PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
, 2017
SUMMARY
This summary highlights information contained elsewhere in this proxy statement and may not contain all the information
that is important to you. We urge you to read carefully the remainder of this proxy statement, including the attached annexes and the documents referred to in this proxy statement, because this
summary does not provide all the information that might be important to you with respect to the merger and the other matters being considered at the special meeting of stockholders (the "special
meeting").
All
references to "Orbital ATK," "we," "us," or "our" in this proxy statement refer to Orbital ATK, Inc., a Delaware corporation; all references in this proxy statement to
"Northrop Grumman" refer to Northrop Grumman Corporation, a Delaware corporation; all references to "Sub" refer to Neptune Merger, Inc., a Delaware corporation and a wholly-owned subsidiary of
Northrop Grumman; all references to the "merger" refer to the merger of Sub with and into Orbital ATK, with Orbital ATK surviving as a wholly-owned subsidiary of Northrop Grumman; and, unless
otherwise indicated or as the context requires, all references to the "merger agreement" refer to the Agreement and Plan of Merger, dated as of September 17, 2017, as it may be amended from
time to time, by and among Orbital ATK, Northrop Grumman and Sub, a copy of which is attached as
Annex A
to this proxy statement. Orbital ATK,
with respect to its existence after the effective time of the merger, is sometimes referred to in this proxy statement as the "surviving corporation."
The Companies
Orbital ATK, Inc. (see page 24)
Orbital ATK is an aerospace and defense systems developer, manufacturer and supplier of systems and products to the U.S. Government, allied
nations, prime contractors and other customers. Our main products include launch vehicles and related propulsion systems, satellites and associated components and services, composite aerospace
structures, tactical missiles, subsystems and defense electronics, and precision weapons, armament systems and ammunition. We are headquartered in Dulles, Virginia and have operating locations
throughout the United States.
Our
principal executive offices are located at 45101 Warp Drive, Dulles, VA 20166 and our telephone number is (703) 406-5000. Our common stock, par value $0.01 per share ("common
stock"), is listed and traded on the New York Stock Exchange ("NYSE") under the symbol "OA."
See
"Where You Can Find More Information" on page 99.
Northrop Grumman Corporation (see page 24)
Northrop Grumman Corporation is a leading global security company. Northrop Grumman offers a broad portfolio of capabilities and technologies
that enable Northrop Grumman to deliver innovative products, systems and solutions for applications that range from undersea to outer space and into cyberspace. Northrop Grumman provides products,
systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance, and reconnaissance
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(C4ISR);
strike; and logistics and modernization. Northrop Grumman participates in many high-priority defense and government programs in the United States and abroad. Northrop Grumman conducts most of
its business with the U.S. Government, principally the Department of Defense and intelligence
community. Northrop Grumman also conducts business with foreign, state and local governments, as well as commercial customers.
Northrop
Grumman's principal executive offices are located at 2980 Fairview Park Drive, Falls Church, VA 22042 and its telephone number is (703) 280-2900. Northrop
Grumman's common stock is listed and traded on the NYSE under the symbol "NOC."
Neptune Merger, Inc. (see page 25)
Neptune Merger, Inc., a wholly-owned subsidiary of Northrop Grumman, is a Delaware corporation that was formed on September 15,
2017 for the purpose of effecting the merger. Sub has not engaged in any business to date except for activities incidental to its incorporation and activities undertaken in connection with the merger
and the other transactions contemplated by the merger agreement. Upon the terms and subject to the conditions of the merger agreement, Sub will be merged with and into Orbital ATK, with Orbital ATK
surviving the merger as a wholly-owned subsidiary of Northrop Grumman.
The
principal executive offices of Sub are located at 2980 Fairview Park Drive, Falls Church, VA 22042, and its telephone number is (703) 280-2900.
The Merger
A copy of the merger agreement is attached as
Annex A
to this proxy statement and is
incorporated herein by reference. We encourage you to read the entire merger agreement carefully and in its entirety because it is the principal document governing the merger. For more information
about the merger agreement, see "The Merger Agreement" beginning on page 66.
The Merger (see page 27)
If the merger is completed, at the effective time of the merger, Sub will be merged with and into Orbital ATK. Orbital ATK will survive the
merger as a wholly-owned subsidiary of Northrop Grumman. We intend to complete the merger as soon as reasonably practicable and currently expect to complete the merger in the first half of 2018. The
merger is subject to regulatory clearances and other conditions, in addition to the approval of the stockholders of Orbital ATK at the special meeting. It is possible that factors outside the control
of Orbital ATK and Northrop Grumman could result in the merger being completed at a later time or not at all.
Merger Consideration (see page 67)
Upon completion of the merger, each issued and outstanding share of common stock will automatically be canceled and will cease to exist and will
be converted into the right to receive $134.50 in cash, without interest (the "merger consideration") and less any required withholding taxes (other than (i) shares of common stock where the
holder has properly exercised appraisal rights under Section 262 of the Delaware General Corporation Law ("DGCL") (and has not withdrawn such exercise or lost such rights) and
(ii) shares of common stock owned by Orbital ATK, Northrop Grumman or Sub (collectively, "excluded shares")).
Appraisal Rights (see page 88)
Shares of common stock held by stockholders who have properly exercised appraisal rights under Section 262 of the DGCL (and have not
withdrawn such exercise or lost such rights) will not be
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converted
into the right to receive the merger consideration, but will instead be converted into the right to receive payment in cash for the fair value of their shares of common stock as determined
in accordance with Section 262 of the DGCL. The fair value of shares of common stock as determined in accordance with Section 262 of the DGCL may be more or less than (or the same as)
the merger consideration. Stockholders who wish to exercise appraisal rights must comply fully with all applicable requirements of Section 262 of the DGCL, which is summarized in this proxy
statement and attached as
Annex C
to this proxy statement. Failure to follow exactly the procedures specified under Section 262 of the
DGCL may result in the loss of appraisal rights. Because of the complexity of Section 262 of the DGCL relating to appraisal rights, if you are considering exercising your appraisal rights, we
encourage you to seek the advice of your own legal counsel.
The Special Meeting (see page 19)
The special meeting of stockholders is scheduled to be held at 45101 Warp Drive, Dulles, VA 20166 on , 2017, at
, Eastern Time. The special meeting is being held in order to consider and vote on the following:
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a proposal to adopt the merger agreement, a copy of which is attached as
Annex A
to this
proxy statement, pursuant to which Sub will be merged with and into Orbital ATK, with Orbital ATK surviving the merger as a wholly-owned subsidiary of Northrop Grumman, and Orbital ATK stockholders
will be entitled to receive $134.50 in cash, without interest and less any applicable withholding taxes, for each share of common stock that they own immediately prior to the effective time of the
merger (referred to as the "merger proposal");
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a non-binding, advisory proposal to approve the compensation that will or may be paid to Orbital ATK's named executive officers in connection
with the merger (referred to as the "compensation proposal"); and
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a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to
approve the merger proposal (referred to as the "adjournment proposal").
Only
holders of record of common stock at the close of business on , 2017, the record date for the special meeting ("record date"), are entitled to notice of, and to vote
at, the special meeting or any adjournment or postponement of the special meeting. At the close of business on the record date, shares of
common stock were issued and outstanding.
A
quorum is necessary to transact business at the special meeting. Holders of a majority of all issued and outstanding shares of common stock as of the record date and entitled to vote
at the special meeting must be present in person or represented by proxy at the special meeting in order for there to be a quorum. Shares of common stock represented at the special meeting but not
voted, including shares for which a stockholder directs an "abstention" from voting, will be counted as present for purposes of establishing a quorum. Broker non-votes will not be counted as present
for purposes of establishing a quorum. Shares of common stock held in treasury will not be included in the calculation of the number of shares of common stock represented at the special meeting for
purposes of determining whether a quorum is present. If a quorum is not present in person or represented by proxy, the special meeting may be adjourned or postponed until the holders of the number of
shares of common stock required to constitute a quorum are present in person or represented by proxy.
You
may cast one vote on each matter submitted to a vote at the special meeting for each share of common stock you own at the close of business on the record date. The merger proposal
requires the affirmative vote of the holders of a majority of the outstanding shares of common stock entitled to vote as of the record date. The compensation proposal and the adjournment proposal each
requires the
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affirmative
vote of the holders of a majority of the shares of common stock represented at the special meeting and entitled to vote thereon.
Your
failure to vote, or failure to instruct your broker, bank, trust company or other nominee to vote, will have the same effect as a vote against the merger proposal, but, assuming a
quorum is present at the special meeting, will have no effect on the compensation proposal or the adjournment proposal.
Recommendation of the Orbital ATK Board (see page 39)
After careful consideration, the Orbital ATK board of directors (the "Orbital ATK Board"), on September 16, 2017, unanimously approved
the merger agreement and determined that it is advisable, fair to and in the best interests of Orbital ATK and its stockholders for Orbital ATK to enter into the merger agreement and effect the merger
and the other transactions contemplated thereby. The Orbital ATK Board unanimously recommends that our stockholders vote
"FOR"
the adoption of the
merger agreement. The Orbital ATK Board considered many factors in reaching its conclusion, including, without limitation, the value that stockholders would realize in the merger, the current and
historical market prices of Orbital ATK shares relative to the $134.50 per share merger consideration, the fact that the merger consideration consists entirely of cash and the risks associated with
the implementation of Orbital ATK's business plan. See "The MergerReasons for the Merger" beginning on page 39.
The
Orbital ATK Board also unanimously recommends that you vote
"FOR"
the compensation proposal and
"FOR"
the adjournment proposal.
Opinion of Financial Advisor (see page 43)
In connection with the merger, Orbital ATK's financial advisor, Citigroup Global Markets Inc. ("Citigroup"), delivered a written opinion,
dated September 16, 2017, to the Orbital ATK Board as to the fairness, from a financial point of view and as of the date of the opinion, of the $134.50 in cash per share merger consideration to
be received in the merger by holders of common stock (other than excluded shares) pursuant to the merger agreement. The full text of Citigroup's written opinion, dated September 16, 2017, which
describes the assumptions made, procedures followed, matters considered, and limitations and qualifications on the review undertaken, is attached as
Annex B
to this proxy statement and is
incorporated herein by reference. The description of Citigroup's opinion set forth under "The
MergerOpinion of Financial Advisor" beginning on page 43 is qualified in its entirety by reference to the full text of Citigroup's opinion.
You are urged to read
the opinion in its entirety. Citigroup's opinion was provided for the information of the Orbital ATK Board (in its capacity as such) in connection with its evaluation of the per share merger
consideration from a financial point of view and did not address any other aspects or implications of the merger. Citigroup was not requested to consider, and its opinion did not address, the
underlying business decision of Orbital ATK to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for Orbital ATK or the effect of
any other transaction in which Orbital ATK might engage. Citigroup's opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote or act on any matters relating the proposed merger or otherwise.
Treatment of Equity Awards (see page 67)
Options.
At the effective time of the merger, each option to purchase common stock that is outstanding will automatically become fully
vested and
will be converted into the right to receive a cash payment equal to the product of (i) the number of shares of common stock subject to such option immediately prior to the effective time of the
merger, and (ii) the excess, if any, of the merger consideration over the exercise price applicable to such option, less any applicable tax withholding. If
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the
exercise price applicable to shares of common stock subject to an option is equal to or greater than the merger consideration, the option shall terminate and be canceled for no consideration.
Restricted Shares.
Immediately prior to the effective time of the merger, each restricted share that is outstanding will automatically
become fully
vested and will be converted into the right to receive a cash payment equal to the merger consideration, less any applicable tax withholding.
Performance Shares.
If the closing date occurs prior to the date on which performance shares with respect to the 2015-2017 performance
period would
vest in the ordinary course of business, such performance shares will become vested based on achievement of performance metrics at the greater of target performance or actual performance and will be
converted into the right to receive a cash payment equal to the product of (i) the number of shares of common stock subject to such performance share immediately prior to the effective time of
the merger (after taking into account the vesting in
connection with the merger described above), and (ii) the merger consideration, less any applicable tax withholding.
Immediately
prior to the effective time of the merger, each performance share with respect to the 2016-2018 or 2017-2019 performance period that is outstanding and that is held by an
individual who is not a participant in one of Orbital ATK's income security plans or who waives participation in Orbital ATK's income security plans prior to the effective time of the merger, will
become vested based on deemed achievement of target performance, pro-rated based on the number of days elapsed from the beginning of the performance period through and including the closing date over
the total number of days from the beginning of the performance period through the end of the scheduled performance period. Such performance shares will be converted into the right to receive a cash
payment equal to the product of (i) the number of shares of common stock subject to such performance share immediately prior to the effective time of the merger (after taking into account the
vesting at target in connection with the merger described above), and (ii) the merger consideration, less any applicable tax withholding. For each performance share that is forfeited due to
pro-ration, as soon as reasonably practicable following the effective time of the merger, Northrop Grumman will grant each holder thereof who is an employee of Northrop Grumman as of the grant date
with a "Northrop Grumman retention grant" of Northrop Grumman restricted stock rights with a value equal to two times the value of such forfeited performance share (determined based on target
performance) that will time vest and not be dependent on the achievement of any performance metrics. One-half of the Northrop Grumman retention grant will vest on March 1, 2019, and the
remaining one-half of the Northrop Grumman retention grant will vest on March 1, 2020, in each case subject to continued employment with Northrop Grumman and its subsidiaries as of such dates;
provided, however, that holders of Northrop Grumman retention grants who are involuntarily terminated other than for cause prior to March 1, 2019 will vest in one-half of the Northrop Grumman
retention grant upon such termination and forfeit the remaining one-half.
Immediately
prior to the effective time of the merger, each performance share with respect to the 2016-2018 or 2017-2019 performance period that is outstanding and that is held by an
individual who is a participant in one of Orbital ATK's income security plans and who does not waive participation therein prior to the effective time, will become vested based on deemed achievement
of target performance and will be converted into the right to receive a cash payment equal to the product of (i) the number of shares of common stock subject to such performance share
immediately prior to the effective time (after taking into account the vesting in connection with the merger described above), and (ii) the merger consideration, less any applicable tax
withholding.
Deferred Stock Units.
At the effective time of the merger, each deferred stock unit that is outstanding will automatically become fully
vested and
will be converted into the right to receive a cash payment equal to the product of (i) the number of shares of common stock subject to such deferred stock unit immediately prior to the
effective time, and (ii) the merger consideration, less any applicable
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tax
withholding. Such payment will be paid in accordance with and subject to the deferral elections applicable to such deferred stock units as of immediately prior to the effective time.
Phantom Stock Units.
At the effective time of the merger, each phantom stock unit that is outstanding will become fully vested and will
be converted
into the right to receive a cash payment equal to the product of (i) the number of shares of common stock subject to such phantom stock unit immediately prior to the effective time, and
(ii) the merger consideration, less any applicable tax withholding. Such payment will be paid in accordance with and subject to the deferral elections applicable to such phantom stock units as
of immediately prior to the effective time.
Notwithstanding
the above, if any options, restricted shares, performance shares or deferred stock units are granted following the date of the merger agreement and prior to the effective
time of the merger, the vesting of such awards will instead be pro-rated based on the number of days from the grant date (or for performance shares, from the beginning of the performance period)
through and including the closing date over the number of days from the grant date through the final regularly scheduled vesting date of such award (or for performance shares, from the beginning to
the end of the performance period).
An
individual who is a participant in one of Orbital ATK's income security plans and who does not waive participation therein prior to the effective time of the merger has certain rights
as provided in the applicable income security plan. The terms of the merger agreement do not alter the participant's rights under the income security plans. See "The MergerInterests of
Directors and Executive Officers in the MergerChange in Control Severance" beginning on page 58 and "The Merger AgreementTreatment of Equity Awards" beginning on page 67.
Interests of Directors and Executive Officers in the Merger (see page 51)
In considering the recommendation of the Orbital ATK Board that our stockholders vote to approve the merger proposal, stockholders should be
aware that our directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally and that may present actual or
potential conflicts of interest. The Orbital ATK Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, in approving
the merger agreement
and in recommending to stockholders the approval of the merger proposal, the compensation proposal and the adjournment proposal. These interests include the
following:
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Each of Orbital ATK's directors and executive officers holds outstanding equity awards and pursuant to the merger agreement will receive both
accelerated vesting thereof and cash payments with respect thereto in connection with the merger. For more information regarding the treatment of outstanding Orbital ATK equity-based awards in the
merger, see "The MergerInterests of Directors and Executive Officers in the MergerTreatment of Equity Awards" beginning on page 52.
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Each of Orbital ATK's executive officers participates in one of Orbital ATK's income security plans, which plans provide for severance payments
and benefits upon a "qualifying termination" in connection with a change in control of Orbital ATK. Generally, a "qualifying termination" is an involuntary termination of employment without "cause" or
a voluntary termination of employment for "good reason," in each case, after or in anticipation of a "change in control" (as such terms are defined in the applicable income security plan). For more
information regarding the severance triggers and entitlements of each executive officer, see "The MergerInterests of Directors and Executive Officers in the MergerChange in
Control Severance" beginning on page 58.
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Orbital ATK's directors and executive officers are entitled to continued indemnification and insurance coverage pursuant to the terms of the
merger agreement.
For
more information and quantification of these interests, please see "The MergerInterests of Directors and Executive Officers in the Merger" beginning on page 51.
Material U.S. Federal Income Tax Consequences of the Merger (see page 85)
The merger will generally be a taxable transaction to U.S. holders of our common stock for U.S. federal income tax purposes. In general, each of
our stockholders who is a U.S. holder whose shares of common stock are converted into the right to receive cash in the merger will recognize gain or loss for U.S. federal income tax purposes in an
amount equal to the difference, if any, between the amount of cash received with respect to such shares and the U.S. holder's adjusted tax basis in such shares. In general, each of our stockholders
who is a non-U.S. holder will not be subject to U.S. federal income tax as a result of the non-U.S. holder's receipt of the merger consideration in exchange for shares of common stock pursuant to the
merger unless the non-U.S. holder has certain connections to the United States, but may be subject to tax under non-U.S. federal income tax laws.
You
should read the section entitled "Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 85 for a more detailed discussion of the U.S. 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 tax situation. You are encouraged to consult your tax advisor to
determine the tax consequences of the merger to you.
No Financing Condition; Financing Cooperation (see page 65)
The merger is not subject to a financing condition. Northrop Grumman has represented that it will have on the closing date sufficient funds
available through credit arrangements or otherwise to pay the aggregate merger consideration and all related fees required to be paid by Northrop Grumman and the surviving corporation. Northrop
Grumman has delivered to Orbital ATK an executed commitment letter from its financing source pursuant to which Northrop Grumman's financing source has agreed to provide debt financing for the merger.
Orbital ATK has agreed to provide all cooperation reasonably requested by Northrop Grumman in connection with any financing by Northrop Grumman, including using reasonable best efforts to, among other
things, participate in meetings, assist with preparing materials, provide documentation, and obtain letters and documentation customary for the type and nature of financing Northrop Grumman intends to
secure.
See
"The MergerNo Financing Condition; Financing Cooperation" beginning on page 65.
Regulatory Approvals
(
see page 65
)
The
merger is subject to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), which provides that the merger may
not be completed until the applicable waiting period under the HSR Act is terminated or expires, and the requirements of the European Commission with respect to the compatibility of the merger with
the common market under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, Official Journal L 24, 29.01.2004 (the "Council
Regulation"). Orbital ATK and Northrop Grumman intend to promptly file the requisite notification and report forms under the HSR Act with the Antitrust Division of the Department of Justice and the
Federal Trade Commission.
The
waiting period in the EU begins with the filing of the requisite notification by Northrop Grumman to the European Commission which will be made after the conclusion of
pre-notification discussions with the European Commission. The parties expect that these pre-notification discussions will continue for some weeks before Northrop Grumman files the requisite
notification with the
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European
Commission. The initial review period (the "Phase I period") expires on the 25th business day following the filing with the European Commission. The Phase I period may be
extended to 35 business days if the European Commission receives a referral request from an EU member state or the parties offer remedies to resolve any competition issues. If the European Commission
decides to open a Phase II investigation or the matter is referred to any EU member state for national review, the waiting period would be extended.
At
any time before or after the effective time of the merger, the U.S. reviewing antitrust authority or another person could take action under the antitrust laws as it deems necessary or
desirable in the public interest, including, without limitation, seeking to enjoin the completion of the merger, seeking a rescission or other unwinding of the merger, or permitting completion subject
to regulatory concessions or conditions. The European Commission could permit completion subject to regulatory conditions or prohibit the merger. We cannot assure you that a challenge to the merger
will not be made or that, if a challenge is made, it will not succeed.
Conditions to the Merger (see page 77)
Each party's obligation to complete the merger depends on the following conditions being satisfied or, where legally permissible,
waived:
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Orbital ATK stockholders shall have approved the merger proposal;
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the termination or expiration of any applicable waiting period under the HSR Act and the issuance, or deemed issuance, by the European
Commission of a decision finding the merger to be compatible with the common market under the Council Regulation; and
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the absence of any temporary restraining order, injunction or other judgment issued by any court of competent jurisdiction or other legal
restraint or prohibition that has the effect of preventing the consummation of the merger.
Each
party's obligation to complete the merger is also subject to the following additional conditions:
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subject to certain materiality qualifiers, the accuracy of the representations and warranties of the other party; and
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the performance in all material respects by the other party of its obligations required to be performed by it under the merger agreement at or
prior to the closing date of the merger.
In
addition, Northrop Grumman's obligation to complete the merger is also subject to the following conditions:
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no claim, action, suit, arbitration, proceeding or investigation by any governmental entity shall be pending and no temporary restraining
order, injunction or other judgment issued by any court of competent jurisdiction or other legal restraint or prohibition shall be in effect which, in each case, imposes or seeks to impose any
restrictions on Northrop Grumman and its subsidiaries (including, after the effective time of the merger, the surviving corporation and its subsidiaries), other than certain permitted restrictions
described in the merger agreement; and
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the absence of a material adverse effect on Orbital ATK since the date of the merger agreement.
The
completion of the merger is not conditioned upon Northrop Grumman's receipt of financing.
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No Solicitation of Alternative Proposals (see page 80)
The merger agreement provides that Orbital ATK, its subsidiaries and its and their representatives shall
not:
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directly or indirectly solicit, initiate or knowingly encourage, or take any other action to knowingly facilitate, any takeover proposal or any
inquiries or the making of any proposal that would reasonably be expected to result in or lead to a takeover proposal; or
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enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person, or any such person's
representative, information with respect to or in connection with, or otherwise knowingly cooperate with any person with respect to, any takeover proposal or any inquiries or proposals that would
reasonably be expected to result in or lead to a takeover proposal.
Orbital
ATK, its subsidiaries and its and their representatives must also immediately cease and cause to be terminated all existing activities, discussions and negotiations with any
person conducted prior to entering into the merger agreement with respect to any takeover proposal or any inquiries or proposals that would reasonably be expected to result in or lead to a takeover
proposal.
Notwithstanding
the above-described restrictions, if prior to the approval of the Orbital ATK stockholders of the merger proposal, Orbital ATK receives a bona fide written unsolicited
takeover proposal that the Orbital ATK Board determines in good faith is, or determines in good faith would reasonably be expected to lead to, a superior proposal and that the failure to take such
action would be inconsistent with its fiduciary duties to stockholders, Orbital ATK may under certain circumstances furnish information to, and engage in discussions or negotiations with, the third
party making such takeover proposal.
The
terms "superior proposal" and "takeover proposal" are defined under "The Merger AgreementNo Solicitation of Alternative Proposals" beginning on page 80.
Changes in Board Recommendation; Termination For Superior Proposal (see page 81)
Under the merger agreement, subject to certain exceptions, neither the Orbital ATK Board nor any committee thereof may (i) withhold,
withdraw, modify or qualify, publicly or otherwise, in a manner adverse to Northrop Grumman or Sub, the recommendation or declaration of
advisability with respect to the merger agreement or merger or (ii) recommend, declare advisable or propose to recommend or declare advisable (or agree to do any of the foregoing) any takeover
proposal.
Notwithstanding
the foregoing limitations, prior to the approval of the Orbital ATK stockholders of the merger proposal, the Orbital ATK Board may, under certain circumstances, effect an
adverse recommendation change or terminate the merger agreement pursuant to the terms of the merger agreement to accept a superior proposal, only if the Orbital ATK Board has determined in good faith,
after, among other things, consultation with its outside legal counsel and Citigroup or another financial advisor of nationally recognized reputation, that the failure to do so would be inconsistent
with its fiduciary duties to the stockholders of Orbital ATK under applicable law. Prior to effecting an adverse recommendation change or terminating the merger agreement pursuant to the terms of the
merger agreement to accept a superior proposal, the Orbital ATK Board must provide written notice to Northrop Grumman at least three business days prior to such action and during such notice period
must negotiate in good faith with Northrop Grumman regarding, and consider in good faith, any revisions to the merger agreement proposed in writing by Northrop Grumman.
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Termination of the Merger Agreement (see page 82)
The merger agreement may be terminated by the mutual written consent of Orbital ATK, Northrop Grumman and Sub, and under certain specified
circumstances by either Orbital ATK or Northrop Grumman.
Termination Fees; Effect of Termination (see page 83)
In certain circumstances, the Orbital ATK Board has the right to terminate the merger agreement in order to enter into a definitive agreement
relating to a superior proposal, as further described in "The Merger AgreementTermination of the Merger Agreement" beginning on page 82. In that event and in certain other specified
circumstances, the merger agreement
provides that we must pay Northrop Grumman a termination fee of $275 million. See "The Merger AgreementTermination Fees and Expenses" beginning on page 83.
Effects on Orbital ATK if the Merger is not Completed (see page 83)
In the event that the proposal to adopt the merger agreement does not receive the required approval from our stockholders, or if the merger is
not completed for any other reason, you will not receive any payment for your shares of common stock in connection with the merger. Instead, Orbital ATK will remain an independent public company and
stockholders will continue to own their shares of common stock. Under certain circumstances, if the merger agreement is terminated, we may be obligated to pay to Northrop Grumman a termination fee.
See "The Merger AgreementTermination Fees and Expenses" beginning on page 83.
Delisting and Deregistration of Shares of Common Stock (see page 65)
Upon completion of the merger, the shares of our common stock currently listed on the NYSE will cease to be listed and will be deregistered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Market Price of Common Stock and Dividend Information (see page 97)
The closing price of common stock on the NYSE on September 15, 2017, the last trading day prior to the announcement of the merger
agreement, was $110.04 per share. The closing price of common stock on the NYSE on , 2017, the last trading
day before the date of this proxy statement was $ per share.
For
the first three quarters of the current fiscal year, Orbital ATK paid three quarterly dividends of $0.32 per share, and the most recent of such dividends was declared on
August 10, 2017 and paid on
September 21, 2017. During the fiscal year ended December 31, 2016, Orbital ATK paid four quarterly dividends of $0.30 per share. Under the terms of the merger agreement, Orbital ATK is
permitted to, and intends to, continue paying a $0.32 per share quarterly cash dividend between the date of the merger agreement and the effective time of the merger.
10
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers address briefly some questions you may have regarding the special meeting and the
proposed merger. These questions and answers may not address all questions that may be important to you as a stockholder. For important additional information, please refer to the more detailed
discussion contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.
-
Q:
-
Why am I receiving this proxy statement?
-
A:
-
You
are receiving this proxy statement because you were a stockholder of record of Orbital ATK as of the close of business on the record date for the special meeting.
This
document serves as the proxy statement through which Orbital ATK will solicit proxies to obtain the necessary stockholder approval for the consummation of the proposed merger and the other
matters to be voted on at the special meeting described below under "What is the purpose of the special meeting?".
-
Q:
-
When and where will the special meeting of stockholders be held?
-
A:
-
The
special meeting will be held at Orbital ATK's executive offices located at 45101 Warp Drive, Dulles, VA 20166 on , 2017,
at ,
Eastern Time.
-
Q:
-
What is the purpose of the special meeting?
-
A:
-
At
the special meeting, stockholders will consider and vote on:
-
-
a proposal to adopt the merger agreement;
-
-
a non-binding, advisory proposal to approve the compensation that will or may be paid to our named executive officers in connection with the
merger; and
-
-
a proposal to adjourn the meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the
merger proposal.
-
Q:
-
What will I receive in the merger?
-
A:
-
If
the merger is completed, you will have the right to receive $134.50 in cash, without interest and subject to any applicable withholding taxes, for each share of
common stock that you own immediately prior to the effective time of the merger.
The
exchange of shares of common stock for cash in the merger will generally be a taxable transaction to U.S. holders for U.S. federal income tax purposes. In general, a non-U.S. holder will not be
subject to U.S. federal income tax as a result of the non-U.S. holder's receipt of the merger consideration in exchange for shares of common stock pursuant to the merger unless the non-U.S. holder has
certain connections to the United States, but may be subject to tax under non-U.S. federal income tax laws. Please see the section of this proxy statement entitled "Material U.S. Federal Income Tax
Consequences of the Merger" beginning on page 85 for a more detailed discussion of the U.S. federal income tax consequences of the merger.
-
Q:
-
What happens if the market price of shares of Orbital ATK common stock changes before the closing of the
merger?
-
A:
-
No
change will be made to the merger consideration of $134.50 per share of common stock as a result of a change in the market price of our common stock.
11
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-
Q:
-
If the merger is completed, what will happen to Orbital ATK stock options and other Orbital ATK equity
awards?
-
A:
-
For
information regarding the treatment of Orbital ATK stock options and other Orbital ATK equity awards, please see "The Merger AgreementTreatment of
Equity Awards" beginning on page 67.
-
Q:
-
What constitutes a "quorum" for purposes of the special meeting?
-
A:
-
A
quorum is necessary to transact business at the special meeting. Holders of a majority of all issued and outstanding shares of common stock as of the record date
and entitled to vote at the special meeting must be present in person or represented by proxy at the special meeting in order for there to be a quorum. Shares of common stock represented at the
special meeting but not voted, including shares for which a stockholder directs an "abstention" from voting, will be counted as present for purposes of establishing a quorum. Broker non-votes will not
be counted as present for purposes of establishing a quorum. Shares of common stock held in treasury will not be included in the calculation of the number of shares of common stock represented at the
meeting for purposes of determining whether a quorum is present. If a quorum is not present in person or represented by proxy, the special meeting may be adjourned or postponed until the holders of
the number of shares of common stock required to constitute a quorum are present in person or represented by proxy.
-
Q:
-
What is the vote required to adopt the merger agreement?
-
A:
-
The
proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of common stock entitled to vote as of
the record date.
Abstentions and "broker non-votes" will have the same effect as a vote "AGAINST" the proposal to adopt the merger agreement.
-
Q:
-
What is the vote required to approve the other proposals?
-
A:
-
The
compensation proposal and the adjournment proposal each requires the affirmative vote of the holders of a majority of the shares of common stock represented at
the special meeting and entitled to vote thereon. Assuming a quorum is present at the special meeting, abstentions will have the same effect as a vote
"AGAINST"
the compensation proposal and the
adjournment proposal. Broker non-votes will have no effect on the outcome of the compensation proposal or
the adjournment proposal.
-
Q:
-
When is the proposed merger expected to be completed?
-
A:
-
We
intend to complete the merger as soon as reasonably practicable and currently expect to complete the merger in the first half of 2018. However, the merger is
subject to regulatory clearances and other conditions, in addition to the approval of Orbital ATK's stockholders at the special meeting, and it is possible that factors outside the control of Orbital
ATK and Northrop Grumman could result in the merger being completed at a later time or not at all.
-
Q:
-
Who is entitled to vote at the special meeting?
-
A:
-
Only
holders of record of common stock at the close of business on , 2017, the record date for the special meeting, are entitled to receive notice
of,
and to vote at, the special meeting or any adjournment or postponement of the special meeting. At the close of business on the record date,
shares of common stock were issued and
outstanding and held by holders of record. Each share of common stock is entitled to one vote on each matter submitted to a vote at the special
meeting.
12
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-
Q:
-
Who may attend the special meeting?
-
A:
-
Stockholders
of record as of the close of business on , 2017, or their duly appointed proxies, may attend the special meeting. "Street name" holders
(those whose shares are held through a broker, bank, trust company or other nominee) should bring a copy of an account statement reflecting their ownership of common stock as of the record date. If
you are a "street name" holder and you wish to vote at the special meeting, you must also bring a legal proxy from the record holder (your broker, bank, trust company or other nominee) of the shares
of common stock authorizing you to vote at the special meeting.
-
Q:
-
How does the Orbital ATK Board recommend that I vote?
-
A:
-
The
Orbital ATK Board unanimously approved the merger agreement and determined that it is advisable, fair to and in the best interests of Orbital ATK and its
stockholders for Orbital ATK to enter into the merger agreement and effect the merger and the other transactions contemplated thereby. The Orbital ATK Board accordingly unanimously recommends that you
vote
"FOR"
each of the merger proposal, the compensation proposal and the adjournment proposal.
-
Q:
-
Who is soliciting my vote?
-
A:
-
The
Orbital ATK Board is soliciting your proxy, and Orbital ATK will bear the cost of soliciting proxies. D.F. King & Co., Inc. ("D.F. King") has
been retained as our proxy solicitor to assist with the solicitation of proxies for the special meeting.
-
Q:
-
What do I need to do now?
-
A:
-
Carefully
read and consider the information contained in this proxy statement, including its annexes.
If
you are a holder of record, in order for your shares to be represented at the special meeting:
-
-
you can attend the special meeting in person;
-
-
you can submit a proxy through the Internet or by telephone by following the instructions included on your proxy card; or
-
-
you can indicate on the enclosed proxy card how you would like to vote and return the proxy card.
If
you hold your shares in "street name," in order for your shares to be represented at the special meeting, you must instruct your broker, bank, trust company or other nominee as to how to vote your
shares by following the directions provided to you by your broker, bank, trust company or other nominee.
-
Q:
-
How do I vote if my shares are registered directly in my name?
-
A:
-
If
you are a record holder of common stock, you may vote in person at the special meeting or authorize the persons named as proxies on the proxy card to vote your
shares by returning the proxy card by mail, or by submitting a proxy to vote through the Internet, or by telephone. We recommend that you vote as soon as possible, even if you are planning to attend
the special meeting, so that the vote count will not be delayed. Both the Internet and the telephone provide convenient, cost-effective alternatives to returning your proxy card by mail. If you choose
to submit a proxy to vote your shares through the Internet or by telephone, there is no need for you to mail back your proxy card. For more detailed instructions on how to vote using one of these
methods, please see "The Special MeetingVoting of Proxies" beginning on page 21.
13
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Your
failure to vote, or failure to instruct your broker, bank, trust company or other nominee to vote, will have the same effect as a vote
"AGAINST"
the merger proposal.
-
Q:
-
How do I vote my shares if they are held in the name of my broker ("street name")?
-
A:
-
If
you hold your shares in a stock brokerage account or if your shares are held by a broker, bank, trust company or other nominee (that is, in "street name"), you
must follow the directions from your broker, bank, trust company or other nominee provided to you in order to vote. Please check the voting form used by your broker, bank, trust company or other
nominee. If you do not provide your broker, bank, trust company or other nominee with instructions, your shares of common stock will not be counted for purposes of determining a quorum at the special
meeting and such shares will not be voted on any proposal at the special meeting, which will have the same effect as a vote
"AGAINST"
the merger
proposal.
Please
note that you may not vote shares held in "street name" by returning a proxy card directly to Orbital ATK or by voting in person at the special meeting unless you provide a legal proxy, which
you must obtain from your broker, bank, trust company or other nominee.
-
Q:
-
What will happen if I fail to submit a proxy or I abstain from voting?
-
A:
-
If
you fail to submit a proxy or fail to instruct your broker, bank, trust company or other nominee to vote, it will have the effect of a vote against the merger
proposal, but, assuming a quorum is present at the special meeting, will have no effect on the compensation proposal or the adjournment proposal. If you mark your proxy to abstain or provide voting
instructions to abstain, it will have the effect of a vote against the merger proposal, the compensation proposal and the adjournment proposal.
-
Q:
-
How do I vote my shares held in the Orbital ATK, Inc. 401(k) Plan?
-
A:
-
If
you hold shares of common stock in the Orbital ATK, Inc. 401(k) Plan, you will receive voting instructions in lieu of a proxy card. The trustee of the Plan
will vote such shares. See "The Special MeetingParticipants in Benefit Plans" beginning on page 21.
-
Q:
-
How can I revoke my proxy?
-
A:
-
If
you have already submitted your proxy by Internet, telephone or by returning your proxy card, you can change your voting instructions at any time before your proxy
is voted at the special meeting. If you are a holder of record, you can do this by sending a signed notice of revocation, granting a new, valid proxy bearing a later date (including by telephone or
through the Internet), or attending the special meeting and voting in person. If you submit a written notice of revocation, it must be received by the Corporate Secretary of Orbital ATK no later than
the beginning of the special meeting. If you grant a new proxy by telephone or Internet, your revised instructions must be received by 11:59 p.m., Eastern Time,
on , 2017.
If
your shares are held in "street name" by your broker, bank, trust company or other nominee, you should contact your broker, bank, trust company or other nominee to change your vote or revoke your
proxy.
-
Q:
-
Do I need to do anything with my stock certificates now?
-
A:
-
No.
After the merger is completed, the paying agent for the merger will mail to each holder of certificates representing shares of common stock as of the effective
time of the merger a letter of transmittal and instructions for exchanging their shares of common stock for the merger consideration. Upon surrender of the certificates for cancellation along with the
executed letter of
14
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transmittal
and other required documents described in the instructions or otherwise required by the paying agent in accordance with the merger agreement, you will receive the merger consideration.
Please do not send your stock
certificates with your proxy card.
-
Q:
-
Can I participate if I am unable to attend the special meeting?
-
A:
-
If
you are unable to attend the special meeting in person, we encourage you to send in your proxy card or submit a proxy to vote by telephone or over the Internet.
The special meeting will not be broadcasted telephonically or over the Internet.
-
Q:
-
What happens if the merger is not completed?
-
A:
-
If
the merger agreement is not adopted by our stockholders or if the merger is not completed for any other reason, stockholders will not receive any payment for their
shares of common stock in connection with the merger. Instead, Orbital ATK will remain an independent public company, and shares of common stock will continue to be listed and traded on the NYSE.
Under certain circumstances, if the merger is not completed, a termination fee of $275 million may become payable by Orbital ATK to Northrop Grumman pursuant to the merger agreement.
-
Q:
-
Why am I being asked to consider and cast a non-binding advisory vote on the compensation proposal?
-
A:
-
Under
Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, we are required to submit a proposal to our stockholders for a
non-binding, advisory vote to approve certain compensation that will or may be paid to our named executive officers in connection with the merger. The compensation proposal gives our stockholders the
opportunity to vote, on a non-binding, advisory basis, on the compensation that will or may be paid to our named executive officers in connection with the merger.
-
Q:
-
What will happen if the compensation proposal is not approved?
-
A:
-
Approval
of the compensation proposal is not a condition to consummation of the merger, and it is advisory in nature only, meaning it will not be binding on Orbital
ATK. Accordingly, because Orbital ATK is contractually obligated to pay such compensation, if the proposed merger is completed, the compensation will be payable, subject only to the conditions
applicable to such compensation payments, regardless of the outcome of the advisory vote.
-
Q:
-
What does it mean if I receive more than one set of voting materials for the special meeting?
-
A:
-
You
may receive more than one set of voting materials for the special meeting including multiple copies of this proxy statement and multiple proxy cards or voting
instruction cards. Please complete, sign, date and return each proxy card and voting instruction card that you receive or, if available, please submit your proxy by telephone or over the Internet.
-
Q:
-
What happens if I sell my shares of common stock before the special meeting?
-
A:
-
The
record date for the special meeting is earlier than the expected closing date of the merger. If you own shares of common stock as of the close of business on the
record date but transfer your shares prior to the special meeting, you will retain your right to vote at the special meeting, but the right to receive the merger consideration will pass to the person
who holds your shares as of immediately prior to the effective time of the merger. In addition, if you have exercised appraisal rights, transferring your shares prior to the effective time of the
merger will result in the loss of your right to receive the amount determined by the Delaware Court of Chancery to be the fair value of your shares.
15
Table of Contents
-
Q:
-
May I exercise dissenters' rights or rights of appraisal in connection with the merger?
-
A:
-
Yes.
Shares of common stock held by stockholders who have properly exercised appraisal rights under Section 262 of the DGCL (and have not withdrawn such
exercise or lost such rights) will not be converted into the right to receive the merger consideration, but will instead be converted into the right to receive payment in cash for the fair value of
their shares of common stock as determined in accordance with Section 262 of the DGCL. The fair value of shares of common stock as determined in accordance with Section 262 of the DGCL
may be more or less than (or the same as) the merger consideration. Stockholders who wish to exercise appraisal rights must comply fully with all applicable requirements of Section 262 of the
DGCL, which are summarized in this proxy statement and attached as
Annex C
to this proxy statement. Failure to follow exactly the procedures
specified under Section 262 of the DGCL may result in the loss of appraisal rights. Because of the complexity of Section 262 of the DGCL relating to appraisal rights, if you are
considering exercising your appraisal rights, we encourage you to seek the advice of your own legal counsel.
-
Q:
-
How can I obtain additional information about Orbital ATK?
-
A:
-
We
will provide copies of this proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2016, without charge to any
stockholder who makes a written request to our Corporate Secretary at Orbital ATK, Inc., 45101 Warp Drive, Dulles, VA 20166. Our Annual Report on Form 10-K and other SEC filings also may
be accessed at www.sec.gov or on the Investor Relations section of our website at www.orbitalatk.com. Our website address is provided as an inactive textual reference only. The information provided on
or accessible through our website is not part of this proxy statement and is not incorporated in this proxy statement by this or any other reference to our website provided in this proxy statement.
-
Q:
-
Who can help answer my questions?
-
A:
-
If
you have questions about the merger or the other matters to be voted on at the special meeting or desire additional copies of this proxy statement or additional
proxy cards or otherwise need assistance voting, you should contact:
D.F.
