receive $7.00 per share in cash for each of their shares of
Company common stock. Upon completion of
the merger, each then-outstanding stock option that was granted by the Company
will be cancelled, and option holders will receive from Buyer or the surviving
corporation an amount in cash equal to the product of (x) the number of
shares of Company common stock covered by such option, whether or not vested,
multiplied by (y) the excess, if any, of the $7.00 per-share merger
consideration over the per-share exercise price for such option, less any
applicable withholding taxes. No amounts
will be paid with respect to options that have an exercise price equal to or
greater than $7.00 per share. All
restricted stock awards will become fully vested and each share that is subject
to a restricted stock award will be treated identically to all other
outstanding shares of Company common stock.
See The MergerInterests of the Companys Executive Officers and
Directors in the Merger on page 43.
Q: Will the merger be a taxable transaction to
me?
A: Yes. The exchange of shares of Company common
stock for cash pursuant to the merger generally will be a taxable transaction
to U.S. holders for U.S. federal income tax purposes. If you are a U.S. holder
and you exchange your shares of Company common stock pursuant to the merger,
you will generally recognize gain or loss in an amount equal to the difference,
if any, between the cash payments made to you pursuant to the merger and your
adjusted tax basis in your shares of Company common stock. Backup withholding may also apply to the cash
payments made pursuant to the merger unless the U.S. holder or other payee
provides a taxpayer identification number, certifies that such number is
correct and otherwise complies with the backup withholding rules. Payments made with
respect to stock options and restricted stock will generally be subject to
ordinary income tax. You should
read The MergerMaterial U.S. Federal Income Tax Consequences of the Merger beginning
on page 46 for a more detailed discussion of the U.S. federal income tax
consequences of the merger.
You should also consult
your tax advisor for a complete analysis of the effect of the merger on your
federal, state, local and/or foreign taxes.
Q: Who can answer further questions?
A: If you would like additional copies of this
proxy statement or a new proxy card or if you have questions about the merger,
you should contact our Corporate Secretary, Nu Horizons Electronics Corp.,
70 Maxess Road, Melville, New York 11747. You may also call our proxy solicitor,
MacKenzie Partners, Inc., toll-free at (800) 322-2885 (banks and
brokers may call collect at (212) 929-5500). See Where You Can Find More Information on
page 73.
14
Table of Contents
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This
proxy statement, and the documents to which we refer you in this proxy
statement, contain forward-looking statements that involve numerous risks and
uncertainties. The statements contained
in this proxy statement that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended, which we refer to as the Securities Act, and Section 21E
of the Exchange Act of 1934, as amended, which we refer to as the Exchange Act,
including, without limitation, statements regarding the expected benefits and
closing of the proposed merger, the management of the Company and the Companys
expectations, beliefs and intentions. All forward-looking statements included
in this proxy statement are based on information available to the Company on
the date hereof. In some cases, you can
identify forward-looking statements by terminology such as may, can, will,
should, could, expects, plans, anticipates, intends, believes, estimates,
predicts, potential, targets, goals, projects, outlook, continue,
preliminary, guidance, or variations of such words, similar expressions, or
the negative of these terms or other comparable terminology. No assurance can be given that any of the
events anticipated by the forward-looking statements will transpire or occur,
or if any of them do so, what impact they will have on our results of
operations or financial condition.
Accordingly, actual results may differ materially and adversely from
those expressed in any forward-looking statements. Neither the Company nor any other person can
assume responsibility for the accuracy and completeness of forward-looking
statements. There are various important
factors that could cause actual results to differ materially from those in any
such forward-looking statements, many of which are beyond the Companys
control. These risks and uncertainties
include, but are not limited to, the risks detailed in our filings with the
SEC, including our most recent filings on Forms 10-Q and 10-K, and the
following factors, which are not exhaustive:
·
the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger agreement
that could require us to reimburse Buyer up to $3,000,000 of its fees and
expenses and, in some cases, to pay to Buyer a termination fee of 3% of the
aggregate merger consideration payable, or approximately $4,039,800, plus
expenses (less any such fees and expenses we already paid);
·
the outcome of any legal proceedings that
have been or may be instituted against us and others relating to the merger
agreement;
·
the failure to obtain stockholder approval
or the failure to satisfy other conditions to completion of the merger;
·
the inability to obtain any required regulatory
approvals in a timely manner, if at all;
·
the failure of the merger to close for any
other reason;
·
risks that the proposed transaction disrupts
current plans and operations, and the potential difficulties in employee
retention as a result of the merger;
·
the effect of the announcement of the merger
on our business and customer and supplier relationships, operating results and
business generally, including our ability to retain key employees; and
·
the amount of the costs, fees, expenses and
charges related to the merger, which we will not recover if we do not complete
the merger.
If one or more
events related to these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may differ materially
from what we anticipate. We undertake no
obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable
securities laws.
15
Table of Contents
INTRODUCTION
This proxy statement
and the accompanying form of proxy are being furnished to the holders of shares
of Company common stock, $0.0066 par value, in connection with the solicitation
of proxies by the board of directors of Nu Horizons for use at the special
meeting of the stockholders of Nu Horizons to be held in [
·
], on [
·
], [
·
] [
·
], 2010, at [
·
] New York City time.
We are asking our
stockholders to vote on a proposal to adopt the merger agreement, dated as of
September 19, 2010, by and among Nu Horizons, Buyer and Merger
Sub. If the merger is completed,
Nu Horizons will become a wholly-owned subsidiary of Buyer and our
stockholders (other than Buyer, Merger Sub, or any other subsidiary of Buyer,
Nu Horizons or any subsidiary of Nu Horizons and those who perfect
their appraisal rights under Delaware law) will have the right to receive $7.00
in cash, without interest, for each share of Company common stock. Holders of options will also receive the
excess, if any, of $7.00 over the applicable per-share exercise price for each
option.
THE PARTIES TO THE MERGER
Nu
Horizons Electronics Corp.
Nu Horizons,
headquartered in Melville, New York, and its wholly- and majority-owned
subsidiaries, are engaged in the distribution of, and supply chain services
for, high technology active and passive electronic components. The active and passive components distributed
by the Company are utilized by the electronics industry and other industries in
the manufacture of sophisticated electronic products including: industrial instrumentation, computers and
peripheral equipment, consumer electronics, telephone and telecommunications
equipment, satellite communications equipment, cellular communications
equipment, medical equipment, automotive electronics, and audio and video
electronic equipment.
Nu Horizons was
incorporated in the State of Delaware in 1987.
Nu Horizons maintains its principal executive offices at
70 Maxess Road, Melville, New York 11747. Nu Horizons telephone number is
(631) 396-5000.
Arrow
Electronics, Inc.
Arrow is a global provider
of products, services, and solutions to industrial and commercial users of
electronic components and enterprise computing solutions. Arrow maintains over
200 sales facilities
and 22
distribution and value-added centers in 51 countries and territories, serving
over 70 countries and territories, over 900 suppliers
and over 125,000
original
equipment manufacturers, contract manufacturers, and commercial customers. As a supply chain partner, Arrow offers both
a wide spectrum of products and a broad range of services and solutions,
including materials planning, design services, programming and assembly
services, inventory management, and a variety of online supply chain
tools. Customers include manufacturers
of consumer and industrial equipment (including machine tools, factory automation,
and robotic equipment), telecommunications products, automotive and
transportation, aerospace and defense, scientific and medical devices, and
computer and office products, as well as value-added resellers of enterprise
computing solutions.
Arrow was incorporated in
the State of New York in 1946. Arrow maintains its principal executive
offices at 50 Marcus Drive, Melville, New York 11747. Arrows telephone number is
(631) 847-2000.
Neptune
Acquisition
Corporation, Inc.
Neptune Acquisition
Corporation, Inc. ( Merger Sub), a Delaware corporation, was formed by Buyer
solely for the purpose of completing the merger. Merger Sub is wholly-owned by Buyer and has
not engaged in any business except in anticipation of the merger. Upon the consummation of the proposed merger,
Merger Sub will cease to exist and Nu Horizons will continue as the
surviving corporation. The principal
executive offices of Merger Sub are located at c/o Arrow Electronics, Inc.,
50 Marcus Drive, Melville, New York 11747. The telephone number at such principal
offices is (631) 847-2000.
16
Table of Contents
THE SPECIAL MEETING
Time,
Place and Purpose of the Special Meeting
This proxy statement
is being furnished to holders of Company common stock as part of the
solicitation of proxies by the Companys board of directors for use at a
special meeting of stockholders to be held at [
·
] on [
·
], [
·
] [
·
], 2010, starting at [
·
] New York City time.
The purpose of the
special meeting is for the holders of Company common stock to consider and vote
upon a proposal to adopt the merger agreement which provides for the merger of
Merger Sub with and into the Company. A
copy of the merger agreement is attached to this proxy statement as
Annex A. You are also being asked to approve a proposal to adjourn the
special meeting, if necessary, to solicit additional proxies if, at the time of
the adjournment, there are insufficient votes to approve the merger
agreement. This proxy statement and the
enclosed form of proxy are first being mailed to the holders of Company common
stock on or about [
·
], [
·
] [
·
], 2010.
On
September 19, 2010, our board of directors unanimously determined that the
merger and the merger agreement are advisable and fair to, and in the best
interests of, Nu Horizons stockholders and approved the merger agreement
and the transactions contemplated thereby, including the merger.
Therefore
,
our board of directors unanimously recommends that you vote
FOR
the proposal to adopt the merger agreement and
FOR
the proposal to
adjourn the special meeting
,
if necessary
,
to solicit additional proxies if
,
at the time
of the adjournment
,
there are insufficient
votes to approve the merger agreement
.
Our board of
directors knows of no other matter that will be presented for consideration at
the special meeting. If any other matter
properly comes before the special meeting, the persons named in the enclosed
form of proxy or their substitutes will vote in accordance with their best
judgment on such matters.
Record
Date, Quorum and Voting
The holders of
record of Company common stock, par value $0.0066, as of the close of business
on [
·
], [
·
] [
·
], 2010, the record date for the special
meeting, are entitled to receive notice of, and to vote at, the special
meeting. On the record date, there were
[18,525,911]
shares of Company common stock outstanding,
with each share entitled to one vote.
The holders of a
majority of the outstanding shares of Company common stock on [
·
], [
·
] [
·
], 2010, represented in person or by proxy,
will constitute a quorum for purposes of the special meeting. A quorum is necessary to hold the special meeting. In the event that a quorum is not present at
the special meeting, it is expected that the meeting will be adjourned or
postponed to solicit additional proxies.
Any shares of Company common stock held in treasury by the Company or by
any of its subsidiaries are not considered to be outstanding for purposes of
determining a quorum. Abstentions and
properly executed broker non-votes will be counted as shares present and
entitled to vote for the purposes of determining a quorum. Broker non-votes result when brokers are
prohibited from exercising their voting discretion with respect to the approval
of non-routine matters such as the merger proposal, and, thus, absent specific
instructions from the beneficial owner of those shares, brokers are not empowered
to vote the shares with respect to the approval of those proposals.
The adoption of the
merger agreement and thereby approval of the merger requires the affirmative
vote of holders representing at least a majority of the shares of Company
common stock outstanding and entitled to vote at the special meeting on [
·
], [
·
] [
·
], 2010, the record date for the special
meeting. Shares that are present but not
voted, either by abstention or non-vote (including broker non-vote), will be
counted for purposes of establishing a quorum.
BECAUSE
APPROVAL OF THE MERGER REQUIRES THE APPROVAL OF HOLDERS REPRESENTING A MAJORITY
OF THE OUTSTANDING SHARES OF COMPANY COMMON STOCK
,
FAILURE TO VOTE YOUR
SHARES OF NU HORIZONS STOCK (INCLUDING IF YOU HOLD THEM THROUGH A BROKER
OR OTHER NOMINEE) WILL HAVE EXACTLY THE SAME EFFECT AS A VOTE
AGAINST
THE MERGER AGREEMENT.
17
Table of Contents
The approval of the
proposal to adjourn the special meeting if there are not sufficient votes to
approve the merger requires the affirmative vote of holders representing a
majority of the shares of Company common stock present in person or by proxy at
the special meeting and entitled to vote on the matter. The persons named as proxies may propose and
vote for one or more adjournments of the special meeting, including
adjournments to permit further solicitations of proxies. No proxy voted against the proposal to
approve the merger agreement will be voted in favor of any adjournment of the
special meeting.
Under Delaware law,
holders of shares of Company common stock are eligible for appraisal rights in
connection with the merger. In order to
exercise appraisal rights, you must comply with all of the requirements of
Delaware law. See Appraisal Rights
beginning on page 70 and Annex C for information on the requirements
of Delaware law regarding appraisal rights.
How
You Can Vote
Each share of
Company common stock outstanding on [
·
], [
·
] [
·
], 2010, the record date for stockholders
entitled to vote at the special meeting, is entitled to vote at the special
meeting. Adoption of the merger
agreement and approval of the merger requires the affirmative vote of holders
representing at least a majority of the outstanding shares of Company common
stock entitled to vote at the special meeting.
You may vote your
shares as follows:
Voting
by Mail.
If you choose to vote by mail,
simply mark your proxy, date and sign it, and return it in the postage-paid
envelope provided.
Voting
by Telephone.
If you chose to vote by
telephone, simply call the phone number printed on your proxy card and follow
the instructions.
Voting
by Internet.
If you chose to vote by
Internet, simply follow the instructions printed on your proxy card.
Voting
in Person.
You can also vote by appearing
and voting in person at the special meeting.
If you vote your
shares of Company common stock by submitting a proxy, your shares will be voted
at the special meeting as you indicated on your proxy card. If no instructions are indicated on your
signed proxy card, all of your shares of Company common stock will be voted
FOR
the adoption of the merger
agreement and approval of any proposal to adjourn the special meeting, if
necessary, to solicit additional proxies in the event that there are not
sufficient votes at the time of the special meeting to approve the proposal to
adopt the merger agreement. You should
return a proxy by mail or otherwise vote your shares of Company common stock,
even if you plan to attend the special meeting in person.
If your shares are
held in street name, you will receive instructions from your broker, bank or
other nominee that you must follow to have your shares voted.
If you do not instruct
your broker
,
bank
,
or other nominee how to vote your shares
,
your shares will
not
be voted and the effect will be the same as
a vote by you
against
the merger proposal
,
but will have no effect on the proposal to adjourn the special
meeting.
Stock
Ownership and Interests
of
Certain Persons; Voting Agreements
As of [
·
], [
·
] [
·
], 2010, the record date for stockholders
entitled to vote at the special meeting, the directors and executive officers
of Nu Horizons owned, in the aggregate,
[1,016,931]
shares of Company common stock, or collectively approximately
[5.5]%
of the outstanding shares of Company common stock,
excluding
[1,107,051]
shares issuable currently
or issuable within 60 days upon exercise of outstanding options.
Certain members of
the Companys management and board of directors have interests that are different
from, or in addition to, those of holders of Company common stock
generally. It is anticipated that
certain of our executive officers may have roles with Buyer following the
merger, although to our knowledge no agreements have been reached with Buyer
regarding the terms thereof. See The
Merger
Interests of the Companys Executive Officers and Directors in the Merger
beginning on page 43.
18
Table of Contents
In connection with
the merger agreement, the directors of Nu Horizons beneficially owning
shares on September 19, 2010, entered into voting agreements pursuant to
which each of them has agreed to vote his shares of Company common stock in
favor of the merger and to refrain from granting any proxies or entering into
any other voting arrangements with respect to, or assigning, encumbering or
otherwise disposing of any of, his shares.
How
You May Revoke or Change Your Vote
You can revoke your
proxy at any time before it is voted at the special meeting by:
·
granting a proxy through the Internet or by
telephone after the date of your original proxy;
·
giving later-dated written notice of
revocation to the Secretary of the Company;
·
submitting another later-dated written
proxy; or
·
attending the special meeting and voting by
paper ballot in person. If your shares
of Company common stock are held in the name of a bank, broker, trustee or
other holder of record, including the trustee or other fiduciary of an employee
benefit plan, you must obtain a proxy, executed in your favor, from the holder
of record to be able to vote at the special meeting.
Proxy
Solicitation
The Company will pay
the costs of soliciting proxies for the special meeting. Officers, directors and employees of
Nu Horizons, and any other representatives appointed by it from time to
time, may solicit proxies by telephone, mail or in person. However, they will not be paid for soliciting
proxies. Nu Horizons also will
request that individuals and entities holding shares in their names, or in the
names of their nominees, that are beneficially owned by others, send proxy
materials to and obtain proxies from those beneficial owners, and will
reimburse those holders for their reasonable expenses in performing those
services. MacKenzie Partners has been
retained by the Company to assist it in the solicitation of proxies, using the
means referred to above, and will receive a fee of $12,500, plus reimbursement
of out-of-pocket expenses. The Company
may retain or appoint other representatives from time to time to solicit
proxies.
Adjournments
Although it is not
expected, the special meeting may be adjourned for, among other reasons, the
purpose of soliciting additional proxies to a date not later than 90 days
after the date of the special meeting.
You should note that the meeting could be successively adjourned to a
specified date not longer than 90 days after such initial
adjournment. If the special meeting is
adjourned for the purpose of soliciting additional proxies, stockholders who
have already sent in their proxies will be able to revoke them at any time
prior to their use. The persons named as
proxies may propose and vote for one or more adjournments of the special
meeting, including adjournments to permit further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement will be voted in favor of any adjournment of the special
meeting.
19
Table of Contents
THE MERGER
Background
of the Merger
The board of
directors and management of the Company regularly review the Companys business
and operations, as well as the strategic alternatives available to maximize
stockholder value, including, among others, continuing to operate as a public
company, continuing to make acquisitions, and being acquired.
The Companys
attempts to maximize stockholder value have resulted in the Company making
three acquisitions over the past few years to expand our global footprint. In fiscal 2007, we continued our growth
strategy of expanding our European presence by acquiring DT Electronics on
August 29, 2006. In fiscal 2008, we
acquired Dacom Sud, a franchised electronic component distributor, based in Munich,
Germany, on June 6, 2007. In
addition, to further expand our European presence, in September 2008, we
acquired C 88 A/S, a franchised electronic components distributor
based in Hoersholm, Denmark.
During the period
from June 2007 through July 2008, members of Company management and
our board of directors were approached by certain companies in the Companys
industry, including Arrow, to discuss the potential sale of the Company. However, during this period, the Company
began to experience several business challenges, described below, that
adversely affected the Companys stock price, managements ability to maximize
profits and, consequently, the ability to consummate a transaction.
On April 13,
2007, the Company and its wholly-owned subsidiary, Titan Logistics Corp. (Titan),
received subpoenas from the SEC requiring them to produce documents related to
their business relationship with Vitesse Semiconductor Corp. (Vitesse). The
Company and Titan act as distributors of Vitesse products. As a result of the SEC subpoenas, the Company
began to conduct its own internal investigation under the auspices of the audit
committee of the board of directors. The
cost of the SEC and related internal investigation was significant, resulting
in expenditures of $160,602 during fiscal 2007, $1,437,386 during fiscal 2008,
$3,577,399 during fiscal 2009 and $654,802 during fiscal 2010.
In August 2007,
during the preliminary stages of its discussions with Arrow and another
potential strategic buyer, in order to distinguish between the interests of
management and unaffiliated stockholders, the board of directors formed a
special committee consisting of Dominic A. Polimeni, as Chairman, and
Herbert M. Gardner, Martin Novick and David Siegel, the four independent
disinterested members of the board of directors at that time. The special committee was charged with
representing the interests of the unaffiliated stockholders for the purpose of
determining if it was advisable to pursue a transaction with either potential
strategic buyer, to solicit third parties with respect to alternative
transactions and to consider whether it was advisable to continue to operate
the Company on a stand-alone basis. In
connection with its authority to consider the Companys strategic alternatives,
the special committee retained Morgan Stanley to act as its financial advisor.
On October 3,
2007, the Company concluded that its annual and quarterly financial statements
for the fiscal years 2002 through 2007, as well as the first quarter of fiscal
2008 ended May 31, 2007, should no longer be relied upon and that a
restatement of some or all of those financial statements was required. The restatement was due to a material
understatement of its provision for income taxes for prior periods and the
related U.S. income tax obligations. As
a result of the need to restate its Form 10-K for the fiscal year ended
February 28, 2007 and the Form 10-Q for the quarter ended
May 31, 2007, the Company was unable to timely file its Form 10-Q for
the quarter ended August 31, 2007.
On October 12, 2007, the Company received a notice from the NASDAQ
Global Select Market that the Companys common stock would be delisted from
trading on NASDAQ as a result of the Companys failure to timely file its
Form 10-Q for the quarter ended August 31, 2007.
In addition, on
October 11, 2007, the Company and Titan were named as co-defendants in a
stockholder class action commenced by a group of Vitesse stockholders against
Vitesse, the Company, Titan and others.
The plaintiffs in the Vitesse class action alleged that they had a
private right of action against the Company because the Company participated in
a scheme to assist Vitesse in violating the United States securities laws. Following a United States Supreme Court
decision that held there is no private right of action for aiding and abetting
violations of the United States securities laws, the stockholder class action
was dismissed with prejudice in November 2008.
20
Table of Contents
These events
negatively impacted the market value of the Companys common stock.
On November 21,
2007, the Company completed the restatement of its financial statements and, as
a result, again became current in its SEC filings. On November 26, 2007,
the NASDAQ Global Select Market notified the Company that, due to the fact that
the Company regained compliance with the NASDAQ requirement relating to the
filing of periodic reports with the SEC, the hearing regarding the Companys
listing status was moot and the review of the Companys listing status had been
closed.
Between March and
July 2008, the special committee led the negotiations between the Company
and both Arrow and another strategic party with respect to a possible sale of
the Company. While the Company entered
into non disclosure agreements with both Arrow and the other strategic party
and provided each with certain confidential information subject to the terms of
such agreements, none of the discussions led to a proposal that, based on the
advice of Morgan Stanley, the Company was willing to pursue.
At a meeting of the
special committee on June 29, 2008, the members of the special committee
and a representative of Morgan Stanley discussed certain metrics regarding the
value of the Company that had been analyzed by Morgan Stanley relative to the
Companys then-current stock price.
Based on the information provided by Morgan Stanley, the members of the
special committee discussed the need to focus on running the business as a
stand-alone entity and, accordingly, the need for succession planning. On July 1, 2008, at a meeting of the
board of directors, the members of the board of directors determined, based on
the then-current economic environment and the advice of Morgan Stanley
regarding the value of the Company relative to its then-current market price,
that it was not advisable to consider a sale transaction at that time.
During the period
from July 2008 through February 2010, the Company continued to
operate in the ordinary course on a stand-alone basis, during which time
management sought to increase the Companys franchise lines and profit margins,
notwithstanding the unfavorable economic environment.
In April 2009,
the audit committee completed its internal inquiry related to the ongoing SEC
investigation of Vitesse and concluded that that there was not presently
sufficient evidence that the Company or its officers or employees aided and
abetted in any alleged violations of the securities laws by Vitesse. Also, based upon the forensic accounting
analysis conducted within the scope of the internal investigation, the internal
investigation concluded that the Company appropriately adjusted its inventory
for Vitesse product purchases, returns and sales. However, the internal investigation did find
evidence of internal control, inventory management and recordkeeping
deficiencies, including, but not limited to, entering into significant
transactions with Vitesse with oral terms.
The Company, in consultation with the audit committee, remedied these
deficiencies.
On March 1,
2010, the Company was formally notified that its largest supplier, Xilinx, Inc.,
would be terminating its distribution relationship with the Company effective June 2010
due to a change in Xilinxs distribution strategy. The net value of Xilinx inventories at
February 28, 2010 was $41.2 million, inclusive of confirmed
orders. Xilinx product sales were
approximately 32% of the Companys total sales for fiscal 2010.
In March 2010,
a member of the Companys management was approached by another potential strategic
buyer, Strategic Party A, which expressed a preliminary interest in acquiring
the Company. Separately, in March 2010,
Arrow again approached the Company, through Mr. Polimeni, to express a
preliminary interest in acquiring the Company.
On April 5,
2010, in response to the unsolicited expressions of interest from Arrow and
Strategic Party A, the board of directors met and, due to the fact that
there might be potential conflicts of interest resulting from the terms of any
acquisition proposal, unanimously resolved to reestablish the special committee
composed of independent directors to represent the interests of the
unaffiliated stockholders of the Company.
The board of directors reactivated the special committee, which was
subsequently renamed the strategic committee, and which consisted of
Dominic A. Polimeni, as Chairman, Herbert M. Gardner as Vice
Chairman, Steven J. Bilodeau, Martin Novick and David Siegel, each an
independent, disinterested director, to represent the interests of the
unaffiliated stockholders by considering (i) any acquisition proposal from
Arrow or Strategic Party A, (ii) whether to solicit third parties
with respect to potential alternative strategic transactions and (iii) the
strategy of continuing the Companys
21
Table
of Contents
business without
entering into a strategic transaction.
In order to assist the Company in evaluating its strategic alternatives
and the advisability of pursuing a transaction with either Arrow or Strategic
Party A, the strategic committee determined to engage Houlihan Lokey as
its financial advisor at a meeting on May 3, 2010.
In May 2010, in
furtherance of the Companys succession plan and the retirement of
Mr. Nadata, the Company retained Martin Kent to act as its President and
Chief Executive Officer. Mr. Kent
previously served as CEO of Abacus Group, plc, a European electronic component
distributor with approximately $500 million in sales for their fiscal year
ended September 30, 2008, which was acquired in January 2009. His familiarity with the Companys products
and geographic markets was expected, among other things, to assist the Company
in continuing as a stand-alone entity to the extent that the board of
directors, through the strategic committee, determined that such course of
action would to be in the best interests of the Company and its stockholders.
From May 2010
through June 2010, representatives of Houlihan Lokey held discussions with
members of the Companys management and members of the board of directors
regarding various strategic and financial alternatives, including, among
others, engaging in a going-private transaction, selling to a strategic party,
pursuing another acquisition, paying a dividend, repurchasing shares of Company
common stock or restructuring portions of the Companys international
operations.
On May 17,
2010, various members of senior management, members of the strategic committee,
representatives of Farrell Fritz, P.C., outside counsel to the Company, and
representatives of Houlihan Lokey met telephonically to review the preliminary
acquisition discussions with Arrow and Strategic Party A. It was determined at that meeting that
various members of senior management, members of the strategic committee,
representatives of Farrell Fritz and representatives of Houlihan Lokey would
meet on a weekly basis to discuss the conversations with Arrow and Strategic
Party A, as well as the ongoing review of the strategic alternatives
available to the Company.
In connection with
the evaluation of its strategic alternatives, and in response to requests from
Arrow and Strategic Party A to engage in potential acquisition discussions, the
Company entered into separate confidentiality agreements with each of Arrow and
Strategic Party A on May [19], 2010, and May 20, 2010, respectively.
On May 25,
2010, members of Company management and representatives of Houlihan Lokey met
with Arrow management and representatives of Goldman Sachs, Arrows financial
advisor, to discuss a possible transaction.
In early June 2010,
the Company and Oracle Corporation (formerly Sun Microsystems) entered into
discussions relating to the non-renewal of their supplier/distributor
relationship following the acquisition of Sun Microsystems by Oracle
Corporation. Sun Microsystems was one of
the Companys ten largest suppliers for the preceding fiscal year. On August 20, 2010, it was confirmed by
Sun/Oracle that the termination would become effective November 30, 2010.
On June 13 and
14, 2010, Company management and Mr. Polimeni met with management from
Strategic Party A to provide an overview of the Companys business and
discuss a potential transaction. At the
meeting with Strategic Party A on June 14, 2010, the Companys
executives made a presentation regarding the Companys business and financial
condition.
On June 15,
2010, representatives of Houlihan Lokey and Farrell Fritz attended a telephonic
meeting of the board of directors; the representatives of Houlihan Lokey made a
general presentation regarding various strategic alternatives for the Company. The presentation considered the Companys
strategic positioning, historical and projected financial performance, the cash
and debt trends, and the Companys historical stock performance. In connection with the Companys evaluation
of its strategic alternatives, the board of directors discussed with
representatives of Houlihan Lokey the advisability of contacting additional
potential acquirers, in addition to Arrow and Strategic Party A, to enable
the strategic committee to better gauge any offer received from either Arrow or
Strategic Party A. The members of the board of directors and
representatives of Houlihan Lokey discussed other potential strategic acquirers
based on their stated interest in, and history of successfully completing,
acquisitions in the electronic component distribution sector. There was also discussion of the advisability
of contacting possible
22
Table
of Contents
financial
acquirers. However, based on the results
of the various analyses performed by Houlihan Lokey, the board of directors
determined that strategic buyers would be able to realize certain synergies
that would not be available to financial buyers and, as a result, a financial
buyer would be unable to rationalize a purchase price comparable to that which
a strategic buyer would be willing to pay.
There was a discussion of the various potential strategic acquirers and
their financial condition, including the likelihood that any such potential
acquirer could finance an acquisition of, and deliver immediate liquidity to,
the Company and its stockholders.
Following that discussion, Houlihan Lokey was authorized to contact one
additional strategic acquirer, Strategic Party B, which was believed to be
potentially interested in, and financially able to consummate, an acquisition
of the Company. However, Strategic
Party B informed representatives of Houlihan Lokey that it was not
interested in pursuing a transaction with the Company. At that meeting, the board of directors also
determined that Houlihan Lokey should explore a potential acquisition in Europe
or Asia, including the acquisition of a specific United Kingdom company.
On June 16,
2010, the Companys executives met with Arrow at the offices of Farrell Fritz,
where the Company executives made a presentation regarding the Companys
business and financial condition.
On June 17,
2010, the strategic committee and a representative of Farrell Fritz met to
discuss a presentation made by Houlihan Lokey at the board of directors meeting
on June 15, 2010. At the meeting,
the members of the strategic committee discussed advisable next steps to be
taken in connection with the strategic alternatives discussed at the
June 15, 2010 board meeting, including obtaining a valuation from Houlihan
Lokey based on management-provided projections in connection with any potential
acquisition and having management contact the specific acquisition target in
the United Kingdom to ascertain whether that company had any interest in a
merger with the Company.
During June and
July 2010, representatives of Houlihan Lokey engaged in various
discussions with both Arrow and Strategic Party A with respect to their
due diligence investigations of the Company in connection with a possible
transaction.
On July 19,
2010, representatives of Houlihan Lokey and Farrell Fritz attended a telephonic
meeting of the board of directors; representatives of Houlihan Lokey made a
general presentation regarding Houlihan Lokeys preliminary valuation analysis
of the Company. In order to assist the
board of directors in evaluating an acquisition proposal (in the event such a
proposal were received) in comparison to other strategic alternatives available
to the Company, the board of directors discussed, as a strategic alternative,
the possibility of the Company acquiring another business, as had been
previously discussed by both the strategic committee and the entire board of
directors. In this context, the board of directors considered the risks
associated with financing such a transaction and the expected synergies that
could be realized by the Company if it were to successfully complete such a
strategic acquisition. The board of directors also discussed certain factors
that could have a negative impact on the Company in the absence of a sale
transaction, including the potential loss of another supplier in addition to
the termination of the Companys relationships with both Xilinx and Sun
Microsystems, as well as the consolidation in the semiconductor distribution
industry generally, which has had a detrimental impact on the Companys
competitive position. The board of
directors also discussed whether a merger might be more favorable to
stockholders than the Company remaining independent. Factors discussed by the
board of directors included uncertainties with respect to the return on
investment that the Company could provide to its stockholders, particularly in
light of the nature of the Companys industry, then-current and future or
expected market and regulatory conditions and the risks related to the Companys
execution of its strategic plan and operation of the business. The board of directors also discussed the
timing considerations related to the return on investment it could provide to
its stockholders in the context of the various strategic alternatives available
to the Company at the time.
On July 20,
2010, there was a meeting of the strategic committee, which was attended by a
representative of Farrell Fritz, to discuss further the valuation materials
prepared by Houlihan Lokey. In addition,
on July 20, 2010, Houlihan Lokey received a written, non-binding
indication of interest from Strategic Party A to acquire the Company at a
price of $6.78 per share. Strategic
Party As proposal was subject to the satisfactory completion of due
diligence. In addition, Strategic
Party A indicated that it would require a period of exclusivity.
On July 21,
2010, there was a meeting of the strategic committee, which was attended by a
representative of Farrell Fritz, to discuss the indication of interest received
from Strategic Party A. The members
of the strategic
23
Table
of Contents
committee discussed
the fact that the proposal made by Strategic Party A may not reflect
potential synergies that would be realized by an acquirer of the Company,
including Strategic Party A, the conditions to closing contained in the
proposal and the next steps to be taken in connection with the proposed
transaction, including the need to have Houlihan Lokey revise its valuation
analysis in light of the discussions of the board of directors and strategic
committee on July 19, 2010 and July 20, 2010, respectively.
On July 22,
2010, there was a weekly update call in which a majority of the strategic
committee and board of directors participated, in addition to representatives
of Farrell Fritz and Houlihan Lokey.
During that call, there was additional discussion of Strategic
Party As indication of interest.
Members of management noted that the indication of interest contained
certain conditions that would negatively affect the certainty that a
transaction could be successfully consummated, including that the consummation
of the merger would be conditioned upon the retention of certain named
suppliers. Following the discussion, the
members of the board concluded that it would be advisable to seek an indication
of interest from Arrow to assist it in evaluating the indication of interest
from Strategic Party A. Houlihan Lokey suggested that the Company consider
having Farrell Fritz prepare a form of merger agreement to be provided to any
potential purchaser so that the Company would be in a position to quickly
determine whether an agreement could be reached on acceptable terms, including
with respect to price and certainty of closing.
On July 27,
2010, Messrs. Nadata and Schuster met with representatives of Strategic
Party A to discuss the Companys passive components business, which is
conducted through its NIC Components subsidiaries. There was a general
discussion regarding NICs business, including the potential loss of sales upon
the closing of an acquisition of the Company due to the fact that the
components sold by NIC are distributed by various component distributors who
compete with Strategic Party A, including Arrow.
On July 28,
2010, Messrs. Nadata, Kent and Polimeni met with representatives of
Arrow. At that meeting, representatives
of Arrow indicated that it was interested in pursing a transaction with the
Company. Arrow presented calculations
based on its own valuation methodologies, reflecting an acquisition price range
of $4.42 to $6.54 per share. Arrow then
orally indicated that it believed a price of $6.00 per share would be
appropriate for an acquisition of the Company, but invited the Company to
provide a response as to why a higher per-share price should be acceptable to
Arrow.
On July 29,
2010, there was a meeting of the board of directors, which was attended by a
representative of Farrell Fritz. At the
meeting, there was a discussion of the status of the Companys discussions with
Arrow and Strategic Buyer A. The board of directors discussed the need for
the Company to negotiate a merger agreement with the least amount of risk that
a transaction would be announced but not successfully consummated. During this discussion, the board of
directors determined that the conditions set forth in Strategic Party As
proposal with respect to suppliers amounted to an unacceptable level of risk
that a transaction would be announced but not successfully consummated.
On the July 30,
2010 weekly update call, in which various members of management and the
strategic committee, as well as representatives of Houlihan Lokey and Farrell
Fritz, participated, there was further discussion regarding the non-binding
indication of interest received from Strategic Party A and the status of
the Companys discussions with Arrow.
At a telephonic
board of directors meeting on August 2, 2010, at which representatives of
Houlihan Lokey and Farrell Fritz were present, there was a discussion of the
status of the communications with Arrow with respect to purchase price and the
written indication of interest received from Strategic Party A. At that
meeting, a representative of Farrell Fritz reviewed the boards fiduciary
responsibilities under Delaware law in connection with any sale of the
Company. The board of directors
discussed negotiating strategies with respect to both Strategic Party A
and Arrow, and ultimately determined that Farrell Fritz should prepare a form
of merger agreement to be provided to each of Arrow and Strategic Party A
so that the board of directors and strategic committee, together with their
advisors, could better assess the legal and business issues related to each
partys proposal, including conditions that would increase the risk that the
transaction would be announced but not successfully consummated. Following consultation with representatives
of Houlihan Lokey, the board of directors determined that a purchase price of
24
Table
of Contents
$7.00 per share
would be an appropriate target for any possible sale of the Company and
therefore determined to request a price in excess of that amount.
On August 3,
2010, Mr. Kent spoke with a representative of Arrow with respect to
updated projections for the Company.
Following the discussion, Mr. Kent received from Arrow additional
calculations indicating that Arrow would be willing to proceed with a possible
acquisition of the Company at a price of $6.19 per share.
On August 4,
2010, Houlihan Lokey provided Arrow and Strategic Party A with a letter
proposal stating that the Company would consider a transaction at a price in
excess of $7.00 per share, subject to each of Arrow and Strategic Party A
providing comments to the form of merger agreement that had been prepared, a
copy of which was included with the letter proposal.
On August 6,
2010, Mr. Kent spoke with a representative of Arrow to provide information
with respect to the Companys financial projections in an effort to maximize
Arrows offer price. On August 6,
2010, Mr. Nadata spoke with a representative of Strategic Party A
with respect to the letter proposal and form of merger agreement provided to
Strategic Party A. During that conversation, Mr. Nadata stressed the
Companys desire to quickly ascertain the likelihood of proceeding with a sale
transaction at a price and on terms acceptable to the board of directors and
the strategic committee.
On August 10,
2010, Strategic Party A provided a revised written, non-binding indication
of interest which eliminated certain of the closing conditions contained in its
initial non-binding indication of interest and increased its proposed purchase
price to $6.89 per share. The proposal
from Strategic Party A did not include comments to the form of merger
agreement.
On August 11,
2010, Arrow provided a written, non-binding indication of interest stating that
it was interested in acquiring the Company at a price of $6.50 per share. Although the indication of interest did not
include specific comments to the form of merger agreement, Arrow indicated that
it did not believe, based on its review of the form of merger agreement, that
the parties were significantly apart with respect to the terms of a potential
acquisition transaction.
On August 13,
2010, there was a telephonic meeting of the board of directors which was
attended by representatives of Houlihan Lokey and Farrell Fritz. It was determined that it would be advisable
to ascertain each of Arrows and Strategic Party As view on the terms of the
merger agreement prior to entering into any period of exclusivity with either
party. At the conclusion of the meeting,
Houlihan Lokey was authorized to respond to Arrow and Strategic Party A
indicating that the Company would be willing to enter into an agreement to
negotiate exclusively with either strategic party if it agreed to a purchase
price of $7.00 per share and provided an acceptable markup of the form of
merger agreement. Accordingly, on the evening of August 13, 2010, Houlihan
Lokey provided representatives of each of Arrow and Strategic Party A with
a letter proposal advising them of the Companys determination, together with a
form of exclusivity agreement providing for a two-week exclusivity period.
On August 18,
2010, Houlihan Lokey received a markup of the form of merger agreement from
Milbank, Tweed, Hadley & McCloy LLP, counsel for Arrow, together with
a revised form of exclusivity agreement requesting a three-week period for
exclusive negotiations. The Arrow
revisions were circulated to the members of the board of directors. In a separate communication, a representative
of Arrow also orally communicated to Mr. Nadata Arrows willingness to pay
a purchase price of $7.00 per share.
On August 19,
2010, Houlihan Lokey distributed to representatives of Arrow and Strategic
Party A draft disclosure schedules containing preliminary disclosures that
would be required by the representations and warranties contained in the form
of merger agreement.
On August 20,
2010, there was a weekly update call in which a majority of the board of
directors participated, which was attended by representatives of Houlihan Lokey
and Farrell Fritz. During the call,
Farrell Fritz reviewed the material substantive changes to the form of merger
agreement proposed by Arrow, including changes to the conditions to closing
relating to the risks of supplier and customer terminations, covenants related
to
25
Table
of Contents
antitrust approval,
the elimination of a cap on Arrows expenses in the event the merger agreement
is terminated prior to closing, an increase to the termination fee from 2.5% to
4.0% and revisions to the events giving rise to the payment of a termination
fee. The members of the board of
directors in attendance considered the issues and determined that Farrell Fritz
should discuss with Milbank the issues raised in its comments to ascertain
Arrows willingness to negotiate its proposed changes. In addition, on August 20, 2010, Arrow
submitted a written proposal to acquire the Company for $7.00 per share.
On August 23,
2010, Farrell Fritz and Milbank discussed Arrow and Milbanks comments to the
form of merger agreement. Farrell Fritz
sought to eliminate the risks of supplier and customer terminations as
conditions to closing, further revise the covenants related to antitrust
approval, reinsert a cap on Arrows expenses in the event of a termination of
the merger agreement, propose a lesser increase in the amount of the
termination fee, and further revise the events giving rise to the payment of a
termination fee. On August 24,
2010, the Company retained Skadden Arps, Slate, Meagher & Flom LLP to
assist with antitrust matters related to the possible sale of the Company. On August 26, 2010, the Company
responded to Arrows comments to the merger agreement, again seeking the
changes discussed in the August 23, 2010 telephone call and specifically
proposing that any termination fee be fixed at 2.75% of the total merger
consideration.
On August 27,
2010, Houlihan Lokey received a markup of the form of merger agreement from
counsel to Strategic Party A, together with a markup of the form of
exclusivity agreement provided by Houlihan Lokey. Separately, a representative of Strategic
Party A advised Mr. Nadata that Strategic Party A would be
willing to proceed with an acquisition of the Company at a price of $7.00 per
share. Strategic Party As proposed
revisions to the merger agreement indicated that, subject to due diligence, it
did not agree with the proposed structure of the transaction and included
changes that the Company considered to be material and significant, including a
proposed closing date no earlier than January 3, 2011, which the board of
directors believed to be significant due to the tax implications to the holders
of Company common stock of a closing in 2011, when tax rates are anticipated to
increase from 2010 levels, an increase in the termination fee from 2.5% to 4.5%
of the total merger consideration and revisions to the events giving rise to
the payment of a termination fee.
Strategic Party A also proposed to revise the form of exclusivity
agreement to provide an exclusivity period ending on September 30, 2010.
On August 29,
2010, Houlihan Lokey received from Arrow an executed copy of the Companys
initial exclusivity agreement, providing for a two-week period for exclusive
negotiations.
Also on
August 29, 2010, members of Strategic Party As management indicated
to Mr. Nadata and Houlihan Lokey that Strategic Party A still had a
significant amount of due diligence to perform and would not be in a position
to execute a merger agreement until September 30, 2010.
On August 30,
2010, there was a telephonic meeting of the board of directors which was
attended by representatives of Houlihan Lokey and Farrell Fritz. The
representatives of Houlihan Lokey reported to the board regarding the status of
discussions with both Arrow and Strategic Party A. There was a brief discussion of the
outstanding issues related to Arrows proposal, including with respect to
closing conditions tied to customers and suppliers terminating their
relationships with the Company, proposed revisions to the covenants related to
antitrust approval, the amount of the cap on Arrows reimbursable expenses and
the amount of the termination fee. There
was also a discussion about the markup received from Strategic
Party A. Following the
August 30, 2010 board of directors meeting, representatives of Farrell
Fritz and counsel for Strategic Party A discussed the issues raised in the
revised merger agreement, as described above.
On September 1,
2010, there were telephonic meetings of the board of directors at which
representatives of Farrell Fritz, Houlihan Lokey and Skadden were present. Representatives of Farrell Fritz and Houlihan
Lokey advised the board of directors regarding the status of negotiations with,
and due diligence by, each of Arrow and Strategic Party A in order to
assist the board of directors in determining whether to enter into exclusive
negotiations with Arrow, Strategic Party A or neither party. There was a discussion of the issues raised
by each of Arrows and Strategic Party As markups of the merger
agreement. The board of directors
discussed the fact that, to date, Arrow had conducted a more thorough due
diligence investigation, presumably enabling it to agree to a shorter period of
exclusive negotiation, and concluded that the greater amount of due diligence
conducted by Arrow to date could
26
Table
of Contents
reduce the
likelihood that Arrow would propose a price adjustment following the completion
of its due diligence investigation.
As a result, it was
determined that, subject to Arrows agreement to eliminate the risks of
supplier and customer terminations as conditions to closing, further revisions
to the covenants related to antitrust approval, a $3,000,000 million cap
on Arrows reimbursable expenses and a termination fee of 3%, the Company would
be willing to enter into an exclusivity agreement with Arrow. The board of directors noted that a
termination fee of 3% would permit the board of directors to consider a
superior proposal with the payment of a total termination fee of only
approximately $4 million, excluding expenses. Farrell Fritz was then instructed to contact
Milbank to see if such an agreement could be reached.
During the later meeting,
there was also a discussion about the role of the strategic committee. Farrell Fritz advised the members of the
board of directors with respect to the role of a special committee in certain
acquisition transactions. There was then
a discussion about the need for the strategic committee going forward with the
possible transaction with Arrow, following which it was determined that, unless
the terms of the proposed merger transaction with Arrow were revised in the
course of negotiations in a manner that would create the need for a special
committee to allow the board of directors to appropriately carry out its duties
in connection with the proposed transaction, there would be no need for
separate action by the strategic committee.
