AXYS Axsys Technologies (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A
(RULE 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

 

Filed by the Registrant  þ

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

o   Preliminary Proxy Statement

o   Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ   Definitive Proxy Statement

o   Definitive Additional Materials

o   Soliciting Material Pursuant to § 240.14a-12

 

AXSYS TECHNOLOGIES, INC.

(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):

 

 

common stock, par value $0.01 per share

 

 

11,622,629 outstanding shares of common stock (includes restricted shares) and options to purchase 294,322 shares of common stock

 

 

 

$54.00 per outstanding share of common stock plus $11,018,976 in the aggregate to cash out options to purchase shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

August 4, 2009

 

Dear Fellow Stockholders:

 

You are cordially invited to attend a special meeting of stockholders of Axsys Technologies, Inc., which is referred to as Axsys, to be held on September 1, 2009, at 10:00 a.m. (Eastern Time), at Hartford Marriott Rocky Hill at Corporate Ridge, 100 Capital Boulevard, Rocky Hill, Connecticut, unless postponed to a later date.

 

At the special meeting, we will ask you to adopt a merger agreement among Axsys, General Dynamics Advanced Information Systems, Inc., which is referred to as GD AIS, and Vision Merger Sub, Inc., an indirect, wholly owned subsidiary of General Dynamics Corporation, which is referred to as General Dynamics and which is GD AIS’s ultimate parent. As a result of the merger, Axsys will become an indirect, wholly owned subsidiary of General Dynamics and each of your shares of Axsys common stock will be converted into the right to receive $54.00 in cash, without interest.

 

The proxy statement accompanying this letter is furnished in connection with the solicitation by the Board of Directors of Axsys of proxies to be used at the special meeting.

 

The Board of Directors of Axsys, which is referred to as the Board, has carefully reviewed and considered the terms and conditions of the proposed merger. Based on its review, the Board has determined that the merger is advisable to and in the best interests of Axsys and its stockholders. Accordingly, the Board has unanimously approved the merger agreement and unanimously recommends that you vote FOR the adoption of the merger agreement.

 

Your vote is very important. The merger cannot be completed unless holders of at least a majority of shares of Axsys common stock outstanding and entitled to vote at the special meeting vote to adopt the merger agreement.

 

Only holders of record of Axsys common stock at the close of business on July 30, 2009, will be entitled to vote at the special meeting. Please complete, sign, date and return your proxy. If you hold your shares in “street name,” you should instruct your broker how to vote in accordance with your voting instruction form. Completing a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote. Failure to submit a signed proxy or to vote in person at the special meeting will have the same effect as a vote against the adoption of the merger agreement.

 

The proxy statement accompanying this letter explains the proposed merger and the merger agreement and provides specific information concerning the special meeting. Please read the entire proxy statement carefully.

 

Sincerely,

 

Stephen W. Bershad

Chairman of the Board of Directors and

Chief Executive Officer

 

This Proxy Statement is dated August 4, 2009, and is first being mailed to Axsys stockholders on or about August 4, 2009

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 1, 2009

 

 

To Stockholders of Axsys Technologies, Inc.

 

A special meeting of stockholders of Axsys Technologies, Inc., which is referred to as Axsys, will be held at 10:00 a.m. (Eastern Time), on September 1, 2009, at Hartford Marriott Hill at Corporate Ridge, 100 Capital Boulevard, Rocky Hill, Connecticut, unless postponed to a later date. The special meeting is being held to consider and vote upon the following proposals:

 

 

Only holders of record of shares of Axsys common stock at the close of business on July 30, 2009, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements thereof. Each share of common stock is entitled to vote on all matters that properly come before the special meeting and is entitled to one vote on each matter properly brought before the special meeting.

 

The Board of Directors of Axsys unanimously recommends that Axsys stockholders vote FOR the adoption of the merger agreement. Axsys cannot complete the merger unless the merger agreement is adopted by Axsys stockholders. Adoption of the merger agreement requires the affirmative vote of the holders of at least a majority of shares of Axsys common stock outstanding and entitled to vote at the special meeting. Stephen W. Bershad, who is our Chairman of the Board and Chief Executive Officer and who owns in the aggregate 1,666,753, or approximately 14.3%, of the shares of our common stock entitled to vote at the special meeting, has entered into a voting agreement under which he has agreed to vote or cause to be voted all of his shares of Axsys common stock FOR the adoption of the merger agreement.

 

The attached proxy statement describes the proposed merger and the actions to be taken in connection with the merger and provides additional information about the parties involved.

 

Whether or not you plan to attend the special meeting, please complete, sign and date the enclosed proxy and return it promptly in the enclosed postage-paid return envelope, or give your proxy by telephone or over the Internet by following the instructions on the proxy card. You may revoke the proxy at any time prior to its exercise at the special meeting in the manner described in the attached proxy statement. Completing a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote. Your vote at the special meeting will supersede any previously submitted proxy.

 

If you fail to return your proxy or to attend the special meeting in person, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote AGAINST the adoption of the merger agreement.

 

Please do not send any stock certificates at this time.

 

By order of the Board of Directors,

 

Cynthia McNickle
Secretary

 

August 4, 2009

 

TABLE OF CONTENTS

 

 

ANNEXES

 

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. You should carefully read this entire proxy statement, including the attached annexes, and the other documents to which we have referred you. We have included page references parenthetically to direct you to a more complete description of the topics presented in this summary.

 

Axsys Technologies, Inc., which is referred to as Axsys, we, us or the Company, designs and manufactures precision optical solutions for defense, aerospace, homeland security, and commercial applications. Our principal executive offices are located at 175 Capital Boulevard, Suite 103, Rocky Hill, Connecticut 06067, and our telephone number is (860) 257-0200.

 

General Dynamics Advanced Information Systems, Inc., which is referred to as GD AIS, is an indirect, wholly owned subsidiary of General Dynamics Corporation. GD AIS designs, develops, manufactures, integrates, operates and maintains mission systems for defense, space, intelligence, surveillance, reconnaissance, homeland security and homeland defense customers. Headquartered in Fairfax, Va., GD AIS specializes in ground systems; imagery processing; mission payloads; space vehicles; maritime subsurface, surface and airborne mission systems; and tasking, collection, processing, exploitation and dissemination programs for national intelligence. GD AIS’ principal executive offices are located c/o General Dynamics Corporation at 2941 Fairview Park Drive, Suite 100, Falls Church, Virginia 22042, and its telephone number is (703) 876-3000.

 

Vision Merger Sub, Inc., a Delaware corporation, which is referred to as Merger Sub, is an indirect, wholly owned subsidiary of General Dynamics Corporation formed solely for the purpose of effecting the merger with Axsys. Merger Sub has not conducted any unrelated activities since its organization. Merger Sub’s principal executive offices are located c/o General Dynamics Corporation at 2941 Fairview Park Drive, Suite 100, Falls Church, Virginia 22042, and its telephone number is (703) 876-3000.

 

General Dynamics Corporation, which is referred to as General Dynamics, offers a broad portfolio of products and services in business aviation; combat vehicles, weapons systems, and munitions; shipbuilding design and construction; and information systems, technologies, and services. General Dynamics serves the U.S. government as well as international defense and commercial customers worldwide. General Dynamics’ principal executive offices are located at 2941 Fairview Park Drive, Suite 100, Falls Church, Virginia 22042, and its telephone number is (703) 876-3000.

 

While Axsys negotiated the merger agreement with General Dynamics, General Dynamics and Axsys agreed to have GD AIS, an indirect, wholly owned subsidiary of General Dynamics, enter into the Merger Agreement for organizational reasons, with General Dynamics providing a guaranty of the obligations of GD AIS and Merger Sub. See “The Merger — Background of the Merger” on page 16. Upon completion of the merger, Axsys will become an indirect, wholly owned subsidiary of General Dynamics.

 

We are furnishing this proxy statement to our stockholders as part of the solicitation of proxies by our Board for use at the special meeting.

 

The special meeting of stockholders of Axsys will be held at 10:00 a.m. (Eastern Time), on September 1, 2009, at Hartford Marriott Rocky Hill at Corporate Ridge, 100 Capital Boulevard, Rocky Hill, Connecticut, unless postponed to a later date.

 

You will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, which is referred to as the merger agreement. The merger agreement provides that Merger Sub will merge with and into Axsys, and Axsys will become an indirect, wholly owned subsidiary of General Dynamics. Each share of Axsys common stock that you own immediately prior to the effective time of the merger will be converted into the right to receive $54.00 in cash, without interest.

 

You may also be asked to vote to approve adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

You are entitled to vote at the special meeting if you owned shares of Axsys common stock as of the close of business on July 30, 2009, the record date for the special meeting. As of the record date, there were 11,624,837 shares of Axsys common stock outstanding. You will have one vote on each matter submitted to a vote at the special meeting for each share of Axsys common stock that you owned as of the close of business on the record date.

 

Stockholders can vote or submit a proxy for their shares of Axsys common stock on the matters presented at the special meeting in four ways. See and read carefully “Proposals to be Considered at the Special Meeting — Voting — Voting and Proxies” beginning on page 13.

 

(a)  By Proxy.   You can cause your shares to be voted by signing, dating and returning the enclosed proxy card. If you do this, the proxies will vote your shares of Axsys common stock in the manner you indicate. All properly executed proxies that we receive prior to the vote at the special meeting, and that are not revoked, will be voted in accordance with the instructions indicated on the proxies. If you do not indicate instructions on the proxy card, your shares of Axsys common stock will be voted FOR the adoption of the merger agreement.

 

(b)  By Telephone.   After reading the proxy materials and with your proxy and voting instruction form in front of you, you may call the toll-free number 1-866-540-5760 using a touch-tone telephone. You will be prompted to enter your control number from your proxy and voting instruction form. This number will identify you and Axsys. Then you can follow the simple instructions that will be given to you to record your proxy.

 

(c)  Over the Internet.   After reading the proxy materials and with your proxy and voting instruction form in front of you, you may use your computer to access the Web site http://www.proxyvoting.com/axys . You will be prompted to enter your control number from your proxy and voting instruction form. This number will identify you and Axsys. Then you can follow the simple instructions that will be given to you to record your proxy.

 

(d)  In Person.   You may attend the special meeting and cast your vote in person.

 

The Internet and telephone proxy submission procedures have been set up for your convenience and have been designed to authenticate your identity, allow you to give voting instructions and confirm that those instructions have been recorded properly.

 

If you are a participant in the Axsys 401(k) Retirement Plan and hold shares of Axsys common stock within the 401(k) plan, you will receive a proxy card that covers shares credited to your plan account. That proxy card serves as a voting instruction for the trustee of the plan in which you are a participant. Participants who wish to vote via the Internet may submit their voting instructions at http://www.proxyvoting.com/axys-esop . If you do not return that proxy card to the plan trustee, or do not provide voting instructions via the Internet, the trustee will not vote the Axsys shares credited to your account.

 

The trustee will vote unallocated shares of Axsys common stock held in the 401(k) plan in direct proportion to the voting of allocated shares in the plan for which voting instructions have been received unless otherwise required by applicable law.

 

Brokers or banks holding shares of Axsys common stock in “street name” may vote your shares of Axsys common stock on the adoption of the merger agreement and adjournments of the special meeting, if necessary, only if you provide instructions on how to vote. Brokers or banks will provide you with directions on how to instruct the broker or bank to vote your shares of Axsys common stock, and you should carefully follow these instructions.

 

You may revoke your proxy at any time prior to the vote at the special meeting by delivering to Axsys’ Corporate Secretary a signed notice of revocation or submitting a later-dated, signed proxy (either manually, telephonically or over the Internet) following the instructions provided on the proxy card. You also may revoke your proxy by attending the special meeting and voting in person. Attendance at the special meeting will not, in and of itself, result in the revocation of a proxy or cause your shares of Axsys common stock to be voted.

 

A quorum of stockholders is necessary to hold a valid meeting. Under our Amended and Restated By-Laws, the holders of a majority of the outstanding shares of Axsys common stock, present in person or by proxy, constitute a quorum.

 

If a quorum is not present, the special meeting will be postponed until the holders of the number of votes required to constitute a quorum attend.

 

If you submit a properly executed proxy card, even if you abstain from voting, your shares of Axsys common stock will be counted for purposes of determining whether a quorum is present at the special meeting. If additional votes must be solicited to adopt the merger agreement, it is expected that the special meeting will be postponed or adjourned to solicit additional proxies.

 

Adoption of the merger agreement requires the affirmative vote of the holders of at least a majority of shares of Axsys common stock outstanding and entitled to vote at the special meeting. If a quorum is present, a proposal to approve an adjournment of the special meeting requires the affirmative vote of a majority of the votes cast by the stockholders entitled to vote, present in person or by proxy at the special meeting. As of the record date, there were 11,624,837 shares of Axsys common stock outstanding. Mr. Bershad, who owns in the aggregate 1,666,753, or approximately 14.3%, of the shares of our common stock entitled to vote at the special meeting, has entered into a voting agreement under which he has agreed to vote or cause to be voted all of his shares FOR the adoption of the merger agreement.

 

Abstentions and shares not in attendance and not voted at the special meeting will have the same effect as a vote AGAINST the proposal to adopt the merger agreement and will have no effect on the proposal to adjourn the special meeting. Because brokers or banks holding shares of Axsys common stock in “street name” may vote your shares of Axsys common stock on the adoption of the merger agreement and adjournments of the special meeting, if necessary, only if you provide instructions on how to vote, your failure to provide instructions will result in your shares not being present at the meeting and not being voted on either proposal. Consequently, there cannot be any broker non-votes occurring in connection with either proposal at the special meeting. It is very important that ALL

of our stockholders vote their shares of Axsys common stock, so please promptly complete and return the enclosed proxy card.

 

Our directors, officers and other employees may solicit proxies in person, by telephone, electronically, by mail or other means, but they will not be specifically compensated for these services. Brokers, banks and other persons will be reimbursed by us for expenses they incur in forwarding proxy materials to obtain voting instructions from beneficial stockholders. We have also hired Georgeson, Inc., which is referred to as Georgeson, to assist in the solicitation of proxies. The total cost of solicitation of proxies will be borne by us. For a description of the costs and expenses to us of soliciting proxies, see “Proposals to be Considered at the Special Meeting — Solicitation Costs” on page 15.

 

Stockholders should not send in their stock certificates with their proxies.   A letter of transmittal with instructions for the surrender of certificates representing shares of Axsys common stock will be mailed to stockholders if the merger is completed.

 

The Board has found and declared that the merger agreement and the merger are advisable to and in the best interests of the Company and its stockholders, has unanimously approved the merger agreement and unanimously recommends that our stockholders vote FOR the adoption of the merger agreement. The Board considered many factors in reaching its conclusion, including, without limitation, the value that stockholders would realize in the merger compared to the value likely to be realized by stockholders in the event the Company remained independent, the current and historical market prices of Axsys shares relative to the $54.00 per share merger consideration, and the fact that the merger consideration consists entirely of cash. See and read carefully “The Merger — Axsys’ Reasons for the Merger” beginning on page 19.

 

The Board also unanimously recommends that you vote FOR any adjournment of the special meeting, if necessary, to permit solicitation of further proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

The rights and obligations of the parties to the merger agreement are governed by the specific terms and conditions of the merger agreement and not by any summary or other information in this proxy statement. Therefore, the information in this proxy statement regarding the merger agreement and the merger is qualified in its entirety by reference to the merger agreement, a copy of which is attached as Annex A to this proxy statement. We encourage you to read the merger agreement carefully and in its entirety because it is the principal legal agreement that governs the merger.

 

At the effective time of the merger, Merger Sub, an indirect, wholly owned subsidiary of General Dynamics, will be merged with and into Axsys. Axsys will continue as the surviving corporation of the merger and become an indirect, wholly owned subsidiary of General Dynamics.

 

At the effective time of the merger, each outstanding share of Axsys common stock, including restricted stock, which will become fully vested, will be converted into the right to receive $54.00 in cash, without interest, less any applicable withholding tax. After the effective time of the merger, shares of Axsys common stock will no longer be publicly traded.

 

Pursuant to the merger agreement, at the effective time of the merger, each option outstanding immediately prior to the effective time of the merger will become fully vested and will be converted into the right to receive the excess, if any, of $54.00 (without interest) over the exercise price per share of the stock option multiplied by the number of shares of Axsys common stock subject to the stock option, less any applicable withholding tax. No consideration will be payable in respect of any options with an exercise price per share equal to or in excess of $54.00 as of immediately prior to the effective time of the merger, and all such options will be cancelled automatically at the effective time of the merger.

 

Jefferies & Company, Inc., which is referred to as Jefferies, has delivered its opinion to the Board to the effect that, as of June 3, 2009 and based upon and subject to the various considerations and assumptions set forth therein, the merger consideration to be received by the holders of shares of Axsys common stock pursuant to the merger agreement was fair, from a financial point of view, to those holders. The full text of the written opinion of Jefferies, dated June 3, 2009, is attached to this proxy statement as Annex C . We urge you to read that opinion carefully and in its entirety. Jefferies’ opinion was provided to the Board in connection with the Board’s consideration of the merger and addresses only the fairness, from a financial point of view and as of the date of Jefferies’ opinion, of the merger consideration to be received by the holders of Axsys common stock pursuant to the merger agreement and does not address any other aspect of the merger. Jefferies’ opinion does not constitute a recommendation as to how any holder of Axsys common stock should vote on the merger or any matter related thereto. Axsys has agreed to pay Jefferies a fee for its services, based upon a percentage of the transaction value, in the amount of approximately $7 million, of which $1.5 million was earned upon delivery of Jefferies’ opinion, and the balance of which is payable contingent upon consummation of the merger, as described in greater detail on page 21.

 

Consummation of the merger is subject to customary conditions, including, among others, (i) adoption of the merger agreement by Axsys’ stockholders, (ii) expiration or termination of the applicable waiting period of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to as the HSR Act, (iii) absence of any order or injunction prohibiting the consummation of the merger, (iv) the accuracy of representations and warranties with respect to Axsys’ business and compliance by Axsys with its covenants contained in the merger agreement and (v) stockholders owning no more than 12% of Axsys outstanding common stock dissenting from the merger. Consummation of the merger is not subject to any financing conditions, GD AIS has represented to us that it has sufficient financial resources to consummate the transactions and General Dynamics has guaranteed GD AIS’s performance under the merger agreement. See and read carefully “The Merger Agreement — Conditions of the Merger” beginning on page 50. We can offer no assurance that all of the conditions will be satisfied or waived or that the merger will occur.

 

The merger agreement may be terminated by the mutual written consent of us and GD AIS or by either us or GD AIS, under certain specified circumstances. Upon termination of the merger agreement under certain specified circumstances, we may be required to pay a termination fee of $23.6 million to GD AIS and/or may be required to reimburse GD AIS and General Dynamics for certain expenses incurred in connection with the merger of up to $2.0 million. See and read carefully “The Merger Agreement — Termination” beginning on page 51, “The Merger Agreement — Termination Fees” beginning on page 52 and “The Merger Agreement — Effect of Termination” beginning on page 52.

 

The merger agreement restricts our ability to solicit or engage in discussions or negotiations with third parties regarding proposals to acquire a significant interest in us. However, subject to specified conditions, we may furnish information to, or enter into discussions or negotiations with a third party in response to an unsolicited acquisition proposal from such third party if our Board determines in good faith (after consultation with outside legal counsel and its financial advisor) such actions would reasonably be expected to result in such acquisition proposal becoming a superior proposal and the Board determines in good faith that the failure to take such actions would violate its fiduciary duties. See and read carefully “The Merger Agreement — Covenants and Agreements — No Solicitation” beginning on page 46.