King & Co., Inc.
48 Wall Street
New York, New York 10005
Stockholders Call Toll Free: (800) 399-1581
Banks and Brokers Call Collect: (212) 269-5550
Email: oa@dfking.com
or
Orbital
ATK, Inc.
45101 Warp Drive
Dulles, VA 20166
(703) 406-5000
Attn: Corporate Secretary
16
Table of Contents
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement contains not only historical information, but also forward-looking statements made pursuant to the safe-harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include the words "forecast," "expect," "believe," "will," "intend," "plan," and words of similar substance.
Such forward-looking statements include the expected completion and timing of the proposed transaction and other information relating to the proposed transaction. Such forward-looking statements are
subject to risks and uncertainties that could cause actual results or performance to differ materially from those expressed in or contemplated by the forward-looking statements, including the
following:
-
-
the risk that the proposed transaction may not be completed in a timely manner or at all, which may adversely affect Orbital ATK's business and
the price of Orbital ATK's common stock;
-
-
the failure to satisfy any of the conditions to the consummation of the proposed transaction, including the adoption of the merger agreement by
Orbital ATK stockholders and the receipt of certain governmental and regulatory approvals;
-
-
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 proceedings that have been or may be instituted against Orbital ATK related to the merger agreement or the proposed
transaction, and the costs and ultimate outcome of litigation matters, government investigations and other legal proceedings;
-
-
the effect of the restatements of our previously issued financial results for the first quarter 2016, the 2015 transition period, fiscal 2015
and fiscal 2014 and any actual or unasserted claims, investigations or proceedings as a result of the restatements;
-
-
our ability to remediate the material weaknesses in our internal control over financial reporting described in Item 9A, "Control and
Procedures" of our Annual Report on Form 10-K;
-
-
reductions or changes in programs administered by the National Aeronautics and Space Administration or in U.S. Government military spending,
timing of payments and budgetary policies, including impacts of sequestration under the Budget Control Act of 2011, and sourcing strategies;
-
-
intense competition for U.S. Government contracts and programs;
-
-
increases in costs, which we may not be able to react to due to the nature of our U.S. Government contracts;
-
-
our inability to retain and hire key personnel;
-
-
the impact on our business due to merger-related uncertainty;
-
-
changes in cost and revenue estimates and/or timing of programs;
-
-
the potential termination of U.S. Government contracts and the potential inability to recover termination costs;
-
-
other risks associated with U.S. Government contracts that might expose us to adverse consequences;
-
-
government laws and other rules and regulations applicable to us, including procurement and import-export control;
-
-
reduction or change in demand and manufacturing costs for commercial ammunition;
17
Table of Contents
-
-
the manufacture and sale of products that create exposure to potential product liability, warranty liability or personal injury claims and
litigation;
-
-
risks associated with expansion into new and adjacent commercial markets;
-
-
greater risk associated with international business, including foreign currency exchange rates and fluctuations in those rates;
-
-
federal and state regulation of defense products and ammunition;
-
-
costs of servicing our debt, including cash requirements and interest rate fluctuations;
-
-
actual pension and other postretirement plan asset returns and assumptions regarding future returns, discount rates, service costs, mortality
rates and health care cost trend rates;
-
-
security threats, including cybersecurity and other industrial and physical security threats, and other disruptions;
-
-
supply, availability and costs of raw materials and components, including commodity price fluctuations;
-
-
performance of our subcontractors;
-
-
development of key technologies and retention of a qualified workforce;
-
-
performance of our products;
-
-
fires or explosions at any of our facilities;
-
-
government investigations and audits;
-
-
environmental laws that govern past practices and rules and regulations, noncompliance with which may expose us to adverse consequences;
-
-
impacts of financial market disruptions or volatility to our customers and vendors;
-
-
unanticipated changes in tax provisions or exposure to additional tax liabilities; and
-
-
other risks described in Orbital ATK's filings with the SEC, such as its Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q.
Orbital
ATK assumes no obligation to update or revise publicly the information in this communication, whether as a result of new information, future events or otherwise, except as
otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. There can be no assurance that the merger will
in fact be completed.
18
Table of Contents
THE SPECIAL MEETING
This proxy statement is being provided to the stockholders of Orbital ATK in connection with the solicitation of proxies
by the Orbital ATK Board for use at the special meeting to be held at the time and place specified below, and at any properly convened meeting following an adjournment or postponement thereof. This
proxy statement provides stockholders of Orbital ATK with information about the special meeting and should be read carefully and in its entirety.
Date, Time and Place
The special meeting is scheduled to be held at 45101 Warp Drive, Dulles, VA 20166
on , 2017, at , Eastern
Time.
Purpose of the Special Meeting
At the special meeting, stockholders will be asked to consider and vote on the following proposals:
-
-
the merger proposal;
-
-
the compensation proposal; and
-
-
the adjournment proposal.
Recommendation of the Orbital ATK Board
After careful consideration, the Orbital ATK Board, on September 16, 2017, unanimously approved the merger agreement and determined that
it is advisable, fair to and in the best interests of Orbital ATK and its stockholders for Orbital ATK to enter into the merger agreement and effect the merger and the other transactions contemplated
thereby. The Orbital ATK Board unanimously recommends that stockholders vote
"FOR"
the merger proposal, the compensation proposal and the adjournment
proposal. The Orbital ATK Board considered many factors in reaching its conclusion to enter into the merger agreement, including, without limitation, the value that stockholders would realize in the
merger, the current and historical market prices of Orbital ATK shares relative to the $134.50 per share merger consideration, the fact that the merger consideration consists entirely of cash and the
risks associated with the implementation of Orbital ATK's business plan. See and read carefully "The MergerReasons for the Merger" beginning on page 39.
The Orbital ATK Board unanimously recommends that stockholders vote "FOR" each of the merger proposal, the compensation proposal and the adjournment
proposal.
See "The MergerReasons for the Merger" beginning on page 39.
Record Date; Stockholders Entitled to Vote
Only holders of record of common stock at the close of business on ,
2017, the record date for the special meeting, are entitled
to notice of, and to vote at, the special meeting or any adjournment or postponement thereof. At the close of business on the record date,
shares of common stock were issued and
outstanding and held by holders of record. As of the close of business on the record date,
approximately % of the outstanding shares of common stock were held by our
directors and executive officers and their affiliates. We currently expect that our directors and executive officers will vote their shares in favor of the above-listed proposals, although none of
them has entered into any agreements obligating him or her to do so. A complete list of stockholders entitled to vote at the special meeting will be available for examination by any stockholder for
any purpose germane to the special meeting at our executive offices at 45101 Warp Drive, Dulles, VA 20166 during ordinary business hours for a period of ten days before the special meeting. The list
19
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will
also be available at the special meeting for examination by any stockholder present at the special meeting.
Each
share of common stock owned is entitled to one vote on each proposal at the special meeting.
If
you own shares of common stock that are registered in the name of someone else, such as a broker, bank, trust company or other nominee, you are not a holder of record and instead hold
your shares in "street name." If you hold your shares in "street name," in order for your shares to be represented at the special meeting, you must instruct your broker, bank, trust company or other
nominee as to how to vote your shares by following the directions provided to you by your broker, bank, trust company or other nominee.
Quorum
A quorum is necessary to transact business at the special meeting. Holders of a majority of all issued and outstanding shares of common stock as
of the record date and entitled to vote at the special meeting must be present in person or represented by proxy at the special meeting in order for there to be a quorum. Shares of common stock
represented at the special meeting but not voted, including shares for which a stockholder directs an "abstention" from voting, will be counted as present for purposes of establishing a quorum. Broker
non-votes will not be counted as present for purposes of establishing a quorum. Shares of common stock held in treasury will not be included in the calculation of the number of shares of common stock
represented at the meeting for purposes of determining whether a quorum is present. If a quorum is not present in person or represented by proxy, the special meeting may be adjourned or postponed
until the holders of the number of shares of common stock required to constitute a quorum are present in person or represented by proxy.
Required Vote
Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of common stock entitled to
vote as of the record date. Approval of
the compensation proposal and the adjournment proposal each requires the affirmative vote of the holders of a majority of the shares of common stock represented at the special meeting and entitled to
vote thereon.
Failure to Vote, Abstentions and Broker Non-Votes
If you are a stockholder and fail to submit a proxy or fail to instruct your broker, bank, trust company or other nominee to vote, it will have
the effect of a vote against the merger proposal, but, assuming a quorum is present at the special meeting, will have no effect on the compensation proposal or the adjournment proposal. If you are a
stockholder and you mark your proxy to abstain or provide voting instructions to abstain, it will have the effect of a vote against the merger proposal, the compensation proposal and the adjournment
proposal.
Voting in Person
If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however,
that if your shares are held in "street name," and you wish to vote at the special meeting, you must bring to the special meeting a legal proxy executed in your favor from the record holder of the
shares (your broker, bank, trust company or other nominee) authorizing you to vote at the special meeting.
In
addition, please be prepared to provide proper identification, such as a driver's license or passport. If you hold your shares in "street name," you will need to provide proof of
ownership, such
20
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as
a recent account statement or letter from your broker, bank, trust company or other nominee proving ownership on the record date, along with proper identification. Stockholders will not be allowed
to use cameras, recording devices and other similar electronic devices at the meeting.
Voting of Proxies
If you are a holder of record of common stock as of the record date for the special meeting there are four ways to have your shares
voted:
-
-
You can submit a proxy over the Internet at www.proxyvote.com, 24 hours a day, seven days a week, by following the instructions on your
proxy card.
-
-
You can submit a proxy using a touch-tone telephone by calling (800) 690-6903, 24 hours a day, seven days a week, and following
the instructions on your proxy card.
-
-
You may complete, sign and mail your proxy card to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood,
NY 11717.
-
-
Finally, you may vote in person by written ballot at the special meeting.
You
will need the 16-digit control number included on your proxy card if you submit a proxy by Internet or telephone. Proxies submitted by Internet or telephone must be received by
11:59 p.m., Eastern Time, on , 2017.
As
of the date hereof, management has no knowledge of any business that will be presented for consideration at the special meeting and which would be required to be set forth in this
proxy statement or the related proxy card other than the matters set forth in the Notice of Special Meeting of
Stockholders. If any other matter is properly presented at the special meeting for consideration, it is intended that the persons named in the enclosed form of proxy and acting thereunder will vote in
accordance with their best judgment on such matter.
Your
vote is important. Accordingly, please mark, sign, date and return the enclosed proxy card or submit a proxy via the Internet or by telephone whether or not you plan to attend the
special meeting in person.
If
a properly executed proxy is returned without an indication as to how the shares of common stock represented are to be voted with regard to a particular proposal, the common stock
represented by the proxy will be voted
"FOR"
such proposal. All shares represented by properly executed proxies received (including proxies received via
the Internet or by telephone) in time for the special meeting will be voted at the meeting in the manner specified by the stockholder giving those proxies.
Participants in Benefit Plans
Participants in the Orbital ATK, Inc. 401(k) Plan who have shares of common stock allocated to their plan accounts will receive voting
instruction cards in lieu of a proxy card. Only the trustee of this plan, in its capacity as directed trustee, can exercise the voting rights with respect to shares of common stock allocated to
participants' plan accounts and held in the plan's trust at the special meeting. However, if you are a plan participant who has shares of common stock allocated to your plan account, you are entitled,
on a confidential basis, to instruct the trustee how to cast the votes attributable to the shares of common stock allocated to your plan account (including instructing the trustee not to vote), as
well as a proportionate number of plan shares for which properly executed instructions are not timely received. If you elect not to vote the shares allocated to your accounts, your shares will be
voted proportionally in accordance with the voting instructions received by the trustees from those plan participants who do vote.
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Shares Held in "Street Name"
If you hold your shares in a stock brokerage account or if your shares are held by a broker, bank, trust company or other nominee (that is, in
"street name"), you must provide the record holder of your shares with instructions on how to vote your shares if you wish them to be counted. Please follow the voting instructions provided by your
broker, bank, trust company or other nominee. Please note that you may not vote shares held in "street name" by returning a proxy card directly to Orbital ATK or by voting in person at the special
meeting unless you provide a legal proxy, which you must obtain from your broker, bank, trust company or other nominee. Further, brokers who hold shares of common stock on behalf of their customers
may not give a proxy to Orbital ATK to vote those shares without specific instructions from their customers.
If
you are a stockholder holding your shares in "street name" and you do not instruct your broker, bank, trust company or other nominee on how to vote your shares, your broker, bank,
trust company or other nominee cannot vote your shares, which will have the same effect as a vote against the merger proposal. If you do not instruct your broker, bank, trust company or other nominee
on how to vote your shares, it will have no effect on the compensation proposal and the adjournment proposal, assuming a quorum is present at the special meeting.
Revocation of Proxies
You have the power to revoke your proxy at any time before your proxy is voted at the special meeting. If you are a holder of record, you can
revoke your proxy in one of three ways:
-
-
you can send a signed notice of revocation;
-
-
you can grant a new, valid proxy bearing a later date (including by telephone or through the Internet);
or
-
-
you can attend the special meeting and vote in person, which will cancel any proxy previously given. Your attendance at the special meeting
alone will not revoke any proxy that you have previously given.
If
you submit a written notice of revocation, it must be received by the Corporate Secretary of Orbital ATK at 45101 Warp Drive, Dulles, VA 20166 no later than the beginning of the
special meeting. If you do so by telephone or through the Internet, your revised instructions must be received by 11:59 p.m. Eastern Time
on , 2017.
If
your shares are held in "street name" by your broker, bank, trust company or other nominee, you should contact your broker to change your vote or revoke your proxy.
Tabulation of Votes
Orbital ATK has appointed one or more representatives of Broadridge Financial Solutions, Inc. to serve as the inspector of election for
the special meeting. The inspector of election will, among other matters, determine the number of shares represented at the special meeting to confirm the existence of a quorum, determine the validity
of all proxies and ballots and certify the results of voting on all proposals submitted to the stockholders.
Solicitation of Proxies
The cost of proxy solicitation for the special meeting will be borne by Orbital ATK. Solicitation initially will be made by mail. Forms of
proxies and proxy materials also may be distributed through brokers, custodians, and other like parties to the beneficial owners of shares of common stock, in which case these parties will be
reimbursed for their reasonable out-of-pocket
expenses. Proxies also may be solicited in person or by telephone, facsimile, electronic mail, or other electronic medium by D.F. King
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or
by certain of our directors, officers, and employees, without additional compensation. Orbital ATK will also request that brokerage firms, nominees, custodians and fiduciaries forward proxy
materials to the beneficial owners of shares of common stock held of record on the record date and will provide customary reimbursement to such firms for the cost of forwarding these materials.
Orbital ATK has retained D.F. King to assist in its solicitation of proxies and has agreed to pay them a fee of approximately $20,000, plus reasonable expenses, for these services.
Adjournment
If a quorum is not present in person or represented by proxy, the chairman of the meeting and the stockholders entitled to vote at the special
meeting, present in person or represented by proxy, shall have the power to adjourn the special meeting from time to time, without notice other than announcement at the meeting, until a quorum is
present in person or represented by proxy. If a quorum is present at the special meeting but there are not sufficient votes at the time of the special meeting to approve the merger proposal, then
stockholders may be asked to vote on the adjournment proposal. No notices of an adjourned meeting need be given unless the adjournment is for more than 30 days, in which case a notice of the
adjourned meeting will be given to each stockholder of record entitled to vote at the meeting. If, after the adjournment, a new record date is fixed for the adjourned meeting, a notice of the
adjourned meeting will be given to each stockholder of record entitled to vote at such adjourned meeting as of the record date for notice of such adjourned meeting. At any subsequent reconvening of
the special meeting at which a quorum is present, any business may be transacted that might have been transacted at the original meeting and all proxies will be voted in the same manner as they would
have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.
Assistance
If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact our proxy solicitor, D.F.
King:
D.F.
King & Co., Inc.
48 Wall Street
New York, New York 10005
Stockholders Call Toll Free: (800) 399-1581
Banks and Brokers Call Collect: (212) 269-5550
Email: oa@dfking.com
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THE COMPANIES
Orbital ATK, Inc.
Orbital ATK is an aerospace and defense systems developer, manufacturer and supplier of systems and products to the U.S. Government, allied
nations, prime contractors and other customers. Our main products include launch vehicles and related propulsion systems, satellites and associated components and services, composite aerospace
structures, tactical missiles, subsystems and
defense electronics, and precision weapons, armament systems and ammunition. We are headquartered in Dulles, Virginia and have operating locations throughout the United States.
We
conduct business in three segments:
-
-
Flight Systems Group develops rockets that are used as small-and medium-class space launch vehicles to place satellites into Earth orbit and
escape trajectories, interceptor and target vehicles for missile defense systems and suborbital launch vehicles that place payloads into a variety of high-altitude trajectories. The group also
develops and produces medium-and large-class rocket propulsion systems for human and satellite launch vehicles, strategic missiles, missile defense interceptors and target vehicles. Additionally,
Flight Systems Group operates in the military and commercial aircraft and launch vehicle structures markets.
-
-
Defense Systems Group develops and produces small-, medium-and large-caliber military ammunition, propulsion systems for tactical missiles and
missile defense applications, fuzes and warheads, strike weapons, precision weapons and munitions, high-performance gun systems, special mission aircraft, aircraft survivability systems and energetic
materials.
-
-
Space Systems Group develops and produces small- and medium-class satellites that are used to enable global and regional communications and
broadcasting, conduct space-related scientific research and perform other activities related to national security. In addition, Space Systems Group develops and produces human-rated space systems for
Earth-orbit and deep-space exploration, including cargo delivery to the International Space Station. This group is also a provider of spacecraft components and subsystems and specialized engineering
and operations services to U.S. government agencies.
Our
common stock is listed and traded on the NYSE under the symbol "OA."
Our
principal executive offices are located at 45101 Warp Drive, Dulles, VA 20166; our telephone number is (703) 406-5000; and our Internet website address is www.orbitalatk.com.
The information provided on or accessible through our website is not part of this proxy statement and is not incorporated in this proxy statement by this or any other reference to our website provided
in this proxy statement.
See
"Where You Can Find More Information" on page 99.
Northrop Grumman Corporation
Northrop Grumman is a leading global security company. Northrop Grumman offers a broad portfolio of capabilities and technologies that enable
Northrop Grumman to deliver innovative products, systems and solutions for applications that range from undersea to outer space and into cyberspace. Northrop Grumman provides products, systems and
solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance, and reconnaissance (C4ISR); strike; and logistics and modernization. Northrop
Grumman participates in many high-priority defense and government programs in the United States and abroad. Northrop Grumman conducts most of its business with the U.S. Government, principally the
Department of Defense and intelligence community. Northrop Grumman also conducts business with foreign, state and local governments, as well as commercial customers.
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Northrop
Grumman's common stock is listed and traded on the NYSE under the symbol "NOC."
Northrop
Grumman's principal executive offices are located at 2980 Fairview Park Drive, Falls Church, VA 22042; its telephone number is (703) 280-2900; and its Internet website
address is www.northropgrumman.com. The information provided on or accessible through Northrop Grumman's website is not part of this proxy statement and is not incorporated in this proxy statement by
this or any other reference to its website provided in this proxy statement.
Neptune Merger, Inc.
Neptune Merger, Inc., a wholly-owned subsidiary of Northrop Grumman, is a Delaware corporation that was formed on September 15,
2017, for the purpose of effecting the merger. Sub has not engaged in any business to date except for activities incidental to its incorporation and activities undertaken in connection with the merger
and the other transactions contemplated by the merger agreement. Upon the terms and subject to the conditions of the merger agreement, Sub will be merged with and into Orbital ATK, with Orbital ATK
surviving the merger as a wholly-owned subsidiary of Northrop Grumman.
The
principal executive offices of Sub are located at 2980 Fairview Park Drive, Falls Church, VA 22042, and its telephone number is (703) 280-2900.
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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
As discussed below, stockholders are being asked to consider and vote on a proposal to adopt the merger agreement. You should read this proxy
statement carefully and in its entirety for more detailed information concerning the merger agreement and the merger. In particular, you should read carefully and in its entirety the merger agreement,
which is attached as
Annex A
to this proxy statement.
If you return a properly executed proxy (including proxies received via the Internet or by telephone), but do not indicate instructions on your
proxy, your shares of common stock represented by such proxy will be voted
"FOR"
the merger proposal.
Approval
of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of common stock entitled to vote as of the record date.
Your
failure to vote, or failure to instruct your broker, bank, trust company or other nominee to vote, will have the same effect as a vote
"AGAINST"
the merger proposal. Abstentions and broker non-votes
will have the same effect as a vote
"AGAINST"
the merger proposal.
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THE MERGER
The discussion of the merger in this proxy statement is qualified in its entirety by reference to the merger agreement,
a copy of which is attached to this proxy statement as
Annex A
and which is incorporated by reference into this proxy
statement.
Effects of the Merger
Orbital ATK is seeking the adoption by its stockholders of the merger agreement. Pursuant to the terms of the merger agreement, at the effective
time of the merger, Sub will be merged with and into Orbital ATK, with Orbital ATK surviving the merger as a wholly-owned subsidiary of Northrop Grumman. The Orbital ATK Board has unanimously approved
the merger agreement and unanimously recommends that Orbital ATK's stockholders vote to adopt the merger agreement.
Common Stock.
At the effective time of the merger, each outstanding share of common stock (other than treasury shares and any shares
owned by
Northrop Grumman, Sub or any person who properly demands appraisal of their shares pursuant to Section 262 of DGCL (and has not withdrawn such demand or lost its appraisal rights)), will be
converted into the right to receive the merger consideration less any applicable withholding taxes.
Options.
At the effective time of the merger, each option to purchase common stock that is outstanding will automatically become fully
vested and
will be converted into the right to receive a cash payment equal to the product of (i) the number of shares of common stock subject to such option immediately prior to the effective time of the
merger, and (ii) the excess, if any, of the merger consideration over the exercise price applicable to such option, less any applicable tax withholding. If the exercise price applicable to
shares of common stock subject to an option is equal to or greater than the merger consideration, the option will terminate and be canceled for no consideration.
Restricted Shares.
Immediately prior to the effective time of the merger, each restricted share that is outstanding will automatically
become fully
vested and will be converted into the right to receive a cash payment equal to the merger consideration, less any applicable tax withholding.
Performance Shares.
With respect to our performance shares, if the closing date occurs prior to the date on which performance shares
with respect to
the 2015-2017 performance period would vest in the ordinary course of business, such performance shares will become vested based on achievement of performance metrics at the greater of target
performance or actual performance and will be converted into the right to receive a cash payment equal to the product of (i) the number of shares of common
stock subject to such performance share immediately prior to the effective time of the merger (after taking into account the vesting in connection with the merger described above), and (ii) the
merger consideration, less any applicable tax withholding.
Immediately
prior to the effective time of the merger, each performance share with respect to the 2016-2018 or 2017-2019 performance period that is outstanding and that is held by an
individual who is not a participant in one of Orbital ATK's income security plans or who waives participation in Orbital ATK's income security plans prior to the effective time of the merger, will
become vested based on deemed achievement of target performance, further pro-rated based on the number of days elapsed from the beginning of the performance period through and including the closing
date over the total number of days from the beginning of the scheduled performance period through the end of the performance period. Such performance shares will be converted into the right to receive
a cash payment equal to the product of (i) the number of shares of common stock subject to such performance share immediately prior to the effective time (after taking into account the vesting
at target in connection with the merger described above), and (ii) the merger consideration, less any applicable tax withholding. For each performance share that is forfeited due to pro-ration,
as soon as reasonably practicable following the effective time of the merger, Northrop Grumman will grant each
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holder
thereof who remains an employee as of the grant date with a "Northrop Grumman retention grant" of Northrop Grumman restricted stock rights with a value equal to two times the value of such
forfeited performance share (determined based on target performance) that will time vest and not be dependent on the achievement of any performance metrics. One-half of the Northrop Grumman retention
grant will vest on March 1, 2019, and the remaining one-half of the Northrop Grumman retention grant will vest on March 1, 2020, in each case subject to continued employment with
Northrop Grumman and its subsidiaries as of such dates; provided, however, that holders of Northrop Grumman retention grants who are involuntarily terminated other than for cause prior to
March 1, 2019, will vest in one-half of the Northrop Grumman retention grant upon such termination and forfeit the remaining one-half.
Immediately
prior to the effective time of the merger, each performance share with respect to the 2016-2018 or 2017-2019 performance period that is outstanding and that is held by an
individual who is a participant in one of Orbital ATK's income security plans and who does not waive participation therein prior to the effective time, will become vested based on deemed achievement
of target performance and will be converted into the right to receive a cash payment equal to the product of (i) the number of shares of common stock subject to such performance share
immediately prior to the effective time (after taking into account the vesting in connection with the merger described above), and (ii) the merger consideration, less any applicable tax
withholding.
Deferred Stock Units.
At the effective time of the merger, each deferred stock unit that is outstanding will automatically become fully
vested and
will be converted into the right to receive a cash payment equal to the product of (i) the number of shares of common stock subject to such deferred stock unit immediately prior to the
effective time, and (ii) the merger consideration, less any applicable tax withholding. Such payment will be paid in accordance with and subject to the deferral elections applicable to such
deferred stock units as of immediately prior to the effective time.
Phantom Stock Units.
At the effective time of the merger, each phantom stock unit that is outstanding will become fully vested and will
be converted
into the right to receive a cash payment equal to the product of (i) the number of shares of common stock subject to such phantom stock unit immediately prior to the effective time, and
(ii) the merger consideration, less any applicable tax withholding. Such payment will be paid in accordance with and subject to the deferral elections applicable to such phantom stock units as
of immediately prior to the effective time.
Notwithstanding
the above, if any options, restricted shares, performance shares, or deferred stock units are granted following the date of the merger agreement and prior to the
effective time of the merger, the vesting of such awards will instead be pro-rated based on the number of days from the grant date (or for performance shares, from the beginning of the performance
period) through and including the closing date over the number of days from the grant date through the final regularly scheduled vesting date of such award (or for performance shares, from the
beginning to the end of the performance period).
Background of the Merger
Orbital ATK's management and the Orbital ATK Board regularly review Orbital ATK's performance, prospects and strategy in light of the current
business and economic environment, as well as developments in the aerospace and defense industries, and opportunities and challenges facing participants in such industries. These reviews have
included, among other things, consideration, from time to time, of potential strategic alternatives, including strategic acquisitions, divestitures and business combination transactions.
In
2015, Company A approached Orbital ATK about a possible acquisition of Company A by Orbital ATK. Orbital ATK and Company A entered into a mutual non-disclosure agreement (the "Company
A NDA") on November 5, 2015 that included customary confidentiality provisions and a
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two-year
standstill provision prohibiting the parties from engaging in certain types of actions, including making an acquisition proposal with respect to the other party without the other party's
prior written consent. The standstill provision included a prohibition on both parties from asking for a waiver of the prohibitions, which is commonly referred to as a "don't ask, don't waive"
provision. In December 2015, Orbital ATK ceased discussions with Company A regarding a possible acquisition of Company A. On September 17, 2017, prior to executing the merger agreement, Orbital
ATK sent a letter to Company A releasing it from its standstill obligations under the Company A NDA.
In
2016, Company B approached Orbital ATK about a possible acquisition of Company B by Orbital ATK. The mutual non-disclosure agreement entered into between Orbital ATK and Company B did
not include a standstill provision. Following several meetings and discussions, the parties ceased discussions in early 2017.
Northrop
Grumman's management and its board of directors (the "Northrop Grumman Board") regularly review Northrop Grumman's performance, prospects and strategy in light of the current
business, global security and economic environment, as well as developments in the aerospace and defense industries, and opportunities and challenges facing participants in these industries. These
reviews have included consideration, from time to time, of potential strategic alternatives, including strategic acquisitions, divestitures and business combination transactions, as well as other uses
of company resources.
Orbital
ATK and Northrop Grumman have had a long-standing commercial relationship. Currently, Orbital ATK is a supplier to Northrop Grumman on several significant programs. In light of
the nature of Orbital ATK's and Northrop Grumman's businesses and the commercial relationship between the companies, members of management of both companies generally are familiar with the other's
businesses, and representatives of both companies periodically have consulted on matters relating to their commercial relationship and the industries in which they operate.
On
January 24, 2017, Mr. Wesley G. Bush, Chairman, Chief Executive Officer and President of Northrop Grumman, invited Mr. David W. Thompson, President and Chief
Executive Officer of Orbital ATK, to a dinner meeting in Great Falls, Virginia, during which Messrs. Bush and Thompson discussed general aerospace and defense industry matters as well as
activities relating to several significant programs the companies were working on together. Neither Mr. Bush nor Mr. Thompson raised the subject of a potential business combination
between Northrop Grumman and Orbital ATK at that meeting.
On
May 24, 2017, during the Aerospace Industries Association Spring Board of Governors meeting, Mr. Bush initiated a meeting with Mr. Thompson. Mr. Bush was
complimentary of Orbital ATK's work on certain Northrop Grumman programs. He also stated his desire to continue to expand Northrop Grumman's business relations with Orbital ATK, ranging from broader
teaming agreements on specific
programs, to potential strategic alliances in selected business areas, or a potential business combination of the two companies. Mr. Bush did not, however, make any specific proposal regarding
a potential business combination, nor were price or any other terms mentioned or discussed. Mr. Thompson indicated that Orbital ATK had been focused on pursuing its strategy, which was based on
organic growth in Orbital ATK's existing product lines as well as in new products currently in development. He also stated that Orbital ATK itself considered acquisitions of other businesses to
strengthen its competitive position and growth opportunities. Mr. Thompson said that Orbital ATK was not for sale, but stated that he would report Northrop Grumman's potential interest to Gen.
Ronald R. Fogleman, Chairman of the Orbital ATK Board.
Also
on May 24, 2017, Mr. Brett B. Lambert, Vice President of Strategic Planning of Northrop Grumman, met with Mr. Blake E. Larson, Chief Operating Officer of
Orbital ATK. As part of the discussion, Mr. Lambert outlined Northrop Grumman's desire to pursue closer business relations with Orbital ATK, primarily focused on teaming or partnering on
certain programs and certain other
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strategic
initiatives. In the course of the discussions, Mr. Larson mentioned the earlier meeting between Messrs. Thompson and Bush to Mr. Lambert, but Messrs. Larson and
Lambert focused their meeting on potential programmatic collaboration.
On
June 1, 2017, Mr. Thompson met with Gen. Fogleman to discuss a range of topics, including Northrop Grumman's interest in a closer business relationship with Orbital ATK,
which could potentially include a business combination. Mr. Thompson and Gen. Fogleman agreed that, while Orbital ATK was not contemplating a sale, management should explore Northrop Grumman's
interest in a range of strategic relationships with Orbital ATK and that Mr. Thompson would brief the Orbital ATK Board after more information on the matter was available.
On
June 9, 2017, Messrs. Lambert and Larson met in-person at Orbital ATK's corporate offices to discuss the potential merits of a closer strategic relationship between the
companies and possible next steps. No price or other terms in respect of a potential business combination were mentioned or discussed between Messrs. Lambert and Larson at that meeting.
On
June 23, 2017, Messrs. Lambert and Larson held telephone discussions to discuss logistics relating to an upcoming meeting of representatives of the two companies
scheduled for June 28, 2017.
On
June 28, 2017, Messrs. Thompson and Larson and Mr. David M. Wise, Vice President of Corporate Strategy and Integration, of Orbital ATK and Mr. Bush,
Mr. Kenneth L. Bedingfield, Corporate Vice
President and Chief Financial Officer, Ms. Sheila C. Cheston, Corporate Vice President and General Counsel, Mr. Mark A. Caylor, Corporate Vice President, President of
Enterprise Services and Chief Strategy Officer and Mr. Lambert of Northrop Grumman met in-person in Vienna, Virginia to discuss the possibility of a potential business combination between the
two companies. The representatives of Northrop Grumman indicated that Northrop Grumman was interested in a possible acquisition of Orbital ATK, but that Northrop Grumman would not participate in any
auction process. The representatives of Northrop Grumman also emphasized their desire to move quickly. Orbital ATK's representatives stated that any potential business combination would have to
reflect a compelling valuation and structure for Orbital ATK's stockholders and also would have to maintain Orbital ATK's customer commitments and workforce stability, among other considerations.
Orbital ATK's representatives also emphasized the importance of strict confidentiality during any future discussions. No price or other terms were mentioned or discussed at that meeting.
Orbital
ATK and Northrop Grumman entered into a mutual non-disclosure agreement, dated June 29, 2017, which did not include a standstill provision. Prior to entering into the
non-disclosure agreement, representatives of Orbital ATK and Northrop Grumman disclosed only publicly available information.
On
June 29 and July 7, 2017, Mr. Thompson and Gen. Fogleman held telephone discussions in which Mr. Thompson reported to Gen. Fogleman on the June 28,
2017 meeting with Northrop Grumman, and Mr. Thompson and Gen. Fogleman discussed an additional meeting to be held with Northrop Grumman on July 11, 2017. Mr. Thompson and
Gen. Fogleman again agreed that, while Orbital ATK was not contemplating a sale, management should continue to explore Northrop Grumman's interest in a potential business combination with Orbital ATK
and that a meeting of the Orbital ATK Board could be scheduled during the week of July 17-21, 2017 if Northrop Grumman continued to express interest in a possible acquisition of Orbital ATK at
the July 11, 2017 meeting.
On
July 5-7, 2017, the Northrop Grumman Board held its regularly scheduled annual board meeting focused on Northrop Grumman's strategy and various strategic alternatives. At that
meeting, the Northrop Grumman Board received an update on the discussions with Orbital ATK.
On
July 11, 2017, Messrs. Thompson, Larson and Wise, Mr. Garrett E. Pierce, Chief Financial Officer, Mr. Thomas E. McCabe, Senior Vice President, General
Counsel and Secretary, and Mr. Vivek Upadhyaya, Vice President of Financial Planning and Analysis, of Orbital ATK met in-person in
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Vienna,
Virginia, with Messrs. Bedingfield, Caylor and Lambert, Ms. Cheston, Mr. Prabu Natarajan, Vice President of Business Management, and Ms. Karin Flanagan, Vice
President of Mergers and Acquisitions of Northrop Grumman, to present an overview of Orbital ATK's business, including its growth strategy, financial plans through 2020, capital allocation priorities,
organizational structure and
business model, significant programs, contracts and risk items, potential benefits of a combination involving Orbital ATK and Northrop Grumman, workforce matters and Orbital ATK's recent financial
restatement. The financial plan Orbital ATK provided to Northrop Grumman included Orbital ATK's financial projections for its business for 2018, 2019 and 2020. See "Certain Unaudited
Financial Information" beginning on page 49.
On
July 12, 2017, Mr. Thompson held a telephone discussion with Dr. James G. Roche, a member of the Orbital ATK Board, to discuss Northrop Grumman's interest in a
potential transaction. Mr. Thompson called Dr. Roche because he was familiar with Northrop Grumman and several of its current executives, having held several executive positions with
Northrop Grumman from 1984 to 2001, including Corporate Vice President and President of its electronic sensors and systems sector, as well as having served as Secretary of the U.S. Air Force from 2001
to 2005.
On
July 13, 18 and 19, 2017, Orbital ATK provided written responses to Northrop Grumman's diligence requests that were made during and subsequent to the July 11, 2017
meeting. Related conference calls between representatives of Orbital ATK and Northrop Grumman were held on July 17 and 18, 2017.
On
July 21, 2017, the Orbital ATK Board held a telephonic meeting. Attending the meeting were all directors, except for Mr. Martin C. Faga and Mr. Robert M. Hanisee,
who were planning to retire at Orbital ATK's annual meeting of stockholders on August 10, 2017, and Dr. Harrison H. Schmitt, who was traveling internationally. Mr. Thompson
provided a report on Northrop Grumman's interest in a potential transaction and the interactions between Orbital ATK's representatives and Northrop Grumman's representatives to date. Mr. McCabe
briefed the Orbital ATK Board on its fiduciary duties in the context of a potential transaction. A discussion ensued among the members of the Orbital ATK Board regarding a potential transaction. The
Orbital ATK Board instructed Mr. Thompson to provide an update following the anticipated telephone call from Mr. Bush on July 26, 2017.
On
July 24, 2017, the Northrop Grumman Board held a telephonic meeting during which Mr. Bush provided an update on discussions with Orbital ATK and possible next steps.
On
July 26, 2017, Mr. Bush telephoned Mr. Thompson and provided Northrop Grumman's indication of interest potentially to acquire all of the issued and outstanding
shares of common stock for $130.00 per share in cash. Mr. Bush explained that in valuing Orbital ATK, Northrop Grumman had not discounted the baseline financial projections that Orbital ATK's
management had provided; rather, Northrop Grumman had accepted the pre-tax projections without adjustment or discount to the baseline financial plan, which in Northrop Grumman's view, meant that the
$130.00 per share offer attributed full-value to the pre-tax projections. Mr. Bush responded to Mr. Thompson's earlier concerns about customer and program continuity and workforce
stability by assuring Mr. Thompson that Northrop Grumman shared those concerns. Mr. Bush said that Northrop Grumman proposed to retain Orbital ATK's lines of business, to continue
Orbital ATK's major growth investments, and, at least initially, to establish Orbital ATK as a fourth business sector within Northrop Grumman, in part to minimize disruption to ongoing operations,
program performance and personnel. Mr. Thompson stated that he would discuss Northrop Grumman's proposal with the Orbital ATK Board and would contact Mr. Bush on August 1, 2017,
for
clarification or questions regarding the proposal in advance of the Orbital ATK Board's in-person meeting on August 10-11, 2017.
On
July 28, 2017, the Orbital ATK Board held a telephonic meeting. Attending the meeting were all directors, except for Mr. Faga and Mr. Hanisee. Mr. Thompson
informed the Orbital ATK Board of Northrop Grumman's proposal. Mr. McCabe briefed the Orbital ATK Board on its fiduciary duties and
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other
applicable considerations in the context of a sale transaction. A discussion ensued among the members of the Orbital ATK Board regarding the proposal. The Orbital ATK Board authorized management
to contact Citigroup and Hogan Lovells US LLP ("Hogan Lovells") to discuss their potential roles as financial advisor and outside legal counsel, respectively, in connection with the potential
transaction. Orbital ATK subsequently engaged Citigroup as financial advisor and Hogan Lovells as outside legal counsel. Citigroup and Hogan Lovells had previously represented Orbital Sciences
Corporation, including in its merger with Alliant Techsystems, Inc. to form Orbital ATK. Subsequent to that merger, Citigroup advised Orbital ATK on its consideration of several potential
strategic alternatives, including strategic acquisitions and divestitures. Similarly, Hogan Lovells had been previously retained by Orbital ATK in connection with corporate and securities matters,
potential acquisitions and divestitures and other legal matters.
On
July 31, 2017, members of Orbital ATK's senior management held a telephone call with representatives of Citigroup and Hogan Lovells to discuss the potential transaction and
negotiating strategy.
On
August 1, 2017, Messrs. Bush and Thompson held a previously scheduled telephone call in which Mr. Thompson advised Mr. Bush that the Orbital ATK Board
would be reviewing Northrop Grumman's proposal at a board meeting on August 10-11, 2017, with the assistance of a financial advisor and legal counsel. On this telephone call, Mr. Bush
informed Mr. Thompson that the Northrop Grumman Board was supportive of the $130.00 per share proposal. Mr. Bush stated that this represented a full price, giving full credit without any
discount to Orbital ATK's pre-tax projections in its baseline financial plan. Messrs. Bush and Thompson agreed to speak on August 11, 2017, after the Orbital ATK Board meeting.
On
August 10, 2017, Mr. Faga and Mr. Hanisee, who did not stand for re-election, retired from the Orbital ATK Board at Orbital ATK's 2017 annual meeting of
stockholders.
On
August 10-11, 2017, the Orbital ATK Board met in-person to further discuss Northrop Grumman's proposal. All directors, certain members of Orbital ATK's senior management and
representatives of
Citigroup and Hogan Lovells attended the meeting. Mr. Thompson began the meeting by providing an overview of Northrop Grumman and a summary of the discussions to date between Orbital ATK and
Northrop Grumman that led to Northrop Grumman's proposal to acquire all of the issued and outstanding shares of common stock at a price of $130.00 per share in cash. The Orbital ATK Board discussed
the merits of and risks related to Northrop Grumman's proposal, including that the proposal was at a significant premium to the historical and recent trading prices of shares of common stock.
Representatives from Hogan Lovells briefed the Orbital ATK Board on its fiduciary duties and other legal matters to be considered in connection with its review of Northrop Grumman's proposal. A
discussion ensued among the directors and representatives of Hogan Lovells regarding fiduciary duties and other legal matters. The Citigroup representatives reviewed Citigroup's relationships with
Northrop Grumman, including its prior mergers and acquisitions advisory work for Northrop Grumman, its role as bookrunner on an investment grade bond offering in 2016 by Northrop Grumman and its
current participation as one of 18 lenders in Northrop Grumman's revolving credit facility. Citigroup committed orally at the meeting (which commitment was subsequently confirmed in writing) that it
would not participate in any potential committed or bridge financing Northrop Grumman may enter into in connection with a transaction with Orbital ATK, or any related debt offering without the consent
of Orbital ATK. Thereafter, the Orbital ATK Board concluded that Citigroup had no material relationships that in the Orbital ATK Board's view would impair Citigroup's ability to serve as the financial
advisor to the Orbital ATK Board.