Following additional discussions on the material terms of the merger,
the Company countersigned the exclusivity agreement with Arrow on
September 2, 2010, pursuant to which Arrow was granted an exclusivity
period through September 16, 2010.
From
September 2, 2010 through September 19, 2010, representatives of the
Company and Arrow continued to negotiate the terms of the merger agreement and
a voting agreement, pursuant to which directors of the Company beneficially owning
shares on the date of the merger agreement would agree to vote in favor of the
merger.
On
September 13, 2010, members of Company management, representatives of
Houlihan Lokey, Arrow management and representatives of Goldman Sachs met in
person for a full day of due diligence.
On
September 15, 2010, the board of directors was given an update on the
status of the negotiations of the merger agreement with Arrow. Representatives of Houlihan Lokey reported
with respect to Arrows continued due diligence investigation of the
Company. Representatives of Farrell Fritz
reported that the only significant issue remaining related to the negotiation
of the merger agreement was the circumstances under which a termination fee or
expenses would be payable and the timing of such payments. There was a lengthy discussion regarding the
proposed expense and termination fee provisions. Based in part on the advice of its advisors,
the board of directors authorized Farrell Fritz to agree to the termination fee
and expenses proposed by Arrow in its most recent comments to the merger
agreement. Based on the advanced status
of the negotiations, the board of directors agreed to schedule another meeting
for September 16, 2010 for the purpose of having Houlihan Lokey provide
its opinion with respect to the fairness of the merger to the holders of
Company common stock from a financial point of view in the event that the terms
of the merger agreement and the information in the disclosure schedules were
fully agreed at that time.
On
September 16, 2010, the board of directors held a telephonic meeting,
which was attended by representatives of Houlihan Lokey and Farrell Fritz. At the meeting, representatives of Farrell
Fritz advised the members of the board of directors that the terms of the
merger agreement had been agreed and that the Company had provided its
disclosure schedules to Arrow.
Accordingly, if the board of directors determined to enter into the
merger agreement, the Company would likely be in a position to execute a
definitive merger agreement following a review by Milbank and Arrow of the
latest version of the merger agreement and schedules. The representatives of Houlihan Lokey then
reviewed with the members of the board of directors an analysis relating to the
fairness, from a financial point of view, of the consideration to be received
by the stockholders pursuant to the merger.
The members of the board of directors noted that a price of $7.00 per
share represented a 127.3% premium compared to the closing price of Company
common stock on September 15, 2010 (the day before the meeting), and a
115.8%, 113.6% and 109.7% premium to the one month, three month and six month
average closing prices of Company common stock over these periods,
respectively, prior to the date of the meeting.
The board of directors then considered various factors related to
whether it would be advisable and in the best interests of the Company and its
stockholders to proceed with a merger transaction, including whether a merger
with Arrow would be more favorable
27
Table
of Contents
to stockholders than
if the Company were to remain independent, the conduct of the sales process by
Houlihan Lokey, the terms of the merger agreement, including that the Company
is free to accept, under certain circumstances, a superior proposal, as well
as certain negative factors, such as the fact under certain circumstances the
Company must pay Arrows expenses up to $3,000,000, that the Company must pay
Arrow a termination fee of 3% of total equity value of the transaction, plus
expenses, in order to accept a superior proposal, the risk that the merger
may not be approved by regulators and the impact on the Company if the merger
is announced but not consummated. In
light of the foregoing considerations, the board determined that it was
advisable and in the best interests of the Company and its stockholders to
proceed with the merger with Arrow.
On
September 17, 2010, there was a telephonic meeting of the board of
directors, which was attended by representatives of Houlihan Lokey and Farrell
Fritz, to discuss the anticipated timing of the execution and delivery of the
definitive merger agreement. After
discussion of the various outstanding items, it was determined that the board
of directors would seek to approve the definitive merger agreement on Sunday,
September 19, 2010, subject to Houlihan Lokeys continued ability to opine
that the consideration to be paid to the holders of Company common stock in the
merger is fair, from a financial point of view.
On
September 19, 2010, there was a telephonic meeting of the board of
directors which was attended by representatives of Houlihan Lokey and Farrell
Fritz. At the request of the board of
directors, Houlihan Lokey reviewed with the board of directors its analysis
relating to the fairness, from a financial point of view, of the consideration
to be received by the stockholders pursuant to the merger and orally rendered
its opinion (which opinion was confirmed by delivery of a written opinion dated
September 19, 2010) that, based upon and subject to the procedures
followed, assumptions, qualifications and limitations stated in its opinion,
the consideration to be paid to the holders of Company common stock in the
merger was fair, from a financial point of view. At the conclusion of the discussion, the
board of directors determined that each of the transactions contemplated by the
merger agreement, including the merger, was fair to, and in the best interests
of, the Company and its stockholders, declared the advisability of, and
approved, the merger agreement and the transactions contemplated thereby,
including the merger, and resolved to recommend that the holders of Company
common stock adopt the merger agreement and approve the merger.
On
September 19, 2010, the Company signed the merger agreement with Arrow and
those directors of the Company beneficially owning shares of Company common
stock on that date entered into a voting agreement with Arrow. The parties issued press releases announcing
the merger on the morning of September 20, 2010.
Reasons
for the Merger; Recommendation
of Nu Horizons Board of Directors
The board of
directors, acting with the advice and assistance of Houlihan Lokey, evaluated
and negotiated the merger proposal, including the terms and conditions of the
merger agreement.
In the course of
reaching its determination, the board of directors considered the following
substantive factors and potential benefits of the merger, each of which the
board of directors believed supported its decision:
·
its belief that the merger was more
favorable to the holders of Company common stock than the alternative of
remaining a stand-alone, independent company, because of the uncertain returns
to such holders if the Company remained independent in light of the Companys
business, operations, financial condition, strategy and prospects, as well as
the risks involved in achieving the anticipated returns of executing the
Companys current strategic plan, the nature of the industry in which the
Company competes, and general industry, market and regulatory conditions, both
on an historical and on a prospective basis;
·
its belief that the merger was more
favorable to holders of Company common stock than the potential value that
might result from other strategic alternatives available to the
Companyincluding, among others, remaining an independent company and pursuing
the current strategic plan or pursuing a significant acquisitiongiven the
potential rewards, risks and uncertainties associated with those alternatives;
28
Table of Contents
·
the fact that, prior to entering into the
merger agreement, the Company had been engaged in a competitive process which
included soliciting an indication of interest from a second potential strategic
buyer, approaching a third potential strategic buyer which indicated that it
was not interested in proceeding with a transaction and taking into
consideration that, based on the proposed purchase price of $7.00 per share and
the Companys historical and projected financial performance, financial buyers
would be unable to offer a comparable price.
(See Background of the Merger);
·
its belief that no other alternative
reasonably available to the Company and its stockholders would provide greater
value to stockholders within a timeframe comparable to that in which the merger
could be completed;
·
the fact that the merger consideration of
$7.00 per share is all cash, so that the transaction allows the holders of
Company common stock to realize in the near term a fair value, in cash, for
their investment and provides such holders certainty of value for their shares;
·
Nu Horizons historical and current
financial performance and results of operations, its prospects and long-term
strategy, its competitive position in its industry, the outlook for the
electronics component distribution market and general stock market and economic
conditions;
·
the historical market prices of Company
common stock, including the market price of the Company common stock relative
to those of other industry participants and general market indices, and recent
trading activity, including the fact that the $7.00 per share merger
consideration represented a 127.3% premium over Nu Horizons closing stock
price on September 15, 2010 (the last business day preceding the delivery by
Houlihan Lokey of its analyses in support of its fairness opinion), and a
115.8%, 113.6% and 109.7% premium to the one month, three month and six month
average closing prices of Company common stock, respectively, prior to such
date;
·
its belief that Nu Horizons stock price was
not likely to trade at or above the $7.00 price offered in the merger in the
near future. The board based this belief
on a number of factors, including: the
directors knowledge and understanding of the Company and its industry;
managements projections and the Companys business plan; and the various
valuation methodologies and analyses prepared by Houlihan Lokey and described
under Opinion of Nu Horizons Financial Advisor below;
·
the financial analyses reviewed by Houlihan
Lokey with the board of directors and the oral opinion to the board of
directors (which was confirmed in writing by delivery of Houlihan Lokeys
written opinion dated September 19, 2010) with respect to the fairness, from a
financial point of view, of the $7.00 per share merger consideration to be
received by the holders of shares of Company common stock in the merger, as of September
19, 2010, and based upon and subject to the procedures followed, assumptions
made, qualifications and limitations on the review undertaken and other matters
considered by Houlihan Lokey in preparing its opinion. See Opinion of Nu Horizons Financial
Advisor. In considering the opinion, the board of directors noted that
Houlihan Lokey will receive a fee of $1.5 million upon the closing of the
merger and a fee of $200,000 for providing the fairness opinion with respect to
the merger;
·
the reputation and financial condition of
Arrow;
·
the efforts made by the board and their
advisors to negotiate a merger agreement favorable to the Company and its
stockholders and the financial and other terms and conditions of the merger
agreement;
·
the fact that, subject to compliance with
the terms and conditions of the merger agreement, the Company is permitted to
terminate the merger agreement, prior to the adoption of the merger
29
Table
of Contents
agreement by
our stockholders, in order to approve an alternative transaction proposed by a
third party that is a superior proposal as defined in the merger agreement,
upon the payment to the Buyer of a termination fee of 3% of the total equity
value of the transaction plus expenses, less any such fees and expenses we
already paid, and its belief that such termination fee was reasonable in the
context of break-up fees that were payable in other transactions and would not
impede another party from making a competing proposal. The board believed that these provisions were
important in ensuring that the transaction would be fair and the best available
to Nu Horizons unaffiliated stockholders and providing the board with adequate
flexibility to explore potential transactions with other parties;
·
the fact that, subject to compliance with
the terms and conditions of the merger agreement, the board has the ability to
modify its recommendation of the merger in the event it receives a superior
proposal;
·
the ability of the Company to conduct its business
operations generally in the ordinary course during the time period between
signing the merger agreement and closing;
·
the absence of a financing condition to the
transaction;
·
the reasonable likelihood of obtaining the
regulatory approvals necessary to complete the merger;
·
the fact that under Delaware law, the
holders of Company common stock have the right to demand appraisal of their
shares. See Appraisal Rights beginning
on page 70; and
·
the fact that the stockholder agreements
with directors do not represent an obligation to vote a number of shares that
would forestall a vote of our stockholders.
The board was aware
of and also considered, among others, the following adverse factors associated
with the merger:
·
that the public holders of Company common
stock will have no ongoing equity participation in the surviving corporation
following the merger and will cease to participate in Nu Horizons future
earnings or growth, or to benefit from any increases in the value of Nu Horizons
stock;
·
that if the merger is not completed, Nu Horizons
will be required to pay its fees associated with the transaction as well as,
under certain circumstances, reimburse Buyer up to $3,000,000 of its
out-of-pocket expenses associated with the transaction;
·
the limitations on Nu Horizons ability to
solicit or engage in discussions or negotiations with a third party regarding
specified transactions involving Nu Horizons and the requirement that Nu Horizons
pay Buyer a termination fee equal to 3% of the transaction value, approximately
$4,039,800, plus expenses, less any such fees and expenses we already paid, in
order for the board of directors to accept a superior proposal;
·
that if the merger is not completed, Nu Horizons
may be adversely affected due to potential disruptions in its operations,
including the diversion of management and employee attention, potential
employee attrition and the potential effect on the Companys business and its
business relationships;
·
that Nu Horizons business operations will
be restricted prior to the completion of the merger; and
·
the merger consideration received by U.S.
persons who are holders of Company common stock will be taxable for federal
income tax purposes.
In view of the large
number of factors considered in connection with the evaluation of the merger
agreement and the merger and the complexity of these matters, except as
expressly noted above, the board of
30
Table
of Contents
directors did not
consider it practicable to, nor did it attempt to, quantify, rank or otherwise
assign relative weights to the specific factors it considered in reaching its
decision, nor did it evaluate whether these factors were of equal
importance. In addition, each director
may have given different weight to the various factors. The board of directors held extensive discussions
with Houlihan Lokey with respect to the quantitative and qualitative analyses
of the financial terms of the merger.
The board of directors conducted a discussion of, among other things,
the factors described above, including, asking questions of Nu Horizons
management and the Companys financial and legal advisors, and reached the
conclusion that the merger is fair to and in the best interests of holders of
Company common stock.
Other than as
described in this proxy statement, Nu Horizons is not aware of any firm offers
by any other person during the prior two years for a merger or consolidation of
Nu Horizons with another company, the sale or transfer of all or substantially
all of Nu Horizons assets or a purchase of Nu Horizons securities that would
enable such person to exercise control of Nu Horizons.
Our board of directors,
acting in large part upon the opinion from Houlihan Lokey Capital, Inc., at a
meeting described above on September 19, 2010, (i) determined that the merger
agreement and the transactions contemplated thereby, including the merger, are
advisable, fair to and in the best interests of the Company and its
unaffiliated stockholders; (ii) approved the merger agreement and the
transactions contemplated thereby, including the merger, and (iii) recommended
the adoption by our stockholders of the merger agreement. In reaching these determinations, our board
of directors considered the presentation of Houlihan Lokey that was prepared
for the board of directors, as well as the fact that the board of directors
received an opinion delivered by Houlihan Lokey as to the fairness, from a
financial point of view, to the Companys unaffiliated stockholders of the
merger consideration to be received by such stockholders in the merger.
Our
board of directors recommends that you vote
FOR
the proposal to adopt
the merger agreement and
FOR
the proposal to adjourn the special
meeting, if necessary or appropriate, to solicit additional proxies.
Financing
We estimate that the
total amount of funds necessary to complete the merger and related transactions
in connection with the merger is approximately $146,497,772
representing:
·
$134,652,772 due to holders of Company
common stock under the merger agreement, assuming that no holder of Company
common stock validly exercises and perfects his, her or its appraisal rights;
and
·
$11,845,000 related to our outstanding
indebtedness, at face value and net of cash, as of August 31, 2010.
These amounts are
expected to be paid by Buyer from its cash on hand or borrowings from its
existing credit facilities.
Opinion
of Nu Horizons Financial Advisor
On
September 19, 2010, Houlihan Lokey rendered an oral opinion to the board of
directors (which was confirmed in
writing by delivery of Houlihan Lokeys written opinion dated September 19, 2010), to the effect
that, as of September 19, 2010 and based upon and subject to the procedures
followed, assumptions made, qualifications and limitations on the review
undertaken and other matters considered by Houlihan Lokey in preparing its
opinion, the consideration to be received by the holders of Company common
stock in the merger was fair, from a financial point of view, to the holders of
Company common stock.
HOULIHAN LOKEYS OPINION WAS DIRECTED TO THE BOARD OF DIRECTORS AND
ONLY ADDRESSED THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE CONSIDERATION
TO BE RECEIVED BY THE HOLDERS OF COMPANY COMMON STOCK IN THE MERGER AND DOES
NOT ADDRESS ANY OTHER ASPECT OR IMPLICATION
31
Table of Contents
OF THE
MERGER. THE SUMMARY OF HOULIHAN LOKEYS OPINION IN THIS PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS WRITTEN OPINION,
WHICH IS INCLUDED AS ANNEX B TO THIS PROXY STATEMENT AND SETS FORTH THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, QUALIFICATIONS AND LIMITATIONS ON THE
REVIEW UNDERTAKEN AND OTHER MATTERS CONSIDERED BY HOULIHAN LOKEY IN PREPARING
ITS OPINION. WE ENCOURAGE OUR
STOCKHOLDERS TO CAREFULLY READ THE FULL TEXT OF HOULIHAN LOKEYS WRITTEN
OPINION
.
HOWEVER,
NEITHER HOULIHAN LOKEYS OPINION
NOR THE SUMMARY OF ITS OPINION
AND THE RELATED ANALYSES SET FORTH IN THIS PROXY STATEMENT ARE INTENDED TO BE,
AND DO NOT CONSTITUTE ADVICE OR A RECOMMENDATION TO THE BOARD OF DIRECTORS OR
ANY STOCKHOLDER AS TO
HOW TO
ACT OR VOTE WITH RESPECT TO THE MERGER OR RELATED MATTERS.
In
arriving at its opinion, Houlihan Lokey, among other things:
·
reviewed a draft of the merger agreement;
·
reviewed a draft of the voting agreement;
·
reviewed certain publicly available business and
financial information relating to the Company that Houlihan Lokey deemed to be
relevant;
·
reviewed certain information relating to the
historical, current and future operations, financial condition and prospects of
the Company made available to Houlihan Lokey by the Company, including
financial projections prepared by the management of the Company relating to the
Company for the fiscal years ending 2011 through 2015;
·
spoke with certain members of the management of the
Company regarding the business, operations, financial condition and prospects
of the Company, the merger and related matters;
·
compared the financial and operating performance of
the Company with that of other public companies that Houlihan Lokey deemed to
be relevant;
·
considered the publicly available financial terms of
certain transactions that Houlihan Lokey deemed to be relevant;
·
reviewed the current and historical market prices
and trading volume for Company common stock; and
·
conducted such other financial studies, analyses and
inquiries and considered such other information and factors as Houlihan Lokey
deemed appropriate.
Houlihan
Lokey relied upon and assumed, without independent verification, the accuracy
and completeness of all data, material and other information furnished, or
otherwise made available, to Houlihan Lokey, discussed with or reviewed by
Houlihan Lokey, or publicly available, and did not assume any responsibility
with respect to such data, material and other information. In addition, management
of the Company advised Houlihan Lokey, and
Houlihan Lokey assumed, that the financial projections
reviewed
by Houlihan Lokey were reasonably prepared in good faith on bases
reflecting the best currently available estimates and judgments of such
management as to the future financial results and condition of the Company, and
Houlihan Lokey expressed no opinion with respect to such projections or the
assumptions on which they were based.
Houlihan Lokey relied upon and assumed, without independent verification,
that there had been no change in the business, assets, liabilities, financial
condition, results of operations, cash flows or prospects of the Company since
the respective dates of the most recent financial statements and other
information, financial or otherwise, provided to Houlihan Lokey that would have
been be material to its analyses or the opinion, and that there was no
information or any facts that would have made any of the information reviewed
by Houlihan Lokey incomplete or misleading.
32
Table of Contents
Houlihan
Lokey relied upon and assumed, without independent verification, that (a) the
representations and warranties of all parties to the agreements identified in
the first and second bullet points above and all other related documents and
instruments that are referred to therein were true and correct, (b) each party
to all such agreements and other related documents and instruments would fully
and timely perform all of the covenants and agreements required to be performed
by such party, (c) all conditions to the consummation of the merger would be
satisfied without waiver thereof, and (d) the merger would be consummated in a
timely manner in accordance with the terms described in all such agreements
and
other related
documents and instruments, without any amendments or modifications
thereto. Houlihan Lokey relied upon and
assumed, without independent verification, that (1) the merger would be consummated
in a manner that complies in all respects with all applicable international,
federal and state statutes, rules and regulations, and (2) all
governmental, regulatory, and other consents and approvals necessary for the
consummation of the merger would be obtained and that no delay, limitations,
restrictions or conditions will be imposed or amendments, modifications or
waivers made that would be material to its analyses or the opinion. In addition, Houlihan Lokey relied upon and
assumed, without independent verification, that the final forms of any draft
documents identified above would not differ in any respect from the drafts of
said documents.
Furthermore,
in connection with its opinion, Houlihan Lokey was not requested to make, and
did not make, any physical inspection or independent appraisal or evaluation of
any of the assets, properties or liabilities (fixed, contingent, derivative,
off-balance-sheet or otherwise) of the Company
or any other party, nor was Houlihan Lokey provided with any such appraisal. Houlihan Lokey did not estimate, and
expressed no opinion regarding, the liquidation value of any entity or
business.
Houlihan Lokey did not
undertake independent analysis of any potential or actual litigation,
regulatory action, possible unasserted claims or other contingent liabilities,
to which the Company is or may be a party or is or may be subject, or of any
governmental investigation of any possible unasserted claims or other
contingent liabilities to which the Company is or may be a party or is or may
be subject. The opinion was necessarily
based on financial, economic, market and other conditions as in effect on, and
the information made available to Houlihan Lokey as of September 19, 2010. Houlihan
Lokey did not undertake, and is under no obligation, to update, revise,
reaffirm or withdraw its opinion, or otherwise comment on or consider events
occurring or coming to its attention after September 19, 2010.
Houlihan
Lokeys opinion was furnished for the use and benefit of the board of directors
(solely in its capacity as such) in connection with the consideration to be
received by the holders of Company common stock in the merger and may not be
used for any other purpose without Houlihan Lokeys prior written consent. Houlihan Lokeys opinion should not be
construed as creating any fiduciary duty on Houlihan Lokeys part to any
party. Its opinion was not intended to
be, and does not constitute, a recommendation to the board of directors, any
security holder or any other person as to how to act or vote with respect to
any matter relating to the merger.
Houlihan
Lokey was not requested to opine as to, and its opinion did not express an
opinion as to or otherwise address, among other things: (1) the underlying business decision of the
Company, Arrow, their respective security holders or any other party to proceed
with or effect the merger, (2) the terms of any arrangements, understandings,
agreements or documents related to, or the form, structure or any other portion
or aspect of, the merger or otherwise (other than the consideration to be
received by the holders of Company common stock in the merger to the extent
expressly specified therein), (3) the fairness of any portion or aspect of the
merger to the holders of any class of securities, creditors or other
constituencies of the Company, Arrow, or to any other party, except if and only
to the extent expressly set forth in the last sentence of the opinion, (4) the
relative merits of the merger as compared to any alternative business
strategies that might exist for the Company, Arrow or any other party or the
effect of any other transaction in which the Company, Arrow
or any other party might engage,
(5) the fairness of any portion or aspect
of the merger to any one class or group of the Companys, Arrows or any other
partys security holders vis-à-vis any other class or group of the Companys,
Arrows or such other partys security holders (including, without limitation,
the allocation of any consideration amongst or within such classes or groups of
security holders), (6) whether or not the Company, Arrow,
their respective security holders or any
other party is receiving or paying reasonably equivalent value in the merger, (7) the solvency, creditworthiness or
fair value of the Company, Arrow or any other participant in the merger, or any
of their respective assets, under any applicable laws relating to bankruptcy,
insolvency, fraudulent conveyance or similar matters, or (8) the fairness,
financial or otherwise, of the amount, nature or any other aspect of any
compensation to or consideration payable to or received
33
Table of Contents
by
any officers, directors or employees of any party to the merger, any class of
such persons or any other party, relative to the consideration in the merger or
otherwise. Furthermore, no opinion,
counsel or interpretation was intended in matters that require legal, regulatory,
accounting, insurance, tax or other similar professional advice. It was assumed that such opinions, counsel or
interpretations were or would be obtained from the appropriate professional
sources. Furthermore, Houlihan Lokey
relied, with the consent of the board of directors, on the assessments by the
Company and its advisors, as to all legal, regulatory, accounting, insurance
and tax matters with respect to the Company, Arrow and the merger.
In
preparing its opinion to the board of directors, Houlihan Lokey performed a
variety of analyses, including those described below. The summary of Houlihan Lokeys analyses is
not a complete description of the analyses underlying Houlihan Lokeys opinion.
The preparation of a fairness opinion is a complex process involving various
quantitative and qualitative judgments and determinations with respect to the
financial, comparative and other analytical methods employed and the adaptation
and application of these methods to the unique facts and circumstances presented. As a consequence, neither a fairness opinion
nor its underlying analyses is readily susceptible to summary description. Houlihan Lokey arrived at its opinion based
on the results of all analyses undertaken by it and assessed as a whole and did
not draw, in isolation, conclusions from or with regard to any individual
analysis, methodology or factor. Accordingly, Houlihan Lokey believes that its
analyses and the following summary must be considered as a whole and that
selecting portions of its analyses, methodologies and factors or focusing on
information presented in tabular format, without considering all analyses,
methodologies and factors or the narrative description of the analyses, could
create a misleading or incomplete view of the processes underlying Houlihan
Lokeys analyses and opinion. Each analytical technique has inherent strengths
and weaknesses, and the nature of the available information may further affect
the value of particular techniques.
In
performing its analyses, Houlihan Lokey considered general business, economic,
industry and market conditions, financial and otherwise, and other matters as
they existed on, and could be evaluated as of, the date of the opinion. Houlihan Lokeys analyses involved judgments
and assumptions with regard to industry performance, general business,
economic, regulatory, market and financial conditions and other matters, many
of which are beyond the control of the
Company, such as the impact of competition on the business of the Company and on the industry
generally, industry growth and the absence of any adverse material change in
the financial condition and prospects of the Company or the industry or in the markets generally. No company, transaction or business used in
Houlihan Lokeys analyses for comparative purposes is identical to the Company or the merger and an
evaluation of the results of those analyses is not entirely mathematical. Houlihan Lokey believes that mathematical
derivations (such as determining average and median) of financial data are not
by themselves meaningful and should be considered together with qualities,
judgments and informed assumptions. The estimates contained in the Companys
analyses and the implied reference range values indicated by Houlihan Lokeys
analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by the analyses. In
addition, any analyses relating to the value of assets, businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold, which may depend on a variety of
factors, many of which are beyond the control of the Company. Much of the information used in, and
accordingly the results of, Houlihan Lokeys analyses are inherently subject to
substantial uncertainty.
Houlihan
Lokeys opinion was provided to the board
of directors in connection with its consideration of the proposed merger
and was only one of many factors considered by the board of directors in
evaluating the proposed merger. Neither
Houlihan Lokeys opinion nor its analyses were determinative of the
consideration in the merger or of the views of the board of directors or
management with respect to the merger or the consideration in the merger. The type and amount of consideration payable
in the merger were determined through negotiation between the Company and
Arrow, and the decision to enter into the merger was solely that of the board
of directors.
The
following is a summary of the material analyses reviewed by Houlihan Lokey with
the board of directors in connection with Houlihan Lokeys opinion rendered on September
19, 2010. The order of the analyses does
not represent relative importance or weight given to those analyses by Houlihan
Lokey. The analyses summarized below
include information presented in tabular format. The tables alone do not constitute a complete
description of the analyses. Considering
the data in the tables below without considering the full narrative
34
Table of Contents
description
of the analyses, as well as the methodologies underlying, and the assumptions,
qualifications and limitations affecting, each analysis, could create a
misleading or incomplete view of Houlihan Lokeys analyses.
For
purposes of its analyses, Houlihan Lokey reviewed a number of financial
metrics, including:
·
Enterprise
Value calculated as the value of the relevant companys outstanding equity
securities (taking into account its outstanding warrants and other convertible
securities) based on the relevant companys closing stock price, or equity
value, plus net debt (calculated as outstanding indebtedness, preferred stock
and capital lease
obligations less the amount of
cash on its balance sheet), as of a specified date.
·
Earnings before
interest, taxes, depreciation, and amortization, adjusted for certain non-recurring
items, or EBITDA.
·
Net income
divided by the number of the Companys outstanding equity securities, adjusted
for certain non-recurring items, or EPS.
Unless the context indicates
otherwise, enterprise values and equity values derived from the selected
companies analysis described below were calculated using the closing price of
Company common stock and the common stock of the selected companies
in
the technology systems and component distribution industry listed below
as of September 15, 2010, and
transaction values for the target companies derived from the selected
transactions analysis described below were calculated as of the announcement
date of the relevant transaction based on the estimated purchase prices paid in
the selected transactions. Accordingly,
this information may not reflect current or future market conditions. Unless the context indicates otherwise,
estimates of each of (1) revenue for calendar year 2010, or CY10 Revenue, (2) revenue
for calendar year 2011, or CY11 Revenue, (3) EBITDA for calendar year 2010, or
CY10 EBITDA, (4) EBITDA for calendar year 2011, or CY11 EBITDA, (5) earnings
per share for calendar year 2010, or CY10 EPS, and (6) earnings per share for
calendar year 2011, or CY11 EPS, were based on certain publicly available
consensus research analyst estimates. In
addition, unless the context indicates otherwise, per share reference range
amounts for the Company were based on assumptions of (1)
18.16 million
shares of Company common stock outstanding, as per 10-Q filed for the quarterly
period ended May 31, 2010, (2) 368,154 restricted shares outstanding as of
September 2, 2010 as per management estimates, (3) 710,021 options outstanding
as of September 2, 2010, as calculated per treasury method, and (4) net debt of
$15.2 million, as per management estimates as of August 31, 2010.
Selected Companies Analysis
. Houlihan Lokey calculated multiples of
enterprise value and price per share based on certain financial data for the
following twelve selected companies in the technology systems and component
distribution industry and compared such multiples to corresponding financial
data for the Company:
·
Avnet Inc.
·
Arrow Electronics, Inc.
·
Ingram Micro Inc.
·
WPG Holdings Limited
·
Tech Data Corp.
·
SYNNEX Corp.
·
Insight Enterprises Inc.
·
Datatec Ltd.
·
Richardson Electronics Ltd.
·
PC Connection, Inc. *
·
Softchoice Corp. *
·
PC Mall, Inc. *
*
Excluded from high, low, mean and median calculations.
35
Table of Contents
The
calculated multiples included multiples of: (1) enterprise value to CY10
Revenue, (2) enterprise value to CY11 Revenue, (3) enterprise value to CY10
EBITDA, (4) enterprise value to CY11 EBITDA, (5) price per share to CY10 EPS,
and (6) price per share to CY11 EPS. The
analysis included the following implied high, low, mean and median multiples
for the selected companies:
|
|
Enterprise Value/
Revenue
|
|
Enterprise Value/
EBITDA
|
|
Price/ EPS
|
|
|
|
CY 10
|
|
CY 11
|
|
CY 10
|
|
CY 11
|
|
CY 10
|
|
CY 11
|
|
High
|
|
0.33
|
x
|
0.32
|
x
|
10.3
|
x
|
8.6
|
x
|
12.6
|
x
|
10.3
|
x
|
Low
|
|
0.06
|
x
|
0.06
|
x
|
4.0
|
x
|
3.4
|
x
|
7.7
|
x
|
6.8
|
x
|
Mean
|
|
0.18
|
x
|
0.16
|
x
|
5.5
|
x
|
4.8
|
x
|
9.6
|
x
|
8.3
|
x
|
Median
|
|
0.16
|
x
|
0.15
|
x
|
4.8
|
x
|
4.2
|
x
|
9.5
|
x
|
7.9
|
x
|
The
selected companies analysis indicated the following implied per share reference
ranges for the Company, based on selected high and low multiples (i.e.,
excluding certain outlier data) for each valuation metric, as compared to the
proposed per share consideration:
|
|
Enterprise Value /
Revenue
|
|
Enterprise Value /
EBITDA
|
|
Price / EPS
|
|
|
|
CY10
|
|
CY 11
|
|
CY10
|
|
CY 11
|
|
CY10
|
|
CY11
|
|
Implied Reference Range
|
|
$2.94- $7.41
|
|
$2.62- $7.73
|
|
$2.13-$6.74
|
|
$1.21-$4.12
|
|
$2.49-$4.08
|
|
$1.40-$2.11
|
|
Per Share Consideration
|
|
$7.00
|
|
$7.00
|
|
$7.00
|
|
36
Table of Contents
Selected Transactions Analysis
.
Houlihan Lokey calculated multiples or
enterprise value based on estimated purchase prices paid in the following
publicly-announced transactions in the technology systems and component
distribution industry:
Announced
|
|
Acquiror
|
|
Target
|
8/13/2010
|
|
Avnet
Inc.
|
|
itX
Group Ltd.
|
5/25/2010
|
|
Avnet
Inc.
|
|
Unidux
Inc. (3)
|
3/29/2010
|
|
Avnet
Inc.
|
|
Bell
Microproducts Inc.
|
3/20/2010
|
|
WPG
Holdings
|
|
Yosun
Industrial Corp. (2)
|
12/21/2009
|
|
Synnex
Corp.
|
|
Jack
of All Games (2)(3)
|
10/27/2009
|
|
Acal
plc
|
|
Bfi
OPTiLAS International S.A.S. (3)
|
9/25/2009
|
|
Platinum
Equity
|
|
Pomeroy(2)(3)
|
3/11/2009
|
|
Din
Global Corp
|
|
En
Ponte Technologies(2)
|
11/7/2008
|
|
WPG
Americas
|
|
Jaco
Electronics, Distribution Business (2)(3)
|
10/10/2008
|
|
Avnet, Inc.
|
|
Abacus
Group Plc(3)
|
9/9/2008
|
|
Daiwobo
Co
|
|
Daiwobo
Information System
|
9/1/2008
|
|
WPG
Holdings Limited
|
|
Asian
Information Technology Inc.
|
7/31/2008
|
|
Zones
Acquisition Corp
|
|
Zones
|
3/13/2008
|
|
Avnet, Inc.
|
|
Horizon
Technology Group
|
3/4/2008
|
|
Tech
Data
|
|
Scribona(2)(3)
|
2/29/2008
|
|
Arrow
Electronics, Inc.
|
|
Achieva
Ltd. (1)(2)(3)
|
2/25/2008
|
|
Synnex
Corp.
|
|
New
Age Electronics (2)(3)
|
2/19/2008
|
|
Arrow
Electronics, Inc.
|
|
LOGIX
France, SA(2)(3)
|
1/24/2008
|
|
Insight
Enterprises
|
|
Calence(3)
|
11/12/2007
|
|
DCC
|
|
Banque
Magnetique(2)(3)
|
8/17/2007
|
|
PC
Mall
|
|
Sarcom(3)
|
7/9/2007
|
|
Court
Square Capital Partners
|
|
CompuCom(3)
|
6/13/2007
|
|
Ingram
Micro
|
|
DBL
Distributing(2)(3)
|
5/25/2007
|
|
Agilysys
Inc.
|
|
Innovativ
Systems Design(3)
|
5/18/2007
|
|
Arrow
Electronics, Inc.
|
|
Ultra
Source Technology Corp. (2)(3)
|
4/11/2007
|
|
Datatec
Ltd.
|
|
Crane
Telecommunications(3)
|
4/2/2007
|
|
Agilysys, Inc.
|
|
Stack
Computer, Inc. (3)
|
2/27/2007
|
|
Synnex
Corp.
|
|
PC
WholeSale(2)(3)
|
1/2/2007
|
|
Arrow
Electronics, Inc.
|
|
Agilysys, Inc.,
Keylink Systems Group(3)
|
12/6/2006
|
|
Arrow
Electronics, Inc.
|
|
InTechnology
plc. Distribution Business(2)(3)
|
11/6/2006
|
|
Avnet
Inc.
|
|
GE
Access Distribution(3)
|
37
Table of Contents
10/5/2006
|
|
Arrow
Electronics, Inc.
|
|
Alternative
Technology(2)(3)
|
10/2/2006
|
|
Bell
Microproducts Inc.
|
|
ProSys
Information Solutions(2)
|
(1) Not
included in the implied maximum, mean, median and minimum multiples for LTM
Revenue.
(2) Not
included in the implied maximum, mean, median and minimum multiples for LTM
EBITDA.
(3) Not
included in the implied maximum, mean, median and minimum multiples for LTM Net
Income.
The
calculated multiples included: enterprise value as a multiple of
(1) revenue, (2) EBITDA, and (3) net income, in each case, for
the most recently reported twelve months for which financial information had
been made public prior to the announcement of the transactions (which are
referred to as LTM Revenue, LTM EBITDA and LTM Net Income
respectively). The analysis indicated
the following implied maximum, mean, median and minimum multiples for the
selected transactions:
|
|
Transaction Value/
|
|
|
|
Revenue
LTM
|
|
EBITDA
LTM
|
|
Net Income
LTM
|
|
Maximum
|
|
0.5
|
x
|
23.2
|
x
|
18.4
|
x
|
Mean
|
|
0.2
|
x
|
9.1
|
x
|
12.9
|
x
|
Median
|
|
0.2
|
x
|
7.4
|
x
|
13.6
|
x
|
Minimum
|
|
0.1
|
x
|
5.0
|
x
|
5.6
|
x
|
The
selected transactions analysis indicated the following implied per share
reference ranges for the Company, as compared to the proposed per share
consideration:
|
|
Transaction Value/
|
|
|
|
Revenue
LTM
|
|
EBITDA
LTM
|
|
Net Income
LTM
|
|
Implied Reference Range
|
|
$3.80-$8.76
|
|
$4.57-$7.64
|
|
$4.06-$6.62
|
|
Per Share Consideration
|
|
$7.00
|
|
$7.00
|
|
$7.00
|
|
Discounted Cash Flow Analysis.
Houlihan Lokey also calculated the net
present value of the Companys unlevered, after-tax cash flows based on the
estimates provided by the management of the Company. In performing this analysis, Houlihan Lokey
used discount rates ranging from 10.0% to 12.0% and terminal value multiples
ranging from 7.5x to 8.5x 2015 EBITDA.
Houlihan Lokey selected discount rates based on the Companys historical
weighted average costs of capital, or WACC, and the WACCs for the companies
used in the selected companies analysis.
Houlihan Lokey selected 2015 EBITDA multiples based on the EBITDA
multiples implied by the selected transactions analysis. The discounted cash flow analysis indicated
the following implied per share reference range for the Company, as compared to
the proposed per share consideration:
Implied Per Share
Equity Reference Range for the Company
|
|
Per Share Consideration
|
|
$4.87-$6.31
|
|
$7.00
|
|
38
Table of Contents
Other Matters.
Houlihan Lokey
was engaged by the Company to
act as its financial advisor in connection with the merger and provide
financial advisory services, including rendering an opinion to the board of
directors as to the fairness,
from a financial point of view, of the consideration to be received by the
holders of Company common stock in the merger.
We engaged Houlihan Lokey based on Houlihan Lokeys experience and
reputation. Houlihan Lokey is regularly
engaged to provide advisory services in connection with mergers and
acquisitions, financings, and financial restructurings. Pursuant to the engagement letter, the Company has agreed to pay Houlihan
Lokey a customary fee for its services, a portion of which became payable upon
the execution of Houlihan Lokeys engagement letter. Houlihan Lokey also acted as financial
advisor to the Company in connection with, and participated in certain of the
negotiations leading to, the merger and will receive a fee for such services, a
substantial portion of which is contingent upon the consummation of the
merger. In addition, Houlihan Lokey will
receive a fee for rendering its opinion, regardless of the conclusion reached
therein, and which is not contingent upon the successful completion of the
merger. The Company has agreed to
reimburse certain of Houlihan Lokeys expenses and to indemnify Houlihan Lokey
and certain related parties for certain potential liabilities arising out of
Houlihan Lokeys engagement.
In the ordinary
course of business, certain of the affiliates of Houlihan Lokey, as well as
investment funds in which they may have financial interests, may acquire, hold
or sell, long or short positions, or trade or otherwise effect transactions, in
debt, equity, and other securities and financial instruments (including loans
and other obligations) of, or investments in, the Company, Arrow, or any other
party that may be involved in the merger and their respective affiliates or any
currency or commodity that may be involved in the merger. Houlihan Lokey and certain of its affiliates
may provide investment banking, financial advisory and other financial services
to the Company, Arrow, other participants in the merger or certain of their
respective affiliates in the future, for which Houlihan Lokey and such
affiliates may receive compensation.
Financial
Projections
We provided Arrow
with non-public business and financial information about us in connection with
its due diligence review of our company.
We also provided our financial advisor, Houlihan Lokey, with the
information we provided to Arrow, as well as additional financial projections,
in connection with its analysis of the merger consideration. This information included:
·
Annual Operating Plan.
We provided Arrow and Houlihan Lokey with our
annual operating plan for fiscal year 2011, which contained financial
projections for our company for each quarter and the fiscal year ending
February 28, 2011. This annual
operating plan was finalized in the second quarter of fiscal year 2011 in the
ordinary course of our business.
·
Five-Year Financial
Projections
. We provided Houlihan Lokey and
Arrow with our projected financial performance for the fiscal years ending
February 28, 2011 through February 28, 2015. These financial projections were prepared in August 2010
and reflect information then-available to Company management. Houlihan Lokey considered these financial
projections in preparing the financial analysis it presented to our board of
directors. See Opinion of
Nu Horizons Financial Advisor beginning on page 31.
These financial
projections are included in this proxy statement solely because they were
furnished to Arrow or Houlihan Lokey, or both, in connection with the
discussions giving rise to the merger agreement. The inclusion of financial projections in
this proxy statement should not be regarded as an indication that any person
that received this information considered, or now considers, these projections
to be a reliable prediction of our future results. These projections were prepared for our
internal purposes as described above, and not with a view toward public
disclosure or compliance with published guidelines of the SEC, the guidelines
established by the American Institute of Certified Public Accountants with
respect to prospective financial information or generally accepted accounting
principles. Neither our independent
auditors, nor any other independent accountants, have compiled, examined, or
performed any procedures with respect to the projections, nor have they
expressed any opinion or any other form of assurance on such information or its
achievability, and assume no responsibility for, and disclaim any association
with, these financial projections.
39
Table of Contents
The projections
included below are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
shown below and should be read with caution.
See Cautionary Statement Regarding Forward-Looking Statements on page 15. The projections are subjective in many
respects and thus susceptible to interpretations and periodic revisions based
on actual experience and developments occurring subsequent to the date the
projections were prepared. Although
presented with numerical specificity, the projections are based upon numerous
estimates and assumptions made by our management. Some or all of the assumptions may not be
realized, and they are inherently subject to significant business, economic and
competitive uncertainties and contingencies, all of which are difficult to
predict and many of which are beyond our control. Such uncertainties and contingencies can
generally be expected to increase with the passage of time from the date the
projections were made. Accordingly, the
assumptions made in preparing the projections might not prove accurate, and
actual results might differ materially from those projections. In addition, the projections do not take into
account any of the transactions contemplated by the merger agreement, including
the merger, or our compliance with the covenants we made under the merger
agreement, all of which might also cause actual results to differ materially.
For these reasons,
the inclusion of the projections in this proxy statement should not be regarded
as an indication that the projections are an accurate prediction of future
events, and they should not be relied on as such. Neither we nor any other person has made, or
makes, any representation regarding these projections, and we do not intend nor
do we undertake any obligation to update or otherwise revise the projections to
reflect circumstances existing after the date when made or to reflect the occurrences
of future events, even if any or all of the assumptions are shown to be in
error. You are cautioned not to rely on
this information in making a decision whether to vote in favor of the merger
proposal.
We have publicly
announced the actual results of our operations for the three months ended
August 31, 2010. You should review
our Quarterly Report on Form 10-Q for the period ended August 31,
2010. See Where You Can Find More
Information on page 73.
The financial
projections from our annual operating plan for fiscal year 2011 that we
provided to Arrow and Houlihan Lokey are summarized in the following table
(dollars in millions, except per share amounts).
|
|
Fiscal Year 2011 Quarter Ending
|
|
Fiscal Year
Ending February
|
|
|
|
May 31
|
|
August 31
|
|
November 30
|
|
February 28
|
|
28, 2011
|
|
Total net sales
|
|
$
|
210.8
|
|
$
|
158.1
|
|
$
|
161.6
|
|
$
|
157.1
|
|
$
|
687.6
|
|
Gross profit
|
|
30.1
|
|
25.5
|
|
26.1
|
|
25.4
|
|
107.1
|
|
Operating income
|
|
5.2
|
|
2.2
|
|
2.0
|
|
2.1
|
|
11.5
|
|
Net income
|
|
3.4
|
|
0.6
|
|
0.5
|
|
0.7
|
|
5.1
|
|
EPS
|
|
0.18
|
|
0.03
|
|
0.03
|
|
0.04
|
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our five-year
financial projections for the fiscal years ending February 28 or 29, 2011
through 2015 that we provided to Houlihan Lokey are summarized in the following
table (dollars in millions).
|
|
Fiscal Year Ending February 28 or 29
|
|
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
Total net sales
|
|
$
|
687.6
|
|
$
|
653.3
|
|
$
|
740.1
|
|
$
|
840.5
|
|
$
|
956.8
|
|
Gross profit
|
|
107.1
|
|
106.5
|
|
120.6
|
|
137.0
|
|
156.0
|
|
EBITDA
|
|
13.1
|
|
11.0
|
|
16.8
|
|
22.8
|
|
28.6
|
|
Operating income
|
|
11.5
|
|
9.2
|
|
14.9
|
|
20.9
|
|
26.4
|
|
Net income
|
|
5.1
|
|
4.1
|
|
7.6
|
|
11.3
|
|
14.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
EBITDA is defined as earnings before interest,
taxes, depreciation and amortization. We
calculate EBITDA by adding GAAP depreciation and amortization to GAAP operating
income.
40
Table of Contents
In developing our
one-year and five-year financial projections, we made numerous assumptions
about our industry, markets, products and ability to execute on our business plans. In particular, we made the following
assumptions:
·
The global economic recovery would continue
and accelerate over time, resulting in increased revenues and profits in all
regions.
·
The current competitive landscape would
remain materially unchanged.
·
We would not make any significant
acquisitions or divestitures.
·
Sales in currencies other than the U.S.
Dollar would be converted into U.S. Dollars using the applicable exchanges
rates as of the date that the projections were prepared.