 

The merger is subject to review under the HSR Act. Under the provisions of the HSR Act, the merger cannot be completed until the companies have made required notifications, given certain information and materials to the U.S. Federal Trade Commission, which is referred to as the FTC, and to the antitrust division of the U.S. Department of Justice, which is referred to as the Antitrust Division, and a required 30-day waiting period has expired or been terminated. We and GD AIS initially filed the notifications required under the HSR Act with the FTC and the Antitrust Division on June 8, 2009. On July 8, 2009, GD AIS withdrew its original notifications and on July 9, 2009, re-filed them with the FTC and Antitrust Division in order to provide more time for review. The 30-day waiting period, which cannot expire on a Saturday, Sunday or a U.S. federal holiday, will expire at 11:59 p.m. Eastern Time on August 10, 2009, unless the FTC or the Antitrust Division earlier terminates the waiting period or makes a request for more information related to the merger. See and read carefully “The Merger — Governmental and Regulatory Matters” beginning on page 31.

 

In connection with the merger agreement, Mr. Bershad, who beneficially owns 1,666,753, or approximately 14.3%, of the shares of our common stock entitled to vote at the special meeting, entered into a voting agreement with GD AIS and Merger Sub and agreed to vote or cause to be voted all of his shares of Axsys common stock at the time of the special meeting for the adoption of the merger agreement at the special meeting. The information in this proxy statement regarding the voting agreement is qualified in its entirety by reference to the voting agreement, a copy of which is attached as Annex B to this proxy statement.

 

Subject to the exceptions discussed below in “The Merger — Certain United States Federal Income Tax Consequences,” a holder of shares of Axsys common stock will recognize taxable gain or loss for United States federal income tax purposes equal to the difference between (1) the amount of cash such holder receives and (2) the adjusted tax basis of such holder’s shares of Axsys common stock exchanged therefor.

 

You should read “The Merger — Certain United States Federal Income Tax Consequences” beginning on page 32 for a more complete discussion of certain United States federal income tax consequences of the merger. Tax matters can be complicated, and the tax consequences of the merger to you will depend on your particular circumstances. We urge you to consult your own tax advisor to fully understand the tax consequences of the merger to you (including the application and effect of any state, local, or foreign income and other tax laws).

 

When considering the recommendation of the Board with respect to the adoption of the merger agreement, you should be aware that some of our directors and executive officers have interests in the merger that may be different from, or in addition to, their interests as stockholders and the interests of stockholders generally. The Board was aware of these interests during its deliberations on the merits of the merger and in deciding to recommend that you vote for the adoption of the merger agreement at the special meeting. For a more detailed discussion of these

interests, see “The Merger — Interests of Axsys Directors and Executive Officers in the Merger” beginning on page 28.

 

Holders of shares of Axsys common stock who do not wish to accept the consideration payable pursuant to the merger agreement may seek, under Section 262 of the General Corporation Law of the State of Delaware, which is referred to as the DGCL, judicial appraisal of the fair value of their shares by the Delaware Court of Chancery. This value could be more than, less than, or the same as the merger consideration for shares of Axsys common stock. Failure to strictly comply with all procedures required by Section 262 of the DGCL will result in a loss of the right to appraisal, in which event, each share held by the Axsys stockholder will be deemed to have been converted into the right to receive the $54.00 merger consideration, payable in cash (without interest) pursuant to the merger agreement.

 

Merely voting against the adoption of the merger agreement will not preserve your right to appraisal under the DGCL. Also, because a submitted proxy not marked “against” or “abstain” will be voted “for” the proposal to adopt the merger agreement, the submission of a proxy not marked “against” or “abstain” will result in the waiver of appraisal rights. If you hold shares in the name of a broker or other nominee, you must cause your nominee to take the steps necessary to enable you to demand appraisal for your shares.

 

Annex D to this proxy statement contains the full text of Section 262 of the DGCL, which relates to appraisal rights. We encourage you to read these provisions carefully and in their entirety.

 

 

 

 

 

 

 

 

 

 

 

Certain statements and assumptions in this proxy statement are based on “forward-looking” information and involve risks and uncertainties. We believe that such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include those that may predict, forecast, indicate or imply future results, performance or achievements. These statements are subject to numerous risks, assumptions and uncertainties that could cause actual results, performance or achievements to differ materially from those suggested by our forward-looking statements. Although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements could be incorrect. Such risks, assumptions and uncertainties include the ability to obtain required regulatory approvals for the transaction; the failure of Axsys stockholders to adopt the merger agreement; the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; the outcome of any legal proceeding that may be instituted against us and others following the announcement of the merger agreement; the failure to close for any other reason; the amount of the costs, fees, expenses and charges related to the merger; the effect of the announcement of the merger on our customer relationships, operating results and business generally, including the ability to retain key employees; and disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers. Additional important factors, which could cause actual results to differ materially, include without limitation: changes in the U.S. federal government spending priorities including, without limitation, as a result of the current economic downturn; the Company’s ability to compete in the industries in which it operates, including the introduction of competing products or technologies by other companies and/or pricing pressures from competitors and/or customers; the potential for the Company’s backlog to be reduced or cancelled; the Company’s ability to implement its acquisition strategy and integrate its acquired companies successfully; the Company’s ability to manage costs under the Company’s fixed-price contracts effectively; and changes in general economic and business conditions. These statements reflect the Company’s current beliefs and are based upon information currently available to the Company. We do not undertake any obligation to update or release any revisions to any forward- looking statements or to report any events or circumstances after the date of this proxy statement or to reflect the occurrence of unanticipated events, except as required by law.

 

Words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “hopes,” “targets” or similar expressions are intended to identify forward-looking statements, which speak only as to the date of this proxy statement. It is not possible to predict all risk factors or to estimate the impact of these factors. Accordingly, stockholders should not place undue reliance on our forward-looking statements.

 

We are furnishing this proxy statement to our stockholders as part of the solicitation of the enclosed proxy card by our Board for use at the special meeting in connection with the proposed merger and the other items to be voted on at the special meeting. This proxy statement provides our stockholders with the information they need to know to be able to vote or instruct their vote to be cast at the special meeting.

 

We will hold the special meeting on September 1, 2009 at 10:00 a.m. (Eastern Time), at Hartford Marriott Rocky Hill at Corporate Ridge, 100 Capital Boulevard, Rocky Hill, Connecticut, unless postponed to a later date.

 

The record date for the special meeting is July 30, 2009. Record holders of shares of Axsys common stock at the close of business on the record date are entitled to vote or have their votes cast at the special meeting. On the record date, there were 11,624,837 outstanding shares of Axsys common stock. Stockholders will have one vote for the merger and any other matter properly brought before the special meeting for each share of Axsys common stock they owned at the close of business on the record date.

 

A quorum of stockholders is necessary to hold a valid meeting. Under our Amended and Restated By-Laws, the holders of a majority of the outstanding shares of Axsys common stock, present in person or by proxy, constitute a quorum. Abstentions are counted as present for establishing a quorum.

 

If a quorum is not present, the special meeting will be postponed until the holders of the number of votes required to constitute a quorum attend.

 

If you submit a properly executed proxy card, even if you abstain from voting or vote against the adoption of the merger agreement, your shares of Axsys common stock will be counted for purposes of calculating whether a quorum is present at the special meeting. If additional votes must be solicited to adopt the merger agreement, it is expected that the meeting will be postponed or adjourned to solicit additional proxies.

ITEM 1 — THE MERGER

 

As discussed elsewhere in this proxy statement, our stockholders will consider and vote on a proposal to adopt the merger agreement. You should carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger. In particular, you should read in its entirety the merger agreement, which is attached as Annex A to this proxy statement.

 

The Board unanimously recommends that Axsys stockholders vote FOR the adoption of the merger agreement.

 

If you return a properly executed proxy card but do not indicate instructions on your proxy card, your shares of Axsys common stock represented by such proxy card will be voted FOR the adoption of the merger agreement.

ITEM 2 — APPROVE AN ADJOURNMENT OF THE
SPECIAL MEETING, IF NECESSARY, TO PERMIT
FURTHER SOLICITATION OF PROXIES

 

Stockholders may be asked to vote on a proposal to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

The Board unanimously recommends that stockholders vote FOR a proposal to adjourn the special meeting.

 

If you return a properly executed proxy card but do not indicate instructions on your proxy card, your shares of Axsys common stock represented by such proxy card will be voted FOR a proposal to adjourn the special meeting.

 

Adoption of the merger agreement requires the affirmative vote of the holders of at least a majority of shares of Axsys common stock outstanding and entitled to vote at the special meeting. Mr. Bershad, who owns in the aggregate 1,666,753, or approximately 14.3%, of the shares of our common stock entitled to vote at the special meeting, has entered into a voting agreement under which he has agreed to vote or cause to be voted all of his shares FOR the adoption of the merger agreement. All of our directors and all of our executive officers, who collectively own approximately 16.1% of the shares of Axsys common stock entitled to vote at the special meeting, have informed us that they intend to vote all of their shares of Axsys common stock FOR the adoption of the merger agreement. Consequently, approximately 33.9% of our shares of common stock, or approximately 3,936,700 shares of common stock, not held by directors or executive officers must be voted in favor of adoption of the merger agreement for this proposal to be approved.

 

Abstentions and shares not in attendance at the special meeting will have the same effect as a vote AGAINST the proposal to adopt the merger agreement. An abstention occurs when a stockholder marks a proxy card to abstain from voting for or against a proposal.

 

If a quorum is present, approval of adjournments of the special meeting requires the affirmative vote of a majority of the votes cast by the stockholders entitled to vote present in person or represented by proxy at the special meeting. Abstentions and shares not in attendance at the special meeting will have no effect on the outcome of any vote to adjourn the special meeting.

 

Because brokers and banks holding shares of Axsys common stock in “street name” may vote your shares of Axsys common stock on the adoption of the merger agreement and adjournments of the special meeting, if necessary, only if you provide instructions on how to vote, your failure to provide instructions will result in your shares not being present at the meeting and not being voted on either proposal. Consequently, there cannot be any broker non-votes occurring in connection with either proposal at the special meeting.

 

Stockholders who hold shares of Axsys common stock can vote or submit a proxy for shares on matters presented at the special meeting in four ways:

 

(a)  By Proxy.   You can cause your shares to be voted by signing, dating and returning the enclosed proxy card. If you do this, the proxies will vote your shares of Axsys common stock in the manner you indicate. All properly executed proxy cards that we receive prior to the vote at the special meeting, and that are not revoked, will be voted in accordance with the instructions indicated on the proxy cards. If you sign, date and return but do not indicate instructions on the card, your shares of Axsys common stock will be voted FOR the adoption of the merger agreement.

 

(b)  By Telephone.   After reading the proxy materials and with your proxy and voting instruction form in front of you, you may call the toll-free number 1-866-540-5760 using a touch-tone telephone. You will be prompted to enter your control number from your proxy and voting instruction form. This number will identify you and Axsys. Then you can follow the simple instructions that will be given to you to record your proxy.

 

(c)  Over the Internet.   After reading the proxy materials and with your proxy and voting instruction form in front of you, you may use your computer to access the Web site http://www.proxyvoting.com/axys . You will be prompted to enter your control number from your proxy and voting instruction form. This number will identify you and Axsys. Then you can follow the simple instructions that will be given to you to record your proxy.

(d)  In Person.   You may attend the special meeting and cast your vote in person.

 

The Internet and telephone proxy submission procedures have been set up for your convenience and have been designed to authenticate your identity, allow you to give voting instructions and confirm that those instructions have been recorded properly.

 

If you are a participant in the Axsys 401(k) Retirement Plan and hold shares of Axsys common stock within the 401(k) plan, you will receive a proxy card that covers shares credited to your plan account. This proxy card serves as a voting instruction for the trustee of the plan in which you are a participant. Participants who wish to vote via the Internet may submit their voting instructions at http://www.proxyvoting.com/axys-esop . If you do not return the proxy card to the plan trustee, or do not provide voting instructions via the Internet, the trustee will not vote the Axsys shares credited to your account.

 

The trustee will vote unallocated shares of Axsys common stock held in the 401(k) plan in direct proportion to the voting of allocated shares in the plan for which voting instructions have been received unless otherwise required by applicable law.

 

Brokers or banks holding shares of Axsys common stock in “street name” may vote your shares of Axsys common stock on the adoption of the merger agreement and adjournments of the special meeting, if necessary, only if you provide instructions on how to vote. Brokers or banks will provide you with directions on how to instruct the broker or bank to vote your shares of Axsys common stock, and you should carefully follow these instructions. If you do not provide instructions to your bank or broker, your shares of Axsys common stock will not be voted on the proposal to adopt the merger agreement, which will have the effect of a vote AGAINST adoption of the merger agreement. If you do not provide instructions to your bank or broker, your shares of Axsys common stock will not be voted on a proposal to adjourn the special meeting, if necessary, which will have no effect on the outcome of any vote to adjourn the special meeting.

 

If you have any questions about how to vote or direct a vote in respect of your shares of Axsys common stock, you may contact our Investor Relations Department by phone at 1-860-594-5751 or by submitting a question to Georgeson at:

 

Georgeson, Inc.
199 Water Street — 26 ^th Floor
New York, NY 10038
Banks and Brokers Call: (212) 440-9800
All Others Call Toll Free: (888) 264-6994

 

Stockholders should not send in their stock certificates with their proxy cards.   A letter of transmittal with instructions for the surrender of certificates representing shares of Axsys common stock will be mailed to stockholders if the merger is completed.

 

Any proxy given by an Axsys stockholder may be revoked at any time before it is voted at the special meeting by doing any of the following:

 

 

We are soliciting the enclosed proxy card on behalf of our Board. In addition to solicitation by mail, our directors, officers and employees may solicit proxies in person, by telephone or by electronic means. These persons will not be specifically compensated for doing this.

 

We have retained Georgeson to assist in the solicitation process. We will pay Georgeson a fee of $18,500 plus reimbursement of out-of-pocket costs and expenses. We also have agreed to indemnify Georgeson against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

 

We will ask banks, brokers and other custodians, nominees and fiduciaries to forward our proxy solicitation materials to the beneficial owners of shares of Axsys common stock held of record by such nominee holders. We will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

 

Our stockholders should not send stock certificates with their proxies. Separate transmittal documents for the surrender of shares of Axsys common stock in exchange for the merger consideration will be mailed to our stockholders promptly following the effective date of the merger. See “The Merger Agreement — Payment for Shares” beginning on page 39.

 

The discussion in this proxy statement of the merger and the principal terms of the merger agreement is subject to, and is qualified in its entirety by reference to, the merger agreement, a copy of which is attached to this proxy statement as Annex A . You should read the entire merger agreement carefully.

 

The Board, as part of its ongoing oversight and planning, regularly reviews and evaluates Axsys’ business strategy and strategic alternatives with the goal of enhancing stockholder value. As part of these reviews and evaluations, the Board and management on various occasions have received advice from outside financial advisors and have periodically considered a sale of the Company. Most recently, the Board had engaged a financial advisor in late 2003 to formally evaluate the potential interest in an acquisition of Axsys. In that regard, the Board had instructed management to continually evaluate when a sale might be opportune.

 

Between early 2004 and late 2007, Axsys, under the guidance of the Board, engaged in a number of strategic actions to enhance stockholder value as it evaluated the opportunities for a possible sale. In particular, in addition to organic development, Axsys acquired Telic Optics, Inc. and Diversified Optical Products, Inc. and substantially all of the assets of Cineflex LLC. In addition, Axsys disposed of its distributed products business. During that same period of time, notwithstanding the success of these various strategic transactions, various members of the Board had continued to express concern over the increasing unevenness of Axsys’ business.

 

In late 2008, Stephen W. Bershad, Chairman and Chief Executive Officer of Axsys, had multiple conversations with David Baxt, Group Head, Aerospace & Defense, at Jefferies, who had previously worked with Mr. Bershad and Axsys for several years, regarding whether it might be an appropriate time to consider selling Axsys. In particular, during the later part of 2008, Mr. Baxt contacted Mr. Bershad on multiple occasions to inform him of conversations Mr. Baxt had with various companies where third parties had mentioned Axsys in the context of a possible acquisition. Messrs. Bershad and Baxt discussed their belief that the Company’s recent performance and prospects likely made Axsys an attractive acquisition target. While Axsys’ stock price was not discussed in detail, Messrs. Bershad and Baxt discussed their belief that a stock price over $60 per share was probably too high to commence a robust marketing process to sell Axsys. When the stock price dropped into the low $50’s, Messrs. Bershad and Baxt agreed that the common stock price was at a level where the possibility of a sale pursuant to a structured process could be explored. Finally, they discussed how the current economy was negatively affecting the credit markets, which could make financing a deal difficult for companies that did not have strong balance sheets, but that many companies in the defense industry had sufficiently strong balance sheets to consider participating in a structured auction process to acquire Axsys.

 

Based on these conversations with the Board and Jefferies, management determined the time was appropriate to evaluate the level of potential interest in an acquisition of Axsys in a structured manner and engage a financial advisor to assist it in running a formal process. Subsequently, on January 26, 2009, Axsys engaged Jefferies to provide financial advice and assistance in connection with a possible sale of Axsys.

 

In early February 2009, Jefferies, on behalf of Axsys, began contacting a number of defense and aerospace companies and private equity firms in order to determine whether any of those entities would be interested in considering an acquisition of Axsys. The entities selected to be contacted were chosen based on factors including perceived interest in the businesses in which Axsys operates, familiarity with the defense and aerospace industries, financial position and ability to consummate an acquisition of Axsys.

 

During this period, Jefferies contacted or had initial discussions with 24 parties potentially interested in a transaction involving Axsys, including General Dynamics and 17 other potential strategic buyers and six private equity firms. Sixteen of these parties, which did not include General Dynamics but included 10 other potential strategic buyers and six private equity firms, executed confidentiality agreements. Each of these 16 parties received certain summary non-public information regarding Axsys and were requested to provide a non-binding, preliminary indication of interest by March 10, 2009.

 

Prior to the March 10, 2009 deadline for the submission of preliminary indications of interest, Jefferies had extensive conversations with management about the status of the various bidders and which ones seemed likely to

submit a preliminary indication of interest, although no bidder submitted a preliminary indication of interest by the March 10, 2009 deadline.

 

On March 11, 2009, in response to press reports, Axsys announced that it had retained Jefferies as its financial advisor to explore a possible sale of the Company. Following this announcement Jefferies had discussions with an additional 11 parties, including seven potential strategic buyers and four private equity firms, to explore their possible interest in acquiring Axsys. Of this group, four entities, including one potential strategic buyer and three private equity firms, executed confidentiality agreements and received the summary non-public information regarding Axsys that had previously been distributed to other potential bidders.

 

The Board next met for a regularly scheduled meeting on March 12, 2009. Based on its conversations with Jefferies, management discussed with the Board the status of the various bidders’ participation in the process. After extensive discussion, the Board authorized management and Jefferies to continue discussions with potential bidders.

 

Over the next week, Jefferies had multiple conversations with the bidders remaining in the process to encourage them to submit a formal indication of interest. Jefferies was informed by various bidders that, due to the publicity surrounding the fact that Axsys was evaluating a possible sale of the Company, they were not prepared to submit a formal indication of interest at a specific price or ranges of prices. Axsys was not aware of any potential bidders that actually dropped out of, or did not participate in, the sale process due to concerns about publicity. Three strategic bidders, however, provided conditional preliminary indications of interest that were interpreted to imply a per share price ranging from the upper $40’s to the low $50’s. After extensive discussion between Jefferies and management, these three bidders were invited to continue in the sale process.

 

On April 13, 2009, General Dynamics executed a confidentiality agreement with Axsys and received the summary non-public information regarding Axsys that had previously been distributed to other potential bidders. Previously, General Dynamics had declined to participate in the auction process and had not received any diligence materials.

 

Throughout the remainder of March and April, the bidders continued their financial and legal due diligence review of Axsys, which included discussions and meetings with Axsys’ management and review of certain non-public information pursuant to the terms of the confidentiality agreements between the bidders and the Company. In addition, four parties, consisting of General Dynamics and the three parties that had submitted oral indications of interest, attended presentations conducted by Axsys’ management.

 

On April 30, 2009, a final bid instruction letter, which enclosed a draft merger agreement, was distributed to the four bidders who had attended the management presentations. These bidders were requested to submit final bids by May 12, 2009. These parties also continued their respective due diligence investigations of Axsys, to varying degrees, during this period.

 

On May 7, 2009, the Board met for a regularly scheduled meeting and received an update from management on the sale process. In particular, management discussed the status of the various bidders remaining in the process and the reasons disclosed by other bidders to Jefferies why they dropped out of, or passed on the opportunity to participate in, the sale process. Some of the bidders dropped out of, or passed on the opportunity to participate in, the sale process because they lacked the financial capacity to purchase Axsys or because the transaction lacked strategic importance to such bidders. Management, however, noted and discussed with the Board that the general feedback from the bidders on Axsys’ business was positive. Management viewed the remaining bidders as competitive in light of their discussion with the Board.

 

On May 13, 2009, General Dynamics submitted an offer of $645 million, which equated to approximately $53.00 per share, to purchase 100% of the outstanding equity of Axsys. General Dynamics also delivered a markup of the merger agreement.

 

On May 15, 2009, one other bidder submitted an offer to purchase 100% of the outstanding equity of Axsys, while the two other bidders who had received bid packages declined to make final bids.

 

Between receipt of the two bids and May 21, 2009, representatives of Axsys, including representatives of Jefferies, had multiple conversations with representatives of General Dynamics and the other bidder concerning

price and various due diligence matters. During these conversations, General Dynamics and the other bidder were requested to provide their best and final offers. On May 20, 2009, General Dynamics raised its bid to $53.50 per share subject to the resolution of certain third party contract liability issues. The other bidder declined to increase its offer.

 

On May 21, 2009, the Board met with management, outside legal counsel and Jefferies to consider the two final bids that had been submitted. Management updated the Board on the process since the May 7, 2009 Board meeting and gave a general overview of the bids and discussions with the bidders. Axsys’ legal counsel reviewed with the Board members their fiduciary duties in the context of a sale transaction and discussed the possible timeline until a possible closing. In addition to summarizing each of the bids and updating the Board on the status of discussions with each of the bidders, Jefferies reviewed with the Board its preliminary valuation analysis of Axsys in relation to each proposal, which preliminary valuation analysis was subsumed by the final valuation analysis that was presented by Jefferies to the Board on June 3, 2009 and described below under the caption — “Opinion of Jefferies & Company, Inc.” After discussing the two bids, the Board determined that the General Dynamics bid was superior as the other bid was at a lower cash price and the other bidder had not supplied comments to the draft merger agreement or completed as much due diligence as General Dynamics, giving General Dynamics a significant timing advantage, and the other bidder had potential regulatory issues that General Dynamics did not have because the other bidder was a foreign company. At the conclusion of the meeting, the Board authorized management, Jefferies and legal counsel to negotiate with General Dynamics and its advisors to arrive at a final negotiated deal by Wednesday, June 3, 2009, at or above $53.50 per share and on terms generally consistent with the terms set forth in the latest draft of the merger agreement. General Dynamics had previously informed Axsys that General Dynamics’ Board of Directors would not be able to meet before June 3, 2009 to formally approve the acquisition of Axsys.

 

Later in the day on May 21, 2009, General Dynamics adjusted its bid price to $54.00 per share based on information provided to it with respect to the correct number of fully diluted Axsys shares outstanding.

 

Between May 22, 2009 and June 3, 2009, legal counsel to Axsys and legal counsel to General Dynamics negotiated the terms of the merger agreement, in particular, closing conditions, termination events and termination fees and related triggers, and General Dynamics concluded its due diligence review of Axsys.

 

On the morning of June 3, 2009, the Board convened a meeting to consider the proposed merger with General Dynamics. The Board reviewed with Axsys’ management and legal and financial advisors the status of negotiations with General Dynamics and the proposed terms and conditions of the merger. Axsys’ legal counsel reviewed with the Board members the material terms and conditions of the merger agreement, as reflected in the then current draft. Counsel also summarized certain contractual obligations, conditions and termination rights relating to obtaining antitrust and other regulatory approvals, as well as the provisions and termination fees applicable in situations in which the transaction was made the subject of competitive bids from third parties or in which the Board withdrew its recommendation of the merger. Representatives of Jefferies then reviewed the financial aspects of the proposed merger. At the conclusion of its presentation, Jefferies delivered its opinion to the Board to the effect that, as of June 3, 2009 and based upon and subject to the various considerations and assumptions set forth therein, the merger consideration to be received by the holders of shares of Axsys common stock pursuant to the merger agreement was fair, from a financial point of view, to those holders. Following a thorough discussion, the Board unanimously determined that the merger is advisable to, and in the best interests of, Axsys and its stockholders and approved and adopted the merger and the merger agreement, resolved to recommend that Axsys stockholders vote to adopt the merger agreement, and authorized its executive officers to execute and deliver the merger agreement.

 

Also on June 3, 2009, General Dynamics requested to have GD AIS enter into the merger agreement as a principal instead of General Dynamics for internal organizational purposes at General Dynamics. General Dynamics determined that having GD AIS be the acquirer would best position Axsys within General Dynamics’ overall corporate structure. In return for designating GD AIS as the acquirer, Axsys negotiated for General Dynamics to guarantee GD AIS’ obligations under the merger agreement. GD AIS considered and approved the terms of the acquisition as originally negotiated by General Dynamics, but GD AIS itself did not participate in the negotiation process. Later that day, the Boards of Directors of General Dynamics and GD AIS approved the merger agreement.

On June 4, 2009, the parties executed and delivered the merger agreement and announced the signing of the merger agreement.

 

During the course of reaching its decision to adopt and approve the merger and the transactions contemplated by the merger agreement, the Board considered a number of factors and consulted the Company’s senior management and outside financial and legal advisors.

 

The Board considered a number of potentially positive factors in its deliberations, including, among other matters:

 

 

 

opinion, of the merger consideration to be received by the holders of shares of Axsys common stock pursuant to the merger agreement, as more fully described below under the caption — “Opinion of Jefferies & Company, Inc.” beginning on page 21. The full text of the opinion is attached to this proxy statement as Annex C and incorporated by reference into this proxy statement;

 

 

 

 

 

 

 

The Board also considered a number of potentially negative factors in its deliberations concerning the merger, including, but not limited to:

 

 

 

 

 

 

 

During its consideration of the merger, the Board was also aware that some of our directors and executive officers have interests in the merger that may be in addition to or differ from those of our stockholders generally, as described in “— Interests of Axsys Directors and Executive Officers in the Merger” beginning on page 28. These interests did not have any effect on the Board’s deliberations of the proposed merger.

 

This summary is not meant to be an exhaustive description of the information and factors considered by the Board but is believed to address the material information and factors considered by the Board. In view of the wide variety of factors considered by the Board, it is not possible to quantify or to give relative weights to the various factors. After taking into consideration all of the factors set forth above, as well as other factors not specifically described above, the Board unanimously concluded that the merger is advisable to, and in the best interests of, Axsys and its stockholders and approved and adopted the merger agreement and the transactions contemplated by the merger agreement.

 

At its meeting on June 3, 2009, the Board met to consider the merger agreement and after due consideration, unanimously adopted and approved the merger agreement and determined that the merger agreement and the related transactions are advisable to and in the best interests of Axsys and its stockholders, and the Board unanimously recommends that Axsys stockholders vote FOR the adoption of the merger agreement.

 

Jefferies served as Axsys’ financial advisor in connection with the merger. On June 3, 2009, Jefferies rendered to the Board its opinion as investment bankers to the effect that, as of that date and based upon and subject to the various considerations and assumptions set forth therein, the merger consideration of $54.00 per share in cash to be received by holders of Axsys common stock pursuant to the merger agreement was fair, from a financial point of view, to those holders.

 

The full text of Jefferies’ opinion, which sets forth the assumptions made, matters considered and limitations on the scope of review undertaken by Jefferies in rendering its opinion, is attached to this proxy statement as Annex C . Axsys encourages stockholders to read the Jefferies opinion carefully and in its entirety. Jefferies’ opinion was provided to the Board in connection with the Board’s consideration of the merger and addresses only the fairness, from a financial point of view and as of the date of Jefferies’ opinion, of the merger consideration to be received by the holders of Axsys common stock pursuant to the merger agreement and does not address any other aspect of the merger. Jefferies’ opinion does not constitute a recommendation as to how any holder of Axsys common stock should vote on the merger or any matter related thereto.

 

In arriving at its opinion, Jefferies, among other things:

 

 

 

In Jefferies’ review and analysis and in rendering its opinion, Jefferies assumed and relied upon, but did not assume any responsibility to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available by Axsys to it or that was publicly available (including, without limitation, the information described above), or that was otherwise reviewed by it. In its review, Jefferies relied on assurances of the management of Axsys that management was not aware of any facts or circumstances that would make such information inaccurate or misleading. In its review, Jefferies did not obtain any independent evaluation or appraisal of any of the assets or liabilities of, nor did Jefferies conduct a physical inspection of any of the properties or facilities of, Axsys. Jefferies was not furnished with any such evaluations or appraisals of such physical inspections and did not assume any responsibility to obtain any such evaluations or appraisals.

 

With respect to the financial forecasts provided to and examined by Jefferies, Jefferies’ opinion noted that projecting future results of any company is inherently subject to uncertainty. Axsys informed Jefferies, however, and Jefferies assumed, that such financial forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Axsys as to the future financial performance of Axsys. Jefferies expressed no opinion as to Axsys’ financial forecasts or the assumptions on which they were made.

 

Jefferies’ opinion was based on economic, monetary, regulatory, market and other conditions existing and which could be evaluated as of the date of its opinion. Jefferies expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting Jefferies’ opinion of which Jefferies became aware after the date of its opinion.

 

Jefferies made no independent investigation of any legal or accounting matters affecting Axsys, and Jefferies assumed the correctness in all respects material to Jefferies’ analysis of all legal and accounting advice given to Axsys and the Board, including, without limitation, advice as to the legal, accounting and tax consequences of the terms of, and transactions contemplated by, the merger agreement to Axsys and its stockholders. In addition, in preparing its opinion, Jefferies did not take into account any tax consequences of the transaction to any holder of Axsys common stock. In rendering its opinion, Jefferies assumed that the final form of the merger agreement and the voting agreement would be substantially similar to the last drafts reviewed by it. Jefferies also assumed that in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Axsys or the contemplated benefits of the merger in any way meaningful to Jefferies’ analysis.

 

Jefferies’ opinion was for the use and benefit of the Board in its consideration of the merger, and Jefferies’ opinion did not address the relative merits of the transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to Axsys, nor did it address the underlying business decision by Axsys to engage in the merger or the terms of the merger agreement or the documents referred to therein. Jefferies’ opinion does not constitute a recommendation as to how any holder of shares of Axsys common stock should vote on the merger or any matter relating thereto. In addition, Jefferies was not asked to address, and its opinion did not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of Axsys, other than the holders of Axsys common stock. Jefferies expressed no opinion as to the price at which shares of Axsys common stock will trade at any time. Jefferies did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of Axsys’ officers, directors or employees, or any class of such persons, in connection with the merger relative to the merger consideration to be received by holders of shares of Axsys common stock.

 

In preparing its opinion, Jefferies performed a variety of financial and comparative analyses. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant quantitative and qualitative methods of financial analysis and the applications of those methods to the particular circumstances and, therefore, is not necessarily susceptible to partial analysis or summary description. Jefferies believes that its analyses must be considered as a whole. Considering any portion of Jefferies’ analyses or the factors considered by Jefferies, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the conclusion expressed in Jefferies’ opinion. In addition, Jefferies may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described below should not be taken to be Jefferies’ view of Axsys’ actual value. In this regard, as noted below, less weight was given by Jefferies to the premiums paid analysis for the periods 1-day and 4-weeks prior to June 2, 2009, that Jefferies noted was not particularly meaningful. Accordingly, the conclusions reached by Jefferies are based on all analyses and factors taken as a whole and also on the application of Jefferies’ own experience and judgment.

 

In performing its analyses, Jefferies made numerous assumptions with respect to industry performance, general business, economic, monetary, regulatory, market and other conditions and other matters, many of which are beyond Axsys’ and Jefferies’ control. The analyses performed by Jefferies are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the per share value of Axsys common stock do not purport to be appraisals or to reflect the prices at which Axsys common stock may actually be sold. The analyses performed were prepared solely as part of Jefferies’ analysis of the fairness, from a financial point of view, of the merger consideration to be received by holders of Axsys common stock pursuant to the merger, and were provided to the Board in connection with the delivery of Jefferies’ opinion.

 

The following is a summary of the material financial and comparative analyses performed by Jefferies in connection with Jefferies’ delivery of its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand Jefferies’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Jefferies’ financial analyses.

 

Transaction Overview

 

Based upon the approximately 11.8 million shares of Axsys common stock that were outstanding as of May 19, 2009 on a fully diluted basis (calculated using the treasury stock method), Jefferies noted that the merger consideration of $54.00 per share implied an equity value of approximately $638.6 million. Net of approximately $26.1 million of cash and cash equivalents (as of March 28, 2009), Jefferies noted that the merger consideration implied an enterprise value of approximately $612.5 million. Jefferies also noted that the merger consideration of $54.00 per share of Axsys common stock represented:

 

 

Historical Trading Analysis

 

Jefferies reviewed the share price trading history of Axsys common stock for the two-year period ending June 1, 2009 on a stand-alone basis and also in relation to the NASDAQ Composite, the Standard & Poor’s 500 Index, and a composite index consisting of the enterprise companies listed below in the defense electronics, intelligence, surveillance and reconnaissance (“ISR”) and homeland security markets, which are referred to as the “Axsys Selected Comparable Companies”. Jefferies selected the Axsys Selected Comparable Companies because their businesses, end markets and operating profiles are reasonably similar to that of Axsys.

 

 

The historical trading analysis was presented to the Board solely for informational purposes to provide it with background information and perspective with respect to the relative historical share price of Axsys common stock. This analysis showed that during the two-year period ending June 1, 2009, the trading price of Axsys common stock rose 141.3%, the NASDAQ Composite Index declined 30.0%, the Standard & Poor’s 500 Index declined 38.6%, and the composite index consisting of the Axsys Selected Comparable Companies declined 16.9%. This analysis also showed that from March 10, 2009, which was the date one day prior to the date on which Axsys announced it was evaluating the possible sale of the Company and had engaged Jefferies as its financial advisor, to March 12, 2009, the closing trading price of Axsys common stock rose 49.1%.

 

Comparable Public Company Analysis

 

Using publicly available information and information provided by Axsys’ management, Jefferies analyzed the trading multiples of Axsys and the corresponding trading multiples of the Axsys Selected Comparable Companies. In its analysis, Jefferies derived and compared multiples for Axsys and the Axsys Selected Comparable Companies, calculated as follows:

 

 

This analysis indicated the following:

 

Comparable Public Company Multiples

 

 

Using a reference range of 8.5x to 10.0x Axsys’ LTM EBITDA of approximately $48.9 million, Jefferies determined an implied enterprise value for Axsys, then added cash and cash equivalents to determine an implied equity value. After accounting for the vesting of in-the-money stock options (using the treasury stock method), this analysis indicated a range of implied values per share of Axsys common stock of approximately $37.46 to $43.62 using LTM EBITDA, compared to the merger consideration of $54.00 per share of Axsys common stock.

 

Using a reference range of 8.0x to 9.5x Axsys’ 2009E EBITDA of approximately $56.9 million (which amount included Axsys’ actual EBITDA for the fiscal quarter ended March 31, 2009), Jefferies determined an implied enterprise value for Axsys, then added cash and cash equivalents to determine an implied equity value. After accounting for the vesting of in-the-money stock options (using the treasury stock method), this analysis indicated a

range of implied values per share of Axsys common stock of approximately $40.78 to $47.95 using 2009E EBITDA, compared to the merger consideration of $54.00 per share of Axsys common stock.

 

No company utilized in the comparable public company analysis is identical to Axsys. In evaluating the selected companies, Jefferies made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Axsys’ and Jefferies’ control. A purely mathematical analysis is not in itself a meaningful method of using comparable company data.

 

Selected Comparable Transactions Analysis

 

Using publicly available information and other information, Jefferies examined the nine transactions listed below and announced during the past 3 years involving companies providing services and products to the defense electronics, ISR and homeland security markets with enterprise values between $27.0 million and $5.2 billion. Jefferies selected these transactions because they involved companies with businesses, end markets and operating profiles that are reasonably similar to that of Axsys, and each of these transactions involved a cash acquisition by a strategic buyer of a privately-owned company or business (other than Finmeccanica SpA’s acquisition of DRS Technologies, Inc.). The transactions considered and the month and year each transaction was announced were as follows:

 

 

Using publicly available estimates and other information for each of these transactions, Jefferies reviewed the enterprise value as a multiple of the target company’s LTM EBITDA immediately preceding announcement of the transaction, which is referred to below as “Enterprise Value/LTM EBITDA.”

 

This analysis indicated the following:

 

Selected Comparable Transactions Multiples

 

 

Using a reference range of 10.0x to 12.0x Axsys’ LTM EBITDA, Jefferies determined an implied enterprise value for Axsys, then added cash and cash equivalents to determine an implied equity value. After accounting for the vesting of in-the-money stock options (using the treasury stock method), this analysis indicated a range of implied values per share of Axsys common stock of approximately $43.62 to $51.83, compared to the merger consideration of $54.00 per share of Axsys common stock.

 

No transaction utilized as a comparison in the comparable transaction analysis is identical to the merger. In evaluating the merger, Jefferies made numerous judgments and assumptions with regard to industry performance, general business, economic, market, and financial conditions and other matters, many of which are beyond Axsys’ and Jefferies’ control. A purely mathematical analysis is not in itself a meaningful method of using comparable transaction data.

Discounted Cash Flow Analysis

 

Jefferies performed a discounted cash flow analysis to estimate the present value of the free cash flows of Axsys through the fiscal year ending December 31, 2013 using Axsys management’s financial projections, discount rates ranging from 11.0% to 12.0%, and perpetual growth rates of free cash flow after fiscal year 2013 ranging from 3.0% to 5.0%. To determine the implied total equity value for Axsys, Jefferies added cash and cash equivalents to the implied enterprise value for Axsys. After accounting for the vesting of in-the-money stock options, this analysis indicated a range of implied values per share of Axsys common stock of approximately $33.35 to $47.00, compared to the merger consideration of $54.00 per share of Axsys common stock.

 

Premiums Paid Analysis

 

Using publicly available information, Jefferies analyzed the premiums offered in 18 selected merger and acquisition transactions (which transactions were not presented to the Board) over the past five years within selected industries, including aerospace & defense and government services, involving public companies having enterprise values between $500 million and $2 billion.

 

For each of these transactions, Jefferies calculated the premium represented by the offer price over the target company’s closing share price one day and four weeks prior to the transaction’s announcement. This analysis indicated the following median premiums for those time periods prior to announcement:

 

 

Using these median premia and the closing prices per share of Axsys common stock 1-day and 4-weeks prior to March 11, 2009, which was the date that Axsys announced it was evaluating the possible sale of the Company and had engaged Jefferies as its financial advisor, this analysis indicated a range of implied value per share of Axsys common stock of approximately $33.55 to $49.14, compared to the merger consideration of $54.00 per share of Axsys common stock.

 

Jefferies also performed a premiums paid analysis using the adjusted closing prices per share of Axsys common stock on the dates 1-day and 4-weeks prior to June 2, 2009, respectively. The closing prices per share of Axsys common stock were adjusted to reflect the average change in the trading prices of the Axsys Selected Comparable Companies during the period from March 10, 2009, to May 5, 2009 (which was the date four weeks prior to the date of Jefferies’ analysis) and to June 1, 2009 (which was the date one day prior to the date of Jefferies’ analysis), respectively. During the period from March 10, 2009 to May 5, 2009, the average change in the trading prices of the Axsys Selected Comparable Companies was up 34.2%, and during the period from March 10, 2009 to June 1, 2009, the average change in the trading prices of the Axsys Selected Comparable Companies was up 28.6%. This analysis indicated a range of median implied values per share of Axsys common stock of approximately $43.14 to $47.67, compared to the merger consideration of $54.00 per share of Axsys common stock.

 

In addition, Jefferies performed a premiums paid analysis using the closing prices per share of Axsys common stock for the periods 1-day and 4-weeks prior to June 2, 2009 which was the date one day prior to the date of Jefferies’ analysis. This analysis indicated a range of median implied value per share of Axsys common stock of approximately $55.55 to $62.39, compared to the merger consideration of $54.00 per share of Axsys common stock. However, Jefferies noted that this analysis was not particularly meaningful because Axsys common stock was likely trading in anticipation of a transaction announcement following the announcement by Axsys on March 11, 2009 that it was evaluating a potential sale.

 

General

 

The type and amount of consideration payable in the merger was determined through negotiations between Axsys and General Dynamics, rather than by any financial advisor, and was approved by the Board. The decision to

enter into the merger agreement was solely that of the Board. As described above, Jefferies’ opinion was one of many factors taken into consideration by the Board in making its determination to approve the merger and should not be considered determinative of the views of the Board or management with respect to the merger or the merger consideration.

 

Jefferies was selected by the Board based on Jefferies’ qualifications, expertise and reputation. Jefferies is an internationally recognized investment banking and advisory firm. Jefferies, as part of its investment banking business, is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements, financial restructurings and other financial services.

 

In the ordinary course of business, Jefferies and its affiliates may trade or hold securities of Axsys or General Dynamics and/or their respective affiliates for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions in those securities.

 

Pursuant to an engagement agreement between Axsys and Jefferies dated January 26, 2009, Axsys has agreed to pay Jefferies a fee for its services, based upon a percentage of the transaction value, in the amount of approximately $7 million, of which $1.5 million was earned upon delivery of Jefferies’ opinion, and the balance of which is payable contingent upon consummation of the merger. In addition, Axsys has agreed to reimburse Jefferies for reasonable expenses incurred, including certain fees and disbursements of Jefferies’ legal counsel. Axsys also has agreed to indemnify Jefferies and certain related parties against liabilities arising out of or in connection with the services rendered and to be rendered by it under its engagement, including liabilities arising under federal securities laws.

Certain Financial Information

 

In the course of the sale process described under “— Background of the Merger,” we provided General Dynamics and certain other potential purchasers who signed confidentiality agreements selected, non-public financial projections prepared by our senior management. Axsys does not as a matter of course make public projections as to future performance or earnings, and the portions of these financial projections set forth below are included in this proxy statement only because this information was provided to General Dynamics and certain other potential purchasers on a confidential basis in connection with Axsys’ sale process. You should note that these financial projections constitute forward-looking statements. See “Forward-Looking Statements May Prove Inaccurate” on page 11.

 

Axsys advised the recipients of the financial projections that such projections are subjective in many respects. The financial projections are based on a variety of estimates and assumptions of our senior management regarding our business, industry performance, general business, economic, market and financial conditions and other matters, all of which are difficult to predict and many of which are beyond our control. In particular, these forward-looking statements were based on numerous assumptions that are now out-dated. You should not regard the inclusion of these projections in this proxy statement as an indication that Axsys, General Dynamics, Jefferies or any of their respective affiliates or representatives considered or consider the projections to be a reliable prediction of actual future events, and you should not rely on the projections as such. Accordingly, there can be no assurance that the assumptions made in preparing the projections will prove accurate. If the assumptions do not prove accurate, the projections will not be accurate. It is expected that there will be differences between actual and projected results, and actual results may be materially greater or less than those contained in the projections. It is highly likely that the contribution of Axsys’ business to the consolidated results of General Dynamics will be different from Axsys’ performance on a stand alone basis. In addition, if the merger is not consummated, we may not be able to achieve these financial projections. None of Axsys, General Dynamics or any of their respective affiliates or representatives has made or makes any representations to any person regarding the ultimate performance of Axsys compared to the information contained in the projections.

 

The financial projections have been prepared by Axsys’ senior management. Neither Axsys’ independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the financial projections set forth below, nor have they expressed any opinion or any other form of assurance with respect thereto. The financial projections were not prepared with a view toward public disclosure or

compliance with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. We do not intend to update these out-dated financial projections or to make other projections public in the future.

 

The financial projections included (in millions of dollars):

 

 

 

 

In mid-April 2009, Axsys revised its 2009 projections, adjusting revenue to $278.0 million and gross profit to $96.5 million.

 

The foregoing financial projections are based upon numerous estimates and assumptions including, without limitation, the following:

 

 

In considering the Board’s recommendation to vote for the proposal to adopt the merger agreement, Axsys stockholders should be aware that some of the directors and executive officers of Axsys have interests in the merger that may be different from, or in addition to, the interests of Axsys stockholders generally and that may create potential conflicts of interest. The Board was aware of and considered the interests of the Company’s directors and executive officers when the Board considered, adopted and approved the merger agreement and determined to recommend to Axsys stockholders that they vote for the proposal to adopt the merger agreement. These interests did not have any effect on the Board’s deliberations of the proposed merger.

 

Under the terms of the merger agreement, each outstanding stock option held by our employees (including our executive officers) and directors that is outstanding and unexercised as of immediately prior to the effective time of the merger (whether or not such stock option is vested and exercisable prior to the effective time) will be canceled and converted into the right to receive a cash payment equal to the number of shares underlying the option multiplied by the amount (if any) by which $54.00 exceeds the option exercise price, less any applicable withholding taxes, and without interest.

 

The following table shows, for our directors and executive officers, the aggregate number of shares subject to outstanding options, whether vested or unvested and the cash-out value of all outstanding options with a per share exercise price less than $54.00. The information in the table is as of August 3, 2009.

 

 

Under the terms of the merger agreement, each outstanding restricted share of common stock held by our employees (including our executive officers) and directors that is outstanding as of immediately prior to the effective time of the merger will cease to be subject to any restrictions and will be canceled and converted into the right to receive a cash payment equal to $54.00, less any applicable withholding taxes, and without interest.

 

The following table shows, for our executive officers and directors, the aggregate number of restricted shares and the cash-out value of such restricted shares (calculated at $54.00 per restricted share). The information in the table is as of August 3, 2009.

 

 

Axsys entered into an amended and restated employment agreement with Stephen W. Bershad, dated May 7, 2009, as amended on June 3, 2009, an amended and restated severance protection agreement with David A. Almeida, dated December 22, 2008, as amended on May 7, 2009 and June 3, 2009, and an amended and restated severance protection agreement with Scott B. Conner, dated December 22, 2008, as amended on May 7, 2009 and June 3, 2009. The executives’ agreements provide for severance payments to the applicable executive if his employment with Axsys is terminated within the two-year period following a change in control of Axsys under any of the following circumstances:

 

 

 

 

The completion of the merger will constitute a change in control for purposes of these agreements.

 

If the executive’s employment is terminated under any of the circumstances listed above within the two-year period following a change in control or preceding the change in control if the executive demonstrates the termination was at the request of a third party that took steps to effectuate and actually effectuated the change in control or the termination arose in connection with a change in control, the executive will be entitled to receive all accrued but unpaid salary, prior year’s bonus, vacation pay and reimbursable expenses, and the following severance payments and benefits:

 

 

Each executive’s agreement provides, with respect to the annual incentive bonus earned in the year in which the change in control occurs, that if the executive’s employment is not terminated prior to the last day of the fiscal year in which the change in control occurs, the executive will receive the greater of the bonus he would have received for the full year based on actual achievement of the performance goals or the bonus he would have received for the full year based on Axsys’ monthly annual forecast produced immediately prior to the change in control and prorated based on the number of days in the fiscal year preceding the change in control. Each executive’s agreement also provides that if, prior to the last day of the fiscal year in which the change in control occurs, the executive’s employment is terminated by Axsys other than for cause, upon death, or by the executive for good reason or for any reason during the executive’s window period, the executive will receive a payment for his annual incentive bonus equal to the greater of the bonus he would have received for the full year based on Axsys’ monthly annual forecast produced immediately prior to his termination date and prorated based on the number of days in the fiscal year preceding his termination date or the bonus he would have received for the full year based on Axsys’ monthly annual forecast produced immediately prior to the change in control and prorated based on the number of days in the fiscal year preceding the change in control.

 

Each executive’s agreement provides that the executive is entitled to a “gross-up” payment to make him whole for any federal excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended, which is referred to as the Code, on change in control payments, severance payments or benefits received by the executive officer (including the value of accelerated vesting of stock options and restricted stock upon completion of the merger) that are treated as “excess parachute payments” under Section 280G of the Code. The purpose of the gross-up payment is to put the executive in the same position with respect to the payments and benefits he may receive in connection with the change in control, as described above, after payment of all federal, state and local taxes (including income taxes and the excise tax under Section 4999 of the Code), as the executive would have been in if the excise tax under Section 4999 of the Code had not applied.

 

Under each executive’s agreement, Axsys is required to pay all reasonable legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the executive as they become due as a result of or in connection with (a) the executive’s contesting, defending or disputing the basis for the termination of the executive’s employment, (b) the executive’s hearing before the Board as contemplated in his agreement in connection with his right to contest a termination of his employment for cause, or (c) the executive’s seeking to obtain or enforce any right or benefit provided by his applicable agreement or by any other plan or arrangement maintained by Axsys under which the executive is or may be entitled to receive benefits.

 

The following table summarizes the estimated amount of the change in control and severance benefits that would be paid to our executive officers if each executive officer’s employment were terminated immediately following the merger, as well as the pro rata bonus payments that the executive officers would receive, as described above, assuming a September 3, 2009 closing date.

 

 

 

 

The merger agreement requires that the indemnification provisions of the certificate of incorporation and bylaws of the surviving corporation as in effect at the effective time of the merger not be amended, modified or repealed for six years from the effective time of the merger in any manner that would adversely affect the rights of individuals who immediately prior to the effective time of the merger were directors, officers or employees of Axsys unless required by law. GD AIS also has agreed to indemnify the present and former employees, officers and directors of Axsys and to cause the surviving corporation to provide directors’ and officers’ liability insurance coverage for the benefit of the present and former officers and directors of Axsys that will contain substantially equivalent scope and amount of coverage as the policy maintained by Axsys immediately prior to effectiveness of the merger, subject to certain limitations on the amount of premiums required to be paid for such insurance coverage.

 

Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain acquisition transactions may not be consummated unless information has been furnished to the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. The merger is subject to these requirements and may not be completed until the expiration of a 30-day waiting period following the filing of the required Notification and Report Forms, which are referred to as the forms, with the Antitrust Division and the FTC. Pursuant to the requirements of the HSR Act, Axsys completed the filing of the forms with the Antitrust Division and the FTC on June 8, 2009. GD AIS also filed the forms on June 8, 2009. On July 8, 2009, GD AIS withdrew its original notifications and on July 9, 2009, refiled them with the FTC and Antitrust Division in order to provide more time for review. The 30-day waiting period, which cannot expire on a Saturday, Sunday or a U.S. federal holiday, will expire at 11:59 p.m. Eastern Time on August 10, 2009, unless the FTC or the Antitrust Division earlier terminates the waiting period or makes a request for more information related to the merger.

 

The Antitrust Division and the FTC have the authority to scrutinize the legality of transactions under the antitrust laws. For example, the FTC could issue requests to Axsys and GD AIS for additional information regarding the merger. If such requests for additional information were made, the waiting period referred to above would be extended until the end of the 30th day after both Axsys and GD AIS have substantially complied with the requests for additional information or such later time as is agreed among the parties and the FTC, unless the waiting period is earlier terminated because the FTC determines to close its review.

Further, at any time before or after the consummation of the merger, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the merger or seeking divestiture of certain of Axsys’ or GD AIS’ assets. Private parties and state attorneys general may also bring legal actions under the antitrust laws.

 

The following is a summary of certain United States federal income tax consequences of the merger to Axsys stockholders whose shares of common stock are converted into the right to receive cash under the merger agreement. This summary is based on provisions of the Internal Revenue Code of 1986, as amended, United States Treasury Regulations promulgated thereunder, judicial opinions and administrative rulings and published positions of the United States Internal Revenue Service, each in effect as of the date of this proxy statement and all of which are subject to change, possibly with retroactive effect.

 

This summary applies only to stockholders who hold shares of Axsys common stock as capital assets within the meaning of Section 1221 of the Internal Revenue Code. This summary does not address the United States federal income tax consequences to any stockholder who, for United States federal income tax purposes, is a non-resident alien individual, foreign corporation, foreign partnership or foreign estate or trust. This summary does not address the federal income taxation of holders of options to purchase Axsys common stock. In addition, no information is provided with respect to the tax consequences of the merger under applicable state, local, foreign or United States federal non-income tax laws.

 

This summary does not purport to consider all aspects of United States federal income taxation that might be relevant to Axsys stockholders in light of their particular circumstances and does not apply to stockholders that are subject to special rules under the United States federal income tax laws (including, for example, insurance companies, tax-exempt organizations, financial institutions, dealers in securities, persons subject to the alternative minimum tax, persons who hold or have held shares of Axsys common stock as part of a straddle, hedge, integrated constructive sale or conversion transaction for tax purposes and persons who acquired shares of Axsys common stock pursuant to the exercise of an employee stock option or right or otherwise as compensation). If a partnership (including for this purpose any entity or arrangement treated as a partnership for United States federal income tax purposes) is a beneficial owner of shares of Axsys common stock, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership.

 

All holders of shares of Axsys common stock are urged to consult their own tax advisors to determine the particular tax consequences to them of the merger.

 

Subject to the limitations disclosed above, a stockholder who surrenders shares of Axsys common stock for cash pursuant to the merger will recognize a capital gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received in the merger and the stockholder’s adjusted tax basis in shares of Axsys common stock surrendered. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction) surrendered for cash pursuant to the merger. Such gain or loss will be long-term capital gain or loss if a stockholder’s holding period for such shares is more than one year at the time of the completion of the merger. In the case of individuals, long-term capital gain is currently eligible for reduced rates of United States federal income tax. There are limitations on the deductibility of capital losses.

 

Federal backup withholding at a rate of 28% may apply with respect to certain payments, including cash received in the merger, unless a payee (1) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (2) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and that such stockholder is a U.S. person (including a U.S. resident alien) and otherwise complies with applicable requirements of the backup withholding rules. Each of our stockholders and, if applicable, each other payee should complete and sign the Substitute Form W-9 that will be included as part of the letter of transmittal to be returned to the disbursing agent, in order to provide the information and certification

necessary to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the disbursing agent.

 

Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against your United States federal income tax liability provided that you furnish the required information to the United States Internal Revenue Service. Such amounts, once withheld, are not refundable by us or the disbursing agent.

 

The summary of certain United States federal income tax consequences set forth above does not constitute a complete description of all tax consequences relating to the merger. Because tax matters are very complicated and individual tax consequences may differ depending on your facts and circumstances, all stockholders are urged to consult with their own tax advisors regarding the tax consequences of the merger to them, including the application of state, local and foreign tax laws.

 

Record holders of shares of Axsys common stock who do not vote in favor of the adoption of the merger agreement, and who otherwise comply with the applicable provisions of Section 262 of the DGCL, will be entitled to exercise appraisal rights under Section 262 of the DGCL in connection with the merger. A person having a beneficial interest in shares of Axsys common stock held of record in the name of another person, such as a broker, bank or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights.

 

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL, which is reprinted in its entirety as Annex D and incorporated into this proxy statement by reference. The following summary does not constitute any legal or other advice nor does it constitute a recommendation that stockholders exercise their appraisal rights. All references in Section 262 of the DGCL and in this summary to a “stockholder” or “holder” are to the record holder of the shares of Axsys common stock as to which appraisal rights are asserted.

 

Holders of shares of Axsys common stock who follow the procedures set forth in Section 262 of the DGCL will be entitled to have their shares of Axsys common stock appraised by the Delaware Court of Chancery and to receive, in lieu of the merger consideration, payment in cash of the “fair value” of their shares of Axsys common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, as determined by that court (described more fully below).

 

Under Section 262 of the DGCL, when a proposed merger of a Delaware corporation is to be submitted for adoption at a meeting of its stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders entitled to appraisal that appraisal rights are so available, and must include in this required notice a copy of Section 262 of the DGCL.

 

This proxy statement constitutes the required notice to the holders of the shares of Axsys common stock in respect of the merger, and Section 262 of the DGCL is attached to this proxy statement as Annex D . Any Axsys stockholder who wishes to exercise appraisal rights in connection with the merger or who wishes to preserve the right to do so should review the following discussion and Annex D carefully, because failure to comply timely and properly with the procedures specified in Annex D will result in the loss of appraisal rights under the DGCL. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Axsys common stock, Axsys believes that if a stockholder considers exercising such rights, such stockholder should seek the advice of legal counsel.

 

A holder of Axsys common stock wishing to exercise appraisal rights must not vote in favor of the adoption of the merger agreement, and must deliver to Axsys before the taking of the vote on the adoption of the merger agreement at the Axsys special meeting a written demand for appraisal of their shares of Axsys common stock. This written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the merger agreement. Neither abstaining from voting or failing to vote on the adoption of the merger agreement or instructing or effecting a vote against the adoption of the merger agreement will in

and of itself constitute a written demand for appraisal satisfying the requirements of Section 262 of the DGCL. This demand must reasonably inform Axsys of the identity of the stockholder and of the stockholder’s intent thereby to demand appraisal of their shares in connection with the merger. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the merger agreement at the special meeting of stockholders will constitute a waiver of appraisal rights. A holder of Axsys common stock wishing to exercise appraisal rights must be the record holder of the shares of Axsys common stock on the date the written demand for appraisal is made and must continue to hold the shares of Axsys common stock through the effective date of the merger. Accordingly, a holder of Axsys common stock who is the record holder of Axsys common stock on the date the written demand for appraisal is made, but who thereafter transfers the shares of Axsys common stock prior to the effective date of the merger, will lose any right to appraisal in respect of those shares of Axsys common stock.

 

A proxy card that is signed and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the merger agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote AGAINST adoption of the merger agreement, or abstain from voting on the adoption of the merger agreement .

 

Only a holder of record of Axsys common stock on the date of the making of a demand for appraisal will be entitled to assert appraisal rights for the shares of Axsys common stock registered in that holder’s name. A demand for appraisal in respect of shares of Axsys common stock should be executed by or on behalf of the holder of record, fully and correctly, as the holder’s name appears on the holder’s stock certificates, should specify the holder’s name and mailing address and the number of shares registered in the holder’s name and must state that the person intends to demand appraisal of the holder’s shares, in connection with the merger. If the shares of Axsys common stock are held of record by a person other than the beneficial owner, including a broker, fiduciary (such as a trustee, guardian or custodian), depository or other nominee, execution of the demand should be made in that capacity, and if the Axsys common stock is held of record by more than one holder as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint holders. An authorized agent, including an agent for one or more joint holders, may execute a demand for appraisal on behalf of a holder of record. The agent, however, must identify the record holder or holders and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record holder or holders. A record holder such as a broker, bank or nominee who holds Axsys common stock as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of Axsys common stock held for one or more beneficial owners while not exercising appraisal rights with respect to the Axsys common stock held for other beneficial owners. In this case, the written demand should set forth the number of shares of Axsys common stock as to which appraisal is sought. When no number of shares of Axsys common stock is expressly mentioned, the demand will be presumed to cover all Axsys common stock in brokerage accounts or other nominee forms held by such record holder, and those who hold shares in brokerage accounts or other nominee forms and who wish to exercise appraisal rights under Section 262 of the DGCL are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

 

All written demands for appraisal pursuant to Section 262 of the DGCL should be sent or delivered to Axsys Technologies, Inc., 175 Capital Boulevard, Suite 103, Rocky Hill, Connecticut 06067, Attention: Corporate Secretary.

 

At any time within 60 days after the effective date of the merger, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the merger agreement by delivering to Axsys, as the surviving corporation, a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the effective date of the merger will require written approval of the surviving corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Court deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the merger consideration offered pursuant to the merger agreement within 60 days after the effective date of the merger. If the

surviving corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s right to appraisal in accordance with the proviso in the immediately preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration being offered pursuant to the merger agreement.

 

Within 10 days after the effective date of the merger, Axsys, or the surviving company, will notify each former Axsys stockholder who has properly asserted appraisal rights under Section 262 of the DGCL, and has not voted in favor of the adoption of the merger agreement, of the date the merger became effective.

 

Within 120 days after the effective date of the merger, but not thereafter, the surviving company or any former Axsys stockholder who has complied with the statutory requirements summarized above and is entitled to appraisal rights under Section 262 of the DGCL may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the surviving corporation in the case of a petition filed by the stockholder, demanding a determination of the fair value of the shares of Axsys common stock that are entitled to appraisal rights. None of GD AIS, the surviving company or Axsys is under any obligation to and none of them has any present intention to file a petition with respect to the appraisal of the fair value of the shares of Axsys common stock, and stockholders seeking to exercise appraisal rights should not assume that the surviving company, Axsys or GD AIS will file a petition. Accordingly, it is the obligation of Axsys stockholders wishing to assert appraisal rights to take all necessary action to perfect and maintain their appraisal rights within the time prescribed in Section 262 of the DGCL.

 

Within 120 days after the effective date of the merger, any former Axsys stockholder who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving company a statement setting forth the aggregate number of shares of Axsys common stock not voted in favor of adoption of the merger agreement, and with respect to which demands for appraisal have been received and the aggregate number of former holders of these shares of Axsys common stock. The statement must be mailed within 10 days after a written request therefor has been received by the surviving company or within 10 days after expiration of the period for delivery of demands for appraisal under Section 262 of the DGCL, whichever is later. Notwithstanding the foregoing, a person who is the beneficial owner of shares of Axsys common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition or request from the surviving corporation the statement described in this paragraph.

 

If a petition for an appraisal is filed timely with the Delaware Court of Chancery by a former Axsys stockholder and a copy thereof is served upon the surviving company, the surviving company will then be obligated within 20 days of service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all former Axsys stockholders who have demanded appraisal of their shares of Axsys common stock and with whom agreements as to the value of their shares have not been reached. After notice to such former Axsys stockholders as required by the Delaware Court of Chancery, the Delaware Court of Chancery is empowered to conduct a hearing on such petition to determine those former Axsys stockholders who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the former Axsys stockholders who demanded appraisal of their shares of Axsys common stock to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceeding. If any former stockholder fails to comply with such direction, the Delaware Court of Chancery may dismiss the proceedings as to that former stockholder.

 

After determining which, if any, former Axsys stockholders are entitled to appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings, and the Delaware Court of Chancery will appraise such holders’ shares of Axsys common stock, determining their “fair value,” exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Delaware Court of Chancery 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. Axsys stockholders considering seeking appraisal should be aware that the fair value of their shares of Axsys common stock as determined under Section 262 of the DGCL could be more than, the same as, or less than the value of the consideration they would receive pursuant to the merger agreement if they did not seek appraisal of their shares of Axsys common stock and that the investment banking opinion as to fairness from a financial point of view included in this proxy statement is not necessarily an opinion as to fair value under Section 262 of the DGCL. Although Axsys believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the merger consideration. Neither GD AIS nor Axsys anticipates offering more than the applicable merger consideration to any stockholder of Axsys exercising appraisal rights, and each reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262 of the DGCL, the “fair value” of a share of Axsys common stock is less than the applicable merger consideration. The Delaware courts have stated that the methods which are generally considered acceptable in the financial community and otherwise admissible in court may be considered in the appraisal proceedings.

 

In determining “fair value,” the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc. , the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating 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 and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that in making this determination of fair value the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which could be ascertained as of the date of the merger which throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc. , the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger , the Delaware Supreme Court construed Section 262 of the DGCL to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

 

In addition, Delaware courts have decided that a stockholder’s statutory appraisal remedy may or may not be a dissenter’s exclusive remedy, depending on the factual circumstances. Depending on such circumstances and the court’s findings of fact and view of the equities, a court could grant additional remedies in the form of injunctive relief, money damages for breach of fiduciary duties, rescission or rescissory damages.

 

If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The costs of the appraisal action (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and levied upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a former Axsys stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by any former Axsys stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts used in the appraisal proceeding, be charged pro rata against the value of all of the shares of Axsys common stock entitled to appraisal.

 

Any holder of Axsys common stock who has duly demanded an appraisal in compliance with Section 262 of the DGCL will not, after the consummation of the merger, be entitled to vote the shares of Axsys common stock subject to this demand for any purpose or be entitled to the payment of dividends or other distributions on those shares of Axsys common stock (except dividends or other distributions payable to holders of record of Axsys common stock as of a record date prior to the effective date of the merger).

 

If any stockholder who properly demands appraisal of his, her or its Axsys common stock under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses, his, her or its right to appraisal, as provided in Section 262 of the DGCL, that stockholder’s shares of Axsys common stock will be deemed to have been converted at the effective date of the merger into the right to receive the merger consideration payable (without interest)

pursuant to the merger agreement. An Axsys stockholder will fail to perfect, or effectively lose, his, her or its right to appraisal if, among other things, no petition for appraisal is filed within 120 days after the effective date of the merger. In addition, as indicated above, a stockholder may withdraw his, her or its demand for appraisal in accordance with Section 262 of the DGCL and accept the merger consideration offered pursuant to the merger agreement.

 

Failure to follow strictly the steps required by Section 262 of the DGCL for perfecting appraisal rights will result in the loss of these rights, in which event the shares held by the Axsys stockholder will be deemed to have been converted into the right to receive the merger consideration payable (without interest) pursuant to the merger agreement.

 

Any stockholder wishing to exercise appraisal rights is urged to consult with legal counsel prior to attempting to exercise such rights.

 

Shares of Axsys common stock are currently authorized for listing on the Nasdaq Global Select Market under the symbol “AXYS.” Following the consummation of the merger, the listing of shares of Axsys common stock on the Nasdaq Global Select Market will terminate.

 

Certain Litigation Related to the Merger

 

Three class action lawsuits are pending in the Connecticut and Delaware state courts relating to the merger. Two such actions, filed on June 10 and June 25, 2009, respectively, are pending in the Superior Court for the Judicial District of Hartford, Connecticut, each on behalf of a putative class of Axsys stockholders and each naming Axsys, all of the members of the Board, GD AIS and General Dynamics as defendants. The Connecticut actions were consolidated on July 7, 2009, under the caption Chalverus v. Bershad , Case No. HHD-CV09-4044848-S. The third class action lawsuit relating to the merger is pending in the Delaware Chancery Court, captioned Holzer v. Bershad , Case No. 4702. The action, filed on behalf of a putative class of Axsys stockholders, names as defendants Axsys, all of the members of the Board, GD AIS and Merger Sub. The plaintiffs in the Connecticut and Delaware lawsuits generally allege that, in connection with approving the merger, the Axsys directors breached their fiduciary duties of care, good faith and fair dealing, loyalty and disclosure owed to the Axsys stockholders. The plaintiffs in the Connecticut case further allege that GD AIS and General Dynamics, and the plaintiff in the Delaware action further alleges that GD AIS and Merger Sub, have aided and abetted the Axsys directors in the breach of their fiduciary duties. In addition to monetary and/or rescissory damages with interest, the plaintiffs seek, among other things, a determination that the lawsuit is a proper class action and that the plaintiffs are proper class representatives, a declaration that the defendants breached their fiduciary duties to the plaintiffs and the other Axsys stockholders and/or aided and abetted such breaches, an accounting for all profits and any special benefits obtained by any defendants as a result of their breaches of their fiduciary duties, orders preliminarily and permanently enjoining the merger transaction, or rescinding or setting aside the merger if consummated, an award of the costs of the lawsuit, including reasonable attorneys’ and experts’ fees and other costs and expenses, and such other relief as the courts may find just and proper.

 

Based on our review of the complaints, we believe that these lawsuits and the underlying claims are without merit. Axsys intends to defend the lawsuits vigorously.

 

The following description of the merger agreement describes the material provisions of the merger agreement but does not purport to describe all of the terms of the merger agreement. The full text of the merger agreement is attached to this proxy statement as Annex A and incorporated by reference into this proxy statement. You are urged to read the merger agreement in its entirety because it is the legal document that governs the merger.

 

The provisions contained in the merger agreement are intended to govern the contractual rights and relationships, and to allocate risks, between Axsys and GD AIS with respect to the merger. The representations and warranties made by Axsys and GD AIS to one another in the merger agreement were negotiated between the parties, and any inaccuracies in the representations and warranties may be waived by the beneficiary of such representations and warranties. Moreover, the representations and warranties are qualified in a number of important respects, including through the use of exceptions for certain matters disclosed by the party that made the representations and warranties to the other party. None of the representations and warranties will survive the closing of the merger.

 

At the effective time of the merger, Merger Sub, an indirect, wholly owned subsidiary of General Dynamics, will merge with and into Axsys. The separate corporate existence of Merger Sub will cease and Axsys will continue as the surviving corporation and will become an indirect, wholly owned subsidiary of General Dynamics. Merger Sub was created solely for purposes of the merger and has no material assets or operations of its own.

 

The merger will become effective at the time a certificate of merger is filed with the Secretary of State of the State of Delaware or such later date or time as Axsys and GD AIS mutually agree and specify in the certificate of merger, which is referred to as the effective time of the merger.

 

The closing of the merger will take place on the second business day after satisfaction or waiver of the conditions described below under “— Conditions of the Merger” beginning on page 50 (other than those conditions that by their nature are to be satisfied at the closing but subject to the fulfillment or waiver of those conditions), unless otherwise agreed by Axsys and GD AIS.

 

The merger agreement provides that, at the effective time of the merger, each issued and outstanding share of Axsys common stock immediately prior to the effective time of the merger, subject to certain exceptions, will be converted into the right to receive $54.00 in cash, without interest. At that time, except with respect to dissenting shares as described below, each holder of shares of Axsys common stock will no longer have any rights with respect to such shares of common stock, except for the right to receive the merger consideration.

 

Each share of Axsys common stock held by Axsys (including as treasury stock), General Dynamics, GD AIS, Merger Sub and any of their respective subsidiaries immediately prior to the effective time of the merger automatically will be cancelled and will not be entitled to any merger consideration nor any other payment or distribution.

 

Only stock options and shares of restricted stock have been issued and are outstanding under Axsys’ stock incentive plan. At the effective time of the merger, each share of Axsys restricted common stock outstanding as of immediately prior to the effective time of the merger will become fully vested and then will be cancelled and converted into the right to receive $54.00 in cash, without interest, less any applicable withholding tax.

At the effective time of the merger, each option outstanding as of immediately prior to the effective time of the merger will become fully vested and then will be cancelled and converted into the right to receive the excess, if any, of $54.00 over the exercise price per share of the stock option multiplied by the number of shares of Axsys common stock subject to the stock option, without interest, less any applicable withholding tax. No consideration will be payable in respect of any options with an exercise price per share equal to or in excess of $54.00 as of immediately prior to the effective time of the merger, and all such options will be cancelled automatically at the effective time of the merger.

 

GD AIS will, or will cause the surviving corporation to, pay to holders of Axsys stock options and restricted shares the option consideration or restricted share consideration, as the case may be, payable as described above as soon as practicable after the effective time of the merger and in any case within five business days thereafter.

 

Shares of Axsys common stock held by any Axsys stockholder that neither votes in favor of the adoption of the merger agreement nor consents thereto in writing and that properly demands payment for its shares in compliance with the appraisal rights under Section 262 of the DGCL will not be converted into the right to receive the merger consideration. Axsys stockholders properly exercising appraisal rights will be entitled to payment as further described above under “The Merger — Appraisal Rights of Axsys Stockholders” beginning on page 33. However, if any Axsys stockholder withdraws his or her demand for appraisal (in accordance with Section 262 of the DGCL) or otherwise loses the right to appraisal, then that Axsys stockholder will not be paid in accordance with Section 262 of the DGCL, and the shares of Axsys common stock held by such Axsys stockholder will be converted as of the effective time of the merger into the right to receive the merger consideration, without interest.

 

Prior to the effective time of the merger, Axsys and GD AIS will mutually agree upon a disbursing agent to act as disbursing agent for the payment of the merger consideration. Prior to the effective time of the merger, GD AIS will deposit, or cause to be deposited, with the paying agent funds sufficient to pay the merger consideration.

 

Promptly after the effective time of the merger, but in no event later than two business days after the effective time of the merger, the disbursing agent will mail or deliver to all record holders of shares of Axsys common stock as of immediately prior to the effective time of the merger a letter of transmittal containing instructions on how to surrender stock certificates in exchange for the merger consideration. Following delivery of a stock certificate for cancellation along with a valid letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such certificate will be provided with, in exchange for the stock certificate, cash in an amount equal to the merger consideration in respect of the shares of Axsys common stock represented by such certificate, without interest. Each certificate representing shares of Axsys common stock that is surrendered will be cancelled. Do not send stock certificates with your proxy card.

 

Payment of the merger consideration may be made to a person other than the person in whose name the surrendered certificate is registered if:

 

 

Notwithstanding the foregoing, the procedures described above will not apply to restricted stock, which will be governed by the procedures set forth above under “Treatment of Stock Options and Restricted Stock.”

 

After the completion of the merger, no transfers of shares of Axsys common stock will be made on the transfer books of the surviving corporation.

 

If your Axsys common stock certificate has been lost, stolen or destroyed, you will be entitled to obtain payment of the merger consideration only by signing an affidavit (in form and substance reasonably acceptable to

GD AIS) to that effect and, if required by GD AIS or the disbursing agent, posting a bond in such an amount as GD AIS or the disbursing agent may direct as indemnity against claims by any other party related to your lost, stolen or destroyed Axsys common stock certificate.

 

From and after the effective time of the merger, the holders of certificates representing shares of Axsys common stock will cease to have any rights as stockholders of the surviving corporation, except as otherwise expressly provided in the merger agreement or by applicable law, and GD AIS will be entitled to treat each certificate that has not yet been surrendered for exchange solely as evidence of the right to receive the consideration into which the Axsys common stock formerly evidenced by such certificate has been converted pursuant to the merger.

 

The merger consideration paid in the merger to any Axsys stockholder will be subject to reduction for the withholding of any federal taxes payable by such stockholder.

 

The merger agreement contains a number of representations and warranties made by Axsys, including representations and warranties relating to:

 

 

The merger agreement also contains a number of representations and warranties by GD AIS and Merger Sub, including representations and warranties relating to:

 

 

Significant portions of the representations and warranties of Axsys, GD AIS and Merger Sub are qualified as to “materiality” or “material adverse effect.” Under the merger agreement, a material adverse effect means, when used in connection with Axsys, any effect, event, change, occurrence, state of facts, development or circumstance that (individually or in the aggregate) has had, or would reasonably be expected to have, a material adverse effect on (i) the condition (financial or otherwise), assets, liabilities, results of operations or business of Axsys and its subsidiaries, taken as a whole, or (ii) the ability of Axsys to perform its obligations under the merger agreement or to consummate the transactions by the termination date except, in the case of clause (i), any such effect resulting from any of the following:

 

 

 

except to the extent in the case of the first, second, third, fifth or sixth bullet points above that such change, effect, event, occurrence, state of facts, development or circumstance materially and disproportionately has had, or would reasonably be expected to have, a greater adverse impact on Axsys as compared to the adverse impact on the competitors of Axsys, but taking into account in determining whether there has been, or would reasonably be expected to be, a material adverse effect with respect to Axsys only such materially disproportionate greater adverse impact.

 

When used in connection with GD AIS or Merger Sub, a material adverse effect means any change, effect, occurrence, state of facts, development or circumstance that, individually or in the aggregate, has had, or would reasonably be expected to have, a material and adverse effect on the ability of GD AIS or Merger Sub to perform their respective obligations under the merger agreement or to consummate the transactions by the termination date.

 

We have agreed that during the period from the date of the merger agreement until the effective time of the merger or the earlier termination of the merger agreement, subject to certain exceptions, we shall conduct our business and cause to be conducted the businesses of our subsidiaries in the ordinary course of business and shall use reasonable best efforts to preserve intact our respective business organizations, keep available the services of our respective current officers and employees, preserve the goodwill of those having material business relationships with us and our subsidiaries, preserve our respective material relationships with customers, creditors and suppliers, maintain our respective books, accounts and records and comply in all material respects with applicable laws.

 

Without limiting the generality of the foregoing, except as expressly required by the merger agreement or as required by applicable law, without the prior written consent of GD AIS, from the date of the merger agreement until the effective time of the merger or the earlier termination of the merger agreement, Axsys shall not, and shall cause each of its subsidiaries not to:

 

 

 

 

From the date of the merger agreement to the effective time of the merger, Axsys has agreed to timely file with, or furnish to, the SEC all forms, statements, reports, certifications, schedules and other documents (including all exhibits and amendments thereto) required to be filed or furnished by it under the Exchange Act and/or the Securities Act. Axsys has agreed to furnish to GD AIS drafts of all such forms, statements, reports, certifications, schedules and other documents a reasonable time prior to filing with, or furnishing to, the SEC, and copies of any such forms, statements, reports, certifications, schedules and other documents that it files with, or furnishes to, the SEC on or after the date of the merger agreement.

 

Subject to certain limitations, we, GD AIS and Merger Sub have each agreed to use our reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things, necessary, proper or advisable to consummate and make effective, as promptly as

practicable prior to the termination date, the transactions in accordance with the terms of the merger agreement and the voting agreement, including:

 

 

In addition, we and GD AIS have each agreed to:

 

 

 

Axsys and GD AIS will each use its respective reasonable best efforts to obtain early termination of the applicable waiting period, if any, under all antitrust laws. Notwithstanding anything to the contrary contained in the merger agreement, nothing contained in the merger agreement will be deemed to require General Dynamics or GD AIS to enter into any agreement, consent decree or other commitment requiring General Dynamics, GD AIS or any of their subsidiaries to (1) divest, hold separate or otherwise limit the use of any assets of Axsys or its subsidiaries, or General Dynamics, GD AIS or their subsidiaries, (2) litigate, pursue or defend any action or proceeding challenging any of the transactions as violative of any antitrust laws, (3) other than filing fees required by the HSR Act, make any out of pocket expenditures of more than a de minimis amount or incur any obligations or liabilities, in each case, in order to comply with the provisions of the merger agreement or (4) take any other action that would, or would reasonably be expected to, materially and adversely affect General Dynamics, GD AIS or any of their subsidiaries (including after the effective time of the merger, the surviving corporation).

 

Further, we, GD AIS and Merger Sub, except as prohibited by any applicable representative of any applicable governmental authority, and subject to any applicable laws, have each agreed to:

 

 

Each party shall respond as promptly as reasonably practicable under the circumstances to any inquiries received from any antitrust authority for additional information or documentation and to all inquiries and requests received from any state attorney general or other governmental authority in connection with antitrust matters relating to the merger agreement or the merger, including the antitrust filings, and not extend any waiting period under the HSR Act or enter into any agreement with any antitrust authority not to consummate the merger without the prior written consent of the other parties.

 

GD AIS has agreed to cause Merger Sub to comply with all of Merger Sub’s obligations under or related to the merger agreement and the merger.

 

We have agreed to submit the merger agreement for adoption by Axsys stockholders at the special meeting as soon as possible after the date of the merger agreement. At the special meeting, GD AIS and Merger Sub have agreed to cause all shares owned by them and their respective subsidiaries to be voted in favor of the adoption of the merger agreement.

 

We have agreed to use our reasonable best efforts to solicit proxies from Axsys stockholders in favor of the adoption of the merger agreement and take all actions reasonably necessary or advisable to secure Axsys stockholder approval.

 

Our obligations will not be affected by the commencement, public proposal, public disclosure or communication to us of any acquisition proposal or superior proposal or any withdrawal of the recommendation by the Board. Subject to the Board withholding, withdrawing, qualifying or modifying its recommendation pursuant to and in accordance with specific provisions of the merger agreement, Axsys, acting through its Board, will make its Board recommendation at the special meeting.

 

Subject to certain limitations, prior to the effective time of the merger or the earlier termination of the merger agreement, Axsys will afford to GD AIS and its representatives such access to the officers, employees, agents, books, records and properties of Axsys and its subsidiaries as GD AIS may reasonably request. Any information provided will be held in confidence to the extent required by the provisions of the confidentiality agreement between us and General Dynamics.

 

We have agreed that we will not, and we will cause our subsidiaries and our and their directors, officers, employees and representatives (including any investment banker, attorney, accountant or other advisor or representative retained by us or any of our subsidiaries) not to directly or indirectly:

 

 

The merger agreement provides that if, at any time prior to the time that our stockholders adopt the merger agreement, we receive an unsolicited acquisition proposal which did not result from a breach of the merger

agreement, we may furnish information to, or enter into discussions or negotiations with, any person or entity that has made such unsolicited acquisition proposal if, and only to the extent that:

 

 

We shall as promptly as reasonably practicable (and in any event within two business days after receipt) notify GD AIS of the existence of any proposal or inquiry received by Axsys that has led to, or might reasonably be expected to lead to, any acquisition proposal, including a copy of any such proposal or inquiry, and the identity of the third party making the proposal or inquiry. We will keep GD AIS reasonably apprised of any material developments with respect to such proposal or inquiry (including providing GD AIS with copies of all drafts and versions of agreements relating to such acquisition proposal) and promptly make available to GD AIS any non-public information concerning Axsys or any of its subsidiaries furnished to any third party that has not previously been provided to GD AIS. We will give GD AIS prompt notice after any determination by our Board that an acquisition proposal is, or would reasonably be likely to result in, a superior proposal.

 

Immediately prior to execution of the merger agreement, we terminated all negotiations that may lead to an acquisition proposal between Axsys and parties other than GD AIS. We have agreed to use our commercially reasonable efforts to effect prompt return or destruction of all confidential information furnished to any third party in connection with a possible acquisition proposal during the 12-month period ending on the date of the merger agreement.

 

Prior to the effective time of the merger or the earlier termination of the merger agreement, the Board will not make a Board change of recommendation. However, at any time prior to adoption of the merger agreement by the Axsys stockholders, the Board may, in response to a material development or change in circumstances occurring or arising after the date of the merger agreement that was neither known to the Board nor reasonably foreseeable as of or prior to the date of the merger agreement (and not relating to any acquisition proposal), which is referred to as an intervening event, make a Board change of recommendation if the Board has concluded in good faith, after consultation with, and taking into account the advice of, its outside legal counsel, that, in light of such intervening event, the failure of the Board to make such Board change of recommendation would result in a breach of its fiduciary duties under applicable law. Axsys shall not be entitled to exercise its right to make such a Board change of recommendation unless it has:

 

 

At any time prior to the merger agreement being adopted by the Axsys stockholders, the Board may, in response to a superior proposal, cause Axsys to terminate the merger agreement and enter into a definitive agreement providing for the transactions contemplated by such superior proposal; provided, however, that Axsys shall not terminate the merger agreement unless:

 

 

Axsys also may not exercise its right to terminate the merger agreement in this manner until after the second business day following actual receipt by GD AIS of written notice from Axsys advising GD AIS that Axsys has received a superior proposal, specifying the material terms and conditions of the superior proposal and attaching the most current versions of the definitive agreement, all exhibits and other attachments thereto and agreements (such as stockholder agreements) ancillary thereto to effect such superior proposal, and identifying the party making such superior proposal and stating that the Board intends to cause Axsys to exercise its right to terminate the merger agreement (provided that prior to such termination taking effect, an amendment to the price or other material term of a superior proposal will require a new notice and a new two business day period with respect to the amended proposal). During such two business day period Axsys will negotiate in good faith with GD AIS so that GD AIS may propose an adjustment to the merger agreement for the purpose of causing the acquisition proposal to no longer be a superior proposal. In addition, Axsys may not exercise its right to terminate the merger agreement in this manner unless either (i) on or before the expiration of the two business day period following the actual receipt by GD AIS of any notice of a superior proposal, GD AIS does not make such adjustment in the terms and conditions of the merger agreement so that such acquisition proposal ceases to constitute a superior proposal or (ii) following receipt of such adjustment to the merger agreement within the two business day period, the Board concludes in good faith, after consultation with the Company’s outside legal counsel and after taking into consideration the adjusted merger agreement, that the superior proposal continues to be a superior proposal.

 

Nothing described above limits our ability to take actions to comply with our disclosure obligations under Rule 14e-2(a) of the Exchange Act with regard to an acquisition proposal or prohibits us from making such disclosure to our stockholders as, in the good faith judgment of the Board, after receiving advice from counsel, would be inconsistent with applicable law.

 

A Board change of recommendation, as used herein, means the Board (1) approves or recommends, or proposes to approve or recommend, any acquisition proposal, (2) causes or permits Axsys to enter into any letter of intent, agreement in principle, acquisition agreement or similar agreement with respect to any acquisition proposal, or (3) withdraws, amends or modifies in a manner adverse to GD AIS or Merger Sub, or publicly proposes to withdraw, amend or modify in a manner adverse to GD AIS or Merger Sub, the Board’s recommendation.

 

An acquisition proposal, as used herein, means, other than the merger, any inquiry, proposal, indication of interest or offer (whether written or oral) with respect to any direct or indirect: (1) purchase or sale of an equity interest (including by means of a tender or exchange offer) representing more than 15% of the voting power in Axsys or any of its significant subsidiaries; (2) merger, consolidation, other business combination, reorganization, recapitalization, share exchange, dissolution, liquidation or similar transaction involving Axsys or any of its significant subsidiaries; or (3) purchase or sale of assets, businesses, securities or ownership interests representing more than 15% of the consolidated assets of Axsys and its subsidiaries.

 

A superior proposal, as used herein, means a bona fide, written, unsolicited acquisition proposal (with all references to “15%” in the definition of acquisition proposal deemed to be “a majority” for the purposes of this definition) made by any person that is (1) not received in violation of the no solicitation provision of the merger agreement, (2) fully financed, (3) on terms that the Board determines in good faith, after consultation with Axsys’ financial and legal advisors, and in light of all relevant circumstances as the Board in good faith considers to be appropriate, are more favorable to Axsys and its stockholders than the merger from a financial point of view, and (4) is reasonably likely to be consummated according to its terms.

 

Each of Axsys and the Board will take all actions to cause the merger and related transactions (1) not to be subject to the requirements of any applicable takeover law and will take all necessary steps within its control to exempt the transactions from any applicable takeover law, and (2) to comply with any takeover provisions in the constituent documents of Axsys. If any takeover law or takeover provision becomes applicable to the merger or related transactions, each of Axsys and the Board will, upon the request of GD AIS or Merger Sub, use its best efforts to ensure that the merger or related transactions may be consummated as promptly as practicable on the terms contemplated by the merger agreement and otherwise to minimize the effect of such takeover law or takeover provision on the merger or related transactions.

 

Axsys will give GD AIS the opportunity to participate in the defense or settlement of any stockholder litigation against Axsys and/or its directors or executive officers relating to the merger or any related transactions, whether commenced prior to or after the execution and delivery of the merger agreement. Axsys has agreed that it will not settle or offer to settle in exchange for the payment of funds any litigation commenced prior to or after the date of the merger agreement against Axsys or any of its directors or executive officers by any stockholder of Axsys relating to the merger agreement, the merger or any other related transaction (unless such payment of funds will be made under Axsys’ applicable insurance policy), without the prior written consent of GD AIS (which consent will not be unreasonably withheld, conditioned or delayed).

 

The merger agreement requires that the indemnification provisions of the certificate of incorporation and bylaws of the surviving corporation as in effect as of the effective time of the merger not be amended, modified or repealed for six years from the effective time of the merger in any manner that would adversely affect the rights of any individual who immediately prior to the effective time of the merger was a director, officer or employee of Axsys unless required by law. GD AIS also has agreed to indemnify the present and former employees, officers and directors of Axsys and to cause the surviving corporation to provide directors’ and officers’ liability insurance coverage for the benefit of the present and former officers and directors of Axsys that will contain substantially equivalent scope and amount of coverage as the policy maintained by Axsys immediately prior to the effective time of the merger, subject to certain limitations on the amount of premiums required to be paid for such insurance coverage.

 

GD AIS has agreed to provide for the employees and former employees of Axsys and its subsidiaries as of the effective time of the merger, referred to as the covered employees, employee benefits and compensation plans (including with respect to salary and bonus, but not equity awards), programs and arrangements no less favorable, in the aggregate, than those benefits provided by Axsys or its subsidiaries, as the case may be, immediately prior to the effective time of the merger and for a period of 12 months thereafter.

 

GD AIS has further agreed to:

 

 

If Axsys’ or any of its subsidiaries’ medical, vision and/or dental benefit plans for covered employees are terminated prior to the end of a plan year, covered employees and their dependents who are then participating in a deductible-based medical, vision and/or dental benefit plan sponsored by Axsys or any of its subsidiaries will be given credit for deductibles, co-payments and eligible out-of-pocket expenses incurred toward deductibles, co-payments and out-of-pocket maximums during the portion of the plan year preceding the termination date (or transfer date) in a comparable deductible-based medical, vision and/or dental benefit plan of General Dynamics, GD AIS or any of their subsidiaries for the corresponding Axsys benefit plan year.

 

GD AIS and Axsys, as the surviving corporation, shall honor, in accordance with their respective terms, all vested or accrued benefit obligations to, and contractual rights of, covered employees, including any benefits or rights arising as a result of the merger.

 

The merger agreement contains additional agreements between us and GD AIS relating to, among other things:

 

 

The obligation of each party to effect the merger is subject to the satisfaction or written waiver on or before the closing date of each of the following conditions:

 

 

The obligation of Axsys to effect the merger is also subject to the satisfaction or written waiver of the following conditions:

 

 

The obligation of GD AIS and Merger Sub to effect the merger is also subject to the satisfaction or written waiver of the following conditions:

 

 

 

We and GD AIS can provide no assurance that all of the conditions precedent to the merger will be satisfied or waived by the party permitted to do so.

 

We and GD AIS may mutually agree in writing, at any time before the effective time of the merger, to terminate the merger agreement. Also, either GD AIS or we may terminate the merger agreement, without the consent of the other, before the effective time of the merger if:

 

 

GD AIS may terminate the merger agreement before the effective time of the merger if:

 

 

Axsys may terminate the merger agreement if:

 

 

Axsys must pay to GD AIS a $23.6 million termination fee, referred to as the termination fee, and reimburse up to an aggregate of $2.0 million for the documented out-of-pocket expenses of GD AIS and General Dynamics incurred in connection with the merger, referred to as the expense reimbursement, if the merger agreement is terminated (1) by Axsys because Axsys terminates the merger agreement to enter into a definitive agreement with respect to a superior proposal; or (2) by GD AIS because the Board fails to include the Board’s recommendation in this proxy statement, a Board change of recommendation occurs, or the Board resolves to do either of the foregoing.

 

If GD AIS terminates the merger agreement because Axsys breaches any representation, warranty, covenant or agreement set forth in the merger agreement (other than with respect to Axsys’ no solicitation obligations), which breach results in the failure of certain conditions of the merger being satisfied, and such breach is not cured or is incapable of being cured within 15 days after GD AIS gives Axsys written notice of such breach, then Axsys will pay to GD AIS the expense reimbursement. If there shall have existed at or prior to the time of such termination an acquisition proposal (whether or not such offer or proposal has been rejected or has been withdrawn prior to the time of such termination) and within 12 months after such termination, Axsys or any of its subsidiaries accepts a written offer for, or otherwise enters into an agreement to consummate or consummates, an acquisition proposal, then upon the signing of a definitive agreement relating to such acquisition proposal, or, if no such agreement is signed, then upon consummation of any such acquisition proposal, in addition to the expense reimbursement Axsys will pay to GD AIS the termination fee.

 

If the merger agreement is terminated because (i) the merger has not been consummated on or before the termination date or (ii) for five days or more Axsys stockholders dissenting from the merger constitute more than 12% of the outstanding shares of Axsys common stock, then (1) if prior to such termination there exists an acquisition proposal (whether or not such offer or proposal has been rejected or has been withdrawn prior to the time of such termination) and (2) within 12 months after such termination, Axsys or any of its subsidiaries accepts a written offer for, or otherwise enters into an agreement to consummate or consummates, an acquisition proposal, then upon the signing of a definitive agreement relating to such acquisition proposal, or, if no such agreement is signed, then upon consummation of any such acquisition proposal, Axsys will pay to GD AIS the expense reimbursement and the termination fee.

 

In the event that GD AIS terminates the merger agreement because adoption of the merger agreement shall not have been obtained at the special meeting or at any adjournment or postponement of the special meeting, Axsys will pay to GD AIS the expense reimbursement.

 

If the merger agreement is terminated by either Axsys or GD AIS in accordance with its terms, the merger agreement will immediately become void and there will be no liability on the part of any party or their affiliates, directors, officers or stockholders, except for (i) payment of the termination fee and/or expense reimbursement by Axsys in certain circumstances (ii) the survival of certain provisions of the agreement, including those relating to press releases, the effect of termination and the termination fee, and (iii) nothing shall relieve Axsys, on the one had, or GD AIS or Merger Sub, on the other hand, from liability for fraud or any willful or intentional breach of the merger agreement or any willful or intentional misrepresentation in the merger agreement.

 

At any time before the effective time of the merger, the merger agreement may be amended by the parties at any time by an instrument in writing signed on behalf of each of the parties. However, after the adoption of the merger agreement at the special meeting no such amendment shall be made or given that requires further approval of Axsys stockholders under the DGCL unless the required approval is obtained.

 

At any time before the effective time of the merger, any party may extend the time for the performance of any of the obligations or acts of the other party, waive any inaccuracies in any representations or warranties or waive compliance with any of the covenants or conditions contained in the merger agreement. Any agreement on the part of either party to any such extension or waiver shall be valid only if in a written instrument signed on behalf of such party.

 

In connection with the merger agreement, Mr. Bershad and a holding corporation controlled by Mr. Bershad, who are referred to as the voting agreement stockholders and collectively own approximately 14.3% of the shares of our common stock entitled to vote at the special meeting, as of the close of business on the record date, entered into a voting agreement with GD AIS and Merger Sub. The following description of the voting agreement describes the material provisions of the voting agreement but does not purport to describe all of the terms of the voting agreement. The full text of the voting agreement is attached to this proxy statement as Annex B and incorporated by reference into this proxy statement. You are urged to read the voting agreement in its entirety because it is a legal document that relates to the rights among the voting agreement stockholders, GD AIS, and Merger Sub and may affect whether the vote required to adopt the merger agreement will be obtained.

 

The voting agreement stockholders have agreed to vote (or cause to be voted) all of their shares of Axsys common stock for the proposal to adopt the merger agreement at the special meeting or any adjournment thereof or in any other circumstance upon which a vote or other approval with respect to the proposal to adopt the merger agreement is sought or required.

 

In addition, the voting agreement stockholders have agreed (unless otherwise directed by GD AIS) to vote (or cause to be voted), at any Axsys stockholders meeting or any adjournment thereof or in any other circumstance in which their vote is sought or required, all of their shares of Axsys common stock against:

 

 

The voting agreement stockholders also appointed GD AIS and Merger Sub during and for the term of the voting agreement, as their true and lawful attorney-in-fact and proxy to vote, express consent or dissent, or otherwise utilize such voting power with respect to the voting agreement stockholders’ shares in connection with any proposals relating to the above-listed actions.

 

Pursuant to the terms of the voting agreement, the voting agreement stockholders irrevocably and unconditionally waived, and agreed to prevent the exercise of, any rights of appraisal, any dissenters’ rights and any similar rights relating to the merger or the related transactions that they may directly or indirectly have by virtue of the ownership of their shares of Axsys common stock.

 

The voting agreement stockholders have agreed that, from the date of the voting agreement and until the earlier of the effective time of the merger or the termination of the merger agreement, they will not, directly or indirectly:

 

 

 

The voting agreement will terminate on the earlier of: (i) the mutual written agreement of the voting agreement stockholders and GD AIS; (ii) in the event the merger is consummated, the effective time of the merger; or (iii) the date on which the merger agreement is terminated pursuant to its terms. Certain general provisions will survive the termination and no party will be relieved for any breach of the voting agreement.

MARKET PRICE OF AXSYS COMMON STOCK

 

Shares of Axsys common stock are listed for trading on the Nasdaq Global Select Market under the Symbol “AXYS.” The following table sets forth, for the fiscal quarters indicated, the high and low sales prices per share of Axsys common stock. No dividends were declared on the shares of Axsys common stock during the period covered by the table.

 

 

The closing price of the shares of Axsys common stock on the Nasdaq Global Select Market on June 3, 2009, the trading day prior to the announcement of the merger, was $50.00 per share. On August 3, 2009, the most recent practicable date before this proxy statement was printed, the closing price for the shares of Axsys common stock on the Nasdaq Global Select Market was $53.75 per share.

 

The information presented below regarding beneficial ownership of shares of our common stock is based upon representations made to us by our directors and officers, and is not necessarily indicative of beneficial ownership for any other purpose. In the table below, we have deemed a person to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose of or direct the disposition of the security. Beneficial ownership includes any security with respect to which a person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. The table sets forth as to each current director and each named executive officer: (1) the number of shares of common stock, and (2) the percent of total shares of common stock outstanding, that are beneficially owned. As of August 3, 2009, there were 11,624,837 shares of common stock outstanding.

Security Ownership of Directors and Named Executive Officers

 

 

 

 

 

 

 

 

 

 

Security Ownership of Certain Owners

 

Axsys knows of no person who beneficially owned, within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, more than five percent of the common stock outstanding, except for Mr. Bershad and except as set forth below. As of August 3, 2009, 11,624,837 shares of Axsys common stock were outstanding.

 

 

 

 

 

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy this information at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. You also may obtain copies of this information by mail from the Public Reference Room at the address set forth above, at prescribed rates. In addition, the SEC maintains a website that contains reports, proxy statements and other information about issuers like Axsys who file electronically with the SEC. The address of that site is http://www.sec.gov. Axsys SEC filings are also available, free of charge, on our website, at http://www.axsys.com.

 

You should rely only on the information contained in this proxy statement. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated August 4, 2009. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date. Neither the mailing of this proxy statement to Axsys stockholders nor the payment of cash in the merger shall create any implication to the contrary.

 

We incorporate by reference into this proxy statement the documents listed below and any future filings we make with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, including any filings after the date of this document until the date of the special meeting. The information incorporated by reference is an important part of this proxy statement. Any statement in a document incorporated by reference into this document will be deemed to be modified or superseded for purposes of this document to the extent a statement contained in this or any other subsequently filed document that is incorporated by reference into this document modifies or supersedes such statement. Any statement so modified or superseded will be not deemed, except as so modified or superseded, to constitute a part of this document.

 

Securities and Exchange Commission Filings

 

 

THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K, ITS SCHEDULES AND LIST OF ITS EXHIBITS. REQUESTS SHOULD BE SENT TO AXSYS TECHNOLOGIES, INC., 175 CAPITAL BOULEVARD, SUITE 103, ROCKY HILL, CONNECTICUT 06067, ATTENTION: CORPORATE SECRETARY.

 

Axsys does not currently expect to hold an annual meeting of stockholders in 2010 because Axsys will not be a separate public company after the merger is consummated. If the merger is not consummated and such a meeting is held, stockholders who intend to present proposals at the next annual meeting of stockholders, and who wish to have such proposals included in the proxy statement and form of proxy for such meeting, pursuant to the mechanism provided by SEC rules, must submit such proposals in writing to the Corporate Secretary of Axsys Technologies, Inc., 175 Capital Boulevard, Suite 103, Rocky Hill, Connecticut 06067, and such notice must be received no later than November 21, 2009.

 

Stockholders who cannot or do not wish to use the mechanism provided by SEC rules for proposing a matter for action at the next annual meeting to be provided in a proxy statement must notify Axsys in writing of the proposal and the information required by the provisions of Axsys’ By-Laws dealing with stockholder proposals. The notice must be submitted in writing to Axsys generally not less than 60 days nor more than 90 days in advance of an annual meeting. If the merger is not consummated and such meeting is to be held, it is presently anticipated that next year’s annual meeting will be held on May 6, 2010 and, accordingly, any stockholder proposal for next year’s annual meeting submitted to Axsys on or between February 5, 2010 and March 7, 2010 will be considered submitted on a timely basis. Axsys reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements. A copy of Axsys’ By-Laws that describes the advance-notice procedures can be obtained from the Corporate Secretary of Axsys.

 

Axsys Technologies, Inc.

 

August 4, 2009

 

ANNEX A

 

EXECUTION COPY

 

 

AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 4, 2009
BY AND AMONG
GENERAL DYNAMICS ADVANCED INFORMATION SYSTEMS, INC.,
VISION MERGER SUB, INC.
AND
AXSYS TECHNOLOGIES, INC.

 

TABLE OF CONTENTS

 

 

This AGREEMENT AND PLAN OF MERGER (this “Agreement” ), dated as of June 4, 2009, is by and among General Dynamics Advanced Information Systems, Inc., a Delaware corporation (“Parent”) , Vision Merger Sub, Inc., a Delaware corporation (“Merger Sub”) , and Axsys Technologies, Inc., a Delaware corporation (the “Company” ).

 

RECITALS

 

WHEREAS, the Board of Directors of each of the Company, Parent and Merger Sub has approved this Agreement and deemed it advisable and in the best interests of their respective companies and stockholders to consummate the merger of Merger Sub with and into the Company (the “Merger” ) upon the terms and subject to the conditions set forth herein, and have unanimously adopted resolutions adopting, approving and declaring the advisability of this Agreement, the Merger and the other transactions contemplated hereby;

 

WHEREAS, as a condition and inducement to Parent and Merger Sub entering into this Agreement, certain stockholders of the Company are entering into a Voting Agreement with Parent and Merger Sub simultaneously with the execution and delivery of this Agreement in substantially the form attached hereto as Exhibit A (the “Voting Agreement” ), whereby, among other things, such stockholders have agreed, upon the terms and subject to the conditions set forth therein, to vote their shares of Company Common Stock in favor of adoption of this Agreement; and

 

WHEREAS, pursuant to the Merger, shares of the common stock, par value $.01 per share, of the Company ( “Company Common Stock” ) (all such shares of Company Common Stock being hereinafter referred to as the “Shares” ), will be, except as otherwise provided herein, converted into the right to receive the Merger Consideration (as defined herein) in the manner set forth herein, and the Company will become an indirect, wholly-owned subsidiary of Guarantor.

 

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained in this Agreement, and such other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, on the terms and subject to the conditions set forth in this Agreement, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

 

ARTICLE I

 

Definitions; Interpretation

 

1.01  Definitions.   This Agreement uses the following definitions:

 

“Acquisition Proposal” means, other than the Transactions, any inquiry, proposal, indication of interest or offer (whether written or oral) with respect to any direct or indirect: (a) purchase or sale of an equity interest (including by means of a tender or exchange offer) representing more than fifteen percent (15%) of the voting power in the Company or any of its Significant Subsidiaries; (b) merger, consolidation, other business combination, reorganization, recapitalization, share exchange, dissolution, liquidation or similar transaction involving the Company or any of its Significant Subsidiaries; or (c) purchase or sale of assets, businesses, securities or ownership interests (including the securities of any Significant Subsidiary of the Company) representing more than fifteen percent (15%) of the consolidated assets of the Company and its Subsidiaries.

 

“Agreement” has the meaning assigned in the Preamble.

 

“Anti-Bribery Laws” has the meaning assigned in Section 3.01(j)(5) .

 

“Antitrust Authorities” means the Antitrust Division, the FTC and any other Governmental Authority of any other jurisdiction (whether United States, foreign or multinational) responsible for implementing the Antitrust Laws.

 

“Antitrust Division” has the meaning assigned in Section 4.04(b) .

“Antitrust Filings” has the meaning assigned in Section 4.04(b) .

 

“Antitrust Laws” means the HSR Act and any other applicable competition, merger control, antitrust or similar Laws.

 

“Benefit Arrangement” means, with respect to the Company, each of the following (a) under which any of its employees, former employees or any of its directors has any right to benefits, (b) that is sponsored, maintained or contributed to by it or its ERISA Affiliates or (c) under which it or its ERISA Affiliates has any liability: each “employee benefit plan” (within the meaning of Section 3(3) of ERISA) and each stock purchase, stock option, equity-based grants, severance, employment, post-employment, change-in-control, fringe benefit, bonus, incentive, retirement, deferred compensation, welfare, paid time off benefits and other employee benefit plan, agreement, program, policy or other arrangement (with respect to any of the preceding, whether or not subject to ERISA).

 

“Business Combination Law” means Section 203 of the DGCL.

 

“Business Day” means any day other than a day on which banks in the State of Delaware are required or authorized to be closed.

 

“Certificate” means a certificate issued by the Company to a Company Stockholder representing Shares held by such Company Stockholder.

 

“Certificate of Merger” has the meaning assigned in Section 2.03 .

 

“Closing” has the meaning assigned in Section 2.02 .

 

“Closing Date” has the meaning assigned in Section 2.02 .

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company” has the meaning assigned in the Preamble.

 

“Company Board” means the Board of Directors of the Company.

 

“Company Board Change of Recommendation” has the meaning assigned in Section 4.09(f) .

 

“Company Board Recommendation” has the meaning assigned in Section 3.01(c)(2) .

 

“Company Common Stock” has the meaning assigned in the Recitals.

 

“Company IP Assets” has the meaning assigned in Section 3.01(p)(1) .

 

“Company Preferred Stock” means the preferred stock, par value $.01 per share, of the Company.

 

“Company Regulatory Filings” has the meaning assigned in Section 3.01(g)(1) .

 

“Company Restricted Share” has the meaning assigned in Section 2.09(a)(2) .

 

“Company Restricted Share Consideration” has the meaning assigned in Section 2.09(a)(2) .

 

“Company Stock Option” has the meaning assigned in Section 2.09(a)(1) .

 

“Company Stock Option Consideration” has the meaning assigned in Section 2.09(a)(1) .

 

“Company Stock Plan” means the Company’s Amended and Restated Long-Term Stock Incentive Plan.

 

“Company Stock-Based Award” means each right of any kind, whether vested or unvested, contingent or accrued, to acquire or receive Company Common Stock (other than Company Stock Options or Company Restricted Shares) or to receive benefits measured by the value of a number of Shares, that may be held, awarded, outstanding, credited, payable or reserved for issuance under the Company Stock Plan.

 

“Company Stock-Based Award Consideration” has the meaning assigned in Section 2.09(a)(3) .

 

“Company Stockholder Approval” has the meaning assigned in Section 3.01(b) .

 

“Company Stockholders” has the meaning assigned in Section 3.01(c)(2) .

“Confidentiality Agreement” means the letter agreement, dated April 13, 2009, by and between Guarantor and the Financial Advisor (as agent-in-fact for the Company).

 

“Constituent Documents” means the charter or articles or certificate of incorporation and bylaws of a corporation, the certificate of partnership and partnership agreement of a general or limited partnership, the certificate of formation and limited liability company agreement of a limited liability company, the trust agreement of a trust and the comparable documents of other legal entities.

 

“Covered Employees” has the meaning assigned in Section 5.02(a) .

 

“DGCL” means the General Corporation Law of the State of Delaware.

 

“Disbursing Agent” has the meaning assigned in Section 2.08(a) .

 

“Disclosure Schedule” has the meaning assigned in Section 8.06 .

 

“Dissenting Shares” has the meaning assigned in Section 2.10(a) .

 

“Dissenting Stockholders” has the meaning assigned in Section 2.10(a) .

 

“Effective Time” has the meaning assigned in Section 2.03 .

 

“Environmental Laws” means all applicable Laws regulating, relating to, or imposing liability or standards of conduct concerning pollution, protection of the environment or worker safety.

 

“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” has the meaning assigned in Section 3.01(m)(3) .

 

“Exception Shares” means, collectively, shares of Company Common Stock owned or held by the Company, Guarantor, Parent, Merger Sub and any of their respective Subsidiaries, including any such shares held as treasury stock of the Company; provided, however, that Shares of Company Common Stock owned beneficially or held of record by any plan, program or arrangement sponsored or maintained for the benefit of any current or former employee of the Company, Parent, Merger Sub or any of their respective Subsidiaries, will not be deemed to be Exception Shares, regardless of whether the Company, Guarantor, Parent, Merger Sub or any such Subsidiary has the power, directly or indirectly, to vote or control the disposition of such shares.

 

“Exchange Act” means the U.S. Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.

 

“Expense Reimbursement” has the meaning assigned in Section 7.03(a) .

 

“Financial Advisor” has the meaning assigned in Section 3.01(t) .

 

“Financial Statements” has the meaning assigned in Section 3.01(g)(1) .

 

“FTC” has the meaning assigned in Section 4.04(b) .

 

“GAAP” means generally accepted accounting principles in the United States.

 

“Government Contract” has the meaning assigned in Section 3.01(k)(3) .

 

“Governmental Authority” means any court, administrative agency, bureau, board, department, official, political subdivision, tribunal or commission or other governmental authority or instrumentality, whether domestic or foreign.

 

“Grant Date” has the meaning assigned in Section 3.01(e)(4) .

 

“Guarantor” means General Dynamics Corporation, a Delaware corporation.

 

“Hazardous Materials” means any hazardous or toxic substances, materials, wastes, pollutants or contaminants, including those defined or regulated as such under any Environmental Law, and any other substance the presence of which may give rise to liability under any Environmental Law.

“HSR Act” means the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder.

 

“HSR Filing” has the meaning assigned in Section 4.04(b) .

 

“Import and Export Control Laws” has the meaning assigned in Section 3.01(j)(4) .

 

“Indemnified Party” has the meaning assigned in Section 5.01(b) .

 

“Insurance Policy” has the meaning assigned in Section 3.01(r) .

 

“Intellectual Property” means all of the following in any jurisdiction throughout the world: (a) patents, patent applications, patent disclosures and inventions; (b) trademarks, service marks, trade dress, trade names, corporate names and Internet domain names; (c) copyrights; (d) registrations for and applications to register any of the foregoing; (e) computer software (other than commercial off-the-shelf software); (f) trade secrets, confidential information and know-how; and (g) any other intellectual property rights.

 

“Intervening Event” has the meaning assigned in Section 4.09(f) .

 

“IP Assets” has the meaning assigned in Section 3.01(p)(1) .

 

“IP Licenses” has the meaning assigned in Section 3.01(p)(4) .

 

“Knowledge” means or has reference to, respectively, the actual knowledge of the executive officers of the Company or Parent, as the case may be, after reasonable inquiry and investigation with respect to the matter(s) referenced.

 

“Laws” means all federal, state, local and foreign laws, statutes, rules, regulations, ordinances, codes, licenses, permits, Orders or requirements issued, enacted, adopted, promulgated or otherwise implemented or put into effect by any Governmental Authority (including common law or the interpretation thereof).

 

“Leased Property” has the meaning assigned in Section 3.01(q)(2) .

 

“Leases” has the meaning assigned in Section 3.01(q)(2) .

 

“Lien” means any mortgage, pledge, security interest, lien or similar encumbrance.

 

“Matching Agreement” has the meaning assigned in Section 4.09(g) .

 

“Material Adverse Effect” means:

 

(a) with respect to the Company, any change, effect, event, occurrence, state of facts, development or circumstance that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on, (i) the condition (financial or otherwise), assets, liabilities, results of operations or business of the Company and its Subsidiaries, taken as a whole, or (ii) the ability of the Company to perform its obligations under this Agreement or to consummate the Transactions by the Termination Date, excluding in each case solely for purposes of clause (i) the impact of (1) changes after the date of this Agreement in GAAP or regulatory accounting requirements applicable to U.S. publicly owned business organizations generally or changes after the date of this Agreement in Laws, (2) changes or developments in general economic or political conditions, including acts of war (whether or not declared), sabotage, insurrection, terrorism and armed hostilities, (3) changes in any financial, banking, credit or securities markets (including any disruption thereof), (4) changes in the stock price or trading volume of the Shares (it being understood that the facts or circumstances giving rise to or contributing to such change in stock price or trading volume, if not otherwise excluded under this clause (a), may be taken into account in determining whether there has been, or would reasonably be expected to be, a Material Adverse Effect with respect to the Company), (5) general changes in industries in which the Company operates, (6) natural disasters, (7) any failure of the Company to meet revenue, backlog or earnings projections or forecasts (whether internal or published by the Company or third parties) or any decline in the Company’s credit rating (it being understood that the facts or circumstances giving rise to or contributing to such failure to meet revenue, backlog or earnings projections or forecasts or decline in the Company’s credit rating, if not otherwise excluded under this clause (a), may be taken into account in

determining whether there has been, or would reasonably be expected to be, a Material Adverse Effect with respect to the Company), (8) changes resulting from the announcement of this Agreement or the consummation of the Transactions or (9) any effect arising out of any action taken or omitted to be taken by the Company with the prior written consent of Parent or Merger Sub, except to the extent in the case of clauses (1), (2), (3), (5) or (6) that such change, effect, event, occurrence, state of facts, development or circumstance materially and disproportionately has had, or would reasonably be expected to have, a greater adverse impact on the Company and its Subsidiaries, taken as a whole, as compared to the adverse impact on the competitors of the Company and its Subsidiaries, but taking into account in determining whether there has been, or would reasonably be expected to be, a Material Adverse Effect with respect to the Company only such materially disproportionate greater adverse impact; and

 

(b) with respect to Parent or Merger Sub, any change, effect, occurrence, state of facts, development or circumstance that, individually or in the aggregate, has had, or would reasonably be expected to have, a material and adverse effect on the ability of Parent or Merger Sub to perform their respective obligations under this Agreement or to consummate the Transactions by the Termination Date.

 

 

“Material Contract” has the meaning assigned in Section 3.01(k)(1) .

 

“Material Customers” has the meaning assigned in Section 3.01(v) .

 

“Material Suppliers” has the meaning assigned in Section 3.01(v) .

 

“Merger” has the meaning assigned in the Recitals.

 

“Merger Consideration” has the meaning assigned in Section 2.07(a) .

 

“Merger Sub” has the meaning assigned in the Preamble.

 

“Merger Sub Common Stock” means the common stock, par value $.01 per share, of Merger Sub.

 

“Modified Superior Proposal” has the meaning assigned in Section 4.09(g) .

 

“Nasdaq” means The Nasdaq Stock Market, Inc.

 

“Notice of Superior Proposal” has the meaning assigned in Section 4.09(g) .

 

“Order” means, with respect to any Person, any order, writ, judgment, injunction, decree, ruling, stipulation or award by, or subject to, any Governmental Authority or arbitrator that is binding upon or applicable to such Person or its property.

 

“Ordinary Course of Business” means an action taken or not taken with respect to the business of the Company and its Subsidiaries that is consistent with the reasonably recent past practices of the Company and its Subsidiaries (including with respect to quantity, nature, magnitude and frequency) and is taken in the ordinary course of the normal and recurring operations of the Company and its Subsidiaries.

 

“Parent” has the meaning assigned in the Preamble.

 

“Parent Approval” has the meaning assigned in Section 3.02(b) .

 

“Party” means Parent, Merger Sub or the Company, as the context requires.

 

“Permitted Lien” means any Lien (a) disclosed in the consolidated financial statements of the Company and its Subsidiaries or the notes thereto set forth in the most recent Company Regulatory Filing publicly available at least one Business Day prior to the date of this Agreement or securing liabilities reflected on such financial statements, (b) incurred in the Ordinary Course of Business since the date of such financial statements and which is not material in amount or nature, (c) for Taxes not yet due and payable or that are being contested in good faith and reserved for on such financial statements in accordance with GAAP, or (d) that is a carrier’s, warehousemen’s, mechanic’s, materialmen’s, repairmen’s, landlord’s or other similar lien arising in the Ordinary Course of Business and which is not material in amount or nature.

 

“Person” means any individual, corporation, limited liability company, partnership, association, joint-stock company, business trust or unincorporated organization and is intended to be interpreted broadly.

“Previously Disclosed” means (a) information set forth by the Company in the applicable paragraph of the Disclosure Schedule, or any other paragraph of the Disclosure Schedule (so long as it is reasonably clear from the context that the disclosure in such other paragraph of the Disclosure Schedule is also applicable to the Section of this Agreement in question) or (b) except with respect to Sections 3.01(a) through 3.01(f) and Section 3.01(s) , information set forth in those Company Regulatory Filings (including any schedules and exhibits thereto) filed with the SEC and publicly available during the period beginning on December 31, 2007 and ending on the Business Day prior to the date of this Agreement, so long as it is reasonably clear from the context that the disclosure in those Company Regulatory Filings is applicable to the Section of this Agreement in question (but not including any disclosures set forth in any section of any such Company Regulatory Filing entitled “Risk Factors”, “Cautionary Factors That May Affect Future Results”, “Forward-Looking Statements” or “Qualitative and Quantitative Disclosures About Market Risk” or any other disclosures included in any such Company Regulatory Filing that are general cautionary, predictive or forward-looking in nature), without giving effect to any amendment to any such Company Regulatory Filing filed on or after the date of this Agreement.

 

“Proxy Statement” means the proxy statement, including the form of proxy, the letter to stockholders and the notice of meeting, as the case may be, to be provided to the Company Stockholders for the purpose of obtaining the Company Stockholder Approval in connection with the Merger (including any amendments or supplements thereto) and any schedules required to be filed with the SEC in connection therewith.

 

“Representatives” means, with respect to any Person, such Person’s directors, officers, employees, legal or financial advisors, accountants, representatives and agents.

 

“Rights” means subscriptions, options, warrants, calls, convertible securities, rights of first refusal, preemptive rights, or other similar rights, agreements or commitments relating to the issuance of capital stock obligating the Company or any of its Subsidiaries to (a) issue, transfer or sell any shares of capital stock or other equity interests of the Company or any of its Subsidiaries or securities convertible into or exchangeable for such shares or equity interests, (b) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement, arrangement or commitment to repurchase, (c) redeem or otherwise acquire any such shares of capital stock or other equity interests or (d) provide an amount of funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, the Company or any of its Subsidiaries.

 

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Securities Act” means the U.S. Securities Act of 1933 and the rules and regulations promulgated thereunder.

 

“Shares” has the meaning assigned in the Recitals.

 

“Stockholders’ Meeting” has the meaning assigned in Section 4.05(a) .

 

“Subsidiary” and “Significant Subsidiary” have the respective meanings ascribed to those terms in Rule 1-02 of Regulation S-X promulgated by the SEC.

 

“Superior Proposal” means a bona fide written Acquisition Proposal (with all references to “fifteen percent (15%)” in the definition thereof deemed to be “a majority” for the purposes of this definition) made by any Person that (a) is not received in violation of Section 4.09 , (b) is fully financed, (c) is on terms that the Company Board determines in good faith, after consultation with the Company’s financial and legal advisors, and in light of all relevant circumstances as the Company Board in good faith considers to be appropriate (including the conditionality, regulatory aspects, time likely to be required to consummate such Acquisition Proposal and the likelihood of success of such Acquisition Proposal), are more favorable to the Company and its stockholders from a financial point of view than the Transactions, and (d) is reasonably likely to be consummated according to its terms.

“Surviving Corporation” has the meaning assigned in Section 2.01 .

 

“Takeover Laws” has the meaning assigned in Section 3.01(s) .

 

“Takeover Provisions” has the meaning assigned in Section 3.01(s) .

 

“Tax” and “Taxes” means all federal, state, local or foreign taxes, levies or other assessments, however denominated, including all net income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, excise, estimated, severance, stamp, occupation, property, unemployment or other taxes, custom duties, fees, assessments or similar charges, together with any interest, penalties and additions to tax imposed by any Governmental Authority, including any transferee, successor or secondary liability for any such tax and any liability assumed by contract or arising as a result of being or ceasing to be a member of any affiliated group, or similar group under state, provincial, local or foreign Law, or being included or required to be included in any income Tax Return relating thereto.

 

“Tax Returns” means a report, return or other information required to be filed with a taxing authority with respect to Taxes (including any amendments and schedules thereto).

 

“Termination Date” has the meaning assigned in Section 7.01(f) .

 

“Termination Fee” has the meaning assigned in Section 7.03(a) .

 

“Transactions” has the meaning assigned in Section 3.01(c)(2) .

 

“Voting Agreement” has the meaning assigned in the Recitals.

 

1.02  Interpretation .

 

(a) In this Agreement, except as the context may otherwise require, references:

 

(1) to the Preamble, Recitals, Sections, Exhibits or Schedules are to the Preamble to, a Recital or Section of, or Exhibit or Schedule to, this Agreement, as applicable;

 

(2) to this Agreement are to this Agreement and the Exhibits and Schedules to it taken as a whole;

 

(3) to any agreement (including this Agreement), contract or Law are to the agreement, contract or Law as amended, modified, supplemented, restated or replaced from time to time (in the case of an agreement or contract, to the extent permitted by the terms thereof);

 

(4) to any section of any Law include any successor to that section;

 

(5) to any Governmental Authority include any successor to that Governmental Authority;

 

(6) to the date of this Agreement are to the date set forth in the Preamble; and

 

(7) to “$” are to United States Dollars.

 

(b) The table of contents and Article and Section headings contained in this Agreement are for reference purposes only and do not limit or otherwise affect any of the substance of this Agreement.

 

(c) The words “include,” “includes” or “including” and any other variations thereof as used in this Agreement are to be deemed followed by the words “without limitation.”

 

(d) The words “herein,” “hereof,” “hereunder” and similar terms as used in this Agreement are to be deemed to refer to this Agreement as a whole and not to any specific Section.

 

(e) This Agreement is the product of negotiation by the Parties, which have had the assistance of counsel and other advisors. The Parties intend that this Agreement not be construed more strictly with regard to one Party than with regard to any other Party.

 

(f) No provision of this Agreement is to be construed to require, directly or indirectly, any Person to take any action, or omit to take any action, to the extent such action or omission would violate applicable Law.

(g) Whenever the context requires, terms defined in this Agreement in the singular will be deemed to include the plural and vice versa.

 

(h) The word “extent” in the phrase “to the extent” as used in this Agreement means the degree to which a subject or other thing extends and such phrase does not simply mean “if.”

 

(i) With respect to this Agreement and the Voting Agreement, when calculating the period of time before which, within which or following which any act is to be done or step taken, the date that is the reference date in beginning the calculation of such period will be excluded (for example, if an action is to be taken within two (2) days of a triggering event and such event occurs on a Tuesday, then the action must be taken by the end of the day on Thursday). If the last day of such period is not a Business Day, the period in question will end on the next succeeding Business Day.

 

ARTICLE II

 

The Merger

 

2.01  The Merger.   At the Effective Time, the Company and Merger Sub shall consummate the Merger, pursuant to which (a) the separate corporate existence of Merger Sub will terminate, (b) the Company will be the surviving corporation (the “Surviving Corporation” ) and will continue its corporate existence under the Laws of the State of Delaware and will become an indirect, wholly-owned Subsidiary of Guarantor and (c) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises will continue unaffected by the Merger.

 

2.02  Closing.   The closing of the Merger (the “Closing” ) will take place at the offices of Jones Day, 901 Lakeside Avenue, Cleveland, Ohio, at 10:00 a.m. prevailing Eastern time, on the second Business Day (unless the Parties agree to another time or date) after satisfaction or waiver of the conditions set forth in Article VI , other than those conditions that by their nature are to be satisfied at the Closing but subject to the fulfillment or waiver of those conditions (the “Closing Date” ).

 

2.03  Effective Time.   On the Closing Date, the Parties shall cause the Merger to be consummated by executing and delivering a certificate of merger (the “Certificate of Merger” ) to the Secretary of State of the State of Delaware for filing in accordance with Section 103 of the DGCL. The Parties will make any and all other filings or recordings required under the DGCL, and the Merger will become effective when the Certificate of Merger is filed in the office of the Secretary of State of the State of Delaware, or at such later date or time as Parent and the Company mutually agree and specify in the Certificate of Merger in accordance with the DGCL (the time the Merger becomes effective being referred to herein as the “Effective Time” ).

 

2.04  Effects of the Merger.   At the Effective Time, the Merger will have the effects set forth in this Agreement and prescribed by the DGCL and any other applicable Law. Without limiting the generality of the foregoing, as of the Effective Time, the Surviving Corporation will succeed to all of the properties, rights, privileges, powers, franchises and assets of the Company and Merger Sub, and all debts, liabilities and duties of the Company and Merger Sub will become debts, liabilities and duties of the Surviving Corporation.

 

2.05  Certificate of Incorporation and Bylaws.

 

(a) At the Effective Time, the certificate of incorporation of the Company as in effect immediately prior to the Effective Time shall be amended in the Merger to read in its entirety as set forth on Exhibit B , and as so amended, will be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law (subject to the requirements of Section 5.01 ).

 

(b) At the Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will be the bylaws of the Surviving Corporation until thereafter amended as provided therein, by the certificate of incorporation of the Surviving Corporation or by applicable Law (subject to the requirements of Section 5.01 ).

 

2.06  Directors and Officers.   The directors and officers of Merger Sub immediately prior to the Effective Time will be the directors and officers of the Surviving Corporation as of the Effective Time.

2.07  Conversion or Cancellation of Shares.   At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holders of any of the following securities:

 

(a) Each Share issued and outstanding immediately prior to the Effective Time, other than Exception Shares (which will be canceled and cease to exist with no payment or distribution being made with respect thereto), Company Restricted Shares (which will be treated in accordance with Section 2.09(a)(2) ) and Dissenting Shares (which will be treated in accordance with Section 2.10 ), will be converted into and constitute the right to receive cash in an amount equal to $54.00, without interest (the “Merger Consideration” ), payable to the holder thereof in the manner provided in Section 2.08. At the Effective Time, all Shares that have been converted into the right to receive the Merger Consideration as provided in this Section 2.07(a) will no longer be outstanding and will be canceled and will cease to exist, and each holder of a Certificate that immediately prior to the Effective Time represented such Shares will cease to have any rights with respect thereto, except the right to receive the Merger Consideration in exchange therefor in accordance with Section 2.08 .

 

(b) Each issued and outstanding share of Merger Sub Common Stock will be converted into one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation, and will constitute the only outstanding shares of capital stock of the Surviving Corporation.

 

2.08  Exchange of Certificates; Payment of the Merger Consideration .

 

(a)  Appointment of Disbursing Agent.   Prior to the Effective Time, Parent shall deposit, or cause to be deposited, with a disbursing agent agreed upon by Parent and the Company (the “Disbursing Agent” ) cash in an amount sufficient to allow the Disbursing Agent to pay the aggregate Merger Consideration payable pursuant to Section 2.07(a) in exchange for outstanding Shares. Any income from investment of such funds, which investment will be in accordance with the instructions of Parent, will be payable solely to Parent (or its designee). Parent shall be obligated to, from time to time, deposit any additional funds necessary to make all payments that may be required pursuant to Section 2.07(a). Any such cash remaining in the possession of the Disbursing Agent six (6) months after the Effective Time (together with any earnings in respect thereof) will be delivered by the Disbursing Agent to Parent (or its designee), and any holder of Certificates immediately prior to the Effective Time who has not theretofore exchanged such Certificates pursuant to this Article II will thereafter be entitled to look exclusively to Parent and/or the Surviving Corporation, and only as a general creditor thereof, for the consideration to which such holder may be entitled upon exchange of such Certificates pursuant to Section 2.07(a). Notwithstanding the foregoing, neither the Disbursing Agent nor any Party will be liable to any holder of Certificates for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws. After any remaining cash has been delivered by the Disbursing Agent to Parent pursuant to this Section 2.08(a) , in the event any Certificate has not been surrendered for the consideration to which such holder may be entitled prior to the date that such Certificate, or the consideration payable upon the surrender thereof, would otherwise escheat to or become the property of any Governmental Authority, then the consideration otherwise payable upon the surrender of such Certificate will, to the extent permitted by applicable Law, become the property of Parent, free and clear of all Liens, rights, interests and adverse claims of any Person. The consideration paid in accordance with the terms of this Article II in respect of Certificates that have been surrendered in accordance with the terms of this Agreement will be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formerly represented thereby. Notwithstanding anything herein to the contrary, the exchange procedures described in this Section 2.08 will not apply to Company Restricted Shares and the Company Restricted Share Consideration, and the Disbursing Agent will not act as disbursing agent for the Company Restricted Shares.

 

(b)  Exchange Procedures.   As contemplated by Section 2.08(a) above, promptly after the Effective Time, but in no event more than two (2) Business Days thereafter, Parent shall cause the Disbursing Agent to mail or deliver to each Person who was, immediately prior to the Effective Time, a holder of record of Company Common Stock, a form of letter of transmittal (which will specify that delivery will be effected, and risk of loss and title to Certificates will pass, only upon proper delivery of such Certificates to the Disbursing Agent and will be in such form and have such other customary provisions as Parent reasonably specifies) containing instructions for use in effecting the surrender of Certificates in exchange for the consideration to which such Person is entitled pursuant to Section 2.07(a). Upon surrender to the Disbursing Agent of a Certificate for cancellation together with such letter of

transmittal, duly executed and completed in accordance with the instructions thereto, and all other documents required by the Disbursing Agent, the holder of such Certificate will promptly be provided in exchange therefor cash in the amount to which such holder is entitled pursuant to Section 2.07(a) , and the Certificate so surrendered will forthwith be canceled. No interest will accrue or be paid with respect to any consideration to be delivered upon surrender of Certificates.

 

(c)  Transfer to Holder other than Existing Holder.   If any cash payment is to be made pursuant to Section 2.07(a) in a name other than that in which the Certificate surrendered in exchange therefor is registered, it will be a condition of such payment that (1) the Person requesting such payment shall pay any transfer or other similar Taxes required by reason of the making of such payment in a name other than that of the registered holder of the Certificate surrendered, or required for any other reason relating to such holder or requesting Person, or shall establish to the reasonable satisfaction of the Disbursing Agent that any such Tax has been paid or is inapplicable, and (2) the Certificate so surrendered will be properly endorsed or will be otherwise in proper form for transfer.

 

(d)  Transfers.   At the Effective Time, the stock transfer books of the Company will be closed, and there will be no further registration of transfers of Company Common Stock or Certificates that were outstanding immediately prior to the Effective Time on the stock transfer books of the Company. If after the Effective Time Certificates are presented to the Surviving Corporation for any reason, they will be canceled and exchanged as provided in this Article II , subject to applicable Laws in the case of Dissenting Shares.

 

(e)  Lost, Stolen or Destroyed Certificates.   If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit (in form and substance reasonably acceptable to Parent) of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or the Disbursing Agent, the posting by such Person of a bond in such reasonable amount as Parent or the Disbursing Agent may direct as indemnity against any claim that may be made against it with respect to such Certificate, Parent or the Disbursing Agent shall, in exchange for such lost, stolen or destroyed Certificate, pay or cause to be paid the consideration deliverable in respect of Company Common Stock formerly represented by such Certificate pursuant to Section 2.07(a) .

 

(f)  Return of Merger Consideration for Dissenting Shares.   Any portion of the Merger Consideration deposited by Parent with the Disbursing Agent pursuant to Section 2.08(a) in respect of any Dissenting Shares will be returned to Parent (or its designee) upon demand.

 

(g)  Cessation of Rights.   From and after the Effective Time, the holders of Certificates will cease to have any rights as stockholders of the Surviving Corporation, except as otherwise expressly provided in this Agreement or by applicable Law, and Parent will be entitled to treat each Certificate that has not yet been surrendered for exchange solely as evidence of the right to receive the consideration into which the Company Common Stock formerly evidenced by such Certificate has been converted pursuant to the Merger.

 

2.09  Stock Incentives .

 

(a)  Company Stock Options; Company Restricted Shares; Company Stock-Based Awards .

 

(1) Each option to purchase Company Common Stock granted under the Company Stock Plan (each, a “Company Stock Option” ) outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested), by virtue of the Merger and without any action on the part of any holder of any Company Stock Option, will become fully vested and exercisable immediately prior to, and then will be canceled automatically at, the Effective Time and will thereafter represent, and will be converted into, only the right to receive an amount of cash, if any (and without interest), equal to the product of (A) the excess, if any, of (i) the Merger Consideration over (ii) the exercise price per share of the Company Common Stock subject to such Company Stock Option and (B) the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to its cancellation, regardless of the vested status of such Company Stock Option (the “Company Stock Option Consideration” ). Parent will, or will cause the Surviving Corporation to, pay to holders of Company Stock Options the Company Stock Option Consideration, if any, as soon as practicable after the Effective Time and in any case within five (5) Business Days thereafter. For the avoidance of doubt, no Company Stock Option Consideration will be payable in respect of Company Stock Options with an exercise price per share in excess of the Merger

Consideration as of immediately prior to the Effective Time, and all such Company Stock Options will be canceled automatically at the Effective Time without any payment therefor.

 

(2) Each restricted share of Company Common Stock granted under the Company Stock Plan (each a “Company Restricted Share” ) outstanding and subject to restrictions immediately prior to the Effective Time (whether vested or unvested), by virtue of the Merger and without any action on the part of the holder of any Company Restricted Share, will become fully vested and no longer subject to any restrictions immediately prior to, and then will be canceled automatically at the Effective Time and will thereafter represent, and will be converted into, only the right to receive an amount of cash, without interest, equal to the Merger Consideration (the “Company Restricted Share Consideration” ). Parent will, or will cause the Surviving Corporation to, pay to holders of Company Restricted Shares the Company Restricted Share Consideration as soon as practicable after the Effective Time and in any case within five (5) Business Days thereafter.

 

(3) Each Company Stock-Based Award outstanding immediately prior to the Effective Time will, by virtue of the Merger and without any action on the part of the holder thereof, become fully vested and no longer subject to any restrictions immediately prior to, and then will be cancelled automatically at the Effective Time and will thereafter represent, and will be converted into, only the right to receive an amount of cash, without interest, equal to the product of (1) the Merger Consideration (or, if the Company Stock-Based Award provides for payments to the extent the value of the Shares exceeds a specified reference price, the amount, if any, by which the Merger Consideration exceeds such reference price) and (2) the number of Shares subject to such Company Stock-Based Award (the “Company Stock-Based Award Consideration” ). Parent will, or will cause the Surviving Corporation to, pay to holders of Company Stock-Based Awards the Company Stock-Based Award Consideration as soon as practicable after the Effective Time and in any case within five (5) Business Days thereafter.

 

(b) As of the Effective Time, the Company Stock Plan will terminate and all rights under any provision of any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company will be canceled. At and after the Effective Time, no Person will have any right under the Company Stock Options, the Company Restricted Shares, the Company Stock-Based Awards, the Company Stock Plan or any other plan, program or arrangement with respect to equity securities of the Surviving Corporation or any Subsidiary thereof, except the right to receive the amounts payable under this Section 2.09 , if any.

 

(c) As soon as practicable following the date of this Agreement, the Company Board or any committee administering the Company Stock Plan will adopt such resolutions or take such other actions as may be required or appropriate to effect the provisions of this Section 2.09. The Company will provide notice (in a form reasonably satisfactory to Parent) to each holder of an outstanding Company Stock Option, a Company Restricted Share or a Company Stock-Based Award describing the treatment of such Company Stock Option, Company Restricted Share or Company Stock-Based Award, as applicable, in accordance with this Section 2.09 .

 

(d) Except to the extent permitted by Section 4.01(b) , unless this Agreement is terminated in accordance with its terms, no additional Company Stock Options, Company Restricted Shares, Company Stock-Based Awards or any other equity-based awards or other Rights will be granted pursuant to the Company Stock Plan or otherwise by the Company or its Subsidiaries after the date of this Agreement.

 

2.10  Appraisal Rights .

 

(a) Notwithstanding any provision of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time (other than the Exception Shares) and that are held by Company Stockholders who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have demanded properly in writing appraisal for such Shares in accordance with Section 262 of the DGCL (the “Dissenting Stockholders” ) shall not be converted into, or represent the right to receive, the Merger Consideration (collectively, the “Dissenting Shares” ). Dissenting Stockholders shall be entitled to receive payment of the fair value of the Dissenting Shares as determined in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Shares held by Company Stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Shares under Section 262 of the DGCL will thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration in

accordance with Section 2.07 , without any interest thereon, upon surrender, in the manner provided in Section 2.08 , of the Certificate or Certificates that formerly evidenced such Shares.

 

(b) The Company shall give Parent notice as promptly as reasonably practicable upon receipt by the Company of any demand for appraisal pursuant to Section 262 of the DGCL and of withdrawals of any such demand, and any other communications delivered to the Company pursuant to or in connection with Section 262 of the DGCL with respect to the Transactions, and the Company will give Parent the opportunity to participate in all negotiations and proceedings with respect to any such demands (including any settlement offers). Except with the prior written consent of Parent, the Company will not voluntarily make any payment with respect to any demand for appraisal and will not settle or offer to settle any such demand.

 

2.11  Withholdings.   All amounts payable pursuant to this Agreement will be subject to any required withholding of Taxes and will be paid at or as soon as practicable following the Effective Time, but in any event within five (5) Business Days following the Effective Time, without interest. To the extent that amounts are so withheld and paid over to the appropriate Governmental Authority by Parent, Merger Sub, the Surviving Corporation or the Disbursing Agent, such withheld amounts will be treated for all purposes of this Agreement as having been paid to the holder of Certificates, Company Restricted Shares, Company Stock Options or Company Stock-Based Awards as the case may be, in respect of which such deduction and withholding was made by Parent, Merger Sub, the Surviving Corporation or the Disbursing Agent.

 

2.12  Section 16 Matters.   Prior to the Effective Time, the Company Board or an appropriate committee of non-employee directors will adopt a resolution and take all other necessary action consistent with the interpretative guidance of the SEC so that the disposition of Shares, Company Stock Options, Company Restricted Shares or Company Stock-Based Awards pursuant to this Agreement and the Merger by any officer or director of the Company who is a covered person of the Company for purposes of Section 16 of the Exchange Act will be an exempt transaction for purposes of Section 16 of the Exchange Act.

 

2.13  Further Action.   If at any time after the Effective Time the Surviving Corporation shall determine, in its sole discretion, that any actions are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Merger Sub vested in the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, then the officers and directors of the Surviving Corporation will be authorized to take all such actions as may be necessary or desirable to vest all right, title or interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement.

 

ARTICLE III

 

Representations and Warranties

 

3.01  Representations and Warranties about the Company.   Except as Previously Disclosed, the Company hereby represents and warrants to Parent and Merger Sub as follows:

 

(a)  Organization and Standing.   The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. The Company is duly qualified and licensed to do business and is in good standing in all jurisdictions where its ownership, leasing or operation of property or assets or its conduct of business requires it to be so qualified or licensed, except where the failure to be in good standing or be so qualified or licensed has not had, and would not reasonably be expected to have, a Material Adverse Effect with respect to the Company. The Company has made available to Parent or its counsel, true, correct and complete copies of the Constituent Documents of the Company and each of its Subsidiaries, in each case as amended and in effect. Neither the Company nor any of its Subsidiaries is in material violation of any of the provisions of its Constituent Documents. The Company has made available to Parent or its counsel true, correct and complete copies of the minute books containing records of all consents, actions and meetings of (1) the Company Board, committees of the Company Board and stockholders of the Company, and (2) the boards of directors, managers or equivalent governing bodies of each of the Company’s Subsidiaries and all stockholders and equity holders thereof, in each case, since January 1, 2007.

(b)  Power.   The Company has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the Transactions, subject to the receipt of the affirmative vote of the holders of a majority of the outstanding Shares entitled to vote thereon to adopt this Agreement (the “Company Stockholder Approval” ). The Company and each of its Subsidiaries has the corporate (or comparable) power and authority to carry on its business as it is now being conducted and to own, lease and operate all its properties and assets, except where the failure to have such power and authority has not had, and would not reasonably be expected to have, a Material Adverse Effect with respect to the Company.

 

(c)  Authority .