Representatives
of Citigroup then made a presentation covering, among other topics, current market conditions, the recent trading performance of the shares of common stock, preliminary
financial analyses of Orbital ATK, Northrop Grumman and its financial condition and potential financing
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scenarios
and requirements. The Citigroup representatives also discussed with the Orbital ATK Board a range of possible non-price transaction terms. Citigroup also provided the Orbital ATK Board with
an overview of a potential process and a possible timeline for a potential transaction if the Orbital ATK Board determined that pursuing the potential transaction was in the best interests of Orbital
ATK and its stockholders. The directors asked numerous questions of Citigroup and Hogan Lovells and discussed negotiating strategy with Mr. Thompson. The Orbital ATK Board agreed that an
all-cash transaction was desirable because of the certainty of value it would provide to Orbital ATK stockholders, particularly when considering that the expected timing of the closing of any
transaction would increase the uncertainty in respect of stock consideration. Mr. Thompson informed the Orbital ATK Board that Mr. Bush had stated that Northrop Grumman would not
participate in an auction of Orbital ATK. The representatives of Citigroup identified other potential strategic companies that might be able to make and be interested in making an acquisition proposal
for Orbital ATK. A discussion ensued among members of the Orbital ATK Board and representatives of Citigroup regarding the possibility that any other potential strategic buyers would have both the
financial ability and the interest in making and closing on an acquisition proposal at a price greater than Northrop Grumman's $130.00 per share proposal. Representatives of Citigroup and the Orbital
ATK Board also discussed potential financial buyers and, in Citigroup's judgment, the unlikelihood that they would be able to make an acquisition proposal at a greater price than Northrop Grumman's
$130.00 per share offer. After this discussion, the Orbital ATK Board decided that the risk of unauthorized or inadvertent disclosure from any outreach to other potential strategic buyers and the
impact that such disclosure would have on customers and
employees of Orbital ATK, and the risk that Northrop Grumman, in light of Mr. Bush's statements that Northrop Grumman would not participate in an auction of Orbital ATK, would withdraw,
outweighed the benefit of contacting other potential strategic buyers. The Orbital ATK Board considered the benefits and cost to stockholders of monetizing the value of Orbital ATK's business through
Northrop Grumman's proposal, versus the risk and opportunities of continuing on a standalone basis. The directors then discussed the upside potential versus downside risk of Orbital ATK's standalone
business prospects. After further discussion, the Orbital ATK Board directed Mr. Thompson to advise Mr. Bush that the Orbital ATK Board authorized Mr. Thompson to continue
discussions with respect to a potential transaction but that the price of $130.00 per share was inadequate and the Orbital ATK Board was unwilling to proceed with a transaction based on that
valuation.
Later
on August 11, 2017, Mr. Thompson telephoned Mr. Bush to relay that the Orbital ATK Board had met and authorized him to continue discussions with Northrop
Grumman but that the Orbital ATK Board was not willing to proceed with a transaction at a price of $130.00 per share. Among other things, Mr. Thompson advised Mr. Bush that the $130.00
per share offer price was not a sufficient premium for Orbital ATK which, in Orbital ATK's view, occupies a unique position in the aerospace and defense industry. Mr. Thompson also pointed out
that any revised offer would need to reflect a substantial increase in price and should take into account Orbital ATK's strong financial projections and the possibility that any transaction may not
close until 2018 if there were regulatory scrutiny on the combination of the two companies.
On
August 16, 2017, the Northrop Grumman Board held a telephonic meeting. Mr. Bush and Northrop Grumman's management updated the Northrop Grumman Board on the status of
discussions with Orbital ATK, issues of valuation and the potential transaction, and negotiations. The Northrop Grumman Board expressed support for the positions Mr. Bush discussed.
On
August 17, 2017, Mr. Bush and Mr. Thompson had a telephone conversation during which Mr. Bush informed Mr. Thompson that Northrop Grumman had
performed further analysis and that Northrop Grumman was prepared to increase its proposal to $134.00 per share in cash. He explained that Northrop Grumman had taken into consideration the points
Mr. Thompson outlined on the August 11, 2017 telephone call. Mr. Bush stated that the $134.00 per share offer price was conditioned on the completion of customary confirmatory due
diligence by Northrop Grumman and agreement on
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satisfactory
terms. Mr. Bush also stated that this revised offer of $134.00 per share in cash was determined after discussions with, and with the support of, the Northrop Grumman Board.
Mr. Bush emphasized that if the Orbital ATK Board concluded that the $134.00 per share offer price was insufficient, he expected Northrop Grumman would move on to focus on other strategic
priorities. Mr. Thompson informed Mr. Bush that he would relay the revised proposal to the Orbital ATK Board. Mr. Thompson summarized this discussion in a call with Gen. Fogleman
later that day in preparation for Orbital ATK's Board meeting the following day.
On
August 18, 2017, the Orbital ATK Board held a telephonic meeting. Attending the meeting were all directors, certain members of Orbital ATK's senior management and
representatives of Citigroup and Hogan Lovells. Mr. Thompson reported on his discussions with Mr. Bush since the last Orbital ATK Board meeting, including the price increase to $134.00
per share of common stock in cash and that he viewed it as Northrop Grumman's best and final offer. The Orbital ATK Board discussed this revised offer and the likelihood that this was in fact Northrop
Grumman's best and final price. The Orbital ATK Board discussed the fact that Northrop Grumman's first offer was a significant premium over recent trading prices of shares of common stock, including
the 52-week high, and Northrop Grumman's characterization of its initial offer as representing full value. The Orbital ATK Board also discussed the negotiations with Northrop Grumman that had occurred
to date and the Orbital ATK Board's view, based on prior business dealings with Northrop Grumman, as to the likelihood of further price increases or extended price negotiations. Representatives of
Hogan Lovells reviewed the directors' fiduciary duties and other legal matters in connection with the Orbital ATK Board's evaluation of the revised offer and the potential transaction. Representatives
from Citigroup provided an update with respect to certain financial analyses based on more recent market information about Orbital ATK and Northrop Grumman and the increased proposal of $134.00 per
share in cash. Representatives of Citigroup and Hogan Lovells also reviewed precedent aerospace and defense and other large diversified industrial transactions, including merger agreement provisions
and timelines for such transactions, as part of discussions focused on considerations relating to conditionality and closing certainty in the context of a potential transaction with Northrop Grumman.
The directors engaged in a discussion regarding Northrop Grumman's revised proposal and Orbital ATK's potential response. The Orbital ATK Board asked that Orbital ATK's management and its advisors
consider what important non-price terms of a merger agreement Orbital ATK should seek. The Orbital ATK Board concluded that it should consider the revised proposal further and discuss again at a
meeting early the following week.
Later
on August 18, 2017, Mr. Thompson held a telephone conversation with Mr. Bush during which Mr. Thompson conveyed to Mr. Bush that the Orbital ATK
Board appreciated Northrop Grumman's additional work on valuation and the increased offer, but that the Orbital ATK Board needed additional time to consider the revised offer.
On
August 18, 19 and 20, 2017, Mr. Thompson had telephone conversations with several directors, including Gen. Fogleman, regarding Northrop Grumman's revised offer.
On
August 22, 2017, the Orbital ATK Board held a telephonic meeting. Attending the meeting were all directors, certain members of Orbital ATK's management and representatives of
Citigroup and Hogan Lovells. The representatives of Citigroup made a presentation covering, among other topics, an update on the recent trading performance of the shares of common stock, an updated
preliminary financial analysis of Orbital ATK, taking into account the increased proposal of $134.00 per share of common stock in cash, Northrop Grumman's financial condition and potential financing
scenarios and requirements and certain non-price transaction terms. A discussion among the Orbital ATK Board members ensued. The Orbital ATK Board determined that the risk of unauthorized or
inadvertent disclosure about a potential transaction between Orbital ATK and Northrop Grumman and the possibility of Northrop Grumman withdrawing its proposal if Citigroup were requested to reach out
to other potential interested strategic buyers outweighed the benefit of contacting other potential strategic buyers. The Orbital ATK Board discussed a range of termination or "break-up" fees and
concluded
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that
a break-up fee ranging from $250 million to $300 million would be acceptable, consistent with termination fees in similar transactions and not likely to preclude a superior proposal
for the acquisition of Orbital ATK. The Orbital ATK Board discussed potential counterproposals which would not involve rejecting Northrop Grumman's increased $134.00 per share offer, but could
possibly either secure certain important non-price transaction terms for Orbital ATK or result in a further increase in price. The Orbital ATK Board then discussed negotiating strategy and potential
counterproposals with Mr. Thompson and authorized Mr. Thompson to continue negotiations with Northrop Grumman.
On
August 23, 2017, Mr. Thompson called Mr. Bush to provide a counterproposal involving two alternatives: (i) Orbital ATK would accept the increased price of
$134.00 per share of common stock in cash if Northrop Grumman agreed to several key conditions, along the following lines: (x) Northrop Grumman would agree to have committed financing at
signing with no financing condition to closing, (y) Northrop Grumman would agree to take any and all actions necessary to secure antitrust approval and (z) a two-tiered break-up fee of
$125 million (representing approximately 1.6% of the aggregate transaction consideration represented by the revised offer) for the first 45 days after the execution of a definitive
merger agreement, and $250 million (representing approximately 3.2% of the aggregate transaction consideration represented by the revised offer) thereafter, or (ii) if Northrop Grumman
would not agree to the conditions in (i) above, Orbital ATK would be prepared to accept an increased price, more in the range of $135.00 to $136.00 per share, with a single break-up fee of
$250 million. During the August 23, 2017, phone call, Mr. Thompson also told Mr. Bush that Northrop Grumman would need to complete its due diligence faster than Northrop
Grumman's originally proposed timeline of four to six weeks and that Orbital ATK was prepared to open a virtual dataroom on August 25, 2017 to facilitate Northrop Grumman's due diligence.
On
August 24, 2017, Mr. Bush held a telephone conversation with Mr. Thompson during which Mr. Bush informed Mr. Thompson that he had given
consideration to Orbital ATK's counterproposal, in consultation with Northrop Grumman's legal and financial advisors. After further consideration, and with the support of the Northrop Grumman Board,
Mr. Bush said Northrop Grumman was prepared to increase its offer to $134.50 per share of common stock in cash, but Northrop Grumman was not prepared to accept all of Orbital ATK's proposed non-price
terms. Specifically, Northrop Grumman would not accept a two-tiered termination fee structure, but instead would require a $275 million termination fee. With respect to the antitrust
provisions, Mr. Bush said that Northrop Grumman would not agree to take any and all actions to obtain antitrust clearance, but Northrop Grumman would be willing to take reasonable actions to obtain
antitrust approval. Finally, Mr. Bush told Mr. Thompson that Northrop Grumman would agree to Orbital ATK's request that there be no financing condition to closing and that Northrop
Grumman would have committed financing in place at signing. Mr. Thompson said that he would relay the revised proposal to the Orbital ATK Board. Mr. Thompson and Mr. Bush then
discussed a possible due diligence schedule, the importance of maintaining the confidentiality of the negotiations and the need to move quickly to negotiate a merger agreement and complete due
diligence in the event the companies' respective boards of directors could agree on price and other key terms.
On
August 25, 2017, the Orbital ATK Board held a telephonic meeting. Attending the meeting were all directors, except for Dr. Lennard A. Fisk and Dr. Schmitt,
certain members of Orbital ATK's management and representatives of Citigroup and Hogan Lovells. At this meeting, Mr. Thompson briefed the Orbital ATK Board on Northrop Grumman's revised
proposal of $134.50 per share of common stock in cash. Mr. Thompson also described Northrop Grumman's revised proposal regarding the non-price terms, including a $275 million termination
fee and that Northrop Grumman would agree to have committed financing at signing but would not agree to an unconditional obligation to obtain antitrust approval and instead would agree to a merger
agreement provision requiring Northrop Grumman to take reasonable actions necessary to obtain antitrust approval. The Orbital ATK Board then discussed Northrop Grumman's revised proposal. The Orbital
ATK Board also discussed Orbital
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ATK's
ability to consider alternative proposals after the execution of a merger agreement with Northrop Grumman. The Orbital ATK Board determined that a termination fee of $275 million would
not be preclusive to the submission by third parties of acquisition proposals or Orbital ATK's ability to consider and accept a superior proposal, in each case following the execution of a merger
agreement with Northrop Grumman. The Orbital ATK Board agreed that it would be willing to accept the $134.50 per share price, subject to the Orbital ATK Board's final approval of the non-price terms
of a merger agreement, and authorized management and Orbital ATK's advisors to negotiate the terms of a merger agreement with Northrop Grumman. Mr. Thompson separately called Drs. Fisk and
Schmitt after the meeting to brief them on Northrop Grumman's revised proposal and the Orbital ATK Board's direction to management to proceed with negotiations with Northrop Grumman.
After
the August 25, 2017 Orbital ATK Board meeting, Mr. Thompson called Mr. Bush to convey that the Orbital ATK Board would be willing to accept the price of
$134.50 per share of common stock in cash, subject to the Orbital ATK Board's final approval of the non-price terms of a merger agreement, and reiterated the importance of the "no shop" and "fiduciary
out" provisions and the provisions related to closing conditions and efforts to secure antitrust approvals. On August 25, 2017, Orbital ATK opened the virtual dataroom and provided access to
Northrop Grumman and its advisors.
From
August 24 through September 15, 2017, representatives from Orbital ATK and Northrop Grumman held numerous telephone conferences and in-person meetings to discuss due
diligence matters regarding finance, accounting, legal, contracts, regulatory and compliance, operations and human resources.
On
August 29, 2017, Mr. Bush and members of Northrop Grumman's management provided the Northrop Grumman Board with a further update and discussion.
On
August 30, 2017, Orbital ATK and Northrop Grumman entered into a revised mutual non-disclosure agreement, which superseded the non-disclosure agreement dated June 29,
2017. In the August 30, 2017 non-disclosure agreement, Northrop Grumman agreed that, subject to certain exceptions, it had not, and would not, acquire any shares of common stock other than
pursuant to a definitive merger agreement between the two companies. The non-disclosure agreement dated August 30, 2017 further detailed and addressed the sharing of particular types of
potentially sensitive information with the intent to limit access to only certain individuals.
On
September 2, 2017, Cravath, Swaine & Moore LLP ("Cravath"), outside legal counsel to Northrop Grumman, delivered a draft merger agreement to Hogan Lovells.
On
September 5, 2017, Mr. McCabe and Mr. James S. Black II, Vice President and Assistant General Counsel of Orbital ATK, met in-person with representatives from the
legal department of Northrop Grumman, including Ms. Cheston and Mr. John F. Cox, Vice President and Assistant General Counsel (M&A), Kathryn G. Simpson, Vice President and Deputy General
Counsel, Jennifer C. McGarey, Corporate Vice President and Secretary, and Melissa A. Cox, Corporate Counsel of Northrop Grumman, to discuss legal and compliance matters related to Orbital ATK.
Ms. Cheston and Mr. McCabe also discussed certain provisions of the draft merger agreement.
On
September 6, 2017, Mr. Thompson called Mr. Bush to review the status of due diligence and to discuss certain provisions in the draft merger agreement received
from Cravath on September 2, 2017. They agreed to meet in-person on September 11, 2017, to discuss the potential transaction further and, as necessary, to address certain significant
unresolved matters.
On
September 6, 7 and 8, 2017, Hogan Lovells and Cravath exchanged revised drafts of the merger agreement.
On
September 7, 2017, Messrs. Larson, McCabe and Black from Orbital ATK, representatives of Citigroup and Hogan Lovells, Ms. Cheston and Messrs. Caylor and
Cox and representatives of Cravath met in-person at the McLean, Virginia offices of Hogan Lovells to discuss, review and negotiate terms of the draft merger agreement.
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Also on September 7, 2017, the Orbital ATK Board held a telephonic meeting. Attending the meeting were all directors, certain members of Orbital ATK's
management and representatives of Citigroup and Hogan Lovells. At this meeting, Mr. Thompson and Mr. Larson briefed the Orbital ATK Board on the progress of the in-person negotiations on
the draft merger agreement.
On
September 8, 2017, Messrs. Larson, McCabe and Black from Orbital ATK, representatives of Citigroup and Hogan Lovells, Ms. Cheston and Messrs. Caylor and
Cox from Northrop Grumman and representatives of Cravath reconvened in-person at the McLean, Virginia, offices of Hogan Lovells to continue to discuss, review and negotiate the draft merger agreement.
On
September 10, 2017, Orbital ATK's senior management met telephonically with representatives of Citigroup and Hogan Lovells to discuss the terms of the draft merger agreement.
Also, Orbital ATK executed an agreement with Citigroup, dated September 10, 2017, with respect to Citigroup's engagement as Orbital ATK's financial advisor in connection with a potential
transaction. Later on September 10, 2017, Messrs. Larson and McCabe of Orbital ATK discussed certain terms of the draft merger agreement with Ms. Cheston and Mr. Caylor of
Northrop Grumman by telephone.
On
September 11, 2017, Mr. Thompson and Mr. Bush met at the McLean, Virginia, offices of Hogan Lovells to discuss Northrop Grumman's status in securing financing
commitments for the transaction as well as certain organizational topics, customer contact plans, internal communication plans and other outstanding activities leading to the companies' respective
board meetings later that week.
From
September 11 through September 14, 2017, Cravath and Hogan Lovells exchanged revised drafts of the merger agreement. On September 15 and 16, 2017, Cravath and
Hogan Lovells exchanged further revised drafts, particularly of schedules associated with the merger agreement, which provided data and final numbers in place of blanks.
On
September 12, 2017, Mr. Thompson and Mr. Bush talked by telephone to discuss, among other things, certain remaining issues associated with the draft merger
agreement and the proposed transaction.
From
September 12 through September 14, 2017, Messrs. Larson and McCabe of Orbital ATK discussed certain remaining open terms of the proposed merger agreement with
Ms. Cheston and Mr. Caylor of Northrop Grumman by telephone.
On
September 13 and 14, 2017, Cravath and Hogan Lovells exchanged revised drafts of the disclosure schedules. On September 14, 2017, representatives of Hogan Lovells and
Cravath, along with Messrs. McCabe and Black and Ms. Christine A. Wolf, Senior Vice President, Human Resources, of Orbital ATK and Ms. Denise M. Peppard, Chief Human
Resources Officer, Mr. Cox, Ms. Simpson and Ms. Eun Ah Choi, Corporate Counsel, of Northrop Grumman held telephonic meetings to discuss certain of the proposed disclosure
schedules.
On
September 14, 2017, Mr. Thompson and Mr. Bush spoke by telephone to discuss the status of certain issues and next steps.
On
September 14, 2017, the Northrop Grumman Board held a telephonic meeting where it reviewed details regarding the proposed transaction, received advice from its financial and
legal advisors, approved the acquisition of Orbital ATK on substantially the terms and conditions presented, approved the terms of the committed financing and authorized management to execute the
transactions.
On
September 14, 2017, the Orbital ATK Board held a telephonic meeting. Attending the meeting were all directors, except Dr. Fisk, who was traveling internationally,
certain members of Orbital ATK's management and representatives of Citigroup and Hogan Lovells. At this meeting, Messrs. Thompson and Larson briefed the Orbital ATK Board on the progress of the
negotiations. Representatives from
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Hogan
Lovells briefed the Orbital ATK Board on the key terms in the draft merger agreement related to the "no shop" and "fiduciary out" provisions, closing conditions and efforts to secure antitrust
approvals, and the negotiations over those terms.
On
September 14 and 15, 2017, representatives of Orbital ATK met with representatives of Northrop Grumman at the McLean, Virginia offices of Hogan Lovells to discuss communication
plans related to the possible announcement.
On
September 15, 2017, Mr. Thompson and Mr. Bush also spoke by telephone to address several open issues associated with the merger agreement.
Later
on September 15, 2017, Messrs. Larson and McCabe of Orbital ATK held a telephonic meeting with Ms. Cheston, Ms. Peppard and Mr. Cox of Northrop
Grumman, with representatives of Hogan Lovells and representatives of Cravath present, to discuss and resolve the remaining open issues in the draft disclosure schedules.
On
September 16, 2017, the Orbital ATK Board met in-person. All directors, certain members of Orbital ATK's senior management, and representatives of Citigroup and Hogan Lovells
attended the meeting. Representatives of Citigroup reviewed Citigroup's financial analyses of the merger consideration and rendered an oral opinion, confirmed by delivery of a written opinion dated
September 16, 2017, to the Orbital ATK Board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered, and limitations
and qualifications on the review undertaken in such opinion, the merger consideration to be received by the holders of common stock (other than holders of excluded shares) pursuant to the merger
agreement was fair, from a financial point of view, to such holders. Representatives of Hogan Lovells reviewed the terms of the proposed merger agreement, with a particular focus on the terms relating
to Orbital ATK's representations and warranties, interim operating covenants, the "no-shop" and "fiduciary out" provisions, efforts to secure antitrust approvals, financing, closing conditions,
termination fees and termination rights, and the negotiations over those terms. The Orbital ATK Board discussed the terms of the proposed merger agreement, including that Orbital ATK could entertain
certain unsolicited third-party proposals following the execution and announcement of the merger agreement and the termination fee that would be payable in the event the Orbital ATK Board were to
pursue, subject to the terms and conditions of the merger agreement, an alternative proposal that was viewed by the Orbital ATK Board as superior to the merger with Northrop Grumman. After
consultation with Orbital ATK's advisors, the Orbital ATK Board concluded that a termination fee of $275 million was acceptable, consistent with termination fees in similar transactions and not
likely to preclude a superior proposal. The Orbital ATK Board also discussed the Company A NDA and authorized Orbital ATK's senior management to send a letter to Company A releasing it from its
standstill obligations under the Company A NDA.
Following
consideration of the matters discussed during the course of the Orbital ATK Board meeting, Orbital ATK's directors unanimously (i) determined that it was advisable, fair
to, and in the best interests of Orbital ATK and its stockholders for Orbital ATK to enter into the merger agreement and effect the merger and the other transactions contemplated thereby,
(ii) authorized, approved and adopted the execution, delivery and performance of the merger agreement and the transactions contemplated thereby (including the merger) on behalf of Orbital ATK,
(iii) authorized and approved the merger proposal, the compensation proposal and the adjournment proposal to be submitted for approval by stockholders of Orbital ATK at a special meeting of the
stockholders and (iv) recommended to Orbital ATK's stockholders that they approve the three proposals.
On
September 17, 2017, Orbital ATK and Northrop Grumman executed the merger agreement. On the morning of September 18, 2017, prior to the commencement of trading on the
NYSE, Orbital ATK and Northrop Grumman issued a joint press release announcing the transaction and their execution of the merger agreement.
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Recommendation of the Orbital ATK Board
At its meeting on September 16, 2017, the Orbital ATK Board met to consider the merger agreement and after due consideration, unanimously
approved the merger agreement, determined that it is advisable, fair to and in the best interests of Orbital ATK and its stockholders for Orbital ATK to enter into the merger agreement and effect the
merger and the other transactions contemplated thereby and directed that the adoption of the merger agreement be submitted to a vote at a meeting of the stockholders. The Orbital ATK Board unanimously
recommends that stockholders vote
"FOR"
the merger proposal, the compensation proposal and the adjournment proposal.
Reasons for the Merger
As described above in the section entitled "Background of the Merger," in evaluating the merger and the merger agreement, the
Orbital ATK Board consulted and discussed with senior management topics and issues related to the merger, the merger agreement and the other transactions contemplated thereby, and consulted with and
received the advice of Orbital ATK's legal and financial advisors.
After
careful consideration, the Orbital ATK Board, at a special meeting held on September 16, 2017, unanimously:
-
-
determined that the merger agreement was advisable, fair to and in the best interests of Orbital ATK and its stockholders;
-
-
authorized, approved and adopted the execution, delivery and performance of the merger agreement and the transactions contemplated thereby
(including the merger) on behalf of Orbital ATK;
-
-
authorized and approved the merger proposal, the compensation proposal and the adjournment proposal to be submitted for approval by
stockholders of Orbital ATK at a special meeting of the stockholders; and
-
-
recommended to Orbital ATK's stockholders that they approve the three proposals.
In
unanimously determining to adopt the merger agreement and approve the merger and recommend that Orbital ATK's stockholders vote their shares of common stock in favor of the proposal
to adopt the merger agreement, the Orbital ATK Board also considered the material factors that are discussed below. The discussion in this section is not intended to be an exhaustive list of the
information and factors considered by the Orbital ATK Board, but rather includes all material factors considered by the Orbital ATK Board. In view of the wide variety of factors considered by the
Orbital ATK Board in connection with its evaluation of the merger and the complexity of these matters, the Orbital ATK Board did not consider it practicable, and did not attempt, to quantify, rank or
otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any
aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the Orbital ATK Board. In addition, individual members of the Orbital ATK Board may have given different
weight to different factors. The Orbital ATK Board made its recommendation based on the totality of the information available to the Orbital ATK Board, including discussions with, and questioning of,
management and the financial and legal advisors.
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The
Orbital ATK Board considered, among other things, the following factors as supporting its decision to recommend that Orbital ATK's stockholders vote in favor of the adoption of the
merger agreement:
-
-
the $134.50 per share price to be paid in cash in respect of each share of common stock, which represented:
-
-
a premium of 22.2% over the closing price of shares of common stock on September 15, 2017 (the last trading day prior to
the Orbital ATK Board's approval of the merger agreement);
-
-
a premium of 24.8% to the average closing price of shares of common stock for the 30 trading days prior to and including
September 15, 2017;
-
-
a premium of 28.7% to the average closing price of shares of common stock for the 60 trading days prior to and including
September 15, 2017;
-
-
a premium of 30.7% to the average closing price of shares of common stock for the 90 trading days prior to and including
September 15, 2017;
-
-
a premium of 20.1% to the 52-week all-time high (intraday) price of shares of common stock as of September 15, 2017; and
-
-
a multiple of 14.4 times Orbital ATK's earnings before interest, taxes, depreciation and amortization ("EBITDA") for the 12-month
period ended July 2, 2017;
-
-
the Orbital ATK Board's belief, based on discussions and negotiations between Orbital ATK's Chief Executive Officer and other members of
Orbital ATK's management and Northrop Grumman, that $134.50 per share was the highest price Northrop Grumman would be willing to pay;
-
-
the opinion of Citigroup, dated September 16, 2017, to the Orbital ATK Board as to the fairness, from a financial point of view and as
of the date of the opinion, of the $134.50 in cash per share merger consideration to be received by holders of common stock (other than holders of excluded shares) pursuant to the merger agreement,
which opinion was based on and subject to various assumptions made, procedures followed, matters considered, and limitations and qualifications on the review undertaken as more fully described under
"Opinion of Financial Advisor" beginning on page 43;
-
-
the Orbital ATK Board's assessment of Orbital ATK's present and future value on a standalone basis relative to the $134.50 per share in cash to
be paid in the merger;
-
-
the Orbital ATK Board's belief, based on a review of the possible alternatives to a sale of Orbital ATK, including the prospects of continuing
to operate in accordance with the existing business plan or undertaking additional share buyback programs or other strategic initiatives, the potential value to stockholders of such alternatives and
the timing and likelihood of actually achieving additional value for stockholders from these alternatives, that none of these options, on a risk- and time-adjusted basis, was reasonably likely to
create value for stockholders greater than the merger consideration;
-
-
the continued costs, risks and uncertainties associated with continuing to operate independently as a public company, including risks
associated with Orbital ATK's operations and business plan;
-
-
whether there were other potential parties that might have an interest in, and be financially capable of, engaging in a strategic transaction
with Orbital ATK at a value higher than Northrop Grumman's proposal; the potential regulatory, commercial and financing issues that might arise in connection with pursuing such a transaction; and the
belief that Northrop Grumman would
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-
-
the fact that the merger agreement permits Orbital ATK to continue to pay to its stockholders quarterly cash dividends not to exceed $0.32 per
share of common stock, which potentially provides additional amounts to Orbital ATK stockholders prior to the effective time of the merger;
-
-
the Orbital ATK Board's belief that the terms of the merger agreement, taken as a whole, including, among other things, the parties'
representations, warranties and covenants, and the conditions to the parties' respective obligations, are reasonable;
-
-
the fact that a vote of Orbital ATK stockholders is required under the DGCL to adopt the merger agreement; and
-
-
the Orbital ATK Board's belief, based on the Orbital ATK Board's general knowledge of Northrop Grumman's business, operations, management,
reputation and financial condition, that there was a high probability that the merger would be completed on the agreed-upon terms.
In
the course of its deliberations, the Orbital ATK Board also considered a variety of risks and other countervailing factors related to the merger agreement and the merger, including,
among other things, the following factors:
-
-
the possibility that the merger might not be consummated in a timely manner or at all due to a failure of the conditions specified in the
merger agreement, including, among other things, with respect to the required approvals of the merger by antitrust regulatory authorities;
-
-
the fact that the merger may not be completed unless and until the conditions specified in the merger agreement are satisfied or waived (see
"The Merger AgreementConditions to the Merger" beginning on page 77);
-
-
the potential risks and costs to Orbital ATK if the merger is not consummated, or is not consummated in a timely manner, including, among other
things, the potential distraction of management and employee attention during the pendency of the merger, employee attrition, the possible impact on customer relationships, the potential effect on
existing relationships with other parties, and the impact that the failure of the merger to close could have on the trading price of shares of common stock, Orbital ATK's operating results (including
the costs incurred in connection with the merger) and Orbital ATK's ability to maintain sales;
-
-
the restrictions on the conduct of Orbital ATK's business prior to the consummation of the merger, which may delay or prevent Orbital ATK from
undertaking certain business opportunities, such as material acquisitions or divestitures;
-
-
the risk that the parties may incur significant costs and delays in connection with obtaining the regulatory approvals necessary for the
completion of the merger;
-
-
the provisions of the merger agreement that restrict Orbital ATK's ability to solicit a takeover proposal to acquire Orbital ATK or to engage
in discussions or negotiations with third parties regarding a takeover proposal to acquire Orbital ATK, in the latter case unless, and subject to compliance with the terms and conditions of the merger
agreement, in response to a bona fide written unsolicited takeover proposal which did not result from a material breach of the no solicitation provision of the merger agreement, the Orbital ATK Board
determines in good faith, after consultation with its outside legal counsel and Citigroup or another financial advisor of nationally recognized reputation, that such unsolicited takeover proposal
constitutes or would reasonably be expected to lead to a superior proposal and that the failure to take such action would be inconsistent with its fiduciary duties to the stockholders of Orbital ATK
under applicable law;
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-
-
the significant costs involved in connection with negotiating the merger agreement and completing the merger, including in connection with any
litigation that may result from the announcement or pendency of the merger, and the fact that if the merger is not consummated Orbital ATK may be required to bear such costs;
-
-
the fact that receipt of the merger consideration in exchange for shares of common stock pursuant to the merger would generally be a taxable
transaction for U.S. federal income tax purposes (see "Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 85); and
-
-
the fact that the all-cash consideration, while providing relative certainty of value, would prevent Orbital ATK stockholders from having an
ongoing equity interest in Northrop Grumman, meaning that stockholders will not participate in Northrop Grumman's potential revenue or earnings growth, including any growth or share gains with current
customers, and any increase in demand from customers in the industries in which Orbital ATK operates.
In
addition to considering the factors described above, the Orbital ATK Board also considered (i) the prior relationships between Citigroup and Northrop Grumman that Citigroup
disclosed to the Orbital ATK Board, as described below in the section entitled "Opinion of Financial Advisor," and (ii) the fact that Orbital ATK's directors and executive officers
have financial interests in the
merger that may be different from, or in addition to, those of Orbital ATK stockholders generally, including those interests that are a result of employment and compensation arrangements with Orbital
ATK, as described in the section below entitled "Interests of Directors and Executive Officers in the Merger."
This
explanation of the Orbital ATK Board's reasons for recommending the adoption of the merger agreement and other information presented in this section is forward-looking in nature
and, therefore, should be read in light of the factors described in the section entitled "Cautionary Statement Concerning Forward-Looking Statements" beginning on page 17.
The Orbital ATK Board accordingly unanimously recommends that you vote "FOR" the merger proposal, the compensation proposal and the adjournment
proposal.
Opinion of Financial Advisor
Orbital ATK retained Citigroup as its financial advisor in connection with the merger. In connection with this engagement, Orbital ATK requested
that Citigroup evaluate the fairness, from a financial point of view, of the $134.50 per share cash consideration to be received in the merger by holders of common stock (other than holders of
excluded shares). On September 16, 2017, at a meeting of the Orbital ATK Board held to evaluate the merger and at which the merger agreement was approved, Citigroup rendered to the Orbital ATK
Board an oral opinion, confirmed by delivery of a written opinion dated September 16, 2017, to the effect that, as of that date and based on and subject to various assumptions made, procedures
followed, matters considered, and limitations and qualifications on the review undertaken by Citigroup as set forth in its written opinion, the merger consideration to be received by the holders of
common stock (other than holders of excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders.
The
full text of Citigroup's written opinion, dated September 16, 2017, which describes the assumptions made, procedures followed, matters considered, and limitations and
qualifications on the review undertaken, is attached as
Annex B
to this proxy statement and is incorporated herein by reference. The description
of Citigroup's opinion set forth below is qualified in its entirety by reference to the full text of Citigroup's opinion.
You are urged to read the opinion in its entirety.
Citigroup's opinion was provided for the information of the Orbital ATK Board (in its capacity as such) in connection with its evaluation of the merger consideration from a financial point of view and
did not address any other aspects or implications of the merger. Citigroup was not requested to consider, and
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its opinion did not address, the underlying business decision of Orbital ATK to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist
for Orbital ATK or the effect of any other transaction in which Orbital ATK might engage. Citigroup's opinion is not intended to be and does not constitute a recommendation to any stockholder as to
how such stockholder should vote or act on any matters relating to the proposed merger or otherwise.
In
arriving at its opinion, Citigroup, among other things:
-
-
reviewed a draft, dated September 16, 2017, of the merger agreement;
-
-
held discussions with certain senior officers, directors, and other representatives and advisors of Orbital ATK concerning the business,
operations and prospects of Orbital ATK;
-
-
examined certain publicly available business and financial information relating to Orbital ATK as well as certain financial forecasts and other
information and data relating to Orbital ATK which were provided to or discussed with Citigroup by Orbital ATK's management;
-
-
reviewed the financial terms of the merger as set forth in the merger agreement in relation to, among other things, current and historical
market prices and trading volumes of Orbital ATK's common stock, the historical and projected earnings and other operating data of Orbital ATK and the capitalization and financial condition of Orbital
ATK;
-
-
considered, to the extent publicly available, the financial terms of certain other transactions which Citigroup considered relevant in
evaluating the merger;
-
-
analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose
operations Citigroup considered relevant in evaluating those of Orbital ATK; and
-
-
conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citigroup
deemed appropriate in arriving at its opinion.
In
rendering its opinion, Citigroup assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly
available or provided to or otherwise reviewed by or discussed with Citigroup and upon the assurances of Orbital ATK's management that it was not aware of any relevant information that was omitted or
that remained undisclosed to Citigroup. With respect to financial forecasts and other information and data relating to Orbital ATK provided to or otherwise reviewed by or discussed with Citigroup,
Citigroup was advised by Orbital ATK's management that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments
of Orbital ATK's management as to the future financial performance of Orbital ATK.
Citigroup
assumed, with Orbital ATK's consent, that the merger would be completed in accordance with its terms as set forth in the merger agreement, without waiver, modification, or
amendment of any material term, condition or agreement and 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 Orbital ATK or the merger. Citigroup was advised by representatives of Orbital ATK, and assumed, that the
financial terms of the merger agreement would not vary from those set forth in the draft reviewed by Citigroup. Citigroup did not make, nor was it provided with, an independent evaluation or appraisal
of the assets or liabilities (contingent or otherwise) of Orbital ATK, nor did Citigroup make any physical inspection of the properties or assets of Orbital ATK. Citigroup was not requested to, nor
did Citigroup, solicit third party indications of interest in the possible acquisition of all or a part of Orbital ATK, nor was Citigroup requested to consider, and its opinion does not address, the
underlying business decision of Orbital ATK to effect the merger, the relative merits of the merger as compared to any alternative
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business
strategies that might exist for Orbital ATK or the effect of any other transaction in which Orbital ATK might engage. Citigroup expressed no view as to, and its opinion did not address, the
fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons,
relative to the merger consideration or otherwise. Citigroup's opinion was necessarily based upon information available to Citigroup, and financial, stock market and other conditions and circumstances
existing, as of the date of its opinion. The issuance of Citigroup's opinion was authorized by Citigroup's fairness opinion committee.
In
preparing its opinion, Citigroup performed a variety of financial and comparative analyses, including those described below. This summary of these analyses is not a complete
description of Citigroup's opinion or the analyses underlying, and factors considered in connection with, Citigroup's opinion. The preparation of a financial opinion is a complex analytical process
involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial
opinion is not readily susceptible to summary description. Citigroup arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not draw, in
isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, Citigroup believes that its analyses must be considered as a whole and that
selecting portions of such analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could
create a misleading or incomplete view of the processes underlying such analyses and Citigroup's opinion.
In
its analyses, Citigroup considered industry performance, general business, economic, market and financial conditions, and other matters existing as of the date of its opinion, many of
which are beyond the control of Orbital ATK. No company, business or transaction reviewed is identical to Orbital ATK or the merger. An evaluation of these analyses is not entirely mathematical;
rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values
of the companies, business segments or transactions reviewed.
The
estimates contained in the analyses performed by Citigroup and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, the
analyses are inherently subject to substantial uncertainty.
Citigroup
was not requested to, and it did not, recommend the specific consideration payable in the merger. The type and amount of consideration payable in the merger was determined
through
negotiations between Orbital ATK and Northrop Grumman, and the decision to enter into the merger agreement was solely that of the Orbital ATK Board. The opinion of Citigroup was only one of many
factors considered by the Orbital ATK Board in its evaluation of the merger and should not be viewed as determinative of the views of the Orbital ATK Board or Orbital ATK's management with respect to
the merger or the consideration payable in the merger or any other aspect of the transactions contemplated by the merger agreement.
The
following is a summary of the material financial analyses presented to the Orbital ATK Board in connection with the delivery of Citigroup's opinion.
The
financial analyses summarized below include information presented in tabular format. In order to fully understand Citigroup's 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 below without
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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 such
analyses.
Selected Public Companies Analysis
Citigroup performed a selected public companies analysis, which is an analysis designed to estimate an implied value of a company through an
analysis of the public valuation and trading multiples of similar publicly traded companies. Citigroup reviewed financial and stock market information of Orbital ATK and the selected publicly traded
companies described below (the "selected companies"), which include aerospace and defense companies. No publicly traded company is identical to Orbital ATK, but these companies were selected because,
among other reasons, they possessed certain financial, operational or business characteristics that, in Citigroup's view, were sufficiently comparable to those of Orbital ATK or otherwise relevant for
purposes of comparison:
-
-
Aerojet Rocketdyne Holdings, Inc.;
-
-
BAE Systems plc;
-
-
General Dynamics Corporation;
-
-
Harris Corporation;
-
-
Lockheed Martin Corporation;
-
-
L3 Technologies, Inc.;
-
-
MacDonald, Dettwiler & Associates Ltd.;
-
-
Northrop Grumman Corporation;
-
-
Raytheon Company; and
-
-
Thales SA.
Citigroup
reviewed, among other information, (i) firm values of the selected companies, calculated as equity values (based on closing stock prices of the selected companies on
September 14, 2017) plus debt, less cash and cash equivalents and other adjustments, as a multiple of EBITDA and (ii) per share equity values of the selected companies (based on closing
stock prices of the selected companies on September 14, 2017) as a multiple of earnings per share ("EPS") using the estimated EBITDA and EPS for calendar year 2018. The observed multiples of
firm value to estimated 2018 EBITDA for the selected companies ranged from 8.8x to 13.4x (with a median of 12.4x). The observed multiples of per share equity values to estimated 2018 EPS for the
selected companies ranged from 10.9x to 26.9x (with a median of 19.4x). Based on its professional judgment and taking into consideration the observed multiples for the selected companies, Citigroup
then derived a selected range of multiples of 9.0x to 13.0x for firm value to estimated 2018 EBITDA and a selected range of multiples of 17.5x to 21.5x for per share equity value to estimated 2018
EPS, and applied these selected ranges to the 2018 estimated EBITDA and the 2018 estimated EPS of Orbital ATK, respectively, to calculate implied firm value and equity value per share reference ranges
for Orbital ATK, respectively. Financial data of the selected companies were based on publicly available research analysts' estimates, public filings and other information and took into account the
pending acquisition of Guavus, Inc. and DigitalGlobe, Inc. by Thales SA and MacDonald, Dettwiler & Associates Ltd., respectively. Financial data of Orbital ATK were
based on Orbital ATK's filings and financial information provided by Orbital ATK's management. From this analysis, using its professional judgment, Citigroup derived the following implied average per
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share
equity value reference range (rounded to the nearest $0.05) for Orbital ATK, as compared to the merger consideration to be received in the merger:
|
|
|
|
|
Implied Average Per Share Equity Value Reference Range
|
|
Merger
Consideration
|
|
$100.00 - $137.60
|
|
$
|
134.50
|
|
Selected Transactions Analysis
Citigroup performed a selected transactions analysis, which is an analysis designed to estimate an implied value of a company through an
analysis of the multiples paid in acquisitions of similar companies and businesses. Citigroup reviewed, to the extent publicly available, financial information for selected transactions in the
aerospace and defense industries announced between June 2012 and February 2017 with a range of approximate transaction values of $875 million to $9.0 billion, which are collectively
referred to in this proxy statement as the "selected transactions." The selected transactions are set forth in the table below.
|
|
|
|
|
Target
|
|
Acquiror
|
|
Announcement Date
|
DigitalGlobe, Inc.
|
|
Macdonald, Dettwiler & Associates Ltd.
|
|
February 24, 2017
|
Sikorsky Aircraft Corporation
|
|
Lockheed Martin Corporation
|
|
July 20, 2015
|
Exelis Inc.
|
|
Harris Corporation
|
|
February 6, 2015
|
Aeroflex Holding Corp.
|
|
Cobham plc
|
|
May 20, 2014
|
ARINC Incorporated
|
|
Rockwell Collins, Inc.
|
|
August 11, 2013
|
Space Systems/Loral, Inc.
|
|
Macdonald, Dettwiler & Associates Ltd.
|
|
June 26, 2012
|
The
transactions were generally selected because they involved companies with certain financial, operational or business characteristics that, in Citigroup's view, made them sufficiently
comparable to Orbital ATK and/or the transactions contemplated by the merger agreement or otherwise relevant for purposes of comparison. For each of the selected transactions, Citigroup reviewed the
firm value of the selected transaction, calculated as the diluted equity purchase price plus debt, less cash and cash equivalents and other adjustments, as a multiple, to the extent publicly
available, of, among other things, the last twelve months ("LTM") EBITDA of the relevant target company. The observed multiples of firm value to LTM EBITDA for the selected transactions ranged from
9.2x to 12.6x (with a median of 10.4x and a mean of 10.7x). Based on its professional judgment and taking into consideration the observed multiples for the selected transactions, Citigroup then
applied a selected range of multiples of 9.5x to 11.5x to the estimated 2017 EBITDA of Orbital ATK. Financial data of the selected transactions were based on public filings and other information.