·
We would not incur any significant
restructuring and impairment costs.
·
We would maintain a constant number of total
shares outstanding.
Certain
Effects of the Merger
If the merger is
completed, all of the equity interests in Nu Horizons will be owned by Buyer. No current holder of Company common stock
will have any ownership interest in, nor be a stockholder of, Nu Horizons
after the completion of the merger. As a
result, holders of Company common stock will no longer benefit from any
increase in Nu Horizons value, nor will they bear the risk of any
decrease in Nu Horizons value.
Following the merger, Buyer will benefit from any increase in the value
of Nu Horizons and also will bear the risk of any decrease in the value of
Nu Horizons.
Upon completion of
the merger, each holder of Company common stock will be entitled to receive
$7.00 in cash for each share of Company common stock held. Each holder of options outstanding at the
closing of the merger, whether or not vested, will be entitled to receive, upon
the completion of the merger, a cash payment equal to the amount by which $7.00
exceeds the exercise price of the option, multiplied by the number of shares of
Company common stock underlying the option.
See The Merger Agreement Treatment
of Options and Restricted Stock on page 50.
At the effective time of the merger, all options to acquire shares of
Company common stock will be cancelled.
Following the merger,
shares of Company common stock will be delisted from the NASDAQ Global Select
Market and deregistered from the Exchange Act.
Procedures
for Receiving the Merger Consideration
If the merger is
completed, each holder of Company common stock will receive materials from the
paying agent, American Stock Transfer & Trust Company. As soon as reasonably practicable after the
completion of the merger, the paying agent will provide instructions to each
holder of record of shares of Company common stock that will explain how to
surrender stock certificates. Each
holder of Company common stock will receive cash for his, her or its shares
from the paying agent after complying with these instructions. If your shares of Company common stock are
held in street name by your broker, bank or other nominee, you will receive
instructions from your broker, bank or other nominee as to how to surrender
your street name shares and receive the merger consideration for those
shares.
Conduct
of Company Business if the Merger is Not Completed
In the event that
the merger agreement is not adopted by holders of Company common stock or if
the merger is not completed for any other reason, holders of Company common
stock will not receive any payment for their shares of Company common
stock. Instead, Nu Horizons will
remain an independent public company, Company common stock will continue to be
listed and traded on the NASDAQ Global Select Market and holders of Company
common stock will continue to be subject to the same risks and opportunities as
they currently are with respect to their
41
Table
of Contents
ownership of Company
common stock. If the merger is not
completed, there can be no assurance as to the effect of these risks and
opportunities on the future value of your Nu Horizons shares, including
the risk that the market price of Company common stock may decline to the extent
that the current market price of our stock reflects a market assumption that
the merger will be completed and does not reflect the costs incurred by the
Company in connection with the merger, which will be reflected in the Companys
financial results regardless of whether the merger is consummated. From time to time, our board of directors
will evaluate and review the business operations, properties, dividend policy
and capitalization of Nu Horizons, and, among other things, make such
changes as are deemed appropriate and continue to seek to identify strategic
alternatives to maximize stockholder value.
If the merger agreement is not adopted by our stockholders or if the
merger is not consummated for any other reason, there can be no assurance that
any other transaction acceptable to Nu Horizons will be offered or that
the business, prospects or results of operations of Nu Horizons will not
be adversely impacted.
However, pursuant to
the merger agreement, under certain circumstances, Nu Horizons is permitted
to terminate the merger agreement and recommend an alternative
transaction. See The Merger
AgreementTermination beginning on page 61.
Under certain
circumstances, if the merger is not completed, Nu Horizons may be
obligated to reimburse Buyer for up to $3,000,000 of its fees and expenses, and
pay to Buyer a termination fee of 3% of the aggregate merger consideration,
approximately $4,039,800, plus expenses, less any such fees and expenses
already paid. See The Merger
AgreementTermination Fee, Expenses beginning on page 62.
Regulatory
Approvals
The merger agreement
requires Buyer, Merger Sub and us to use commercially reasonable best efforts
to prepare any merger notifications or obtain any government consents or approvals
required to close the merger under the HSR Act and other antitrust laws. The merger is subject to review by the
Antitrust Division and the FTC under the HSR Act, and by foreign governmental
authorities under the antitrust laws of various other jurisdictions where Buyer
and the Company conduct business. Under
the HSR Act, Buyer and the Company were required to make pre-merger
notification filings and await the expiration of statutory waiting periods
prior to completing the merger. Buyer
and the Company have made the requisite pre-merger notification filings with
the Antitrust Division and the FTC. The
completion of the merger is also conditioned upon the expiration or termination
of the HSR Act waiting period. Buyer and
the Company submitted the filings required by the HSR Act on October 5,
2010. The initial 30 day waiting period
under the HSR Act will expire on November 4, 2010. We also expect to make antitrust filings in
Germany, Austria and China. The dates on
which those filings are made will dictate the dates on which the applicable
notice period expires.
In addition, during
or after the statutory waiting periods and clearance of the merger, and even
after completion of the merger, any of the Antitrust Division, the FTC, or
other U.S. or foreign governmental authorities could challenge or seek to block
the merger under the antitrust laws, as it deems necessary or desirable in the
public interest. Moreover, in some
jurisdictions, a competitor, customer or other third party could initiate a
private action under the antitrust laws challenging or seeking to enjoin the
merger, before or after it is completed.
Buyer and the Company cannot be sure that a challenge to the merger will
not be made or that, if a challenge is made, Buyer and we will prevail. There can be no assurance that the parties
will obtain the required antitrust approvals or obtain the approvals without
restrictions or conditions. These restrictions
and conditions could include the grant of a complete or partial license,
divestiture or holding separate of assets or businesses. Under the terms of the merger agreement,
Buyer is not required to agree to commit to any divestiture, license or hold
separate with respect to any of its or our assets or businesses, or otherwise
take or commit to take any action that limits Buyers freedom of action with
respect to, or its ability to retain, any asset or business of Buyer or the
Company.
Except as noted
above, and the filing of a certificate of merger or similar document in Delaware
at or before the effective time, we are unaware of any material federal, state
or foreign regulatory requirements or approvals required for the execution of
the merger agreement or completion of the merger.
42
Table of Contents
Interests
of the Companys Executive
Officers and Directors in the Merger
In considering the recommendation of
Nu Horizons board of directors with respect to the merger, holders of
Company common stock should be aware that Nu Horizons executive officers
and directors may have interests in the merger that are different from, or in
addition to, the interests of holders of Company common stock in general. The
members of the board were aware of such interests when deciding to approve the
merger and to recommend that holders of Company common stock vote in favor of
the proposal to adopt the merger agreement. See Background of the Merger
beginning on page 20 and Reasons for the Merger; Recommendation of
Nu Horizons Board of Directors beginning on page 28.
As summarized below,
Nu Horizons executive officers and directors will be entitled to certain
payments with respect to their equity-based awards upon the closing of the merger,
and Nu Horizons executive officers will be entitled to certain payments
and benefits in the event of specified terminations of their employment
following the merger. Nu Horizons
executive officers and directors will also be entitled to indemnification and
officers and directors insurance coverage following the merger.
Payments with Respect to
Equity-Based Awards
In connection with the transaction, the equity-based
awards held by Nu Horizons executive officers and directors will be
treated as follows:
Stock Options.
Upon completion of the merger, each
then-outstanding stock option that was granted by the Company will be
cancelled, and option holders will receive from Buyer or the surviving
corporation an amount in cash equal to the product of (x) the number of
shares of Company common stock covered by such option, whether or not vested,
multiplied by (y) the excess, if any, of the $7.00 per share merger
consideration over the per-share exercise price for such option, less any
applicable withholding taxes.
All
of the options currently held by Nu Horizons executive officers and
directors were granted at exercise prices that are between $1.52 and
$14.62. No payments will be made with
respect to options that have an exercise price equal to or greater than
$7.00. The following table sets forth
the number of vested and unvested options that executive officers and directors
of Nu Horizons will hold at the time of the merger with exercise prices
less than $7.00, assuming that the merger becomes effective on December 10,
2010, and that the executive officers and directors are not granted any
additional stock options or exercise any options prior to such date:
Executive Officer/Director
|
|
Vested
|
|
Unvested
|
|
Total
|
|
Steven J. Bilodeau
|
|
15,000
|
|
15,000
|
|
30,000
|
|
Kurt Freudenberg
|
|
12,500
|
|
37,500
|
|
50,000
|
|
Herbert M. Gardner
|
|
150,000
|
|
15,000
|
|
165,000
|
|
Martin Kent
|
|
0
|
|
360,000
|
|
360,000
|
|
Stephen Mussmacher
|
|
10,250
|
|
23,750
|
|
34,000
|
|
Arthur Nadata
|
|
350,551
|
|
104,449
|
|
455,000
|
|
Martin Novick
|
|
90,000
|
|
15,000
|
|
105,000
|
|
Dominic A. Polimeni
|
|
105,000
|
|
15,000
|
|
120,000
|
|
Richard Schuster
|
|
210,000
|
|
200,000
|
|
410,000
|
|
David Siegel
|
|
150,000
|
|
15,000
|
|
165,000
|
|
Kent Smith
|
|
13,750
|
|
61,250
|
|
75,000
|
|
Restricted Stock.
At the time the merger becomes effective, all restricted stock awards
will become fully vested
(including those
held
by Nu Horizons executive officers and directors), and each share that is
subject to a restricted stock award will be treated identically to all other
outstanding shares of Company common stock.
Assuming that
the
merger becomes effective on December 10, 2010 and that the executive
officers and directors are not granted any additional restricted shares prior
to such date, the executive officers and directors will hold the following
number of restricted shares at the time the merger becomes effective:
43
Table of
Contents
Executive Officer/Director
|
|
Restricted
Shares
|
|
Steven J. Bilodeau
|
|
0
|
|
Kurt Freudenberg
|
|
33,722
|
|
Herbert M. Gardner
|
|
0
|
|
Martin Kent
|
|
0
|
|
Stephen Mussmacher
|
|
8,574
|
|
Arthur Nadata
|
|
50,000
|
|
Martin Novick
|
|
0
|
|
Dominic A. Polimeni
|
|
0
|
|
Richard Schuster
|
|
50,000
|
|
David Siegel
|
|
0
|
|
Kent Smith
|
|
24,505
|
|
Payments and Benefits upon Termination of Employment
Nu Horizons
has entered into employment agreements and/or change in control agreements with
its executive officers that provide for severance payments and other benefits
in the event of specified terminations of the executive officers
employment. Certain of these
arrangements only provide for severance payments and benefits in the event of
specified terminations following a change in control. For purposes of such agreements, the
transactions contemplated by the merger agreement will constitute a change in
control.
Martin Kent.
We are party to an employment agreement with
Mr. Kent, our President and Chief Executive Officer. The employment agreement provides that in
the event that the Company terminates Mr. Kents employment other than for
cause on or before May 3, 2011, the Company will reimburse Mr. Kent
for certain relocation expenses in connection with his physical relocation to
the United Kingdom in an amount not to exceed an aggregate $100,000. In the event that the Company terminates his
employment without cause or Mr. Kent resigns for good reason, he will
be entitled to
continued
salary for a
period of six months. The severance
payments under Mr. Kents employment agreement are not conditioned upon
the occurrence of a change in control, and the agreement does not otherwise
provide for enhanced benefits in the event of a termination following a
change-in-control.
Richard Schuster.
We are party to an
employment agreement and a
change in control agreement with Mr. Schuster, our Chief Operating
Officer, Senior Executive Vice President, Secretary and a director
(collectively, the Schuster Agreement).
The Schuster Agreement provides that upon Mr. Schusters exercise,
within six months of a change-in-control, of his option to terminate his
employment, or upon his termination of employment by the Company at any time
following a change in control, Mr.
Schuster
is entitled to
a lump sum payment equal to three times the average of the total annual
compensation paid to him with respect to the five prior fiscal years of the
Company, minus $100, plus a gross up payment for income and excise taxes
thereon.
The Schuster Agreement
further provides that upon a termination of employment by the Company without
cause, Mr. Schuster and the Company will enter into a consulting
agreement, pursuant to which Mr. Schuster will serve as a consultant for a
five-year period in exchange for certain medical and dental benefits for him
and his spouse plus reimbursement for the income taxes payable in respect of
such benefits.
Additionally, pursuant to
the terms of the Companys retirement plan, Mr. Schuster will be entitled
to receive for five calendar years an annual cash benefit in an amount
determined by the number of years of service he has provided to the Company,
ranging from a minimum of $310,000 for 20 years of service to a maximum of
approximately $393,000 for 25 or more years of service. Based on his current years
of
service, Mr. Schuster will be entitled to receive the maximum
cash benefit. The payments and benefits
under Mr. Schusters consulting agreement and the retirement plan are not
conditioned upon the occurrence of a change-in-control, and the agreement and
the plan do not otherwise provide for enhanced benefits following a
change-in-control.
44
Table of
Contents
Kurt Freudenberg, Kent Smith and
Stephen Mussmacher.
The Company
is a party to change in control agreements with each of Messrs. Freudenberg,
Smith and Mussmacher. The agreement with
Mr. Freudenberg provides that if Mr. Freudenberg terminates his
employment for good reason or Nu Horizons terminates his employment, in
either case, within one year following a change in control, he is entitled to
receive a lump sum payment equal to the amount of his base salary in effect at
the time of such event, plus a pro-rata portion of his annual bonus, based on
the bonus paid to him for the immediately preceding fiscal year. Each of the agreements with
Messrs. Smith and Mussmacher provides that if his employment is terminated
by the Company within one year following a change in control, the executive is
entitled to receive an amount equal to the average of the base salary paid to
him for the three preceding fiscal years, payable ratably over a twelve-month
period commencing on the termination date.
Estimated Amounts of Transaction-Related Payments
and Benefits
Set forth below is the
estimated value of the payments and benefits described above that
Nu Horizons executive officers and directors will receive upon completion
of the merger or in the event of specified terminations of their employment
following the merger. The amounts set forth do not include any payments (including
those described above) that are not conditioned upon the occurrence of a change
in control. The amounts set forth in
this table assume that the merger will close on December 10, 2010 and that
the executive officers employment will be terminated immediately
thereafter.
The
actual amounts of these payments and benefits can only be determined at the
time of the closing of the merger or termination of employment, as applicable,
and may differ from the amounts set forth below.
Name
|
|
Payment in
Respect of Stock
Options
|
|
Payment in
Respect of
Restricted Stock
|
|
Cash
Severance
Payment
|
|
Tax
Gross-Up
|
|
Total
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
Martin Kent
|
|
$
|
1,191,600
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
1,191,600
|
|
Richard Schuster
|
|
$
|
836,300
|
|
$
|
350,000
|
|
$
|
1,594,655
|
|
$
|
2,289,459
|
*
|
$
|
5,070,414
|
|
Kurt Freudenberg
|
|
$
|
140,500
|
|
$
|
236,054
|
|
$
|
360,000
|
|
$
|
0
|
|
$
|
736,554
|
|
Kent Smith
|
|
$
|
274,000
|
|
$
|
171,535
|
|
$
|
227,035
|
|
$
|
0
|
|
$
|
672,570
|
|
Stephen Mussmacher
|
|
$
|
103,200
|
|
$
|
60,018
|
|
$
|
209,414
|
|
$
|
0
|
|
$
|
372,632
|
|
Directors
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
Arthur Nadata
|
|
$
|
914,750
|
|
$
|
350,000
|
|
$
|
0
|
|
$
|
0
|
|
$
|
1,264,750
|
|
Dominic A. Polimeni
|
|
$
|
139,200
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
139,200
|
|
Herbert M. Gardner
|
|
$
|
160,050
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
160,050
|
|
Martin Novick
|
|
$
|
147,600
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
147,600
|
|
David Siegel
|
|
$
|
160,050
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
160,050
|
|
Steven J. Bilodeau
|
|
$
|
104,550
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
104,500
|
|
*
Amount consists of $1,189,051 attributable to
excise tax and $1,100,408 attributable to federal and state income taxes.
Strategic Committee Fees.
In connection with establishing the
compensation payable to the non-employee directors generally, the board of
directors established the compensation payable to the members of the strategic
committee during any period that the strategic committee was necessary. For the period from the re-establishment of
the strategic committee in April 2010 in connection with the commencement
of discussions with Arrow and Strategic Party A, through June 2010,
the strategic committee chairman received $4,500 per month, the strategic
45
Table of Contents
committee
vice chairman received $2,250 per month and all members of the strategic
committee received $1,800 per meeting.
In June 2010, in conjunction with a salary increase to employees,
the cash compensation payable to the members of the strategic committee was
increased and the chairman was paid $4,750 per month, the vice-chairman was
paid $2,375 per month and all members of the strategic committee received
$1,900 per meeting.
Indemnification of Directors and
Officers; Insurance.
The merger agreement
provides that, for six years after the effective time of the merger, the current
and former directors and officers of the Company will be indemnified and held
harmless in respect of acts or omissions occurring prior to the effective time
of the merger. Further, for a period of
six years, the Company will maintain the insurance coverage provided under the
policies of directors and officers liability insurance maintained by the
Company as of the date of the merger agreement (although the policies may be
substituted for policies reasonably acceptable to the beneficiaries of such policies
that provide at least the same coverage, on terms and conditions which are no
less advantageous to such persons), provided that the Company shall not be
required to pay an annual premium for such coverage in excess of 250% of the
last annual premium paid by the Company prior to the date of the merger
agreement. See The Merger
AgreementIndemnification on page 58.
Agreements and Intent to Vote in
Favor of the Merger.
All of
Nu Horizons
directors benefically owning shares on September 19, 2010, have agreed to
vote in favor of the merger. Collectively, these persons represent
[974,365]
of Nu Horizons common stock, which is
equivalent to approximately
[5.3%]
of the
total shares of Nu Horizons common stock outstanding as of
[
·
], [
·
]
[
·
],
2010, the record date for stockholders entitled to vote at the special meeting.
Material
U.S. Federal Income Tax Consequences of the Merger
General.
The
following is a summary of material U.S. federal income tax consequences of the
merger to U.S. holders of Company common stock whose shares are converted into
the right to receive cash in the merger.
This summary is based upon current provisions of the Internal Revenue
Code of 1986, as amended (the Code), applicable U.S. Treasury Regulations,
judicial authority and administrative rulings and practice, all as in effect as
of the date hereof, and all of which are subject to change or varying
interpretation, possibly with retroactive effect. It is assumed, for purposes of this summary,
that the shares of Company common stock are held as capital assets within the
meaning of Section 1221 of the Code (generally property held for
investment) by a U.S. person (i.e., a citizen or resident of the U.S. or a
domestic corporation). This discussion
is for general information only and does not address all aspects of U.S.
federal income taxation that may be relevant to a particular holder of Company
common stock in light of that holders particular circumstances, or to those holders
that may be subject to special treatment under the U.S. federal income tax
laws, for example, life insurance companies, tax-exempt organizations,
financial institutions, U.S. expatriates, persons that are not U.S. persons,
dealers or brokers in securities or currencies, pass-through entities (e.g.,
partnerships) and investors in such entities, or stockholders who hold shares
of Company common stock as part of a hedging, straddle, conversion,
constructive sale or other integrated transaction, who are subject to the
alternative minimum tax or who acquired their shares of Company common stock
through the exercise of director or employee stock options or other
compensation arrangements. In addition,
the discussion does not address any aspect of foreign, state or local taxation
or estate and gift taxation that may be applicable to a holder of Company
common stock, or the U.S. tax consequences to any holder of convertible
securities.
The U.S. federal
income tax consequences summarized below are not intended to constitute a
complete description of all tax consequences relating to the merger. Because individual circumstances may differ,
each U.S. holder of Company common stock and anyone else who may receive merger
consideration is urged to consult such persons own tax advisor as to the
particular tax consequences to such person of the merger, including the
application and effect of state, local, foreign and other tax laws.
Consequences
of the Merger to Holders of Company Common Stock.
The
receipt by a U.S. holder of cash in exchange 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 stockholder
who surrenders shares of Company common stock in exchange for cash pursuant to
the merger will recognize gain or loss for U.S. federal income tax purposes
equal to the difference, if any, between the amount of cash received and such
stockholders adjusted basis in the shares surrendered. Gain or loss will be calculated separately
for each block of shares surrendered in the merger (i.e.,
46
Table
of Contents
shares acquired at
the same cost in a single transaction and not aggregated with other blocks of
shares). Such gain or loss will
generally be capital gain or loss, and will generally be long-term gain or loss
provided that a holder has held such shares for more than one year as of the
closing date of the merger. In the case
of stockholders who are individuals, long-term capital gain is currently
eligible for reduced rates of federal income tax. There are limitations on the deductibility of
capital losses.
In general, U.S.
holders who exercise dissenters or appraisal rights will also recognize gain
or loss. Any holder considering
exercising statutory dissenters or appraisal rights should consult the holders
own tax advisor.
Information
Reporting and Backup Withholding.
Payments
made to a U.S. holder in connection with the merger will be subject to
information reporting and may be subject to backup withholding for U.S. federal
income tax purposes. Generally, under
the U.S. federal income tax backup withholding rules, a holder of Company
common stock or other payee that exchanges shares of Company common stock for
cash may be subject to backup withholding, currently at a rate of 28%, unless
the holder of Company common stock or other payee establishes that it is an
exempt recipient or (i) provides a taxpayer identification number or TIN
(social security number, in the case of individuals, or employer identification
number, in the case of other stockholders), and (ii) certifies under
penalties of perjury that (A) such TIN is correct, (B) such holder is
not subject to backup withholding and (C) such holder is a U.S.
person. Each holder of Company common
stock and, if applicable, each other payee should complete and sign the
substitute Form W-9 included as part of the letter of transmittal and
return it to the paying agent, in order to provide information and
certification necessary to avoid backup withholding, unless an exemption
applies and is otherwise established in a manner satisfactory to the paying
agent.
Backup withholding
is not an additional tax. Any amounts
withheld under the backup withholding rules will be allowable as a refund
or credit against a U.S. persons federal income tax liability provided that
the required information is timely furnished to the Internal Revenue Service.
The foregoing
discussion of certain U.S. federal income tax consequences is for general
information only and is not tax advice.
Holders of Company common stock should consult their own tax advisors to
determine the U.S. federal, state, local and foreign tax consequences of the
merger to them in view of their own particular circumstances.
Litigation
Challenging the Merger
The following
actions have been commenced in connection with the proposed acquisition of the
Company by Arrow pursuant to the merger agreement.
On
September 22, 2010, a putative class action was commenced in New York
State Supreme Court, Suffolk County, entitled
Jun Pan v.
Nu Horizons Electronics Corp., Arthur Nadata, Martin Kent, Richard
Schuster, Kurt Freudenberg, Steven J. Bilodeau, Herbert M. Gardner,
Martin Novick, Dominic A. Polimeni, David Siegel, Arrow Electronics, Inc.
and Nu Horizons Acquisition Corp.
The action alleges that the individual
defendants breached their fiduciary duties to the shareholders and that the
Company aided and abetted such breach.
The action seeks to enjoin or rescind the merger, to require the
individual defendants to properly exercise their fiduciary duties, and to
recover unspecified damages and costs.
On
September 22, 2010, a putative class action was commenced in New York
State Supreme Court, Suffolk County, entitled
Vladimir
Gusinsky Revocable Trust v. Nu Horizons Electronics Corp., Martin Kent,
Kurt Freudenberg, Richard S. Schuster, Arthur Nadata, Herbert M.
Gardner, Dominic A. Polimeni, David Siegel, Martin Novick, Steven J.
Bilodeau, Arrow Electronics, Inc., and Neptune Acquisition Corporation, Inc.
The action alleges that the individual defendants breached their fiduciary
duties to the shareholders and that the Company aided and abetted such
breach. The action seeks to enjoin or
rescind the merger, to require the individual defendants to properly exercise
their fiduciary duties, to impose a constructive trust, and to recover
unspecified damages and costs.
On
September 22, 2010, a putative class action was commenced New York
State Supreme Court, Suffolk County, entitled
Joseph
Ferris v. Nu Horizons Electronics Corp., Martin Kent, Kurt Freudenberg,
Richard S. Schuster, Arthur Nadata, Herbert M. Gardner,
Dominic A. Polimeni, David Siegel, Martin Novick, Steven J.
47
Table
of Contents
Bilodeau, Arrow Electronics, Inc.,
and Neptune Acquisition Corporation, Inc.
The action alleges that the individual
defendants breached their fiduciary duties to the shareholders and that the
Company aided and abetted such breach.
The action seeks to enjoin or rescind the merger, to require the
individual defendants to properly exercise their fiduciary duties, to impose a
constructive trust, and to recover unspecified damages and costs.
On
September 29, 2010, a putative class action was commenced in New York
Supreme Court, Suffolk County entitled
Andrew Weston v. Martin
Kent, Arthur Nadata, Herbert Gardner, Martin Novick, Steven Bilodeau,
Nu Horizons Electronics Corp., Arrow Electronics, Inc., and Neptune
Acquisition Corporation, Inc.
The action alleges that the individual defendants breached their
fiduciary duties to the shareholders and that the Company aided and abetted
such breach. The action seeks to enjoin
or rescind the merger and to obtain an accounting for profits, benefits and
unspecified damages and costs.
48
Table of Contents
THE MERGER AGREEMENT
(PROPOSAL
NO. 1)
Following
is a summary describing the material provisions of the merger agreement. The provisions of the merger agreement are
complicated and not easily summarized.
This summary may not contain all of the information about the merger
agreement that is important to you. The
merger agreement is attached to this proxy statement as Annex A. We
encourage you to read it carefully in its entirety for a more complete
understanding of the merger agreement.
Effective
Time of Merger
The merger agreement
provides for the merger of Merger Sub with and into Nu Horizons upon the
terms and subject to the conditions of the merger agreement, including approval
of its principal terms by the holders of Company common stock. The merger will become effective at the
effective time, which will be the time stated in certain filings with the
Secretary of State of the State of Delaware.
We are working with Arrow to complete the merger as quickly as
possible. We cannot predict the exact
effective time, because completion of the merger is subject to certain
conditions that are beyond our control, but absent any unanticipated delay, we
expect the merger to become effective promptly following the special meeting
and the expiration of applicable waiting periods under antitrust law. In the event, however, that all of the
conditions are satisfied during the period from December 13, 2010 to
December 31, 2010, we will close on January 3, 2010, unless Arrow and
Nu Horizons agree otherwise.
Structure
of Merger
At the effective
time, Merger Sub will merge with and into Nu Horizons. Nu Horizons will be the surviving
corporation in the merger. As a result
of the merger, Nu Horizons will become a wholly-owned subsidiary of Arrow.
Articles
of Incorporation, Bylaws, and Directors and Officers of the Surviving
Corporation
At the effective
time:
·
our articles of incorporation will be
amended in their entirety to read as set forth in Exhibit A of the merger
agreement;
·
the bylaws of Merger Sub will become our
bylaws;
·
the directors of Merger Sub immediately
prior to the effective time will be the initial directors of the surviving
corporation; and
·
the officers of Merger Sub immediately prior
to the effective time will be the initial officers of the surviving
corporation.
Merger
Consideration
Each share of
Company common stock issued and outstanding immediately before the effective
time will automatically be cancelled, will cease to exist and will be converted
into the right to receive the merger consideration of $7.00 per share, except
that:
·
each share held by Arrow, Merger Sub or us
or any of our respective subsidiaries immediately prior to the effective time
will be cancelled, and no payment will be made with respect to these shares;
and
·
so long as the requirements of
Section 262 of the General Corporation Law of the State of Delaware are
satisfied, shares held by holders of Company common stock who have properly
demanded and perfected, and have not timely withdrawn, their appraisal rights
with respect to
49
Table
of Contents
such shares
in accordance with Section 262 will be cancelled, and the holders of those
shares will have only the rights granted by Section 262.
After the effective
time, each holder of a certificate that formerly represented shares of Company
common stock will have, and the certificate will represent, only the rights
described above. Each share of Merger
Sub outstanding immediately prior to the effective time will be converted into
a share of stock of the surviving corporation.
Treatment
of Options and Restricted Stock
When the merger becomes
effective, each then-outstanding stock option that was granted by the Company
will be cancelled, and option holders will receive from Buyer or the surviving
corporation an amount in cash equal to the product of (x) the number of
shares of Company common stock covered by such option, whether or not vested,
multiplied by (y) the excess, if any, of the $7.00 per-share merger
consideration over the per-share exercise price for such option, less any
applicable withholding taxes. No amounts
will be paid with respect to options that have an exercise price equal to or
greater than $7.00 per share.
When the merger
becomes effective, each then-outstanding share of restricted stock will become
vested and will be cancelled and converted into the right to receive the merger
consideration.
Payment
for Shares and Exchange Procedures
American Stock
Transfer & Trust Company, which we refer to in this proxy statement as
the paying agent, will act as the agent for the payment of merger
consideration upon surrender of stock certificates that formerly represented
Company common stock and were converted into the right to receive the merger
consideration after the effective time.
After the effective time, Arrow will provide or cause to be provided to
the paying agent cash necessary for payment of the merger consideration and the
aggregate option payments, which we refer to in this proxy statement as the exchange
fund.
As promptly as
practicable after the effective time, Arrow and Merger Sub shall cause the
paying agent to mail to each holder of record of a certificate or shares
represented by book entry appropriate transmittal materials and instructions
for effecting the surrender of certificates in exchange for the merger
consideration.
When a certificate
is properly delivered, duly endorsed as the paying agent may require, or, in
the case of book-entry shares, the transmittal materials and instructions are
adhered to, the holder of the certificate or shares represented by book entry
will be entitled to receive in exchange therefor the amount of cash which the
shares of Company common stock formerly represented and the certificate or
shares represented by book entry will have been converted into the right to receive
this merger consideration after the effective time.
Holders of Company common
stock should not return their stock certificates with the enclosed proxy or
send their stock certificates until they receive the transmittal materials and
instructions for the surrender of stock certificates.
In the event of a
transfer of ownership of Company common stock that is not registered in our
records, payment of merger consideration may be made to someone other than the
person in whose name the certificate is registered, if such certificate is
delivered to the paying agent accompanied by all documents required to evidence
such transfer and by evidence satisfactory to the paying agent that any
applicable stock transfer taxes have been paid.
Additionally, in the event that a certificate shall have been lost,
stolen, mislaid or destroyed, payment of the merger consideration will be made
upon the claimants compliance with certain procedures.
The surviving
corporation shall pay all charges and expenses in connection with the
distribution of the merger consideration.
Representations
and Warranties
The merger agreement
contains representations and warranties made by the Company to Arrow and Merger
Sub and representations and warranties made by Arrow and Merger Sub to the
Company. The representations and
warranties expire at the effective time.
The assertions embodied in the representations and warranties were made
for the benefit of the other party to the merger agreement, and are intended
not as statements of fact, but rather as a way
50
Table
of Contents
of allocating the
risk to one of the parties if those statements prove to be incorrect. In particular, the representations and
warranties made by the parties to each other in the merger agreement have been
negotiated among the parties with the principal purpose of setting forth their
respective rights with respect to their obligation to close the merger should
events or circumstances change or be different from those stated in the
representations and warranties. Matters
may change from the state of affairs contemplated by the representations and
warranties. Neither we, Arrow nor Merger
Sub undertakes any obligations to publicly release any revisions to the
representations and warranties, except as required under U.S. federal or other
applicable securities laws.
The representations
and warranties in the merger agreement and the description of them in this
proxy statement should be read in conjunction with the other information
provided elsewhere in the proxy statement.
Representations
and Warranties of Nu Horizons.
The
assertions embodied in the representations and warranties of the Company to
Arrow and Merger Sub are qualified by information in disclosure schedules that
we prepared for Arrow and Merger Sub in connection with signing the merger
agreement and that we refer to in this proxy statement as the disclosure
schedules. While we do not believe that
the disclosure schedules contain information that corporate or securities laws
or other regulations require us to publicly disclose, other than information
that has already been so disclosed, the disclosure schedules do contain
information that modifies, qualifies and creates exceptions to our
representations and warranties set forth in the merger agreement. Accordingly, our representations and
warranties in the merger agreement should not be relied upon as
characterizations of the actual state of facts, since such representations and
warranties are qualified in important respects by the disclosure schedules and
since facts may have changed or may change in the future. The disclosure schedules contain information
that has been included in our general prior public disclosures, as well as
additional non-public information.
Moreover, information concerning the subject matter of the
representations and warranties may have changed since the date of the merger
agreement, and such subsequent information may or may not be fully reflected in
our public disclosures.
Our representations
and warranties to Arrow and Merger Sub relate to the following matters, among
others:
·
our due organization, valid existence and
good standing;
·
our corporate power and authority to own,
lease and operate our properties and assets and to carry on our business as now
being conducted and as proposed to be conducted and our due qualification and
good standing to do business in every jurisdiction in which the nature of our
activities make qualification necessary;
·
our corporate power and authority to enter
into, and perform our obligations under, the merger agreement and to complete
the transactions contemplated thereby;
·
our capital structure, including our
subsidiaries and the capital structure of our subsidiaries;
·
the absence of conflicts with, material
defaults, or material breaches under our organizational documents or material
contracts as a result of the merger agreement or the completion of the
transactions contemplated thereby;
·
the government consents, approvals,
licenses, permits, orders or authorizations we require in connection with the
merger agreement or the completion of the transactions;
·
the vote of our stockholders required to
approve the merger proposal and to complete the merger;
·
the recommendation by our board of directors
that our stockholders approve the merger proposal;
·
our filings with the SEC since March 1,
2007, including our financial statements included in our SEC filings;
51
Table of Contents
·
our establishment and maintenance of
disclosure controls and procedures and internal controls required by rules promulgated
under the Exchange Act and our relationship with our independent auditors;
·
the absence of material undisclosed
liabilities of the Company;
·
the absence of certain changes in our
business since May 31, 2010;
·
our material contracts and obligations and
the absence of certain defaults thereunder;
·
certain insurance matters;
·
the absence of proceedings pending or to our
knowledge threatened against or affecting us as well as the absence of court or
other government orders that would be expected to be material to us;
·
our compliance with environmental laws;
·
our payment, and compliance with laws
related to payment, of taxes, and other tax and accounting matters;
·
the real property and other assets we lease,
and other real estate and personal property matters;
·
our ownership, license and lawful use of
intellectual property, and other intellectual property matters, including the
absence of infringement by us on intellectual property of third parties, and
third parties on our intellectual property;
·
our benefit plans, employees and employment
practices and other labor matters, including compliance with applicable labor
laws since March 1, 2007;
·
the permits required to operate our business
and our possession and maintenance of such permits;
·
our compliance with applicable laws since
March 1, 2005;
·
our material customers and material
suppliers and our relationship with them;
·
our compliance with U.S. export and import
laws and privacy laws and other laws applicable to our business;
·
information we supplied for inclusion in
this proxy statement;
·
the absence of brokers, finders, financial
advisors or other similar fees or commissions in connection with any of the
transactions contemplated by the merger agreement (other than the fee payable
to Houlihan Lokey);
·
our receipt of a fairness opinion from our
financial advisor;
·
our accounts and notes receivable;
·
our inventory, including its origin and
condition, as well as the business processes used for testing and monitoring
the same;
·
our books and records; and
·
our product and service warranties,
including the absence of any claims based thereon.
52
Table of Contents
Material
Adverse Effect.
Some of the representations and
warranties referred to above are qualified by a material adverse effect
standard. See Conditions to Completing
the Merger Material Adverse Effect beginning on page 58.
Representations
and Warranties of Arrow and Merger Sub
. The merger
agreement also contains representations and warranties made by each of Arrow
and Merger Sub to the Company relating to the following matters, among others:
·
the due organization, valid existence and
good standing of Arrow and Merger Sub;
·
the corporate power and authority of each of
Arrow and Merger Sub to own, lease and operate its properties and assets and to
carry on its business as now being conducted and as proposed to be conducted
and its due qualification and good standing to do business in every
jurisdiction where the failure to be so qualified or in good standing would
materially impair its ability to perform its obligations under the merger
agreement;
·
the corporate power and authority of Arrow
and Merger Sub to enter into, and perform its obligations under, the merger
agreement and to complete the transactions contemplated thereby;
·
the absence of conflicts with, defaults, or
breaches under Arrow and Merger Subs organizational documents or contracts as
a result of the merger agreement or the completion of the transactions
contemplated thereby;
·
the approval of the merger agreement and the
transactions contemplated thereby by the boards of directors of each of Arrow
and Merger Sub;
·
the governmental consents, approvals,
licenses, permits, orders or authorizations required with respect to Arrow or
Merger Sub in connection with the merger agreement or the completion of
transactions contemplated thereby;
·
the absence of certain changes in Arrow or
Merger Subs business since Arrows last periodic report filed with the SEC;
·
the purpose for which Merger Sub was formed
and its operation until the merger is completed;
·
the absence of proceedings pending or to
Arrows knowledge threatened against or affecting Arrow or any of its
subsidiaries as well as the absence of court or other government orders that
could reasonably be expected to materially restrict or enjoin the completion of
the transactions contemplated by the merger agreement or prevent or materially
delay the ability of Arrow or Merger Sub to complete the transactions
contemplated by the merger agreement or to perform their obligations
thereunder;
·
the absence of brokers, finders, financial
advisors or other similar fees or commissions in connection with any of the
transactions contemplated by the merger agreement (other than the fee payable
to Arrows financial advisor);
·
the financial capability of Arrow to pay the
merger consideration and perform Arrows and Merger Subs other obligations
under the merger agreement; and
·
information supplied by Arrow, Merger Sub or
their representatives for inclusion in this proxy statement.
Nu
Horizons Conduct of Business
Pending the Merger
We have agreed,
until the earlier of the termination of the merger agreement in accordance with
its terms or the effective time, subject to certain exceptions, to conduct our
business in the ordinary course and use commercially
53
Table
of Contents
reasonable efforts
to preserve our business organization, assets and properties, and to preserve
our goodwill. In connection therewith,
we have agreed, until the earlier of the termination of the merger agreement in
accordance with its terms or the effective time, subject to certain exceptions,
including Arrows consent (which will not be unreasonably withheld or delayed),
that we will not:
·
pay dividends or split, combine or
reclassify our capital stock;
·
purchase, redeem or otherwise acquire our
capital stock or securities or any related rights or options (other than
forfeiture of Company stock options pursuant to any Company stock plan);
·
issue, pledge or otherwise dispose of or
encumber any shares of our capital stock or securities or any related rights or
options (other than issuances on exercise of Company stock options or
restricted stock awards outstanding on the date of the merger agreement);
·
amend our charter documents;
·
acquire any business, company or material
assets, except purchases of inventory in the ordinary course of business;
·
sell, lease, license, pledge or otherwise
dispose of or encumber any of our material properties or assets;
·
sell or otherwise transfer any material
assets, other than sales of inventory in the ordinary course of business;
·
adopt or implement any stockholder rights
plan;
·
enter into an agreement with respect to any
merger, liquidation, dissolution, restructuring, recapitalization or other
reorganization or acquisition or disposition of all of or any substantial
portion of our assets or securities, except as otherwise permitted by the
merger agreement as described below under No Solicitation, Acquisition
Proposals;
·
incur any new indebtedness for borrowed
money other than indebtedness reflected on our February 28, 2010, audited
balance sheet, issue, sell or amend any debt securities or rights to acquire
any debt securities of the Company, guarantee any debt securities of another
company or enter into any keep well or other agreement to maintain the
financial condition of another person;
·
make any loans, advances, or capital
contributions to, or investments in, any other person, other than employee
advances made in the ordinary course of business;
·
enter into any hedging agreement or other
derivatives instrument;
·
make any capital expenditures or other
expenditures with respect to property, plan or equipment during any fiscal
quarter in excess of $100,000 in the aggregate;
·
change our pricing policies, credit
practices, the rate or timing of our payment of accounts payable, the
collection of accounts receivable, or our earnings accrual rates on contracts;
·
change accounting methods or change any
assumption underlying, or method of calculating, any bad debt, contingency or
other reserve or revalue any assets, except as required by a change in GAAP;
·
change the Companys fiscal year;
54
Table of Contents
·
pay, settle or accept any material claims,
liabilities, disputes, audit or investigation findings or results or
obligations, except according to their terms or as reserved against in the most
recent consolidated financial statements included in our Form 10-Q for the
quarter ended May 31, 2010;
·
waive any material benefit of, modify in any
adverse respect, fail to enforce, or consent to any matter with respect to
which our consent is required under any confidentiality or similar agreement;
·
terminate any material contract or waive,
release or assign any material rights or claims, or, except in the ordinary
course of business, modify or amend any material contract;
·
terminate any confidentiality or standstill
agreement, or waive, release or assign any material rights or claims, or modify
or amend any such contract;
·
enter into or modify the terms of any
contract relating to the rendering of services or the distribution, sale or
marketing by third parties of the products of, or products licensed by, the
Company, except in the ordinary course of business;
·
license, or modify the terms of any license
of, any material intellectual property rights, other than non-exclusive
licenses that we may cancel without penalty on 30 days written notice;
·
make changes in severance arrangements or
other employee agreements or employee benefits, materially increase
compensation or pay a bonus other than as required by an existing agreement,
grant, or accelerate payment of, any stock options or restricted stock awards,
employ, promote or terminate any executive officers or certain other employees,
or fund or otherwise secure payments or benefits under employee benefit plans
or agreements, other than in the ordinary course of business;
·
make or rescind any tax election
inconsistent with the prior tax year, settle or compromise any tax liability,
amend any tax return, make a request for a written ruling of a taxing authority
relating to taxes or file a request for a pre filing agreement or similar
procedure, enter into an agreement with a taxing authority with respect to
taxes;
·
close or open any material facility or
office;
·
initiate, compromise or settle any material
proceeding;
·
authorize any transfer or exercise of rights
with respect to shares of Company common stock in violation of the voting
agreements;
·
fail to maintain insurance at levels
substantially comparable to levels existing as of the date of the merger
agreement or to timely file claims thereunder;
·
fail to pay accounts payable and other
obligations in the ordinary course of business; or
·
agree to any covenant not to compete or
other covenant restricting the marketing or distribution of the Companys
products or services or otherwise limiting the Companys freedom to compete or
to dispose or encumber any of our material assets, or that would so limit Arrow
after the effective time, other than territorial limitations in certain
agreements entered into in the ordinary course of business.
No
Solicitation, Acquisition Proposals
No
Solicitation.
Under the terms of the merger
agreement, subject to certain negotiated exceptions, we generally will not:
55
Table of Contents
·
initiate, solicit, encourage, facilitate or
induce the submission of another acquisition proposal;
·
engage or participate in any discussions or
negotiations regarding, or provide any person with non-public information in
connection with, another acquisition proposal, or otherwise encourage or
facilitate any effort or attempt to make or implement another acquisition
proposal;
·
approve, endorse or recommend another
acquisition proposal; or
·
enter into any letter of intent, agreement
in principle, merger agreement, option agreement or similar contract relating
to another acquisition proposal.
An acquisition
proposal is any inquiry, proposal or offer relating or likely to lead to:
·
a merger, consolidation, dissolution, tender
or exchange offer, joint venture, liquidation, recapitalization, share
exchange, business combination or similar transaction involving the Company;
·
the acquisition of 15% or more of the
outstanding capital stock of the Company; or
·
the acquisition of assets constituting 15%
or more of net revenues, net income, EBITDA or consolidated total assets of the
Company.
Acquisition
Proposals.
Notwithstanding these
restrictions, if before stockholder approval of the merger we receive a bona
fide, unsolicited written acquisition proposal that is not obtained in
violation of the prohibitions described above and that our board of directors
determines in good faith (after consultation with our financial advisor and
outside counsel) constitutes or could reasonably be expected to result in a
superior proposal, and if our board of directors concludes in good faith (after
consultation with our financial advisor and outside counsel) that the failure
to take such action would be inconsistent with its fiduciary duties to our
stockholders under applicable law, we may furnish information to the person
making the acquisition proposal and discuss or negotiate the acquisition
proposal with such person. We will not
disclose any non-public information to any person making such an acquisition
proposal without entering into a confidentiality agreement with such person on
terms no less favorable in the aggregate to us than those contained in our
confidentiality agreement with Arrow.
A superior proposal
is a bona fide written acquisition proposal to acquire all or substantially all
of our equity or assets that our board of directors determines, in good faith
(after consultation with our financial advisor and outside counsel):
·
is reasonably capable of being completed
timely on the proposed terms, taking into account all aspects of the proposal;
·
for which any required financing is fully
committed, or which, in the good-faith judgment of our board of directors
(based on the advice of our financial advisor), is reasonably capable of being
timely financed by the person making the proposal to finance the acquisition
proposal; and
·
would, if consummated, result in a
transaction that, after taking into account all of the terms and conditions, is
more favorable from a financial point of view to the holders of Company common
stock than the transactions provided for in the merger agreement and any bona
fide amendment offered or proposed by Arrow.