Financial data of Orbital ATK were based on financial information provided by Orbital ATK's management. This analysis implied the following approximate per share equity value reference range for
Orbital ATK (rounded to the nearest $0.05), as compared to the merger consideration to be received in the merger:
|
|
|
|
|
Implied Per Share Equity Value Reference Range
|
|
Merger
Consideration
|
|
$96.85 - $121.25
|
|
$
|
134.50
|
|
Discounted Cash Flow Analysis
Citigroup also performed a discounted cash flow analysis of Orbital ATK by calculating the estimated present value of the unlevered, after-tax
free cash flows that Orbital ATK was forecasted to generate during calendar years 2018 through 2020 based on the Orbital ATK projections (the "projected cash flows"). For purposes of this analysis,
the projected cash flows provided by Orbital ATK's management excluded the impact of cash pension reimbursements and contributions and annual cash flows from Orbital ATK's A350 and CRS-2 receivables,
which, collectively, we refer to as the
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"additional
cash flow items," as well as net environmental remediation payments. The estimated range of terminal values of Orbital ATK was calculated by applying a selected range of perpetuity growth
rates of 1.5% to 2.5% to Orbital ATK's estimated unlevered, after-tax free cash flows for the terminal year (excluding the additional cash flow items and the net environmental remediation payments),
as provided by Orbital ATK's management. The projected cash flows, range of terminal values, and additional cash flow items (based on projections provided by Orbital ATK's management) were discounted
to present value (as of December 31, 2017) using discount rates ranging from 6.9% to 8.2% derived from a weighted average cost of capital calculation, and the net environmental remediation
liability, as disclosed in Orbital ATK's public filings, was then subtracted. Based on this analysis, Citigroup calculated the following approximate per share equity value reference range for Orbital
ATK (rounded to the nearest $0.05), as compared to the merger consideration to be received in the merger:
|
|
|
|
|
Implied Per Share Equity Value Reference Range
|
|
Merger
Consideration
|
|
$82.85 - $130.45
|
|
$
|
134.50
|
|
STOCKHOLDER PROPOSALS
If the merger is completed on the expected timetable, Orbital ATK will not hold an annual meeting of its stockholders in 2018 (the "2018 annual
meeting"). If, however, the merger is not completed or is delayed, and our 2018 annual meeting is held, we expect that it will be held more than 30 days earlier than the date our annual meeting
was held in 2017. We will provide notice of or otherwise publicly disclose the date on which the 2018 annual meeting will be held. If you would like to submit a proposal for us to include in the proxy
statement for our 2018 annual meeting, you must
comply with Rule 14a-8 under the Exchange Act. In accordance with Rule 14a-8, you must also make sure that we receive your proposal at our executive offices (sent c/o Corporate
Secretary) within a reasonable time before Orbital ATK begins to print and send its proxy materials for the 2018 annual meeting. Any stockholder proposal included in our proxy statement will also be
included on our form of proxy so that stockholders can indicate how they wish to vote their shares on the proposal.
If
you would like to submit a proposal outside of Rule 14a-8 or nominate a person for election as a director at the 2018 annual meeting, you must comply with the advance notice
provisions of our bylaws. Due to the expectation that the 2018 annual meeting, if any, will be held more than 30 days earlier than the date our annual meeting was held in 2017, our bylaw
provisions require that we receive your proposal or nomination at our executive offices (sent c/o Corporate Secretary) no later than the later of (i) 90 days prior to the 2018 annual
meeting and (ii) the close of business on the tenth calendar day following the public disclosure of the date of the 2018 annual meeting.
HOUSEHOLDING
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and
annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. This process,
which is commonly referred to as "householding," potentially provides extra convenience for stockholders and cost savings for companies.
If,
at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of this proxy statement
and wish to receive only one, please contact Orbital ATK at 45101 Warp Drive, Dulles, VA 20166, attention of Corporate Secretary. Orbital ATK will promptly deliver, upon oral or written request, a
separate copy of this proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies should be directed to Orbital ATK, Inc., at
45101 Warp Drive, Dulles, VA 20166, attention of Corporate Secretary or by telephone at (703) 406-5000.
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WHERE YOU CAN FIND MORE INFORMATION
Orbital ATK files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any of this
information at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public
Reference Room. The SEC also maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including Orbital ATK, who file
electronically with the SEC. The address of that site is www.sec.gov.
Investors
may also consult Orbital ATK's website for more information concerning the transaction described in this proxy statement. Orbital ATK's website is www.orbitalatk.com. The
information contained on the websites of Orbital ATK and the SEC is expressly not incorporated by reference into this proxy statement.
You
should rely only on the information contained in this proxy statement. No persons have been authorized to give any information or to make any representations other than those
contained in this proxy statement and, if given or made, such information or representations must not be relied upon as having been authorized by Orbital ATK or any other person. Orbital ATK has
supplied all information contained in this proxy statement relating to Orbital ATK and its affiliates. Northrop Grumman has supplied all information contained in this proxy statement relating to
Northrop Grumman, Sub and their affiliates.
If
you are a stockholder of Orbital ATK and would like to request any documents that are referenced in this proxy statement, please do so by , 2017, to
receive them before
the special meeting. If you request any documents from Orbital ATK, we will mail them to you by first class mail, or another equally prompt means, within one business day after Orbital ATK receives
your request.
THIS
PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. THIS PROXY STATEMENT IS
DATED , 2017. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION
TO THE CONTRARY.
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ANNEX AAGREEMENT AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER
Among
NORTHROP GRUMMAN CORPORATION
NEPTUNE MERGER, INC.
and
ORBITAL ATK, INC.
Dated as of September 17, 2017
A-1
Table of Contents
TABLE OF CONTENTS
A-2
Table of Contents
A-3
Table of Contents
GLOSSARY
|
|
|
Term
|
|
Section
|
2015 Company Performance Shares
|
|
5.04(c)(i)
|
2015 Performance Share Merger Consideration
|
|
5.04(c)(i)
|
Acceptable Confidentiality Agreement
|
|
4.02(a)
|
Acquisition Agreement
|
|
4.02(b)
|
Adverse Change Notice
|
|
4.02(b)
|
Adverse Recommendation Change
|
|
4.02(b)
|
affiliate
|
|
8.03(a)
|
Agreement
|
|
Preamble
|
Alternate Financing
|
|
5.07(c)
|
Appraisal Shares
|
|
2.02
|
Baseline Financials
|
|
8.03(b)
|
Benefit Plans
|
|
8.03(c)
|
Certificate
|
|
2.01(c)
|
Certificate of Merger
|
|
1.03
|
Citigroup
|
|
3.01(w)
|
Closing
|
|
1.02
|
Closing Date
|
|
1.02
|
Code
|
|
2.04(f)
|
Commitment Letter
|
|
3.02(f)
|
Company
|
|
Preamble
|
Company Bylaws
|
|
3.01(a)
|
Company Certificate
|
|
3.01(a)
|
Company Common Stock
|
|
2.01
|
Company Deferred Stock Units
|
|
3.01(c)(i)
|
Company Equity-Based Awards
|
|
3.01(c)(i)
|
Company ESPP
|
|
8.03(d)
|
Company Intellectual Property
|
|
3.01(o)(ii)(B)
|
Company Letter
|
|
3.01
|
Company Material Adverse Effect
|
|
8.03(e)
|
Company Owned Intellectual Property
|
|
3.01(o)(i)
|
Company Performance Shares
|
|
3.01(c)(i)
|
Company Personnel
|
|
8.03(f)
|
Company Phantom Stock Units
|
|
3.01(c)(i)
|
Company Preferred Stock
|
|
3.01(c)(i)
|
Company Restricted Shares
|
|
3.01(c)(i)
|
Company Stock Options
|
|
3.01(c)(i)
|
Company Stock Plans
|
|
8.03(g)
|
Confidentiality Agreement
|
|
8.03(h)
|
Consent
|
|
3.01(d)
|
Continuing Employee
|
|
5.05(a)
|
Contract
|
|
3.01(d)
|
Controlled Affiliate
|
|
8.03(i)
|
Council Regulation
|
|
8.03(j)
|
DGCL
|
|
1.01
|
Effective Time
|
|
1.03
|
Environmental Claims
|
|
3.01(k)
|
Environmental Law
|
|
3.01(k)
|
Environmental Permits
|
|
3.01(k)
|
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|
|
|
Term
|
|
Section
|
Equity Equivalents
|
|
3.01(c)(iii)
|
ERISA
|
|
8.03(c)
|
ERISA Affiliate
|
|
8.03(l)
|
ESPP Participants
|
|
5.04(i)
|
ESPP Suspension Date
|
|
5.04(i)
|
Exchange Act
|
|
3.01(d)
|
Exchange Fund
|
|
2.04(a)
|
FAR
|
|
8.03(m)
|
FCPA
|
|
3.01(r)(v)
|
Fee Letter
|
|
3.02(f)
|
Filed Company Contract
|
|
3.01(i)
|
Filed SEC Document
|
|
3.01(e)(i)
|
Financing
|
|
3.02(f)
|
Financing Sources
|
|
8.03(n)
|
Financing Sources Related Parties
|
|
7.02
|
GAAP
|
|
3.01(e)(i)
|
Government Bid
|
|
8.03(o)
|
Government Contract
|
|
8.03(p)
|
Governmental Entity
|
|
3.01(d)
|
Hazardous Materials
|
|
3.01(k)
|
HSR Act
|
|
3.01(d)
|
indebtedness
|
|
8.03(q)
|
Intellectual Property
|
|
3.01(o)
|
IRS
|
|
3.01(l)(ii)
|
Judgment
|
|
8.03(r)
|
knowledge
|
|
8.03(k)
|
Law
|
|
8.03(s)
|
Leased Real Property
|
|
3.01(n)(iii)
|
Legal Restraints
|
|
6.01(c)
|
Liens
|
|
3.01(b)
|
Maximum Premium
|
|
5.06(c)
|
Measurement Time
|
|
3.01(c)(i)
|
Merger
|
|
Recitals
|
Merger Consideration
|
|
2.01(c)
|
New Commitment Letter
|
|
5.07(c)
|
NISPOM
|
|
3.01(s)(vi)
|
Option Merger Consideration
|
|
5.04(a)
|
Original Financing Failure
|
|
5.07(c)
|
Outside Date
|
|
7.01(b)(i)
|
Owned Real Property
|
|
3.01(n)(ii)
|
Parent
|
|
Preamble
|
Parent Material Adverse Effect
|
|
8.03(t)
|
Parent Retention Grant
|
|
5.04(c)(ii)
|
Parent Welfare Plan
|
|
5.05(b)
|
Paying Agent
|
|
2.04(a)
|
Performance Share Merger Consideration
|
|
5.04(c)(ii)
|
Permits
|
|
3.01(j)(i)
|
Permitted Liens
|
|
3.01(i)(iv)
|
Permitted Restrictions
|
|
5.03(a)
|
person
|
|
8.03(u)
|
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|
|
|
Term
|
|
Section
|
Proceeding
|
|
3.01(h)
|
Proxy Statement
|
|
3.01(d)
|
Release
|
|
3.01(k)
|
Representatives
|
|
8.03(v)
|
Required Divestitures
|
|
5.03(a)
|
Restricted Share Merger Consideration
|
|
5.04(b)
|
Restriction
|
|
5.03(a)
|
Review Laws
|
|
5.03(a)
|
SEC
|
|
3.01(d)
|
SEC Documents
|
|
3.01(e)(i)
|
Section 262
|
|
2.02
|
Securities Act
|
|
3.01(e)(i)
|
Significant Program Contracts
|
|
3.01(i)(xii)
|
SOX
|
|
3.01(e)(i)
|
Specified Contracts
|
|
3.01(i)
|
Stockholder Approval
|
|
3.01(v)
|
Stockholders Meeting
|
|
5.01(c)
|
Sub
|
|
Preamble
|
Subsequent Period Company Performance Shares
|
|
5.04(c)(ii)
|
Subsequent Period Performance Share Merger Consideration
|
|
5.04(c)(ii)
|
Subsidiary
|
|
8.03(w)
|
Superior Proposal
|
|
4.02(a)
|
Surviving Corporation
|
|
1.01
|
Takeover Proposal
|
|
4.02(a)
|
Tax Return
|
|
3.01(m)(i)
|
Taxes
|
|
3.01(m)(i)
|
Taxing Authority
|
|
3.01(m)(i)
|
Termination Fee
|
|
5.08(b)
|
Trade Secrets
|
|
3.01(o)
|
Uncertificated Shares
|
|
2.01(c)
|
Welfare Plan
|
|
3.01(l)(iv)
|
A-6
Table of Contents
AGREEMENT AND PLAN OF MERGER, dated as of September 17, 2017 (this "
Agreement
"), by and among Northrop
Grumman Corporation, a Delaware corporation ("
Parent
"), Neptune Merger, Inc., a Delaware corporation and a wholly owned subsidiary of Parent
("
Sub
"), and Orbital ATK, Inc., a Delaware corporation (the "
Company
").
WHEREAS,
the Board of Directors of each of Parent, Sub and the Company has approved this Agreement;
WHEREAS
the Board of Directors of each of the Company and Sub deems it in the best interests of their respective stockholders to consummate the merger (the
"
Merger
"), on the terms and subject to the conditions set forth in this Agreement, of Sub with and into the Company in which the Company would survive
and become a wholly owned subsidiary of Parent, and such Boards of Directors have approved this Agreement, declared its advisability and recommended that this Agreement be adopted by the stockholders
of the Company or Sub, as the case may be; and
WHEREAS,
Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions
to the Merger.
NOW,
THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01.
The Merger.
Upon the terms and subject to the conditions set forth in this Agreement, and
in accordance with the General Corporation Law of the State of Delaware (the
"
DGCL
"), Sub shall be merged with and into the Company at the Effective Time. At the Effective Time, the separate corporate existence of Sub shall cease
and the Company shall continue as the surviving corporation (the "
Surviving Corporation
").
SECTION 1.02.
Closing.
The closing of the Merger (the "
Closing
") will take place at 10:00 a.m., New York time, on a date to be
specified by the parties, which shall be not later than the second business day after satisfaction or (to the extent permitted by Law) waiver of the conditions set forth in Article VI (other
than those that by their terms are to be satisfied or waived at the Closing, it being understood that the occurrence of the Closing shall remain subject to the satisfaction or waiver of such
conditions at Closing), at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019, unless another time, date or place is agreed to in writing by Parent
and the Company;
provided
,
however
, that if all the conditions set forth in Article VI shall not
have been satisfied or (to the extent permitted by Law) waived on such second business day, then the Closing shall take place on the first business day on which all such conditions shall have been
satisfied or (to the extent permitted by Law) waived. The date on which the Closing occurs is referred to in this Agreement as the "
Closing Date
".
SECTION 1.03.
Effective Time of the Merger.
Upon the terms and subject to the conditions set
forth in this Agreement, as soon as practicable on or after the Closing Date, the parties shall properly
file a certificate of merger (the "
Certificate of Merger
") in such form as is required by, and executed and acknowledged in accordance with, the
relevant provisions of the DGCL. The Merger shall become effective at such date and time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or, to the
extent permitted by applicable Law, at such subsequent date and time as Parent and the Company shall agree and specify in the Certificate of Merger. The date and time at which the Merger becomes
effective is referred to in this Agreement as the "
Effective Time
".
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Table of Contents
SECTION 1.04.
Effects of the Merger.
The Merger shall have the effects set forth in
Section 259 of the DGCL.
SECTION 1.05.
Certificate of Incorporation and Bylaws.
(a) The certificate of incorporation
of the Company as in effect immediately prior to the Effective Time shall be amended by virtue of the Merger at the
Effective Time to read in its entirety as set forth on Exhibit A hereto and, as so amended, shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable Law and, in each case, subject to Section 5.06.
(b) The
bylaws of the Company as in effect immediately prior to the Effective Time shall be amended at the Effective Time to read in the same form as the bylaws of Sub as in
effect immediately prior to the Effective Time (except that references therein to the name of Sub shall be replaced by references to Orbital ATK, Inc.) and, as so amended, shall be the bylaws
of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law and, in each case, subject to Section 5.06.
SECTION 1.06.
Directors.
The directors of Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case may be.
SECTION 1.07.
Officers.
The officers of Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case may be.
ARTICLE II
Conversion of Securities
SECTION 2.01.
Conversion of Capital Stock.
At the Effective Time, by virtue of the Merger and without
any action on the part of the holder of any shares of common stock, par value $0.01 per share, of the
Company (the "
Company Common Stock
"), or the holder of any shares of capital stock of Sub:
(a)
Capital Stock of Sub.
Each issued and outstanding share of common stock of Sub, par value $0.01 per share,
shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.
(b)
Cancelation of Treasury Stock and Parent-Owned Stock.
All shares of Company Common Stock that are owned as
treasury stock by the Company or owned by Parent or Sub immediately prior to the Effective Time shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or
deliverable in exchange therefor.
(c)
Conversion of Company Common Stock.
Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than (i) shares to be canceled in accordance with Section 2.01(b) and (ii) except as provided in Section 2.02, the Appraisal Shares)
shall be converted into the right to receive $134.50 in cash, without interest (the "
Merger Consideration
"). At the Effective Time such shares shall no
longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate (a "
Certificate
") or evidence of
shares in book-entry form
("
Uncertificated Shares
"), in each case, that immediately prior to the Effective Time represented any such shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration in accordance with the terms of this Agreement. The right of any holder of any share of Company Common Stock to receive the Merger
Consideration shall be subject to withholding as provided in Section 2.04(f).
SECTION 2.02.
Appraisal Rights.
Notwithstanding anything in this Agreement to the contrary,
shares (the "
Appraisal Shares
") of Company Common
Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who is entitled to demand and properly demands
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Table of Contents
appraisal
of such shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL ("
Section 262
")
shall not be converted into the right to receive the Merger Consideration as provided in Section 2.01(c), but instead, at the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate or evidence in book entry form that
immediately prior to the Effective Time represented Appraisal Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of such shares in accordance with
the provisions of Section 262. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262
or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262, then the right of such holder to be paid the fair value of such
holder's Appraisal Shares under Section 262 shall cease and such Appraisal Shares shall be deemed to have been converted at the Effective Time into, and shall have become, the right to receive
the Merger Consideration as provided in Section 2.01(c). The Company shall serve prompt notice to Parent of any demands for appraisal of any shares of Company Common Stock, withdrawals of any
such demands and any other related instruments served pursuant to the DGCL that are received by the Company, and Parent shall have the right to participate in and direct all negotiations and
proceedings with respect to such demands. Notwithstanding anything to the contrary in this Agreement, the Company shall not, without the prior written consent of Parent, make any payment with respect
to, or settle or offer to settle, or otherwise negotiate, any such demands, or agree to do or commit to do any of the foregoing.
SECTION 2.03.
Adjustments.
If at any time during the period between the date of this Agreement
and the Effective Time, any change in the outstanding Company Common Stock shall occur by
reason of any reclassification, recapitalization, split or combination (including a reverse stock split), exchange, merger, consolidation or readjustment of shares, or any stock dividend thereon with
a record date during such period, or any similar transaction or event, the Merger Consideration and any other similarly dependent items, as the case may be, shall be appropriately and equitably
adjusted to provide the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such event. Nothing in this Section 2.03 shall be construed as
permitting the Company to take any action or enter into any transaction otherwise prohibited by this Agreement.
SECTION 2.04.
Exchange of Certificates.
(a)
Paying
Agent.
Prior to the Effective Time, Parent shall designate a bank or trust company reasonably
acceptable to the Company to act as agent for the payment of the Merger Consideration upon surrender of Certificates and Uncertificated Shares (the "
Paying
Agent
"), and in connection therewith, shall enter into an agreement with the Paying Agent in a form reasonably acceptable to the Company. Prior to the Effective Time, Parent
shall deposit with the Paying Agent, for the benefit of holders of shares of Company Common Stock, cash in immediately available funds (such cash in immediately available funds, the
"
Exchange Fund
") in an amount necessary for the payment of the aggregate Merger Consideration pursuant to Section 2.01(c) upon surrender of
Certificates and Uncertificated Shares, it being understood that all such funds shall be invested as directed by Parent and that any and all interest or other amounts earned with respect to funds made
available to the Paying Agent pursuant to this Agreement shall be turned over to Parent. If for any reason (including losses) the Exchange Fund is inadequate to pay the amounts to which holders of
Certificates and Uncertificated Shares shall be entitled under Section 2.01(c), Parent shall promptly deposit, or cause to be deposited, in the Exchange Fund additional cash in immediately
available funds so as to ensure that the Exchange Fund has sufficient funds available for Paying Agent to make all such payments.
(b)
Exchange Procedure.
As soon as reasonably practicable after the Effective Time (but in no event later than
two business days thereafter), the Surviving Corporation or Parent shall cause the Paying Agent to mail to (i) each holder of record of a Certificate (A) a form of letter of transmittal
(which shall include an accompanying IRS Form W-9 or the applicable IRS Form W-8,
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Table of Contents
shall
specify that delivery shall be effected, and risk of loss and title to the Certificates held by such person shall pass, only upon proper delivery of such Certificates to the Paying Agent and
shall be in a
customary form and have such other provisions as reasonably acceptable to Parent and the Company) and (B) instructions for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration and (ii) each holder of Uncertificated Shares (A) materials advising such holder of the effectiveness of the Merger and the conversion of its Uncertificated Shares
into the right to receive the Merger Consideration and (B) a check in an amount equal to the aggregate amount of Merger Consideration to which such holder is entitled. Upon surrender of a
Certificate for cancelation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed, and such
other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash equal to the Merger Consideration
that such holder has the right to receive pursuant to Section 2.01(c), and each Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Company Common
Stock that is not registered in the stock transfer books of the Company, payment of the Merger Consideration in exchange therefor may be made to a person other than the person in whose name the
Certificate so surrendered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and accompanied by all documents required to evidence and effect
such transfer and the person requesting such payment shall pay any transfer or other Taxes required by reason of the payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Corporation that such Taxes have been paid or are not applicable. Until surrendered as contemplated by this Section 2.04, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the shares of Company Common Stock
theretofore represented by such Certificate, as applicable, have been converted pursuant to Section 2.01(c). No interest shall be paid or shall accrue on the cash payable upon surrender of any
Certificate.
(c)
No Further Ownership Rights in Company Common Stock.
All Merger Consideration paid upon the surrender of a
Certificate in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock formerly
represented by such Certificate. After the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the
Paying Agent for transfer or any other reason, they shall be canceled and exchanged as provided in this Article II. No cash payment with respect to the Merger Consideration shall be paid to the
holder of any unsurrendered Certificate until the surrender of such Certificate in accordance with this Section 2.04.
(d)
No Liability.
None of Parent, Sub, the Company, the Surviving Corporation or the Paying Agent shall be
liable to any person in respect of any Merger Consideration that would otherwise have been payable to a holder of a Certificate or Uncertificated Shares which is delivered to a public official in
accordance with any applicable abandoned property, escheat or similar Law. If any holder of a Certificate or Uncertificated Shares has not received the Merger Consideration that such holder is
entitled to under this Section 2.04, and such Merger Consideration would otherwise escheat to or become the property of any Governmental Entity, such Merger Consideration shall, to the extent
permitted by applicable Law, immediately prior to such date, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto.
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Table of Contents
(e)
Lost Certificates.
If any Certificate shall have been lost, stolen, defaced or destroyed, upon the making of
an affidavit of that fact by the person claiming such Certificate to be lost, stolen, defaced or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond in such
reasonable and customary amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent or the Surviving
Corporation, as the case may be, shall pay the Merger Consideration in respect of such lost, stolen, defaced or destroyed Certificate.
(f)
Withholding Rights.
Parent, the Surviving Corporation or the Paying Agent shall be entitled to deduct and
withhold from the Merger Consideration and any other amounts otherwise payable to any person pursuant to this Agreement such amounts as Parent, the Surviving Corporation or the Paying Agent is
required to deduct and withhold with respect to the making of such payment under the U.S. Internal Revenue Code of 1986, as amended (the "
Code
") or any
applicable state, local or foreign Tax Law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by Parent, the Surviving Corporation or the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having been paid to the person in respect of whom such deduction and withholding was made.
(g)
Termination of Exchange Fund.
At any time following the six-month anniversary of the Closing Date, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) remaining in the Exchange Fund or that had
otherwise been made available to the Paying Agent pursuant to Section 2.04(a) and that have not been disbursed to holders of Certificates or Uncertificated Shares, and thereafter, subject to
the time limitations in Section 2.04(d), such holders shall be entitled to look only to Parent and the Surviving Corporation (subject to abandoned property, escheat or other similar Laws) as
general creditors thereof with respect to the payment of any Merger Consideration that may be payable upon surrender of any Certificates held by such holders or to holders of Uncertificated Shares, as
applicable, as determined pursuant to this Agreement, without any interest thereon.
ARTICLE III
Representations and Warranties
SECTION 3.01.
Representations and Warranties of the Company.
Except as set forth in (x) the letter
delivered by the Company to Parent on or prior to the date of this Agreement (the "
Company
Letter
") (with specific reference to the Section of this Agreement to which the information stated in such disclosure relates;
provided
that disclosure of information in any
section of the Company Letter shall be deemed to qualify or apply to other Sections in this
Article III to the extent it is reasonably apparent on the face of such disclosure that such disclosure is relevant to such other Sections) or (y) the Filed SEC Documents filed on or
after January 1, 2016, other than any disclosure contained therein under the caption "Risk Factors" or "Forward-Looking Statements" or any other disclosure contained therein of information,
factors or risks that are predictive, cautionary or forward-looking in nature and not statements of historical fact (it being agreed that any matter disclosed in such Filed SEC Documents shall be
deemed to qualify this Article III only to the extent that it is reasonably apparent on the face of such disclosure the Section or Sections of this Article III to which such disclosure
is relevant), the Company represents and warrants to Parent and Sub as follows:
(a)
Organization, Standing and Corporate Power.
Each of the Company and each Subsidiary of the Company
(i) is a corporation or other legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization (except, in the case of good standing,
for entities organized under the Laws of any jurisdiction that does not recognize such concept), (ii) has all requisite corporate, company, partnership or other organizational power and
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Table of Contents
authority
to enable it to own, lease or otherwise hold its properties and assets and to carry on its business as currently conducted and (iii) is duly qualified or licensed to do business and
is in good standing in each jurisdiction (except, in the case of good standing, any jurisdiction that does not recognize such concept) in which the nature of its business or the ownership, leasing or
operation of its assets or properties makes such qualification or licensing necessary, other than where the failure to be so organized, existing, qualified or licensed or in good standing (except, in
the case of clause (i) above, with respect to the Company), or to have such power or authority, individually or in the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect. The Company has made available to Parent true and complete copies of the certificate of incorporation of the Company,
as amended to the date of this Agreement (the "
Company Certificate
"), the bylaws of the Company, as amended to the date of this Agreement (the
"
Company Bylaws
") and the certificate or articles of incorporation and bylaws or comparable organizational documents of each Subsidiary of the Company,
in each case as amended to the date of this Agreement.
(b)
Subsidiaries.
Section 3.01(b) of the Company Letter sets forth a list as of the date of this
Agreement of each Subsidiary of the Company and its place and form of organization. All the outstanding shares of capital stock of, or other equity or voting interests in, each such Subsidiary of the
Company are owned by the Company, by one or more wholly owned Subsidiaries of the Company or by the Company and one or more wholly owned Subsidiaries of the Company, free and clear of all pledges,
claims, liens, charges, options, security interests or other encumbrances of any kind or nature whatsoever (collectively, "
Liens
"), and free and clear
of any other restriction (including any restriction on the right to vote, sell or dispose of such capital stock or other equity or voting interest), except for transfer restrictions imposed by
applicable securities Laws, and are duly authorized, validly issued, fully paid and nonassessable, and not subject to or issued in violation of any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right. Except for the capital stock of, or other equity or voting interests in, Subsidiaries of the Company, neither the Company nor any of
its Subsidiaries own, directly or indirectly, any capital stock of, or other equity or voting interests in, or any interest convertible into or exchangeable for any capital stock of, or other equity
or voting interest in, any person.
(c)
Capital Structure.
(i) The authorized capital stock of the Company consists of 180,000,000 shares of Company
Common Stock and 5,000,000 shares of preferred stock, par value $1.00 per share, of the Company (the "
Company Preferred Stock
"). At the close of
business on September 8, 2017 (such date and time, the "
Measurement Time
"), (A) 57,621,261 shares of Company Common Stock (excluding
treasury shares but including 302,247 shares of Company Common Stock granted under the Company Stock Plans and subject to forfeiture conditions (the "
Company Restricted
Shares
")) were issued and outstanding, (B) 11,313,763 shares of Company Common Stock were held by the Company as treasury shares, (C) 2,086,845 shares of Company
Common Stock were reserved and available for issuance in the aggregate pursuant to the Company Stock Plans, options to purchase shares of Company Common Stock pursuant to the Company Stock Plans (the
"
Company Stock Options
") were outstanding, entitling the holders thereof to receive an aggregate of 270,126 shares of Company Common Stock,
performance-based restricted stock units granted under the Company Stock Plans (the "
Company Performance Shares
") were outstanding, entitling the
holders thereof to receive an aggregate of 52,204, 208,815 and 417,630 shares of Company Common Stock based on "threshold", "target" and "maximum" performance levels, respectively, deferred stock
units granted under the Benefit Plans (the "
Company Deferred Stock Units
") were outstanding, entitling the holders thereof to receive an aggregate of
94,524 shares of Company Common Stock and phantom stock units granted under the Benefit Plans (the "
Company Phantom Stock Units
") were outstanding,
entitling the holders thereof to receive cash payments equal to the value of an aggregate of 12,986 shares of Company Common Stock (the Company Restricted Shares, the Company Stock Options, the
Company Performance Shares, the
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Company
Deferred Stock Units and the Company Phantom Stock Units collectively, the "
Company Equity-Based Awards
") and (D) 1,820,525 shares of
Company Common Stock were reserved and available for issuance pursuant to the Company ESPP. As of the date of this Agreement, none of the issued and outstanding shares of Company Common Stock (other
than the Company Restricted Shares) are subject to vesting or forfeiture conditions or a right of repurchase by the Company. All outstanding Company Equity-Based Awards have been granted under the
Company Stock Plans. Other than the Company Stock Plans and the award agreements thereunder, there is no plan, Contract or arrangement providing for the grant of Company Equity-Based Awards. No shares
of Company Preferred Stock are issued or outstanding. No shares of Company Common Stock are owned by any Subsidiary of the Company. As of the date of this Agreement, other than the outstanding Company
Equity-Based Awards or pursuant to the Company ESPP, there are no outstanding rights of any person to receive Company Common Stock under the Company Stock Plans or Company ESPP or otherwise from the
Company, on a deferred basis or otherwise.
(ii) Except
for outstanding shares of Company Common Stock and Company Equity-Based Awards, as of the Measurement Time, no shares of capital stock of, or other equity or
voting interests in, the Company, or securities convertible into, or exchangeable or exercisable for, any such capital stock of, or other equity or voting interests in, the Company were issued,
reserved for issuance or outstanding. From the Measurement Time to the date of this Agreement, (A) there have been no issuances by the Company of shares of capital stock of, or other equity or
voting interests in, the Company, other than issuances of shares of Company Common Stock pursuant to the exercise or settlement of Company Equity-Based Awards outstanding as of the Measurement Time
pursuant to the existing terms thereof and (B) there have been no issuances by the Company of securities convertible into, or exchangeable or exercisable for, or options, warrants, shares of
deferred stock, restricted stock awards, stock appreciation rights, restricted stock units, performance units, phantom stock awards, or other rights to acquire or receive shares of capital stock of,
or other equity or voting interests in, the Company, or other securities that are linked to the value of Company Common Stock or the value of the Company or any part thereof.
(iii) All
outstanding shares of capital stock of the Company are, and all shares that may be issued prior to the Effective Time will be when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right.
Except as set forth in this Section 3.01(c), there are no (A) bonds, debentures, notes or other indebtedness of the Company or any of its Subsidiaries that may have at any time (whether
actual or contingent) the right to vote (or which are convertible into, or exchangeable for, securities having the right to vote) on any matter on which stockholders of the Company or its Subsidiaries
may vote or (B) securities or other instruments or rights (including stock appreciation rights, phantom stock awards or other similar rights) issued by, or other obligations of, the Company or
any of its Subsidiaries, in each case, that are linked to, or the value of which is in any way based upon or derived from, the value of any class of capital stock of, or other equity or voting
interests in, the Company or any of its Subsidiaries, the value of the Company, any of its
Subsidiaries or any part thereof, or any dividends or other distributions declared or paid on any shares of capital stock of, or other equity or voting interests in, the Company or any of its
Subsidiaries, or which have or which by their terms may have at any time (whether actual or contingent) the right to vote (or which are convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Company or any of its Subsidiaries may vote (the items referred to in clauses (A) and (B) collectively,
"
Equity Equivalents
"). Except as set forth in this Section 3.01(c), there are no securities, options, warrants, calls, rights or Contracts of any
kind to which the Company or any of its Subsidiaries is a party, or by which the Company or any
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of
its Subsidiaries is bound, (x) obligating the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of,
or other equity or voting interests in, or securities convertible into, or exchangeable or exercisable for, shares of capital stock of, or other equity or voting interests in, the Company or any of
its Subsidiaries, (y) obligating the Company or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right or Contract or (z) that give
any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights accruing to holders of capital stock of the Company or any of its
Subsidiaries. Except pursuant to the forfeiture conditions of the Company Equity-Based Awards outstanding as of the date of this Agreement and except pursuant to any cashless exercise or Tax
withholding provisions of or authorizations related to such Company Equity-Based Awards as in effect on the date of this Agreement, there are no outstanding contractual or other obligations of the
Company or any of its Subsidiaries to (I) repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries
or (II) vote or dispose of any shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is a
party to any voting agreement with respect to any shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries and, to the knowledge of the Company, as of
the date of this Agreement there are no irrevocable proxies and no voting agreements with respect to any shares of capital stock of, or other equity or voting interests in, the Company or any of its
Subsidiaries.
(d)
Authority; Noncontravention.
The Company has the requisite corporate power and authority to execute and
deliver this Agreement, to consummate the Merger and the other transactions contemplated by this Agreement and to comply with the provisions of this Agreement, subject, in the case of the consummation
of the Merger, to obtaining the Stockholder Approval. The execution and delivery of this Agreement by the Company, the consummation by the Company of the Merger and the other transactions contemplated
by this Agreement and the compliance by the Company with the provisions of this Agreement have been duly authorized by all necessary corporate action on the part of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement, to comply with the terms of this Agreement or to consummate the Merger and the other transactions contemplated by this
Agreement, subject, in the case of the consummation of the Merger, to obtaining the Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and, assuming the due execution and delivery of this Agreement by Parent and Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including all Laws related to fraudulent transfers), reorganization, moratorium or similar Laws
affecting creditors' rights generally and subject to the effect of general principles of equity. The Board of Directors of the Company, at a meeting duly called and held at which all of the directors
of the Company were present, duly and unanimously adopted resolutions (i) approving and declaring advisable this Agreement, the Merger and the other transactions contemplated by this Agreement,
(ii) declaring that it is in the best interests of the Company's stockholders that the Company enter into this Agreement and consummate the Merger and the other transactions contemplated by
this Agreement on the terms and subject to the conditions set forth in this Agreement, (iii) directing that the adoption of this Agreement be submitted to a vote at a meeting of the Company's
stockholders to be held as set forth in Section 5.01(c) and (iv) recommending that the Company's stockholders adopt this Agreement, which resolutions, except to the extent expressly
permitted by Section 4.02, have not been rescinded, modified or withdrawn in any way. The execution and delivery by the Company of this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement and compliance by the Company with the provisions
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of
this Agreement do not and will not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of, or result
in, termination, cancelation, first offer, first refusal, modification or acceleration of any right or obligation or to a loss, suspension, limitation or impairment of a benefit under, or result in
the creation of any Lien in or upon any of the properties or assets of the Company or any of its Subsidiaries under, or give rise to any increased, additional, accelerated or guaranteed rights or
entitlements of any person under (including any right of a holder of a security of the Company or any of its Subsidiaries to require the Company or any of its Subsidiaries to acquire such security),
any provision of (x) the Company Certificate or the Company Bylaws or the certificate of incorporation or bylaws (or similar organizational documents) of any of its Subsidiaries, (y) any
loan or credit agreement, bond, debenture, note, mortgage, indenture, guarantee, lease or other contract, commitment, agreement, instrument, arrangement, understanding, obligation, undertaking or
license, whether oral or written (each, including all amendments thereto, a "
Contract
"), or Permit to or by which the Company or any of its Subsidiaries
is a party or bound or to or by which any of their respective properties or assets are subject or bound or otherwise under which the Company or any of its Subsidiaries has rights or benefits or
(z) subject to the governmental filings and other matters referred to in the following sentence, any Law applicable to the Company or any of its Subsidiaries or their respective properties or
assets, assuming receipt of the Stockholder Approval and the adoption of this Agreement by Parent, as the sole stockholder of Sub, other than, in the case of clauses (y) and (z), any such
conflicts, violations, breaches, defaults, terminations, cancelations, accelerations, losses, Liens, rights or entitlements that, individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect and would not reasonably be expected to prevent, materially impede or materially delay the consummation by the Company of the Merger or the other transactions
contemplated by this Agreement. No consent, waiver, approval, order or authorization ("
Consent
") of or from, or registration, declaration or filing
with, or
notice to, any Federal, state or local, domestic or foreign government or any court, administrative agency or commission or other governmental, quasi-governmental or regulatory authority or agency,
domestic or foreign (a "
Governmental Entity
"), is required by or with respect to the Company or any of its Subsidiaries in connection with the execution
and delivery of this Agreement by the Company, the consummation by the Company of the Merger and the other transactions contemplated by this Agreement or the compliance by the Company with the
provisions of this Agreement, except for (I) the filing of a premerger notification and report form by the Company and the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "
HSR Act
"), and the filings and receipt, termination or expiration, as applicable,
of such other approvals or waiting periods required under such other applicable competition, merger control, antitrust or similar Laws set forth in Section 3.01(d) of the Company Letter,
(II) the filing with the Securities and Exchange Commission (the "
SEC
") of a proxy statement relating to the adoption of this Agreement by the
Company's stockholders (as amended or supplemented from time to time, the "
Proxy Statement
") and such reports under the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder (collectively, the "
Exchange Act
"), as may be required in connection with this
Agreement and the Merger and the other transactions contemplated by this Agreement, (III) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other jurisdictions in which the Company or any of its Subsidiaries is qualified to do business, (IV) any filings required under the rules
and regulations of the New York Stock Exchange and (V) such other Consents the failure of which to be obtained or made, individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect and would not reasonably be expected to prevent, materially impede or materially delay the consummation by the Company of the Merger or the other transactions
contemplated by this Agreement.
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(e)
SEC Documents.
(i) The Company has filed or furnished, as applicable, all reports, schedules,
forms, statements and other documents with the SEC required to be filed or
furnished by the Company since January 1, 2015 (together with all documents and information incorporated therein by reference, the "
SEC
Documents
"), in each case at or prior to the time required. No Subsidiary of the Company is, or has been, required to file or furnish any report, schedule, form, statement or
other document with, or make any other filing with, or furnish any other material to, the SEC. As of their respective effective dates (in the case of SEC Documents that are registration statements
filed pursuant to the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the "
Securities Act
")) and
as of their respective filing dates (in the case of all other SEC Documents), each SEC Document complied as to form in all material respects with the requirements of the Securities Act, the Exchange
Act and the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder (collectively, "
SOX
"), in each case, applicable to such SEC
Document, and none of the SEC Documents at the time it was filed or furnished contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any SEC Document filed
or furnished and publicly available prior to the date of this Agreement (a "
Filed SEC Document
") has been amended, restated, revised or superseded by a
later filed or furnished Filed SEC Document, none of the SEC Documents contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of the date of this Agreement, there are no outstanding or unresolved comments in any
comment letters received by the Company from the SEC relating to the SEC Documents. As of the date of this Agreement, to the knowledge of the Company, none of the SEC Documents is the subject of any
ongoing review by the SEC. The financial statements (including the related notes) of the Company included in the SEC Documents complied, at the time the respective statements were filed, as to form in
all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were derived from the books of account and other financial
records of the Company and its Subsidiaries, were prepared in accordance with generally accepted accounting principles in effect from time to time in the United States of America
("
GAAP
") (except, in the case of unaudited quarterly financial statements, as permitted by Form 10-Q or other rules and regulations of the SEC)
applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject, in the case of unaudited quarterly
financial statements, to normal recurring year-end adjustments that are immaterial in nature). Except as reflected or reserved against on the consolidated balance sheet of the Company included in the
Company's financial statements (or the notes thereto) included in the Filed SEC Documents, the Company and its Subsidiaries have no material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that are required to be recorded as a liability or disclosed by GAAP in the financial statements or footnotes thereto other than liabilities or obligations that
(A) were incurred after the date of the latest balance sheet included in the Baseline Financials in the ordinary course of business consistent with past practice or (B) were incurred in
connection with this Agreement, the Merger or the other transactions contemplated by this Agreement.
(ii) The
Company is in compliance in all material respects with the provisions of SOX applicable to it.
(iii) The
principal executive officer of the Company and the principal financial officer of the Company each has made all certifications required by Rules 13a-14 and
15d-14 under the Exchange Act and Sections 302 and 906 of SOX, as applicable, with respect to the SEC Documents, and the statements contained in such certifications were accurate as of the date
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they
were made. For purposes of this Agreement, "principal executive officer" and "principal financial officer" shall have the meanings given to such terms in SOX. Neither the Company nor any of its
Subsidiaries has outstanding, or has (since the Company was subject thereto) arranged any outstanding, "extension of credit" to directors or executive officers within the meaning of Section 402
of SOX.
(iv) Neither
the Company nor any of its Subsidiaries is a party to or bound by, or has any commitment to become a party to or bound by, any joint venture, off-balance sheet
partnership or any similar Contract (including any Contract relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any
unconsolidated affiliate, including any structured finance, special purpose or limited purpose entity or person, on the other hand, or any "off-balance sheet arrangements" (as defined in
Item 303(a) of Regulation S-K under the Securities Act)) where the purpose or intended or known result or effect of such joint venture, partnership or Contract is to avoid disclosure of
any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company's or any of its Subsidiaries' published financial statements or other SEC
Documents.
(v) The
Company maintains "internal control over financial reporting" (as defined in Rule 13a-15(f) of the Exchange Act) and "disclosure controls and procedures" (as
defined in Rule 13a-15(e) of the Exchange Act) as required by the Exchange Act. The Company has disclosed, based on its most recent evaluation of internal control over financial reporting, to
the Company's auditors and the audit committee of the Company's Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of its internal control
over financial reporting that are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information and (B) any fraud, whether or not
material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. The Company has not identified any current significant
deficiencies or material weaknesses in the design or operation of its internal control over financial reporting.
(f)
Information Supplied.
None of the information included or incorporated by reference in the Proxy Statement
will, at the time it is filed with the SEC, at the date it is first mailed to the Company's stockholders, at the time of the Stockholders Meeting or at the time of any amendment or supplement
thereof, as amended or supplemented at such date or time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Parent or any of its Subsidiaries specifically for inclusion or incorporation by reference in the Proxy Statement. The Proxy Statement will comply as
to form in all material respects with the requirements of the Exchange Act.
(g)
Absence of Certain Changes or Events.
From January 1, 2017 to the date of this Agreement,
(i) except in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement or as expressly contemplated or permitted by this Agreement, the Company and
its Subsidiaries have conducted their respective businesses only in the ordinary course of business consistent with past practice and (ii) there has not been any Company Material Adverse Effect
or any change, development, event, effect, condition, occurrence, action or omission that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.
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(h)
Litigation.
There is no claim, action, suit, arbitration or judicial, administrative
or regulatory proceeding or investigation (each, a "
Proceeding
") pending or, to the knowledge of the Company, threatened or reasonably anticipated by or
against the Company, any of its Subsidiaries or the Controlled Affiliate that, individually or in the aggregate, would reasonably be expected to be material and adverse to the Company and its
Subsidiaries, taken as a whole. There is no Judgment of any Governmental Entity or arbitrator outstanding against the Company or any of its Subsidiaries or, to the knowledge of the Company, the
Controlled Affiliate that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
(i)
Contracts.
Neither the Company nor any of its Subsidiaries is party to any Contract required to be filed by
the Company as a "material contract" pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act as of the date of this Agreement that has not been so filed (a
"
Filed Company Contract
"). Section 3.01(i) of the Company Letter sets forth (with specific reference to the subsection of this
Section 3.01(i) to which such Contract relates, including any further subsection) a list as of the date of this Agreement of:
(i) each
Contract pursuant to which the Company or any of its Subsidiaries has agreed not to compete with any person in any geographic area or in any activity or business
that (A) is material to the operation of the Company and its Subsidiaries, taken as a whole, or (B) after the Effective Time would restrict Parent or any of its Subsidiaries (other than
the Surviving Corporation and its Subsidiaries) in any material respect;
(ii) each
Contract to or by which the Company or any of its Subsidiaries is a party or bound providing for exclusivity (A) pursuant to which the Company or any of its
Subsidiaries is restricted in any respect, which restrictions are material to the operation of the Company and its Subsidiaries, taken as a whole, or (B) which after the Effective Time would
restrict Parent or any of its Subsidiaries (other than the Surviving Corporation and its Subsidiaries) in any respect, in each of the above clauses (A) and (B), with respect to the development,
manufacture, marketing or distribution of their respective products or services;
(iii) each
Contract under which the Company or any of its Subsidiaries has incurred any indebtedness having an aggregate principal amount in excess of $10,000,000;
(iv) each
Contract which has aggregate future sums due to or from the Company or any of its Subsidiaries of more than $10,000,000 during the life of the Contract and to or
by which the Company or any of its Subsidiaries is a party or bound creating or granting a Lien (including Liens upon properties or assets acquired under conditional sales, capital leases or other
title retention or security devices), other than (1) Liens for Taxes, assessments and other governmental charges not yet due and payable that are payable without penalty or that are being
contested in good faith and, in each case, for which adequate reserves have been established, (2) Liens for landlords', carriers', warehousemen's, mechanics', repairmen's, workers' or similar
Liens incurred in the ordinary course of business consistent with past practice, in each case for sums not yet due and payable or due but not delinquent or being contested in good faith by appropriate
proceedings, (3) Liens incurred in the ordinary course of business consistent with past practice in connection with workers' compensation, unemployment insurance and other types of social
security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations and
(4) Liens incurred in the ordinary course of business consistent with past practice that are not reasonably likely to adversely interfere in a material respect with the use of the properties or
assets encumbered thereby (collectively, "
Permitted Liens
");
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(v) each
Contract which has aggregate future sums due to or from the Company or any of its Subsidiaries of more than $25,000,000 per annum or $100,000,000 over the life of
the Contract and to or by which the Company or any of its Subsidiaries is a party or bound (other than Benefit Plans) containing any provisions contemplating or relating in any way to a "change in
control" or similar event with respect to the Company or one or more of its Subsidiaries, including provisions requiring Consent
of, or notice to, any Governmental Entity or other person in the event of a change in control of the Company or one or more of its Subsidiaries, or otherwise having the effect of providing that the
consummation of the Merger or any of the other transactions contemplated by this Agreement or the execution, delivery or effectiveness of this Agreement will materially conflict with, result in a
material violation or material breach of, or constitute a default (with or without notice or lapse of time or both) under, such Contract, or give rise under such Contract to any right of, or result
in, termination, right of first refusal or first offer, material amendment, revocation, cancelation or acceleration of any material obligation, or loss of a material benefit or the creation of any
material Lien upon any of the properties or assets of the Company, Parent or any of their respective Subsidiaries, or to any increased, guaranteed, accelerated or additional material rights or
material entitlements of any person;
(vi) each
Contract to or by which the Company or any of its Subsidiaries is a party or bound granting the other party to such Contract or a third party "most favored nation"
pricing or terms and contemplates aggregate payments to the Company or any of its Subsidiaries in excess of $15,000,000 per annum and that (1) applies to the Company or any of its Subsidiaries
or (2) following the Effective Time, would apply to Parent or any of its Subsidiaries other than the Surviving Corporation or its Subsidiaries;
(vii) each
Contract to or by which the Company or any of its Subsidiaries is a party or bound forming or establishing, or relating to the formation or establishment or
operation of, any joint venture (whether in partnership, limited liability company or other legal entity), in each case, that is material to the operation of the Company and its Subsidiaries, taken as
a whole;
(viii) each
Contract to or by which the Company or any of its Subsidiaries is a party or bound entered into in connection with the settlement or other resolution of any
Proceeding involving the future performance of material obligations by the Company or any of its Subsidiaries;
(ix) each
Contract to or by which the Company or any of its Subsidiaries is a party or bound containing any standstill provisions which in any material respect limit
(1) the ability of any person to acquire the securities or assets of the Company or any of its Subsidiaries or (2) the ability of the Company or any of its Subsidiaries to acquire the
securities or assets of any person;
(x) each
Contract to or by which the Company or any of its Subsidiaries is a party or bound that contains any continuing indemnification, "earn-out" or other similar
contingent payment obligations (other than milestone payments and warranty obligations, in each case, under commercial Contracts entered into the ordinary course of business consistent with past
practice), or credit support relating to such obligations, which would reasonably be expected to result in payments in excess of $10,000,000;
(xi) each
Contract (1) under which the Company or any of its Subsidiaries licenses or sublicenses material Intellectual Property from or to any third party (other
than non-exclusive licenses to customers and off-the-shelf, commercially available and/or "shrink-wrap" agreements) outside of the ordinary course of business consistent with past practice or
(2) that
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restricts
in any material respect the right of the Company or any of its Subsidiaries to use, deploy or register any material Intellectual Property; and
(xii) each
Contract pursuant to which the Company guarantees performance obligations of any person either (1) which would reasonably be expected to result in payments
by the Company in excess of $10,000,000 or (2) with a remaining term of longer than two years from the date of this Agreement (other than (A) Contracts that are terminable at will or
upon advance notice, in each case, by the Company or its Subsidiaries, prior to the expiration of the remaining term and (B) off-the shelf, commercially available and/or "shrink-wrap"
agreements or that contain similar immaterial obligations).
The
Contracts of the Company or any of its Subsidiaries of the type referred to in clauses (i) through (xii) of this Section 3.01(i) (whether in effect on the date of this
Agreement or entered into following the date of this Agreement and prior to the Closing Date), together with the Filed Company Contracts and the Significant Program Contracts, are collectively
referred to in this Agreement as "
Specified Contracts
". The Company has made available to Parent a true and complete copy of, and all material
substantive written modifications and amendments currently in effect to, (x) each of the Specified Contracts other than the Significant Program Contracts and (y) a representative
Contract for each of the programs listed on Section 3.01(i)(y) of the Company Letter (all Contracts for such programs, the "
Significant Program
Contracts
"). Each Specified Contract is in full force and effect (except for those Contracts that have expired in accordance with their terms) and is a legal, valid and binding
agreement of the Company or such Subsidiary, as the case may be, and, to the knowledge of the Company, of each other party thereto, enforceable against the Company or such Subsidiary, as the case may
be, and, to the knowledge of the Company, against the other party or parties thereto, in each case, in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency
(including all Laws related to fraudulent transfers), reorganization, moratorium or similar Laws affecting creditors' rights generally and subject to the effect of general principles of equity. Each
of the Company and its Subsidiaries has performed or is performing all material obligations required to be performed by it under the Specified Contracts and is not (with or without notice or lapse of
time or both) in breach in any material respect or default thereunder, and has not waived (other than any implied waiver) or failed to enforce any material rights or benefits thereunder and, to the
knowledge of the Company, no other party to any of the Specified Contracts is (with or without notice or lapse of time or both) in breach in any material respect or default thereunder. To the
knowledge of the Company, there has occurred no event that (with or without notice or lapse of time or both) would give to others any right of termination, material amendment or cancelation of any
Specified Contract.
(j)
Permits; Compliance with Laws.
(i) The Company and its Subsidiaries possess all certificates, permits,
licenses, franchises, approvals, concessions, qualifications, registrations, certifications and similar authorizations from any Governmental Entity (collectively,
"
Permits
") that are necessary for them to own, lease, operate or otherwise hold their properties and assets and to carry on their businesses as
currently conducted except where the failure to possess a Permit, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. Neither
the Company nor any of its Subsidiaries has received any communication since January 1, 2015 from any person that alleges that the Company or any of its Subsidiaries is not in compliance with,
or is subject to liability under, any Permit or relating to the revocation or modification of any Permit that, individually or in the aggregate, is or would reasonably be expected to be material and
adverse to the Company and its Subsidiaries, taken as a whole.
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(ii) Each
of the Company, its Subsidiaries and, to the knowledge of the Company, the Controlled Affiliate is, and has been since January 1, 2015, in compliance with
all applicable Laws, except for such noncompliance that, individually or in the aggregate, is not and would not reasonably be expected to be material and adverse to the Company and its Subsidiaries,
taken as a whole, and, to the knowledge of the Company, no facts or circumstances exist that are reasonably likely to give rise to a violation of, or a liability under, any applicable Law that,
individually or in the aggregate, would reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole. Neither the Company nor any of its Subsidiaries nor, to
the knowledge of the Company, the Controlled Affiliate, has received any written communication since January 1, 2015 from any person that alleges that the Company or any of its Subsidiaries or
the Controlled Affiliate is not in compliance with, or is subject to liability under, any applicable Law that, individually or in the aggregate, is or would reasonably be expected to be material and
adverse to the Company and its Subsidiaries, taken as a whole. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, the Controlled Affiliate, has received any written
notice that any potentially material investigation or review by any Governmental Entity is pending with respect to the Company or any of its Subsidiaries or the Controlled Affiliate or any of the
assets or operations of any of them or that any such investigation or review is contemplated and, to the knowledge of the Company, no facts or circumstances exist that are reasonably likely to give
rise to any such investigation or review with respect to the Company or any of its Subsidiaries or, to the knowledge of the Company, the Controlled Affiliate.
(k)
Environmental Matters.
(i) Each of the Company and its Subsidiaries is, and, except for matters that have
been fully and finally resolved or with respect to which the Company and its Subsidiaries would not reasonably expect to incur further material liability or obligation, since January 1, 2012,
has been, in compliance with all Environmental Laws, except for such noncompliance that, individually or in the aggregate, is not and would not reasonably be expected to be material and adverse to the
Company and its Subsidiaries, taken as a whole, and neither the Company nor any of its Subsidiaries has received any written notice alleging that the Company or such Subsidiary is in violation of, or
may have liability under, any Environmental Law that, individually or in the aggregate, is or would reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a
whole; (ii) each of the Company and its Subsidiaries possesses and is in compliance in all material respects with all material Permits required under Environmental Laws
("
Environmental Permits
") for the conduct of its
operations as currently conducted, and all such Environmental Permits are valid and in good standing; (iii) there are no material Environmental Claims pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries; and (iv) to the knowledge of the Company, there has been no Release of or exposure to any Hazardous Material that would
reasonably be expected to form the basis of any material Environmental Claim against the Company or any of its Subsidiaries or against any person whose liabilities for such Environmental Claims the
Company or any of its Subsidiaries has, or may have, retained or assumed, either contractually or by operation of Law. Notwithstanding any other provisions herein, other than the representations and
warranties of the Company contained in Sections 3.01(d), 3.01(e)(i) and 3.01(g), this Section 3.01(k) contains the sole and exclusive representations and warranties of the Company with
respect to Environmental Laws, Hazardous Materials, Environmental Permits, Environmental Claims or any other environmental matters.
For
all purposes of this Agreement, (w) "
Environmental Claims
" means any and all administrative, regulatory or judicial
Proceedings, Judgments, demands, directives, claims, Liens or written notices of noncompliance or violation by or from any person alleging liability of any kind or nature (including liability or
responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resource damages,
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property
damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from (1) the presence or Release
of, or exposure to, any Hazardous Material at any location, or (2) the failure to comply with any Environmental Law; (x) "
Environmental
Law
" means any Law, legally binding agreement or Environmental Permit issued, promulgated or entered into by or with any Governmental Entity relating to the regulation of
pollution, or to the protection or regulation of the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), natural resources, the climate, human health as
it relates to exposure to hazardous or toxic materials, or to the protection of endangered or threatened species; (y) "
Hazardous Materials
" means
any petroleum or petroleum products, radioactive materials or wastes, asbestos in any form, polychlorinated biphenyls, pesticides, hazardous or toxic substances and any other chemical, material,
substance or waste that is prohibited, limited or regulated, or that can result in liability, under any Environmental Law; and (z) "
Release
"
means any actual or threatened release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the indoor or outdoor
environment or within any building, structure, facility or fixture.
(l)
Employee Benefits and Labor Matters.
(i) Section 3.01(l)(i) of the Company Letter sets forth a list
of each material Benefit Plan. With respect to each material Benefit Plan, the Company has delivered or made available to Parent true and complete copies of (A) such Benefit Plan (or, in the
case of any
unwritten Benefit Plans, written descriptions thereof), including any amendments thereto, (B) the most recent annual report, or such similar report, statement, or information return required to
be filed with or delivered to any Governmental Entity, if any, with respect to such Benefit Plan (including reports filed on Form 5500 with accompanying schedules and attachments),
(C) the most recent summary plan description (if any), and any summary of material modifications, prepared for such Benefit Plan for which a summary plan description is required under
applicable Law, (D) each trust agreement and group annuity or insurance Contract and other documents relating to the funding or payment of compensation or benefits under such Benefit Plan (if
any) and (E) the most recent actuarial valuation for such Benefit Plan (if any). Other than any instances of non-compliance that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect: (x) each Benefit Plan has been administered, funded and invested in accordance with its terms; and (y) the Company and
its Subsidiaries and each Benefit Plan are in compliance with applicable Law, including ERISA and the Code, and all applicable Laws respecting labor, employment, fair employment practices (including
equal employment opportunity Laws), worker classification, terms and conditions of employment, workers' compensation, occupational safety and health, and wages and hours.
(ii) Each
Benefit Plan intended to be Tax qualified under the Code has been the subject of a favorable determination, opinion or advisory letter from the U.S. Internal
Revenue Service (the "
IRS
") to the effect that such Benefit Plan is qualified and exempt from United States Federal income Taxes under
Sections 401(a) and 501(a), respectively, of the Code, and no such letter has been revoked (nor, as of the date of this Agreement, has revocation been threatened). Each Benefit Plan required to
have been approved by any Governmental Entity outside of the United States (or permitted to have been approved to obtain any beneficial Tax or other status) has been so approved or timely submitted
for approval, and no such approval has been revoked (nor, as of the date of this Agreement, has revocation been threatened).
(iii) Neither
the Company nor any ERISA Affiliate has sponsored, maintained, contributed to or been obligated to contribute to, or has any actual or contingent liability
under, any Benefit Plan that is a "defined benefit plan" (as defined in Section 3(35) of ERISA, whether or not subject to ERISA) or a "multiemployer plan" (within the meaning of
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Section 4001(a)(3)
of ERISA, whether or not subject to ERISA), or that is subject to Section 302 or Title IV of ERISA or Section 412 of the Code.
(iv) No
Benefit Plan that provides welfare benefits, whether or not subject to ERISA (each, a "
Welfare Plan
"), provides
benefits, and there are no written understandings with respect to the provision of
welfare benefits, after termination of employment, except where the cost thereof is borne entirely by the former employee (or his or her eligible dependents or beneficiaries) or as required by
Section 4980B of the Code or any similar state, local or foreign Law.
(v) None
of the execution and delivery of this Agreement, the obtaining of the Stockholder Approval or the consummation of the Merger or any other transaction contemplated
by this Agreement (whether alone or as a result of any termination of employment on or following the Effective Time) will (A) entitle any Company Personnel to severance, termination, retention,
change in control or similar compensation or benefits, (B) accelerate the time of payment or vesting, or trigger any payment or funding (through a grantor trust or otherwise) of, compensation
or benefits under, increase the amount payable or trigger any other material obligation pursuant to any Benefit Plan, (C) result in any payment that will be considered an "excess parachute
payment" within the meaning of Section 280G of the Code to any "disqualified individual" within the meaning of Section 280G of the Code or (D) limit or restrict the ability of
Parent or the Company to merge, amend or terminate any Benefit Plan. Neither the Company nor any Subsidiary has any obligation to provide, and no Benefit Plan provides, any Company Personnel with the
right to, a gross-up, indemnification, reimbursement or other payment for any excise or additional taxes, interest or penalties incurred pursuant to Section 409A or Section 4999 of the
Code.
(vi) Except
as would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect, neither the Company nor any of its Subsidiaries
has received written notice of any, and there are no, pending investigations by any Governmental Entity with respect to, or pending termination proceedings or other material claims (except claims for
benefits payable in the normal operation of the Benefit Plans), suits or proceedings against or involving or asserting any rights or claims to benefits under, any Benefit Plan or in respect of labor
or employment matters.
(vii) All
material contributions, premiums and benefit payments under or in connection with each Benefit Plan that are required to have been made by the Company or any of
its Subsidiaries in accordance with the terms of such Benefit Plan and applicable Laws have been timely made or, in cases where funding is not required, have been accrued to the extent required by
GAAP.
(viii) Section 3.01(l)(viii)
of the Company Letter lists all collective bargaining agreement or other similar agreements with a labor union, works council or similar
organization covering any current Company Personnel.
(ix) Since
January 1, 2015 through the date of this Agreement, (A) there have been and are no labor unions or works councils purporting to represent or
attempting to represent any employees employed by the Company or any of its Subsidiaries, nor is there any pending or threatened application for certification of a collective bargaining agent seeking
to represent any employees of the Company or any of its Subsidiaries or any pending union or works council representation election, (B) there has not been nor, to the knowledge of the Company,
is there threatened any labor strike, work stoppage, organized slowdown, picketing or concerted refusal to work overtime by, or lockout of, any employees of the Company or any of its Subsidiaries,
(C) the Company has not received written notice or threat of, and, to the knowledge of the Company, there are not pending any unfair labor practice charges against
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the
Company or its Subsidiaries before the National Labor Relations Board or any similar state, local or foreign Governmental Entity and (D) the Company has not received written notice or
threat of, and, to the knowledge of the Company, there are not pending, any suits, actions or other proceedings alleging violation of any applicable Laws pertaining to labor relations or employment
matters that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect, including any charge or complaint filed by any Company Personnel before the
Equal Employment Opportunity Commission or any similar state, local or foreign Governmental Entity responsible for the prevention of unlawful employment practices, and any lawsuit alleging violation
of applicable labor or employment Laws (including human rights Laws).
(m)
Taxes.
(i) For the purposes of this Agreement,
(A) "
Taxes
" shall include all (1) Federal, state and local and foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated or other tax of any kind whatsoever (including any escheat and unclaimed property
obligations) and any interest, penalties or additions imposed with respect thereto, whether or not disputed and (2) liability for the payment of any amounts of the types described in
clause (1) as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group and (3) liability for the payment of any amounts as a result of transferee
or successor liability with respect to the payment of any amounts of the types described in clause (1) or (2); (B) "
Taxing Authority
"
means any Governmental Entity exercising regulatory authority in respect of any Taxes; and (C) "
Tax Return
" means any return, declaration,
report, estimate, form, claim for refund, information return, statement or other document in each case relating to Taxes (including any related or supporting information with respect thereto, any
certificate, schedule or attachment thereto and any amendment thereof).
(ii) Except
for those matters that, individually or in the aggregate, are not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken
as a whole:
(A) all
Tax Returns required to be filed by the Company and each of its Subsidiaries have been timely filed (taking into account any extensions);
(B) all
such Tax Returns are true and correct in all respects;
(C) the
Company and each of its Subsidiaries has timely paid or withheld all Taxes required to be paid or withheld; and
(D) no
Liens (other than Permitted Liens) for Taxes exist, and no outstanding claims for Taxes have been asserted in writing against the Company or any of its Subsidiaries.
(iii) The
most recent financial statements in the Filed SEC Documents reflect an adequate reserve in accordance with GAAP for all Taxes payable by the Company and its
Subsidiaries (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items).
(iv) No
audit or other Proceeding with respect to material Taxes or Tax Returns of the Company or any of its Subsidiaries is currently in progress, and no deficiency for any
material amount of Tax has been asserted or assessed by a Taxing Authority against the Company or any of its Subsidiaries that has not been completely settled, paid or withdrawn.
(v) There
is no currently effective agreement extending or waiving the period of assessment or collection for any material Taxes. The relevant statute of limitations is
closed
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with
respect to all material Tax Returns of the Company and its Subsidiaries for all taxable years through March 31, 2013.
(vi) In
the five years prior to the date hereof, neither the Company nor any of its Subsidiaries (A) has been a member of an affiliated group (or similar state, local
or foreign filing group) other than a group consisting solely of the Company and any of its Subsidiaries or (B) has any material liability for the Taxes of any person other than the Company or
one of its Subsidiaries under U.S. Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law).
(vii) Neither
the Company nor any of its Subsidiaries is bound by an agreement or arrangement the primary purpose of which relates to Taxes (other than (A) such an
agreement or arrangement
exclusively between or among the Company and its Subsidiaries and (B) the Tax Matters Agreement dated as of February 9, 2015 between the Company (formerly known as Alliant
Techsystems Inc.) and Vista Outdoor Inc.).
(viii) To
the knowledge of the Company, all representations made by the Company in the letter dated February 9, 2015, to Hogan Lovells US LLP and Cravath,
Swaine & Moore LLP for the purposes of their respective tax opinions were true and correct in all respects as of such date and, to the Company's knowledge, there have been no subsequent
events, changes, facts or circumstance which have caused those representations not to be true and correct as of February 9, 2015. To the knowledge of the Company, there was no agreement,
understanding, or arrangement by one or more officers or directors acting on behalf of the Company, by "controlling shareholders" of the Company, or by another person or persons with the implicit or
explicit permission of one or more of such officers, directors, or "controlling shareholders," with Parent or with a person or persons with the implicit or explicit permission of Parent, nor were
there discussions of significant economic terms by one or more officers or directors acting on behalf of the Company, by "controlling shareholders" of the Company, or by another person or persons with
the implicit or explicit permission of one or more officers, directors, or "controlling shareholders," with Parent or with a person or persons with the implicit or explicit permission of Parent,
concerning Parent's acquisition of all or a significant portion of the Company during the period beginning on February 9, 2013 and ending on February 9, 2015. For purposes of this
paragraph, "controlling shareholder" shall have the meaning set forth in U.S. Treasury Regulation Section 1.355-7(h)(3). Neither the Company nor any of its Subsidiaries has been a "distributing
corporation" or a "controlled corporation" in a distribution intended to be governed in whole or in part by Section 355 of the Code (A) in the two years prior to the date hereof or
(B) as part of a "plan" or "series of related transactions" within the meaning of Section 355(e) of the Code in connection with the Merger.
(ix) Neither
the Company nor any of its Subsidiaries has "participated" in a "reportable transaction" within the meaning of U.S. Treasury Regulation Section 1.6011-4.
(x) Neither
the Company nor any of its Subsidiaries has been a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(xi) Neither
the Company nor any of its Subsidiaries owns any interest in any entity that is treated as a "passive foreign investment company" within the meaning of
Section 1297(a) of the Code.
(xii) Each
of the Company and its Subsidiaries has disclosed on its U.S. Federal income Tax Returns all positions taken therein that could give rise to a "substantial
understatement" within the meaning of Section 6662 of the Code.
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(n)
Properties.
(i) Each of the Company and its Subsidiaries has good and marketable title to, or in the case of
leased property and leased tangible assets has valid and enforceable leasehold interests in, all of its material properties and tangible assets, free and clear of all Liens, except for Permitted
Liens.
(ii) Section 3.01(n)(ii)
of the Company Letter sets forth a list, as of the date of this Agreement, of all material real property and material interests in real
property owned by the Company or any of its Subsidiaries (collectively, in each case together with all buildings, structures, improvements and fixtures thereon and all easements and rights of way
pertaining thereto or accruing to the benefit thereof and all other appurtenances and real property rights pertaining thereto, the "
Owned Real
Property
"). As of the date of this Agreement, (A) the Company or one of its Subsidiaries has good and insurable fee simple title to all Owned Real Property, in each case
free and clear of all Liens other than Permitted Liens and (B) there are no reversion rights, outstanding options or rights of first refusal in favor of any other person to purchase, lease,
occupy or otherwise utilize the Owned Real Property or any portion thereof or interest therein that would reasonably be expected to materially and adversely affect the use of such Owned Real Property.
There is no pending or, to the knowledge of the Company, threatened condemnation or eminent domain proceeding with respect to any Owned Real Property.
(iii) Section 3.01(n)(iii)
of the Company Letter sets forth a list as of the date of this Agreement of all material real property and material interests in real
property leased by the Company or any of its Subsidiaries (each such property, a "
Leased Real Property
").
(iv) With
respect to each Leased Real Property, (A) neither the Company nor any of its Subsidiaries has subleased, licensed or otherwise granted anyone the right to
use or occupy such Leased Real Property or any portion thereof and (B) neither the Company nor any of its Subsidiaries has collaterally assigned or granted any other Lien in any such leasehold
estate or any interest therein.
(v) Each
of the Company and its Subsidiaries is in compliance in all material respects with the terms of all leases of Leased Real Property to which it is a party and under
which it is in occupancy, and each such lease is a legal, valid and binding agreement of the Company or its Subsidiary, as the case may be, and, to the knowledge of the Company, of each other party
thereto, enforceable against the Company or such Subsidiary, as the case may be, and, to the knowledge of the Company, against the other party or parties thereto, in each case, in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency (including all Laws related to fraudulent transfers), reorganization, moratorium or similar Laws affecting creditors' rights
generally and subject to the effect of general principles of equity.
(o)
Intellectual Property.
(i) Section 3.01(o)(i) of the Company Letter sets forth a list, as of the date
of this Agreement, of all material Intellectual Property that is owned by the Company or any of its Subsidiaries (the "
Company Owned Intellectual
Property
") that is registered or subject to an application for registration.
(ii) (A)
The Company or one of its Subsidiaries has the exclusive title to all Company Owned Intellectual Property, free and clear of all Liens other than Permitted Liens.
All Company Owned Intellectual Property is subsisting and, to the knowledge of the Company, is valid and enforceable.
(B) The
Company or one of its Subsidiaries owns, or is licensed or otherwise permitted to use (in each case, free and clear of all Liens other than Permitted Liens) all
Intellectual Property used or held for use in the business of the Company and its
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Subsidiaries
and that is material to the business of the Company and its Subsidiaries (the "
Company Intellectual Property
").
(C) No
material claims are pending or, to the knowledge of the Company, have been asserted, in each case against the Company or any of its Subsidiaries by any person
(i) claiming that the Company or any of its Subsidiaries is infringing or has infringed any third party Intellectual Property or (ii) challenging the validity, ownership, patentability,
enforceability, ability to register or use by the Company or any of its Subsidiaries of any Intellectual Property (including actions before the United States Patent and Trademark Office or comparable
foreign governmental authorities). As of the date of this Agreement, to the knowledge of the Company, no person is infringing or misappropriating the rights of the Company or any of its Subsidiaries
with respect to any Company Intellectual Property.
(D) The
operation of the business of the Company and its Subsidiaries as currently conducted does not (1) to the knowledge of the Company, infringe on, misappropriate
or otherwise violate the rights of any person in respect of any material Intellectual Property or (2) violate the terms of any agreement pursuant to which the Company or any of its Subsidiaries
possesses the right to use any material Intellectual Property.
(E) Since
January 1, 2015, neither the Company nor any of its Subsidiaries has asserted or threatened in writing to assert in any court any claims of infringement or
other violations of its rights in or to the Company Owned Intellectual Property or Intellectual Property exclusively licensed by the Company.
(F) The
Company and its Subsidiaries have timely made all filings and payments with the appropriate foreign and domestic agencies required to maintain in subsistence all
Company Owned Intellectual Property that is registered or subject to an application for registration. Each of the Company and its Subsidiaries has taken commercially reasonable actions to maintain the
secrecy of all material Trade Secrets which constitute Company Owned Intellectual Property.
For
purposes of this Agreement, "
Intellectual Property
" means all trademarks, service marks, trade names, brand names, Internet domain
names, logos, certification marks, trade dress, publicity rights and other indications of origin (including any common law rights with respect to the foregoing), the goodwill associated with the
foregoing and registrations or applications for registration in any jurisdiction, foreign or domestic, of the foregoing and any extensions, modifications or renewals thereof; designs, industrial
models, methods of doing business, all patents, applications for patents (including divisions, continuations, continuations in part and renewal applications), and any renewals, extensions or reissues
thereof, in any jurisdiction, foreign or domestic; all nonpublic information, processes, procedures, product specifications, research records, test information, market surveys, marketing plans and
techniques, formulae, recipes, trade secrets, inventions, know-how, customer lists, databases, data rights and other confidential information (collectively, "
Trade
Secrets
") and rights in any jurisdiction, foreign or domestic, to limit the use or disclosure thereof by any person; all writings and other published or unpublished works of
authorship, whether copyrightable or not (including computer software, source code and object code versions thereof and all related documentation), in any jurisdiction, foreign or domestic; all
copyrights (including any common law rights), any registrations or applications for registration thereof in any jurisdiction, foreign or domestic, and any extensions, modifications or renewals
thereof; and all similar intellectual property or proprietary rights.
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(p)
Insurance.
The Company or its Subsidiaries are either self-insured or maintain
policies of fire and casualty, liability and other forms of insurance coverage in each case in such amounts, with such deductibles and against such risks and losses as are customary in all material
respects for businesses in the Company's and its Subsidiaries' businesses. All such insurance policies that are material to the Company or any of its Subsidiaries are in full force and effect and no
written notice of cancelation or termination has been received by the Company or any of its Subsidiaries with respect to any such policy. All premiums due and payable under any material insurance
policies have been paid.
(q)
Related Party Transactions.
Since January 1, 2017 there have not been any transactions, agreements,
arrangements or understandings between the Company or any of its Subsidiaries, on the one hand, and the Company's affiliates (other than wholly owned Subsidiaries of the Company) or other persons, on
the other hand, that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act and that are not so disclosed.
(r)
Unlawful Payments and Trade Practices.
(i) Since January 1, 2010, neither the Company nor any of its
Subsidiaries nor the Controlled Affiliate, nor, to the knowledge of the Company, any Representative of the Company or any of its Subsidiaries or the Controlled Affiliate, nor, to the knowledge of the
Company, any other person acting for or on behalf of, or purporting to act for or on behalf of, the Company or any of its Subsidiaries or the Controlled Affiliate:
(A) has
directly or indirectly (1) made, offered or promised to make, or authorized or ratified or facilitated the making of, any payment to any person in violation
of the FCPA or any other Law that prohibits corruption, bribery or money laundering, (2) given, offered or promised to give, or authorized or ratified or facilitated the giving of, any gift,
political or charitable contribution or other thing of value or advantage to any person in violation of the FCPA or any other Law that prohibits corruption, bribery or money laundering,
(3) requested or received any payment, gift, political or charitable contribution or other thing of value or advantage in violation of the FCPA or any other Law that prohibits corruption,
bribery or money laundering, (4) violated any provision of the FCPA or any other Law that prohibits corruption, bribery or money laundering or (5) violated any trade sanctions or trade
control regulations, whether administered by the Office of Foreign Assets Control of the U.S. Treasury Department or otherwise; or
(B) has
been subject to any actual, pending or, to the knowledge of the Company, threatened or reasonably anticipated civil, criminal or administrative Proceeding, or made
any voluntary disclosures to any Governmental Entity, with respect to conduct within the scope of subsection (A) above.
(ii) Since
January 1, 2015, there have been no false or fictitious entries made in the books or records of the Company or any of its Subsidiaries relating to any
secret or unrecorded fund or any unlawful payment, gift, political or charitable contribution or other thing of value or advantage and neither the Company nor any of its Subsidiaries has established
or maintained a secret or unrecorded fund.
(iii) The
Company, its Subsidiaries and the Controlled Affiliate have in place policies, procedures and controls that are reasonably designed to promote and ensure
compliance with the FCPA and other applicable anti-bribery, anti-corruption and anti-money laundering Laws in each jurisdiction in which the Company or any of its Subsidiaries or the Controlled
Affiliate do business and have maintained such policies, procedures and controls in force.
(iv) Since
January 1, 2015, to the knowledge of the Company, (A) all imports, exports, re-exports, sales or transfers of products, services or Intellectual
Property or related technical information of the Company and its affiliates have been effected in all material respects in
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accordance
with all applicable export control, anti-terrorism and anti-boycott Laws and (B) all products shipped by the Company and its affiliates have been accurately marked, labeled, licensed
and transported in all material respects in accordance with all applicable export control, anti-terrorism and anti-boycott Laws.
(v) For
the avoidance of doubt, any reference to "other thing of value" in this Section 3.01(r) includes meals, entertainment, travel and lodging. For purposes of
this Agreement, the "
FCPA
" means the Foreign Corrupt Practices Act of 1977, as amended, and any rules, regulations and guidance promulgated thereunder.
(s)
Government Contracts.
(i) Since January 1, 2015, the representations and certifications made by the
Company, its Subsidiaries and the Controlled Affiliate to the applicable Governmental Entity with respect to any Government Contract or Government Bid were, to the Company's knowledge, accurate in all
material respects as of their effective dates, and the Company and its Subsidiaries and, to the Company's knowledge, the Controlled Affiliate have complied in all material respects with all such
representations and certifications. Since January 1, 2015, neither the Company nor any of its Subsidiaries nor, to the Company's knowledge, the Controlled Affiliate, has knowingly,
intentionally or with reckless disregard made any materially untrue representation or certification to any Governmental Entity with respect to any Government Contract or Government Bid.
(ii) (A)
Neither the Company nor any of its Subsidiaries has received written notice of any currently pending or, to the knowledge of the Company, threatened material
Proceeding, and, to the knowledge of the Company, no circumstances exist that would reasonably be expected to give rise to any material Proceeding, brought by any Governmental Entity, prime
contractor, subcontractor or vendor against the Company or any of its Subsidiaries relating to performance under any Government Contract. Since January 1, 2015, neither the Company nor any of
its Subsidiaries has received a notice of termination for convenience, a notice of termination for default, a material cure notice or a material show cause notice pertaining to any material Government
Contract.
(B) Since
January 1, 2015, neither the Company nor any of its Subsidiaries has received written notice of any pending or, to the knowledge of the Company, threatened
Proceeding, and, to the knowledge of the Company, no circumstances exist that would reasonably be expected to give rise to any Proceeding, brought by any Governmental Entity, prime contractor,
subcontractor or vendor against the Company or any of its Subsidiaries relating to any Government Contract or Government Bid that involves allegations of a material violation of the Federal False
Claims Act or any similar statute, a material violation of the Truth in Negotiations Act, or any fraud, bribery, falsification or destruction of records, making false statements or any similar action.
(iii) Since
January 1, 2015, neither the Company nor any of its Subsidiaries has made, nor, to the knowledge of the Company, is the Company or any of its Subsidiaries
required to make, any material mandatory disclosure pursuant to the FAR mandatory disclosure provisions (FAR 9.406-22(b)(1)(vi), 9.407-2(a)(8) & 52.203-13) or the International Traffic in Arms
Regulations to a Governmental Entity in connection with any Government Contract or Government Bid.
(iv) (A)
The government approved systems (including accounting, property, EVMS and billing) of the Company and its Subsidiaries with respect to material Government Contracts
and material Government Bids are, and since January 1, 2015 have been, in compliance with all applicable Laws, except for such noncompliance that, individually or in the aggregate, is not and
would not reasonably be expected to be material and adverse to the Company and its Subsidiaries taken as a whole, and have been approved, where applicable, by the U.S.
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government's
Defense Contract Audit Agency or Defense Contract Management Agency. Since January 1, 2015, (1) no money due to the Company or any of its Subsidiaries under any material
Government Contract or material Government Bid has been withheld or offset, nor has any written claim been made to withhold or offset money due to the Company or any of its Subsidiaries thereunder,
other than any such withholding or offset that does not exceed $25,000,000 per Government Contract or Government Bid, and (2) subject to applicable rate approvals, the Company and its
Subsidiaries, as applicable, are entitled to all progress payments received with respect to each material Government Contract or material Government Bid. No Government Contract has an estimate at
completion or other requirement or condition that would reasonably be expected to result in a material liability or other significant financial exposure to the Company or any of its Subsidiaries,
other than any such liabilities or exposures that (1) are reflected in the financial plan of the Company set forth in Section 3.01(s)(iv)(A) of the Company Letter or (2) do not
exceed $25,000,000 in the aggregate.
(B) With
respect to each material Government Contract and Government Bid, since January 1, 2015, (1) neither the Company nor any of its Subsidiaries has
received written notice of any finding of fraud or any claim of any material liability by a Governmental Entity, prime contractor or subcontractor as a result of defective pricing, labor mischarging
or improper payments on the part of the Company or any of its Subsidiaries and (2) no cost incurred by the Company or any of its Subsidiaries has been disallowed, nor is any such cost the
subject of any investigation, in any amount which is material to the Company and its Subsidiaries, taken as a whole, other than pursuant to routine audit.
(v) Neither
the Company nor any of its Subsidiaries nor the Controlled Affiliate nor any of their respective principals, as defined by FAR 52.209-5 or other applicable
agency regulations, has been (A) debarred, suspended or excluded from participation in, or the award of, Government Contracts, Government Bids or doing business with any Governmental Entity,
(B) the subject of a finding of non-compliance, nonresponsibility or ineligibility for government contracting, (C) proposed for, or been subject to, suspension, debarment or exclusion
Proceedings or threatened in writing with suspension, debarment or exclusion Proceedings, including requests to show cause or (D) for any reason listed on the List of Parties Excluded from
Federal Procurement and Nonprocurement Programs. To the knowledge of the Company, no circumstances exist that would reasonably be expected to warrant the institution of any such debarment, suspension
or exclusion Proceeding or that would reasonably be expected to result in debarment, suspension or exclusion in any U.S. or foreign jurisdiction.
(vi) No
information that is required to be disclosed in any section of the Company Letter has not been so disclosed by reason of any prohibition on the disclosure of
classified information. The Company and its Subsidiaries possess all material facility security clearances and material personnel security clearances necessary to conduct the business of the Company
and its Subsidiaries as it is currently being conducted in all material respects. The Company and its Subsidiaries are in compliance in all material respects with the requirements applicable to such
facility security clearances and personnel security clearances, including those set forth in the National Industrial Security Program Operating Manual
("
NISPOM
"), the NISPOM Supplement, all applicable Director of Central Intelligence Directives and any Contracts, including the provisions of all
applicable DD254 forms and any requirements therein relating to the provision of notice with respect to this Agreement. Neither the Company nor any of its Subsidiaries has received written notice of,
and, to the knowledge of the Company, there is no, proposed or threatened termination of any facility security clearance or personnel security clearance.
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(t)
Organizational and Personal Conflicts.