We will promptly
(and in no event later than two business days following receipt) notify Arrow
and Merger Sub in the event that we receive another acquisition proposal or any
communication from a person indicating that it is considering making another
acquisition proposal and will keep Arrow and Merger Sub informed as to the
status and any material developments, discussions and negotiations concerning
such acquisition proposal, including prompt written notice to Arrow of any
determination by our board of directors (or a special committee thereof) that a
superior proposal has been made.
56
Table of Contents
Change
in Board Recommendation.
Except as the merger agreement
permits, our board of directors will not (1) amend, withdraw, modify, change,
condition or qualify, or publicly propose to withdraw or modify, our board of
directors recommendation that our stockholders approve the merger proposal, (2)
approve or recommend another acquisition proposal or publicly propose to do so,
or (3) make any public statement or take any other action inconsistent with the
recommendation that our stockholders approve the merger proposal.
In response to a
superior proposal, our board of directors may withdraw, modify, change,
condition or qualify its recommendation that our stockholders approve the
merger proposal at any time before our stockholders approve the merger proposal
if all of the following conditions are met:
·
we have complied with our obligations under
the merger agreement relating to solicitation, responding to other acquisition
proposals and changing the boards recommendation, which are described briefly
in this section;
·
Arrow has not made a good faith written
proposal in response to the superior proposal on or before the fifth business
day following Arrows receipt of notice of the superior proposal from us, or
our board of directors concludes in good faith (after consulting with our
financial advisor and outside legal counsel) following the receipt of a good
faith written proposal from Arrow within the five business day period that the
superior proposal that we gave Arrow notice of continues to be a superior
proposal (provided that Arrow is given an additional period of five business
days to make an additional good faith written proposal in the case of a
material modification of the terms of the superior proposal); and
·
our board of directors determines in good
faith (after consulting with our financial advisor and outside legal counsel)
that the failure to change its recommendation that our stockholders approve the
merger proposal would be inconsistent with its fiduciary duties under
applicable law.
At any time before
our stockholders approve the merger proposal, our board of directors may cause
us to terminate the merger agreement and concurrently with or after such
termination enter into an acquisition agreement relating to a superior
proposal, as long as:
·
we have complied in all material respects
with our obligations under the merger agreement relating to solicitation,
responding to other acquisition proposals and changing our board of directors
recommendation;
·
we have negotiated in good faith with Arrow,
if Arrow has notified us of its intent to make a good faith written proposal in
response to the superior proposal, or Arrow has not made a good faith written
proposal in response to the superior proposal and five business days have
elapsed since we provided notice of the superior proposal; and
·
our board of directors concludes in good
faith (after consulting with our financial advisor and outside legal counsel)
that the failure to terminate the merger agreement would be inconsistent with
its fiduciary duties under applicable law.
In any event, we are
not prohibited from (1) taking and disclosing to our stockholders a position
contemplated by Rules 14a-9 or 14e-2(a) under the Exchange Act or (2) making
any disclosure to our stockholders if in the good faith judgment of our board
of directors the failure to make such disclosure would be inconsistent with
applicable law.
Under certain
circumstances in which our board of directors changes its recommendation or we
terminate the merger agreement, we may have to reimburse Arrow for up to $3,000,000
of its fees and expenses related to the transaction and, in some cases, pay to
Arrow a termination fee equal to 3% of the total merger consideration, or
approximately $4,039,800, plus expenses, less any such fees and expenses we
already paid. See Termination Fee,
Expenses beginning on page 62.
57
Table of Contents
The provisions
relating to nonsolicitation and the exceptions thereto were actively negotiated
with Arrow. Our board of directors has
concluded that such provisions do not unduly impede or preclude the receipt or
submission of a superior proposal from a third party who may wish to make a
competing offer to acquire us.
Access
to Information
Under the merger
agreement, we will, and will cause each of our subsidiaries to, afford to Arrow
and its directors, officers, employees, investment bankers, attorneys,
accountants or other agents, advisors or representatives reasonable access to
all of our properties, books, records, contracts, commitments and personnel and
furnish Arrow with all data and information as Arrow may request. We will use our reasonable best efforts to cause
our accountants to allow Arrow access to our accountants work papers for our
2010 audit.
Notwithstanding the
obligations described above, any such exchange of information shall not affect,
in any way, each partys relative competitive position to the other party or to
other entities, and we may deny access to any information if we believe that
providing access to such information would violate antitrust laws or any
confidentiality agreement.
Indemnification
Arrow has agreed
that:
·
for six years after the effective time,
Arrow and the surviving corporation will indemnify and hold harmless our
current and former directors and officers for acts or omissions occurring on or
prior to the effective time to the fullest extent provided in our certificate
of incorporation, bylaws or similar governing instruments as of the date of the
merger agreement, except that such indemnification will be subject to any
limitation imposed under applicable law;
·
for six years after the effective time,
Arrow will provide for indemnification and exculpation of our current and
former directors and officers for acts or omissions, other than those deemed to
be gross negligence or willful misconduct, occurring prior to the effective
time, in a manner consistent with and no less favorable than the
indemnification and exculpation provisions provided in our certificate of
incorporation, bylaws or similar governing instruments and any indemnification
agreement between us and any director or officer, as of the date of the merger
agreement;
·
after the effective time, the surviving
corporation shall, subject to certain cost limitations, cause to be maintained
for at least six years from the effective time the insurance coverage provided
under the directors and officers liability insurance policies in effect as of
the date of the merger agreement, or substitute coverage reasonably acceptable
and no less advantageous to the beneficiaries; and
·
Arrow and the surviving corporation, to the
extent permitted by applicable law, will honor all indemnification agreements
between the Company and our current and former directors and officers in effect
on the date of the merger agreement.
Conditions
to Completing the Merger
Conditions
to Each Partys Obligation.
The
respective obligations of Arrow and Merger Sub, on the one hand, and the
Company, on the other, to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following conditions:
·
the merger proposal will have been approved
by a majority vote of the holders of Company common stock;
·
any requisite waiting period (and any
extension thereof) under the HSR Act and any foreign antitrust laws will have
expired or been terminated; and
58
Table of Contents
·
there shall not be in effect any law or
governmental order making illegal or otherwise prohibiting the consummation of
any of the transactions contemplated by the merger agreement, nor shall there
be a pending proceeding which could reasonably be expected to similarly impact
the transactions.
Conditions
to the Obligation of Arrow and Merger Sub to Effect the Merger.
The
obligation of Arrow and Merger Sub to effect the merger is subject to the
satisfaction, or waiver by Arrow and Merger Sub, of the following additional
conditions:
·
the representations and warranties of the
Company will have been true and correct (without giving any effect to any
qualification as to materiality or material adverse effect contained in any
specific representation or warranty) on the date of the merger agreement and at
the effective time, as if made at and as of that time, except:
·
representations and warranties that address
matters only as of a particular date, will be true and correct only as of that
date;
·
representations and warranties regarding our
capitalization, options and shares reserved for issuance will have been true
and correct except for de minimis differences; and
·
where the failure of such representations
and warranties to be true and correct would not have, or could not reasonably
be expected to result in, a material adverse effect, as described below.
·
the Company will have performed in all
material respects all of the obligations and complied with the agreements and
covenants required to be performed by it under the merger agreement;
·
since the date of the merger agreement there
will not have been any material adverse effect in relation to the Company;
·
any disclosed consents, waivers, approvals,
authorizations and notices shall have been obtained; and
·
there will be no law, proceeding, action,
suit, litigation or order by any government authority pending that: (a) imposes or seeks to impose any limitation
on the ability of Arrow, Merger Sub or the Company, or any of their or our
respective affiliates, to acquire or hold, or which requires any of the parties
to dispose of or hold separately, any material portion of their assets or
business; (b) imposes limitations on the ability of any of them to conduct, own
or operate their business or assets; or (c) imposes or seeks to impose any
limitation upon Arrows full rights of ownership of the surviving corporation
after the closing.
Conditions
to the Obligation of Nu Horizons to Effect the Merger.
Our
obligation to complete the merger is subject to the satisfaction, or waiver by
the Company, of the following additional conditions:
·
the representations and warranties of Arrow
and Merger Sub will have been true and correct in all material respects on the
date of the merger agreement and at the effective time, as if made at and as of
that time, except:
·
representations and warranties that address
matters only as of a particular date, need to be true and correct only as of
that date; and
·
where the failure of such representations
and warranties to be true and correct would not materially impair Arrows or
Merger Subs ability to perform its obligations under the merger agreement or
its obligation to effect the merger; and
59
Table of Contents
·
Arrow and Merger Sub will have performed in
all material respects all of the obligations and complied with the agreements
and covenants required to be performed by them under the merger agreement.
Material
Adverse Effect.
A material adverse effect in
relation to the Company means any fact, change, event, circumstance, occurrence,
development or effect that has or would reasonably be expected to have a
materially adverse effect on our business, assets, operations, condition or
results of operations or prevents the completion of the transactions
contemplated by the merger agreement.
However, none of the following will be considered a material adverse
effect:
·
changes affecting any industry or industries
in which we or any of our subsidiaries operate, except to the extent the change
disproportionately affects us relative to other companies in our industry;
·
changes in the global or national political
conditions or general economic or market conditions affecting the regions in
which we or any of our subsidiaries operate, except to the extent the change
disproportionately affects us relative to other companies in our industry;
·
general financial, credit or capital market
conditions, including interest rates or exchange rates, or any changes therein,
except to the extent the conditions or change disproportionately affects us
relative to other companies in our industry;
·
the announcement or pendency of the merger,
including any cancellation of or delays in customer orders, any reduction in
sales, any disruption in supplier, distributor, partner or similar
relationships, any loss of employees and any actions taken by or inactions of
our competitors, unless we failed to disclose (i) any such cancellation of or
delays in customer orders or reduction in sales related to any material
customer that has (A) from February 28, 2010, to the date of the merger
agreement terminated, rescinded or repudiated any contract prior to the
anticipated end of the engagement contemplated by such contract, or (B) as of
the date of the merger agreement, indicated that it is such material customers
intention to stop or decrease the rate of buying materials, products or
services from the Company or any of its subsidiaries or otherwise reduce or
detrimentally alter such material customers business or relationship with the
Company or any of its subsidiaries (other than in the ordinary course of
business); and (ii) any such disruption in supplier, distributor, partner or
similar relationship related to a material supplier that has (A) from February 28,
2010, to the date of the merger agreement terminated, rescinded or repudiated
any contract prior to the anticipated end of the engagement contemplated by
such contract, or (B) as of the date of the merger agreement, indicated that it
is such material suppliers intention to stop or decrease the rate of supplying
materials, products or services to the Company or any of its subsidiaries or
otherwise reduce or detrimentally alter such material suppliers business or
relationship with the Company or any of its subsidiaries (other than in the
ordinary course of business).
·
our compliance with the terms of the merger
agreement, any action contemplated by the merger agreement or any action taken,
or failure to act, to which Arrow has consented;
·
stockholder class action or derivative
litigation or other litigation to the extent arising from allegations of a
breach of fiduciary or other common law or statutory duty relating to the
negotiation, execution, delivery or performance of the merger agreement and/or
the completion or proposed completion of any of the transactions contemplated
by the merger agreement;
·
acts of war, the commencement, continuation
or escalation of a war, acts of armed hostility, sabotage or terrorism or other
international or national calamity or any material worsening of such conditions
threatened or existing as of the date of the merger agreement, except to the
extent any such event disproportionately affects us relative to other companies
in our industry;
60
Table of Contents
·
changes in law or GAAP after the date of the
merger agreement, except to the extent the change disproportionately affects us
relative to other companies in our industry;
·
our failure to meet any published or
internally prepared estimates of revenues, earnings or other economic
performance for any period ending on or after the date of the merger agreement;
or
·
a decline in the price of Company common
stock.
Termination
The Company and
Arrow may, by mutual written consent, terminate the merger agreement and
abandon the merger at any time prior to the effective time, whether before or
after the adoption of the merger agreement by the holders of Company common
stock.
Under certain
circumstances, the merger agreement may also be terminated and the merger
abandoned at any time prior to the effective time as follows:
·
by either Arrow or the Company, if:
·
the merger does not become effective by
March 19, 2011, or, if certain conditions related to antitrust matters are not
satisfied by that date and no other condition remains to be satisfied, then
June 19, 2011, which we refer to in this proxy statement as the end date,
except that neither Arrow nor the Company may terminate the merger agreement on
this basis if its breach of its obligations under the merger agreement caused
the failure of the merger to become effective by the end date;
·
any law or order has been enacted, issued,
promulgated, enforced or entered by a governmental entity that makes illegal,
permanently enjoins or otherwise permanently prohibits the completion of the
merger, and the law is final and nonappealable, except that neither Arrow nor
the Company may terminate the merger agreement on this basis if its breach of
its obligations under the merger agreement caused the issuance, promulgation,
enforcement or entry of such law or order;
·
the merger agreement is submitted to the
Company stockholders for approval at a meeting and they do not approve the
merger proposal at the meeting or at any adjournment or postponement thereof;
or
·
the other party breaches any of its
representations, warranties, covenants or agreements contained in the merger
agreement, which breach would, under the merger agreement, permit the
terminating party to refuse to complete the merger, except that neither Arrow
nor the Company can terminate the merger agreement on this basis if it is then
in material breach of any of its covenants or other agreements contained in the
merger agreement or has willfully breached its representations and warranties
in the merger agreement. However, if the
breach in the representations, warranties, covenants or agreements is curable
prior to the end date through the exercise of reasonable efforts and the
breaching party exercises reasonable efforts to cure such breach, then Arrow or
the Company, as the case may be, must provide a fifteen day period following
written notice to cure the breach. Any
breach by Arrow of its agreement to deposit with the paying agent the payments
to be made to holders of Company common stock and option holders prior to the
effective time of the merger is not capable of being cured and permits the
Company to immediately terminate the merger agreement.
61
Table of Contents
·
by Arrow, if:
·
(1) the Companys board of directors changes
its recommendation that the holders of Company common stock approve the merger
proposal; (2) the Company breaches its obligations under the merger agreement
relating to solicitation, responding to other acquisition proposals and
changing our board of directors recommendation; (3) following a written
request from Arrow, the Companys board of directors fails to reaffirm its
recommendation that its stockholders approve the merger proposal within ten
business days after the date another acquisition proposal is publicly
disclosed; (4) a tender offer or exchange offer relating to Company common
stock is commenced by a person not affiliated with Arrow and the Companys
board of directors fails to reaffirm its recommendation that the holders of
Company common stock approve the merger proposal and to recommend that such
holders not tender their shares in such tender or exchange offer within ten
business days; or (5) the Company or its board of directors publicly announces
its intentions to take any of these actions; or
·
by the Company, if:
·
before the holders of Company common stock
approve the merger proposal, the Companys board of directors authorizes its
management, in compliance with its obligations under the merger agreement
relating to non-solicitation and in material compliance with its other
obligations under the merger agreement, to enter into an agreement in
principle, letter of intent, term sheet, acquisition agreement, merger
agreement, option agreement, joint venture agreement, partnership agreement or other
agreement in respect of a superior proposal, as long as the Company pays Arrows
fees and expenses as described under Termination Fee, Expenses below.
Termination
Fee, Expenses
Except for the
payment of the expenses and the termination fee, as described below, each party
will pay all fees and expenses incurred by it in connection with the
negotiation and performance of the merger agreement, and no party may recover
any such fees and expenses from the other parties upon any termination of the
merger agreement.
The Company must pay
Arrow for up to $3,000,000 of its fees and expenses related to the transaction,
and in some cases pay to Arrow a termination fee of 3% of the aggregate merger
consideration (approximately $4,039,800) plus expenses, less any such fees and
expenses we already paid, under the following circumstances:
·
if Arrow terminates the merger agreement
because (1) the Companys board of directors changes its recommendation that
its stockholders approve the merger proposal, (2) following a written request
from Arrow, the Companys board of directors fails to reaffirm its
recommendation that its stockholders approve the merger proposal within ten
business days after the date another acquisition proposal is publicly disclosed
or (3) the Company or its board of directors publicly announces its intentions
to take either of these actions, then the Company will pay Arrow the
termination fee plus expenses, less any such fees and expenses we already paid
(but the Company is not required to pay either the termination fee or expenses
if at the time Arrow terminates the merger agreement for these reasons, the
Company had the right to unilaterally terminate the merger agreement due to a
breach of representation, warranty or covenant by Arrow and had notified Arrow
of that fact in writing);
·
if before the holders of Company common
stock approve the merger proposal, the Companys board of directors authorizes
the Company, in compliance with the merger agreement, to enter into an
acquisition agreement in respect of a superior proposal, or takes certain other
actions related
62
Table
of Contents
thereto, then
the Company will pay the termination fee plus expenses, less any such fees and
expenses we already paid;
·
if another acquisition proposal is made
following the date of the merger agreement and prior to the earlier of the
effective time or the termination of the merger agreement pursuant to its terms
and Arrow terminates the merger agreement because (1) the merger has not become
effective by the end date, (2) the merger agreement is submitted to the holders
of Company common stock for approval at a meeting and they do not approve the
merger proposal at the meeting or at any adjournment or postponement thereof,
(3) the Company has breached any of its representations, warranties, covenants
or agreements contained in the merger agreement such that the conditions to the
closing of the merger that the Companys representations and warranties be true
and correct or that the Company will have performed all of the obligations and
complied with the agreements and covenants required to be performed by it under
the merger agreement would not be satisfied, (4) the Company breaches its
obligations under the merger agreement relating to solicitation, responding to
other acquisition proposals and changing the board of directors
recommendation, (5) a tender offer or exchange offer relating to Company common
stock is commenced by a person not affiliated with Arrow and the Companys
board of directors fails to reaffirm its recommendation that its stockholders
approve the merger proposal and to recommend that its stockholders not tender
their shares in such tender or exchange offer within ten business days, (6) the
Company or its board of directors publicly announces its intentions to take the
action described in clauses (4) or (5) of this paragraph, then the Company will
pay Arrows expenses, and, if concurrently with Arrows termination or at any
time within 18 months thereafter the Company enters into an agreement for
another acquisition proposal or another acquisition proposal is consummated,
then the Company will pay the termination fee;
·
if another acquisition proposal is made and
the Company terminates the merger agreement because of either of the reasons
specified in clause (1) or (2) of the preceding paragraph, then the Company
will pay Arrows expenses, and, if concurrently with Arrows termination or at
any time within 18 months thereafter the Company enters into an agreement for
another acquisition proposal or another acquisition proposal is consummated,
then the Company will pay the termination fee; and
·
if (i) the Company terminates the merger
agreement because (1) the merger has not been consummated by the end date or
(2) the holders of Company common stock did not approve the merger proposal, or
(ii) if Arrow terminates the merger agreement because the Company has breached
any of its representations, warranties, covenants or agreements contained in
the merger agreement such that the conditions to the closing of the merger that
its representations and warranties be true and correct or that it will have performed
all of the obligations and complied with the agreements and covenants required
to be performed by it under the merger agreement would not be satisfied, and at
the time of such termination an acquisition proposal has not been made, the
Company will pay Arrows expenses at the time of such termination. Furthermore, in the case of a termination by
the Company because the holders of Company common stock do not approve the
merger, and concurrently with the Companys termination or at any time within 18
months thereafter the Company enters into an agreement for another acquisition
proposal or another acquisition proposal is consummated, the Company will pay
the termination fee.
The Company will not
be required to pay Arrow the expenses or termination fee described above on
more than one occasion, nor will it be required to pay Arrow an amount greater
than the termination fee, plus expenses, described above.
Amendment
At any time before
the effective time, the merger agreement may be amended by Arrow, Merger Sub
and the Company, except that after approval of the merger proposal by the
holders of Company common stock, no such amendment will be made without further
approval of the stockholders if applicable law requires such approval.
63
Table of Contents
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
THE ADOPTION
OF THE MERGER AGREEMENT AND THE APPROVAL OF THE TRANSACTIONS CONTEMPLATED
THEREBY.
64
Table of Contents
ADJOURNMENT OF THE SPECIAL
MEETING
(PROPOSAL NO. 2)
The board of
directors is asking the holders of Company common stock to vote on a proposal
to adjourn the special meeting, if necessary or appropriate, in order to allow
for the solicitation of additional proxies if there are insufficient votes at
the time of the special meeting to adopt the merger agreement and approve the
transactions contemplated thereby.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
THE APPROVAL
OF THE ADJOURNMENT OF THE SPECIAL MEETING
,
IF NECESSARY OR
APPROPRIATE
,
TO SOLICIT ADDITIONAL PROXIES.
65
Table of Contents
MARKET PRICE OF COMPANY COMMON STOCK
Company common stock
is traded on the NASDAQ Global Select Market under the symbol NUHC. The following table sets forth, for the
periods indicated, the high and low sales prices for the Companys common stock
as reported by the NASDAQ Global Select Market.
|
|
High
|
|
Low
|
|
FISCAL YEAR 2009:
|
|
|
|
|
|
First Quarter
|
|
$
|
6.99
|
|
$
|
5.29
|
|
Second Quarter
|
|
5.73
|
|
4.50
|
|
Third Quarter
|
|
4.95
|
|
1.20
|
|
Fourth Quarter
|
|
2.00
|
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
Low
|
|
FISCAL YEAR 2010:
|
|
|
|
|
|
First Quarter
|
|
$
|
3.72
|
|
$
|
1.45
|
|
Second Quarter
|
|
4.10
|
|
2.96
|
|
Third Quarter
|
|
4.50
|
|
3.60
|
|
Fourth Quarter
|
|
4.68
|
|
3.86
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
Low
|
|
FISCAL YEAR 2011:
|
|
|
|
|
|
First Quarter
|
|
$
|
4.40
|
|
$
|
3.00
|
|
Second Quarter
|
|
3.65
|
|
2.95
|
|
|
|
|
|
|
|
|
|
As of October 4,
2010, the Companys common stock was owned by approximately 683 holders of
record and 4,000 beneficial holders.
Under the terms of
its credit agreement, the Company is not permitted to pay dividends. Consequently, the Company currently intends
to retain future earnings for use in the operation and development of its
business. No dividends were paid in
fiscal years 2010 and 2009.
66
Table of Contents
COMPANY COMMON STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table
sets forth, as of October 4, 2010, certain information with regard to the
record and beneficial ownership of Company common stock by (i) all persons
known to be beneficial owners of more than 5% of our outstanding stock, based
solely on filings with the SEC; (ii) each director; (iii) Nu Horizons
principal executive officer, principal financial officer and three other most
highly compensated executive officers of Nu Horizons for fiscal 2010; (iv) one
additional individual for whom disclosure would have been provided but for the
fact that he was not serving as an executive officer as of February 28, 2010;
and (v) all executive officers and directors as a group. Unless otherwise indicated, each holder of
Company common stock has sole voting and investment power.
67
Table of Contents
Name (and
Address) of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership(1)
|
|
Percent
|
|
Officers and Directors
|
|
|
|
|
|
Steven J. Bilodeau
|
|
15,000
|
|
|
*
|
James Estill
|
|
0
|
|
|
*
|
Kurt Freudenberg
|
|
58,947
|
|
|
*
|
Herbert M. Gardner
|
|
184,360
|
(2)
|
|
*
|
Martin Kent
|
|
0
|
|
|
*
|
Stephen Mussmacher
|
|
24,872
|
|
|
*
|
Arthur Nadata
|
|
824,322
|
(3)(4)
|
3.9
|
%
|
Martin Novick
|
|
90,000
|
|
|
*
|
Dominic A. Polimeni
|
|
105,000
|
|
|
*
|
Richard S. Schuster
|
|
629,787
|
(4)
|
3.4
|
%
|
David Siegel
|
|
150,000
|
|
|
*
|
Kent Smith
|
|
41,694
|
|
|
*
|
All directors and executive officers as a group
(11 persons)(5)
|
|
2,123,982
|
|
11.5
|
%
|
|
|
|
|
|
|
Principal Stockholders
|
|
|
|
|
|
Dimensional Fund Advisors
|
|
1,448,569
|
(6)
|
7.8
|
%
|
1299 Ocean Avenue, 11th Floor
|
|
|
|
|
|
Santa Monica, CA 90401
|
|
|
|
|
|
|
|
|
|
|
|
Donald Smith &
Co., Inc.
|
|
1,850,839
|
(7)
|
10.0
|
%
|
152 West 57th Street, 22nd Floor
|
|
|
|
|
|
New York, NY 10019
|
|
|
|
|
|
|
|
|
|
|
|
Nery Capital Partners, L.P.
|
|
1,855,000
|
(8)
|
10.0
|
%
|
22 South Pack Square, Suite 302
|
|
|
|
|
|
Ashville, NC 28801
|
|
|
|
|
|
|
|
|
|
|
|
Wells Fargo & Company
|
|
945,646
|
(9)
|
5.1
|
%
|
420 Montgomery Street
|
|
|
|
|
|
San Francisco, CA 94163
|
|
|
|
|
|
* Less than 1%
(1)
The number of shares owned
by our directors and executive officers shown in the table includes (i) shares
of Company common stock which are issuable upon exercise of options that are
exercisable at October 4, 2010, or will become exercisable within 60 days after
that date, and (ii) shares of restricted stock, the rights to which are not yet
vested. Set forth below is the number of
shares issuable upon exercise of those options and unvested shares of restricted
stock for each of our directors and the executive officers named above.
68
Table of Contents
Name
|
|
Options
|
|
Restricted Stock
|
|
Steven J. Bilodeau
|
|
15,000
|
|
0
|
|
James Estill
|
|
0
|
|
0
|
|
Kurt Freudenberg
|
|
12,500
|
|
33,722
|
|
Herbert M. Gardner
|
|
150,000
|
|
0
|
|
Martin Kent
|
|
0
|
|
0
|
|
Stephen Mussmacher
|
|
10,250
|
|
8,574
|
|
Arthur Nadata
|
|
350,551
|
|
50
,000
|
|
Martin Novick
|
|
90,000
|
|
0
|
|
Dominic A. Polimeni
|
|
105,000
|
|
0
|
|
Richard S. Schuster
|
|
210,000
|
|
50,000
|
|
David Siegel
|
|
150,000
|
|
0
|
|
Kent Smith
|
|
13,750
|
|
24,505
|
|
(2)
Includes 4,330 shares owned by Mr. Gardners spouse,
as to which he disclaims beneficial ownership, and 19,210 shares held by his
IRA.
(3)
Includes 410,644 shares of Company common stock
owned jointly with Mr. Nadatas spouse, with whom he shares both investment and
voting power as to these shares.
(4)
Includes 13,127 shares for Mr. Nadata and 19,688 for
Mr. Schuster of fully-vested Company common stock owned through the Employee
Stock Ownership Plan, which includes voting power. Messrs. Nadata and Schuster are also Trustees
of the Plan.
(5)
Does not include Mr. Estill, who ceased to serve as
President, Chief Executive Officer and director on August 3, 2009.
(6)
Includes 25,198 shares over which Dimensional Fund
Advisors does not have voting power.
(7)
Includes 316,818 shares over which Donald Smith &
Co., Inc. does not have sole voting power.
(8)
Beneficial ownership reported jointly with Nery
Capital Management, L.L.C., Nery Asset Management, L.L.C., and Michael Nery.
(9)
Consists of 945,646 shares over which Wells Fargo &
Company does not have voting power.
69
Table of Contents
APPRAISAL RIGHTS
Under Section 262 of
the Delaware General Corporation Law (the DGCL), any holder of Company common
stock who does not wish to accept the $7.00 per share merger consideration may
dissent from the merger and elect to exercise appraisal rights. Even if the merger is approved by the holders
of the requisite number of shares of Company common stock, you are entitled to
exercise appraisal rights and obtain payment of the fair value for your
shares, exclusive of any element of value arising from the expectation or
accomplishment of the merger.
Under Section 262 of
the DGCL, when a merger is submitted for approval at a meeting of stockholders,
as in the case of the merger agreement, the corporation, not less than 20 days
prior to the meeting, must notify each of its stockholders that appraisal
rights are available and include in the notice a copy of Section 262 of the
DGCL. This proxy statement constitutes
the notice, and we attach the applicable statutory provisions to this proxy
statement as Annex C.
In order to exercise
your appraisal rights effectively, you must satisfy each of the following
primary requirements:
·
You must hold shares in Nu Horizons as of
the date you make your demand for appraisal rights and continue to hold shares
in Nu Horizons through the effective time of the merger;
·
You must deliver to Nu Horizons a written
notice of your demand of payment of the fair value for your shares prior to the
taking of the vote at the special meeting;
·
You must not have voted in favor of adoption
of the merger agreement, either in person or by proxy; and
·
You must file a petition in the Delaware
Court of Chancery (the Delaware Court) demanding a determination of the fair
value of the shares within 120 days after the effective time of the merger.
If you fail to
strictly comply with any of the above conditions or otherwise fail to strictly
comply with the requirements of Section 262 of the DGCL, you will have no
appraisal rights with respect to your shares.
Failing to vote on
the proposal to adopt the merger agreement will not constitute a waiver of
appraisal rights.
Neither voting (in
person or by proxy) against, abstaining from voting on or failing to vote on
the proposal to adopt the merger agreement will constitute a written demand for
appraisal within the meaning of Section 262 of the DGCL. The written demand for appraisal must be in
addition to and separate from any proxy or vote.
The address for
purposes of making an appraisal demand is:
Corporate Secretary
Nu Horizons Electronics Corp.
70 Maxess Road
Melville, New York 11747
Only a holder of
record of shares of Company common stock, or a person duly authorized and
explicitly purporting to act on his or her behalf, is entitled to assert an
appraisal right for the shares of Company common stock registered in his or her
name. Beneficial owners who are not record
holders and who wish to exercise appraisal rights are advised to consult with
the appropriate record holders promptly as to the timely exercise of appraisal
rights. A record holder, such as a
broker, who holds shares of Company common stock as a nominee for others, may
exercise appraisal rights with respect to the shares of Company common stock
held for one or more beneficial owners, while not exercising such rights for
other beneficial owners. In such a case,
the written demand should set forth the number of shares as to which the demand
is made. Where no shares of Company
common stock
70
Table
of Contents
are expressly
mentioned, the demand will be presumed to cover all shares of Company common
stock held in the name of such record holder.
A demand for the
appraisal of shares of Company common stock owned of record by two or more
joint holders must identify and be signed by all of the holders. A demand for appraisal signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity must so
identify the persons signing the demand.
An appraisal demand
may be withdrawn by a former holder of Company common stock within 60 days
after the effective time of the merger, or thereafter only with the approval of
Nu Horizons. Upon withdrawal of an
appraisal demand, the former holder of Company common stock will be entitled to
receive the $7.00 cash payment per share referred to above, without interest.
If we complete the
merger, we will give written notice of the effective time of the merger within
10 days after the effective time of the merger to each of the former holders of
Company common stock who did not vote in favor of the merger agreement and who
made a written demand for appraisal in accordance with Section 262 of the
DGCL. Within 120 days after the
effective time of the merger, but not later, either the surviving corporation
or any dissenting stockholder who has complied with the requirements of Section
262 of the DGCL may file a petition in the Delaware Court demanding a
determination of the value of the shares of Company common stock. Holders of Company common stock who desire to
have their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262 of the DGCL.
Within 120 days
after the effective time of the merger, any holder of Company common stock who
has complied with the provisions of Section 262 of the DGCL up to that point
may receive from the surviving corporation, upon written request, a statement
setting forth the aggregate number of shares not voted in favor of the merger
agreement and with respect to which we have received demands for appraisal, and
the aggregate number of holders of those shares. The surviving corporation must mail this
statement to the stockholder within 10 days of receipt of the request or within
10 days after expiration of the period for delivery of demands for appraisals
under Section 262 of the DGCL, whichever is later.
If a hearing on the
petition is held, the Delaware Court is empowered to determine which dissenting
stockholders are entitled to an appraisal of their shares. The Delaware Court may require dissenting
stockholders to submit their certificates representing shares for notation
thereon of the pendency of the appraisal proceedings, and the Delaware Court is
empowered to dismiss the proceedings as to any dissenting stockholder who does
not comply with this request.
Accordingly, dissenting stockholders are cautioned to retain their share
certificates, pending resolution of the appraisal proceedings.
After determination of
the dissenting stockholders entitled to an appraisal, the Delaware Court will
appraise the shares held by such dissenting stockholders at their fair value as
of the effective time of the merger.
When the value is so determined, the Delaware Court will direct the
payment by the surviving corporation of such value, with interest thereon if
the Delaware Court so determines, to the dissenting stockholders entitled to
receive the same, upon surrender to the surviving corporation by such
dissenting stockholders of the certificates representing such shares.
In determining fair
value, the Delaware Court will take into account all relevant factors. The Delaware Supreme Court has stated that proof
of value by any techniques or methods which are generally considered acceptable
in the financial community and otherwise admissible in court should be
considered.
Stockholders should
be aware that the fair value of their shares as determined under Section 262 of
the DGCL could be greater than, the same as, or less than the $7.00 merger
consideration.
The Delaware courts
may also, on application (1) assess costs among the parties as the Delaware
courts deem equitable and (2) order all or a portion of the expenses incurred
by any dissenting stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees and fees and expenses
of
71
Table
of Contents
experts, to be
charged pro rata against the value of all shares entitled to appraisal. Determinations by the Delaware courts are
subject to appellate review by the Delaware Supreme Court.
No appraisal
proceedings in the Delaware courts shall be dismissed as to any dissenting
stockholder without the approval of the Delaware court, and this approval may
be conditioned upon terms which the Delaware court deems just.
From and after the
effective time of the merger, former holders of Company common stock are not
entitled to vote their shares for any purpose and are not entitled to receive
payment of dividends or other distributions on their shares.
A holder of Company
common stock who wishes to exercise appraisal rights should carefully review
the foregoing description and the applicable provisions of Section 262 of the
DGCL which is set forth in its entirety in Annex C to this proxy statement and
is incorporated herein by reference. Any
holder of Company common stock considering demanding appraisal is advised to
consult legal counsel because the failure to strictly comply with the
procedures required by Section 262 of the DGCL could result in the loss of
appraisal rights.
72
Table of Contents
WHERE YOU CAN FIND MORE INFORMATION
Nu Horizons is
subject to the informational requirements of the Securities Exchange Act of
1934, as amended. Nu Horizons files
reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy
statements and other information at the SECs Public Reference Section at 100 F
Street, N.E., Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet website, located at
http://www.sec.gov
, that contains reports, proxy statements
and other information regarding companies and individuals that file
electronically with the SEC.
The information
contained in this proxy statement speaks only as of the date indicated on the
cover of this proxy statement unless the information specifically indicates
that another date applies.
Requests for copies
of Nu Horizons filings should be directed to Nu Horizons Electronics Corp., 70
Maxess Road, Melville, New York 11747, Attention: Corporate Secretary.
Document requests
from Nu Horizons should be made by [
·
] [
·
], 2010 in order to receive them before the
special meeting.
Our website is
http://www.nuhorizons.com
.
The information contained on our website is not incorporated into this
proxy statement. The following documents
are posted on our website, and can also be obtained from us by written request
to Nu Horizons Electronics Corp., Attention: Corporate Secretary, 70 Maxess
Road, Melville, New York 11747 or by calling (631) 396-5000:
·
our Code of Ethics and Code of Conduct; and
·
the charters of each of the standing committees of
the board of directors: the audit committee, the compensation committee and the
corporate governance committee.
Nu Horizons will
make available to any interested holder of Company common stock or its authorized
representative for inspection and copying, during regular business hours at its
principal executive office at 70 Maxess Road, Melville, New York 11747, copies
of the report provided to the Company by Houlihan Lokey dated September 19,
2010.
The proxy statement
does not constitute an offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction to or from any
person to whom it is not lawful to make any offer or solicitation in that
jurisdiction. The delivery of this proxy
statement should not create an implication that there has been no change in the
affairs of Nu Horizons since the date of this proxy statement or that the
information herein is correct as of any later date.
Holders of Company
common stock should not rely on information other than that contained in this
proxy statement. Nu Horizons has not
authorized anyone to provide information that is different from that contained
in this proxy statement. This proxy
statement is dated [
·
] [
·
], 2010.
No assumption should be made that the information contained in this
proxy statement is accurate as of any date other than that date, and the
mailing of this proxy statement will not create any implication to the
contrary.
If you have questions
about the special meeting or the merger after reading this proxy, or if you
would like additional copies of this proxy statement or the proxy card, you
should contact Nu Horizons Electronics Corp., 70 Maxess Road, Melville, New York
11747,
Attention: Corporate Secretary. You may call our proxy solicitor MacKenzie
Partners toll-free at (800) 322-2885 (banks and brokers may call collect at
(212) 929-5500).
73
Table of Contents
SUBMISSION OF STOCKHOLDER PROPOSALS
If the merger is
completed, there will be no public participation in any future meetings of
holders of Company common stock. If the
merger is not completed, you will continue to be entitled to attend and
participate in our stockholder meetings, and we will hold an annual meeting in
2011, in which case stockholder proposals will be eligible for consideration
for inclusion in the proxy statement and form of proxy for our 2011 annual meeting
of stockholders in accordance with Rule 14a-8 under the Exchange Act. Proposals of stockholders intended to be
presented at the 2011 Annual Meeting of Stockholders pursuant to Rule 14a-8
must be received at our principal office not later than February 14, 2011, to
be included in the proxy statement for that meeting.
In addition, in
order for a stockholder proposal to be presented at our meeting without it
being included in our proxy materials, notice of such proposal must be
delivered to the Secretary of our company at our principal offices (i) if
seeking to nominate directors, not later than April 30, 2011, nor earlier than
March 31, 2011, or (ii) if not seeking to nominate directors, not later than
March 31, 2011, nor earlier than March 1, 2011.
If notice of any stockholder proposal is not received within these time
periods, the notice shall be deemed ineffective and either the nomination shall
be void or the business shall not be transacted. If the board of directors chooses to present
a proposal submitted at the 2011 Annual Meeting, then the persons named in
proxies solicited by the board of directors for the 2011 Annual Meeting may
exercise discretionary voting power with respect to such proposal.
74
Table of Contents
ANNEX A
AGREEMENT AND PLAN OF MERGER, DATED AS OF SEPTEMBER 19, 2010, BY AND AMONG
ARROW ELECTRONICS, INC., NEPTUNE ACQUISITION CORPORATION, INC., AND NU HORIZONS
ELECTRONICS CORP.
A-1
Table of Contents
Execution
Copy
AGREEMENT AND PLAN OF MERGER
By and Among
ARROW ELECTRONICS, INC.,
NEPTUNE ACQUISITION CORPORATION, INC.
and
NU HORIZONS ELECTRONICS CORP.
Dated as of September 19, 2010
Table of Contents
Exhibit AForm of
Articles of Incorporation
Schedule
CKCompanys Knowledge
ii
Table of Contents
AGREEMENT AND PLAN OF MERGER
This
Agreement and Plan of Merger (this
Agreement
), dated as of September 19,
2010, is entered into by and among Arrow Electronics, Inc., a
New York corporation (
Parent
), Neptune Acquisition Corporation, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent (
Purchaser
), and
Nu Horizons Electronics Corp., a Delaware corporation (the
Company
).
WHEREAS,
the respective Boards of Directors of Parent, Purchaser and the Company have
determined that it would be advisable and in the best interests of their
respective stockholders for Parent to acquire the Company upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS,
to effectuate such acquisition, Purchaser will be merged with and into the
Company, with the Company continuing as the surviving corporation in the merger
(the
Merger
);
WHEREAS,
in the Merger, upon the terms and subject to the conditions of this Agreement,
each outstanding share of common stock, par value $0.0066 per share, of the
Company (the
Company
Common Stock
) will be converted into the right to receive the
Merger Consideration (as defined below);
WHEREAS,
the respective Boards of Directors of Parent and Purchaser have approved this
Agreement;
WHEREAS,
the Board of Directors of the Company has (i) determined that the Merger
is fair to, and in the best interest of, the Company and its stockholders,
(ii) declared the advisability of and approved this Agreement and the
transactions contemplated hereby, including the Merger, in accordance with the
General Corporation Law of the State of Delaware (the
D
GCL
) and (iii) resolved to
recommend that the holders of the shares of Company Common Stock approve this
Agreement, including the principal terms of the Merger;
WHEREAS,
the parties desire to make certain representations, warranties, covenants and
agreements in connection with the Merger and the transactions contemplated by
this Agreement and also to prescribe certain conditions to the Merger; and
WHEREAS,
concurrently herewith, Parent and Purchaser are entering into a Stockholder
Agreement (collectively, the
Voting Agreements
)
with each director of the Company who beneficially owns shares of Company
Common Stock as of the date hereof in respect of such Company Common Stock
(each, a
Director Stockholder
);
NOW,
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
Purchaser and the Company agrees as follows:
Table of Contents
ARTICLE I
DEFINITIONS
1.1
Definitions
.
As used in this Agreement, the following terms have the respective meanings set
forth below:
2010 Form 10-K
has the meaning set forth in
Section 4.4(a)
.
Acceptable Confidentiality
Agreements
has the meaning set forth in
Section 6.2(b)
.
Acquisition Proposal
means any inquiry, proposal or offer by any Person other than Parent, Purchaser
or any of their respective Affiliates relating to, or that is reasonably likely
to lead to, directly or indirectly, (i) a merger, consolidation,
dissolution, tender offer, exchange offer, joint venture, liquidation, recapitalization,
share exchange, business combination or other similar transaction involving the
Company or any of its Subsidiaries, (ii) the acquisition by any Person in
any manner of a number of shares of any class of equity securities of the Company
or any Subsidiary equal to or greater than fifteen percent (15%) of the number
of such shares outstanding before such acquisition or (iii) the
acquisition by any Person in any manner, directly or indirectly, of assets that
constitute fifteen percent (15%) or more of the net revenues, net income,
EBITDA or the consolidated total assets of the Company, in each case other than
the transactions contemplated by this Agreement;
provided,
however
, that solely for purposes of
Section 9.3
, the
references to fifteen percent (15%) in this definition shall be replaced by
fifty percent (50%).
Affiliate
has the
meaning set forth in Rule 405 promulgated under the Securities Act.
Affiliated Group
has
the meaning set forth in
Section 4.10(a)
.
Agreement
has the
meaning set forth in the first paragraph hereof.
Book-entry Shares
has the meaning
set forth in
Section 3.2(b)(i)
.
Business Day
has the
meaning set forth in Rule 14d-1(g)(3) promulgated under the Exchange
Act.
Certificate
has the
meaning set forth in
Section 3.2(b)(i)
.
Certificate of Merger
has the meaning set forth in
Section 2.3
.
Change in Board Recommendation
has the meaning set forth in
Section 6.2(d)
.
Closing
has the
meaning set forth in
Section 2.2
.
Closing Date
has the
meaning set forth in
Section 2.2
.
COBRA
means the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as
codified in Section 4980B of the Code and Section 601
et seq
. of ERISA.
Code
means the
Internal Revenue Code of 1986, as amended.
Company
has the
meaning set forth in the first paragraph hereof.
2
Table of
Contents
Company Balance Sheet
means the audited balance sheet of the Company as of February 28, 2010.
Company Board
means
the Board of Directors of the Company.
Company Common Stock
has the meaning set forth in the recitals hereof.
Company Disclosure Schedule
has the meaning set forth in the introductory paragraph to
Article IV
.
Company Employee Plans
has the meaning set forth in
Section 4.13(a)
.
Company Financial Statements
has the meaning set forth in
Section 4.4(b)
.
Company Intellectual Property
means any Intellectual Property that is owned by, or exclusively licensed to,
Company or any of its Subsidiaries.
Company Leases
has
the meaning set forth in
Section 4.11(b)
.
Company Person
means
an officer, director, employee, consultant, contractor, subcontractor or agent
of the Company or any of its Subsidiaries.
Company Preferred Stock
means preferred stock of the Company, par value $0.01 per share.
Company Registered Intellectual
Property
has the meaning set forth in
Section 4.12(a)
.
Company SEC Reports
has the meaning set forth in
Section 4.4(a)
.
Company Stock Award
means each restricted stock award, restricted unit award and other right,
contingent or accrued, to acquire or receive shares of Company Common Stock or
benefits measured by the value of such shares, and each aware of any kind
consisting of shares of Company Common Stock that may be held, awarded,
outstanding, payable or reserved for issuance under any Company stock award, or
other equity-based, plan, other than Company Stock Options.
Company Stock Option
has the meaning set forth in
Section 3.3(a)
.
Company Stock Option Holder
has the meaning set forth in
Section 3.3(a)
.
Company Stock Plans
has the meaning set forth in
Section 4.2(b)
.
Company Stockholders Meeting
has the meaning set forth in
Section 7.3(a)
.
Companys Knowledge
means, with respect to any specific matter, the actual knowledge of the persons
listed on
Schedule CK
to this Agreement, assuming such persons have made
due inquiry of any officer or employee of the Company having responsibility for
such matter.
Consent
has the
meaning set forth in
Section 4.3(c)
.
Contract
means
written or oral contract, note, bond, mortgage, indenture, lease, license, or
other legally binding agreement, instrument, commitment, guarantee, executory
commitment, understanding or obligation.
3
Table of Contents
Court
has the meaning set forth in
Section
10.9
.
Covered Parties
has
the meaning set forth in
Section 7.7(a)
.
Data Protection Legislation
has the meaning
set forth in
Section 4.19
.
Demand Notice
has
the meaning set forth in
Section 3.1(c)(i)
.
DGCL
has the meaning
set forth in the recitals hereof .
Director Stockholder
has the meaning set forth in the recitals hereof.
Dissenting Share
has
the meaning set forth in
Section 3.1(c)(i)
.
DOJ
means the U.S.
Department of Justice.
Effective Time
has
the meaning set forth in
Section 2.3
.
Employee
has the
meaning set forth in
Section 7.10(a)
.
Employee Benefit Plan
means any employee pension benefit plan (as defined in Section 3(2) of
ERISA), any employee welfare benefit plan (as defined in Section 3(1) of
ERISA) and any other written or oral plan, agreement, arrangement, policy or
practice involving direct or indirect compensation, including insurance
coverage, severance benefits, vacation, paid time-off, disability benefits,
deferred compensation, bonuses, allowances, educational assistance, loans,
stock options, restricted stock, restricted stock units, stock purchase,
phantom stock, stock appreciation or other forms of incentive or retention
compensation or post-retirement compensation and all unexpired severance and
retention agreements, written or otherwise, for the benefit of, or relating to,
any current or former Company Person or any current or former officer,
director, employee, consultant, contractor, subcontractor or agent of an ERISA
Affiliate.
End Date
means the
six month anniversary of the date of this Agreement;
provided, however,
that if any of the conditions set forth
in
Section 8.1(b)
relating to, or requiring receipt of, anti-trust or
anti-competition approval by any Governmental Authority to consummate the
Merger, have not been satisfied prior to the six month anniversary of the date
of this Agreement and all of the other conditions set forth in
Article VIII
shall have been satisfied at such time, End Date shall mean the nine month
anniversary of the date of this Agreement.
Environmental Law
means any applicable Law, Permit or Order relating to (A) the protection, investigation
or restoration of the environment, human health and safety as affected by the
environment or natural resources or (B) the handling, use, storage, treatment,
manufacture, transportation, management, disposal, Release or threatened
Release of any Hazardous Substance.
ERISA
means the
Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate
means any entity which is a member of (A) a controlled group of corporations
(as defined in Section 414(b) of the Code), (B) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code) or (C) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes the
Company or a Subsidiary.
4
Table of Contents
Exchange Act
means
the Securities Exchange Act of 1934, as amended, together with the rules and
regulations thereunder.
Exchange Fund
has
the meaning set forth in
Section 3.2(a)
.
Expenses
means
documented out-of-pocket fees and expenses incurred or paid by or on behalf of
Parent and/or Purchaser in connection with the Merger or the consummation of
any of the transactions contemplated by this Agreement, including all fees and
expenses of law firms, investment banking firms, accountants, experts and
consultants to Parent and/or Purchaser but not to exceed $3 million.
Fairness Opinion
has
the meaning set forth in
Section 4.22
.
Financial Advisor
means Houlihan Lokey Capital, Inc., the financial advisor to the Company.
Foreign Export and Import Laws
has the meaning set forth in
Section 4.18(a)
.
FTC
means the U.S.
Federal Trade Commission.
GAAP
means generally
accepted accounting principles in the United States.
Government Contract
means any Contract with any Governmental Authority entered into by the Company
or any of its Subsidiaries or to which the Company or any of its Subsidiaries
is bound.
Governmental Authority
means any government, any governmental or quasi-governmental authority or
entity or municipality or political or other subdivision thereof, department,
commission, board, regulatory or administrative or self-regulating authority,
bureau, branch, authority, official, agency or instrumentality and any court,
tribunal, arbitrator or judicial body, in each case, whether federal, state,
city, municipal, county, local, provincial, foreign, international or
multinational.
Hazardous Substance
means any substance or waste that is (A) listed, classified, regulated as a hazardous
substance, hazardous material, hazardous chemical or hazardous waste
pursuant to any Environmental Law, (B) a petroleum product or by-product,
asbestos-containing material, polychlorinated biphenyl, radioactive material or
radon or (C) any other substance or waste which is regulated by any applicable
Governmental Authority pursuant to any applicable Environmental Law or with
respect to which liability or standards of conduct are imposed under any
Environmental Law.
HSR Act
means the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Insurance Policies
has the meaning set forth in
Section 4.7(g)
.
Intellectual Property
means all intellectual property and intellectual property rights, whether
protected, created or arising under the laws of the United States or a foreign
jurisdiction, including: (i) all works of authorship including all copyrights
and copyrightable works (whether registered or unregistered), and all
applications, registrations and renewals thereof; (ii) all patents, patent
applications, provisional applications, patent disclosures and invention
disclosure statements, together with all reissuances, divisions, continuations,
continuations-in-part,
5
Table of
Contents
substitutes,
extensions, renewals and reexaminations thereof, any confirmation patent,
patent of addition and registration patent, as well as any foreign counterparts
of any of the foregoing; (iii) all trade secret rights and corresponding rights
in confidential information and other non-public information (whether or not
patentable), including ideas, formulas, compositions, inventors notes,
discoveries and improvements, know how, manufacturing and production processes
and techniques, testing information, research and development information,
inventions, invention disclosures, unpatented blueprints, drawings,
specifications, designs, plans, proposals and technical data, business and
marketing plans, market surveys, market know-how and customer lists and
information; (iv) all mask works and all applications, registrations and renewals
in connection therewith; (v) all Software; (vi) all trade names, fictional
business names, trade dress rights, trademarks and service marks including all
applications, registrations and renewals thereof and logos, including any
Internet domain names, and applications therefor and the goodwill associated
with the foregoing, together with all translations, adaptations, derivations
and combinations and like intellectual property rights; (vii) all industrial
designs and any registrations and applications therefor; (viii) all databases
and data collections and all rights therein; (ix) all moral and economic rights
of authors and inventors, however denominated and (x) any similar or equivalent
rights to any of the foregoing anywhere in the world.
ITAR
means the
International Traffic in Arms Regulations, 22 C.F.R. Part 120.
IT Systems
means,
collectively, any electronic data processing, information, record keeping,
communications, telecommunications, account management, inventory management
and other computer systems (including all Software, firmware, hardware and
related documentation) and Internet websites and related content, including,
without limitation, the Companys proprietary software systems.
Law
means any
federal, state, local, municipal, foreign, international, multinational or
administrative Order, constitution, law, common law, ordinance, judicial
decision, writ, injunction, license, permit, regulation, rule, code, plan,
statute or treaty of a Governmental Authority.
Letter of Transmittal
has the
meaning set forth in
Section 3.2(b)(i)
.
Liens
means any
mortgage, pledge, lien (statutory or otherwise), assessment, assignment,
security interest, charge, levy, easement, right of way, claim or encumbrance
of any kind (including any conditional sales or other title retention
agreement, any lease in the nature thereof and any agreement to give any of the
foregoing) and any option or other arrangement having the practical effect of
any of the foregoing.
Matching Bid
means a
good faith written proposal by Purchaser or Parent in response to a Notice of
Superior Proposal.
Material Adverse Effect
means any fact, change, event, circumstance, occurrence, development or effect
(any such item, an
Effect
) that (i) has or
would reasonably be expected to have a materially adverse effect on the
business, assets, operations, condition (financial or otherwise), or results of
operations of the Company and its Subsidiaries, taken as a whole or (ii) prevents
the consummation of the transactions contemplated by this Agreement;
provided
,
however
,
that none of the following shall be deemed to constitute a Material Adverse
Effect (except in the cases of clauses (a), (b), (c), (g) and (h) below to the
extent such occurrence
6
Table of
Contents
disproportionately
affects the Company relative to other similarly situated participants in the
industries in which the Company operates):
(a) changes affecting any industry or industries in
which the Company or any of its Subsidiaries operates;
(b) changes in global or national political
conditions or general economic or market conditions affecting the regions in
which the Company or its Subsidiaries operate;
(c) general financial, credit or capital market
conditions, including interest rates or exchange rates, or any changes therein;
(d) the announcement or pendency of the transactions
contemplated hereby, including the Merger, including any cancellation of or
delays in customer orders, any reduction in sales, any disruption in supplier,
distributor, partner or similar relationships, any loss of employees and any
actions taken by or inactions of competitors;
provided
that this exception shall not apply to:
(i) any such cancellation of or delays in customer
orders or reduction in sales related to any Material Customer that has (A) from
February 28, 2010 to the date hereof terminated, rescinded or repudiated any
Contract prior to the anticipated end of the engagement contemplated by such
Contract or (B) as of the date of this Agreement, indicated that it is such
Material Customers intention to stop or decrease the rate of buying materials,
products or services from the Company or any of its Subsidiaries or otherwise
reduce or detrimentally alter such Material Customers business or relationship
with the Company or any of its Subsidiaries (other than in the Ordinary Course
of Business) and such termination, rescission, repudiation or indication was
not disclosed by the Company in breach of
Section 4.17
; or
(ii) any such disruption in supplier, distributor,
partner or similar relationships related to a Material Supplier that has (A) from
February 28, 2010 to the date hereof terminated, rescinded or repudiated any
Contract prior to the anticipated end of the engagement contemplated by such
Contract or (B) as of the date of this Agreement, indicated that it is such
Material Suppliers intention to stop or decrease the rate of supplying
materials, products or services to the Company or any of its Subsidiaries or
otherwise reduce or detrimentally alter such Material Suppliers business or
relationship with the Company or any of its Subsidiaries (other than in the
Ordinary Course of Business) and such termination, rescission, repudiation or
indication was not disclosed by the Company in breach of
Section 4.17
;
(e) compliance with the terms of this Agreement, any
action contemplated by this Agreement or any action taken, or failure to act,
to which Parent has consented;
(f) stockholder class action or derivative
litigation or other litigation to the extent arising from allegations of a
breach of fiduciary or other common law or statutory duty (including any
stockholder claims alleging any violations of state common or statutory law,
state blue sky laws, federal securities laws or the regulations promulgated
thereunder) relating to the negotiation, execution, delivery or performance of
this Agreement and/or the consummation or proposed consummation of any of the transactions
contemplated hereby;
(g) acts of war (whether or not declared), the
commencement, continuation or escalation of a war, acts of armed hostility,
sabotage or terrorism or other international or
7
Table of
Contents
national
calamity or any material worsening of such conditions threatened or existing as
of the date of this Agreement;
(h) changes in Law or GAAP after the date hereof;
(i) any failure by the Company to meet any published
or internally prepared estimates of revenues, earnings or other economic
performance for any period ending on or after the date of this Agreement (it
being understood that the facts and circumstances giving rise to such failure
may be deemed to constitute, and may be taken into account in determining
whether there has been, a Material Adverse Effect if such facts and
circumstances are not otherwise described in clauses (a)-(h) of this definition);
or
(j) a decline in the price of the Company Common
Stock on the NASDAQ Stock Market (it being understood that the facts and
circumstances giving rise to such decline may be deemed to constitute, and may
be taken into account in determining whether there has been, a Material Adverse
Effect if such facts and circumstances are not otherwise described in clauses
(a)-(i) of this definition);
Material Customer
has the meaning set forth in
Section 4.17
.
Material Supplier
has the meaning set forth in
Section 4.17
.
Merger
has the
meaning set forth in the recitals hereof.
Merger Consideration
has the meaning set forth in
Section 3.1(a)(i)
.
NDA
means the
nondisclosure letter agreement dated May , 2010 between Parent and the Company.
Notice of Superior Proposal
means written notice from the Company to Parent advising Parent that the
Company has received a Superior Proposal.
Open Source Software
means any Software that is, in whole or in
part, subject to the provisions of any Contract that is made generally
available to the public without requiring payment of fees or royalties
(including without limitation any obligation or condition under any open
source license such as the GNU General Public License, GNU Lesser General
Public License, Mozilla Public License or BSD licenses), and that requires or
conditions the use or distribution of any such Software on the disclosure,
licensing or distribution of any source code for any portion of any Software
owned or developed by the Company, or its Subsidiaries, or otherwise imposes
any limitation, restriction or condition on the right or ability of the
Company, or its Subsidiaries to use or distribute any Software owned or
developed by the Company, or its Subsidiaries.
Option Payments
has the
meaning set forth in
Section 3.3(a)
.
Order
means any
order, award, injunction, writ, judgment, stipulation, decree or determination
entered, issued, promulgated, made or rendered by or with any Governmental
Authority.
Ordinary Course of Business
means the ordinary course of business of the Company and its Subsidiaries
consistent with past practice.
8
Table of
Contents
Other Antitrust Laws
means any Law enacted by any Governmental Authority relating to antitrust
matters or regulating competition
and any
analogous or similar Laws of any foreign jurisdiction.
Parent
has the
meaning set forth in the first paragraph hereof.
Parent Benefit Plan
means any employee pension benefit plan (as defined in Section 3(2) of
ERISA), any employee welfare benefit plan (as defined in Section 3(1) of
ERISA), and any other written or oral plan, agreement, arrangement, policy or
practice involving direct or indirect compensation, including insurance
coverage, severance benefits, vacation, paid time-off, disability benefits,
deferred compensation, bonuses, allowances, educational assistance, loans,
stock options, stock purchase, phantom stock, stock appreciation or other forms
of incentive or retention compensation or post-retirement compensation that is
maintained or sponsored by, or contributed to by, Parent and/or any of its
Affiliates.
Paying Agent
has the
meaning set forth in
Section 3.2(a)
.
Permit
means permit,
license, franchise, concession, variance, exemption, certificate, approval
and/or other similar authorization from a Governmental Authority.
Permitted Actions
has the meaning set forth in
Section 6.2(b)
.
Permitted Liens
means (i) any Lien
reflected on the Company Balance Sheet, (ii) Liens for Taxes and other
governmental charges and assessments that are not yet due and payable, (iii) Liens
for carriers, warehousemen, mechanics and materialmen and (iv) Liens incurred
in the Ordinary Course of Business that are insignificant, individually or in
the aggregate, to the operation of the Companys business.
Person
means an
individual, corporation, partnership, limited partnership, limited liability
company, syndicate, person (including a person as defined in Section 13(d)(3)
of the Exchange Act), joint stock company, organization, trust, association,
entity, or government, political subdivision, agency or instrumentality of a
government.
Personal Information
has the meaning set forth in
Section 4.19
.
Proceeding
means an
action, audit, suit, proceeding, claim, arbitration or investigation.
Proxy Statement
has
the meaning set forth in
Section 7.3(b)
.
Purchaser
has the
meaning set forth in the first paragraph hereof.
Recommendation
has
the meaning set forth in
Section 4.3(e)
.
Registered Intellectual Property
means any Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued, filed with, or
recorded by any state, government or other public legal authority, including
any of the following: (i) issued patents and patent applications; (ii) trademark
registrations, renewals and applications; (iii) copyright registrations and
applications and (iv) domain name registrations.
Release
or
Released
means the
actual spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing into the environment
9
Table of
Contents
(including
the abandonment or disposing of barrels, containers and other closed
receptacles containing any Hazardous Substance), whether intentional or
unintentional, of any Hazardous Substance.
Representatives
has
the meaning set forth in
Section 6.2(a)
.
Sarbanes-Oxley Act
means the Sarbanes-Oxley Act of 2002.
SEC
means the U.S.
Securities and Exchange Commission.
Securities Act
means
the Securities Act of 1933, as amended.
Software
means
computer software and firmware (including object code, source code, data and
related documentation).
Stockholder Approval
has the meaning set forth in
Section 7.3(a)
.
Subsidiary
means,
with respect to the Company, any corporation, partnership, joint venture,
limited liability company or other business association or entity, whether
incorporated or unincorporated, of which (i) the Company or any other
subsidiary of the Company is a general partner or a managing member, (ii) the
Company and/or one or more of its Subsidiaries holds voting power to elect a
majority of the board of directors or other governing body performing similar
functions or (iii) the Company and/or one or more of its Subsidiaries, directly
or indirectly, owns or controls more than fifty percent (50%) of the equity,
membership, partnership or similar interests.
Superior Proposal
means any
bona fide
written Acquisition Proposal
to acquire all or substantially all of the equity securities or assets of the
Company, pursuant to a tender or exchange offer, a merger, a sale of its assets
or other similar transaction, on terms and conditions that the Company Board
concludes in good faith (after consultation with the Financial Advisor and
outside legal counsel) (a) is reasonably capable of being completed timely on
the terms proposed, taking into account all financial, regulatory, legal and
other aspects of such proposal, (b) for which financing, to the extent
required, is then fully committed or which, in the good-faith judgment of a
Board of Directors (based on the advice of the Financial Advisor), is
reasonably capable of being timely financed by the Person making the proposal
to finance the Acquisition Proposal, and (c) would, if consummated result in a
transaction that is more favorable from a financial point of view to the
holders of Company Common Stock than the transactions contemplated by this
Agreement (but excluding any impact on the Director Stockholders of the terms
of any stockholders agreement or the absence thereof included as a facet
thereof) taking into account all of the terms and conditions of such
Acquisition Proposal and this Agreement and the Voting Agreements (including
any
bona fide
offer or proposal by Parent to
amend the terms of this Agreement and/or the Voting Agreements).
Surviving Corporation
has the meaning set forth in
Section 2.1
.
Takeover Law
means
any state moratorium, control share acquisition, business combination, fair
price or other form of anti-takeover Law.
Tax Returns
means
all reports, returns, declarations, statements or other information required to
be supplied (including electronically) to a taxing authority in connection with
Taxes.
10
Table of
Contents
Taxes
means all
taxes, charges, fees, levies or other similar assessments or liabilities,
including income, gross receipts, ad valorem, premium, value-added, excise,
real property, personal property, sales, use, services, transfer, withholding,
employment, unclaimed property, payroll and franchise taxes imposed by any
Governmental Authority responsible for the imposition of taxes and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or
dispute thereof, including liability for the payment of any Taxes as a result
of being or having been a member of an Affiliated Group on or before the Effective
Time, or a party to any agreement or arrangement whereby liability of the
Company or any of its Subsidiaries for payments of such amounts was determined
or taken into account with reference to the liability or income of any other
Person.
Termination Fee
means an amount equal to three percent (3%) of the aggregate of the Merger
Consideration and Option Payments, plus Expenses, less any Expenses theretofore
paid by the Company to Parent pursuant to
Section 9.3(b)
.
Third Party Intellectual Property
means any Intellectual Property owned by a third party to which the Company or
any of its Subsidiaries has a license, sublicense or other agreement, including
Software used for internal business processes and operations, but excluding any
Intellectual Property that is licensed on an exclusive basis to Company or any
of its Subsidiaries.
U.S. Export and Import Laws
has the meaning set forth in
Section 4.18(a)
.
Voting Agreements
has the
meaning set forth in the recitals hereof.
1.2
Construction
. Unless expressly specified otherwise,
whenever used in this Agreement, the terms Annex, Appendix, Article, Exhibit,
Schedule and Section refer to annexes, appendices, articles, exhibits,
schedules and sections of this Agreement. Whenever used in this Agreement, the
terms hereby, hereof, herein and hereunder and words of similar import
refer to this Agreement as a whole, including all articles, sections, schedules
and exhibits hereto. Whenever used in this Agreement, the terms include, includes
and including mean include, without limitation, includes, without
limitation and including, without limitation, respectively. Whenever the
context of this Agreement permits, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural, and vice versa. Days
means calendar days unless otherwise specified. Any reference to any Law shall
be deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise, and also shall be deemed to refer to
such Laws as they may be amended after the date of this Agreement. The table of
contents and headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement. For purposes of this Agreement, the Company shall not be deemed
to be an Affiliate or Subsidiary of Purchaser or Parent. No summary of this
Agreement prepared by any party shall affect the meaning or interpretation of
any provision of this Agreement. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement and in the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden of
proof shall arise favoring or disfavoring any party (or any Affiliate thereof)
by virtue of the authorship of any of the provisions of this Agreement.
11
Table of
Contents
ARTICLE II
THE MERGER
2.1
The Merger
.
Upon the terms and subject to the conditions of this Agreement, and in
accordance with the DGCL, Purchaser shall be merged with and into the Company
at the Effective Time. At the Effective Time, the separate corporate existence
of Purchaser shall cease and the Company shall continue as the surviving
corporation (the
Surviving
Corporation
) and, in accordance with the DGCL, shall succeed,
without other transfer, to all the rights and property of Purchaser and shall
be subject to all the debts and liabilities of Purchaser in the same manner as
if the Surviving Corporation had itself incurred them.
2.2
Closing
.
Upon the terms and subject to the conditions set forth in this Agreement, the
closing of the Merger (the
Closing
) shall take place at 10:00 A.M. on the second
(2nd) Business Day after the satisfaction or (to the extent permitted by
applicable Law) waiver of the conditions set forth in
Article VIII
(other than those that by their terms cannot be satisfied until the time of the
Closing but subject to the fulfillment or waiver of such conditions);
provided
,
however
, that
in the event that such satisfaction occurs on any date from December 13, 2010
to December 31, 2010, the Closing shall occur on January 3, 2011 unless
otherwise agreed to by Parent and the Company.
The Closing shall take place at the offices of Milbank, Tweed, Hadley &
McCloy LLP, One Chase Manhattan Plaza, New York, New York 10005, or at such
other location as may be mutually agreed to by Parent and the Company. The date on which the Closing occurs is
referred to in this Agreement as the
Closing Date
.
2.3
Effective Time
. Upon the terms and subject to the
conditions set forth in this Agreement, as soon as practicable on the Closing
Date, the parties shall cause (a) a Certificate of Merger prepared and executed
in accordance with Section 252(c) of the DGCL to be filed with the Secretary of
State of the State of Delaware (the
Certificate of Merger
) and (b) all other
filings, recordings, certifications, publications required by the DGCL, in such
forms as required by such Laws, to be duly prepared, executed and made. The
Merger shall become effective on the date of the filings of the Certificate of
Merger with the Secretary of State of the State of Delaware at the time
specified therein or at such subsequent time and date as Parent and the Company
shall agree and specify in the Certificate of Merger. The time at which the
Merger becomes effective is referred to in this Agreement as the
Effective Time
.
2.4
Effects of the Merger
. The Merger shall have the effects
set forth in Section 259 of the DGCL.
2.5
Certificate of Incorporation and Bylaws
. At the Effective Time,
the Certificate of Incorporation of the Company, as amended, shall be amended
in its entirety to read as set forth on
Exhibit A
hereto, and as so
amended shall be the Certificate of Incorporation of the Surviving Corporation,
until thereafter amended as provided therein and by applicable Law, and the
bylaws of Purchaser in effect immediately prior to the Effective Time shall be
the bylaws of the Surviving Corporation, until thereafter amended as provided
therein and by applicable Law.
2.6
Directors and Officers
. The directors and officers of
Purchaser immediately prior to the Effective Time will be the initial directors
and officers of the Surviving Corporation until their successors are elected
and qualified.
12
Table of
Contents
ARTICLE III
CONVERSION OF SECURITIES IN THE MERGER
3.1
Effect of Merger on Capital Stock
.
(a)
Conversion of Securities
. At the
Effective Time, by virtue of the Merger and without any action on the part of
Purchaser, the Company, the Surviving Corporation or the holder of any of the
following securities:
(i) each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock to be cancelled pursuant to
Section 3.1(a)(ii)
below
and any Dissenting Shares) shall be automatically cancelled and extinguished
and be converted into and become the right to receive from the Surviving
Corporation $7.00 in cash per share without any interest thereon (the
Merger Consideration
),
and all other rights of the holder thereof with respect thereto shall cease to
exist;
(ii) each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time that is owned by Parent,
Purchaser or the Company or any direct or indirect Subsidiary of Parent or the
Company shall automatically be cancelled, and no payment shall be made with
respect thereto; and
(iii) each share of Purchasers capital stock issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and nonassessable share of the same
class of capital stock of the Surviving Corporation.
(b)
Adjustments
. Without limiting the other
provisions of this Agreement, if at any time during the period between the date
of this Agreement and the Effective Time, any change in the outstanding shares
of capital stock of the Company shall occur, including by reason of any
reclassification, recapitalization, stock split (including reverse stock split)
or combination, exchange or readjustment of shares, or any stock dividend or
distribution paid in stock, the Merger Consideration and any other amounts
payable pursuant to this Agreement shall be appropriately adjusted to reflect
such change.
(c)
Dissenting Shares
.
(i) Notwithstanding anything in this Agreement to
the contrary, any share of Company Common Stock that is issued and outstanding
immediately prior to the Effective Time and which is held by a holder who: (A) is
entitled to demand and who has made written demand upon the Company for the
purchase of such shares and payment in cash of the fair market value thereof
in the manner prescribed by Section 262 of the DGCL (the
Demand Notice
) and
(B) has perfected such holders rights in accordance with Section 262 of the
DGCL, shall be deemed a
Dissenting
Share
.
(ii) Notwithstanding anything to the contrary herein,
if a holder of any Dissenting Shares shall fail to perfect or otherwise waives,
withdraws or loses such holders rights under Section 262 of the DGCL or a
court of competent jurisdiction determines that such holder is not entitled to
relief under Section 262 of the DGCL, then any such shares shall be deemed to
have been converted at the Effective Time into, and shall have become, the
right to receive the Merger Consideration as set forth in
Section 3.1(a)(i)
of this Agreement, without any interest thereon.
13
Table of
Contents
(iii) The Company shall give Parent (A) prompt
notice of any Demand Notice received by the Company, withdrawals thereof and
any other instruments served pursuant to Section 262 of the DGCL and received
by the Company and (B) the opportunity to direct all negotiations and
proceedings with respect to the exercise of any rights of the holder of
Dissenting Shares under Section 262 of the DGCL. The Company shall not, except
with the prior written consent of Parent or as otherwise required by applicable
Law, make any payment with respect to any such exercise of any such rights of
the holder of Dissenting Shares under Section 262 of the DGCL or offer to
settle or settle any such rights. The parties hereto agree that they will not,
and this Agreement does not, confer or seek to confer upon any holder of
Company Common Stock any dissenters rights or appraisal rights greater than
those provided by Section 262 of the DGCL or otherwise expand or seek to expand
the rights provided by Section 262 of the DGCL.
3.2
Exchange of Certificates
.
(a)
Paying Agent
. Prior to the Effective
Time, the Company and Parent shall enter into an agreement with the Companys
transfer agent or another paying agent selected by Parent and reasonably
acceptable to the Company to act as agent (the
Paying Agent
) and Parent will deposit
or cause to be deposited, by wire transfer of immediately available funds, in
trust with the Paying Agent for the benefit of the holders of outstanding
shares of Company Common Stock that were converted into the right to receive
Merger Consideration pursuant to
Section 3.1(a)(i)
, cash in an aggregate
amount equal to the sum of (i) the product of the Merger Consideration and the
number of shares of Company Common Stock outstanding immediately prior to the
Effective Time (
provided, however,
that the
portion of the aggregate Merger Consideration allocable to the Dissenting
Shares shall not be required to be deposited with the Paying Agent)
plus
(ii) the aggregate Option Payments (such aggregate
amounts being hereinafter referred to as the
Exchange Fund
).
(b)
Exchange Procedure
.
(i) Promptly after the Effective Time, Parent and
the Surviving Corporation shall cause the Paying Agent to deliver to each
holder of record of (A) a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
(each, a
Certificate
)
or (B) shares of Company Common Stock represented immediately prior to the
Effective Time by book-entry (
Book-Entry
Shares
), appropriate transmittal materials and instructions
(collectively, the
Letter
of Transmittal
) (which shall specify that delivery shall be
effected, and risk of loss and title to such Certificates shall pass, only upon
proper delivery of such Certificates to the Paying Agent or, in the case of
Book-Entry Shares, upon adherence to the procedures set forth in the Letter of
Transmittal). The Certificates so delivered shall be duly endorsed as the
Paying Agent may require. In the event of a transfer of ownership of shares of
Company Common Stock represented by Certificates that is not registered in the
transfer records of the Company, the consideration provided in
Section 3.1(a)(i)
may be issued to a transferee if the
Certificates representing such shares are delivered to the Paying Agent,
accompanied by all documents required to evidence such transfer and by evidence
satisfactory to the Paying Agent that any applicable stock transfer taxes have
been paid. If any Certificate shall have been lost, stolen, mislaid or
destroyed,
14
Table of Contents
upon
receipt of (x) an affidavit of that fact from the holder claiming such
Certificate to be lost, mislaid, stolen or destroyed, (y) such bond, security
or indemnity as Parent and the Paying Agent may reasonably require and (z) any
other documents necessary to evidence and effect the
bona fide
exchange thereof, the Paying Agent shall issue to such holder the consideration
into which the shares represented by such lost, stolen, mislaid or destroyed
Certificate shall have been converted.
(ii) Promptly after the Effective Time, Parent or
the Surviving Corporation shall cause the Paying Agent to deliver the Option
Payments, as appropriate, to each individual whose Company Stock Options are
cancelled pursuant to the provisions of Section 3.3 hereof.
The
Paying Agent may establish such other reasonable and customary rules and
procedures to effect an orderly exchange. The Surviving Corporation shall pay
all charges and expenses, including those of the Paying Agent, in connection
with the distribution of the Merger Consideration.
(c)
No Further Ownership Rights in Company
Capital Stock
. The Merger Consideration paid upon the surrender of a
Certificate in accordance with the terms of this
Article III
shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock formerly represented by such Certificate. At the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective Time, any
Certificates are presented to the Surviving Corporation or the Paying Agent for
any reason, they shall be canceled and exchanged as provided for in this
Article
III
.
(d)
Termination of Exchange Fund
. Any portion
of the Exchange Fund that remains undistributed to the holders of Certificates
on the date that is nine (9) months after the Effective Time shall, upon
demand, be delivered by the Paying Agent to Parent, and any holder of a
Certificate who has not theretofore complied with this
Article III
shall
thereafter look only to Parent for payment of the Merger Consideration, but
shall have no greater rights against Parent than may be accorded to a general
unsecured creditor of Parent under applicable Law.
(e)
No Liability
. None of Parent, its
Affiliates, Purchaser, the Company, the Surviving Corporation or the Paying
Agent or their respective Representatives shall be liable to any Person in
respect of any cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law. If any Certificate has not been
surrendered prior to the one (1) -year anniversary of the Effective Time (or
immediately prior to such earlier date on which the Merger Consideration in
respect of such Certificate would otherwise escheat to or become the property
of any Governmental Authority), any such cash in respect of such Certificate
shall, to the extent permitted by applicable Law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any Person
previously entitled thereto.
(f)
Investment of Exchange Fund
. The Paying
Agent shall invest any cash included in the Exchange Fund as directed by
Parent. Any interest and other income resulting from such investments shall be
paid to Parent. No investment loss or other loss incurred by the
15
Table of
Contents
Exchange
Fund shall affect the Merger Consideration payable pursuant to this
Article III
,
and if such loss is realized Parent shall promptly deposit cash into the
Exchange Fund to the extent necessary to satisfy the payment obligations set
forth in this
Article III
.
(g)
Withholding Rights
. Each of Parent, the
Surviving Corporation and the Paying Agent shall, upon written notice to the
Paying Agent, be entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement such amounts that it is required
to deduct and withhold with respect to the making of such payment under the
Code or any other applicable Law. To the extent that amounts are so withheld
and paid over to the appropriate taxing authority by Parent, the Surviving
Corporation or the Paying Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was
made by Parent, the Surviving Corporation or the Paying Agent. If and to the
extent that amounts so withheld are not paid to a taxing authority, such amount
shall be tendered to the former holder of the shares of Company Common Stock in
respect of which such deduction and withholding were made by Purchaser.
3.3
Stock Options and Other Stock-based
Compensation
.
(a)
Payment for Company Stock Options
. At the
Effective Time, each then-outstanding option to acquire shares of Company
Common Stock (each, a
Company
Stock Option
and each holder thereof a
Company Stock Option Holder
),
whether or not vested or exercisable, shall be cancelled and converted into the
right to receive from Parent or the Survivng Corporation, as promptly as
reasonably practicable after the Effective Time, an amount in cash, without
interest, equal to the product of (x) the aggregate number of shares of Company
Common Stock subject to such Company Stock Option, multiplied by (y) the
excess, if any, of the Merger Consideration over the per share exercise price
under such Company Stock Option (the
Option Payment
). Promptly following the execution of this
Agreement, the Company shall (i) deliver written notice to each Company Stock
Option Holder informing such holder of the treatment of Company Stock Options
as provided above in this paragraph, (ii) use its best efforts to obtain an
option surrender agreement from each Company Stock Option Holder who is
entitled to an Option Payment, which written notice and option surrender
agreement shall be in forms satisfactory to Parent and (iii) take all
reasonable action to effectuate the foregoing.
(b)
Payment for Company Restricted Shares
. At
the Effective Time, each then-outstanding share of restricted Company Common
Stock (each, a
Company
Restricted Share
) shall become vested and shall be treated in
the same manner as Company Common Stock hereunder.
(c)
Necessary Actions
. At or prior to the
Effective Time, the Company, the Company Board and the compensation committee
of the Company Board, as applicable, shall adopt any resolutions and take any
actions (including obtaining any employee consents) that may be necessary to
effectuate the provisions of paragraphs (a) and (b) of this
Section 3.3
.
(d)
Withholding
. All amounts payable pursuant
to this
Section 3.3
shall be subject to any required withholding of
Taxes and shall be paid without interest.
To the extent that amounts are so withheld and paid over to the
appropriate taxing authority, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid.
16
Table of
Contents
(e)
Termination of Company Stock Plans
. The
Company Stock Plans shall terminate as of the Effective Time, and the
provisions in any other Company Employee Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in
respect of any capital stock of the Company shall terminate and be deleted as
of the Effective Time and the Company shall take all necessary actions prior to
the Effective Time to ensure that following the Effective Time no holder of a
Company Stock Option or any participant in any Company Stock Plan or other
Company Employee Plan shall have any right thereunder to acquire any capital
stock of the Company or the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Parent and Purchaser, subject to those
exceptions set forth in the disclosure schedule delivered by the Company to
Parent herewith (the
Company
Disclosure Schedule
) (the disclosure of an item in one section
of the Company Disclosure Schedule as an exception or information relating to a
particular representation or warranty being deemed adequately disclosed as an
exception with respect to all other representations and warranties to the
extent that the relevance of such item to such representations and warranties
is reasonably apparent on the face of the disclosed item), as follows:
4.1
Organization, Standing and Power;
Subsidiaries
.
(a)
Organization, Standing and Power
. (i) Each of the Company and its Subsidiaries
is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, has all requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted and as proposed to be
conducted. (ii) Each of the Company and
its Subsidiaries is duly qualified to do business and is in good standing as a
foreign entity in each jurisdiction where the failure to be so qualified or in
good standing, individually or in the aggregate, would reasonably result in a
Material Adverse Effect.
(b)
Subsidiaries
.
Section 4.1(b)
of
the Company Disclosure Schedule sets forth a complete and accurate list of all
of the Companys Subsidiaries as of the date hereof, the jurisdiction of
organization or incorporation of each such Subsidiary, and the Companys direct
or indirect equity interest therein.
Except as so listed or set forth in
Section 4.1(b)
of the Company
Disclosure Schedule, none of the Company or any of its Subsidiaries directly or
indirectly owns any equity, membership, partnership or similar interest in, or
any interest convertible into or exchangeable or exercisable for any equity,
membership, partnership or similar interest in, any corporation, partnership,
joint venture, limited liability company or other business association or
entity, whether incorporated or unincorporated.
None of the Company or any of its Subsidiaries has at any time been a
general partner or managing member of any general partnership, limited
partnership, limited liability company or other entity.
(c)
Organizational Documents
. The Company has
made available to Parent complete and accurate copies of the Certificate of
Incorporation and Bylaws of the Company, each as amended, and the charter,
bylaws or other organizational documents of each Subsidiary of the Company,
each as amended. All of such organizational documents are in full force and in
effect as of the date hereof in the form made available to Parent.
17
Table of
Contents
4.2
Capitalization
.
(a)
Authorized and Outstanding Capitalization
.
The authorized capital stock of the Company consists of 50,000,000 shares of
Company Common Stock, $0.0066 par value, and 1,000,000 shares of Company
Preferred Stock, $1.00 par value. As of August 31, 2010
,
(i)
18,536,718 shares of Company Common Stock were issued and outstanding, (ii) no
shares of Company Common Stock were held in the treasury of the Company, (iii) no
shares of Company Common Stock are held by Subsidiaries of the Company and (iv)
no shares of Company Preferred Stock were issued and outstanding. No issued and
outstanding shares of Company Common Stock are subject to a repurchase or redemption
right or right of first refusal or condition of forfeiture in favor of the
Company.
(b)
Options and Other Shares Reserved for
Issuance
.
Section 4.2(b)(i)
of
the Company Disclosure Schedule lists as of August 31, 2010 (1) the number of
shares of Company Common Stock reserved for future issuance pursuant to Company
Stock Options and Company Stock Awards granted and outstanding and (2) the
plans or other arrangements under which such Company Stock Options and Company
Stock Awards were granted (collectively, the
Company Stock Plans
).
Section 4.2(b)
of the Company
Disclosure Schedule sets forth as of August 31, 2010 a complete and accurate
list of all holders of outstanding Company Stock Options or Company Stock
Awards, indicating with respect to each Company Stock Option and Company Stock
Award, (1) the number of shares of Company Common Stock subject to such Company
Stock Option or Company Stock Award, (2) the exercise price, date of grant and
expiration date of such Company Stock Option or Company Stock Award, (3) any
acceleration provisions or milestones / vesting dates applicable to such
Company Stock Option or Company Stock Award and (4) whether the exercisability
of such Company Stock Option or Company Stock Award will be accelerated in any
way by the transactions contemplated by this Agreement (and if so, under which
Company Stock Plan and to what extent).
Except as set forth in
Sections 4.2(a)
and
4.2(b)
of this
Agreement and
Section 4.2(b)
of the Company Disclosure Schedule, (i) there
are no equity securities of any class of the Company or any of its
Subsidiaries, or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding and (ii) there are no
options, warrants, securities, calls, rights, commitments, instruments or
agreements of any kind or character to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound, obligating the Company or any of its Subsidiaries to issue, exchange,
transfer, deliver or sell, or cause to be issued, exchanged, transferred,
delivered or sold, additional shares of capital stock or other equity interests
of the Company or any of its Subsidiaries or any security or rights convertible
into or exchangeable or exercisable for any such shares or other equity
interests, or obligating the Company or any of its Subsidiaries to grant,
extend, accelerate the vesting of, otherwise modify or amend or enter into any
such option, warrant, equity security, call, right, commitment or agreement,
except as expressly contemplated by this Agreement. The Company has made available to Parent
accurate and complete copies of all Company Stock Plans and forms of all
agreements evidencing Company Stock Options and Company Stock Awards; except as
set forth in
Section 4.2(b)
of the Company Disclosure Schedule, all
Company Stock Options and Company Stock Awards are pursuant to such forms.
18
Table of
Contents
(c)
Status of Shares
. All outstanding shares of Company Common
Stock are, and all shares of Company Common Stock subject to issuance as
specified in
Section 4.2(b)
above, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be, duly authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar right under
any provision of the DGCL, the Companys Certificate of Incorporation or
Bylaws, each as amended, or any agreement to which the Company is a party or is
otherwise bound. Except as set forth in
Section
4.2(c)
of the Company Disclosure Schedule, there are no obligations,
contingent or otherwise, of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock of the Company or any of its Subsidiaries or to provide funds
to or, except as contemplated by this Agreement, make any investment (in the
form of a loan, capital contribution or otherwise) in the Company or any
Subsidiary of the Company or any other Person.
(d)
Capital Stock of Subsidiaries
. Except as set forth in
Section 4.2(d)
of
the Company Disclosure Schedule, all of the outstanding shares of capital stock
and other equity securities or interests of each of the Companys Subsidiaries
are duly authorized, validly issued, fully paid (to the extent applicable),
nonassessable (to the extent applicable) and free of preemptive rights, and all
such shares are owned, of record and beneficially, by the Company free and
clear of all Liens, agreements, limitations in the Companys voting rights,
charges or other encumbrances of any nature.
4.3
Authority; No Conflict; Required Filings and
Consents
.
(a)
Power and Authority; Execution and Delivery
. The Company has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of the Company. Other than, in connection with the Merger,
approval of the Merger by the holders of a majority of the outstanding shares
of Company Common Stock and the filing and recordation of appropriate merger
documents as and to the extent such may be required by the DGCL, no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the Merger.
This Agreement has been duly executed and delivered by the Company and,
assuming due and valid authorization, execution and delivery by the other
parties to this Agreement, constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms (except
in all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium,
fraudulent transfer or similar Laws affecting the enforcement of creditors
rights generally and except that the availability of specific performance,
injunctive relief or other equitable remedies is subject to general principles
of law and equity and the discretion of the court before which any proceeding
may be brought).
(b)
Absence of Conflicts
. The execution and delivery of this Agreement
by the Company does not, and the consummation of the transactions contemplated
by this Agreement will not, (i) conflict with or result in any violation or
breach of any provision of the Certificate of Incorporation or Bylaws of the
Company, each as amended, or the charter,
19
Table of
Contents
bylaws,
or other organizational document of any Subsidiary of the Company, (ii) except
as set forth in
Section 4.3(c)
of the Company Disclosure Schedule,
conflict with or result in any material violation or breach of, or constitute
(with or without notice or lapse of time, or both) a material default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit or creation of any material obligation) under,
or require a consent, waiver, approval, authorization or notice under,
constitute a change in control under, require the payment of a material penalty
under or result in the imposition of any material Lien on the Companys or any
of its Subsidiaries assets under, any of the terms, conditions or provisions
of any material written Contract to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets are bound or (iii) subject to compliance with the requirements specified
in clauses (i) through (vi) of
Section 4.3(c)
hereof, conflict with or
violate any Permit, Order or Law applicable to the Company or any of its
Subsidiaries or any of its or their properties or assets, except in the case of
clause (iii) of this
Section 4.3(b)
for any matters which, individually
or in the aggregate, are not reasonably likely to have a Material Adverse
Effect.
(c)
Absence of Required Consents
. No consent,
approval, license, permit, order or authorization of, or registration,
declaration, notice or filing (any of the foregoing, a
Consent
) with any
Governmental Authority is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated by this
Agreement, except for (i) the pre-merger notification requirements under the
HSR Act and Other Antitrust Laws, (ii) the filing of the applicable Certificate
of Merger with the Secretary of State of the State of Delaware, (iii) filings
or consents under and compliance with the Exchange Act as may be required in
connection with this Agreement and the Merger, (iv) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable state securities Laws, (v) filings with the NASDAQ
Stock Market and the SEC, (vi) the consents, approvals, licenses, permits,
orders, authorizations, registrations, declarations, notices and filings set
forth in
Section 4.3(b)
of the Company Disclosure Schedule and (vii) such
other Consents which are not, individually or in the aggregate, material.
(d)
Required Vote
. The affirmative vote for
approval of the Merger by the holders of a majority of the outstanding shares
of Company Common Stock on the record date for the Company Stockholders Meeting
is the only vote of the holders of any class or series of the Companys capital
stock or other securities necessary to adopt this Agreement and for the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement.
(e)
Actions by the Company Board
. The Company
Board, at a meeting duly called and held, has (i) determined that each of the
transactions contemplated by this Agreement, including the Merger, are fair to,
and in the best interests of, the Company and its stockholders, (ii) declared
the advisability of and duly approved this Agreement and the transactions
contemplated hereby, including the Merger, which approval is sufficient to
satisfy the requirements of the DGCL, (iii) resolved to recommend that holders
of shares of Company Common Stock approve the principal terms of the Merger
(the
Recommendation
)
and (iv) to the extent necessary, adopted a resolution having the effect of
causing the Company not to be subject to any state Takeover Law or similar Law
20
Table of
Contents
that
might otherwise apply to the Merger and any other transactions contemplated by
this Agreement, and, as of the date hereof, none of the aforesaid actions by the
Company Board has been amended, rescinded or modified. To the Companys Knowledge, no Takeover Law
is applicable to the Merger or the transactions contemplated by this
Agreement. The Company has taken all
necessary actions so that the provisions of Section 203 of the DGCL will not
apply to the transactions contemplated by this Agreement. The Company does not have any poison pill
or similar antitakeover device.
4.4
SEC Filings; Financial Statements;
Information Provided
.