To the knowledge of the Company, there are no activities or
relationships between, on the one hand, the Company or any of its Subsidiaries and, on the other hand, Parent, that would reasonably be expected to result in an organizational or personal conflict of
interest, as defined by FAR, as a result of this Agreement or the consummation of the Merger and the other transactions contemplated by this Agreement. The Company and its Subsidiaries are in
compliance with all organizational or personal conflict of interest (as defined by FAR) mitigation plans entered into by the Company or any of its Subsidiaries in connection with any active program or
proposal except for any noncompliance that, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. The Company and its
Subsidiaries have not received any written notice of any failure to comply with such plans or the existence of any prohibited organizational or personal conflict of interest in connection with any
Government Contract or Government Bid that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
(u)
State Takeover Statutes.
Assuming the accuracy of the representations and warranties in
Section 3.02(e), the approval of this Agreement and the Merger by the Board of Directors of the Company referred to in Section 3.01(d) constitutes the only action necessary to render
inapplicable to this Agreement, the Merger, the other transactions contemplated by this Agreement and compliance with the terms of this Agreement, the restrictions on "business combinations" (as
defined in Section 203 of the DGCL) set forth in Section 203 of the DGCL to the extent, if any, such restrictions would otherwise be applicable to this Agreement, the Merger, the other
transactions contemplated by this Agreement or compliance with the terms of this Agreement. No other state takeover or similar statute or regulation, and, assuming the accuracy of the representations
and warranties in Section 3.02(e), no analogous provision in the Company Certificate or the Company Bylaws, is applicable to this Agreement, the Merger, the other transactions contemplated by
this Agreement or compliance with the terms of this Agreement.
(v)
Voting Requirements.
The affirmative vote at the Stockholders Meeting or any adjournment or postponement
thereof of the holders of a majority of the outstanding shares of Company Common Stock in favor of adopting this Agreement (the "
Stockholder Approval
")
is the only vote of the holders of any class or series of the Company's capital stock necessary to approve or adopt this Agreement or to consummate the Merger and the other transactions contemplated
by this Agreement.
(w)
Brokers; Schedule of Fees and Expenses.
No broker, investment banker, financial advisor or other person,
other than Citigroup Global Markets Inc. ("
Citigroup
"), the fees and expenses of which will be paid by the Company or one or more of its
Subsidiaries, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the Merger and the other transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its Subsidiaries. The Company has delivered to Parent true and complete copies of all agreements under which such fees or
commissions are payable and all indemnification and other agreements related to the engagement of the persons to whom such fees are payable.
(x)
Opinion of Financial Advisor.
The Board of Directors of the Company has received an opinion of Citigroup to
the effect that, as of the date of such opinion, and based upon and subject to the qualifications, assumptions and other matters set forth therein, the Merger Consideration to be received by the
stockholders of the Company (other than holders of (i) shares to be canceled in accordance with Section 2.01(b) and (ii) Appraisal Shares) pursuant to this Agreement is fair to
such stockholders from a financial point of view, a copy of which opinion will be delivered to Parent, for informational purposes only, as promptly as reasonably practicable upon receipt thereof by
the Company.
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(y)
Disclaimer.
Except as set forth in this Section 3.01, none of the Company, its Subsidiaries or any of
their respective affiliates or Representatives makes or has made any other representation or warranty,
express or implied, at law or in equity, in respect of the Company, its Subsidiaries or their respective affiliates. Any such other representation or warranty is hereby expressly disclaimed. In
particular, without limiting the foregoing disclaimer, except for the representations and warranties made by Company in this Section 3.01, none of the Company, its Subsidiaries or any of their
respective affiliates or Representatives makes or has made any representation or warranty to Parent or any of its affiliates or Representatives with respect to (i) any financial projection,
forecast, estimate or budget of future results or future financial condition relating to the Company, any of its Subsidiaries or their respective businesses, or (ii) any oral or written
information presented to Parent or any of its affiliates or Representatives in the course of their due diligence investigation of the Company, any of its Subsidiaries or their respective businesses,
the negotiation of this Agreement or in the course of the transactions contemplated hereby.
SECTION 3.02.
Representations and Warranties of Parent and Sub.
Parent and Sub represent and
warrant to the Company as follows:
(a)
Organization.
Each of Parent and Sub is a corporation duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its organization and has all requisite corporate power and authority to enable it to own, lease or otherwise hold its properties and assets and to carry on its
business as currently conducted.
(b)
Authority; Noncontravention.
Each of Parent and Sub has the requisite corporate power and authority to
execute and deliver this Agreement, to consummate the Merger and the other transactions contemplated by this Agreement and to comply with the provisions of this Agreement (subject, in the case of the
Merger, to the adoption of this Agreement by Parent, as the sole stockholder of Sub). The execution and delivery of this Agreement by Parent and Sub, the consummation by Parent and Sub of the Merger
and the other transactions contemplated by this Agreement and the compliance by Parent and Sub with the provisions of this Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub, and no other corporate proceedings on the part of Parent or Sub are necessary to authorize this Agreement, to comply with the terms of this Agreement or to consummate the
Merger and the other transactions contemplated by this Agreement (subject, in the case of the Merger, to the adoption of this Agreement by Parent, as the sole stockholder of Sub). This Agreement has
been duly executed and delivered by Parent and Sub, as applicable, and, assuming the due execution and delivery of this Agreement by the Company, constitutes a valid and binding obligation of Parent
and Sub, as applicable, enforceable against Parent and Sub, as applicable, in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including all Laws related to
fraudulent transfers), reorganization, moratorium or similar Laws affecting creditors' rights generally and subject to the effect of general principles of equity. The execution and delivery by Parent
and Sub of this Agreement, the consummation of the Merger and the other transactions contemplated by this Agreement and compliance by Parent and Sub with the provisions of this Agreement do not and
will not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, any provision of (i) the certificate of incorporation or
bylaws (or similar organizational documents) of Parent or Sub, (ii) any Contract or Permit to or by which Parent or Sub is a party or bound or to or by which their respective properties or
assets are subject or bound or otherwise under which Parent or Sub has rights or benefits or (iii) subject to the governmental filings and other matters referred to in the following sentence,
any Law applicable to Parent or Sub or their respective properties or assets (assuming receipt of the Stockholder Approval
and the adoption of this Agreement by Parent, as the sole stockholder of Sub), other than any such conflicts, violations, breaches or defaults that, individually
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or
in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect. No Consent of or from, or registration, declaration or filing with, or notice to, any Governmental
Entity is required by or with respect to Parent or Sub in connection with the execution and delivery of this Agreement by Parent and Sub, the consummation by Parent and Sub of the Merger and the other
transactions contemplated by this Agreement or the compliance by Parent and Sub with the provisions of this Agreement, except for (v) the filing of a premerger notification and report form and
the expiration or termination of the waiting period under the HSR Act and the filings and receipt, termination or expiration, as applicable, of such other approvals or waiting periods required under
any other applicable competition, merger control, antitrust or similar Law, (w) the filing by the Company with the SEC of the Proxy Statement and such reports under the Exchange Act as may be
required in connection with this Agreement and the Merger and the other transactions contemplated by this Agreement, (x) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware and appropriate documents with the relevant authorities of other jurisdictions in which the Company or any of its Subsidiaries is qualified to do business, (y) any filings
required under the rules and regulations of the New York Stock Exchange and (z) such other Consents the failure of which to be obtained or made, individually or in the aggregate, would not
reasonably be expected to have a Parent Material Adverse Effect.
(c)
Information Supplied.
None of the information supplied or to be supplied by Parent or Sub specifically for
inclusion or incorporation by reference in the Proxy Statement will, at the time it is filed with the SEC, at the date the Proxy Statement is first mailed to the Company's stockholders, at the time of
the Stockholders Meeting or at the time of any amendment or supplement thereof, as amended or supplemented at such date or time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that, for the
avoidance of doubt, no representation is made by Parent or Sub with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or
incorporation by reference in the Proxy Statement.
(d)
Interim Operations of Sub.
Sub was formed solely for the purpose of engaging in the Merger and the other
transactions contemplated by this Agreement and has engaged in no business other than in connection with the Merger and the other transactions contemplated by this Agreement.
(e)
No Ownership of Company Capital Stock.
Neither Parent nor Sub, nor any of their respective Subsidiaries (nor
any of their respective "Associates" as defined in Section 203 of the DGCL), is or has been during the past three years an "interested stockholder" of the Company as defined in
Section 203 of the DGCL. Neither Parent nor Sub nor any of their respective Subsidiaries is, nor during the two-year period immediately prior to the date of this Agreement has been, the
beneficial owner of Company Common Stock representing 10% or more of the outstanding shares of Company Common Stock.
(f)
Financing.
Parent will have on the Closing Date sufficient funds available (through credit arrangements or
otherwise) to pay the aggregate Merger Consideration and all related fees and expenses required to be paid by Parent and the Surviving Corporation. Parent has delivered to the Company true and
complete copies of (i) an executed commitment letter, from Parent's Financing Sources (such commitment letter or any replacement commitment letter as contemplated by Section 5.07(a), the
"
Commitment Letter
") pursuant to which Parent's Financing Sources have agreed, subject to the terms and conditions therein, to provide the debt
financing for the Merger and the other transactions contemplated by this Agreement (the debt financing pursuant to the Commitment Letter or otherwise shall be referred to herein as the
"
Financing
"), and (ii) any fee letter associated with the Commitment Letter (the "
Fee Letter
")
(it being understood that any such
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fee
letter has been redacted as required by the counterparties thereto and to omit fee amounts and the terms of the "market flex" items in a customary manner). As of the date of this Agreement, the
Commitment Letter is in full force and effect and is the legal, valid, binding and enforceable obligation of Parent, and, to the knowledge of Parent, each of the other parties thereto, subject to the
effect of any applicable bankruptcy, insolvency (including all Laws related to fraudulent transfers), reorganization, moratorium or similar Laws affecting creditors' rights generally and subject to
the effect of general principles of equity. The Commitment Letter has not been amended or modified on or prior to the date of this Agreement and as of the date of this Agreement, no such amendment or
modification is contemplated by Parent (except as described in the Fee Letter), and as of the date of this Agreement, the respective commitments contained in the Commitment Letter have not been
withdrawn, terminated or rescinded in any respect. As of the date of this Agreement, no event has occurred or circumstance exists which, with or without notice, lapse of time or both, would reasonably
be expected to constitute a default or breach on the part of Parent or, to the knowledge of Parent, any of the other parties thereto, under the Commitment Letter. As of the date of this Agreement,
Parent has no reason to believe that any of the conditions to the Financing contemplated in the Commitment Letter will not be satisfied or that the Financing will not be made available to Parent on
the Closing Date. As of the date of this Agreement, there are no side letters or other contracts directly related to the Financing to which Parent or any of its Subsidiaries is a party other than the
Commitment Letter and the Fee Letter and any related customary engagement letters and confidentiality agreements. As of the date of this Agreement, Parent has fully paid, or caused to be fully paid,
any and all commitment
or other fees which are due and payable on or prior to the date of this Agreement pursuant to the terms of the Commitment Letter and the Fee Letter.
(g)
Investigation by Parent.
Parent has conducted its own independent review and analysis of the businesses,
assets, condition, operations and prospects of the Company, its Subsidiaries and their respective businesses. Parent acknowledges that, except for the representations and warranties of the Company
expressly set forth in Section 3.01, none of the Company nor any of its Representatives makes any representation or warranty, either express or implied, as to the accuracy or completeness of
any of the information provided or made available to Parent or any of its Representatives. Without limiting the generality of the foregoing, except for the representations and warranties made by the
Company in Section 3.01, none of the Company nor any of its Representatives or any other person has made a representation or warranty to Parent with respect to (i) any projections,
estimates or budgets of future results or future financial condition relating to the Company, any of its Subsidiaries or their respective businesses or (ii) any material, documents or
information relating to the Company, its Subsidiaries or their respective businesses made available to Parent or its Representatives in any "data room" or otherwise.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01.
Conduct of Business.
(a)
Conduct of Business by the
Company.
During the period from the date of this Agreement to the Effective
Time, except with the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed) or as specifically contemplated by this Agreement, required by
applicable Law or as set forth in Section 4.01(a) of the Company Letter, the Company shall, and shall cause each of its Subsidiaries to, carry on their respective businesses in the ordinary
course consistent with past practice and use reasonable best efforts to comply with all applicable Laws and, to the extent consistent therewith, use reasonable best efforts to keep available the
services of their current officers and other employees, to preserve their assets, their relationships with material customers, suppliers, distributors and others having material business dealings with
them and to maintain their material rights and material Permits. Without in any
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way
limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, except with the prior written consent of Parent (which consent shall not be
unreasonably withheld, conditioned or delayed), as specifically contemplated by this Agreement, as required by applicable Law or as set forth in Section 4.01(a) of the Company Letter (with
specific reference to the subsection of this Section 4.01 to which the information stated in such disclosure relates), the Company shall not, and shall not permit any of its Subsidiaries to:
(i) (A)
declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property or any combination thereof) in respect of, any of
its capital stock or other equity or voting interests, other than (1) dividends by a direct or indirect wholly owned Subsidiary of the Company to its parent, and (2) regular quarterly
cash dividends on Company Common Stock not exceeding $0.32 per share of Company Common Stock with declaration, record and payment dates consistent with past practice and in accordance with the
Company's current dividend schedule and policy, (B) split, combine, subdivide or reclassify any of its capital stock or other equity or voting interests, or securities convertible into or
exchangeable or exercisable for capital stock or other equity or voting interests, or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for, shares
of its capital stock or other equity or voting interests, or (C) purchase, redeem or otherwise acquire any shares of capital stock, other equity or voting interests or any other securities of
the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for capital stock or other equity or voting interests or any options, restricted shares, warrants, calls or
rights to acquire any such shares or other securities (including any Company Equity-Based Awards, except pursuant to the forfeiture conditions of such Company Equity-Based Awards or the cashless
exercise or Tax withholding provisions of or authorizations related to such Company Equity-Based Awards as in effect as of the date of this Agreement);
(ii) issue,
deliver, sell, grant, pledge or otherwise encumber or subject to any Lien any (A) shares of its capital stock, other equity or voting interests or Equity
Equivalents (other than the issuance of shares of Company Common Stock upon the exercise or settlement of Company Equity-Based Awards outstanding as of the date of this Agreement pursuant to the
existing terms thereof), or (B) securities convertible into, or exchangeable or exercisable for, or any options, warrants, calls or rights to acquire, any such stock, interests or Equity
Equivalents;
(iii) amend
its certificate of incorporation or bylaws (or similar organizational documents);
(iv) acquire
or agree to acquire, in a single transaction or a series of related transactions, (A) by merging or consolidating with, or by purchasing all or a
substantial portion of the assets of, or by purchasing all or a substantial equity or voting interest in, or by any other manner, any business or person or division thereof or (B) any other
assets other than (1) capital expenditures, which are subject to the limitations of clause (vii) below, (2) purchases of raw materials, supplies, components, subassemblies or
similar assets in the ordinary course of business consistent with past practice, and (3) other assets if the amount of
consideration paid or transferred by the Company or any of its Subsidiaries would exceed $15,000,000 in the aggregate;
(v) sell,
lease, license, sell and lease back, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its material properties or assets
(including any shares of capital stock, equity or voting interests or other rights, instruments or securities), except sales of inventory or used equipment in the ordinary course of business
consistent with past practice and except for Permitted Liens;
(vi) (A)
repurchase, prepay, redeem, defease, assume or incur any indebtedness, including by way of a guarantee or an issuance or sale of debt securities, or issue and sell
options, warrants, calls or other rights to acquire any debt securities of the Company or any of its Subsidiaries, enter into any "keep well" or other Contract to maintain any financial statement or
similar condition of
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another
person or enter into any arrangement having the economic effect of any of the foregoing, other than (1) the incurrence of borrowings under the Company's revolving credit facility
(including letters of credit) as in effect on the date of this Agreement in the ordinary course of business consistent with past practice and (2) other indebtedness in the ordinary course of
business not in excess of $5,000,000 at any one time outstanding or (B) make any loans, advances or capital contributions to, or investments in, any person, other than the Company or any direct
or indirect wholly owned Subsidiary of the Company, in the case of each of clauses (A) and (B), other than extensions of trade credit in the ordinary course of business consistent with past
practice;
(vii) incur
or commit to incur any capital expenditures, or any obligations or liabilities in connection therewith, other than (A) in accordance with the Company's
discretionary investments plan for 2017 and 2018 set forth in Section 4.01(a)(vii) of the Company Letter or (B) any increases in such discretionary investments plan that individually are
not in excess of $5,000,000 and in the aggregate are not in excess of $10,000,000;
(viii) pay,
discharge, settle or satisfy any claims (including any claims of stockholders and any stockholder litigation relating to this Agreement, the Merger or any other
transaction contemplated by this Agreement or otherwise), liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction in the ordinary course of business consistent with past practice, or as required by their terms on the date
of this Agreement, of claims, liabilities or obligations reserved against in the Baseline Financials (for amounts not in excess of such reserves) or incurred since the date of such financial
statements in the ordinary course of business consistent with past practice, or for an out-of-pocket amount in excess of $5,000,000 individually, in each case, the payment, discharge, settlement or
satisfaction of which does not include any material obligation (other than the payment of money) to be performed by the Company or its Subsidiaries following the Closing Date;
(ix) enter
into any material lease or sublease of real property (whether as a lessor, sublessor, lessee or sublessee), or modify or amend in any material respect, or
exercise any right to renew, any material lease or sublease of real property or acquire any material interest in real property, in each case, for or involving a lease or sublease with annual lease
payments in excess of $5,000,000;
(x) except
as required by the terms of a Benefit Plan as in effect on the date of this Agreement, as required by applicable Law, as required to ensure that any Benefit Plan
as in effect on the date of this Agreement is not then out of compliance with applicable Law, or as specifically required pursuant to this Agreement, (A) adopt, establish, enter into,
terminate, amend or modify any Benefit Plan, (B) increase the compensation or benefits of any Company Personnel, (C) grant or amend any award under any Benefit Plan (including the grant
or amendment of Company Equity-Based Awards), (D) grant or pay any severance, separation, change in control, termination, retention or similar compensation or benefits to, or increase in any
manner the severance, separation, change in control, termination, retention or similar compensation or benefits of, any Company Personnel, (E) enter into any trust, annuity or insurance
Contract or similar agreement or take any other action to fund or in any other way secure the payment of compensation or benefits under any Benefit Plan, (F) take any action to accelerate the
time of payment or vesting of any compensation, benefits or funding obligations under any Benefit Plan or otherwise or (G) make any material determination under any Benefit Plan that is
inconsistent with the ordinary course of business or past practice;
(xi) form
any direct or indirect Subsidiary of the Company;
(xii) adopt,
amend or enter into any collective bargaining agreement or other labor union Contract applicable to Company Personnel except in the ordinary course of business
consistent with past practice;
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(xiii) make
any change in any financial or Tax accounting principle, method or practice, other than as required by GAAP or applicable Law;
(xiv) make
any material Tax election inconsistent with past practice, settle or compromise any material Tax liability or refund, amend any material Tax Return, extend or
waive the period of assessment or collection for any material Taxes or enter into any material agreement or arrangement the primary purpose of which relates to Taxes;
(xv) abandon
or permit to lapse any of the material Intellectual Property of the Company or its Subsidiaries, except in the ordinary course of business consistent with past
practice;
(xvi) (A)
enter into, extend or renew any Contract or amendment thereof which, if executed prior to the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.01(i)(i), (ii), (v), (vi), (vii), (ix)(2), (x) or (xii) or (B) modify or amend in any material respect any Specified Contract (other than
modifications or amendments to Significant Program Contracts in the ordinary
course of business consistent with past practice, which modifications or amendments would not have a material and adverse impact on the financial plan of the Company set forth in
Section 3.01(s)(iv)(A) of the Company Letter) or (C) accelerate, terminate or cancel, any Specified Contract;
(xvii) incur
or commit to incur any expenditures in respect of independent research and development of products, systems or services other than in an amount such that the
indirect rates do not exceed the forward pricing rate proposal or agreement currently in place with the applicable Governmental Entity;
(xviii) amend,
modify or waive any of the Company's existing takeover defenses or take any action to render any state takeover or similar statute inapplicable to any
transaction other than the Merger;
(xix) enter
into any new line of business outside of the businesses of the Company and its Subsidiaries as of the date of this Agreement;
(xx) adopt
a plan of complete or partial liquidation or resolutions providing for the dissolution, restructuring, recapitalization or other reorganization of the Company or
dissolve or liquidate any material Subsidiary of the Company;
(xxi) enter
into or amend any Contract or take any other action if such Contract, amendment of a Contract or action would reasonably be expected to prevent or materially
impede, interfere with, hinder or delay the consummation of the transactions contemplated by this Agreement; or
(xxii) authorize
any of, or commit, resolve or agree to take any of, the foregoing actions.
SECTION 4.02.
No Solicitation.
(a) The Company (i) shall not, and
shall cause its Subsidiaries not to, and shall not authorize or permit its or their Representatives to, directly
or indirectly, (A) solicit, initiate or knowingly encourage, or take any other action to knowingly facilitate, any Takeover Proposal or any inquiries or the making of any proposal that would
reasonably be expected to result in or lead to a Takeover Proposal or (B) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person
(or any Representative thereof) any information with respect to or in connection with, or otherwise knowingly cooperate with any person (or any Representative thereof) with respect to, any Takeover
Proposal or any inquiries or proposals that would reasonably be expected to result in or lead to a Takeover Proposal, (ii) shall and shall cause its Subsidiaries and its and their respective
Representatives to immediately cease and cause to be terminated all existing activities, discussions and negotiations with any person conducted heretofore with respect to any Takeover Proposal or any
inquiries or proposals that would reasonably be expected to result in or lead to a Takeover Proposal and (iii) shall promptly, and in any event within two days following the date of this
Agreement, request, and shall use its commercially reasonable efforts to
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cause,
the prompt return or written acknowledgment of destruction of all confidential information previously furnished to any person within 24 months prior to the date of this Agreement for the
purposes of evaluating a possible Takeover Proposal to the extent that the Company is entitled to have such documents returned or destroyed. Notwithstanding the foregoing, the Company and its
Subsidiaries shall be permitted to release any person from or waive any standstill provision or similar provision with respect to any capital stock of the Company or any of its Subsidiaries in any
agreement to which the Company or any of its Subsidiaries is a party solely to the extent that (x) such provision would otherwise prohibit the counterparty thereto from making a confidential
Takeover Proposal directly to the Board of Directors of the Company in accordance with this Section 4.02 and (y) the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that the failure to take such action would be inconsistent with its fiduciary duties to the stockholders of the Company under applicable Law. Except to the extent
otherwise permitted by the foregoing sentence, the Company shall, and shall cause its Subsidiaries to, enforce the standstill provisions of any such agreement. Notwithstanding anything in this
Section 4.02 to the contrary, at any time prior to obtaining the Stockholder Approval, in response to a bona fide written unsolicited Takeover Proposal received after the execution of this
Agreement which did not result from a material breach of this Section 4.02, (x) the Company and its Representatives may contact the person proposing such Takeover Proposal or the
Representatives of such person solely to clarify the terms and conditions thereof and (y) if the Board of Directors of the Company determines in good faith, after consultation with its outside
legal counsel and Citigroup or another financial advisor of nationally recognized reputation, that such Takeover Proposal constitutes or would reasonably be expected to lead to a Superior Proposal and
that the failure to take such action would be inconsistent with its fiduciary duties to the stockholders of the Company under applicable Law, the Company may, and may permit and authorize its
Subsidiaries and its Representatives and its Subsidiaries' Representatives to, in each case subject to compliance with Section 4.02(c) and the other provisions of this Agreement,
(1) furnish information with respect to the Company and its Subsidiaries to the person making such Takeover Proposal (and its Representatives) pursuant to a confidentiality agreement which
contains terms that are no less restrictive of such person than those contained in the Confidentiality Agreement (an "
Acceptable Confidentiality
Agreement
");
provided
that all such information had been provided, or is concurrently provided, to Parent, and
(2) participate in discussions or negotiations with, and only with, the person making such Takeover Proposal (and its Representatives) regarding such Takeover Proposal. Without limiting the
generality of the foregoing, it is understood that any violation of the restrictions set forth in this Section 4.02(a) by any Subsidiary of the Company or any Representative of the Company or
any of its Subsidiaries shall be deemed to be a breach of this Section 4.02(a) by the Company.
For
purposes of this Agreement, the term "
Takeover Proposal
" means any proposal or offer from any person or "group" (as defined in
Section 13(d) of the Exchange Act) (other than Parent or any of its Subsidiaries) providing for, in one transaction or a series of transactions, any (I) merger, consolidation, binding
share exchange, business combination, recapitalization, liquidation, dissolution or other similar transaction involving the Company or (II) direct or indirect acquisition, including by way of
any merger, consolidation, tender offer, exchange offer, stock acquisition, asset acquisition, binding share exchange, business combination, recapitalization, liquidation, dissolution, joint venture,
license agreement or similar transaction, of (A) assets or businesses that constitute or represent 20% or more of the total revenue, net income, EBITDA (earnings before interest expense, taxes,
depreciation and amortization)
or assets of the Company and its Subsidiaries, taken as a whole, or (B) 20% or more of the outstanding shares of Company Common Stock or of any class of capital stock of, or other equity or
voting interests in, one or more of the Subsidiaries of the Company which, in the aggregate, directly or indirectly hold the assets or businesses referred to in clause (A) above.
For
purposes of this Agreement, the term "
Superior Proposal
" means any binding bona fide unsolicited written offer which did not result
from a material breach of this Section 4.02(a) made by any person (other than Parent or any of its Subsidiaries) that, if consummated, would result in such
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person
(or, in the case of a direct merger between such person and the Company, the stockholders of such person) acquiring, directly or indirectly, more than 50% of the Company Common Stock or the
outstanding voting power of the Company or all or substantially all the assets of the Company and its Subsidiaries, taken as a whole, and which offer, in the good faith determination of the Board of
Directors of the Company (after consultation with its outside legal counsel and Citigroup or another financial advisor of nationally recognized reputation), (1) is more favorable from a
financial point of view to the stockholders of the Company than the consideration payable in the Merger (taking into account all of the terms and conditions of such proposal and this Agreement
(including any changes to the terms of this Agreement proposed by Parent in response to such Superior Proposal or otherwise)) and (2) is reasonably capable of being completed, taking into
account all financial, legal, regulatory and other aspects of such proposal.
(b) Neither
the Board of Directors of the Company nor any committee thereof shall (or shall agree or resolve to) (i) (A) withhold, withdraw, modify or qualify in a
manner adverse to Parent or Sub, or propose publicly to withhold, withdraw, modify or qualify in a manner adverse to Parent or Sub, the recommendation or declaration of advisability by such Board of
Directors or any such committee of this Agreement or the Merger or (B) recommend, declare advisable or propose to recommend or declare advisable the approval or adoption of any Takeover
Proposal or resolve or agree to take any such action, or adopt or approve any Takeover Proposal (any action in this clause (i) being referred to as an "
Adverse
Recommendation Change
") or (ii) cause or permit the Company or any Subsidiary of the Company to enter into any letter of intent, memorandum of understanding, agreement
in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement (each, an "
Acquisition
Agreement
") constituting or related to, or which is intended to or would reasonably be expected to result in or lead to, any Takeover Proposal (other than an Acceptable
Confidentiality Agreement). Notwithstanding the foregoing or anything else to the contrary in this Agreement, at any time prior to the Stockholder Approval, the Board of Directors of the Company may
(x) other than in connection with a Takeover Proposal, effect an Adverse Recommendation Change under clause (A) of the definition thereof, or (y) in response to a Superior
Proposal, effect an Adverse Recommendation Change or terminate this Agreement pursuant to Section 7.01(f) to accept such Superior Proposal, in the case of each of clauses (x) and (y),
only if the Board of Directors of the Company has determined in good faith, after consultation with its outside legal counsel and Citigroup or another financial advisor of nationally recognized
reputation, and after giving effect to all of the adjustments to the terms of this Agreement that have been offered in writing
by Parent in accordance with this Section 4.02(b), that the failure to do so would be inconsistent with its fiduciary duties to the stockholders of the Company under applicable Law;
provided
that
the Board of Directors of the Company may not effect such an Adverse Recommendation Change or terminate this Agreement pursuant to
Section 7.01(f) unless (1) the Board of Directors of the Company shall have first provided written notice to Parent (an "
Adverse Change
Notice
") at least three business days prior to such action that it is prepared to take such action and specifying the reasons therefor, and, if such action is in response to a
Superior Proposal, attaching the most current version of any written agreement relating to the transaction that constitutes such Superior Proposal (including any financing thereof, to the extent such
financing agreements are available) and (2) upon the end of such notice period, the Board of Directors of the Company shall have (aa) considered in good faith any revisions to the terms of this
Agreement proposed in writing by Parent by the end of such notice period and (bb) determined in good faith, after consultation with its outside legal counsel and Citigroup or another financial advisor
of nationally recognized reputation, that (I) in the case of a Superior Proposal, the offer previously constituting a Superior Proposal continues to constitute a Superior Proposal and
(II) the failure to make an Adverse Recommendation Change would be inconsistent with its fiduciary duties to the stockholders of the Company under applicable Law (it being understood and agreed
that any amendment or
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modification
to the financial terms or conditions or other material terms of such Superior Proposal shall require a new Adverse Change Notice and a new notice period under clause (1) of this
proviso shall commence (except that the three business day period referred to in clause (1) of this proviso shall instead be a two business day period)). The Company agrees that, during the
three or two business day period prior to its effecting an Adverse Recommendation Change or termination pursuant to Section 7.01(f), the Company and its Representatives shall negotiate in good
faith with Parent and its Representatives (to the extent Parent desires and is willing to do so) regarding any revisions to the terms of the Merger and the other transactions contemplated by this
Agreement proposed by Parent.
(c) In
addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 4.02, the Company shall, as promptly as
practicable and in any event within 24 hours after the receipt thereof, advise Parent orally and in writing of (i) any Takeover Proposal or any request for information or inquiry that
the Company reasonably believes could lead to or contemplates a Takeover Proposal and (ii) the material terms and conditions of such Takeover Proposal, request or inquiry (including any
subsequent amendment or other modification to such terms and conditions and, if applicable, copies of any written requests, inquiries, proposals or offers, including proposed agreements) and the
identity of the person making any such Takeover Proposal, request or inquiry. Commencing upon the provision of any notice referred to above, the Company (or its outside counsel) shall keep Parent (or
its outside counsel) informed, on a reasonably current basis, of the status, including any change to the material terms and conditions, of such Takeover Proposal, request or inquiry, and the status of
any discussions or negotiations with respect thereto.
(d) Nothing
contained in this Section 4.02 or elsewhere in this Agreement shall prohibit the Company from (i) taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act or complying with Item 1012(a) of Regulation M-A promulgated under the Exchange Act
or (ii) making any disclosure to its stockholders if, in the good faith judgment of the Board of Directors of the Company, after consultation with its outside legal counsel, failure so to
disclose would be inconsistent with applicable Law;
provided
,
however
, that the foregoing shall in no
way eliminate or modify the effect that any such position or disclosure would otherwise have under this Agreement.
ARTICLE V
Additional Agreements
SECTION 5.01.
Preparation of the Proxy Statement; Stockholders Meeting.
(a) Subject to Parent's
compliance with its obligations contained in the next sentence, as promptly as practicable following the date of this Agreement,
the Company shall prepare and, no later than the 15th calendar day (or, if such calendar day is not a business day, on the first business day subsequent to such calendar day) immediately
following the date of this Agreement, file with the SEC the preliminary Proxy Statement. Parent shall furnish all information concerning Parent and Sub to the Company as may be reasonably requested in
connection with the preparation, filing and distribution of the Proxy Statement and shall otherwise reasonably cooperate with the Company in the preparation of the Proxy Statement and the resolution
of any SEC comments related thereto. The Company shall notify Parent as promptly as practicable upon the receipt of any comments from the SEC or its staff or any request from the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information and shall provide (i) copies of all written correspondence or (ii) a summary of all oral communications, in
each case between it and its Representatives, on the one hand, and the SEC, on the other hand, to Parent as promptly as practicable. The Company shall use reasonable best efforts to respond as
promptly as reasonably practicable to any comments of the SEC with respect to the Proxy Statement and to cause the Proxy Statement in definitive form to be mailed to the Company's stockholders as
promptly as reasonably practicable after, but in any event not more than one business day after, the
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Proxy
Statement is cleared by the SEC for mailing to the Company's stockholders. Notwithstanding the foregoing, prior to filing or mailing the Proxy Statement (or any amendment or supplement thereto)
or responding to any comments of the SEC with respect thereto (including any oral response to
comments), the Company (x) shall provide Parent and its counsel a reasonable opportunity to review and comment on such document or response (including any proposed oral response to comments),
(y) shall include in such document or response all comments reasonably proposed by Parent and (z) shall not file or mail such document, or respond to the SEC, prior to receiving the
approval of Parent or its counsel, which approval shall not be unreasonably withheld, conditioned or delayed. If, at any time prior to the Stockholders Meeting, any information relating to the
Company, Parent or any of their respective affiliates, officers or directors should be discovered by the Company or Parent which should be set forth in an amendment or supplement to the Proxy
Statement so that the Proxy Statement shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not misleading, the party that discovers such information shall promptly notify the other parties hereto, and an
appropriate amendment or supplement describing such information shall be filed with the SEC as promptly as practicable and, to the extent required by applicable Law, disseminated to the stockholders
of the Company.
(b) The
Company agrees that the Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and that none of the information
included or incorporated by reference in the Proxy Statement will, at the date the Proxy Statement is filed with the SEC or mailed to the stockholders of the Company or at the time of the Stockholders
Meeting, or at the time of any amendment or supplement thereof, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no covenant is made by the Company with respect to statements made in the Proxy
Statement based on information supplied in writing by or on behalf of Parent specifically for inclusion or incorporation for reference therein. Parent agrees that none of such information will, at the
date the Proxy Statement is filed with the SEC or mailed to the stockholders of the Company or at the time of the Stockholders Meeting, or at the time of any amendment or supplement thereof, contain
any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement mailed to the holders of Company Common Stock shall include the notice of appraisal rights required to be delivered by the Company pursuant to
Section 262 that complies with applicable Law.
(c) The
Company shall, as promptly as reasonably practicable after the date of this Agreement, establish a record date for, duly call, give notice of, convene and hold a
meeting of its stockholders for the sole purpose of obtaining the Stockholder Approval and voting on a proposal to adjourn the Stockholders Meeting (and, if applicable, the advisory vote required by
Rule 14a-21(c) under the Exchange Act in connection therewith), which meeting the Company shall, absent any Legal Restraint that has the effect of preventing such action, cause to occur no
later than the 35th calendar day (or, if such calendar day is not a business day, on the first business day subsequent to such calendar day) immediately following the date that the mailing of
the Proxy Statement has been substantially completed (the "
Stockholders Meeting
");
provided
that the
Stockholders Meeting shall be held no earlier than the 50th calendar day after the date of this Agreement; and
provided
,
further
, that the Company,
after consultation with Parent, may postpone or adjourn, or make one or more successive postponements or adjournments of, the
Stockholders Meeting if the Company reasonably believes that (i)(A) the Company is unable to obtain a quorum of its stockholders at such time or (B) the Company will not receive proxies
sufficient to obtain Stockholder Approval, whether or not a quorum is present, (ii) it is necessary to postpone or adjourn the Stockholders Meeting to ensure that any required amendment or
supplement to the
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Proxy
Statement is mailed to holders of Company Common Stock within a reasonable amount of time in advance of the Stockholders Meeting or (iii) such postponement or adjournment is required by
Law or a court or other Governmental Entity of competent jurisdiction in connection with any actions in connection with this Agreement, the Merger or the other transactions contemplated by this
Agreement or has been requested by the SEC or its staff, so long as, in the case of any postponement or adjournment under clause (i) of this Section 5.01(c), the Stockholders Meeting is
not postponed or adjourned more than an aggregate of 30 calendar days without the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed). In the event
that during the three business days prior to the date that the Stockholders Meeting is then scheduled to be held, the Company delivers a notice of an intent to make an Adverse Recommendation Change,
Parent may direct the Company to postpone the Stockholders Meeting for up to five business days and, to the extent permitted by applicable Law, the Company Certificate and the Company Bylaws, the
Company shall promptly, and in any event no later than the next business day, postpone the Stockholders Meeting in accordance with Parent's direction, subject to the Company's right to postpone the
Stockholders Meeting for a longer period pursuant to the immediately preceding sentence. The notice of the Stockholders Meeting shall state that a proposal to adopt this Agreement will be considered
at the Stockholders Meeting. Subject to Section 4.02(b), (x) the Board of Directors of the Company shall recommend to holders of Company Common Stock that they adopt this Agreement and
shall include such recommendation in the Proxy Statement and (y) the Company shall use its reasonable best efforts to solicit the Stockholder Approval. Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to this Section 5.01(c) shall not be affected by the commencement, public proposal, public disclosure or communication to the Company
or any other person of any Takeover Proposal or, other than with respect to the immediately preceding sentence of this Section 5.01(c), the making of any Adverse Recommendation Change. The
Company shall provide updates to Parent with respect to the proxy solicitation for the Stockholders Meeting (including interim results) as reasonably requested by Parent.
SECTION 5.02.
Access to Information; Confidentiality.
(a) The Company shall, and shall
cause each of its Subsidiaries to, afford to Parent and to Parent's Representatives reasonable access upon reasonable
advance notice and during normal business hours (under supervision of appropriate personnel and in a manner that does not unreasonably interfere with the normal operation of the business of the
Company and its Subsidiaries) during the period prior to the Effective Time or the termination of this Agreement to all their respective properties, assets, books, records, Contracts, Permits,
documents, information, directors, officers and employees, and during such period the Company shall, and shall cause each of its Subsidiaries to, furnish as promptly as reasonably practicable to
Parent any information concerning its business as Parent may reasonably request. Notwithstanding the immediately preceding sentence, neither the Company nor any of its Subsidiaries shall be required
to afford access or furnish information to the extent (i) relating to the minutes of the Company's Board of Directors or any committees thereof (including any presentations or other materials
prepared by or for the Company's Board of Directors or any committee thereof) where the Company's Board of Directors or any such committee thereof discussed this Agreement, the Merger or the other
transactions contemplated by this Agreement or any similar transaction with any other person, including any Takeover Proposal, (ii) the Company determines in good faith that affording such
access or furnishing such information would jeopardize the attorney-client privilege of the Company or any of its Subsidiaries (
provided
that the
Company shall use its reasonable best efforts to allow for such access or to furnish such information in a manner that does not jeopardize the attorney-client privilege), (iii) that affording
such access or furnishing such information would violate applicable Law or result in significant antitrust risk for the Company or its Subsidiaries or (iv) such request involves conducting
subsurface, invasive or environmental sampling or testing, including with respect to building materials and indoor air quality. No investigation by Parent or any of its Representatives and no receipt
of
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information
by Parent or any of its Representatives shall operate as a waiver or otherwise affect any representation, warranty, covenant, agreement or other provision of this Agreement, or the
obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement. Except as required by any applicable Law, Parent will hold, and
will direct its Representatives to hold, any and all information received from the Company confidential in accordance with the Confidentiality Agreement.
(b) Subject
to applicable Law, the Company and Parent shall, and shall cause each of their respective Subsidiaries to, cooperate to ensure an orderly transition and
integration process in connection with the Merger and the other transactions contemplated by this Agreement in order to minimize the disruption to, and preserve the value of, the business of the
Surviving Corporation and its Subsidiaries.
(c) Immediately
following the execution and delivery of this Agreement by each of the parties hereto, Parent, as the sole stockholder of Sub, will adopt this Agreement.
(d) Without
limiting the generality of the foregoing, the Company and each of its Subsidiaries shall cooperate, and shall cause its affiliates and Representatives to
reasonably cooperate, with Parent in all Tax matters, including by maintaining and making available to Parent and its affiliates all books and records relating to Taxes.
(e) Parent
and the Company shall take the actions set forth in Section 5.02(e) of the Company Letter.
SECTION 5.03.
Reasonable Best Efforts; Consultation and Notice.