(a)
Company SEC Reports
. Except as set forth
in
Section 4.4(a)
of the Company Disclosure Schedule, the Company has
filed with the SEC all registration statements, forms, reports and other
documents required to be filed by the Company with the SEC since March 1, 2007
(including all certifications required pursuant to the Sarbanes-Oxley Act), and
copies of all such registration statements, forms, reports and other documents
filed by the Company with the SEC since such date are publicly available. All
such registration statements, forms, reports, certificates and other documents
filed by the Company and that it may file after the date hereof until the
Closing are referred to herein as the
Company SEC Reports
. The Company SEC Reports (i) except as set
forth in
Section 4.4(a)
of the Company Disclosure Schedule, were filed
on a timely basis, (ii) at the time filed, or if amended, as of the time of the
last such amendment prior to the date of this Agreement, were prepared in
compliance in all material respects with the applicable requirements of the
Securities Act, the Exchange Act and/or the Sarbanes-Oxley Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
Company SEC Reports and (iii) except as set forth in
Section 4.4(a)
of
the Company Disclosure Schedule, did not at the time they were filed contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such Company SEC Reports or necessary in order to make
the statements in such Company SEC Reports, in the light of the circumstances
under which they were made, not misleading. No Subsidiary of the Company is
subject to the reporting requirements of Section 15(d) of the Securities Act or
Section 13(a) of the Exchange Act. Neither the Company nor any of its
Subsidiaries is a party to or is bound by, and neither the Companys nor its
Subsidiaries assets or properties are subject to, any Contract required to be
disclosed in a Form 10-K, Form 10-Q or Form 8-K filed prior to the date hereof
that is not disclosed in the Form 10-K for the year ended February 28, 2010, as
filed with the SEC on May 7, 2010, including the consolidated financial
statements of the Company set forth therein and the information incorporated by
reference to the Companys definitive proxy statement filed with the SEC on June
14, 2010 (the
2010 Form
10-K
).
(b)
Financial Statements
. Except as set forth in
Section 4.4(b)
of
the Company Disclosure Schedule, each of the consolidated financial statements
(including, in each case, any related notes and schedules) (the
Company Financial Statements
)
contained in the Company SEC Reports (i) complied as to form in all material
respects, as of their respective dates of filing with the SEC, with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, (ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by the SEC on Form 10-Q under the Exchange Act), (iii) fairly
presented in all
21
Table of
Contents
material
respects the consolidated financial condition of the Company and its
Subsidiaries as of the dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of the Company and its Subsidiaries, except that the unaudited
interim financial statements were subject to normal and recurring year-end
adjustments which were not material in amount and (iv) were prepared from, are
in accordance with and accurately reflect in all material respects, the Companys
books and records as of the times and for the periods referred to therein.
(c)
Sarbanes-Oxley Act
. The Company and its
Subsidiaries are, and have been, in compliance with the applicable provisions
of the Sarbanes-Oxley Act. Except as set forth in
Section 4.4(c)
of the
Company Disclosure Schedule, each of the principal executive officer of the
Company and the principal financial officer of the Company has made all
certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and
Sections 302 and 906 of the Sarbanes-Oxley Act with respect to the Company SEC
Reports, and except as set forth in
Section 4.4(c)
of the Company
Disclosure Schedule, the statements contained in such certifications were
accurate as of the date they were made. For purposes of this Agreement, principal
executive officer and principal financial officer have the meanings given to
such terms in the Sarbanes-Oxley Act. Neither the Company nor any Subsidiary of
the Company has outstanding, or has arranged any outstanding, extensions of
credit to directors or executive officers within the meaning of Section 402 of
the Sarbanes-Oxley Act. Neither the Company nor any Subsidiary of the Company
is a party to, or has any commitment to become a party to, any joint venture,
off-balance sheet partnership or any similar Contract (including any Contract
relating to any transaction or relationship between or among the Company or any
Subsidiary of the Company, on the one hand, and any unconsolidated affiliate, including
any structured finance, special purpose or limited purpose entity or person, on
the other hand or any off-balance sheet arrangements (as defined in Item 303(a)
of Regulation S-K of the SEC)). The Company has adopted a code of ethics, as
defined by Item 406(b) of Regulation S-K of the SEC, applicable to its
principal executive officer, principal financial officer, principal accounting
officer or controller, and persons performing similar functions. Since March 1,
2005, there has not been any change in or waiver of the Companys code of
ethics, and to the Companys Knowledge, there have been no violations of the
Companys code of ethics by its principal executive officer, principal
financial officer, principal accounting officer or controller, persons
performing similar functions, or other senior executive officers. The Company is in material compliance with
all applicable provisions of the Sarbanes-Oxley Act and the applicable listing
and corporate governance rules of the NASDAQ Global Market.
(d)
Internal Controls
. The Company and each
of its Subsidiaries has established and maintains an effective system of internal
controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
of the Exchange Act). No material
weakness was identified in managements assessment of internal controls as of February
28, 2010 (nor has any such material weakness since been identified). The Company has disclosed, based on its most
recent evaluation of such disclosure controls and procedures prior to the date
of this Agreement, to the Companys auditors and the audit committee of the
Company Board and in
Section 4.4(d)
of the Company Disclosure Schedule
(x) any significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting that could adversely
affect in any material respect the Companys ability to record, process,
summarize and report financial information, and (y) any fraud, whether or not
material, that
22
Table of
Contents
involves
management or other employees who have a significant role in the Companys
internal controls over financial reporting. For purposes of the foregoing, the
terms significant deficiency and material weakness have the meaning
assigned to such terms in Public Company Accounting Oversight Board Auditing
Standard 2, as in effect on the date of this Agreement. The audit committee of
the Company Board includes an Audit Committee Financial Expert, as defined by
Item 401(h)(2) of Regulation S-K.
(e)
Disclosure Controls and Procedures
. The
Company and its Subsidiaries have established and maintain disclosure controls
and procedures (as defined in Rules 13a-5(e) and 15d-15(e) of the Exchange
Act).
(f)
No Resignation
. Without limiting the
generality of the foregoing, Ernst & Young LLP has not resigned or been
dismissed as the independent registered public accounting firm of the Company
as a result of or in connection with any disagreement with the Company on a
matter of accounting practices which materially impacts or would require the
restatement of any previously issued financial statements, covering one or more
years or interim periods for which the Company is required to provide financial
statements, such that they should no longer be relied upon.
4.5
Absence of Undisclosed Liabilities
. Except (a) as set forth
in
Section 4.5
of the Company Disclosure Schedule, (b) as disclosed in
the Company Financial Statements or (c) for normal or recurring liabilities
incurred since May 31, 2010 in the Ordinary Course of Business, neither the
Company nor its Subsidiaries have incurred any material liabilities, either
accrued, contingent or otherwise, required to be reflected in financial
statements in accordance with GAAP.
4.6
Absence of Certain Changes or Events
.
(a) Except as set forth in
Section 4.6
of the
Company Disclosure Schedule, since May 31, 2010, the Company and its
Subsidiaries have conducted their respective businesses only in the Ordinary
Course of Business and have not suffered a Material Adverse Effect.
(b) Except as disclosed in
Section 4.6
of the
Company Disclosure Schedule, since May 31, 2010, there has not been any action
taken by the Company through the date hereof that, if taken during the period
from the date hereof through the Effective Time, would constitute a breach of
Section
6.1
.
4.7
Agreements, Contracts and Commitments;
Insurance
.
(a) All of the Contracts required to be set forth in
paragraphs (b), (c), (f) and (g) of
Section 4.7
of the Company
Disclosure Schedule are valid, subsisting, in full force and effect, binding
upon the Company or one of its Subsidiaries, as applicable, and, to the Companys
Knowledge, binding upon the other parties thereto in accordance with their
respective terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, fraudulent transfer or similar Laws affecting the
enforcement of creditors rights generally and except that the availability of
specific performance, injunctive relief or other equitable remedies is subject
to general principles of law and equity and the discretion of the court before
which any proceeding may be brought). No
condition exists that with notice or lapse
23
Table of
Contents
of
time or both would constitute a material default by the Company and/or any of
its Subsidiaries, as applicable, of any Contract required to be set forth in
Company Disclosure Schedule under this
Section 4.7
. The Company has made available to Parent true
and complete copies of all of the Contracts referred to in paragraphs (b), (c),
(f) and (g) of this
Section 4.7
.
(b) Except as set forth in
Section 4.7(b)
of
the Company Disclosure or as described in the 2010 Form 10-K, neither the
Company nor any of its Subsidiaries is a party to or bound by any Contract that
is a material contract (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC).
(c)
Section 4.7(c)
of the Company Disclosure
Schedule sets forth a list of (i) each employment and severance agreement
between the Company (or any of its Subsidiaries) and (A) the chief executive
officer of the Company and (B) each other named executive officer identified
in the 2010 Form 10-K and (ii) all change in control agreements to which the
Company or any of its Subsidiaries is a party.
(d) Except as set forth in
Section 4.7(d)
of
the Company Disclosure Schedule, the Company has no Government Contracts.
(e) Except as described in the 2010 Form 10-K,
neither the Company nor any of its Subsidiaries has entered into any
transaction with any Company Person or any transaction that would be subject to
disclosure pursuant to Item 404 of Regulation S-K of the SEC.
(f) Except as set forth in
Section 4.7(f)
of
the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party or subject to a material non-competition or other
similar Contract or Order that has or could have the effect of prohibiting the
conduct of the business by the Company or any of its subsidiaries in any
material respect. Except as set forth in
Section 4.7(f)
of the Company Disclosure Schedule, neither the Company
nor any of its Subsidiaries has entered into (or is otherwise bound by) any
agreement under which it or any of its Subsidiaries or their respective
successors is restricted in any material respect from selling, licensing or
otherwise distributing any of its technology or products, or providing services
to, customers or potential customers or any class of customers, in any
geographic area, during any period of time or any segment of the market or line
of business. None of the Company or any of its Subsidiaries is a guarantor of
indebtedness of any other Person other than the Company or its Subsidiaries.
(g) The Company maintains insurance policies (the
Insurance Policies
)
for itself and its Subsidiaries with reputable insurance carriers against all
risks of a character and, to the Companys Knowledge, in such amounts as are
usually insured against by similarly situated companies in the same or similar
businesses.
Section 4.7(g)
of the
Company Disclosure Schedule lists each Insurance Policy (including Insurance
Policies providing property, casualty, liability and workers compensation
coverage and bond and surety arrangements) to which Company or any Subsidiary
is currently a named insured. The
premiums have been paid on the Insurance Policies for the coverage periods
disclosed and, except as set forth in
Section 4.7(g)
of the Company
Disclosure Schedule, to the Companys Knowledge, each of the Insurance Policies
is in full force and effect and is enforceable in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, fraudulent transfer or similar Laws affecting the enforcement of
creditors rights generally and except that the availability of specific
performance, injunctive relief or
24
Table of Contents
other
equitable remedies is subject to general principles of law and equity and the
discretion of the court before which any proceeding may be brought).
4.8
Litigation
.
Except for Proceedings that do not involve an amount in controversy in excess
of $100,000.00 or as set forth in
Section 4.8
of the Company Disclosure
Schedule or as set forth in the Company SEC Reports, there are no Proceedings
pending or, to the Companys Knowledge, threatened against or affecting the
Company or any of its Subsidiaries, or any of their material properties, assets
or rights. None of the Company or any of
its Subsidiaries is subject to any Order, whether temporary, preliminary or
permanent which would reasonably be expected to be, individually or in the
aggregate, material to the Company and/or any of its Subsidiaries.
4.9
Environmental Matters
.
(a)
Compliance
. Except as set forth
in
Section 4.9(a)
of the Company Disclosure Schedule:
(i) to the Companys Knowledge, there is no and has
been no Release or threatened Release of any Hazardous Substance at the
properties currently or formerly owned, leased or operated by the Company or
any of its Subsidiaries so as to give rise to any material liability or
material investigatory, corrective or remedial obligation by the Company or any
of its Subsidiaries under applicable Environmental Law;
(ii) to the Companys Knowledge, neither the Company
nor any of its Subsidiaries has received any written notice, demand, letter,
claim or request for information, or is aware of any pending or threatened
notice, demand, letter, claim or request for information, alleging that the
Company or any of its Subsidiaries is or may be liable for material violations
under any applicable Environmental Law or have any material liability under any
applicable Environmental Law;
(iii) to the Companys Knowledge, neither the
Company nor any of its Subsidiaries has received any written Orders, or is
aware of any pending or threatened Orders issued by any Governmental Authority
or any indemnity or other agreement entered with any other Person, including
leases for real property, imposing any material liabilities or obligations on
the Company or any of its Subsidiaries under any applicable Environmental Law
(other than standard lease indemnities or obligations to adhere to
Environmental Law or Hazardous Substance control requirements);
(iv) to the Companys Knowledge, the Company and its
Subsidiaries comply and have at all times complied with applicable
Environmental Law, in all material respects, and have obtained, maintain in
full force and effect and comply with, in all material respects, all Permits
required for their operations under any applicable Environmental Law.
(b)
Sole Environmental Representation
.
Notwithstanding the terms of any other representation and warranty contained in
this Agreement, this
Section 4.9
constitutes the sole representation and
warranty of the Company and its Subsidiaries with respect to Environmental Law
and Environmental Matters.
4.10
Taxes
.
(a)
Filing of Tax Returns and Payment of Taxes;
Definitions
. Except as set forth in
Section 4.10(a)
of the Company
Disclosure Schedule, the Company and each of its
25
Table of
Contents
Subsidiaries
and any affiliated, consolidated, combined, unitary or aggregate group (each,
an
Affiliated Group
)
of which the Company or any of its Subsidiaries is or was a member has filed
all material Tax Returns that it was required to file, and all such Tax Returns
were correct and complete in all material respects based on all applicable Laws
and regulations. Except as set forth in
Section 4.10(a)
of the Company
Disclosure Schedule, the Company and each of its Subsidiaries have paid on a
timely basis all material Taxes that are or were due and payable regardless of
whether they were shown as payable on the applicable Tax Return. The unpaid
Taxes of the Company and its Subsidiaries for Tax periods through the date of
the Company Balance Sheet do not exceed by any material amount the accruals and
reserves for Taxes set forth on the Company Balance Sheet (other than any
accruals and reserves for deferred taxes or similar items that reflect timing
differences between Tax and financial accounting principles) as adjusted for
operations through the Effective Date in accordance with past custom and
practice. Except as set forth in
Section 4.10(a)
of the Company
Disclosure Schedule, all material Taxes that the Company or any of its
Subsidiaries is or was required by Law to withhold or collect (including
withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code
or similar provisions under any other Laws) have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Authority.
(b)
Deficiencies and Audits
. The Company has
made available to Parent correct and complete copies of all material federal
income Tax Returns for all periods from and after January 1, 2006, together
with related material examination reports and material statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries for all periods from and after January 1, 2006. Except as set
forth in
Section 4.10(b)
of the Company Disclosure Schedule, no material
examination or audit of any Tax Return of the Company or any of its Subsidiaries
by any Governmental Authority is currently in progress or, to the Companys
Knowledge, threatened or contemplated. Except as set forth in
Section 4.10(b)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has waived any statute of limitations with respect to material
Taxes or agreed to an extension of time with respect to a material Tax
assessment or deficiency.
(c)
FIRPTA
. Neither the Company nor any of
its Subsidiaries has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(l)(A)(ii) of the Code.
(d)
Change in Accounting Method
. Except as
set forth in
Section 4.10(d)
of the Company Disclosure Schedule, there are
no adjustments under Section 481 of the Code (or any similar adjustments or any
provision of the Code or the corresponding federal, state or local Laws related
to Taxes) that are required to be taken into account by the Company or any of
its Subsidiaries by reason of a change in method of accounting in any taxable
period ending on or before the Closing Date.
(e)
Absence of Group Memberships and Tax
Agreements
. Except as set forth in
Section 4.10(e)
of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries (i) is or
has ever been a member of an Affiliated Group, other than a group of which only
the Company and its Subsidiaries are or were members or (ii) is a party to or
bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement,
or is liable for the Taxes of any other person (other than the Company or any
of its Subsidiaries) as a transferee or successor, by contract, or otherwise.
26
Table of
Contents
(f)
Section 355
. Neither the Company nor any
of its Subsidiaries has distributed to its stockholders or security holders
stock or securities of a controlled corporation, nor has stock or securities of
the Company or any of its Subsidiaries been distributed, in a transaction to
which Section 355 of the Code applies (i) in the two (2) years prior to the
date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a plan or series of related transactions (within the
meaning of Section 355(e) of the Code) that includes the transactions
contemplated by this Agreement.
(g)
Tax Shelters; Disclosure Statements
.
Except as set forth in
Section 4.10(g)
of the Company Disclosure
Schedule, none of the Company or any of its Subsidiaries has ever entered into
or been a party to (i) a transaction subject to registration pursuant to Code
Section 6111 as a reportable transaction as defined in Code Section 6707A(c)(1)
and within the meaning of Code Section 6111(b)(2) or a tax shelter as defined
in former Code Section 6111(c) or (d), (ii) a transaction subject to the list
requirements of Code Section 6112 or (iii) a tax shelter within the meaning of
Code Section 6662(d). None of the Tax Returns filed by the Company or any of
its Subsidiaries contained a disclosure statement under Sections 6011 or 6662
of the Code (or any predecessor statute) or any similar provision of any other
Law.
(h)
Liens
. There are no material Liens for Taxes
upon the assets of the Company or any of its Subsidiaries other than for
current Taxes not yet due and payable or for Taxes that are being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP has been made in the Companys financial statements.
(i)
Tax Jurisdictions
. No material unresolved
claim has been made in writing by any taxing authority in a jurisdiction where
the Company and its Subsidiaries do not file Tax Returns that the Company or
any of its Subsidiaries is or may be subject to Tax in that jurisdiction.
(j)
Tax Rulings
. Neither the Company nor any
of its Subsidiaries has requested or is the subject of or bound by any private
letter ruling, technical advice memorandum or similar ruling or memorandum with
any taxing authority with respect to any material Taxes, nor is any such
request outstanding.
(k)
Post-Closing Tax Items
. The Company and
its Subsidiaries will not be required to include any material item of income
in, or exclude any material item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result
of any (i) closing agreement as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax Law)
executed on or prior to the Closing Date or (ii) installment sale made on or
prior to the Closing Date.
4.11
Real Property; Assets
.
(a)
Owned Property
. The Company does not own
real property.
(b)
Leased Real Properties
.
Section 4.11(b)
of the Company Disclosure Schedule sets forth a complete and accurate list of
all real properties leased, subleased or licensed by the Company or its
Subsidiaries (collectively
Company Leases
) and the location, lessor(s) and lessee(s)
of such real properties. The Company or
a Subsidiary thereof has a valid leasehold estate in and the right to quiet
enjoyment of each property covered by a Company Lease. None of the Company or any of its
Subsidiaries, nor, to the Companys Knowledge,
27
Table of
Contents
any
other party to any Company Lease, has materially violated any provision of, or
committed or failed to perform any act which, with or without notice, lapse of
time or both would constitute a default under the provisions of any Company
Lease. Except as set forth in
Section
4.11(b)
of the Company Disclosure Schedule, each material Company Lease is
in full force and effect and is enforceable in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors rights
generally and except that the availability of specific performance, injunctive
relief or other equitable remedies is subject to general principles of law and
equity and the discretion of the court before which any proceeding may be
brought) and shall not cease to be in full force and effect as a result of the
transactions contemplated by this Agreement. Except as set forth in
Section 4.11(b)
of the Company Disclosure Schedule, none of the Company or any of its
Subsidiaries leases, subleases or licenses any real property to any person
other than the Company and its Subsidiaries. Except as set forth in
Section 4.11(b)
of the Company Disclosure Schedule, all buildings, structures, fixtures and
leasehold improvements, whether required to be maintained or repaired by the
Company or any Subsidiary of the Company or lessee under each Company Lease or
by the lessor thereunder, are in good repair and operating condition in all
material respects, subject only to ordinary wear and tear, and are adequate and
suitable in all material respects for the purposes for which they are presently
being used or held for use, and to the Knowledge of the Company, there are no
facts or conditions that, in the aggregate, would reasonably be expected to
materially and adversely interfere with the current use, occupancy or operation
thereof. Except as set forth in
Section
4.11(b)
of the Company Disclosure Schedule, the Company has made available
to Parent complete and accurate copies of the Company Leases.
(c)
Assets
.
Except as set forth in
Section 4.11(c)
of the Company Disclosure
Schedule, (i) the Company and its Subsidiaries have good and marketable title
to, or a valid leasehold interest in, all buildings, plants, machinery,
equipment and other tangible assets used by them, reflected on the Company
Balance Sheet or acquired after the date thereof, except for properties and
assets disposed of in the Ordinary Course of Business since the date of the
Company Balance Sheet, (ii) all such properties and assets (w) together are
sufficient for the continued conduct of such businesses immediately after the
Closing in substantially the same manner as conducted immediately prior to the
Closing, (x) are structurally sound in all material respects, (y) are in good
operating condition and repair, normal wear and tear excepted and (z) are
adequate for the uses to which they are being put, and none of such assets is
in need of maintenance or repairs, except for ordinary, routine maintenance and
repairs that are not material in nature or cost or for which Company or its
Subsidiaries is not liable and (iii) all such properties and assets are owned
free and clear of all Liens, except for Permitted Liens.
4.12
Intellectual Property
.
(a)
Schedule of Company Intellectual Property
.
Section 4.12(a)
of the Company Disclosure Schedule is a complete and
accurate list of (i) all Registered Intellectual Property included among the
Company Intellectual Property (the
Company Registered Intellectual Property
)
and (ii) all material unregistered trademarks included among the Company
Intellectual Property. For each listed item,
Section 4.12(a)
of the
Company Disclosure
28
Table of
Contents
Schedule
indicates, as applicable, the record owner of and the jurisdictions in which
each such item of Company Registered Intellectual Property has been issued or
registered.
(b)
Company Intellectual Property Rights
. The
Company or one of its Subsidiaries, as applicable, owns, or licenses or
otherwise possesses rights to use, without any obligation to make any fixed or
contingent payments (except as provided in license agreements or support
agreements related to Third Party Intellectual Property, including any royalty
payments or honorariums, all as identified in
Section 4.12(b)
of the
Company Disclosure Schedule), all Company Intellectual Property and Third Party
Intellectual Property used or necessary in the conduct of its respective
businesses as currently conducted. Except as set forth in
Section 4.12(b)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has previously licensed, assigned, transferred or otherwise
conveyed any right, title or interest in, to or under any of the Company
Intellectual Property to any other Person. Neither the Company nor any of its
Subsidiaries is under any obligation to transfer ownership of, or grant any
exclusive license with respect to any Company Intellectual Property to any third
party. Except as set forth in
Section 4.12(b)
of the Company Disclosure
Schedule, the Company Intellectual Property is free and clear of all Liens or
rights of any other Person to possession or use. Except as set forth in
Section
4.12(b)
of the Company Disclosure Schedule, to the extent that any Company
Intellectual Property has been developed or created by a Company Person or any
third party for the Company (or one of its Subsidiaries), the Company (or its
applicable Subsidiary) either (i) has obtained ownership of and is the
exclusive owner of such Intellectual Property by operation of Law or by valid
assignment or (ii) has obtained a license thereto sufficient for the conduct of
its business as currently conducted. Except as set forth in
Section 4.12(b)
of the Company Disclosure Schedule, the IT Systems of the Company and each of
its Subsidiaries (i) are adequate in all material respects for their intended
use and for the operation of the business as currently operated and to the
Companys Knowledge as currently contemplated to be operated by the Company and
its Subsidiaries, (ii) are capable of being operated and maintained for their
intended use in connection with the operation of the business as currently
operated and to the Companys Knowledge as currently contemplated to be
operated other than those third party services that are customary to companies
that offer services and products similar to those offered by the Company, (iii)
to the extent that specifications exist for portions of the IT Systems, conform
in all material respects to such specifications, (iv) are in good working
condition, (v) only use Open Source Software or generally commercially
available software(including off-the-shelf Software subject to a shrinkwrap or
clickwrap license) that is in material compliance with the terms and conditions
for use thereof, (vi) to the Companys Knowledge, (A) are free of all viruses,
worms, Trojan horses and other known contaminants and (B) do not contain any
bugs, errors or problems, in either case, of a nature that would materially
disrupt their operation or have a material adverse impact on the operation of
the IT Systems of each of the Company and its Subsidiaries and (vii) other than
Third Party Intellectual Property and Intellectual Property exclusively
licensed to the Company or any of its Subsidiaries, only include Intellectual
Property (A) developed by employees of the Company or its Subsidiaries within
the scope of their employment, (B) developed by independent contractors who
have assigned their rights to the Company or its Subsidiaries pursuant to
enforceable written agreements or (C) otherwise acquired by the Company or its
Subsidiaries from a third party
29
Table of
Contents
who
has assigned all Intellectual Property rights and ownership of all Software to
the Company or one of its Subsidiaries.
(c)
Contractual Intellectual Property Rights
.
Except as set forth in
Section 4.12(c)
of the Company Disclosure
Schedule, the execution and delivery of this Agreement and consummation of the
Merger will not result in the material breach of, or create on behalf of any
other Person the right to terminate or modify, (i) any Contract relating to any
Company Intellectual Property or (ii) any Contract relating to Third Party
Intellectual Property.
Section 4.12(c)
of the Company Disclosure
Schedule identifies each material Contract pursuant to which the Company or any
of its Subsidiaries has been granted any rights to any (x) Third Party
Intellectual Property (except for any generally commercially available
software, including off-the-shelf Software subject to a shrinkwrap or clickwrap
license), or (y) Company Intellectual Property that has been exclusively
licensed to the Company or one of its Subsidiaries. None of the Third Party
Intellectual Property contains any Software code licensed under any terms or
conditions that impose any requirement that any Software using, linked with, incorporating,
distributed with, based on, derived from or accessing the Software code: (i) be made available or distributed in
source code form; (ii) be licensed for the purpose of making derivative works
or (iii) be licensed under terms that allow reverse engineering, reverse
assembly, or disassembly of any kind.
Except as set forth in
Section 4.12(c)
of the Company Disclosure
Schedule, all of the foregoing contractual Intellectual Property rights will be
available for use by the Surviving Corporation on substantially similar terms
and conditions following the Closing.
(d)
Valid Rights; No Infringement or Challenge by
Others
. The Companys ownership of all Company Intellectual Property and,
to the Companys Knowledge, its rights to all Third Party Intellectual
Property, are subsisting and valid. All registrations with the appropriate
domestic and foreign agencies in respect of such Company Intellectual Property
are valid and in full force and effect and all such registrations and any
applications are not subject to the payment of any Taxes or maintenance fees
that are unpaid as of Closing by the Company and each of its Subsidiaries, as
the case may be, to maintain their validity or effectiveness. To the Companys
Knowledge, no other Person is infringing or misappropriating, and no claim has
been made challenging the enforceability or validity of, any of the Company
Intellectual Property. Neither the Company nor any of its Subsidiaries is
investigating any potential infringement or misappropriation of the Company
Intellectual Property.
(e)
No Infringement By the Company
. Except as
set forth in
Section 4.12(e)
of the Company Disclosure Schedule, to the
Companys Knowledge, the operation of the business of the Company and its
Subsidiaries as such business has been or currently is conducted (including
products and Software previously or currently sold, licensed or distributed by
the Company or any of its Subsidiaries) has not and does not infringe(d) or
misappropriate(d) any Intellectual Property right or other right of any third
party. Except as set forth in
Section 4.12(e)
of the Company Disclosure
Schedule, to the Companys Knowledge, neither the Company nor any of its
Subsidiaries has received any complaint, claim or notice alleging any such
infringement, violation or misappropriation, and there are no other suits,
judicial, arbitral or other similar proceedings or claims pending or threatened
against the Company or any of its Subsidiaries alleging that the conduct of the
business of the Company or its Subsidiaries has infringed or misappropriated
the Intellectual Property of
30
Table of
Contents
any
other Person. None of the items set forth in Section 4.12(e) of the Company
Disclosure Schedule, individually or in the aggregate, has resulted in or will
result in a Material Adverse Effect on the Company or any of its Subsidiaries.
(f)
Protection of Proprietary Rights
. The
Company and each of its Subsidiaries have taken all reasonably necessary
measures to protect the secrecy, confidentiality, and value of the Company
Intellectual Property (including trade secrets and corresponding rights in
confidential information) and any proprietary information of third parties
provided to the Company or any of its Subsidiaries. To the Companys Knowledge,
there has been no unauthorized disclosure of any material trade secret owned by
the Company or its Subsidiaries to any third parties.
(g)
No Intellectual Property Contracts Affecting
Parent
. To the Companys Knowledge, the Company is not party to any
Contract under which any other Person would be entitled to receive a license or
any other right to Intellectual Property of Parent or any of its Affiliates
(other than the Company and its Subsidiaries) following the Closing.
4.13
Employee Benefit Plans
.
(a)
Company Employee Plans; Definitions
.
Section
4.13(a)
of the Company Disclosure Schedule sets forth a complete and
accurate list of all Employee Benefit Plans currently maintained, contributed
to, or sponsored, by the Company, any of the Companys Subsidiaries or any of
their ERISA Affiliates and any other material Employee Benefit Plans with
respect to which the Company or its Subsidiaries have contingent or ongoing
liabilities or obligations (together, the
Company Employee Plans
).
(b)
Documentation Relating to Company Employee
Plans
. With respect to each Company Employee Plan, the Company has made
available to Parent a complete and accurate copy of (i) such Company Employee
Plan (or a written summary of any unwritten plan), (ii) the most recent annual
report (Form 5500) (with respect to those plans for which such form is legally
required) filed with the United States Department of Labor Employee Benefits
Security Administration, (iii) each current trust agreement, group annuity
contract and summary plan description, if any, relating to any such Company
Employee Plan that is subject to the provisions set forth in the Code, (iv) the
most recent financial statements for each Company Employee Plan that is funded
and (v) the most recent actual report or valuation of each Company Employee
Plan.
(c)
Administration of Company Employee Plans
.
Each Company Employee Plan has been administered in all respects in accordance
with all applicable Laws (including, where applicable, ERISA and the Code) and
the regulations thereunder and in all respects in accordance with its terms and
each of the Company, the Companys Subsidiaries and their ERISA Affiliates has
in all respects met its obligations with respect to such Company Employee Plan
and has made all required contributions thereto (or reserved such contributions
on the Company Balance Sheet). All
filings and reports as to each Company Employee Plan required to have been
submitted to the Internal Revenue Service or to the United States Department of
Labor have been submitted. With respect to the Company Employee Plans, no event
has occurred, and there exists no condition or set of circumstances, in
connection with which the Company or any of its Subsidiaries could be subject
to any material liability under ERISA, the Code or any other applicable Law.
31
Table of
Contents
(d)
Benefit Obligations
. With respect to the
Company Employee Plans, there are no material benefit obligations for which
contributions have not been made or properly accrued as required by such
Company Employee Plan or applicable Law, and there are no material benefit
obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with GAAP, on the Company Financial
Statements. The assets of each Company Employee Plan which is funded are reported
at their fair market value on the books and records of such Company Employee
Plan if so required under the terms of such Company Employee Plan or applicable
Law.
(e)
Qualification of Company Employee Plans
.
Each Company Employee Plan that is intended to be qualified under Section 401(a)
of the Code has received a determination, opinion, or advisory letter, as
applicable, from the Internal Revenue Service to the effect that such Company
Employee Plan is so qualified and the plan and trust related thereto are exempt
from federal income taxes under Sections 401(a) and 501(a), respectively, of
the Code. If a determination, opinion or advisory letter has been issued with
respect to any Company Employee Plan, such determination, opinion or advisory
letter has not been revoked and revocation has not been threatened, no act or
omission has occurred, that, in any case, could reasonably be expected to
adversely affect its qualification.
(f)
Absence of Certain Obligations
. None of
the Company, any Company Subsidiary or any ERISA Affiliate has ever sponsored,
maintained or contributed to a Company Employee Plan which was ever subject to
Section 412 of the Code or Title IV of ERISA. No Company Employee Plan is
funded by a voluntary employees beneficiary association within the meaning
of Section 501(c)(9) of the Code. Except as set forth in
Section 4.13(f)
or
Section 4.13(a)
of the Company Disclosure Schedule, no Company
Employee Plan holds securities issued by the Company, any of the Companys
Subsidiaries or any of their ERISA Affiliates.
(g)
Ability to Amend or Terminate
. Except as
set forth in
Section 4.13(g)
of the Company Disclosure Schedule, the
Company or a Subsidiary of the Company, as applicable, may amend or terminate
each Company Employee Plan sponsored or maintained by the Company or the
Subsidiary at any time without material liability to the Company or the
Subsidiary other than the payment of benefits, and any of the Companys
Subsidiaries which are a party thereto may terminate their participation
therein in accordance with the applicable Company Employee Plan documents at
any time without material liability to the Company or its Subsidiary other than
the payment of benefits, and subject to applicable Law. No Company Employee
Plan, plan document or agreement, summary plan description or other written
communication distributed generally to Company Persons, by its terms prohibits
the Company or any of its Subsidiaries from amending or terminating any Company
Employee Plan sponsored or maintained principally by such Company or
Subsidiary, as applicable, in accordance with the Company Employee Plan
document.
(h)
Employment Related Agreements
. Except as
set forth in
Section 4.13(h)
of the Company Disclosure Schedule
separately for each item in this section, neither the Company nor any of its
Subsidiaries is a party to (i) any agreement with any current or former
stockholder, director, officer, employee, consultant, contractor, subcontractor
or agent of the Company or any of its Subsidiaries (A) the benefits of which
are contingent, in whole or in part, or the terms of which are materially
altered, upon the occurrence of a transaction
32
Table of
Contents
involving
the Company or any of its Subsidiaries of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment,
compensation or benefit guarantee or (C) providing severance benefits, welfare
benefits or other benefits after the termination of employment of such
stockholder, director, officer or employee (except as may be required by
COBRA), (ii) any agreement, plan or arrangement under which any disqualified
individual, as defined in Section 280G(c) of the Code, may receive payments
from the Company or any of its Subsidiaries that will be subject to the tax
imposed by Section 4999 of the Code or included in the determination of such
persons parachute payment under Section 280G of the Code, without regard to
Section 280G(b)(4) or (iii) any material agreement or plan binding the Company
or any of its Subsidiaries, including any stock option plan, stock appreciation
right plan, restricted stock plan, stock purchase plan or severance benefit
plan, any of the benefits of which will be materially increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. With respect to any agreement, plan or
arrangement identified pursuant to
Section 4.13(h)(ii)
or
(iii)
,
the Company has provided to Parent (A) the information necessary to calculate
any excise tax due under Section 4999 of the Code as a result of the
transactions contemplated by this Agreement if the Company or Parent may
directly or indirectly become liable and the amount of deductions that may be
disallowed under Section 280G of the Code as a result of the transactions
contemplated by this Agreement and (B) the Companys calculation of such excise
tax. The Company has made available to Parent a complete and accurate copy of
all of the Employee Benefit Plans, Contracts, documents and other instruments
referred to in
Section 4.13(h)
of the Company Disclosure Schedule.
(i)
Retiree Benefits
. Except as set forth in
Section
4.13(i)
of the Company Disclosure Schedule, none of the Company Employee
Plans promises or provides retiree medical or other retiree welfare benefits to
any Person, except as required by COBRA or similar state Law.
(j)
No Violation
. (i) Except as set forth in
item (i) of
Section 4.13(j)
of the Company Disclosure Schedule, to the
Companys Knowledge, no Company Person is in violation of any material term of
any patent disclosure agreement, non-competition agreement, or any restrictive
covenant of a former employer or contracting entity relating to the right of
any such Company Person to be employed or retained by the Company or any of its
Subsidiaries because of the nature of the business conducted or presently
proposed to be conducted by the Company or any of its Subsidiaries or to the
use of trade secrets or proprietary or confidential information of others and
(ii) except as set forth in item (ii) of
Section 4.13(j)
of the Company
Disclosure Schedule, no officer of the Company or Person performing an
equivalent function for any of the Companys Subsidiaries has given written
notice to the Company or any of its Subsidiaries that such officer or Person,
or any group of employees, intends to terminate his or her employment with the
Company or its Subsidiaries, as applicable, and neither the Company nor any of
its Subsidiaries have given notice of intention to terminate the employment of
any such officer or Person.
(k)
Multiemployer Plan
. No Company Employee
Plan is a multiemployer plan, as that term is defined in ERISA Section 4001(a)(3)
and neither the Company, any
33
Table of
Contents
Subsidiaries,
or any ERISA Affiliate has contributed to any such plan in the past six (6) years.
(l)
Section 409A Compliance
. Each Company Employee Plan that is subject to
Section 409A of the Code has been operated and maintained in compliance with
such section and all applicable regulatory guidance (including, without
limitation, proposed regulations, notices, rulings, and final regulations).
(m)
Health Care Compliance
. Each of the
Company and its Subsidiaries complies in all material respects with the
applicable requirements of COBRA or any similar state statute with respect to
each Company Employee Plan that is a group health plan within the meaning of
Section 5000(b)(1) of the Code or such state statute.
(n)
No Litigation
. (i) There are no actions,
suits or claims pending (other than routine claims for benefits in the ordinary
course) or, to the Companys Knowledge, threatened against, or with respect to,
any Company Benefit Plan or its assets and (ii) to the Companys Knowledge, no
set of circumstances exists which may reasonably give rise to an action, claim
or lawsuit against, or with respect to, any Company Employee Plan or its
assets.
(o)
Non-U.S. Plans
.
Section 4.13(o)
of the Company
Disclosure Schedule lists each Company Employee Plan subject to the laws of any
jurisdiction outside of the United States.
Except for matters that, individually or in the aggregate, would not be
reasonably expected to result in material liability to the Company or any of
its Subsidiaries, with respect to each such Company Employee Plan listed in
Section
4.13(o)
of the Company Disclosure Schedule:
(i) if it is intended to be funded and/or book-reserved, the fair market
value of the assets of such funded plan, or the book reserve established for
such plan, together with any accrued contributions, is sufficient to procure or
provide for the accrued benefit obligations with respect to all current and
former participants in such plan according to the actuarial assumptions and
valuations most recently used to account for such obligations in accordance
with applicable generally accepted accounting principles; (ii) if it is
intended to qualify for special tax treatment it meets all requirements for
such treatment; and (iii) it has been registered as required and has been
maintained in good standing with applicable Law.
4.14
Permits
.
The Company and each of its Subsidiaries have all material Permits required to
conduct their businesses as now being conducted. No suspension or cancellation
of any material Permits of the Company or any of its Subsidiaries is pending
or, to the Companys Knowledge, threatened. The Company and its Subsidiaries
are in material compliance with the terms of all such Permits. To the Companys
Knowledge, no such Permit will cease to be effective as a result of the
consummation of any of the transactions contemplated by this Agreement.
4.15
Compliance With Laws
.
Except as set forth in
Section 4.15
of the Company Disclosure
Schedule, the Company and each of its Subsidiaries, since March 1, 2005, has
materially complied with, is not in material violation of, and has not received
any notice alleging any material violation with respect to, any applicable provision
of any Law with respect to the conduct of its business, or the ownership or
operation of its properties or assets.
34
Table of
Contents
4.16
Labor Matters
.
(a) Except as set forth in
Section 4.16(a)
of
the Company Disclosure Schedule, neither the Company, any of its Subsidiaries
nor their respective Company Persons is a party to or otherwise bound by any
collective bargaining agreement or other Contract with a labor union or labor
organization. Except as set forth in
Section 4.16(a)
of the Company
Disclosure Schedule, since March 1, 2007, neither the Company nor any of its
Subsidiaries has been or is the subject of any Proceeding asserting that the
Company or any of its Subsidiaries has committed an unfair labor practice or
seeking to compel it to bargain with any labor union or labor organization, in
relation to any union organizing activity, labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving the Company or any of its
Subsidiaries, nor (except as set forth in
Section 4.16(a)
of the Company
Disclosure Schedule), to the Companys Knowledge, have any such Proceedings or
actions been threatened.
Section 4.16(a)
of the Company Disclosure
Schedule lists all Company employees who are not citizens or permanent resident
aliens of the United States who are employed by the Company in the United
States. The Company and each of its Subsidiaries have complied in all material
respects with all applicable Laws regarding employment practices, including,
without limitation, Laws relating to workers safety and health, sexual
harassment, discrimination, equal pay, immigration, wages and hours, workers
compensation, payment and withholding of taxes and information privacy and
security.
(b) All individuals who are or were performing
consulting or other services for the Company or its Subsidiaries are or were
correctly classified by the Company as either independent contractors or employees
as the case may be, and, at the Closing Date, will qualify for such
classification, except for such misclassifications, if any, individually or in
the aggregate, which would not be material to the Company. Other than as
disclosed in
Section 4.16(b)
of the Company Disclosure Schedule, there
are no pending or, to the Companys Knowledge, threatened Proceedings against
the Company or its Subsidiaries by or on behalf of or related to any
individuals currently or formerly classified by the Company or its Subsidiaries
as independent contractors or consultants and, to the Companys Knowledge,
there is no basis for any such Proceedings, except for such Proceedings, if
any, individually or in the aggregate, would not be material to the Company.
(c) Neither the Company nor any of its Subsidiaries
has effectuated or announced (i) a plant closing (as defined in the Worker
Adjustment and Restraining Notification Act (the WARN Act)) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of the Company or any of its Subsidiaries, (ii) a mass
layoff (as defined in the WARN Act) or (iii) such other transaction, layoff,
reduction in force or employment terminations sufficient in number to trigger
application of any similar Law.
4.17
Customers and Suppliers
.
Section 4.17
of the
Company Disclosure Schedule lists each customer of the Company or any of its Subsidiaries
that constituted one of the Companys ten (10) largest customers based upon
consolidated revenues in the fiscal year ended February 28, 2010 (each, a
Material Customer
). Except as set forth in
Section 4.17
of
the Company Disclosure Schedule, (i) from February 28, 2010 to the date hereof
no Material Customer has terminated, rescinded or repudiated any Contract prior
to the anticipated end of the engagement contemplated by such Contract or (ii) as
of the date of this Agreement, no Material Customer has indicated that it is
their intention to stop or decrease the rate of buying materials, products or
35
Table of Contents
services
from the Company or any of its Subsidiaries or otherwise reduce or
detrimentally alter their business or relationship with the Company or any of
its Subsidiaries, other than in the Ordinary Course of Business.
Section 4.17
of the Company Disclosure
Schedule lists each supplier of the Company, or of any of its Subsidiaries,
that constituted one of the Companys ten (10) largest suppliers in the fiscal
year ended February 28, 2010 (each a
Material Supplier
). Except as set forth in
Section 4.17
of
the Company Disclosure Schedule, (i) from February 28, 2010 to the date hereof
no Material Supplier has terminated, rescinded or repudiated any Contract prior
to the anticipated end of the engagement contemplated by such Contract or (ii) as
of the date of this Agreement, no Material Supplier has indicated that it is
their intention to stop or decrease the rate of supplying materials, products
or services to the Company or any of its Subsidiaries or otherwise reduce or
detrimentally alter their business or relationship with the Company or any of
its Subsidiaries, other than in the Ordinary Course of Business other than
customary decreases effected in the ordinary course of business of such
Material Supplier.
4.18
Export and Import Laws and Regulations Compliance
.
(a) Except as set forth in
Section 4.18
of
the Company Disclosure Schedule, to the Companys Knowledge, (i) the Company
and each of its Subsidiaries is, and for the last five (5) years has been, in
compliance in all material respects with all applicable U.S. export and import
Laws, including the Arms Export Control Act (22 U.S.C. § 2778), ITAR, the
Trading With the Enemy Act (50 U.S.C. § 5), the Export Administration Act (P.L.
96-72), the International Emergency Economic Powers Act (50 U.S.C. § 1701), the
Export Administration Regulations (15 C.F.R. 730
et seq
.), the Customs Regulations (19 C.F.R. 141
et seq
.) and associated executive orders,
and the Laws implemented by the Office of Foreign Assets Control, United States
Department of the Treasury (collectively,
U.S. Export and Import Laws
), and there are
no claims, complaints, charges, investigations, requests for information or
disclosures, or Proceedings pending or expected or threatened between the
Company, any of the Companys Subsidiaries and the United States government
alleging non-compliance with or liability under U.S. Export and Import Laws and
(ii) the Company and each of its Subsidiaries is in compliance in all material
respects with all currently applicable non-U.S. export and import laws (
Foreign Export and Import Laws
),
and there are no claims, complaints, charges, investigations or Proceedings
pending or expected or threatened between the Company, any of the Companys
Subsidiaries and a foreign government alleging non-compliance with or liability
under Foreign Export and Import Laws.
(b) Except as set forth in
Section 4.18
of
the Company Disclosure Schedule, to the Companys Knowledge, the Company and
each of its Subsidiaries has prepared and timely applied for all required import
and export licenses or other government approvals required in accordance with
U.S. Export and Import Laws and Foreign Export and Import Laws, for the conduct
of their respective businesses, and has conducted their respective businesses
in compliance with such licenses in all material respects.
(c) No action has been taken by the Company or any
of its Subsidiaries, or, as applicable, any director, officer, agent, employee
or, to the Knowledge of the Company, any Affiliate thereof, directly or
indirectly, that would result in a violation by the Company or any of its
Subsidiaries of the Foreign Corrupt Practices Act of 1977 (15 U.S.C. § 78
et seq.
), as amended, and the rules and regulations
thereunder (the
FCPA
), including, without limitation, making use of
the mails or any means or instrumentality of interstate commerce
36
Table of
Contents
corruptly
in furtherance of an offer, payment, promise to pay or authorization of the
payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value 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, in contravention of the
FCPA; and the Company and each of its Subsidiaries or, as applicable, any
director, officer, agent, employee or Affiliate thereof have conducted their
respective businesses in compliance with the FCPA and have instituted and
maintain policies and procedures designed to ensure, and which would be
reasonably expected to continue to ensure, continued compliance therewith.
4.19
Data and Records
.
For the purposes of this
Section 4.19
,
Data Protection Legislation
means
the Laws concerning the protection and/or processing of Personal Information,
and
Personal Information
means
information about an individual who can be identified by the Person who holds
that information.
(a) To the Companys Knowledge, the Company and each
of its Subsidiaries has complied in all material respects with all applicable
requirements of Data Protection Legislation, including (i) the data protection
principles, (ii) requests from data subjects for access to data and (iii) notification
to, or registration with, applicable data protection regulators.
(b) To the Companys Knowledge, neither the Company
nor any of its Subsidiaries has received any notice from any data protection
regulator, a data controller or a data subject (i) alleging non-compliance with
any Data Protection Legislation, (ii) requiring the Company or any of its
Subsidiaries to change or delete any data (other than as requested by data
subjects in the Ordinary Course of Business) or (iii) prohibiting any transfer
of data to a place outside the relevant jurisdiction or the European Economic
Area.
(c) No individual has claimed or, to the Companys
Knowledge, has the right to claim compensation from the Company or any of its
Subsidiaries under any Data Protection Legislation, including for unauthorized
or erroneous processing or loss or unauthorized disclosure of data.
4.20
Proxy Statement
. None of the information included or
incorporated by reference in the Proxy Statement, letter to the stockholders,
notice of meeting or forms of proxy to be filed with the SEC in connection with
the Merger, will, at the date it is first mailed to the Companys stockholders
or at the time of the Company Stockholders Meeting or at the time of any amendment
or supplement thereof, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, no representation or warranty is
made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Parent, Purchaser or their
Representatives expressly for inclusion or incorporation by reference in the
Proxy Statement. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act.
4.21
Brokers
.
No agent, broker, investment banker, financial advisor or other firm or Person
is or shall be entitled, or has claimed entitlement to, or is party to a
Contract or commitment of the Company regarding any brokers, finders,
financial advisors or other similar fee or
37
Table of
Contents
commission
in connection with any of the transactions contemplated by this Agreement,
except for the Financial Advisor, whose fees and expense will be paid by the
Company.
4.22
Opinion of Financial Advisor
. The Financial Advisor has
delivered to the Company a written opinion dated the date of this Agreement to
the effect, as of such date, that, on the basis of and subject to the
assumptions set forth therein, the cash consideration of $7 per share of
Company Common Stock to be received by holders of shares of Company Common
Stock pursuant to the Merger is fair to the holders of shares of Company Common
Stock from a financial point of view (the
Fairness Opinion
), and the Fairness Opinion has
not been withdrawn, revoked or modified. The Company has delivered to Parent
and Purchaser a signed copy of the Fairness Opinion.
4.23
Accounts Receivable
.
Except as set forth in
Section 4.23
of the Company Disclosure
Schedule, the accounts and notes receivable of the Company and its Subsidiaries
reflected on the balance sheets included in the most recent Financial
Statements, and all accounts and notes receivable arising subsequent to the
date of the most recent Financial Statements, (i) arose from
bona fide
sales transactions in the Ordinary Course of
Business and are payable on ordinary trade terms, (ii) to the Companys
Knowledge, are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their terms, (iii) to the Companys Knowledge, are
not subject to any valid set-off or counterclaim, (iv) do not represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangement, (v) are not owed
by any Affiliate of the Company and (vi) are not the subject of any
Proceedings.
Section 4.23
of the
Company Disclosure Schedule sets forth a description of any security
arrangements and collateral securing the repayment or other satisfaction of
receivables of the Company and or its Subsidiaries. All steps necessary to render all such
security arrangements legal, valid, binding and enforceable, and to give and
maintain for the Company or its Subsidiaries, as the case may be, a perfected
security interest in the related collateral, have been taken.
38
Table of Contents
4.24
Inventory
.
(a) Except as disclosed in
Section 4.24
of the Company
Disclosure Schedule, none of the inventory was purchased from a source other
than the manufacturer thereof or a distributor duly licensed or franchised to
distribute such items by such manufacturer and, except for inventory purchased
for customer specific requirements (so long as such inventory is subject to a
contract for the purchase thereof by such customer), all such items of
inventory meet the requirements for return to the manufacturer under the
applicable franchise agreement other than as a result of quantity limitations
with respect to such return rights. All
the inventory is good and merchantable and consists of a quality and quantity
usable and salable in the Ordinary Course of Business, subject to normal and
customary allowances in the industry for spoilage, damage and outdated
items. With respect to any inventory
disclosed in
Section 4.24
of the Company Disclosure Schedule, the
Company, as part of its normal business practices, has a policy requiring it to
disclose to any purchaser of such inventory that such items were not purchased
directly from the manufacturer or distributor and, to the Companys Knowledge,
the Company complies with such policy.
The Company implements, as a matter of ordinary course business
practice, processes for validating the origin, authenticity and integrity of
the products they sell, and such validation processes are adequate to ensure
the origin, authenticity and integrity of such products.
(b) To the extent that any inventory intended to be sold to the military
are, in order to meet military or other specifications, required to be
accompanied by (or the seller thereof is required to maintain) traceability,
testing or other documentation, all such documentation has been so maintained
and is in the possession of the Company.
(c) Except as disclosed in
Section 4.24(c)
of the Company
Disclosure Schedule, all items included in the inventory are the property of
the Company, are free and clear of any Liens other than Permitted Liens, have
not been pledged as collateral, are not held by the Company on consignment from
others and conform in all material respects to all standards applicable to such
inventory or its use or sale imposed by Governmental Authorities.
(d) Except as disclosed in
Section 4.24(d)
of the Company
Disclosure Schedule, the Company has not sold any inventory with respect to
which the purchaser thereof has the right of return to the Company or to cause
the Company to repurchase, for any reason, except pursuant to the standard
product warranties of such entity for product quality or mistake in shipment or
implied warranties at law for title against infringement.
4.25
Books and Records
.
Except as disclosed in
Section 4.25
of the Companys Disclosure
Schedule, the minute books and other similar records of the Company and each of
its Subsidiaries as made available to Parent prior to the execution of this
Agreement (a) are under the exclusive ownership and direct control of the
Company or the Subsidiary of the Company to which such books and records pertain,
and are located at the principal offices of the Company or such Subsidiary (if
different than the principle offices of the Company) and (b) contain a true and
complete record, in all material respects, of all action taken at all meetings
and by all written consents in lieu of meetings of the stockholders, the boards
of directors and committees of the boards of directors of the Company and each
of its Subsidiaries. The stock transfer
ledgers and other similar records of the Subsidiaries as made available to
Parent prior to the execution of this
39
Table of
Contents
Agreement
accurately reflect all record transfers after March 1, 2005, and prior to the
execution of this Agreement in the capital stock of the Subsidiaries.
4.26
Product and Service Warranties
. Copies of the standard terms and conditions
for products sold by the Company or any of its Subsidiaries have been delivered
or otherwise made available to Parent.
Except as disclosed in
Section 4.26
of the Company Disclosure
Schedule, none of the Company or any of its Subsidiaries has made any other
written warranties relating to its products or services, that would increase
their respective warranty obligations.
There are no material pending claims against the Company or any of its
Subsidiaries on account of product or services warranties or with respect to
the sale of defective or inferior products.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent
and Purchaser each represent and warrant to the Company as follows:
5.1
Organization, Standing and Power
. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the Laws of its jurisdiction of its incorporation, has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the failure to be so qualified or in good standing,
individually or in the aggregate, would materially impair its ability to
perform its obligations hereunder.
5.2
Authority; No Conflict; Required Filings and
Consents
.
(a)
Power and Authority; Execution and Delivery
.
Each of Parent and Purchaser has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of each of Parent and Purchaser, subject to
adoption of this Agreement by Parent in its capacity as the sole stockholder of
Purchaser immediately after the execution and delivery hereof, and no other
corporate proceedings on the part of Parent are necessary to authorize this
Agreement or to consummate the Merger. This Agreement has been duly executed
and delivered by each of Parent and Purchaser and, assuming due and valid
authorization, execution, and delivery by the Company, constitutes the valid
and binding obligation of each of Parent and Purchaser, enforceable in
accordance with its terms, except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, fraudulent transfer or similar Laws affecting the
enforcement of creditors rights generally and except that the availability of
specific performance, injunctive relief or other equitable remedies is subject
to general principles of law and equity and the discretion of the court before
which any proceeding may be brought.
(b)
Absence of Conflicts
. The execution and
delivery of this Agreement by each of Parent and Purchaser does not, and the
consummation by Parent and Purchaser of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or Bylaws of Parent,
40
Table of
Contents
each
as amended, or the Certificate of Incorporation or Bylaws of Purchaser, (ii) conflict
with, or result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the
terms, conditions or provisions of any Contract to which Parent or Purchaser is
a party or by which either of them or any of their respective properties or
assets may be bound or (iii) subject to compliance with the requirements
specified in clauses (i) through (vi) of
Section 5.2(d)
, conflict with
or violate any Permit, Order or Law applicable to Parent or Purchaser or any of
their respective properties or assets, except in the case of clauses (ii) and
(iii) of this
Section 5.2(b)
for any such conflicts, violations,
breaches, defaults, terminations, cancellations, accelerations or losses which,
individually or in the aggregate, would not materially impair the ability of
Parent or Purchaser to consummate the transactions contemplated by this
Agreement or perform their respective obligations hereunder.
(c)
Board Recommendation
. The respective
Boards of Directors of Parent and Purchaser have declared the advisability of,
and have duly adopted and approved, this Agreement and the transactions
contemplated hereby, including the Merger.
(d)
Absence of Required Consents
. No Consent
of or with any Governmental Authority is required by or with respect to Parent
or Purchaser in connection with the execution and delivery of this Agreement or
the consummation by Parent or Purchaser of the transactions contemplated by
this Agreement, except for (i) the pre-merger notification requirements under
the HSR Act and Other Antitrust Laws, (ii) the filing of the applicable
Certificates of Merger with the Secretary of State of the State of Delaware,
(iii) filings or consents under and compliance with the Securities Act and the
Exchange Act as may be required in connection with this Agreement and the
Merger, (iv) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
Laws, (v) compliance with any applicable requirements of the New York Stock
Exchange and the SEC and (vi) such consents, approvals, licenses, permits,
orders, authorizations, registrations, declarations, notices and filings the
failure of which to make or obtain, individually or in the aggregate, would not
materially impair the ability of Parent or Purchaser to consummate the
transactions contemplated by this Agreement or perform their respective
obligations hereunder.
5.3
Absence of Certain Changes
.
Since the date of the
Parents last periodic report filed with the SEC, the Parent has (a) conducted
its and the Purchasers business in the Ordinary Course of Business, except for
such conduct that may be deemed to be outside the Ordinary Course of Business
that, individually or in the aggregate, would not materially impair the ability
of Parent or Purchaser to consummate the transactions contemplated by this
Agreement or perform their respective obligations hereunder, and (b) has not
suffered an adverse effect that would materially impair the ability of Parent
or Purchaser to consummate the transactions contemplated by this Agreement or
perform their respective obligations hereunder.
5.4
Interim Operations of Purchaser
. Purchaser was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has not engaged in any other business activities and has conducted
its operations only as contemplated hereby.
41
Table of
Contents
5.5
Litigation
.
There are no Proceedings pending, or, to the
knowledge of Parent, threatened against, relating to or affecting Parent or any
of its subsidiaries or any of their respective properties before any Governmental
Authority or any arbitrator that could reasonably be expected to materially
restrict or enjoin the consummation of the transactions contemplated by this
Agreement or prevent or materially delay the ability of Parent or Purchaser to
consummate the transactions contemplated by this Agreement or of Parent or
Purchaser to perform their respective obligations hereunder.
5.6
Brokers
.
No agent, broker, investment banker, financial advisor or other firm or Person
is or shall be entitled, or has claimed entitlement to, or is party to a
Contract or commitment of Parent or Purchaser regarding any brokers, finders,
financial advisors or other similar fee or commission in connection with any
of the transactions contemplated by this Agreement, except Goldman Sachs &
Co., whose fees and expense will be paid by Parent.
5.7
Financial Capability
.
Parent has or will have, and will
cause Purchaser to have, prior to the Effective Time, sufficient funds from
cash on hand and available to it under existing commercial financing
arrangements and lines of credit to pay the aggregate Merger Consideration
contemplated by this Agreement and to perform the other obligations of Parent
and Purchaser contemplated by this Agreement.
5.8
Information Supplied
. None of the information supplied or
to be supplied by Parent or Purchaser or their Representatives for inclusion or
incorporation by reference in the Proxy Statement will, at the date the Proxy
Statement is first mailed to the Companys stockholders or at the time of the Company
Stockholder Meeting or at any time of any amendment or supplement thereof,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order the make the statements made therein, in light of the
circumstances under which they are made, not misleading.
ARTICLE VI
CONDUCT OF BUSINESS
6.1
Conduct Prior to Effective Time
. Except as expressly
contemplated by this Agreement, as set forth in
Section 6.1
of the
Company Disclosure Schedule or with the prior written consent of Parent, which
consent shall not be unreasonably withheld or delayed, from and after the date
of this Agreement until the earlier of the termination of this Agreement in
accordance with its terms or the Effective Time, the Company shall, and shall cause
each of its Subsidiaries to, act in the Ordinary Course of Business, and use
commercially reasonable efforts to maintain and preserve its and each
Subsidiarys business organization, assets, and properties, and to preserve the
goodwill of the Company.
Without
limiting the generality of the foregoing, from and after the date of this
Agreement until the earlier of the termination of this Agreement in accordance
with its terms or the Effective Time, the Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, without the prior
written consent of Parent (which shall not be unreasonably withheld or
delayed):
(a) (i) declare, set aside or pay any dividends on,
or make any other distributions (whether in cash, securities or other property)
in respect of, any of its capital stock, (ii) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
42
Table of
Contents
securities
in respect of, in lieu of or in substitution for shares of its capital stock or
any of its other securities or (iii) purchase, redeem or otherwise acquire any
shares of its capital stock or any other securities or any rights, warrants or
options (other than the forfeiture (at no cost to the Company or its
Subsidiaries) of Company Stock Options pursuant to any Company Stock Plan, by
employees in connection with the termination of such employees employment) to
acquire any such shares or other securities or securities the value of which is
measured by such securities;
(b) issue, deliver, sell, grant, pledge or otherwise
dispose of or encumber any shares of its capital stock, any other voting securities
or any securities convertible into or exchangeable for, or any rights, warrants
or options to acquire, any such shares, voting securities or convertible or
exchangeable securities, phantom stock, phantom stock rights, stock
appreciation rights or stock-based performance units or securities the value of
which is measured by such securities (other than the issuance of shares of
Company Common Stock upon the exercise of Company Stock Options or Company
Stock Awards outstanding on the date of this Agreement in accordance with their
present terms), or amend the terms of any of the foregoing, except as expressly
contemplated by
Section 3.3
of this Agreement;
(c) amend its (or permit any of its Subsidiaries to
amend their respective) Certificate of Incorporation, Bylaws or other
comparable charter or organizational documents, except as expressly provided by
this Agreement;
(d) acquire (i) by merging or consolidating with, or
by purchasing all or a substantial portion of the assets or any stock of, or by
any other manner, any business or any other Person or division thereof or (ii) any
assets that are material, in the aggregate, to the Company and its
Subsidiaries, taken as a whole, except inventory purchased in the Ordinary
Course of Business;
(e) sell, lease, license, pledge, or otherwise
dispose of or encumber any material properties or assets of the Company or of
any of its Subsidiaries;
(f) except for sales of inventory that are in the
Ordinary Course of Business, sell, dispose of, or otherwise transfer any assets
material to the Company and its Subsidiaries, taken as a whole (including any
accounts, leases, Contracts or Intellectual Property or any assets or the stock
of any Subsidiaries);
(g) adopt or implement any stockholder rights plan;
(h) except as contemplated in
Sections 6.2(d)
and
9.1
, enter into a Contract with respect to any merger,
consolidation, liquidation, dissolution, restructuring, recapitalization or
other reorganization or business combination, or any acquisition or disposition
of all or any substantial portion of the assets or securities of the Company or
any of its Subsidiaries;
(i) (i) incur any new indebtedness for borrowed
money, other than such indebtedness as is reflected on the Company Balance
Sheet or pursuant to existing lines of credit disclosed thereon, or guarantee
any such indebtedness of another Person, (ii) issue, sell or amend any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any of its Subsidiaries, guarantee any debt securities of another
Person, enter into any keep well or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, (iii) make any loans or advances (in
each case other than for employee travel or
43
Table of
Contents
other
business purposes or for employee tuition reimbursement in each case in the
Ordinary Course of Business) or capital contributions to, or investments in,
any other Person, other than the Company or any of its direct or indirect
wholly- or majority-owned Subsidiaries or (iv) enter into any hedging agreement
or other financial agreement or arrangement the value of which may change with
fluctuations in commodities or equities, prices or exchange rates or other
derivative instruments;
(j) make any capital expenditures or other
expenditures with respect to property, plant or equipment during any fiscal
quarter period in excess of $100,000.00 in the aggregate for the Company and
its Subsidiaries, taken as a whole;
(k) make any change in its pricing policies, credit
practices, the rate or timing of its payment of accounts payable, the
collection of its accounts receivable, its earnings accrual rates on Contracts
or change its accounting methods, principles or practices, except insofar as
may be required by a change in GAAP or Law or, except as so required, change any
assumption underlying, or method of calculating, any bad debt, contingency or
other reserve or revalue any assets, or make any change in its fiscal year;
(l) (i) pay, discharge, settle, satisfy, fund or
accept any material claims, liabilities, disputes, audit or investigation
findings or results or obligations (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) in existence as of the date hereof, other
than in accordance with their terms as in effect on the date of this Agreement,
or claims, liabilities or obligations reflected or reserved against in, the
most recent consolidated financial statements (or the notes thereto) of the
Company included in the Company SEC Reports filed prior to the date of this
Agreement (to the extent so reflected or reserved against) or (ii) waive any
material benefits of, modify in any adverse respect, fail to enforce, or
consent to any matter with respect to which its consent is required under, any
confidentiality or similar Contracts to which the Company or any of its
Subsidiaries is a party;
(m) terminate any material Contract to which the
Company or any of its Subsidiaries is party (other than expiration of any such
Contract pursuant to its terms), or waive, release or assign any material
rights or claims (including any write-off or other compromise of any accounts
receivable of the Company or any of its Subsidiaries), or except in the
Ordinary Course of Business modify or amend any material Contract to which the
Company or any of its Subsidiaries is party;
(n) terminate any confidentiality or standstill
agreement to which the Company or any of its Subsidiaries is party (other than
expiration of any such Contract pursuant to its terms), or waive, release or
assign any rights or claims (including any write-off or other compromise of any
accounts receivable of the Company or any of its Subsidiaries), or modify or
amend any such Contract to which the Company or any of its Subsidiaries is
party;
(o) except in the Ordinary Course of Business (i) enter
into, or modify the terms of, any Contract relating to the rendering of
services or the distribution, sale or marketing by third parties of the
products of, or products licensed by, the Company or any of its Subsidiaries or
(ii) license, or modify the terms of any license of, any material intellectual
property rights to or from any third party, other than non-exclusive licenses
which may be canceled without penalty by the Company or its Subsidiaries upon
written notice of thirty (30) days or less;
44
Table of
Contents
(p) except as expressly provided by
Section 3.3
or as may be required by applicable Law, (i) take any action with respect to,
adopt, enter into, terminate or amend any employment, severance or similar
agreement, policy, practice or arrangement or benefit plan or compensation for
the benefit or welfare of any current or former Company Person (other than in
the Ordinary Course of Business with respect to any employment-related actions
taken with respect to a current or former Company Person) or any collective
bargaining agreement, (ii) increase the compensation or benefits of (including
promotions), or, other than as may be required under an existing Contract, pay
any bonus to, any Company Person, (iii) amend or accelerate the right to
payment or vesting of any compensation or benefits, including any outstanding
options or any restricted stock awards, (iv) pay any material benefit not
provided for as of the date of this Agreement under any Company Employee Plan,
(v) adopt, grant any awards under, or otherwise change or expand the benefits
of or the persons entitled to participate in, any bonus, incentive,
performance, severance or other compensation plan or arrangement or benefit or
compensation plan (including, without limitation, any medical, dental or
related or similar healthcare benefit plan), policy, practice or arrangement,
including the grant of stock options, stock appreciation rights, stock based or
stock related awards, performance units or restricted stock, or the removal of
existing restrictions in any benefit plans or agreements or awards made
thereunder, (vi) terminate the employment or take other adverse actions with
respect to any of the Company executives and other employees identified in
Section
6.1(p)
of the Company Disclosure Schedule, (vii) employ or offer to employ
or promote or offer to promote, terminate or give notice of intent to
terminate, any executive officer of the Company or Person performing an
equivalent function for any of the Companys Subsidiaries or (viii) take any
action (other than in the Ordinary Course of Business with respect to payment
of compensation) to fund or in any other way secure the payment of compensation
or benefits under any Employee Plan or Contract;
(q) (i) rescind or, other than consistent with prior
year Tax reporting of similar items, make any Tax election, (ii) settle or
compromise any Tax liability, (iii) amend any Tax Return, (iv) make a request
for a written ruling of a taxing authority relating to Taxes or file a request
for a pre-filing agreement or similar procedure or (v) enter into a legally
binding agreement with a taxing authority with respect to Taxes;
(r) close (except pursuant to the existing terms of
leases disclosed in
Section 4.11(b)
of the Company Disclosure Schedule
entered into prior to the date of this Agreement (and without giving effect to
the transactions contemplated by this Agreement)) or open any material facility
or office, or initiate, compromise or settle any material Proceeding;
(s) authorize any transfer of any shares of Company
Common Stock in violation of the Voting Agreements or authorize the removal of
any legend restricting the transfer of such shares;
(t) fail to maintain insurance at levels
substantially comparable to levels existing as of the date of this Agreement or
to timely file claims thereunder (provided that the Company shall not pay or
incur liability for any materially increased premium without Parents consent,
not to be unreasonably withheld);
(u) fail to pay accounts payable and other
obligations in the Ordinary Course of Business;
45
Table of Contents
(v) agree to any covenant of the Company or any of
its Subsidiaries not to compete or other covenant of the Company or any of its
Subsidiaries restricting the marketing or distribution of the products or
services of the Company or any of its Subsidiaries or otherwise limiting in any
material respect the freedom of the Company or any of its Subsidiaries to
compete in any line of business or with any Person or in any area or to own,
operate, sell, transfer, pledge or otherwise dispose of or encumber any
material assets or that would so limit the freedom of Parent or any of its
affiliates after the consummation of the Merger, except for territorial
limitations set forth in supplier or distribution agreements entered into in
the Ordinary Course of Business; or
(w) authorize any of, or commit or agree, in writing
or otherwise, to take any of, the foregoing actions described in (a) through
(v) above.
6.2
Acquisition Proposals
.
(a) Subject to
Section 6.2(b)
, following the
date of this Agreement and prior to the Effective Time or, if earlier, the
termination of this Agreement in accordance with
Article IX
, the Company
shall not, nor shall it permit any of the Companys Subsidiaries or any of
their respective directors, officers, employees, investment bankers, attorneys,
accountants, other agents, advisors or representatives (such directors,
officers, employees, investment bankers, attorneys, accountants, other agents,
advisors and representatives collectively,
Representatives
) to, directly or indirectly,
(i) initiate, solicit, encourage (including by way of providing information),
facilitate or induce the submission of any inquiries, proposals or offers
relating to any Acquisition Proposal, (ii) engage or participate in any
discussions or negotiations regarding, or provide or cause to be provided any
non-public information relating to the Company or any of its Subsidiaries in
connection with, or have any discussions with any Person relating to, an
Acquisition Proposal, or otherwise encourage or facilitate any effort or
attempt to make or implement an Acquisition Proposal, (iii) approve, endorse or
recommend, or propose publicly to approve, endorse or recommend, any
Acquisition Proposal, except as provided in
Section 6.2(d)
or (iv) enter
into any letter of intent, agreement in principle, merger agreement, option
agreement or other similar Contract relating to any Acquisition Proposal. The
Company shall promptly notify Parent after receipt of an actual or proposed
Acquisition Proposal orally and in writing (which notice shall include the
material terms and conditions of the Acquisition Proposal and the Person
submitting the same). The Company shall immediately cease and cause to be
terminated any solicitation, encouragement, discussion or negotiation with any
Persons conducted heretofore by the Company, its Subsidiaries or any of their
respective Representatives with respect to any Acquisition Proposal. The
Company shall ensure that its Representatives and its Subsidiaries
Representatives are aware of the provisions of this
Section 6.2
.
(b) Notwithstanding anything to the contrary
contained in
Section 6.2(a)
, if at any time following the date of this
Agreement and prior to the receipt of the Stockholder Approval, (i) the Company
receives an unsolicited written Acquisition Proposal that was not received in
violation of
Section 6.2(a)
and that the Company Board believes in good
faith to be
bona fide
and (ii) the Company Board
determines in good faith, after consultation with the Financial Advisor and
outside legal counsel, that such Acquisition Proposal constitutes or could
reasonably be expected to result in a Superior Proposal, then the Company may,
prior to the receipt of the Stockholder Approval and subject to compliance with
the provisions of
46
Table of
Contents
this
Section 6.2
, (A) furnish information with respect to the Company and its
Subsidiaries to the Person (and its Representatives) making such Acquisition
Proposal and (B) participate in discussions or negotiations with the Person
(and its Representatives) making such Acquisition Proposal regarding such
Acquisition Proposal (
Permitted
Actions
) if the Company Board concludes in good faith, after
consultation with the Financial Advisor and outside legal counsel, that, as a
result of such Acquisition Proposal, the failure to take such Permitted Action
would be inconsistent with its fiduciary duties under applicable Law. With respect
to an Acquisition Proposal that constitutes or could reasonably be expected to
result in a Superior Proposal, the Company will not, and will not allow its or
its Subsidiaries Representatives to, disclose any non-public information to
such Person without entering into one or more confidentiality agreements with
such Person on terms no less favorable in the aggregate to the Company than
those contained in the NDA (
Acceptable
Confidentiality
Agreements
) and will promptly provide Parent with a copy of
such executed Acceptable Confidentiality Agreement and any information provided
thereunder not previously provided to Parent; and provided further that the
Company shall have delivered written notice to Parent at least two (2) Business
Days in advance of taking any action permitted pursuant to subclauses (A) and
(B) of clause (ii) of this
Section 6.2(b)
. The Company shall promptly
(and in no event later than 24 hours following the Companys Knowledge of, but
in no event later than two (2) Business Days after, receipt thereof) notify
Parent and Purchaser orally and in writing (which notice shall include the
material terms and conditions of the Acquisition Proposal and the Person
submitting the same) in the event it receives an Acquisition Proposal (or any communication
from a Person that such Person is considering making an Acquisition Proposal)
from a Person or group of related Persons and shall keep Parent and Purchaser
reasonably informed orally and in writing as to the status and any material
developments, discussions and negotiations concerning the same, including
prompt written notice to Parent of any determination by the Company Board (or
any special committee thereof) that a Superior Proposal has been made.
(c) Except as permitted by
Section 6.2(d)
, neither
the Company Board nor any committee thereof shall directly or indirectly (i) amend,
withdraw, modify, change, condition or qualify or publicly propose to withdraw
or modify, the Recommendation, (ii) approve or recommend or publicly propose to
approve or recommend, any Acquisition Proposal or (iii) except as permitted by
Section
6.2(f)
, take any other action or make any other public statement
inconsistent with the Recommendation.
(d) Notwithstanding
Section 6.2(a)
and
Section
6.2(c)
, at any time prior to the receipt of the Stockholder Approval, in
response to a Superior Proposal, the Company Board may withdraw, modify,
change, condition or qualify the Recommendation in a manner adverse to Parent
and Purchaser (
Change
in Board Recommendation
);
provided
,
however
, that the Company Board
may not effect a Change in Board Recommendation pursuant to this
Section 6.2(d)
unless: (i) the Company has complied
with this
Section 6.2
; (ii) (A) the Company has delivered a Notice of Superior
Proposal to Parent and (B) either (1) Parent does not make a Matching Bid on or
before the fifth (5th) Business Day following Parents actual receipt of such
Notice of Superior Proposal or (2) following receipt of a Matching Bid within
such five (5) Business Day period, the Company Board concludes in good faith,
after consultation with the Financial Advisor and outside legal counsel and
after taking into consideration the Matching Bid, that the Superior Proposal to
which the Notice of Superior Proposal relates continues to be a Superior
Proposal (provided that any material amendment
47
Table of
Contents
to
the terms of such Superior Proposal after the initial Notice of Superior
Proposal shall require a new Notice of Superior Proposal and restart the five (5)
Business Day period referred to above) and (iii) the Company Board determines
in good faith, after consultation with the Financial Advisor and outside legal
counsel, that the failure to effect a Change in Board Recommendation would be
inconsistent with its fiduciary duties under applicable Law.
(e) Notwithstanding anything in this
Section 6.2
to the contrary, at any time prior to receipt of the Stockholder Approval, the
Company Board may, in response to a Superior Proposal, cause the Company to
terminate this Agreement pursuant to
Section 9.1(d)
and concurrently
with such termination enter into a definitive agreement providing for the
transactions contemplated by such Superior Proposal;
provided
,
however
,
that the Company shall not terminate this Agreement unless: (i) the Company shall have complied in all
material respects with the provisions of this
Section 6.2
; (ii) (A) the
Company has negotiated in good faith with Parent if Parent has notified the
Company of its intent to submit a Matching Bid or (B) Parent has not made a
Matching Bid and five (5) Business Days have elapsed since the Company has
provided the Notice of Superior Proposal and, in each case, the Acquisition
Proposal remains a Superior Proposal; (iii) the Company Board determines in
good faith, after consultation with the Financial Advisor and outside legal
counsel, that the failure to effect such termination would be inconsistent with
its fiduciary duties under applicable Law and (iv) the Company has complied
with all applicable requirements of
Section 9.3(b)
(including the
payment of the Termination Fee prior to or on the date of such termination) in
connection with such Superior Proposal.
(f) Nothing contained in this
Section 6.2
or
elsewhere in this Agreement shall prohibit the Company from (i) taking and
disclosing to its shareholders a position contemplated by Rule 14d-9 or Rule 14e-2(a)
promulgated under the Exchange Act;
provided
,
however
, that any such disclosure other than (x) a stop-look-and-listen
communication to the stockholders of the Company pursuant to Rule 14d-9(f) promulgated
under the Exchange Act (or any similar communications to the stockholders of
the Company), (y) an express rejection of any applicable Acquisition Proposal
or (z) an express reaffirmation of its Recommendation to the stockholders of
the Company in favor of the Merger shall be deemed to be a Change of
Recommendation or (ii) making any disclosure to the Companys shareholders if,
in the good faith judgment of the Board of Directors of the Company, failure so
to disclose would be inconsistent with applicable Law;
provided
,
however
,
that in no event shall the Company or its Board of Directors or any committee
thereof take, agree or resolve to take any action prohibited by
Section 6.2(d)
.
6.3
Certain Tax Matters
.
(a) From the date hereof until the Effective Time,
the Company shall, and shall cause each of its Subsidiaries to, (i) promptly
notify Parent of any Proceeding arising from the date hereof until the
Effective Date against or with respect to the Company or any Subsidiaries in
respect of any material Tax and not settle or compromise any such Proceeding or
other action without Parents prior written consent and (ii) promptly provide
to Parent a written copy of any U.S. Federal income Tax Return filed with the
Internal Revenue Service during the period from the date hereof through the
Effective Date.
(b) The Company shall not, and shall not permit any
Subsidiary to, enter into or effect any transaction that would result in a
material recognition of income or gain by the
48
Table of Contents
Company
or any Subsidiary, other than transactions entered into or effected in the
Ordinary Course of Business.
6.4
Employee Stock Ownership Plan and Trust
. In the event that, prior to the Stockholder
Approval, the Nu Horizons Electronic Corp. Employee Stock Ownership Plan and
Trust has not been terminated, and all assets thereof have not been distributed
to the participants and beneficiaries thereto, the Company shall retain an
independent fiduciary to vote the shares of the Company held under such plan
and trust at any Company Stockholders Meeting held in connection with the
Merger.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1
Efforts; Consents, Notices and Approvals
.
(a)
General
.
(i) Subject to the terms and conditions herein
provided, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective, as
promptly as practicable following the date of this Agreement, the Merger and
the other transactions contemplated by this Agreement, and to cooperate with
each of the other parties hereto in connection with the foregoing, including
using commercially reasonable best efforts: (A) to obtain all necessary
waivers, consents and approvals from third parties; (B) to obtain all necessary
consents, approvals and authorizations as are required to be obtained under any
Laws; (C) to lift or rescind any Order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby; (D) to effect all
necessary registrations, notifications, applications and filings with
Governmental Authorities, as promptly as is reasonably practicable and (E) to
fulfill all conditions to this Agreement. In furtherance and not in limitation
of the foregoing, each party shall: (I) make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act or any applicable Other
Antitrust Laws with respect to the transactions contemplated by this Agreement
as promptly as practicable and supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to the HSR
Act or applicable Other Antitrust Laws (including by substantially complying
with any second request for information pursuant to the HSR Act or applicable
Other Antitrust Laws); (II) make any additional filings required by any
applicable antitrust Laws and take all other actions reasonably necessary,
proper or advisable, as determined upon the reasonable mutual agreement of the
parties, subject to
Section 7.1(a)(ii)
, to cause the expiration or
termination of the applicable waiting periods under the HSR Act or Other
Antitrust Laws, and comply with applicable antitrust Laws, as promptly as
practicable and (III) subject to applicable Laws relating to access to and the
exchange of information, use its reasonable best efforts to (x) cooperate with
each other in connection with any filing or submission and in connection with
any investigation or other inquiry under or relating to any antitrust Law; (y) keep
the other parties informed of any communication received by such party from, or
given by such party to, the FTC, the Antitrust Division of the DOJ or any other
49
Table of
Contents
Governmental
Authority and of any communication received or given in connection with any
proceeding by a private party, in each case regarding any of the transactions
contemplated by this Agreement and (z) consult with the other parties in
advance of any meeting or conference with the FTC, the DOJ or any such other
Governmental Authority, and to the extent permitted by the FTC, the DOJ or such
other applicable Governmental Authority, give the other parties the opportunity
to attend and participate in such meetings and conferences.
(ii) Notwithstanding anything to the contrary
contained in this Agreement, in connection with any filing or submission required
or action to be taken by either Parent or the Company to effect the Merger and
to consummate the other transactions contemplated hereby, the Company shall
not, without Parents prior written consent, commit to, and none of Parent or
Purchaser shall be required to (a) propose or agree to accept any undertaking
or condition, enter into any consent decree, effect any divestiture, hold
separate any assets, business or other holdings or otherwise take or commit to
take any action, that (1) limits its or its Affiliates freedom of action with
respect to, or its ability to retain, the Company or any of the businesses,
product lines or assets of the Company, Parent or any of Parents Affiliates,
(2) would result in a change, event, circumstance, development or effect that
is or is reasonably likely to have an adverse effect on the business, assets,
liabilities, capitalization, prospects, condition (financial or other), or
results of operations of Parent and/or Affiliates of Parent or (3) would impose
or result in any material limitation on the ability of Parent to exercise full
rights of ownership with respect to the shares of the Surviving Corporation
following the Closing, or (b) commence or defend any litigation or Proceeding
involving any Governmental Authority.
(iii) Without expanding its obligations hereunder,
the obligation of Parent and Purchaser to use reasonable best efforts under
Section
7.1(a)(i)
to obtain waivers, consents and approvals to loan agreements,
leases and other Contracts specifically shall not include any obligation to
agree to, and neither the Company nor any of its Subsidiaries shall agree
(without the prior consent of Parent, which shall not be unreasonably withheld)
to, a modification of the terms of such documents, or to make any guaranty or
monetary payment in consideration of such waiver, consent or approval.
(iv) Without prejudice or limitation to the
representations, warranties or covenants in this Agreement, each party
acknowledges and agrees that the issuance of security clearances is in the
discretion of the appropriate Governmental Authorities, and no party shall bear
responsibility for the results of the exercise of such discretion.
(b)
State Takeover Law
. Without limiting the
generality of
Section 7.1(a)
, if any Takeover Law or any state blue sky
Law shall become applicable to the transactions contemplated by this Agreement
or by the Voting Agreements, the Company and the Company Board shall grant such
approvals and take such actions as are necessary so that the transactions
contemplated hereby and thereby may be consummated as promptly as practicable
on the terms contemplated hereby and thereby, and otherwise act to minimize the
effects of such statute or regulation on the transactions contemplated hereby
or thereby.
50
Table of
Contents
7.2
Financing
.
The Company shall and shall cause its Subsidiaries, and shall use commercially
reasonable efforts to cause each of its and their respective Representatives,
including legal and accounting Representatives, to provide all commercially
reasonable cooperation that is reasonably requested by Parent in obtaining any
financing necessary to consummate the Merger and the other transactions
contemplated by this Agreement (provided that such requested cooperation does
not materially interfere with the ongoing operations of the Company and its
Subsidiaries).
7.3
Company Stockholder Adoption of the Agreement
.
(a)
Calling of Company Stockholders Meeting
. The Company shall, acting through the Company
Board, duly call, give notice of, convene and hold a meeting of its
stockholders (the
Company
Stockholders Meeting
) for the purpose of obtaining the approval
of the principal terms of the Merger by the stockholders of the Company (the
Stockholder Approval
).
Without limiting the generality of the foregoing, the obligations of the
Company pursuant to the first sentence of this
Section 7.3(a)
shall not
be affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal or (ii) the withdrawal
or modification by the Company Board of its approval or recommendation of this
Agreement or the Merger.
(b)
Preparation of Proxy Statement
. The Company shall, no later than fifteen (15)
Business Days following the execution of this Agreement, prepare and file with
the SEC a proxy statement (the
Proxy Statement
) in accordance with the Exchange Act
and any other applicable Laws, will use its commercially reasonable efforts to
respond to any comments of the SEC or its staff to the satisfaction of the SEC
or its staff within five (5) Business Days following receipt thereof and to
cause the Proxy Statement to be mailed to the Companys stockholders within
five (5) Business Days following clearance of the Proxy Statement by the SEC,
provided
that the preceding time periods shall be extended
to the extent of any failure by Parent to provide comments within the time
periods set forth in the last sentence of this
Section 7.3(b)
. The Proxy Statement shall include the
Recommendation unless prior to the date of mailing a Change in Board
Recommendation shall have occurred pursuant to
Section 6.2(d)
. The Company shall notify Parent promptly upon
the receipt of any comments from the SEC or its staff or any other government
officials and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Proxy Statement or for
additional information, and shall supply Parent with copies of all
correspondence between the Company or any of its Representatives, on the one
hand, and the SEC, or its staff, or any other government officials, on the
other hand, with respect to the Proxy Statement. The Company shall consult with Parent and its
counsel prior to responding to any comments from the SEC or its staff or any
other government officials. If at any
time prior to the Company Stockholders Meeting there shall occur any event that
should be set forth in an amendment or supplement to the Proxy Statement, the
Company shall promptly prepare and mail to its stockholders and file with the
SEC any such amendment or supplement.
The Company shall not file or mail any Proxy Statement, or any amendment
or supplement thereto, to the Companys stockholders prior to consultation with
Parent and consideration in good faith of any comments submitted by Parent,
which comments of Parent shall be accepted so long as they are reasonable and
not in violation of applicable Law.
Parent shall provide comments regarding any draft of the Proxy Statement
or any amendment or supplement thereto
51
Table of Contents
promptly,
and in any event, with respect to the initial draft of the Proxy Statement,
within five (5) Business Days following Parents receipt thereof, and with
respect to any amendment or supplement thereto, within three (3) Business Days
following Parents receipt thereof.
(c)
Voting of Shares by Parent and Purchaser
. Parent shall cause all shares of Company
Common Stock owned by Parent or Purchaser or any other subsidiary of Parent to
be voted in favor of the approval of the principal terms of the Merger.
7.4
Notification of Certain Matters
. The Company shall give
prompt written notice to Parent of (a) the inaccuracy of any representation or
warranty made by the Company contained in this Agreement that is qualified as
to materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (b) the failure by the Company to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement;
provided
,
however
,
that no such notification shall be deemed to cure any breach or otherwise
affect the representations, warranties, covenants or agreements of the Company
or waive the conditions to the obligations of the parties hereunder. Nothing contained in this Agreement shall
give Parent or Purchaser, directly or indirectly, the right to control, direct
or interfere with the operations of the Company prior to the Effective Time.
Prior to the Effective Time, the Company shall exercise, consistent with the
terms and conditions of this Agreement, control and supervision over its
business operations.
7.5
Access to Information
.
(a) Subject to compliance with applicable Laws, the
Company shall, and shall cause each of its Subsidiaries and the Companys and
such Subsidiaries Representatives to, afford to Parent and its Representatives
access, upon reasonable notice and at all reasonable times, during the period
prior to the Effective Time, to all of the Companys and all of its
Subsidiaries properties, books, records, Contracts, commitments and personnel
and shall furnish Parent all financial, operating and other data and
information as Parent may request. Unless otherwise required by Law, Parent
will hold any such information which is non-public in confidence in accordance
with the NDA. No information or
knowledge obtained in any investigation pursuant to this
Section 7.5
or
otherwise shall affect or be deemed to modify any representation or warranty
contained in the Agreement or the conditions to the obligations of the parties
to consummate the Merger.
Notwithstanding anything to the contrary, it is understood and agreed to
by each party that (i) any exchange of information under this Agreement shall
not affect, in any way, each partys relative competitive position to the other
party or to other entities and (ii) the Company and its Subsidiaries may deny
access to any information if the Company believes, upon advice of outside
counsel, that providing access to such information to Parent and its
Representatives would violate applicable antitrust Laws or any confidentiality
agreement or similar agreement or arrangement to which the Company or any of
its Subsidiaries is a party (which the Company shall use commercially
reasonable best efforts to cause the counterparty thereto to waive).
(b) The parties acknowledge that Parent and the
Company have previously executed the NDA, which shall continue in full force
and effect in accordance with its terms, except as expressly modified herein.
52
Table of
Contents
(c) Promptly following the date hereof, the Company shall
use reasonable best efforts to cause Ernst & Young LLP to allow Parent full
and complete access to its work papers with respect to its audit of the
consolidated balance sheet of the Company as of May 31, 2010, and the related
statements of income, cash flows and changes in equity for the fiscal year then
ended.
7.6
Public Disclosure
. Except as may be required by Law or
applicable stock exchange rules, (a) the press release announcing the execution
of this Agreement shall be issued only in such form as shall be mutually agreed
by the Company and Parent and (b) Parent and the Company shall each use its
reasonable best efforts to consult with the other party before issuing, and
provide each other with a reasonable opportunity to review and comment upon, any
other press release with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release
prior using such efforts;
provided
,
however
, that nothing in this
Section
7.6
shall be deemed to prohibit any party from making any disclosure which
its counsel deems necessary in order to satisfy such partys disclosure
obligations imposed by Law or stock exchange rules. Parent and the Company
shall each use its reasonable best efforts to consult with the other party
before issuing, and provide each other with a reasonable opportunity to review
and comment upon, any written communications to Company employees with respect
to the transactions contemplated by this Agreement, including the Merger.
7.7
Indemnification
.
(a) For six (6) years after the Effective Time,
Parent and the Surviving Corporation will, jointly and severally, indemnify and
hold harmless (including advancement of expenses) the current and former
directors and officers of the Company and its Subsidiaries (the
Covered Parties
) in
respect of acts or omissions occurring on or prior to the Effective Time to the
fullest extent provided in their respective Certificate of Incorporation,
Bylaws or similar governing instruments as in effect as of the date of this
Agreement;
provided
,
however
, that such indemnification shall
be subject to any limitation imposed from time to time under applicable
Law. For a period of six (6) years
following the Effective Time, Parent shall, or shall cause the Surviving
Corporation to, provide for indemnification and exculpation of the Covered
Persons in respect of acts or omissions occurring prior to the Effective Time,
other than such acts or omissions deemed by an applicable arbitral or judicial
body in a final non-appealable order or judgment to be gross negligence or
willful misconduct, in a manner consistent with and no less favorable than the
indemnification and exculpation provisions with respect to the Covered Parties
that are presently set forth in the Companys and its Subsidiaries Certificate
of Incorporation, Bylaws or similar governing instruments and any
indemnification agreement between the Company and any Covered Party.
(b) Parent agrees that the Company and, from and
after the Effective Time, the Surviving Corporation, shall cause to be
maintained in effect for not less than six (6) years from the Effective Time
the insurance coverage provided under the policies of directors and officers
liability insurance maintained by the Company at the date of this Agreement;
provided
,
that (i) after the Effective Time, Parent or the Surviving Corporation may
substitute therefor policies issued by reputable and financially sound carriers
reasonably acceptable to the beneficiaries of such policies that provide at least
the same coverage, on terms and conditions which are no less advantageous to
such persons but only if such substitution does not result in any gaps or
lapses in coverage with respect to matters
53
Table of
Contents
occurring
prior to the Effective Time and (ii) the Surviving Corporation shall not be
required to pay an annual premium for such coverage in excess of two hundred fifty
percent (250%) of the last annual premium paid by the Company prior to the date
of this Agreement; and if the Surviving Corporation is unable to obtain the
insurance required by this Section, it shall obtain as much comparable
insurance as possible for such six-year period for an annual premium equal to
such maximum amount. Parents
obligations under this paragraph may be satisfied by the purchase of a
tail
insurance policy that provides the coverage described above.
(c) Subject to applicable Law, Parent and the
Surviving Corporation shall honor all indemnification agreements between the
Company and the Covered Parties in effect as of the date hereof.
(d) In the event the Surviving Corporation or any of
its 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 or assets to any Person, then, and in each such case, to the
extent necessary to effect the purposes of this
Section 7.7
, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this
Section 7.7
;
provided
,
however
,
that, in the case of any such assignment by the Surviving Corporation, the
Surviving Corporation shall remain liable for all of its obligations under this
Agreement. The obligations under this
Section 7.7
shall not be
terminated or modified in such a manner as to adversely affect any indemnitee
to whom this
Section 7.7
applies without the written consent of such
affected indemnitee. This
Section 7.7
shall survive the Effective Time,
is intended to benefit the Covered Persons, and shall be enforceable by any of
them.
7.8
Stockholder Litigation
. The Company shall keep Parent
fully informed of any stockholder litigation against the Company and its
directors relating to this Agreement, the Voting Agreements, the Merger or any
other transactions contemplated hereby;
provided
,
however
, that no settlement of
any such litigation shall be agreed to without Parents prior written consent,
which shall not be unreasonably withheld or delayed.
7.9
Section 16 Matters
. Prior to the Effective Time, the
Company shall take all such steps as may be required to cause to be exempt
under Rule 16b-3 promulgated under the Exchange Act any dispositions of shares
of Company Common Stock (including derivative securities with respect to shares
of Company Common Stock) that are treated as dispositions under such rule and
result from the transactions contemplated by this Agreement by each director or
officer of the Company who is subject to the reporting requirements of Section 16(a)
of the Exchange Act with respect to the Company.
7.10
Post-Closing Employment Matters
. Subject to
Section 7.10(e)
,
Parent covenants as follows:
(a) From the Closing Date until its first (1
st
) anniversary, Parent shall,
or shall cause the Surviving Corporation and its Subsidiaries to, provide each
active employee of the Company or its Subsidiaries as of the Effective Time
(each, an
Employee
) with benefits and
compensation that are substantially comparable in the aggregate to the benefits
and compensation, excluding equity and equity-based incentive plans and
individual
54
Table of
Contents
agreements,
that are provided by the Company to the Employee immediately prior to the date
of this Agreement. Nothing in this
Section 7.10 shall be deemed to prohibit Parent from, at any time after the
Effective Time, changing the title, rank or job duties of any Employee or from
terminating any Employee.
(b) Subject to applicable Law, with respect to each
Parent Benefit Plan in which any Employee will participate after the Closing
Date, Parent shall, or shall cause the Surviving Corporation and its
Subsidiaries to, recognize all service of the Employees with the Company or any
of its Subsidiaries, as the case may be, for purposes of eligibility to
participate and vesting and, only in the case of any Parent Benefit Plan that
provides vacation benefits or any other form of paid time-off benefits, for
purposes of benefit accrual, under any such Parent Benefit Plan, but only to
the extent such service was recognized under a similar Company Employee Plan
immediately prior to the Closing Date.
(c) Subject to applicable Law, Parent shall use
commercially reasonable efforts to, and cause the Surviving Corporation and its
Subsidiaries to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Employees under any Parent Benefit Plan that is
a welfare benefit plan in which such Employees may be eligible to participate after
the Closing Date, other than limitations or waiting periods that are already in
effect with respect to such Employees and that have not been satisfied as of
the Closing Date under any welfare benefit plan maintained for the Employees
immediately prior to the Closing Date and (ii) provide each Employee with
credit for any co-payments and deductibles paid prior to the Closing Date in
satisfying any applicable deductible or out-of-pocket requirements under any
Parent Benefit Plans that are welfare plans in which such Employees are
eligible to participate in after the Closing Date, in each of cases (i) and (ii)
above, without duplication of benefits.
(d) If any Employee is terminated from employment by
Parent, the Surviving Corporation or any of its Subsidiaries on or after the
Closing Date and before the first anniversary of the Closing Date, such
Employee shall be eligible to receive severance benefits comparable to those
that would have been provided by the Company or its Subsidiaries to such
Employee under the terms of any generally applicable severance policy of the
Company or its Subsidiaries in effect immediately prior to the date of this
Agreement.
(e) Nothing contained in this
Section 7.10
shall (i) be treated as an amendment of any particular Parent Benefit Plan,
(ii) obligate Parent or any of its
Subsidiaries to (A) maintain any particular Company Employee Plan or Parent
Benefit Plan, other than as set forth in Section 7.10 of the Company Disclosure
Schedule or (B) retain the employment of any particular Employee or (iii) create
any third party beneficiary rights in any Person, including any current or
former Company Person.
7.11
Maintenance of Insurance Policies
. The Company will use its commercially
reasonable efforts to ensure that all of the Insurance Policies will be in full
force and effect following the Effective Time.
7.12
Further Assurances
. From 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 Purchaser, any
deeds, bills of sale, assignments or assurances and to take and
55
Table of Contents
do,
in the name and on behalf of the Company or Purchaser, 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.
7.13
No Other Representations
.
Parent and Purchaser acknowledge and agree that the Company has not made
and is not making any representations or warranties whatsoever regarding the
subject matter of this Agreement, express or implied, except as provided in
Article
IV
, and that Parent and Purchaser are not relying and has not relied on any
representations or warranties whatsoever regarding the subject matter of this
Agreement, express or implied, except as provided in
Article IV
. The Company acknowledges and agrees that
Parent and Purchaser have not made and are not making any representations or
warranties whatsoever regarding the subject matter of this Agreement, express
or implied, except as provided in
Article V
, and that the Company is not
relying and has not relied on any representations or warranties whatsoever
regarding the subject matter of this Agreement, express or implied, except as
provided in
Article V
.
ARTICLE VIII
CONDITIONS
8.1
Conditions to Obligation of Each Party t
o Effect the Merger
. The respective obligations of each party to
effect the Merger shall be subject to the satisfaction or, to the extent permitted
by applicable Law, waiver by such party at or prior to the Effective Time of
each of the following conditions:
(a)
Company Stockholder Approval
. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company
under the DGCL and the Companys Certificate of Incorporation, as amended;
(b)
Regulatory Approvals
. Any requisite waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR
Act and any Other Antitrust Laws shall have expired or been terminated, and
there shall be no Order issued by any other Governmental Authority pursuant to
any Other Antitrust Laws; and
(c)
No Injunctions, Restraints or Illegality
. There shall not be in effect any Order or Law
enacted, entered, promulgated or enforced by any court or other Governmental
Authority which has the effect of restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement, and there shall not be pending any Proceeding
in, before or by any Governmental Authority which could reasonably be expected
to result in the issuance of any such Order or the enactment, promulgation or
deemed applicability to Parent or the Company or any of its Subsidiaries, or
the transactions contemplated by this Agreement of any such Law.
8.2
Conditions to Obligations of Parent and
Purchaser to Effect the
Merger
. The obligations of Parent
and Purchaser to effect the Merger are also subject to the satisfaction or, to
the extent permitted by applicable Law, waiver by Parent and Purchaser on or
prior to the Closing Date of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of the
Company set forth in
Sections 4.1(a)(i)
, (
b)
and
(c)
shall
be true and correct in all material
56
Table of
Contents
respects
immediately prior to the Effective Time, as if made at and as of such
time. The representations and warranties
of the Company set forth in
Sections 4.2
,
4.3(a)
,
(b)(i)
,
(c)
,
(d)
and
(e)
,
4.20
,
4.21
and
4.22
shall be
true and correct immediately prior to the Effective Time, as if made at and as
of such time (except, with respect to the representations and warranties in
Section
4.2
, for such inaccuracies that are de minimis in amount and except those
representations and warranties that address matters only as of a particular
date, which shall be true and correct in all respects as of that date). All other representations and warranties of
the Company set forth in
Article IV
of this Agreement shall be true and
correct (without giving effect to any materiality or Material Adverse Effect qualification
or exceptions contained therein except in the representations and warranties
contained in
Section 4.6(a)
) immediately prior to the Effective Time, as
if made at and as of such time (except those representations and warranties
that address matters only as of a particular date, which shall be true and
correct in all respects as of that date), except where the failure of such
representations and warranties to be true and correct would not have, or could
not reasonably be expected to result in, a Material Adverse Effect.
(b)
Performance of Covenants
. The Company shall have performed in all
material respects all obligations, and complied in all material respects with
the agreements and covenants, required to be performed by or complied with by
it hereunder.
(c)
Company Material Adverse Effect
. Since the date of this Agreement, there shall
not have been any Material Adverse Effect.
(d)
Officers Certificate
. Parent shall have received a certificate,
signed by the chief executive officer or chief financial officer of the
Company, certifying as to the matters set forth in
Section 8.2(a)
,
Section
8.2(b)
and
Section 8.2(c)
hereof.
(e)
FIRPTA Certificate
. Parent shall have received from the Company a
duly executed certificate meeting the requirements of Treasury Regulation
Sections 1.897-2(h) and 1.1445-2(c)(3).
(f)
Consents
.
The consents, waivers, approvals, authorizations and notices set forth
in
Section 8.2(f)
of the Company Disclosure Schedule (i) shall have been
obtained, (ii) shall be in form and substance reasonably satisfactory to
Parent, (ii) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (iv) shall be in full force and effect.
(g)
No Restrictions
. There shall be pending no Law, Proceeding,
action, suit, litigation or Order by any Governmental Authority that (a) imposes
or seeks to impose any limitation upon the ability of Parent, Purchaser or the
Company or any of their respective Affiliates to acquire or hold, or which
requires any of such parties to dispose of or hold separately, any portion of
their assets or business, (b) imposes limitations on the ability of any such
parties to conduct, own or operate their businesses or assets or (c) imposes or
seeks to impose any limitation upon Parents full rights of ownership of the
Surviving Corporation after the Closing.
8.3
Conditions to Obligation of the
Company to Effect the Merger
. The obligation of the Company to effect the
Merger are also subject to the satisfaction or, to the extent permitted by
applicable Law, waiver by the Company on or prior to the Closing Date of the
following conditions:
57
Table of
Contents
(a)
Representations and Warranties
. The
representations and warranties of Parent and Purchaser set forth in
Article V
of this Agreement shall be true and correct in all respects immediately prior
to the Effective Time, as if made at and as of such time (except those
representations and warranties that address matters only as of a particular
date, which shall be true and correct in all respects as of that date), except
where the failure of such representations and warranties to be so true and
correct would not materially impair the ability of Parent or Purchaser to
consummate the transactions contemplated by this Agreement or perform their
respective obligations hereunder.
(b)
Performance of Covenants
. Parent and
Purchaser shall have performed in all material respects all obligations, and
complied in all material respects with the agreements and covenants, required
to be performed by or complied with by them hereunder.
(c)
Officers Certificate
. The Company shall
have received a certificate, signed by the chief executive officer or chief
financial officer of Parent, certifying as to the matters set forth in
Section
8.3(a)
and
Section 8.3(b)
hereof.
8.4
Frustration of Closing Conditions
. None of Parent, Purchaser
or the Company may rely on the failure of any condition set forth in
Section
8.1
,
Section 8.2
or
Section 8.3
, as the case may be, to be
satisfied if such failure was caused by such partys failure to use its
reasonable best efforts to consummate the transactions contemplated hereby, as
required by and subject to
Section 7.1
.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1
Termination
. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether prior
to or after the approval of this Agreement by the stockholders of the Company,
as follows:
(a) by mutual written consent of Parent and the
Company;
(b) by either Parent or the Company upon written
notice to the other party:
(i) if the Merger has not been consummated on or
before the End Date;
provided
,
however
, that the right to terminate this
Agreement pursuant to this
Section 9.1(b)(i)
shall not be available to
any party whose breach of any representation, warranty, covenant or agreement
set forth in this Agreement has been the cause of, or resulted in, the failure
of the Merger to be consummated on or before the End Date;
(ii) if any Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law or Order making illegal, permanently enjoining or otherwise permanently
prohibiting the consummation of the Merger or the other transactions
contemplated by this Agreement, and such Law or Order shall have become final
and nonappealable;
provided
,
however
, that the right to terminate this
Agreement pursuant to this
Section 9.1(b)(ii)
shall not be available to
any party whose breach of any representation, warranty, covenant or agreement
set forth in this Agreement has been the cause of, or resulted in, the
issuance, promulgation, enforcement or entry of any such Law or Order;
(iii) if this Agreement has been submitted to the
stockholders of the Company for adoption at a duly convened Company
Stockholders Meeting and the Stockholder
58
Table of
Contents
Approval
shall not have been obtained at such meeting (including any adjournment or
postponement thereof); or
(iv) in the event of a breach by the other party of
any representation, warranty, covenant or agreement contained in this Agreement
which breach would permit the terminating party to refuse to consummate the
transactions contemplated hereby pursuant to the standards set forth in
Section
8.2(a)
or
(b)
or
Section 8.3(a)
or
(b)
, as applicable;
provided, that
the party seeking
termination is not then in material breach of any covenant or other agreement
contained in this Agreement and has not willfully breached any of such partys
representations and warranties contained in this Agreement; and
provided further,
that if such breach in the
representations, warranties, covenants or agreements is curable prior to the
End Date through the exercise of reasonable efforts and the breaching party
exercises reasonable efforts to cure such breach, then the non-breaching party
may not terminate this Agreement under this
Section 9.1(b)(iv)
prior to
fifteen (15) days following the receipt of written notice of such breach by the
other party;
provided further,
that the
failure of Parent to deposit (or caused to be deposited) the Merger
Consideration in the Exchange Fund at the Closing prior to the Effective Time
to the extent required hereunder and to the extent all of the conditions set
forth in
Sections 8.1
and
8.2
have been met, shall not be subject
to cure hereunder, and in the event of such breach, the Company may thereupon
terminate this Agreement immediately.
(c) by Parent upon written notice to the
Company: if (i) a Change in Board
Recommendation shall have occurred, (ii) the Company shall have breached or
failed to perform in any material respect any of the covenants and agreements
set forth in
Section 6.2
, (iii) following a written request from Parent,
the Company Board fails to reaffirm (publicly, if so requested by Parent) the
Recommendation within ten (10) Business Days after the date any Acquisition
Proposal (or material modification thereto) is first publicly disclosed by the
Company or the Person making such Acquisition Proposal, (iv) a tender offer or
exchange offer relating to Company Common Stock shall have been commenced by a
Person not Affiliated with Parent and the Company shall not have sent to its
stockholders pursuant to Rule 14e-2 under the Securities Act, within ten (10) Business
Days after such tender offer or exchange offer is first published, sent or
given, a statement reaffirming the Recommendation and recommending that
stockholders reject such tender or exchange offer or (v) the Company or the
Company Board (or any committee thereof) shall publicly announce its intentions
to do any of the actions specified in this
Section 9.1(c)
; or
(d) by the Company upon written notice to
Parent: if prior to the receipt of the
Stockholder Approval at the Company Stockholders Meeting, the Company Board
authorizes the Company, in compliance with Section 6.2(e) in all respects
(except, for the avoidance of doubt, that the meaning of the word material
appearing in clause (i) of Section 6.2(e) shall not be deemed to be modified in
any way)and in material compliance with all other terms of this Agreement, to
enter into an agreement in principle, letter of intent, term sheet, acquisition
agreement, merger agreement, option agreement, joint venture agreement,
partnership agreement or other Contract relating to any Acquisition Proposal
(other than an Acceptable Confidentiality Agreement) in respect of a Superior
Proposal;
provided
that the
Company shall have paid any amounts due pursuant to
Section 9.3(b)(ii)
hereof
in accordance with the terms, and at the times, specified therein.
59
Table of
Contents
9.2
Effect of Termination
. In the event of the termination of
this Agreement as provided in
Section 9.1
, all obligations and agreements
of the parties set forth in this Agreement shall forthwith terminate and be of
no further force or effect, and there shall be no liability on the part of
Parent, Purchaser or the Company hereunder, except as set forth in this
Section
9.2
and
Section 9.3
and
Article X
, which provisions shall
survive such termination;
provided
,
however
, that the foregoing shall
not relieve any party of liability for an intentional material
misrepresentation or intentional material breach of this Agreement or of liability
for willful misconduct or fraud, and the non-breaching party may seek such
remedies, including damages and fees of attorneys, against the other with
respect to any such breach as are provided in this Agreement or as are
otherwise available at Law or in equity.
Any such termination shall not affect the parties obligations under the
NDA.
9.3
Fees and Expenses
.
(a)
General
. Except as otherwise provided in
this
Section 9.3
, each party shall bear all of the fees and expenses
incurred by it in connection with the negotiation and performance of this
Agreement, and no party may recover any such fees and expenses from the other
parties upon any termination of this Agreement;
provided
,
however
,
that Parent shall be responsible for the payment of any filing or similar fees
in connection with the HSR Act or Other Antitrust Laws.
(b)
Payment of Fees by the Company to Parent
.
(i) If Parent terminates this Agreement pursuant to
Sections 9.1(c)(i)
or
(iii)
, or pursuant to
Section 9.1(c)(v)
if the applicable announcement
relates to any of the actions specified in
Sections 9.1(c)(i)
or
(iii)
,
the Company shall immediately pay to Parent the Termination Fee in cash by wire
transfer of same-day available funds; however, the Company shall not be
required to pay the Termination Fee following any termination by Parent under
this provision if the Company had the right to terminate this Agreement
pursuant to
Section 9.1(b)(iv)
at the time of such termination by Parent
and had so notified Parent in writing prior to the time of such termination by
Parent.
(ii) If the Company terminates this Agreement pursuant to
Section 9.1(d)
,
then the Company shall pay to Parent the Termination Fee in cash by wire
transfer of same-day available funds on the date of and as a precondition to such
termination;
(iii) (x) If after the date hereof an Acquisition Proposal shall have
been made (whether or not conditional or subsequently withdrawn), and
thereafter either Parent or the Company terminates this Agreement pursuant to
Sections
9.1(b)(i)
or
(iii)
, or Parent terminates this Agreement pursuant to
Sections
9.1(b)(iv)
,
9.1 (c)(ii)
or
(9.1)(c)(iv)
, or pursuant to
Section
9.1(c)(v)
if the applicable announcement relates to any of the actions
specified in
Sections 9.1(c)(ii)
or
(iv)
, then the Company shall
pay the Expenses upon demand in cash by wire transfer of same-day available
funds; and (y) if concurrently therewith, or at any time within eighteen (18) months
after such termination, the Company enters into a merger agreement, acquisition
agreement or similar Contract (including a letter of intent) with respect to an
Acquisition Proposal, or an Acquisition Proposal is consummated, including for
the avoidance of doubt a Superior Proposal, then the Company shall pay the
Termination Fee in cash by wire transfer of same-day available funds upon the
consummation of such Acquisition Proposal;
60
Table of
Contents
(iv) If (x) either the Company terminates this
Agreement pursuant to Sections 9.1(b)(i) or (iii), or Parent terminates this
Agreement pursuant to Section 9.1(b)(iv), then the Company shall pay to Parent
the Expenses upon demand in cash by wire transfer of same-day available funds;
and (y) concurrently with the termination of this Agreement by the Company
pursuant to Section 9.1(b)(iii) or at any time within eighteen (18) months
after such termination, the Company enters into a merger agreement, acquisition
agreement or similar Contract (including a letter of intent) with respect to an
Acquisition Proposal, or an Acquisition Proposal is consummated, including for
the avoidance of doubt a Superior Proposal, then the Company shall pay the
Termination Fee in cash by wire transfer of same-day available funds upon the
consummation of such Acquisition Proposal.
Notwithstanding
anything in this Agreement to the contrary, the Company shall not be required
to pay to Parent (i) the Expenses on more than one occasion, (ii) a Termination
Fee on more than one occasion, or (iii) an amount greater than the Termination
Fee.
9.4
Amendment
.
At
any time prior to the Effective Time, the parties may amend, modify and
supplement this Agreement in any and all respects, whether before or after any
vote of the stockholders of the Company or Purchaser;
provided
,
however
,
after approval of this Agreement by the stockholders of the Company or
Purchaser, no such amendment shall be made without further approval of such
stockholders if applicable Law requires such further approval of such
stockholders. Any such amendment, modification or supplement shall be valid
only if set forth in a written instrument executed and delivered by a duly
authorized officer on behalf of each of the parties.
9.5
Extension; Waiver
. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso in
Section 9.4
, waive compliance with any of the
agreements or conditions of the other parties contained in this Agreement. The
forbearance in any one or more instances of a party to insist upon performance
of any of the terms, covenants or conditions of this Agreement or to exercise
any right or privilege conferred by this Agreement shall not be construed as a
waiver of any such terms, covenants, conditions, rights or privileges, but the
same shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred. The waiver by a party of any breach of any
of the terms, covenants or conditions of this Agreement or of any right or
privilege conferred by this Agreement shall not be construed as a subsequent
waiver of any such terms, covenants, conditions, rights or privileges or as a
waiver of any other terms, covenants, conditions, rights or privileges. No
waiver shall be effective unless it is in writing and signed by an authorized
representative of the waiving party.
9.6
Procedure for Termination, Amendment,
Extension or Waiver
. A
termination of this Agreement pursuant to
Section 9.1
, an amendment,
modification or supplement of this Agreement pursuant to
Section 9.4
or
an extension or waiver of this Agreement pursuant to
Section 9.5
shall,
in order to be effective, require, in the case of Purchaser or the Company,
action by its Board of Directors or the duly authorized designee of its Board
of Directors.
61
Table of
Contents
ARTICLE X
MISCELLANEOUS
10.1
Non-survival of Representations
and Warranties
. The
respective representations and warranties of the Company, Parent and Purchaser
contained in this Agreement shall expire with, and be terminated and
extinguished upon, the Effective Time and the covenants of the Company, Parent,
Purchaser and the Surviving Corporation that by their terms survive the
Effective Time shall survive the Effective Time for the period specified in
such covenants. This
Section 10.1
shall have no effect upon any other
obligation of the parties hereto, whether to be performed before or after the
consummation of the Merger.
10.2
Notices
.
All notices required or permitted to be given hereunder shall be in writing and
may be delivered by hand, by United States mail, by nationally recognized
overnight private courier (for overnight delivery), or by facsimile. Except as
provided otherwise herein, notices delivered by hand shall be deemed given upon
receipt; notices delivered by United States mail shall be deemed given five (5)
Business Days after being deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested; notices delivered by
nationally recognized overnight private courier shall be deemed given on the
first (1st) Business Day following deposit with the private courier for
overnight delivery; and notices delivered by facsimile shall be deemed given
upon the senders receipt of confirmation of successful transmission. All
notices shall be addressed as follows:
If
to Parent or Purchaser:
Arrow
Electronics, Inc.
50
Marcus Drive
Melville,
NY 11747
Attention: Peter Brown
Facsimile
No.: (631) 391-4379
with
a copy (which shall not constitute notice) to:
Milbank,
Tweed, Hadley & McCloy LLP
One
Chase Manhattan Plaza
New
York, NY 10005
Attention: Howard
Kelberg
David J. Wolfson
Facsimile
No.: (631) 391-4379
If
to the Company:
Nu
Horizons Electronics Corp.
70
Maxess Road
Melville,
New York 11747
Attention:
Martin Kent
Facsimile
No.: 631-396-5060
with
a copy (which shall not constitute notice) to:
Farrell
Fritz, P.C.
1320
RXR Plaza
62
Table of
Contents
Uniondale,
New York 11556
Attention:
Nancy D. Lieberman, Esq.
Facsimile
No.: (516) 336-2778
and/or
to such other respective addresses and/or addressees as may be designated by
notice given in accordance with the provisions of this
Section 10.2
.
10.3
Entire Agreement
. This Agreement and the Voting
Agreements, together with all annexes, appendices, articles, exhibits,
schedules hereto and thereto, constitutes the entire agreement among the
parties hereto and supersedes any prior understandings, agreements or
representations by or among the parties hereto, or any of them, written or
oral, with respect to the subject matter hereof,
provided
,
however
,
that, except as expressly stated otherwise herein, the NDA shall remain in
effect in accordance with its terms.
10.4
No Third-Party Beneficiaries
. Except for
Section 7.7
,
this Agreement is not intended, and shall not be deemed, to confer any rights
or remedies upon any other Person other than the parties hereto and their
respective successors and permitted assigns, to create any agreement of
employment with any person or to otherwise create any third-party beneficiary
hereto.
10.5
Assignment
.
Neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be assigned or
delegated, in whole or in part, by operation of law or otherwise by any of the
parties hereto without the prior written consent of the other parties, and any
such assignment without such prior written consent shall be null and void,
except that Parent and/or Purchaser may assign this Agreement or assign or
delegate any of Parents and/or Purchasers rights, interests or obligations
under this Agreement to any direct or indirect wholly owned subsidiary of
Parent without the consent of the Company,
provided
that Parent and/or Purchaser, as the case may be, shall remain liable for all
of its obligations under this Agreement. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and
permitted assigns.
10.6
Severability
.
Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties hereto agree that the court making such
determination shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified. In the event
such court does not exercise the power granted to it in the prior sentence, the
parties hereto agree to replace such invalid or unenforceable term or provision
with a valid and enforceable term or provision that will achieve, to the extent
possible, the economic, business and other purposes of such invalid or
unenforceable term.
10.7
Counterparts
.
This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. Any signature page hereto delivered by facsimile
machine or by e-mail
63
Table of
Contents
(including
in portable document format (pdf), as a joint photographic experts group (jpg)
file, or otherwise) shall be binding to the same extent as an original
signature page, with regard to any agreement subject to the terms hereof or any
amendment thereto. Any party who delivers such a signature page agrees to later
deliver an original counterpart to any party who requests it.
10.8
Governing Law
.
The formation, construction, and
performance of this Agreement, including the rights and duties of the parties
hereunder, shall be construed, interpreted, governed, applied and enforced in
accordance with the laws of the State of Delaware applicable to agreements
entered into and performed entirely therein by residents thereof, without
regard to any provisions relating to conflicts of laws among different
jurisdictions.
10.9
Submission to Jurisdiction
. Each of the parties hereto
irrevocably agrees that any legal action or proceeding with respect to this
Agreement and the rights and obligations arising hereunder, or for recognition
and enforcement of any judgment in respect of this Agreement and the rights and
obligations arising hereunder brought by the other party(ies) hereto or such partys successors or assigns shall be brought, heard and determined exclusively in the Chancery Court of
the State of Delaware (the
Court
),
provided
that, in the event that subject
matter jurisdiction is unavailable in the Court, then
any such action or proceeding
shall be brought, heard and determined
exclusively in any other state or federal court sitting in Wilmington,
Delaware. Each of the parties
hereto hereby (A) irrevocably
and unconditionally consents to submit
to the exclusive
personal jurisdiction of such courts
for such litigation (but not other litigation); and (B) waives, to the fullest
extent permitted by applicable Law, any objection to the laying of venue of any
such litigation in the Court and agrees not to plead or claim that such
litigation brought therein has been brought in any inconvenient forum
.
Each of the parties
hereto hereby irrevocably waives, and agrees not to assert, by way of motion,
as a defense, counterclaim or otherwise, in any action or proceeding with
respect to this Agreement and the rights and obligations arising hereunder, or
for recognition and enforcement of any judgment in respect of this Agreement
and the rights and obligations arising hereunder (i) any claim that it is not
personally subject to the jurisdiction of the above named courts for any reason
other than the failure to validly serve process, (ii) any claim that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), and (iii) to the fullest extent permitted
by the applicable Law, any claim that this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
10.10
Remedies
.
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly,
the parties hereto may seek an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.11
WAIVER OF JURY TRIAL
. EACH OF PARENT, PURCHASER AND THE
COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN
64
Table of
Contents
ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF PARENT, PURCHASER OR THE COMPANY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
65
Table of
Contents
IN
WITNESS WHEREOF, Parent, Purchaser and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
|
PARENT
|
|
|
|
ARROW
ELECTRONICS, INC.
|
|
|
|
|
By:
|
/s/
Peter S. Brown
|
|
Name:
|
Peter
S. Brown
|
|
Title:
|
Senior
Vice President and General Counsel
|
|
|
|
|
|
|
|
PURCHASER
|
|
|
|
NEPTUNE
ACQUISITION CORPORATION, INC.
|
|
|
|
|
By:
|
/s/
Peter S. Brown
|
|
Name:
|
Peter
S. Brown
|
|
Title:
|
Director
and Vice President
|
|
|
|
|
|
|
|
COMPANY
|
|
|
|
NU
HORIZONS ELECTRONICS CORP.
|
|
|
|
|
By:
|
/s/
Arthur Nadata
|
|
Name:
|
Arthur
Nadata
|
|
Title:
|
Chairman
|
[Signature Page to Agreement and
Plan of Merger]
Table of
Contents
ANNEX B
OPINION
OF HOULIHAN LOKEY CAPITAL, INC. DATED SEPTEMBER 19, 2010
September 19, 2010
Nu Horizon
Electronics Corp.
70 Maxess Rd.
Melville, NY 11747
Dear Members of the
Board of Directors:
We understand that
Arrow Electronics, Inc. (the Acquiror), Neptune Acquisition Corporation, Inc.,
a wholly-owned subsidiary of the Acquiror (the Sub), and Nu Horizon
Electronics Corp. (the Company), propose to enter into the Agreement (defined
below) pursuant to which, among other things, the Sub will be merged with and
into the Company (the Transaction) and that, in connection with the
Transaction, each outstanding share of common stock, par value $0.0066 per share,
of the Company (Company Common Stock) will be converted into the right to
receive $7.00 in cash (the Consideration).
You have requested
that Houlihan Lokey Capital, Inc. (Houlihan Lokey) provide an opinion (the
Opinion) as to whether, as of the date hereof, the Consideration to be
received by the holders of Company Common Stock in the Transaction pursuant to
the Agreement is fair to them from a financial point of view.
In connection with
this Opinion, we have made such reviews, analyses and inquiries as we have
deemed necessary and appropriate under the circumstances. Among other things, we have:
1.
reviewed the
following agreements and documents:
a.
Draft dated September 19, 2010 of an Agreement and
Plan of Merger dated as of September 19, 2010 by and among the Acquiror, the
Sub and the Company (the Agreement); and
b.
Draft of a Voting Agreement dated as of September 19,
2010 by and among the Acquiror and the stockholders named therein (the Voting
Agreement);
2.
reviewed
certain publicly available business and financial information relating to the
Company that we deemed to be relevant;
3.
reviewed
certain information relating to the historical, current and future operations,
financial condition and prospects of the Company made available to us by the
Company, including financial projections prepared by the management of the
Company relating to the Company for the fiscal years ending 2011 through 2015;
4.
spoken with
certain members of the management of the Company regarding the business,
operations, financial condition and prospects of the Company, the Transaction
and related matters;
5.
compared the
financial and operating performance of the Company with that of other public
companies that we deemed to be relevant;
6.
considered the publicly
available financial terms of certain transactions that we deemed to be
relevant;
7.
reviewed the
current and historical market prices and trading volume for Company Common
Stock; and
8.
conducted such
other financial studies, analyses and inquiries and considered such other
information and factors as we deemed appropriate.
We have relied upon
and assumed, without independent verification, the accuracy and completeness of
all data, material and other information furnished, or otherwise made available,
to us, discussed with or reviewed by us, or publicly available, and do not
assume any responsibility with respect to such data, material and other
information.
B-1
Table
of Contents
In addition,
management of the Company has advised us, and we have assumed, that the
financial projections reviewed by us have been reasonably prepared in good
faith on bases reflecting the best currently available estimates and judgments
of such management as to the future financial results and condition of the
Company, and we express no opinion with respect to such projections or the
assumptions on which they are based. We
have relied upon and assumed, without independent verification, that there has
been no change in the business, assets, liabilities, financial condition,
results of operations, cash flows or prospects of the Company since the
respective dates of the most recent financial statements and other information,
financial or otherwise, provided to us that would be material to our analyses
or this Opinion, and that there is no information or any facts that would make
any of the information reviewed by us incomplete or misleading.
We have relied upon
and assumed, without independent verification, that (a) the representations and
warranties of all parties to the agreements identified in item 1 above and all
other related documents and instruments that are referred to therein are true
and correct, (b) each party to all such agreements and other related documents
and instruments will fully and timely perform all of the covenants and
agreements required to be performed by such party, (c) all conditions to the
consummation of the Transaction will be satisfied without waiver thereof, and
(d) the Transaction will be consummated in a timely manner in accordance with
the terms described in all such agreements and other related documents and
instruments, without any amendments or modifications thereto. We also have relied upon and assumed, without
independent verification, that (i) the Transaction will be consummated in a
manner that complies in all respects with all applicable international, federal
and state statutes, rules and regulations, and (ii) all governmental,
regulatory, and other consents and approvals necessary for the consummation of
the Transaction will be obtained and that no delay, limitations, restrictions
or conditions will be imposed or amendments, modifications or waivers made that
would be material to our analyses or this Opinion. In addition, we have relied upon and assumed,
without independent verification, that the final forms of any draft documents
identified above will not differ in any respect from the drafts of said
documents.
Furthermore, in
connection with this Opinion, we have not been requested to make, and have not
made, any physical inspection or independent appraisal or evaluation of any of
the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet
or otherwise) of the Company or any other party, nor were we provided with any
such appraisal. We did not estimate, and
express no opinion regarding, the liquidation value of any entity or business. We have undertaken no independent analysis of
any potential or actual litigation, regulatory action, possible unasserted
claims or other contingent liabilities, to which the Company is or may be a
party or is or may be subject, or of any governmental investigation of any
possible unasserted claims or other contingent liabilities to which the Company
is or may be a party or is or may be subject.
This Opinion is
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to us as of, the date
hereof. We have not undertaken, and are
under no obligation, to update, revise, reaffirm or withdraw this Opinion, or
otherwise comment on or consider events occurring or coming to our attention
after the date hereof.
This Opinion is
furnished for the use and benefit of the Board of Directors (the Board) of
the Company (solely in its capacity as such) in connection with its
consideration of the Transaction and may not be used for any other purpose
without our prior written consent. This
Opinion should not be construed as creating any fiduciary duty on Houlihan
Lokeys part to any party. This Opinion
is not intended to be, and does not constitute, a recommendation to the Board,
any security holder or any other person as to how to act or vote with respect
to any matter relating to the Transaction.
In the ordinary
course of business, certain of our affiliates, as well as investment funds in
which they may have financial interests, may acquire, hold or sell, long or
short positions, or trade or otherwise effect transactions, in debt, equity,
and other securities and financial instruments (including loans and other
obligations) of, or investments in, the Company, the Acquiror, or any other
party that may be involved in the Transaction and their respective affiliates
or any currency or commodity that may be involved in the Transaction.
Houlihan Lokey and
certain of its affiliates may provide investment banking, financial advisory
and other financial services to the Company, the Acquiror, other participants in
the Transaction or certain of their respective affiliates in the future, for
which Houlihan Lokey and such affiliates may receive compensation.
B-2
Table of Contents
Houlihan Lokey has
also acted as financial advisor to the Company in connection with, and has
participated in certain of the negotiations leading to, the Transaction and
will receive a fee for such services, a substantial portion of which is
contingent upon the consummation of the Transaction. In addition, we will receive a fee for
rendering this Opinion, which is not contingent upon the successful completion
of the Transaction. The Company has
agreed to reimburse certain of our expenses and to indemnify us and certain
related parties for certain potential liabilities arising out of our
engagement.
We have not been
requested to opine as to, and this Opinion does not express an opinion as to or
otherwise address, among other things:
(i) the underlying business decision of the Company, the Acquiror, their
respective security holders or any other party to proceed with or effect the
Transaction, (ii) the terms of any arrangements, understandings, agreements or
documents related to, or the form, structure or any other portion or aspect of,
the Transaction or otherwise (other than the Consideration to the extent
expressly specified herein), (iii) the fairness of any portion or aspect of the
Transaction to the holders of any class of securities, creditors or other
constituencies of the Company, the Acquiror, or to any other party, except if
and only to the extent expressly set forth in the last sentence of this
Opinion, (iv) the relative merits of the Transaction as compared to any
alternative business strategies that might exist for the Company, the Acquiror
or any other party or the effect of any other transaction in which the Company,
the Acquiror or any other party might engage, (v) the fairness of any portion
or aspect of the Transaction to any one class or group of the Companys, the
Acquirors or any other partys security holders vis-à-vis any other class or
group of the Companys, the Acquirors or such other partys security holders
(including, without limitation, the allocation of any consideration amongst or
within such classes or groups of security holders), (vi) whether or not the
Company, the Acquiror, their respective security holders or any other party is
receiving or paying reasonably equivalent value in the Transaction, (vii) the
solvency, creditworthiness or fair value of the Company, the Acquiror or any
other participant in the Transaction, or any of their respective assets, under
any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance
or similar matters, or (viii) the fairness, financial or otherwise, of the
amount, nature or any other aspect of any compensation to or consideration
payable to or received by any officers, directors or employees of any party to
the Transaction, any class of such persons or any other party, relative to the
Consideration or otherwise. Furthermore,
no opinion, counsel or interpretation is intended in matters that require
legal, regulatory, accounting, insurance, tax or other similar professional
advice. It is assumed that such
opinions, counsel or interpretations have been or will be obtained from the
appropriate professional sources.
Furthermore, we have relied, with your consent, on the assessments by
the Company and its advisors, as to all legal, regulatory, accounting,
insurance and tax matters with respect to the Company, the Acquiror and the
Transaction. The issuance of this
Opinion was approved by a committee authorized to approve opinions of this
nature.
Based upon and
subject to the foregoing, and in reliance thereon, it is our opinion that, as
of the date hereof, the Consideration to be received by the holders of Company
Common Stock in the Transaction pursuant to the Agreement is fair to them from
a financial point of view.
Very truly yours,
/s/
Houlihan Lokey
|
|
HOULIHAN LOKEY CAPITAL, INC.
|
|
B-3
Table of
Contents
ANNEX C
GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
§ 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of
this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to § 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholders
shares of stock under the circumstances described in subsections (b) and (c) of
this section. As used in this section,
the word stockholder means a holder of record of stock in a corporation; the
words stock and share mean and include what is ordinarily meant by those
words; and the words depository receipt mean a receipt or other instrument
issued by a depository representing an interest in 1 or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available
for the shares of any class or series of stock of a constituent corporation in
a merger or consolidation to be effected pursuant to § 251 (other than a merger
effected pursuant to § 251(g) of this title), § 252, § 254, § 255, § 256, §
257, § 258, § 263 or § 264 of this title:
(1)
Provided, however, that no appraisal rights
under this section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the record
date fixed to determine the stockholders entitled to receive notice of the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or (ii) held of record
by more than 2,000 holders; and further provided that no appraisal rights shall
be available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in § 251(f) of this
title.
(2)
Notwithstanding paragraph (1) of this
subsection, appraisal rights under this section shall be available for the shares
of any class or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or consolidation
pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263 and 264 of this title to
accept for such stock anything except:
a.
Shares of stock of the corporation surviving
or resulting from such merger or consolidation, or depository receipts in
respect thereof;
b.
Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective date of
the merger or consolidation will be either listed on a national securities
exchange or held of record by more than 2,000 holders;
c.
Cash in lieu of fractional shares or
fractional depository receipts described in the foregoing subparagraphs a. and
b. of this paragraph; or
d.
Any combination of the shares of stock,
depository receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a
subsidiary Delaware corporation party to a merger effected under § 253 or § 267
of this title is not owned by the parent immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its
certificate of incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a result of an
amendment to its certificate of incorporation, any merger or consolidation in
which the corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected
as follows:
C-1
Table of
Contents
(1)
If a proposed merger or consolidation for
which appraisal rights are provided under this section is to be submitted for
approval at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was such on the
record date for notice of such meeting (or such members who received notice in
accordance with § 255(c) of this title) with respect to shares for which
appraisal rights are available pursuant to subsection (b) or (c) of this
section that appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section and, if 1 of the constituent corporations is a nonstock corporation, a
copy of § 114 of this title. Each
stockholder electing to demand the appraisal of such stockholders shares shall
deliver to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholders
shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
stockholders shares. A proxy or vote
against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied with
this subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2)
If the merger or consolidation was approved
pursuant to § 228, § 253, or § 267 of this title, then either a constituent
corporation before the effective date of the merger or consolidation or the
surviving or resulting corporation within 10 days thereafter shall notify each
of the holders of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares of
such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section and, if 1 of the constituent
corporations is a nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in writing
from the surviving or resulting corporation the appraisal of such holders
shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such holders
shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either (i) each
such constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any class
or series of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided, however, that
if such second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holders
shares in accordance with this subsection.
An affidavit of the secretary or assistant secretary or of the transfer
agent of the corporation that is required to give either notice that such
notice has been given shall, in the absence of fraud, be prima facie evidence
of the facts stated therein. For purposes
of determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be not
more than 10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or consolidation,
the record date shall be such effective date.
If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective
date of the merger or consolidation, the surviving or resulting corporation or
any stockholder who has complied with subsections (a) and (d) of this section
hereof and who is otherwise entitled to appraisal rights, may commence an
appraisal proceeding by filing a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time
within 60 days after the effective date of the merger or consolidation, any
stockholder who has not commenced an appraisal proceeding or joined that
proceeding as a named party shall have the right to withdraw such stockholders
demand for appraisal and to accept the terms offered upon the merger or
consolidation.
C-2
Table
of Contents
Within 120 days
after the effective date of the merger or consolidation, any stockholder who
has complied with the requirements of subsections (a) and (d) of this section
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) of this section hereof, whichever is later. Notwithstanding subsection (a) of this
section, a person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such person may, in such
persons own name, file a petition or request from the corporation the
statement described in this subsection.
(f) Upon the filing of any such petition
by a stockholder, service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after such service file in
the office of the Register in Chancery in which the petition was filed a duly
verified list containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to the value of
their shares have not been reached by the surviving or resulting
corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list.
The Register in Chancery, if so ordered by the Court, shall give notice
of the time and place fixed for the hearing of such petition by registered or
certified mail to the surviving or resulting corporation and to the
stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable.
The forms of the notices by mail and by publication shall be approved by
the Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the
Court shall determine the stockholders who have complied with this section and
who have become entitled to appraisal rights.
The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the
stockholders entitled to an appraisal, the appraisal proceeding shall be
conducted in accordance with the rules of the Court of Chancery, including any
rules specifically governing appraisal proceedings. Through such proceeding the Court shall
determine the fair value of the shares exclusive of any element of value
arising from the accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount determined to be the
fair value. In determining such fair
value, the Court shall take into account all relevant factors. Unless the Court in its discretion determines
otherwise for good cause shown, interest from the effective date of the merger
through the date of payment of the judgment shall be compounded quarterly and
shall accrue at 5% over the Federal Reserve discount rate (including any
surcharge) as established from time to time during the period between the
effective date of the merger and the date of payment of the judgment. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, proceed to trial upon the
appraisal prior to the final determination of the stockholders entitled to an
appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such stockholders
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment
of the fair value of the shares, together with interest, if any, by the
surviving or resulting corporation to the stockholders entitled thereto. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Courts decree may be enforced as other
decrees in the Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be
determined by the Court and taxed upon the parties as the Court deems equitable
in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without
C-3
Table
of Contents
limitation,
reasonable attorneys fees and the fees and expenses of experts, to be charged
pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of
the merger or consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be entitled to vote such
stock for any purpose or to receive payment of dividends or other distributions
on the stock (except dividends or other distributions payable to stockholders
of record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal shall
be filed within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a written
withdrawal of such stockholders demand for an appraisal and an acceptance of
the merger or consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just; provided, however that this provision shall not affect the right of any
stockholder who has not commenced an appraisal proceeding or joined that
proceeding as a named party to withdraw such stockholders demand for appraisal
and to accept the terms offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set forth in
subsection (e) of this section.
(l) The shares of the surviving or
resulting corporation to which the shares of such objecting stockholders would
have been converted had they assented to the merger or consolidation shall have
the status of authorized and unissued shares of the surviving or resulting
corporation.
C-4
NU Horizons Electronics (NASDAQ:NUHC)
Historical Stock Chart
From Aug 2024 to Sep 2024
NU Horizons Electronics (NASDAQ:NUHC)
Historical Stock Chart
From Sep 2023 to Sep 2024