(a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take,
or cause to be taken, all actions that are necessary, proper or advisable to consummate and make effective the Merger and the other transactions contemplated by this Agreement, including using its
reasonable best efforts to accomplish the following: (i) the satisfaction of the conditions precedent set forth in Article VI, (ii) the obtaining of all necessary actions or
nonactions and Consents from, and the giving of any necessary notices to, Governmental Entities and other persons and the making of all necessary registrations, declarations and filings (including
filings under the HSR Act (which each of the parties hereto shall file, or cause to be filed, as promptly as reasonably practicable after the date hereof, but not later than fifteen business days
after the date hereof, such date to be determined by Parent in consultation with the Company) and other registrations, declarations and filings with, or notices to, Governmental Entities, that may be
required under the HSR Act or other applicable antitrust, competition or pre-merger notification or trade regulation Laws of any jurisdiction (collectively, "
Review
Laws
"), if any), (iii) the taking of all reasonable steps to provide any supplemental information requested by any Governmental Entity, including participating in
meetings with officials of such entity in the course of its review of this Agreement, the Merger or the other transactions contemplated by this Agreement and (iv) the taking of all reasonable
steps as may be necessary to avoid any Proceeding by any Governmental Entity or third party. In connection with and without limiting the generality of the foregoing, each of the Company and its Board
of Directors shall, if any state takeover statute or similar statute or regulation is or becomes applicable to this Agreement or any of the Merger and the other transactions contemplated by this
Agreement, take all actions necessary to ensure that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by
this Agreement and otherwise to minimize the effect of such statute or regulation on this Agreement, the Merger and the other transactions contemplated by this Agreement. Notwithstanding the foregoing
or any other provision of this Agreement to the contrary, in no event shall Parent or its Subsidiaries (including Sub and, after the Effective Time, the Surviving Corporation and its Subsidiaries) be
required to agree to or accept (A) any prohibition of or limitation on its or their ownership, or any limitation that would affect its or their operation, of any portion of their respective
businesses or assets, including after giving
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effect
to the Merger and the other transactions contemplated by this Agreement, (B) divest, hold separate or otherwise dispose of any portion of its or their respective businesses or assets,
including
after giving effect to the Merger and the other transactions contemplated by this Agreement, (C) any limitation on the ability of Parent or its Subsidiaries to acquire or hold or exercise full
rights of ownership of any capital stock of the Company or its Subsidiaries, including after giving effect to the Merger and the other transactions contemplated by this Agreement, or (D) any
other limitation on its or their ability to, or the manner in which they, operate, conduct or control their respective businesses or operations, including after giving effect to the Merger and the
other transactions contemplated by this Agreement (any such action or limitation described in clauses (A) through (D), a "
Restriction
"), other
than Permitted Restrictions, which Permitted Restrictions Parent or its Subsidiaries shall be required to agree if and only to the extent ultimately necessary to obtain pre-merger clearance from the
U.S. and E.U. antitrust and competition law authorities (specifically, for (1) any waiting period applicable to the Merger under the HSR Act to have been terminated or expired and
(2) the European Commission to have issued a decision finding the Merger to be compatible with the common market under the Council Regulation, or to have been deemed to have done so pursuant to
Article 10(6) of the Council Regulation), provided that in the aggregate any such Permitted Restrictions would not have or reasonably be expected to have a material adverse effect on the
business, assets, properties, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, or, after the Effective Time, the Surviving Corporation and its
Subsidiaries, taken as a whole. For purposes of this Agreement, "
Permitted Restrictions
" shall mean (x) Restrictions of the type described in
clause (B) or (C) of the definition thereof solely involving the businesses or assets of the Company and its Subsidiaries which, in the aggregate, generated no more than $450,000,000 of
the consolidated revenues of the Company and its Subsidiaries for the fiscal year ended December 31, 2016 (any such Restrictions described in this clause (x),
"
Required Divestitures
") and (y) Restrictions of the type described in clause (A) or (D) of the definition thereof which are
applied solely against and solely involve and impact the operations, businesses and assets of the Company and its Subsidiaries and which would not, individually or in the aggregate, when combined with
the impact of any Required Divestitures, have or reasonably be expected to have a material adverse effect on the business, assets, properties, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole, or, after the Effective Time, the Surviving Corporation and its Subsidiaries, taken as a whole. For the avoidance of doubt, Parent is not required to
agree to or accept any Restriction that involves, applies to or impacts the operations, businesses or assets of Parent or any of its affiliates other than Permitted Restrictions with respect to the
Surviving Corporation and Subsidiaries of the Surviving Corporation. In no event shall the Company or any of its Subsidiaries be permitted to commit or agree to any Restriction without Parent's prior
written consent. Nothing in this Section 5.03(a) shall require any party to take or agree to take any action with respect to its business or operations pursuant to this Section 5.03(a)
unless the effectiveness of such agreement or action is conditioned upon the Closing. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, in no event shall Parent
or any of its Subsidiaries be obligated to litigate or participate in the litigation of any Proceeding brought by or against any Governmental Entity in connection with obtaining any Consent from any
Governmental Entity in connection with the transactions contemplated by this Agreement.
(b) Notwithstanding
anything to the contrary herein, Parent shall determine the strategy to be pursued for obtaining and lead the effort to obtain all necessary actions or
nonactions and Consents from Governmental Entities in connection with the Merger and the other transactions contemplated by this Agreement and the Company shall take all reasonable actions to support
Parent in connection therewith. Each of Parent and the Company shall (i) reasonably cooperate with each other in connection with any filing or submission with any Governmental Entity in
connection with the Merger and the other transactions contemplated by this Agreement and any Consents from any Governmental Entity in connection therewith and any investigation or other inquiry
related thereto and in connection with resolving any such investigation or inquiry with
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respect
to any such filing or the Merger, (ii) not extend any waiting or suspension period under any applicable Review Laws or enter into any agreement with any Governmental Entity not to
consummate the Merger, including any timing agreements or agreements to pull and re-file their HSR filing, except with the prior written consent of the other party (such consent not to be unreasonably
withheld, conditioned or delayed), (iii) respond as promptly as practicable to any applicable inquiries or requests received from any Governmental Entity for additional information or
documentation, (iv) promptly make any applicable further filings or information submissions pursuant thereto that may be necessary or advisable and (v) promptly make any requisite
filings or submissions required under any applicable Review Laws. Each of Parent and the Company shall (A) promptly notify the other party of any written or oral communication to that party or
its Subsidiaries or Representatives from any Governmental Entity regarding the parties' collaborative efforts to obtain the Consents, (B) subject to applicable Law and to the extent reasonably
practicable, permit the other party to review and comment on any written communication regarding such efforts prior to providing such communication to any Governmental Entity and (C) to the
extent reasonably practicable, not agree to participate, or permit its Subsidiaries or Representatives or, in the case of the Company, the Controlled Affiliate, to participate, in any substantive
meeting or discussion with any Governmental Entity in respect of any filings, investigation or inquiry concerning Consents to the Merger unless it consults with the other party in advance and, to the
extent permitted by such Governmental Entity and reasonably practicable, gives the other party the opportunity to attend and participate. Without limiting the foregoing, neither party shall make any
filings, submissions or written communications to any Governmental Entity to obtain the Consents without first providing a written copy of such filing, submission or communication to the other party
(or as appropriate to such party's outside counsel) and allowing the other party a reasonable opportunity to provide comments on such filing, submission or communication prior to submission. Parent
and the Company covenant and agree to incorporate all reasonable comments of the other party (or as appropriate such party's outside counsel) with respect to such filings, submissions and
communications prior to delivery of the same to any Governmental Entity.
(c) (i)
In connection with the continuing operation of the business of the Company and its Subsidiaries between the date of this Agreement and the Effective Time, subject to
applicable Law, the Company shall consult in good faith on a reasonably regular basis with Parent to report material, individually or in the aggregate, operational developments, the general status of
relationships with material customers, suppliers and resellers, the general status of ongoing operations and other matters reasonably requested by Parent pursuant to procedures reasonably requested by
Parent and in a manner consistent with (A) any organizational or personal conflict of interest mitigation plans, including firewalls, entered into by the Company or any of its Subsidiaries or
to which the Company or any of its Subsidiaries is subject and (B) applicable confidentiality obligations, including the Confidentiality Agreement;
provided
,
however
, that no such consultation shall operate as a waiver or otherwise affect any
representation, warranty, covenant, agreement or other provision in this Agreement, or the obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement.
(ii) Except
as prohibited by applicable Law, the Company shall promptly notify Parent in writing of:
(A) (1)
any representation or warranty made by Company contained in Section 3.01 becoming untrue or inaccurate such that the condition set forth in
Section 6.02(a) would not be satisfied, (2) the failure of the Company to perform in any material respect any obligation to be performed by it under this Agreement such that the
condition set forth in Section 6.02(b) would not be satisfied or (3) the occurrence of any change, development, event, effect, condition, occurrence, action or omission that would
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reasonably
be expected to result in the condition set forth in Section 6.02(d) not being satisfied;
(B) any
written notice or other communication from any person (other than a Governmental Entity) alleging that notice to or Consent of such person is required in connection
with the Merger or the other transactions contemplated by this Agreement if the subject matter of such communication or the failure of the Company or one of its Subsidiaries to obtain such Consent
would be material to the Company, the Surviving Corporation or Parent;
(C) any
material written notice or other material communication from any Governmental Entity in connection with the Merger or the other transactions contemplated by this
Agreement, and a copy of any such notice or communication shall be furnished to Parent, together with the Company's written notice;
(D) any
material written notice or other material communication from any customer, distributor, supplier or reseller to the effect that such customer, distributor, supplier
or reseller is terminating or otherwise adversely modifying its relationship with the Company or any of its Subsidiaries as a result of the Merger or the other transactions contemplated by this
Agreement; and
(E) any
Proceedings commenced or, to the knowledge of the Company, threatened, or any circumstance that would reasonably be expected to lead to any Proceeding, against or
involving the Company or any of its Subsidiaries that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.01(h) or that relate to
the consummation of the Merger or the other transactions contemplated by this Agreement;
provided
,
however
, that no such notification shall operate as a waiver or otherwise affect any
representation, warranty, covenant, agreement or other provision in this Agreement, or the obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement;
provided further
, that the failure to deliver any such notification, in and of itself, shall not result in the failure of,
or otherwise affect, any of the conditions set forth in Article VI.
(iii) Except
as prohibited by applicable Law, Parent shall promptly notify the Company in writing of:
(A) (1)
any representation or warranty made by Parent or Sub contained in Section 3.02 becoming untrue or inaccurate such that the condition set forth in
Section 6.03(a) would not be satisfied or (2) the failure of Parent or Sub to perform in any material respect any obligation to be performed by such party under this Agreement such that
the condition set forth in Section 6.03(b) would not be satisfied;
(B) any
written notice or other communication from any person (other than a Governmental Entity) alleging that notice to or Consent of such person is required in connection
with the Merger or the other transactions contemplated by this Agreement if the subject matter of such communication or the failure of the Parent or one of its Subsidiaries to obtain such Consent
would be material to the Company, the Surviving Corporation or Parent; and
(C) any
Proceedings commenced or, to the knowledge of Parent, threatened, against or involving Parent or any of its Subsidiaries that relate to the consummation of the
Merger or the other transactions contemplated by this Agreement;
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provided
,
however
, that no such notification shall affect the representations, warranties, covenants,
agreements or obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement;
provided
further
, that the failure to deliver any such notification, in and of itself, shall not result in the failure of, or otherwise affect, any of the conditions set forth in
Article VI.
(d) Without
limiting the generality of the foregoing, the Company shall give Parent the opportunity to participate in the defense of any litigation against the Company, any
of its Subsidiaries and/or any of their respective directors or officers relating to the Merger or the other transactions contemplated by this Agreement and will obtain the prior written consent of
Parent prior to settling or satisfying any such claim, it being understood and agreed that this Section 5.03(d) shall not give Parent the right to direct such defense.
SECTION 5.04.
Company Equity-Based Awards.
(a) Effective as of the Effective Time, by
virtue of the Merger and without any action on the part of any holder of a Company Stock Option, except as set
forth in Section 5.04(f) below, each then outstanding Company Stock Option (whether or not then vested and exercisable) (i) shall automatically become fully vested and (ii) shall
terminate and be converted automatically into the right to receive a lump sum cash payment equal to (A) the product of (1) the number of shares of Company Common Stock subject to such
Company Stock Option immediately prior to the Effective Time, whether or not then vested, and (2) the excess, if any, of the Merger Consideration over the exercise price applicable to such
shares of Company Common Stock subject to such Company Stock Option, less (B) any applicable withholding for Taxes (the "
Option Merger
Consideration
"). For the avoidance of doubt, if the exercise price applicable to shares of Company Common Stock subject to such Company Stock Option is equal to or greater than
the Merger Consideration, such Company Stock Option shall terminate and be canceled in exchange for no consideration. As of the Effective Time, each holder of Company Stock Options shall cease to have
any rights with respect thereto, except the right to receive the Option Merger Consideration related to the applicable Company Stock Option, without interest, payable in accordance with this
Section 5.04.
(b) Effective
as of immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of any holder of Company Restricted Shares, except as
set forth in Section 5.04(f) below, each then outstanding Company Restricted Share (i) shall automatically become fully vested and all restrictions with respect thereto shall lapse and
(ii) shall terminate and be converted automatically into the right to receive a lump sum cash payment equal to (A) the Merger Consideration, less (B) any applicable withholding
for Taxes (the "
Restricted Share Merger Consideration
"). As of the Effective Time, each holder of Company Restricted Shares shall cease to have any
rights with respect thereto, except the right to receive the Restricted Share Merger Consideration for each Company Restricted Share, without interest, payable in accordance with this
Section 5.04.
(c) Effective
as of immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of any holder of Company Performance Shares, except
as set forth in Section 5.04(f) below:
(i) in
the event the Closing occurs prior to the date on which the Company Performance Shares granted in 2015 (the "
2015 Company Performance
Shares"
), would vest in the ordinary course of business consistent with past practice, each then outstanding 2015 Company Performance Share (A) shall automatically
become vested based on deemed achievement of performance metrics at the greater of target performance for all applicable metrics or actual performance for all applicable metrics for the performance
period (without pro-ration) and all restrictions with respect thereto shall lapse and (B) shall terminate and be converted automatically into the right to receive a lump sum cash payment equal
to (1) the product of (x) the number of shares of Company Common Stock subject to such Company Performance
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Share
immediately prior to the Effective Time (determined after taking into account the vesting set forth in Section 5.04(c)(i)(A) and rounded up or down to the nearest share), and
(y) the Merger Consideration, less (2) any applicable withholding for Taxes (the "
2015 Performance Share Merger Consideration
"); and
(ii) each
then outstanding Company Performance Share that was granted in 2016 or 2017 (the "
Subsequent Period Company Performance
Shares
") (A) shall automatically become vested based on deemed achievement of performance metrics at target performance for all applicable performance metrics with
pro-ration in accordance with the applicable Company Stock Plan and the award agreements thereunder and (B) shall terminate and be converted automatically into the right to receive a lump sum
cash payment equal to (1) the product of (x) the number of shares of Company Common Stock subject to such Company Performance Share immediately prior to the Effective Time (determined
after taking into account the vesting set forth above), and (y) the Merger Consideration, less (2) any applicable withholding for Taxes (the "
Subsequent Period
Performance Share Merger Consideration
" and together with the 2015 Performance Share Merger Consideration, the "
Performance Share Merger
Consideration
"). With respect to each Subsequent Period Company Performance Share that is forfeited due to pro-ration, as soon as reasonably practicable following the Effective
Time, Parent shall grant each holder thereof who remains an employee as of the grant date with an award of Parent restricted stock rights with respect to a number of shares of Parent common stock with
a value equal to two times the value of such forfeited Company Performance Shares (for the avoidance of doubt, calculated at target performance multiplied by the Merger Consideration) (the
"
Parent Retention Grant
"). One-half of the Parent Retention Grant shall vest on March 1, 2019 and the remaining one-half of the Parent Retention
Grant shall vest on March 1, 2020, in each case subject to continued employment with Parent and its Subsidiaries as of such dates;
provided
,
however
,
that holders of Parent Retention Grants who are involuntarily terminated other than for cause prior to March 1, 2019 shall vest in half
of the Parent Retention Grant upon such termination.
(iii) As
of the Effective Time, each holder of Company Performance Shares shall cease to have any rights with respect thereto, except the right to receive the Performance
Share Merger Consideration for each Company Performance Share or the Parent Retention Grant, if applicable, without interest, payable in accordance with this Section 5.04.
(d) Effective
as of the Effective Time, by virtue of the Merger and without any action on the part of any holder of Company Deferred Stock Units, except as set forth in
Section 5.04(f) below, each then outstanding Company Deferred Stock Unit (i) shall automatically become fully vested and (ii) shall be converted automatically into the right to
receive a cash payment equal to (A) the product of (1) the number of shares of Company Common Stock subject to such Company Deferred Stock Unit immediately prior to the Effective Time,
and (2) the Merger Consideration, less (B) any applicable
withholding for Taxes, payable in accordance with, and subject to, the deferral elections applicable to such Company Deferred Stock Units as of immediately prior to the Effective Time.
(e) Effective
as of the Effective Time, by virtue of the Merger and without any action on the part of any holder of Company Phantom Stock Units, each then outstanding
Company Phantom Stock Unit (i) shall automatically become fully vested and (ii) shall represent the right to receive a cash payment equal to (A) the product of (1) the
number of shares of Company Common Stock subject to such Company Phantom Stock Unit immediately prior to the Effective Time, and (2) the Merger Consideration, less (B) any applicable
withholding for Taxes, payable in accordance with, and subject to, the deferral elections applicable to such Company Phantom Stock Units as of immediately prior to the Effective Time.
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(f) Notwithstanding
anything to the contrary including the provisions of Sections 5.04(a), (b), (c) and (d) of this Agreement or otherwise, with respect
to Permitted 2018 Awards (as defined and permitted by Section 4.01 of the Company Letter), only the 2018 Award Pro Rata Percentage shall become vested at the Effective Time and shall be
entitled to the Option Merger Consideration, the Restricted Share Merger Consideration, the Performance Share Merger Consideration and the consideration set forth in Section 5.04(d). The
remainder of any Permitted 2018 Award shall be forfeited. The 2018 Award Pro Rata Percentage means a fraction, (i) the numerator of which is the number of days that have elapsed from the grant
date of such award (or in the case of Company Performance Shares, from the beginning of the performance period) through and including the Closing Date and (ii) the denominator of which is the
total number of days from the grant date of such award (or in the case of Company Performance Shares, from the beginning of the performance period) through the final regularly scheduled vesting date
of such award. For the avoidance of doubt, any Permitted 2018 Awards that are Company Performance Shares shall be cashed out at deemed target level performance with pro-ration in accordance with the
terms of the first sentence of Section 5.04(c)(ii).
(g) As
soon as reasonably practicable after the Effective Time (but in no event later than 10 days after the Effective Time), Parent shall cause the Surviving
Corporation to, and the Surviving Corporation shall, pay the amounts payable pursuant to this Section 5.04, net of any applicable withholding Taxes, through the Surviving Corporation's payroll
or a third party engaged to provide payroll services. Notwithstanding the foregoing, in the case of any Company Equity-Based Awards subject to Section 409A of the Code, including the Company
Deferred Stock Units and the Company Phantom Stock Units, the payments required under this Section 5.04 shall be made in accordance with the deferral elections applicable to such Company
Equity-Based Awards as in effect immediately prior to the Effective Time and otherwise in compliance with Section 409A of the Code.
(h) At
or prior to the Effective Time, the Board of Directors of the Company (or if appropriate, any committee administering the applicable Company Stock Plans) shall adopt
such resolutions or take such
other actions as may be reasonably necessary or desirable to (i) effectuate the treatment of the Company Equity-Based Awards pursuant to this Section 5.04 and (ii) cause the
Company Stock Plans (other than the Company ESPP) to terminate at the Effective Time.
(i) The
Board of Directors of the Company (or, if appropriate, any committee administering the Company ESPP) shall adopt such resolutions or take such other actions as may
be required to provide that with respect to the Company ESPP: (i) participants in the Company ESPP ("
ESPP Participants
") may not increase their
payroll deductions under the Company ESPP from those in effect on the date of this Agreement; (ii) no new ESPP Participants may commence participation in the Company ESPP following the date of
this Agreement; (iii) all participation in and purchases under the Company ESPP shall be suspended effective as of the last day of the offering period that includes the date of this Agreement
(the "
ESPP Suspension Date
"), such that the offering period in effect as of the date of this Agreement will be the final offering period under the
Company ESPP; and (iv) with respect to any offering period under the Company ESPP in effect as of the date of this Agreement, the Company shall ensure that such offering period ends at the ESPP
Suspension Date and that each ESPP Participant's accumulated contributions for such offering period are applied to the purchase of shares of Company Common Stock in accordance with the terms of the
Company ESPP unless the ESPP Participant has previously withdrawn from such offering period in accordance with the terms of the Company ESPP. Any cash remaining in the Company ESPP after purchases
occurring on the ESPP Suspension Date shall be refunded to ESPP Participants promptly following the ESPP Suspension Date.
SECTION 5.05.
Employee Matters.
(a) For the 12 month period following the Closing Date,
Parent shall, and shall cause the Surviving Corporation to, provide to each employee of the
Company
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and
its Subsidiaries who is an employee of the Company or any of its Subsidiaries immediately prior to the Effective Time (a "
Continuing Employee
") with
(i) at least the same base cash compensation or other base wages provided to such Continuing Employee immediately prior to the Effective Time; (ii) target annual incentive opportunities
that are substantially comparable, in the aggregate, to the target annual cash incentive opportunity and target annual equity incentive opportunity provided to such Continuing Employee immediately
prior to the Effective Time (which, in the case of incentive opportunities granted following the Closing, shall be subject to the terms and conditions of the applicable employee benefit plan
maintained by Parent or its Subsidiaries); (iii) severance benefits that are no less favorable, in the aggregate, than the severance benefits provided to such Continuing Employee immediately
prior to the Effective Time (for the avoidance of doubt, after taking into account the service crediting provisions of Section 5.05(b) and any additional service performed following the Closing
Date); and (iv) other compensation and employee benefits (excluding, for this purpose, the compensation contemplated by clauses (i)-(iii) above and retention, change in control, or
one-time or special benefits or arrangements) that are substantially comparable, in the aggregate, to those provided to such Continuing Employee immediately prior to the Effective Time. Nothing in
this Section 5.05(a) is intended to or shall create any right in any employee, consultant or contractor of the
Company to continued employment by or service to Parent, the Company, the Sub, or, in each case, any affiliate or Subsidiary thereof, or limit the ability of Parent, the Company, the Sub, or, in each
case, any affiliate or Subsidiary thereof, to terminate the employment or service of any employee, consultant or contractor of the Company for any reason.
(b) To
the extent that a Continuing Employee becomes eligible to participate in an employee benefit plan maintained by Parent or any of its Subsidiaries (other than the
Company or its Subsidiaries), Parent shall cause such employee benefit plan to (i) recognize the service of such Continuing Employee with the Company and its Subsidiaries (or their predecessor
entities) for purposes of eligibility, participation, vesting and, except under defined benefit pension plans and plans providing for retiree medical or other welfare benefits, benefit accrual under
such employee benefit plan of Parent or any of its Subsidiaries, to the same extent such service was recognized under a comparable Benefit Plan in which such Continuing Employee was eligible to
participate immediately prior to the Effective Time; provided that such recognition of service (A) shall not operate to duplicate any benefits of a Continuing Employee with respect to the same
period of service, and (B) shall not apply for purposes of any plan, program or arrangement under which similarly-situated employees of Parent and its Subsidiaries do not receive credit for
prior service; and (ii) with respect to any health, dental, vision plan or other welfare plan of Parent or any of its Subsidiaries (other than the Company and its Subsidiaries) (any such plan,
a "
Parent Welfare Plan
") in which any Continuing Employee is eligible to participate for the plan year in which such Continuing Employee is first
eligible to participate, use commercially reasonable efforts to (x) cause any pre-existing condition limitations, exclusions or eligibility waiting periods under such Parent Welfare Plan to be
waived with respect to such Continuing Employee to the extent such limitation, exclusion or period would have been waived or satisfied under the Benefit Plan in which such Continuing Employee
participated immediately prior to the Effective Time, and (y) recognize and credit any health, dental or vision expenses incurred by such Continuing Employee in the year that includes the
Closing Date (or, if later, the year in which such Continuing Employee is first eligible to participate) for purposes of any applicable deductible and annual out-of-pocket expense requirements under
any such health, dental or vision plan of Parent or any of its Subsidiaries.
(c) Without
limiting the generality of this Section 5.05, for the performance year that includes the Closing Date, Parent shall, or shall cause the applicable
Subsidiary to, pay such annual cash incentive bonuses following the Closing Date under the terms of the applicable Benefit Plan in the ordinary course of business consistent with past practice.
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(d) Without
limiting the generality of this Section 5.05, from and after the Closing Date, Parent shall, or shall cause its applicable Subsidiary to, honor in
accordance with its terms any employment, change in control, or other agreement set forth on Section 5.05(d) of the Company Letter.
(e) Notwithstanding
the foregoing, all terms and conditions of employment with respect to any Continuing Employee who is subject to a collective bargaining or similar labor
agreement shall be made in accordance with the terms of such agreement.
(f) This
Section 5.05 shall be binding upon and shall inure solely to the benefit of each of the parties to this Agreement, and nothing in this Section 5.05,
express or implied, is intended to confer upon any other person (including for the avoidance of doubt any current or former directors, officers, employees, contractors or consultants of any of the
Company or any of its Subsidiaries, Parent or any of its Subsidiaries, or on or after the Effective Time, the Surviving Corporation or any of its Subsidiaries) any rights or remedies of any nature
whatsoever under or by reason of this Section 5.05 or is intended to be, shall constitute or be construed as an amendment to or modification of any employee benefit plan, program, policy,
agreement or arrangement of Parent, the Company, the Surviving Corporation or any respective Subsidiary thereof. In addition, nothing contained in this Agreement shall obligate Parent, the Company, or
any of their respective Subsidiaries to (i) maintain any particular Benefit Plan or (ii) retain the employment or services of any Company Personnel.
SECTION 5.06.
Indemnification, Exculpation and Insurance.
(a) Parent and Sub agree that all
rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or
prior to the Effective Time now existing in favor of any person who is or prior to the Effective Time becomes or has been at any time prior to the date of this Agreement a director or officer of the
Company or any of its Subsidiaries as provided in the respective certificates of incorporation or bylaws (or comparable organizational documents) of the Company or any of its Subsidiaries and any
indemnification or other agreements of the Company or its applicable Subsidiary, in each case as in effect on the date of this Agreement, shall be assumed by the Surviving Corporation in the Merger,
without further action, at the Effective Time, and shall survive the Merger and shall continue in full force and effect in accordance with their terms and shall not be amended, repealed or otherwise
modified in any manner that would adversely affect any right thereunder of any such indemnified party, and Parent shall cause the Surviving Corporation to comply with and honor the foregoing
obligations.
(b) In
the event that the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, or if Parent dissolves the
Surviving Corporation, then, and in each such case, Parent shall cause proper provision to be made so that the successors and assigns of the Surviving Corporation assume the obligations set forth in
this Section 5.06.
(c) Prior
to the Effective Time, the Company shall purchase a six-year "tail" directors' and officers' liability insurance policy effective for claims asserted for a
six-year period after the Effective Time covering each person covered as of the Effective Time by the Company's directors' and officers' liability insurance policy for acts or omissions occurring
prior to the Effective Time on terms that are no less favorable than those of such policy of the Company as in effect on the date of this Agreement, which insurance shall, prior to the Closing, be in
effect and prepaid for such entire six-year period;
provided
that the Company shall not pay annual premiums for such policy in excess of 300% of the
current annual premium paid by the Company for its existing coverage (the "
Maximum Premium
"). If such
insurance coverage cannot be obtained at all, or can only be obtained at an aggregate premium in excess of the Maximum Premium, the Company shall
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acquire
the most advantageous policy obtainable for an aggregate premium equal to the Maximum Premium.
(d) The
rights of each indemnified party hereunder shall be in addition to, and not in limitation of, any other rights such indemnified party may have under the certificate
of incorporation or bylaws or any other organizational documents of the Company or any of its Subsidiaries, the DGCL or otherwise. The provisions of this Section 5.06 shall survive the
consummation of the Merger and are expressly intended to be for the benefit of, and shall be enforceable by, each of the indemnified parties and shall be binding on Parent, the Surviving Corporation
and their respective successors and assigns.
SECTION 5.07.
Financing Cooperation.
(a) Parent shall use its reasonable best efforts to
take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or
advisable to arrange and obtain the Financing on the terms and conditions set forth in the Commitment Letter, including using its reasonable best efforts to (i) maintain in effect the
Commitment Letter until the Merger and the other transactions contemplated by this Agreement are consummated, (ii) timely negotiate definitive agreements with respect to the facilities
contemplated by the Commitment Letter on the terms and conditions set forth therein (or on terms that will not materially delay or prevent the Closing or make the funding with respect to the Financing
less likely to occur), (iii) satisfy or cause to be waived on a timely basis all conditions applicable to Parent set forth in the Commitment Letter or such definitive agreements that are within
its control and otherwise comply with its obligations thereunder and (iv) upon the satisfaction or waiver of such conditions, consummate the Financing;
provided
, that nothing herein shall prevent
Parent from replacing all or any portion of the Financing provided for in the Commitment Letter with one or
more commitments from financial institutions to provide an equal or greater amount of debt financing to be made available on or prior to the Closing Date with conditionality no less favorable to
Parent in any material respect than that provided for in the Commitment Letter, and upon any such replacement, the definition of "Commitment Letter" set forth in this Agreement shall be deemed to have
been modified as appropriate to reflect such replacement debt financing and any related commitment letter.
(b) Parent
shall not amend, modify or waive, or agree to amend, modify or waive (in any case, whether by action or inaction), any term of the Commitment Letter without the
prior written consent of the Company if such amendment, modification or waiver (i) reduces the aggregate amount of the Financing
available on the Closing Date to pay the aggregate Merger Consideration (unless, in the case of this clause (i), such amount is fully replaced with an amount of new financing with
conditionality no less favorable to Parent in any material respect), or (ii) imposes new or additional conditions or amends or modifies any of the conditions precedent to the receipt of the
Financing in a manner that would reasonably be expected to (x) materially delay or prevent the Closing, (y) make the timely funding of the Financing or satisfaction of the conditions
precedent to obtaining the Financing less likely to occur or (z) adversely impact the ability of Parent to enforce its rights against any other party to the Commitment Letter or the definitive
agreements with respect thereto in any material respect (
provided
,
however
, that Parent may, without the
consent of the Company, amend or modify the Commitment Letter or the definitive agreements with respect thereto (A) in accordance with the "market flex" provisions thereof and (B) to add
lenders, lead arrangers, bookrunners, syndication agents or other titled roles with respect to financial institutions that have not executed the Commitment Letter as of the date of this Agreement).
Parent shall keep the Company reasonably informed of the status of the Financing and developments with respect thereto and shall, upon the request of the Company, provide to the Company copies of all
material definitive documents related to the Financing (subject to customary redactions of fee letters).
(c) If
the Financing in an aggregate amount (together with cash and marketable securities on hand) at least equal to the aggregate Merger Consideration to be deposited with
the Paying Agent
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and
all other amounts required to be paid pursuant to Article II, the Merger and the other transactions contemplated by this Agreement becomes unavailable on the terms and conditions
contemplated by the Commitment Letter, and such unavailable amount is reasonably required to make the payment to the Paying Agent of the aggregate Merger Consideration, all other amounts required to
be paid pursuant to Article II, the Merger and the other transactions contemplated by this Agreement (such event, an "
Original Financing
Failure
"), Parent shall promptly notify the Company in writing of the Original Financing Failure and Parent shall use its reasonable best efforts to arrange and obtain, as
promptly as reasonably practicable, alternative financing from alternative sources on terms and conditions not materially less favorable, taken as a whole, to Parent than those contained in the
Commitment Letter and the Fee Letter and in an amount, when added with cash and marketable securities of Parent and Sub, at least equal to the Financing or such unavailable portion thereof, as the
case may be (the "
Alternate Financing
"), and to obtain a new financing commitment letter with respect to such Alternate Financing (the
"
New Commitment Letter
"), which shall replace the existing Commitment Letter;
provided
that any such
Alternate Financing shall not obligate the Company prior to the Closing as a surety, guarantor or indemnitor or to extend credit to any person. Parent shall promptly provide a true and complete copy
of such New Commitment Letter to the Company. In the event a New Commitment Letter is obtained, (i) any reference in this Agreement to the "Financing" shall mean the financing contemplated by
the Commitment Letter as modified pursuant to clause (ii) below, (ii) any reference in this Agreement to the "Commitment Letter" shall be deemed to mean the New Commitment Letter
and (iii) any reference in this Agreement to the "Fee Letter" shall be deemed to include any fee or other letter relating to the New Commitment Letter to the extent then in effect.
(d) From
the date of this Agreement until the earlier of (x) the termination of this Agreement in accordance with its terms and (y) the Closing, the Company
shall, and shall cause its Subsidiaries to, and shall use its reasonable best efforts to cause its and their respective Representatives to, provide to Parent all cooperation as may be reasonably
requested by Parent in connection with the arrangement and consummation of the Financing or any alternative financing arrangements entered into to provide funds for the aggregate Merger Consideration,
and all other amounts required to be paid pursuant to Article II, the Merger and the other transactions contemplated by this Agreement (
provided
that such cooperation does not unreasonably interfere with the ongoing operations of the Company and its Subsidiaries), including using reasonable best efforts to (i) participate in a
reasonable number of requested meetings (including customary one-on-one meetings with the parties acting as lead arrangers or agents for, and prospective lenders, underwriters and purchasers of, the
Financing and the Company's senior management and Representatives), presentations, road shows, due diligence sessions, drafting sessions and sessions with rating agencies in connection with the
Financing, (ii) assist with the preparation of (A) materials for rating agency presentations and investor presentations, (B) registration statements, prospectuses, offering
memoranda and private placement memoranda (including use of reasonable best efforts to obtain any consents of accountants for use of their reports in any of the foregoing), (C) bank information
memoranda (including a public-side version thereof) and (D) similar documents, in each case required or customary in connection with the Financing or otherwise reasonably requested by Parent,
(iii) execute and deliver (or use reasonable best efforts to obtain) customary certificates, accountant's comfort letters (which shall provide "negative assurance" comfort), consents, legal
opinions, surveys and title insurance in each case as reasonably requested by the Financing Sources, (iv) provide customary authorization letters to the Financing Sources authorizing the
distribution of information to prospective lenders and containing a customary representation that such information does not contain a material misstatement or omission and containing a representation
to the Financing Sources that the public side versions of such documents, if any, do not include material non-public information about the Company or its
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Subsidiaries
or their securities, (v) provide the lead arrangers or agents for, and prospective lenders, underwriters and purchasers of, the Financing with all documentation and other
information required with respect to the Company and its Subsidiaries in connection with applicable "know your customer" and anti-money laundering rules and regulations, including the USA PATRIOT ACT,
Title III of Pub. L. 107-56, (vi) assist Parent and its Representatives with the preparation of the documents governing the Financing (including any schedules, annexes or exhibits thereto and
any pro forma financial statements and financial projections required to be delivered thereunder and such other pertinent and customary financial and other information relating to the Company and its
Subsidiaries as Parent shall reasonably request in order to market, syndicate and consummate the Financing), (vii) obtain customary payoff letters and any necessary lien terminations and other
instruments of discharge in connection with the
repayment of existing indebtedness of the Company and its Subsidiaries reasonably requested by Parent or any of its Subsidiaries and (viii) cooperate with Parent's Financing Sources' due
diligence, to the extent customary or reasonable;
provided
,
however
, all non-public or otherwise
confidential information regarding the Company obtained by Parent pursuant to this Section 5.07(d) shall be kept confidential in accordance with the Confidentiality Agreement, and the Company
shall only be required to furnish such information to any prospective lenders or other proposed Financing Sources, underwriters, placement agents, initial purchasers or other third parties that have
agreed to keep such information confidential; and
provided further
that nothing in this Agreement shall require any cooperation to the extent it would
(1) require the Company, its Subsidiaries or the Board of Directors of the Company or any of its Subsidiaries to waive or amend any terms of this Agreement or agree to pay any commitment,
financing or other fees or reimburse any expenses prior to the Closing Date; (2) require any officer of the Company or its Subsidiaries to execute or deliver any document or certificate in
connection with the Financing that is not contingent upon the Closing or that would be effective prior to the Closing (other than customary documents or certificates solely relating to the Company or
its Subsidiaries, including the authorization letter and representation referred to in Section 5.07(d)(iv)); (3) unreasonably or materially interfere with the ongoing business or
operations of the Company and its Subsidiaries; (4) require the Company or its Subsidiaries to take any action that would conflict with or violate any applicable Laws or any provision of the
organizational documents of the Company, or that would result in a violation or breach of, or default under, any Specified Contract in effect as of the date of any such request; or (5) result
in any officer or director of the Company or its Subsidiaries incurring any personal liability in connection with the Financing. Subject to Parent's indemnification obligations under this
Section 5.07, the Company hereby consents to the customary use of its and its Subsidiaries' trademarks, service marks and logos in connection with the Financing;
provided
that such logos are used
solely in a manner that is not intended to or reasonably likely to harm or disparage the Company or any of its
Subsidiaries or the reputation or goodwill of the Company or any of its Subsidiaries. Notwithstanding anything to the contrary contained in this Agreement, no obligation of the Company or its
Subsidiaries under any certificate, document or instrument shall be effective until the Closing and the Company and its Subsidiaries shall not be required to take any action under any certificate,
document or instrument that is not contingent upon the Closing or that would be effective prior to the Closing (other than, in each case, customary documents or certificates solely relating to the
Company or its Subsidiaries including the authorization letter and management representation referred to in Section 5.07(d)(iv)). Parent shall indemnify, defend and hold harmless the Company
and its affiliates, and their respective pre-Closing Representatives, from and against any liability, obligation or loss suffered or incurred by them in connection with the arrangement of the
Financing, any information provided in connection therewith (other than arising from information provided by the Company or its Subsidiaries but including any violation of the Confidentiality
Agreement) and any misuse of the logos or marks of the Company or its Subsidiaries in connection therewith, except in the event such liabilities, obligations or losses arose out of or result from the
willful misconduct of the Company, any of its Subsidiaries or any of their
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respective
Representatives. Parent shall promptly reimburse the Company and its Subsidiaries for all out-of-pocket costs incurred by the Company or its Subsidiaries in connection with such
cooperation.
Parent acknowledges and agrees that obtaining the financing contemplated by this Section 5.07, or any other financing, is not a condition to the Closing, and affirms its obligations to
consummate the Merger and the other transactions contemplated by this Agreement (subject to the conditions contained in Article VI) irrespective and independently of the availability of any
such financing.
SECTION 5.08.
Fees and Expenses.
(a) Except as expressly set forth in this
Section 5.08 and in Section 5.07, all fees and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated.
(b) In
the event that (i) a Takeover Proposal has been publicly made (whether or not conditional and whether or not withdrawn) to the Company or its stockholders or
any person has publicly announced an intention (whether or not conditional and whether or not withdrawn) to make a Takeover Proposal or, in the case of a termination by Parent pursuant to
Section 7.01(d)(i), a Takeover Proposal (whether or not conditional and whether or not withdrawn) is otherwise made privately or publicly to the Company and thereafter (A) this Agreement
is terminated by either Parent or the Company pursuant to Section 7.01(b)(i) or Section 7.01(b)(iii) or by Parent pursuant to Section 7.01(d)(i) and (B) prior to the date
that is 12 months after such termination, (1) the Company or any of its Subsidiaries enters into any Acquisition Agreement with respect to any Takeover Proposal or (2) any
Takeover Proposal is consummated (solely for purposes of this Section 5.08(b)(i)(B), the term "
Takeover Proposal
" shall have the meaning set
forth in the definition of Takeover Proposal contained in Section 4.02(a) except that all references to 20% shall be deemed references to 50%), (ii) this Agreement is terminated by
Parent pursuant to Section 7.01(c) or 7.01(g) (
provided
that if the Company terminates this Agreement pursuant to Section 7.01(b)(i) or
7.01(b)(iii), in each case, at any time at which Parent would have been permitted to terminate this Agreement pursuant to Section 7.01(c) or 7.01(g), this Agreement shall be deemed terminated
pursuant to Section 7.01(c) or 7.01(g), as applicable, for purposes of this Section 5.08(b)(ii)) or (iii) this Agreement is terminated by the Company pursuant to
Section 7.01(f), then, in each such case, the Company shall pay Parent a fee equal to $275,000,000 (the "
Termination Fee
") by wire transfer of
same-day funds (x) in the case of a termination by Parent pursuant to Section 7.01(c) or 7.01(g), within two business days after such termination, (y) in the case of a termination
by the Company pursuant to Section 7.01(f), no later than the time of such termination and (z) in the case of a payment as a result of any event referred to in
Section 5.08(b)(i)(B), no later than the first to occur of the events referred to in clauses (B)(1) and (B)(2) above, in each case to an account designated by Parent.
(c) The
Company acknowledges that the agreements contained in this Section 5.08 are an integral part of the transactions contemplated by this Agreement and that,
without these agreements, Parent would not have entered into this Agreement. Accordingly, if the Company fails promptly to pay the amounts due pursuant to this Section 5.08 and, in order to
obtain such payment, Parent commences a suit that results in a judgment against the Company for the amounts set forth in this Section 5.08, the Company shall pay to Parent its reasonable costs
and expenses (including attorneys' fees and expenses) in connection with such suit and any appeal relating thereto, together with interest on the amounts set forth in this Section 5.08 at the
prime lending rate as published in the Wall Street Journal in effect on the date such payment was required to be made.
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SECTION 5.09.
Stock Exchange Delisting and Deregistration.
Prior to the
Effective Time, the Company shall cooperate with Parent and use its reasonable best efforts to take, or cause to be taken, all actions, and do or
cause to be done all things, necessary, proper or advisable on its part under applicable Law and the rules and requirements of the New York Stock Exchange to cause the delisting of the Company Common
Stock from the New York Stock Exchange as promptly as practicable after the Effective Time, and in any event no more than two business days after the Closing Date, and the deregistration of the
Company Common Stock under the Exchange Act as promptly as practicable after such delisting;
provided
that, for the avoidance of doubt, the Company
shall not cause the Company Common Stock to be delisted from the New York Stock Exchange prior to the Effective Time.
SECTION 5.10.
Public Announcements.
The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties. Parent and Sub, on the one hand, and the Company, on the other hand, shall consult with each other before making, and give each other a reasonable opportunity to review and
comment upon, any press release or other public statements with respect to this Agreement, the Merger and the other transactions contemplated by this Agreement, and shall not issue any such press
release or make any such public statement without the other party's concurrence, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any
national securities exchange or national securities quotation system and except as permitted by Section 4.02.
SECTION 5.11.
Resignation of Directors.
At the Closing, the Company shall deliver to Parent
evidence reasonably satisfactory to Parent of the resignation of all the directors of the Company and each
Subsidiary of the Company other than those set forth on Section 5.11 of the Company Letter, effective as of the Effective Time.
SECTION 5.12.
Sub Compliance.
Parent shall cause Sub to comply with all of Sub's obligations
under this Agreement.
SECTION 5.13.
Section 16 Compliance.
The Board of Directors of the Company shall, prior to
the Effective Time, take all such actions as may be necessary or appropriate pursuant to
Rule 16b-3(d) and Rule 16b-3(e) under the Exchange Act to exempt from Section 16 of the Exchange Act the disposition of shares of Company Common Stock and "derivative securities"
(as defined in Rule 16a-1(c) under the Exchange Act) with respect to shares of Company Common Stock by officers and directors of the Company subject to the reporting requirements of
Section 16(a) of the Exchange Act.
ARTICLE VI
Conditions Precedent
SECTION 6.01.
Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of
each party to effect the Merger is subject to the satisfaction or, to the extent legally permissible, waiver on or prior to the
Closing Date of the following conditions:
(a)
Stockholder Approval.
The Stockholder Approval shall have been obtained.
(b)
Government Consents.
(i) Any waiting period (and any extension thereof) applicable to the Merger under the
HSR Act shall have been terminated or shall have expired and (ii) the European Commission shall have issued a decision finding the Merger to be compatible with the common market under the
Council Regulation, or been deemed to have done so pursuant to Article 10(6) of the Council Regulation.
(c)
No Injunctions or Legal Restraints.
No temporary restraining order, preliminary or permanent injunction or
other Judgment issued by any court of competent jurisdiction or other
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legal
restraint or prohibition (collectively, "
Legal Restraints
") that has the effect of preventing the consummation of the Merger shall be in effect.
SECTION 6.02.
Conditions to Obligations of Parent and Sub.
The obligations of Parent and Sub to
effect the Merger are further subject to the satisfaction or, to the extent legally permissible, waiver on or prior to the
Closing Date of the following conditions:
(a)
Representations and Warranties.
The representations and warranties of the Company contained (i) in
clauses (i) and (ii) of Section 3.01(c) shall be true and correct in all respects (except for any
de minimis
exceptions or
inaccuracies) as of the date of this Agreement and as of the Closing Date as if made as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such earlier
date), (ii) in the first sentence of Section 3.01(a), Section 3.01(c)(iii), the first four sentences of Section 3.01(d), Section 3.01(w) and Section 3.01(x)
shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as if made as of the Closing Date (except to the
extent expressly made as of an earlier date, in which case as of such earlier date), (iii) in Section 3.01(g)(ii) shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date as if made as of the Closing Date and (iv) in Section 3.01 (other than those set forth in clauses (i), (ii) and (iii) above)
shall be true and correct (ignoring for such purposes any materiality or "Company Material Adverse Effect" qualifiers set forth therein) as of the date of this Agreement and as of the Closing Date as
if made as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such earlier date), other than for such failures in this clause (iv) to be true
and correct (ignoring for such purposes any materiality or "Company Material Adverse Effect" qualifiers set forth therein) that, individually or in the aggregate, have not had and would not reasonably
be expected to have a Company Material Adverse Effect. Parent shall have received a certificate signed on behalf of the Company by the chief executive officer or the chief financial officer of the
Company to such effect.
(b)
Performance of Obligations of the Company.
The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by the chief executive
officer or the chief financial officer of the Company to such effect.
(c)
Restrictions.
No Proceeding by any Governmental Entity shall be pending and no Legal Restraint shall be in
effect, in each case, which imposes or seeks to impose any Restrictions on Parent and its Subsidiaries (including Sub and, after the Effective Time, the Surviving Corporation and its Subsidiaries),
other than Permitted Restrictions.
(d)
No Company Material Adverse Effect.
Since the date of this Agreement, there shall not have occurred a
Company Material Adverse Effect or any state of facts, change, development, event, effect, condition, occurrence, action or omission that, individually or in the aggregate, would reasonably be
expected to have a Company Material Adverse Effect. Parent shall have received a certificate signed on behalf of the Company by the chief executive officer or the chief financial officer of the
Company to such effect.
SECTION 6.03.
Conditions to Obligation of the Company.
The obligation of the Company to effect
the Merger is further subject to the satisfaction or, to the extent legally permissible, waiver on or prior to the Closing
Date of the following conditions:
(a)
Representations and Warranties.
The representations and warranties of Parent and Sub contained in this
Agreement shall be true and correct (ignoring for such purposes any materiality or "Parent Material Adverse Effect" qualifiers set forth therein) as of the date of this Agreement and as of the Closing
Date as if made as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such earlier date), other than for such failures to be true
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and
correct (ignoring for such purposes any materiality or "Parent Material Adverse Effect" qualifiers set forth therein) that, individually or in the aggregate, have not had and would not reasonably
be expected to have a Parent Material Adverse Effect. The Company shall have received a certificate signed on behalf of Parent by the chief executive officer or the chief financial officer of Parent
to such effect.
(b)
Performance of Obligations of Parent and Sub.
Parent and Sub shall have performed in all material respects
all obligations required to be performed by them under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of Parent by the chief
executive officer or the chief financial officer of Parent to such effect.
SECTION 6.04.
Frustration of Closing Conditions.
None of the Company, Parent or Sub may rely on
the failure of any condition set forth in Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if
such failure was caused by such party's failure to use reasonable best efforts to consummate the Merger and the other transactions contemplated by this Agreement, as required by and subject to
Section 5.03, or by such party's breach of any other provision of this Agreement.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01.
Termination.
This Agreement may be terminated, and the Merger contemplated hereby may be
abandoned, at any time prior to the Effective Time, whether before or after the
Stockholder Approval has been obtained (except as specified below), upon written notice (other than in the case of Section 7.01(a) below) from the terminating party to the non-terminating party
specifying the subsection of this Section 7.01 pursuant to which such termination is effected:
(a) by
mutual written consent of Parent, Sub and the Company;
(b) by
either Parent or the Company, if:
(i) the
Merger shall not have been consummated by September 17, 2018 (the "
Outside Date
") for any reason;
provided
,
however
, that (x) if, on such date, the condition to Closing set forth in
Section 6.01(b) shall not have been fulfilled but all other conditions to Closing either have been fulfilled or are then capable of being fulfilled, then the Outside Date shall, without any
action on the part of the parties hereto, be extended to December 17, 2018 and (y) the right to terminate this Agreement under this Section 7.01(b)(i) shall not be available to
any party whose action or failure to act has been a principal cause of or resulted in the failure of the Merger to occur on or before such date and such action or failure to act constitutes a breach
of this Agreement;
(ii) any
Legal Restraint having the effect set forth in Section 6.01(c) shall be in effect and shall have become final and nonappealable; or
(iii) the
Stockholders Meeting shall have been held and the Stockholder Approval shall not have been obtained thereat or at any adjournment or postponement thereof;
(c) prior
to receipt of the Stockholder Approval, by Parent, in the event an Adverse Recommendation Change has occurred;
(d) by
Parent, (i) if the Company shall have breached any of its representations or warranties or failed to perform any of its covenants or other agreements contained
in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.02(a) or 6.02(b) and (B) is incapable of being cured
or is not cured by the Company by the date that is 30 business days after receipt of written notice from Parent of such breach or failure (
provided
that
Parent shall not have the right to terminate this Agreement pursuant to this
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Section 7.01(d)
if Parent or Sub is then in material breach of any representation, warranty or covenant contained in this Agreement) or (ii) if any Legal Restraint which imposes any
Restrictions on Parent and its Subsidiaries (including Sub and, after the Effective Time, the Surviving Corporation and its Subsidiaries), other than Permitted Restrictions, shall be in effect and
shall have become final and nonappealable;
(e) by
the Company, if Parent shall have breached any of its representations or warranties or failed to perform any of its covenants or other agreements contained in this
Agreement, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 6.03(a) or 6.03(b) and (ii) is incapable of being cured or is
not cured by Parent or Sub by the date that is 30 business days after receipt of written notice from the Company of such breach or failure (
provided
that the Company shall not have the right to terminate this Agreement pursuant to this Section 7.01(e) if the Company is then in material breach of any representation, warranty or covenant
contained in this Agreement);
(f) prior
to receipt of the Stockholder Approval, by the Company in accordance with Section 4.02(b) if the Company (i) executes a definitive agreement with
respect to such Superior Proposal and (ii) pays to Parent the Termination Fee, in each case, substantially concurrent with the termination of this Agreement; or
(g) prior
to receipt of the Stockholder Approval, by Parent, in the event the Board of Directors of the Company fails to publicly reaffirm its recommendation of the adoption
of this Agreement within five business days of a written request by Parent for such reaffirmation following the Company's or its Subsidiaries' or Representatives' receipt of a Takeover Proposal or any
material change thereto.
SECTION 7.02.
Effect of Termination.
In the event of termination of this Agreement by either the
Company or Parent as provided in Section 7.01, this Agreement shall forthwith become void and
have no effect, without any liability or obligation on the part of Parent, Sub or the Company, other than the last sentence of Section 5.02(a), Section 5.08, this Section 7.02 and
Article VIII and except for any intentional and material breach by a party of any of its representations, warranties, covenants or agreements set forth in this Agreement (which intentional and
material breach and liability therefor shall not be affected by termination of this Agreement or any payment of the Termination Fee pursuant to Section 5.08(b)). Notwithstanding anything herein
to the contrary, the Company hereby waives any and all rights and claims against any Financing Sources and their respective affiliates and the Representatives of the Financing Sources and such
affiliates (such entities, which, for the avoidance of doubt, do not include Parent or any of its affiliates, the "
Financing Sources Related Parties
")
in connection with this Agreement or the Financing, whether at law or in equity, in contract, in tort or otherwise, and agrees that it will not commence any actions or proceedings asserting any such
rights or claims;
provided
, that the foregoing waiver and release shall not apply to any rights, claims or causes of action that the Company or any of
its affiliates may have against the Financing Sources or the Financing Sources Related Parties for breach of any nondisclosure agreement that any Financing Sources Related Party may have entered into
with the Company or its affiliates.
SECTION 7.03.
Amendment.
This Agreement may be amended by the parties hereto at any time,
whether before or after the Stockholder Approval has been obtained;
provided
,
however
, that after the Stockholder Approval has been obtained, there shall
be made no
amendment that by Law requires further approval by stockholders of the Company without the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. Notwithstanding the foregoing, this Section 7.03, and Sections 7.02, 8.06(b), 8.09(b) and 8.10, of which the Financing Sources and the
Financing Sources Related Parties are express third party beneficiaries, may not be amended, modified, supplemented or waived in a manner adverse to them without the express written consent of the
Financing Sources.
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SECTION 7.04.
Extension; Waiver.
At any time prior to the Effective Time, the parties may
(a) extend the time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto or (c) waive compliance with any of the agreements
or conditions contained herein (to the extent legally permissible);
provided
,
however
, that after the
Stockholder Approval has been obtained, there shall be made no waiver that by Law requires further approval by stockholders of the Company without the further approval of such stockholders. Any
agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party which specifically sets forth the terms of
such extension or waiver. The failure or delay by any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights nor shall any
single or partial exercise by any party to this Agreement of any of its rights under this Agreement preclude any other or further exercise of such rights or any other rights under this Agreement.
ARTICLE VIII
General Provisions
SECTION 8.01.
Nonsurvival of Representations and Warranties.
None of the representations and warranties
in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time.
SECTION 8.02.
Notices.
All notices or other communications required or permitted to be given
hereunder shall be in writing (including email (provided that such email states that it is a
notice delivered pursuant to this Section 8.02)) and shall be deemed given (a) when delivered by hand, (b) on the date sent by facsimile (with confirmation of transmission) or
email of a PDF document if sent during normal business hours of the recipient or (c) three days after mailing by registered or certified mail (one business day in the case of express mail or
overnight courier service), and in each case, addressed to a party at the following address (or at such other address for a party as shall be specified by notice given in accordance with this
Section 8.02):
if
to Parent or Sub, to:
Northrop
Grumman Corporation
2980 Fairview Park Drive
Falls Church, VA 22042
Facsimile: (310) 263-5182
Email: sheila.cheston@ngc.com
Attention: Sheila C. Cheston
with
a copy to:
Cravath,
Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile: (212) 474-3700
Email: fsaeed@cravath.com, eschiele@cravath.com
Attention: Faiza J. Saeed, Esq.
Eric L. Schiele, Esq.
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if
to the Company, to:
Orbital
ATK, Inc.
45101 Warp Drive
Dulles, VA 20166
Facsimile: (703) 406-3509
Email: dwt@orbitalatk.com
Attention: David W. Thompson
with
a copy to:
Hogan
Lovells US LLP
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004
Facsimile: (202) 637-5910
Email: john.beckman@hoganlovells.com and
leslie.reese@hoganlovells.com
Attention: John Beckman
Les Reese
SECTION 8.03.
Definitions.
For purposes of this Agreement:
(a) "
affiliate
" means, with respect to any person, any other person directly or indirectly controlling, controlled by or
under common control with such first person.
(b) "
Baseline Financials
" means the most recent audited financial statements (including the notes thereto) included in the
Filed SEC Documents.
(c) "
Benefit Plans
" means all benefit and compensation plans, contracts, agreements, policies or arrangements sponsored,
maintained or contributed to, or required to be sponsored, maintained or contributed to, by the Company or any of its Subsidiaries or pursuant to which the Company or its Subsidiaries may have any
liability, including "employee benefit plans" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("
ERISA
"), the Company Stock Plans, and all other employment, consulting (to the extent related to a natural person), retirement, termination or change
in control agreements, supplemental retirement, profit sharing, deferred compensation, severance, stock option, stock purchase, stock appreciation rights, stock-based incentive, bonus, insurance,
medical, welfare, fringe or other plans, contracts, policies or arrangements providing for benefits or remuneration of any kind, whether or not written.
(d) "
Company ESPP
" means the Company's 2016 Employee Stock Purchase Plan as in effect on the date of this Agreement.
(e) "
Company Material Adverse Effect
" means any state of facts, change, development, event, effect, condition, occurrence,
action or omission that, individually or in the aggregate, has had a material adverse effect on the business, assets, properties, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole;
provided
,
however
, that none of the following shall be deemed either
alone or in combination to constitute, and none of the following shall be taken into account in determining whether there has been, a Company Material Adverse Effect: any state of facts, change,
development, event, effect, condition, occurrence, action or omission to the extent resulting from or arising out of (i) any change, in and of itself, in the market price or trading volume of
Company Common Stock or any failure, in and of itself, to meet internal projections or forecasts or published revenue or earnings predictions or guidance (it being understood that the facts or causes
underlying or contributing to such change or failure shall be considered in determining whether a Company Material Adverse Effect has occurred or may
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occur,
if not otherwise expressly excluded pursuant to this definition); (ii) changes in general economic, regulatory, legislative or political conditions, or in the financial, credit,
securities or other capital markets in general (including changes in interest or exchange rates) in the United States or elsewhere in the world; (iii) changes or prospective changes in
applicable Law or GAAP or changes or prospective changes in any interpretation of any of the foregoing; (iv) changes in the conditions generally of the industries in which the Company and its
Subsidiaries conduct their respective businesses; (v) acts of war (whether or not declared), armed hostilities or terrorism, or any escalation or worsening (or de-escalation or improvement) of
any acts of war (whether or not declared), armed hostilities or terrorism underway as of the date of this Agreement; (vi) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides,
volcanic eruptions, pandemics or other natural disasters; (vii) any change or prospective change, in and of itself, in the Company's or any of its Subsidiaries' credit ratings (it being
understood that the facts or causes underlying or contributing to such change or prospective change shall be considered in determining whether a Company Material Adverse Effect has occurred or may
occur, if not otherwise expressly excluded pursuant to this definition); (viii) the negotiation or announcement of this Agreement or the pendency of the Merger and the other transactions
contemplated by this Agreement, including the impact thereof on relationships, contractual or otherwise, with current or prospective customers, suppliers, vendors, distributors, partners, employees
(including any departure of any employee or officer) or regulators, or any litigation arising from allegations of breach of fiduciary duty relating to this Agreement or the transactions contemplated
by this Agreement (it being understood that this clause (viii) shall not apply with respect to a representation or warranty contained in this Agreement to the extent that the purpose of such
representation or warranty is to address the consequences resulting from the execution and delivery of this Agreement or the consummation of the Merger and the other transactions contemplated by this
Agreement or the performance of obligations under this Agreement); or (ix) the identity of, or any facts or circumstances specifically relating to, Parent or its Subsidiaries;
provided
, that, in
the case of each of clauses (ii) through (vi), the Company and its Subsidiaries, taken as a whole, are not affected
disproportionately relative to other participants in the industries in which they conduct their businesses.
(f) "
Company Personnel
" means any current or former director, officer or employee of the Company or any of its Subsidiaries.
(g) "
Company Stock Plans
" means the Company's 2015 Stock Incentive Plan, the Alliant Techsystems Inc. 2005 Stock
Incentive Plan, the Alliant Techsystems Inc. Non-Employee Director Restricted Stock Plan, the Orbital Sciences Corporation Amended and Restated 2005 Stock Incentive Plan and the Amended and
Restated Alliant Techsystems Inc. 1990 Equity Incentive Plan, in each case as in effect on the date of this Agreement.
(h) "
Confidentiality Agreement
" means the Non-Disclosure Agreement, dated as of August 30, 2017, between Parent and
the Company.
(i) "
Controlled Affiliate
" means the entity set forth on Section 8.03(i) of the Company Letter.
(j) "
Council Regulation
" means Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations
between undertakings, Official Journal L 24, 29.01.2004.
(k) as
it relates to the Company, "
knowledge
" means, with respect to any matter in question, the actual knowledge of any
officer of the Company or any other employee of the Company identified in Section 8.03(k) of the Company Letter.
(l) "
ERISA Affiliate
" means an entity which is considered a single employer with the Company under Section 4001(b)(1)
of ERISA or Section 414(b), (c), (m) or (o) of the Code.
(m) "
FAR
" means the U.S. Federal Acquisition Regulation.
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(n) "
Financing Sources
" means the entities that may commit to provide or otherwise enter into agreements in connection with
the Financing, including any parties to any definitive agreements with respect to the Financing.
(o) "
Government Bid
" means any offer, proposal, quotation or bid which, if accepted or awarded, would lead to a Government
Contract.
(p) "
Government Contract
" means, with respect to any person, any prime contract, subcontract, facility contract, teaming
agreement or arrangement, joint venture, basic ordering agreement, pricing agreement, blanket purchase agreement, letter agreement, grant, cooperative agreement or other similar Contract, or other
commitment or funding vehicle between such person and (i) a Governmental Entity, (ii) any prime contractor to a Governmental Entity or (iii) any subcontractor with respect to any
Contract described in clause (i) or (ii).
(q) "
indebtedness
" means any (i) indebtedness for borrowed money, (ii) indebtedness evidenced by any bond,
debenture, note, mortgage, indenture or other debt instrument or debt security, (iii) accounts payable to trade creditors and accrued expenses not arising in the ordinary course of business
consistent with past practice, (iv) amounts owing as deferred purchase price for the purchase of any property, (v) capital lease obligations, (vi) obligations in respect of
interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging agreements, (vii) outstanding letters of credit, bank guarantees and similar
contractual obligations or (viii) guarantees with respect to any indebtedness or obligation of a type described in clauses (i) through (vii) above of any other person.
(r) "
Judgment
" means any Federal, state or local, domestic or foreign, judgment, injunction, order, writ, ruling,
determination, directive or decree (including a consent decree) of any Governmental Entity.
(s) "
Law
" means any Federal, state or local, domestic or foreign statute, law, code, ordinance, rule or regulation of any
Governmental Entity or any Judgment.
(t) "
Parent Material Adverse Effect
" means any state of facts, change, development, event, effect, condition, occurrence,
action or omission that, individually or in the aggregate, prevents or materially delays, or would reasonably be expected to prevent or materially delay, the ability of Parent or Sub to consummate the
Merger and the other transactions contemplated by this Agreement.
(u) "
person
" means any natural person, corporation, limited liability company, partnership, joint venture, trust, business
association, Governmental Entity or other entity.
(v) "
Representatives
" means, with respect to any person, its directors, officers, employees, investment bankers, attorneys,
accountants and other advisors and other representatives.
(w) a
"
Subsidiary
" of any person means any other person (i) more than 50% of whose outstanding shares or securities
representing the right to vote for the election of directors or other managing authority of such other person are, now or hereafter, owned or controlled, directly or indirectly, by such first person,
but such other person shall be deemed to be a Subsidiary only so long as such ownership or control exists, or (ii) which does not have outstanding shares or securities with such right to vote,
as may be the case in a partnership, joint venture or unincorporated association, but more than 50% of whose ownership interest representing the right to make the decisions for such other person is,
now or hereafter, owned or controlled, directly or indirectly, by such first person, but such other person shall be deemed to be a Subsidiary only so long as such ownership or control exists.
SECTION 8.04.
Exhibits; Interpretation.
The headings contained in this Agreement or in any
Exhibit hereto and in the table of contents to this Agreement are for reference purposes only and shall
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not
affect the meaning or interpretation of this Agreement. Any capitalized terms used in any Exhibit but not otherwise defined therein shall have the meaning as defined in this Agreement. When a
reference is made in this Agreement to an Article, Section or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. For all
purposes hereof, the terms "include", "includes" and "including" shall be deemed followed by the words "without limitation". The words "hereof", "hereto", "hereby", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term "or" is not exclusive. The word "extent" in the
phrase "to the extent" means the degree to which a subject or other thing extends, and such phrase does not mean simply "if". The word "foreign" means relating to a jurisdiction other than the United
States or any subdivision thereof, and includes multinational and supranational political unions. Except as otherwise provided, the words "made available to Parent" or words of similar import refer to
documents (i) posted to the Merrill virtual dataroom maintained by or on behalf of the Company and to which Parent's Representatives have been granted access as of 5:00 p.m., New York
time, on September 15, 2017 or (ii) delivered in person or electronically to Parent, Sub or their respective Representatives as of such time. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms. References to a person are also to its permitted successors and assigns. Each of the parties has participated in the drafting
and negotiation of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all of the parties, and no presumption or
burden of proof will arise favoring or disfavoring any party by virtue of authorship of any of the provisions in this Agreement. All references to a person shall include any predecessor entities of
such person.
SECTION 8.05.
Counterparts.
This Agreement may be executed in one or more counterparts
(including by facsimile or other electronic image scan transmission), all of which shall be considered
one and the same agreement and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties.
SECTION 8.06.
Entire Agreement; No Third Party Beneficiaries.
This Agreement (a) together
with any Exhibit hereto and the Company Letter, constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties hereto with respect to the subject matter of this Agreement, except for the Confidentiality Agreement, and (b) except for
(i) Sections 7.02, 7.03, and 8.09(b) and 8.10, of which the Financing Sources and the Financing Sources Related Parties are express third party beneficiaries, and
(ii) Section 5.06, is not intended to confer upon any person other than the parties hereto (and their respective successors and assigns) any rights (legal, equitable or otherwise) or
remedies, whether as third party beneficiaries or otherwise.
SECTION 8.07.
Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the Laws of the State of Delaware, regardless of the Laws that might otherwise govern under
applicable principles of conflicts of Laws thereof.
SECTION 8.08.
Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, in whole or in part, by operation of Law or otherwise by any
of the parties without the prior written consent of the other parties, except that Parent and Sub may assign, in their sole discretion, any of or all of their rights, interests and obligations under
this Agreement to any affiliate of Parent, but no such assignment shall relieve the assigning party of any of its obligations under this Agreement if such assignee does not perform such obligations.
Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by, the parties hereto and their respective successors and assigns.
SECTION 8.09.
Consent to Jurisdiction; Service of Process; Venue.
(a) Each of the parties
hereto irrevocably and unconditionally submits to the exclusive jurisdiction of the Delaware Court of Chancery (and if the Delaware
Court of Chancery shall be unavailable, any Delaware State court and the Federal
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court
of the United States of America sitting in the State of Delaware) for the purposes of any Proceeding arising out of this Agreement or the Merger or any other transaction contemplated by this
Agreement (and agrees that no such Proceeding relating to this Agreement shall be brought by it or any of its Subsidiaries except in such courts). Each of the parties further agrees that, to the
fullest extent permitted by applicable Law, service of any process, summons, notice or document by U.S. registered mail to such person's respective address set forth above shall be effective service
of process for any Proceeding in the State of Delaware with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the
parties hereto irrevocably and unconditionally waives (and agrees not to plead or claim), any objection to the laying of venue of any Proceeding arising out of this Agreement or the Merger or any of
the other transactions contemplated by this Agreement in the Delaware Court of Chancery (and if the Delaware Court of Chancery shall be unavailable, in any Delaware State court or the Federal court of
the United States of America sitting in the State of Delaware) or that any such Proceeding brought in any such court has been brought in an inconvenient forum.
(b) Notwithstanding
anything in this Agreement to the contrary, each of the parties hereto agrees that it (i) will not bring or support any Proceeding, cross-claim or
third party claim of any kind or description, whether in law or equity, whether in contract or tort or otherwise against the Financing Sources or the Financing Sources Related Parties arising out of
or relating to this Agreement, including any dispute arising out of or relating in any way to the Financing, in any forum other than a court of competent jurisdiction located within the Borough of
Manhattan in the City of New York, New York, whether a state or federal court, (ii) all claims or causes of action (whether at law, in equity, in contract, in tort or otherwise) against any of
the Financing Sources or the Financing Sources Related Parties in any way relating to this Agreement, shall be exclusively governed by, and constructed in accordance with, the internal laws of the
State of New York, and (iii) the provisions of Section 8.10 relating to the waiver of jury trial shall apply to any such Proceedings.
SECTION 8.10.
Waiver of Jury Trial.
Each party hereto hereby waives, to the fullest extent
permitted by applicable Law, any right it may have to a trial by jury in respect of any Proceeding directly
or indirectly arising out of, under or in connection with this Agreement or the Financing. Each party hereto (a) certifies that no Representative of any other party has represented, expressly
or otherwise, that such party would not, in the event of any Proceeding, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to
enter into this Agreement, by, among other things, the mutual waiver and certifications in this Section 8.10.
SECTION 8.11.
Enforcement.
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the Delaware Court of Chancery (and if the Delaware Court of Chancery shall be unavailable, in any Delaware State court or the Federal court
of the United States of America sitting in the State of Delaware), this being in addition to any other remedy to which they are entitled at law or in equity.
SECTION 8.12.
Consents and Approvals.
For any matter under this Agreement requiring the consent
or approval of any party to be valid and binding on the parties hereto, such consent or approval must be
in writing and executed and delivered to the other parties by a person duly authorized by such party to do so.
SECTION 8.13.
Severability.
If any provision of this Agreement or the application of any such
provision to any person or circumstance shall be held invalid, illegal or unenforceable in any
respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision hereof and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
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IN
WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.
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NORTHROP GRUMMAN CORPORATION,
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by
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/s/ WESLEY G. BUSH
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Name:
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Wesley G. Bush
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Title:
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Chairman, Chief Executive and President
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ORBITAL ATK, INC.,
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by
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/s/ DAVID W. THOMPSON
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Name:
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David W. Thompson
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Title:
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President and Chief Executive Officer
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NEPTUNE MERGER, INC.,
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by
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/s/ STEVEN D. SPIEGEL
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Name:
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Steven D. Spiegel
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Title:
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President
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Exhibit A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ORBITAL ATK, INC.
FIRST:
The name of the corporation (hereinafter called the "
Corporation
") is
Orbital ATK, Inc.
SECOND:
The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, New Castle County,
Wilmington,
Delaware 19801. The name of the Corporation's registered agent at such address is The Corporation Trust Company.
THIRD:
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under
the Delaware General
Corporation Law.
FOURTH:
The total number of shares of stock which the Corporation is authorized to issue is 100 shares of common stock, having a
par value of $0.01
per share.
FIFTH:
The business and affairs of the Corporation shall be managed by or under the direction of the board of directors of the
Corporation (the
"
Board of Directors
"), and the directors need not be elected by ballot unless required by the bylaws of the Corporation (the
"
Bylaws
").
SIXTH:
In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors
is expressly
authorized to adopt, amend and repeal the Bylaws.
SEVENTH:
No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, this provision shall not eliminate or limit the liability of a director to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or
repeal of these provisions shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
EIGHTH:
The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation in the
manner from time to time prescribed by the laws of the State of Delaware. All rights herein conferred are granted subject to this reservation.
Table of Contents
ANNEX BOPINION OF CITIGROUP GLOBAL MARKETS INC.
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388 Greenwich Street
New York, NY 10013
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September 16,
2017
The
Board of Directors
Orbital ATK, Inc.
45101 Warp Drive
Dulles, VA 20166
Members of the Board:
You
have requested our opinion as to the fairness, from a financial point of view, to the holders of the common stock (other than Excluded Shares (defined below)) of Orbital ATK, Inc. (the
"Company") of the Merger Consideration (defined below) to be received by such holders pursuant to the terms and subject to the conditions set forth in an Agreement and Plan of Merger (the "Merger
Agreement") proposed to be entered into among Northrop Grumman Corporation ("Parent"), Neptune Merger, Inc., a wholly owned subsidiary of Parent ("Sub"), and the Company. As more fully
described in the Merger Agreement, (i) Sub will be merged with and into the Company (the "Merger") and (ii) each outstanding share of common stock, par value $0.01 per share, of the
Company ("Company Common Stock") issued and outstanding immediately prior to the effective time of the Merger, other than (a) any Appraisal Shares (as defined in the Merger Agreement) and
(b) any shares of Company Common Stock that are owned as treasury stock by the Company or owned by Parent or Sub (the shares referred to in clauses (a) and (b), "Excluded Shares"), will
be converted into the right to receive $134.50 in cash (the "Merger Consideration").
In
arriving at our opinion, we reviewed a draft dated September 16, 2017 of the Merger Agreement and held discussions with certain senior officers, directors and other representatives and
advisors of the Company concerning the business, operations and prospects of the Company. We examined certain
publicly available business and financial information relating to the Company as well as certain financial forecasts and other information and data relating to the Company which were provided to or
discussed with us by the management of the Company. We reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things: current and historical market
prices and trading volumes of Company Common Stock; the historical and projected earnings and other operating data of the Company; and the capitalization and financial condition of the Company. We
considered, to the extent publicly available, the financial terms of certain other transactions which we considered relevant in evaluating the Merger and analyzed certain financial, stock market and
other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of the Company. In addition to the foregoing, we
conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as we deemed appropriate in arriving at our opinion. The issuance of
our opinion has been authorized by our fairness opinion committee.
In
rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or
provided to or otherwise reviewed by or discussed with us and upon the assurances of the management of the Company that they are not aware of any relevant information that has been omitted or that
remains undisclosed to us. With respect to financial forecasts and other information and data relating to the Company provided to or otherwise reviewed by or discussed with us, we have been advised by
the management of the Company that such forecasts and other information and data were reasonably
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prepared
on bases reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance of the Company.
We
have assumed, with your consent, that the Merger will be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and 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 will be imposed that would have an
adverse effect on the Company or the Merger. Representatives of the Company have advised us, and we further have assumed, that the final terms of the Merger Agreement will not vary materially from
those set forth in the draft reviewed by us. We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company nor
have we made any physical inspection of the properties or assets of the Company. We were not requested to, and we did not, solicit third party indications of interest in the possible acquisition of
all or a part of the Company, nor were we requested to consider, and our opinion does not address, the underlying business decision of the Company to effect the Merger, the relative merits of the
Merger as compared to any alternative business strategies that might exist for the Company or the effect of any other transaction in which the Company might engage. We also express no view as to, and
our opinion does not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the
Merger, or any class of such persons, relative to the Merger Consideration. Our opinion is necessarily based upon information
available to us, and financial, stock market and other conditions and circumstances existing, as of the date hereof.
Citigroup
Global Markets Inc. has acted as financial advisor to the Company in connection with the proposed Merger and will receive a fee for such services, a significant portion of which is
contingent upon the consummation of the Merger. We also will receive a fee in connection with the delivery of this opinion. We and our affiliates in the past have provided, and currently provide,
services to the Company unrelated to the proposed Merger, for which services we and such affiliates have received and expect to receive compensation, including, without limitation, during the two year
period prior to the date hereof, having acted (i) as joint book-runner for an offering of senior notes by the Company in September 2015 and (ii) as lender, syndication agent, joint lead
arranger and joint book-runner in connection with a term loan and revolving credit facility for the Company. We and our affiliates in the past have also provided, and currently provide, services to
Parent unrelated to the proposed Merger, for which services we and such affiliates have received and expect to receive compensation, including, without limitation, during the two year period prior to
the date hereof, having acted or acting as joint book-runner for an offering of senior notes by Parent in November 2016. In the ordinary course of our business, we and our affiliates may actively
trade or hold the securities of the Company and Parent for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. In
addition, we and our affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with the Company, Parent and their respective affiliates.
Our
advisory services and the opinion expressed herein are provided for the information of the Board of Directors of the Company in its evaluation of the proposed Merger, and our opinion is not
intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed Merger.
Based
upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the
Merger Consideration is fair, from a financial point of view, to the holders of Company Common Stock (other than Excluded Shares).
Very
truly yours,
/s/
Citigroup Global Markets Inc.
CITIGROUP
GLOBAL MARKETS INC.
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ANNEX CSECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
§ 262. Appraisal rights.
(a) Any
stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a
holder of record of stock in a corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal
rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to § 251(g) of this title and, subject to paragraph (b)(3) of this section, § 251(h) of
this title), § 252, § 254, § 255, § 256, § 257, § 258, § 263 or
§ 264 of this title:
(1) Provided,
however, that, except as expressly provided in § 363(b) of this title, no appraisal rights under this section shall be available for the
shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of the meeting of
stockholders to act upon the agreement of merger or consolidation, were either: (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in § 251(f) of this title.
(2) Notwithstanding
paragraph (b)(1) of this section, appraisal rights under this section shall be available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263
and 264 of this title to accept for such stock anything except:
a. Shares
of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares
of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository
receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
c. Cash
in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a. and b. of this section; or
d. Any
combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing
paragraphs (b)(2)a., b. and c. of this section.
(3) In
the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 251(h), § 253 or
§ 267 of this title is not owned by the parent immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
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(4) In
the event of an amendment to a corporation's certificate of incorporation contemplated by § 363(a) of this title, appraisal rights shall be
available as contemplated by § 363(b) of this title, and the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as practicable, with the word "amendment" substituted for the words "merger or consolidation," and the word "corporation" substituted for the words "constituent corporation" and/or
"surviving or resulting corporation."
(c) Any
corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its
stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such a provision, the provisions of this section, including those set forth in subsections (d), (e), and (g) of
this section, shall apply as nearly as is practicable.
(d) Appraisal
rights shall be perfected as follows:
(1) If
a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in
accordance with § 255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that
appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand
the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If
the merger or consolidation was approved pursuant to § 228, § 251(h), § 253, or § 267 of
this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each
of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice or, in the case of a
merger approved pursuant to § 251(h) of this title, within the later of the consummation of the offer contemplated by § 251(h) of this title and 20 days
after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such
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constituent
corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice or, in the case
of a merger approved pursuant to § 251(h) of this title, later than the later of the consummation of the offer contemplated by § 251(h) of this title and
20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the notice is given.
(e) Within
120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation,
any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholder's demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later.
Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such
person's own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon
the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within
20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed
for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such
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publication
as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At
the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The
Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. If immediately
before the merger or consolidation the shares of the class or series of stock of the constituent corporation as to which appraisal rights are available were listed on a national securities exchange,
the Court shall dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of
the outstanding shares of the class or series eligible for appraisal, (2) the value of the consideration provided in the merger or consolidation for such total number of shares exceeds
$1 million, or (3) the merger was approved pursuant to § 253 or § 267 of this title.
(h) After
the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery,
including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court
shall take into account all relevant factors. Unless the Court in its discretion determines otherwise for good cause shown, and except as provided in this subsection, 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. At any time before the entry of judgment in the proceedings, the surviving corporation may
pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided herein only upon the sum of (1) the difference, if any, between the
amount so paid and the fair value of the shares as determined by the Court, and (2) interest theretofore accrued, unless paid at that time. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the
stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has
submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is
not entitled to appraisal rights under this section.
(i) The
Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders
entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any state.
(j) The
costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a
stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
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(k) From
and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section
shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record
at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e)
of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not affect the right of any stockholder who
has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or
consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.
(l) The
shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or
consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
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FORM OF PRELIMINARY PROXY CARD VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time one day before the meeting date (two days before the meeting date if you are a 401(k) Plan participant). Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time one day before the meeting date (two days before the meeting date if you are a 401(k) Plan participant). Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ORBITAL ATK, INC. 45101 WARP DRIVE DULLES, VA 20166 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E33488-TBD KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. ORBITAL ATK, INC. The Board of Directors recommends you vote FOR proposals 1, 2 and 3. For Against Abstain 1. To adopt the Agreement and Plan of Merger, dated as of September 17, 2017, by and among Northrop Grumman Corporation, Neptune Merger, Inc. and Orbital ATK, Inc., as it may be amended from time to time. ! ! ! ! ! ! ! ! ! 2. To approve, on a non-binding, advisory basis, the compensation that will or may be paid to Orbital ATKs named executive officers in connection with the merger. To adjourn the Orbital ATK special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes to adopt the merger agreement. 3. NOTE: If you vote your proxy through the Internet or by telephone, you do NOT need to mail back your proxy card. If you are located outside the United States, the delivery of your proxy MUST be by INTERNET or MAIL. ! For address changes and/or comments, please check this box and write them on the back where indicated. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
ORBITAL ATK, INC. 45101 Warp Drive Dulles, VA 20166 (telephone: 703-406-5000; web site: www.orbitalatk.com) Corporate Headquarters and Special Meeting Site: Stockholder Inquiries: If you are a stockholder of record, send inquiries concerning transfer of shares, lost certificates or address changes to the Company's Transfer Agent/Registrar, Computershare, P.O. Box 505000, Louisville, KY 40233; send overnight correspondence to Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202 (telephone toll free: 1-866-865-6322; web site: https://www-us.computershare.com/investor/contact) Investor Relations: Inquiries from stockholders, securities analysts and others in the professional investment community should be directed to Barron S. Beneski, Vice President, Communications and Investor Relations, Orbital ATK, Inc., 45101 Warp Drive, Dulles, VA 20166 (telephone: 703-406-5528; e-mail: barron.beneski@orbitalatk.com) Important Notice Regarding the Availability of Proxy Materials for the Special Meeting: The Notice and Proxy Statement is available at www.proxyvote.com. E33489-TBD ORBITAL ATK, INC. This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby appoints David W. Thompson and Thomas E. McCabe as proxies, each with power to act alone and to appoint a substitute, and authorizes each of them to represent and vote as specified on the other side of this proxy, all shares of common stock of Orbital ATK, Inc. which the undersigned is entitled to vote at the Special Meeting of Stockholders to be held at [] a.m., Eastern Time, on [], 2017, at the headquarters of the Company at 45101 Warp Drive, Dulles, Virginia 20166, and all adjournments thereof. The shares represented by this proxy will be voted as specified on the other side. If no choice is specified, this proxy will be voted FOR Proposals 1, 2 and 3. The proxies are authorized, in their discretion, to vote such shares upon any other business that may properly come before the Special Meeting. The undersigned hereby acknowledges receipt of the Proxy Statement of the Company. Your Internet or telephone vote authorizes the named proxies to vote these shares in the same manner as if you marked, signed and returned your proxy card. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed and dated on the other side Address Changes/Comments:
FORM OF PRELIMINARY 401(K) PLAN VOTING INSTRUCTIONS VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time one day before the meeting date (two days before the meeting date if you are a 401(k) Plan participant). Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time one day before the meeting date (two days before the meeting date if you are a 401(k) Plan participant). Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ORBITAL ATK, INC. 45101 WARP DRIVE DULLES, VA 20166 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E33490-TBD KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. ORBITAL ATK, INC. The Board of Directors recommends you vote FOR proposals 1, 2 and 3. For Against Abstain 1. To adopt the Agreement and Plan of Merger, dated as of September 17, 2017, by and among Northrop Grumman Corporation, Neptune Merger, Inc. and Orbital ATK, Inc., as it may be amended from time to time. ! ! ! ! ! ! ! ! ! 2. To approve, on a non-binding, advisory basis, the compensation that will or may be paid to Orbital ATKs named executive officers in connection with the merger. To adjourn the Orbital ATK special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes to adopt the merger agreement. 3. NOTE: If you vote your proxy through the Internet or by telephone, you do NOT need to mail back your proxy card. If you are located outside the United States, the delivery of your proxy MUST be by INTERNET or MAIL. ! For address changes and/or comments, please check this box and write them on the back where indicated. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
ORBITAL ATK, INC. 45101 Warp Drive Dulles, VA 20166 (telephone: 703-406-5000; web site: www.orbitalatk.com) Corporate Headquarters and Special Meeting Site: Stockholder Inquiries: If you are a stockholder of record, send inquiries concerning transfer of shares, lost certificates or address changes to the Company's Transfer Agent/Registrar, Computershare, P.O. Box 505000, Louisville, KY 40233; send overnight correspondence to Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202 (telephone toll free: 1-866-865-6322; web site: https://www-us.computershare.com/investor/contact) Investor Relations: Inquiries from stockholders, securities analysts and others in the professional investment community should be directed to Barron S. Beneski, Vice President, Communications and Investor Relations, Orbital ATK, Inc., 45101 Warp Drive, Dulles, VA 20166 (telephone: 703-406-5528; e-mail: barron.beneski@orbitalatk.com) Important Notice Regarding the Availability of Proxy Materials for the Special Meeting: The Notice and Proxy Statement is available at www.proxyvote.com. E33491-TBD ORBITAL ATK, INC. This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby directs Fidelity Management Trust Company, the Trustee of the Orbital ATK, Inc. 401(k) Plan, to vote all shares of common stock held in the Plan, which the undersigned is entitled to vote, at the Special Meeting of Stockholders to be held at [] a.m., Eastern Time, on [], 2017, at the headquarters of the Company at 45101 Warp Drive, Dulles, Virginia 20166, and all adjournments thereof. These instructions will be followed as directed on the other side. Shares held in the Plan for which no voting instructions are received by the Trustee, as well as shares not allocated to any participants, will be voted in the same proportion as votes actually cast by participants in the Plan. The undersigned hereby acknowledges receipt of the Proxy Statement of the Company. Your Internet or telephone vote authorizes the Trustee to vote these shares in the same manner as if you marked, signed and returned your proxy card. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed and dated on the other side Address Changes/Comments: