Exhibit 2.4
CONTINGENT VALUE RIGHTS AGREEMENT
This CONTINGENT VALUE RIGHTS AGREEMENT, dated as of October 21, 2003
(this "Agreement"), is entered into by and among MILTOPE GROUP, INC., a Delaware
corporation ("MGI"), MILTOPE CORPORATION, an Alabama corporation (the
"Company"), VISION TECHNOLOGIES KINETICS, INC., a Delaware corporation
("Parent"), and GREAT UNIVERSAL INCORPORATED, a Delaware corporation (the
"Representative").
RECITALS:
WHEREAS, MGI, the Company, Parent and VTK Merger Subsidiary Corporation
have entered into an Agreement and Plan of Merger dated as of October 21, 2003
(the "Merger Agreement"), pursuant to which MGI and VTK Merger Subsidiary
Corporation will each merge with and into the Company, with the Company
surviving the mergers as a direct wholly-owned subsidiary of Parent;
WHEREAS, pursuant to the Merger Agreement the Company agreed to create
and issue to MGI's stockholders of record immediately prior to the Effective
Time contingent value rights (the "CVRs") as hereinafter described; and
WHEREAS, all things necessary have been done to make the CVRs, when
issued pursuant to the Merger Agreement and hereunder, the valid obligations of
the Company and to make this Agreement a valid agreement of the Company, in
accordance with its terms.
NOW, THEREFORE, for and in consideration of the premises and the
consummation of the transactions referred to above, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders (as
hereinafter defined), as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS.
(a) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well
as the singular;
(ii) all accounting terms used herein and not expressly
defined shall have the meanings assigned to such terms in
accordance with generally accepted accounting principles, and the
term "generally accepted accounting principles" means such
accounting principles as are generally accepted in the United
States at the time of any computation;
(iii) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision;
(iv) unless the context otherwise requires, words
describing the singular number shall include the plural and vice
versa, words denoting any gender shall include all genders and
words denoting natural Persons shall include corporations,
partnerships and other Persons and vice versa; and
(v) all references to "including" shall be deemed to
mean including without limitation.
(b) The following terms shall have the meanings ascribed to them as
follows:
"Affiliate" of a Person means a Person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person.
"Board of Directors" means the board of directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
secretary or an assistant secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in New York, New York are authorized or obligated by
law or executive order to remain closed.
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States or Singapore government or any agency
or instrumentality thereof having maturities of not more than six months from
the date of acquisition, (b) certificates of deposit with maturities of six
months or less from the date of acquisition, bankers acceptances with maturities
not exceeding six months and overnight bank deposits, in each case with any
commercial bank organized and in existence under the laws of the United States
and having capital and surplus in excess of $500 million, (c) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (a) and (b) above entered into with any financial
institution meeting the qualifications specified in clause (b) above, (d)
commercial paper having the highest rating obtainable from Xxxxx'x Investors
Service, Inc. or Standard & Poor's Ratings Services and in each case maturing
within 180 days after the date of acquisition, (e) investments in commercial
paper, maturing not more than 180 days after the date of acquisition, issued by
a corporation organized and in existence under the laws of the United States or
any foreign country recognized by the United States with a rating at the time as
of which any investment therein is made of "P-111 (or higher) according to
Xxxxx'x Investor Service, Inc. or "A-11, (or higher) according to Standard
Poor's Ratings Services, and (f) money market mutual funds substantially all of
the assets of which are of the type described in the foregoing clauses (a)
through (e) above.
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"Cash Proceeds" means all cash compensation, payments, penalties,
interest and other damages, if any, recovered or received by the Company or any
of its Affiliates as a result of the Litigation, whether such compensation,
penalties, interest or other damages are recovered at trial, upon appeal or in
settlement.
"Claims Expenses" means, without double counting, the sum of all fees,
costs and expenses (including attorneys fees and expenses) incurred or accrued
after the Effective Time by the Company and its Affiliates in prosecuting and
settling the Litigation (including defending against any counterclaims),
including amounts paid or payable in settlement or in judgment of any
counterclaims against the Company in the Litigation and, except as provided in
Section 2.4, excluding any payment of Firm Expenses. "Claims Expenses" shall
also include any amounts paid or payable to or on behalf of the Representative
pursuant to Section 3.4 of this Agreement (whether paid or payable before or
after the Effective Time). Notwithstanding the foregoing, (i) amounts paid or
payable by the Company or its Affiliates in settlement or judgment with respect
to any counterclaims in the Litigation shall be deemed "Claims Expenses" whether
paid or payable before or after the Effective Time and (ii) in the event the
full and final settlement of, or judgment with respect to, the Litigation occurs
prior to the Effective Time, "Claims Expenses" shall mean all fees, costs and
expenses (including attorneys fees and expenses) paid or payable after the date
hereof by the Company and its Affiliates in prosecuting and settling the
Litigation (including defending against any counterclaims).
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Control" (including the terms "controlled", "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock, including the
power to dispose of or vote such stock, as trustee or executor, by contract or
otherwise.
"CVRs" means the contingent value rights to be issued by the Company
pursuant to the Merger Agreement and this Agreement.
"CVR Payment Amount" means, on the CVR Payment Date, an amount of cash
(if positive) with respect to each CVR equal to the quotient of (A)(i)(x) if
Claims Expenses equal or are less than the Reserve, $700,000.00 minus the Claims
Expenses or (y) if Claims Expenses exceed the Reserve, 50% of the result of
$700,000.00 minus the Claims Expenses, plus (ii) 50% of the sum of (1) the
aggregate amount of Litigation Proceeds actually received by the Company or its
Affiliates, minus (2) the Tax Allocation, divided by (B) the total number of
CVRs outstanding on the CVR Payment Date.
"CVR Payment Date" means the date that the CVR Payment Amount is paid by
the Company to the Holders, which shall be established pursuant to Section 2.4.
"CVR Register" and "CVR Registrar" have the respective meanings specified
in Section 2.3(b).
"Effective Time" has the meaning ascribed to such term in the Merger
Agreement.
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"Firm Expenses" has the meaning specified in Section 2.4(e) of this
Agreement.
"Holder" means a Person in whose name a CVR is registered in the CVR
Register.
"Litigation" means the lawsuit entitled MILTOPE CORPORATION AND IV
PHOENIX GROUP, INC. V. DRS TECHNOLOGIES, INC., DRS ELECTRONICS SYSTEMS, INC.,
XXXXXXX XXXXXXXX, XXXXXXXX XXXXXX, XXXXXXX XXXXX, XXXX SHAFY, XXXXX XXXX, XXXXXX
XXXXX, XXXXX XXXX, AND XXXXXXX XXXXXXX (Case Xx. 00 0000, X.X. Xxxxxxxx Xxxxx
for the Eastern District of New York; filed October 3, 2001).
"Litigation Proceeds" means the aggregate amount of any and all Cash
Proceeds and Realized Non-Cash Proceeds actually received by the Company or any
of its Affiliates.
"Litigation Proceeds Certificate" has the meaning specified in Section
2.4(a) of this Agreement.
"Merger Agreement" has the meaning set forth in the recitals to this
Agreement.
"Non-Cash Proceeds" means all non-cash compensation, payments, penalties,
interest and other damages, if any, recovered or received by the Company or any
of its Affiliates as a result of the Litigation, whether such compensation,
penalties, interest or other damages are recovered at trial, upon appeal or in
settlement.
"Officer's Certificate, means a certificate signed by the president, any
vice president, the controller, the treasurer, the secretary or any assistant
secretary, in each case of the Company, in his or her capacity as such an
officer, and delivered to the Representative.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, business trust, association, joint-stock company,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Realized Non-Cash Proceeds" means (i) all cash proceeds received in
respect of Non-Cash Proceeds, net of direct expenses incurred in converting such
Non-Cash Proceeds to cash and (ii) the fair market value (as determined pursuant
to Section 2.4) of any Non-Cash Proceeds that would not reasonably be expected
to be realized by receipt of cash in the foreseeable future.
"Representative" means the Person named as the "Representative" in the
first paragraph of this Agreement, until a successor Representative shall have
become such pursuant to the applicable provisions of this Agreement, and
thereafter "Representative" shall mean such successor Representative.
"Resolution" has the meaning specified in Section 2.4(e) of this
Agreement.
"Reserve" means the sum of $700,000.00.
"Successor Representative" means any successor Representative appointed
pursuant to Section 3.5(e)
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"Surviving Person" has the meaning set forth in Section 7.1(a)(1).
"Tax Allocation" means the result obtained by multiplying the Litigation
Proceeds actually received by the Company or its Affiliates by 20%.
SECTION 1.2 NOTICES TO REPRESENTATIVE AND COMPANY. Any request, demand,
authorization, direction, notice, consent, waiver or other document provided or
permitted by this Agreement to be made upon, given or furnished to, or filed
with:
(a) the Representative by any Holder or the Company shall be
sufficient for every purpose hereunder if in writing and delivered
personally, or mailed first-class postage prepaid or sent by a nationally
recognized overnight courier to the Representative addressed to it at 000
Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, or at any other address
previously furnished in writing to the Holders and the Company by the
Representative; or
(b) the Company by the Representative or by any Holder shall be
sufficient for every purpose hereunder if in writing and delivered
personally, telecopied or mailed first-class postage prepaid or sent by a
nationally recognized overnight courier to the Company addressed to it at
000 Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, or at any
other address previously furnished in writing to the Representative and
the Holders by the Company.
SECTION 1.3 NOTICE TO HOLDERS. Where this Agreement provides for notice
to Holders, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his, her or its address as it appears in
the CVR Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders.
SECTION 1.4 EFFECT OF HEADINGS. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
SECTION 1.5 SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.6 BENEFITS OF AGREEMENT. Nothing in this Agreement, express
or implied, shall give to any Person (other than the parties hereto, the Holders
and their permitted successors and assigns hereunder) any benefit or any legal
or equitable right, remedy or claim under this Agreement or under any covenant
or provision herein contained, all such covenants and provisions being for the
sole benefit of the parties hereto, the Holders and their permitted successors
and assigns.
SECTION 1.7 GOVERNING LAW. This Agreement and the CVRs shall be
governed by and construed in accordance with the laws of the State of Delaware.
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SECTION 1.8 LEGAL HOLIDAYS. In the event that a CVR Payment Date shall
not be a Business Day, then (notwithstanding any provision of this Agreement to
the contrary) any payment required to be made in respect of the CVRs on such
date need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the applicable CVR
Payment Date.
SECTION 1.9 SEVERABILITY CLAUSE. In case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein. Upon such determination that any term
or other provision is invalid, illegal or unenforceable, the court or other
tribunal making such determination is authorized and instructed to modify this
Agreement so as to effect the original intent of the parties as closely as
possible so that the transactions and agreements contemplated herein are
consummated as originally contemplated to the fullest extent possible.
SECTION 1.10 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be deemed to constitute but one and the same
instrument.
SECTION 1.11 EFFECTIVENESS; TERMINATION. This Agreement shall be
terminated and of no force or effect, and the parties hereto shall have no
liability hereunder, upon the earliest to occur of (i) the payment of all CVR
Payment Amounts required to be paid under the terms of this Agreement, (ii) the
determination that no CVR Payment Amounts are required to be made under the
terms of this Agreement and (iii) the termination of the Merger Agreement in
accordance with the terms thereof, provided that, for the avoidance of doubt, if
the Closing (as defined in the Merger Agreement) occurs, this Agreement shall
only be capable of termination under (i) and (ii) above and shall not be capable
of termination under this clause (iii).
SECTION 1.12 ENTIRE AGREEMENT. This Agreement and the Merger Agreement
represent the entire understanding of the parties hereto with reference to the
transactions and matters contemplated hereby and thereby and this Agreement
supercedes any and all other oral or written agreements hereto made except for
the Merger Agreement. If and to the extent that any provision of this Agreement
is inconsistent or conflicts with the Merger Agreement, this Agreement shall
govern and be controlling.
ARTICLE II
CONTINGENT VALUE RIGHTS
SECTION 2.1 ISSUANCE OF CVRS. The CVRs shall be issued pursuant to the
Merger at the time and in the manner set forth in the Merger Agreement.
SECTION 2.2 NONTRANSFERABLE. The CVRs shall not be assignable or
otherwise transferable by Holders, except by will, upon death or by operation of
law.
SECTION 2.3 NO CERTIFICATE; REGISTRATION; REGISTRATION OF TRANSFER;
CHANGE OF ADDRESS.
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(a) The CVRs shall not be evidenced by a certificate or other
instrument.
(b) The Company shall cause to be kept at the Company's
principal office a register (the register maintained in such office and
in any other office designated pursuant to this Section 2.3 being herein
sometimes referred to as the "CVR Register") in which the Company shall
provide for the registration of CVRs. The secretary of the Company is
hereby initially appointed "CVR Registrar" for the purpose of registering
CVRs and transfers of CVRs as herein provided.
(c) Subject to the restriction on transferability set forth in
Section 2.2, every request made to the Company to transfer a CVR must be
in writing and accompanied by a written instrument of transfer in form
reasonably satisfactory to the Company and the CVR Registrar, duly
executed by the Holder thereof, his attorney duly authorized in writing,
personal representative or survivor and setting forth in reasonable
detail the circumstances relating to the transfer. Upon receipt of such
written notice by the Company, the CVR Registrar shall, subject to his
reasonable determination that the transfer instrument is in proper form
and the transfer otherwise complies with the other terms and conditions
herein, register the transfer of the CVRs in the CVR Register. All
transfers of CVRs registered in the CVR Register shall be the valid
obligations of the Company, evidencing the same right, and shall entitle
the transferee to the same benefits and rights under this Agreement, as
those held by the transferor. No transfer of a CVR shall be valid until
registered in the CVR Register and any transfer not duly registered in
the CVR Register will be void ab initio.
(d) A Holder may make a written request to the CVR Registrar or
the Company to change such Holder's address of record in the CVR
Register. The written request must be duly executed by the Holder. Upon
receipt of such written notice by the CVR Registrar or the Company, the
CVR Registrar shall promptly record the change of address in the CVR
Register.
SECTION 2.4 PAYMENT PROCEDURES.
(a) As promptly as practicable but in no event later than 15
days after the latest to occur of (1) the full and final settlement of,
or the entry of judgment with respect to, the Litigation, including
counterclaims, (2) receipt by the Company or any of its Affiliates of
Litigation Proceeds or any Non-Cash Proceeds, and (3) the Effective Time,
the Company shall deliver to the Representative a certificate (the
"Litigation Proceeds Certificate") setting forth in reasonable detail (i)
the amount of any Cash Proceeds and Realized Non-Cash Proceeds received
by the Company or its Affiliates, if any, (ii) a detailed description of
Non-Cash Proceeds received by the Company, if any, (iii) the fair market
value of any Realized Non-Cash Proceeds described in clause (ii) of the
definition thereof and the methodology used, and calculations made, to
determine such fair market value, (iv) an itemized list in reasonable
detail of the Claims Expenses, (v) the calculation of the Tax Allocation,
(vi) any assumptions underlying the determination of any item used in
making the necessary calculations of the CVR Payment Amount, (vii) any
financial or other documentation reasonably necessary to sufficiently
support the calculation of the CVR Payment Amount, and (viii) the
calculation of the CVR Payment Amount, if any.
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(b) Within 30 days of delivery of the Litigation Proceeds
Certificate, the Representative shall give written notice specifying
whether it agrees with or objects (a "Notice of Agreement" and a "Notice
of Objection", respectively) to the Litigation Proceeds Certificate, the
CVR Payment Amount and the CVR Payment Amount calculation.
(c) If the Representative delivers a Notice of Agreement and
any CVR Payment Amount is payable, the Company shall establish a CVR
Payment Date with respect to such CVR Payment Amount that is within 15
days of the date of the Notice of Agreement. On such CVR Payment Date,
the Company shall then promptly cause the CVR Payment Amount to be
delivered to each of the Holders by check mailed to the address of each
Holder as reflected in the CVR Register as of the close of business on
the last Business Day prior to such CVR Payment Date.
(d) If the Representative delivers a Notice of Objection within
such 30-day period, the Company shall hold an amount of cash equal to the
aggregate CVR Payment Amount, if any, set forth in the Litigation
Proceeds Certificate in a separate bank account invested in Cash
Equivalents until a Resolution is obtained pursuant to the procedures set
forth in Section 2.4(e).
(e) If the Representative delivers a Notice of Objection within
such 30-day period, the Representative shall as promptly as practicable
following delivery of the Notice of Objection, but in no event later than
15 days after delivery of the Notice of Objection, deliver to the Company
a certificate (the "Representative Objection Certificate") setting forth
in reasonable detail each of the objections to the calculations,
valuations, methodologies, lists, computations, assumptions and other
information, including, without limitation, the fair market value of any
Realized Non-Cash Proceeds described in clause (ii) of the definition
thereof (collectively, the "Determinations") that the Representative has
to the Litigation Proceeds Certificate. If the Company does not agree
with the Representative's objections to the Litigation Proceeds
Certificate, then within ten days of the delivery by the Representative
of the Representative Objection Certificate, the Company and the
Representative shall submit the portions of the Determinations set forth
in the Litigation Proceeds Certificate that are in dispute to a mutually
agreed upon independent public accounting firm of national standing that
shall have expertise in income and franchise tax matters and the
valuation of assets and properties (the "Firm"), provided, that the Firm
has not billed the Representative, the Company or the Parent for
professional services within the three-year period immediately prior to
the date of the Litigation Proceeds Certificate. The Firm shall be
instructed to determine whether the Determinations set forth in the
Litigation Proceeds Certificate that are in dispute are correct. If the
Firm determines that such Determinations are correct, the CVR Payment
Amount shall be as set forth in the Litigation Proceeds Certificate, and
the Representative shall be deemed to have delivered a Notice of
Agreement with respect to such Litigation Proceeds Certificate. If the
Firm determines that any of the Determinations set forth in the
Litigation Proceeds Certificate are incorrect in any respect that causes
the CVR Payment Amount determined by the Company to be less than the CVR
Payment Amount determined by the Firm, the Firm's resulting calculation
of the CVR Payment Amount shall be binding on the parties hereto (a
"Resolution"), and in
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addition to the CVR Payment Amount determined by the Firm, the Company
shall pay to the Holders interest on such differential calculated from
the date that the Representative delivered its Notice of objection at an
interest rate equal to the rate actually earned by the Company pursuant
to the investment of such funds in Cash Equivalents. All costs and
expenses billed by the Firm in connection with the performance of its
duties described herein ("Firm Expenses") shall be paid by the Company;
provided, however, that if the Company's determination of the CVR Payment
Amount is:
(i) greater than or equal to 95% of the CVR Payment
Amount determined by the Firm, then 100% of the Firm Expenses
shall be deducted from the CVR Payment Amount;
(ii) greater than or equal to 85% of the CVR Payment
Amount determined by the Firm, but less than 95% of the CVR
Payment Amount determined by the Firm, then 50% of the Firm
Expenses shall be deducted from the CVR Payment Amount; or
(iii) less than 85% of the CVR Payment Amount determined
by the Firm, then the Company shall not be reimbursed for any
portion of the Firm Expenses.
(f) If the Representative does not deliver a Notice of
Agreement or a Notice of objection to the Litigation Proceeds Certificate
within the 30-day period described above, the Representative shall be
deemed to have delivered a Notice of Agreement with respect to such
Litigation Proceeds Certificate, and, if any CVR Payment Amount is
payable, the Company shall establish a CVR Payment Date with respect to
such CVR Payment Amount that is within 15 days following the last day of
such 30-day period. On such CVR Payment Date, the Company shall then
promptly cause the CVR Payment Amount to be delivered to each of the
Holders by check mailed to the address of each Holder as reflected in the
CVR Register as of the close of business on the last Business Day prior
to such CVR Payment Date. If the Representative delivers a Notice of
Objection with respect to such Litigation Proceeds Certificate within the
30-day period described above, then after a Resolution is obtained, the
Company shall establish a CVR Payment Date with respect to such CVR
Payment Amount that is within ten days of the date of such Resolution. On
such CVR Payment Date, the Company shall then promptly cause the CVR
Payment Amount to be delivered to each of the Holders by check mailed to
the address of each Holder as reflected in the CVR Register as of the
close of business on the last Business Day prior to such CVR Payment
Date.
SECTION 2.5 PAYMENTS ON CVRS.
(a) In the event that the Company or its Affiliates receive
payments of Litigation Proceeds on more than one date, then the CVR
Payment Amount with respect to any such Litigation Proceeds shall be paid
with respect to each such receipt of Litigation Proceeds and the
procedures described in Section 2.4 shall apply to each such receipt of
Litigation Proceeds. The calculation of the CVR Payment Amount following
the calculation of the initial CVR Payment Amount shall be made on a
cumulative, non-duplicative, basis to
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reflect the receipt of all Litigation Proceeds, the payment of all Claims
Expenses and the prior payment of any CVR Payment Amounts (including the
$700,000 referred to in the definition thereof) from the date of this
Agreement to the date of determination of each such subsequent CVR
Payment Amount (it being understood, however, that in no event shall the
Holders be obligated or required to refund to the Company or any of its
Affiliates any portion of any CVR Payment Amount previously paid to the
Holders).
(b) The determination by the Company and the Representative of
any CVR Payment Amount pursuant to the procedures set forth in Section
2.4, absent a mathematical error, shall be final and binding on the
Company and each Holder.
(c) Except in the specific cases specified in this Agreement,
no interest shall accrue on any amounts payable on the CVRs to any
Holder.
(d) The Company shall be entitled to deduct and withhold, or
cause to be deducted or withheld, from the CVR Payment Amount otherwise
payable pursuant to this Agreement such amounts as it is required to
deduct and withhold with respect to the making of such payment under the
Code (as defined in the Merger Agreement), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld or
paid over to or deposited with the relevant governmental entity, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the Holder in respect of which such deduction and
withholding was made.
(e) Notwithstanding anything herein to the contrary, in the
event the Company incurs Claims Expenses in excess of $700,000.00, the
Company shall be reimbursed for such excess Claims Expenses out of
Litigation Proceeds, if any, prior to the payment of any CVR Payment
Amount.
SECTION 2.6 NO VOTING, DIVIDENDS OR STATED INTEREST; NO EQUITY OR
OWNERSHIP INTEREST IN THE COMPANY.
(a) The CVRs shall not have any voting or dividend rights and
shall not bear a stated rate of interest.
(b) The CVRs shall not represent any equity or ownership
interest in the Company or in any constituent company to the Merger.
ARTICLE III
THE REPRESENTATIVE
SECTION 3.1 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Representative undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement. The
Representative shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in its
exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs; provided, however, that the
Representative shall not be
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liable for any acts or omissions except to the extent that the
Representative has engaged in willful misconduct or bad faith or is
grossly negligent in the performance of its duties.
(b) No provision of this Agreement shall be construed to
relieve the Representative from liability for its own willful misconduct
or bad faith or gross negligence, except that no provision of this
Agreement shall require the Representative to expend or risk its own
funds or otherwise incur any financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or
powers.
SECTION 3.2 CERTAIN RIGHTS OF REPRESENTATIVE. The Representative
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement, and no implied covenants or obligations shall be read
into this Agreement against the Representative. In addition:
(a) the Representative shall have the right, and is hereby
authorized on behalf of the Holders, to approve or reject in writing any
settlement of any aspect or portion of the Litigation entered into by the
Company or its Affiliates;
(b) the Representative may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(c) whenever the Representative shall deem it desirable that a
matter be proved or established prior to taking, suffering or omitting
any action hereunder, the Representative may, in the absence of bad faith
or willful misconduct on its part, rely upon an Officer's Certificate;
(d) the Representative may engage and consult with counsel of
its selection and the written advice of such counsel or any opinion of
counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Representative may engage and consult with tax experts,
valuation firms and other experts and third parties that it, in its sole
and absolute discretion, deems appropriate or necessary to enable it to
discharge its duties hereunder;
(f) the permissive rights of the Representative to do things
enumerated in this Agreement shall not be construed as a duty;
(g) the Representative shall not be required to give any note
or surety in respect of the execution of such powers or otherwise in
respect of the premises; and
(h) the initial Representative may be a Holder.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF CVRS. The
recitals contained herein shall be taken as the statements of the Company, and
the Representative assumes no responsibility for their correctness. The
Representative makes no representations as
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to the validity or sufficiency of this Agreement or the CVRs. The Representative
shall not be accountable or liable for the use or application by the Company of
the Litigation Proceeds or Non-Cash Proceeds.
SECTION 3.4 REIMBURSEMENT AND INDEMNIFICATION OF THE REPRESENTATIVE.
The Company agrees:
(a) except as otherwise expressly provided herein, to pay the
Representative, upon the request of the Representative, all reasonable
expenses and disbursements incurred or to be incurred after the date
hereof by the Representative in accordance with any provision of this
Agreement (including, without limitation, the reasonable compensation and
the expenses and disbursements of its counsel, tax experts, valuation
firms and other experts and third parties as contemplated in Section
3.2); and
(b) to indemnify the Representative and hold it harmless from
and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, reasonable expenses and
reasonable disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable compensation and the expenses and
disbursements of its counsel, tax experts, valuation firms and other
experts and third parties as contemplated in Section 3.2) that may be
imposed on, asserted against or incurred by it resulting or arising from
actions taken under this Agreement by it after the date hereof until the
termination of this Agreement, and the Representative shall be so
indemnified under this Agreement for its own ordinary (but not gross)
negligence, but the Representative does not have the right to be
indemnified under this Agreement for its own willful misconduct or bad
faith or gross negligence.
(c) Notwithstanding Section 3.4(a) and (b), to the extent the
Claims Expenses exceed the Litigation Proceeds, any payment the
Representative is entitled to receive under this Section 3.4 shall be
reduced by the amount by which the Claims Expenses so exceed the
Litigation Proceeds.
SECTION 3.5 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) The Representative may resign at any time by giving written
notice thereof to the Company.
(b) If at any time the Representative shall become incapable of
acting, any Holder of a CVR may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Representative and the appointment of a successor
Representative.
(c) If the Representative shall resign, be removed or become
incapable of acting, the Company, by a Board Resolution, shall promptly
appoint a qualified successor Representative who is a Holder and not an
officer of the Company. The successor Representative so appointed shall,
forthwith upon its acceptance of such appointment in accordance with this
Section 3.5(c), become the successor Representative.
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(d) The Company shall give notice of each resignation and each
removal of a Representative and each appointment of a successor
Representative by mailing written notice of such event by first-class
mail, postage prepaid, to the Holders as their names and addresses appear
in the CVR Register. Each notice shall include the name and address of
the successor Representative. If the Company fails to send such notice
within ten days after acceptance of appointment by a successor
Representative, the successor Representative shall cause the notice to be
mailed at the expense of the Company.
SECTION 3.6 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor
Representative appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Representative an instrument accepting such
appointment and a counterpart of this Agreement, and thereupon such successor
Representative, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Representative;
but, on request of the Company or the successor Representative, such retiring
Representative shall execute and deliver an instrument transferring to such
successor Representative all the rights, powers and trusts of the retiring
Representative.
ARTICLE IV
HOLDERS' LISTS AND REPORTS BY REPRESENTATIVE AND COMPANY
SECTION 4.1 COMPANY TO FURNISH REPRESENTATIVE WITH NAMES AND ADDRESSES
OF HOLDERS. The Company shall furnish or cause to be furnished to the
Representative (a) in such form as the Representative may reasonably require,
the names and addresses of the Holders within 15 days of the Effective Time, and
(b) at such times as the Representative may request in writing, within five days
after receipt by the Company of any such request, a list, in such form as the
Representative may reasonably require, of the names and the addresses of the
Holders as of a date not more than 15 days prior to the time such list is
furnished.
ARTICLE V
COVENANTS
SECTION 5.1 PROSECUTION OF LITIGATION BY COMPANY; SETTLEMENT; PERIODIC
REPORTS.
(a) The Company shall prosecute the Litigation in good faith.
In any settlement to resolve the Litigation, the Company shall seek in
good faith a settlement of the Litigation for Cash Proceeds or Non-Cash
Proceeds that will become Realized Non-Cash Proceeds as described in
clause (i) of the definition thereof in as short a period of time after
the settlement is entered as is reasonably practicable. At the time that
any settlement of the Litigation is entered into, the Company and the
Representative shall seek in good faith to agree on the amount, or a
methodology for determining the amount, of any Cash Proceeds, Realized
Non-Cash Proceeds or Non-Cash Proceeds resulting from the settlement and
of the appropriate treatment thereof for purposes of calculating the
Assumed Tax Liability.
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(b) The Company shall not settle any aspect or portion of the
Litigation without obtaining (i) the prior approval of the specific terms
of such settlement by the Board of Directors and (ii) the prior written
consent of the Representative (which consent shall not be unreasonably
withheld). Unless advised by its counsel in the Litigation that doing so
may adversely affect any legal privilege or protection it may have with
respect to such information in connection with the Litigation, the
Company shall afford the Representative (1) reasonable access to
information concerning the Litigation that is in the possession, custody
or control of the Company and its Affiliates and (2) the reasonable
assistance of the officers, employees, counsel and experts of the Company
and its Affiliates for purposes of performing the Representative's duties
under this Agreement.
(c) Unless advised by its counsel in the Litigation that doing
so may adversely affect any legal privilege or protection it may have
with respect to such information in connection with the Litigation, upon
request by the Representative to the Company from time to time, the
Company shall provide the Representative with such information regarding
the status of the Litigation, including the amount of Claims Expenses
incurred, as shall be reasonably necessary to enable it to satisfy its
obligations hereunder.
(d) The Company in good faith shall convert or cause to be
converted any Non-Cash Proceeds to cash as promptly as reasonable
practicable after receiving any such Non-Cash Proceeds.
(e) The Company shall hold an amount of cash equal to the
aggregate amount of any CVR Payment Amount payable pursuant to this
Agreement in a separate bank account invested in Cash Equivalents until
such cash has been paid to the Holders.
SECTION 5.2 PAYMENT OF CVR PAYMENT AMOUNT. The Company shall duly and
promptly pay each Holder the CVR Payment Amount in the manner provided for in
Section 2.4 and in accordance with the terms of this Agreement. For the
avoidance of doubt, the CVR Payment Amounts will in no way depend on or relate
to the operating results of the Company or any constituent company to the
Merger.
ARTICLE VI
AMENDMENTS
SECTION 6.1 AMENDMENTS WITHOUT CONSENT OF HOLDERS.
(a) Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Representative, in the
Representative's sole and absolute discretion, at any time and from time
to time, may enter into one or more amendments hereto, for any of the
following purposes:
(i) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants
of the Company herein;
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(ii) to evidence the succession of another Person as a
successor Representative and the assumption by any successor of
the covenants and obligations of the Representative herein;
(iii) to add to the covenants of the Company such further
covenants, restrictions, conditions or provisions as the Board of
Directors and the Representative shall consider to be for the
protection of the Holders; provided that in each case, such
provisions shall not materially adversely affect the interests of
the Holders;
(iv) to cure any ambiguity, to correct or supplement any
provision herein that may be defective or inconsistent with any
other provision herein, or to make any other provisions with
respect to matters or questions arising under this Agreement;
provided that in each case, such provisions shall not materially
adversely affect the interests of the Holders; or
(v) as may be necessary or appropriate to ensure that
the CVRs are not subject to registration under the Securities Act
or the Exchange Act (each as defined in the Merger Agreement),
provided that such provisions shall not materially adversely
affect the interests of the Holders.
(b) Promptly after the execution by the Company and the
Representative of any amendment pursuant to the provisions of this
Section 6.1, the Company shall mail a notice thereof by first class mail
to the Holders at their addresses as they shall appear on the CVR
Register, setting forth in general terms the substance of such amendment.
SECTION 6.2 AMENDMENTS WITH CONSENT OF HOLDERS.
(a) With the consent of the Holders of not less than a majority
of the outstanding CVRs, the Company, when authorized by a Board
Resolution, and the Representative may enter into one or more amendments
hereto for the purpose of adding, eliminating or changing any provisions
of this Agreement if such addition, elimination or change is in any way
materially adverse to the interest of the Holders.
(b) Promptly after the execution by the Company and the
Representative of any amendment pursuant to the provisions of this
Section 6.2, the Company shall mail a notice thereof by first class mail
to the Holders at their addresses as they shall appear on the CVR
Register, setting forth in general terms the substance of such amendment.
SECTION 6.3 EXECUTION OF AMENDMENTS. In executing any amendment
permitted by this Article, the Representative shall be entitled to receive, and
shall be fully protected in relying upon, an opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement. The
Representative may, but is not obligated to, enter into any such amendment that
affects the Representative's own rights, privileges, covenants or duties under
this Agreement or otherwise.
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SECTION 6.4 EFFECT OF AMENDMENTS. Upon the execution of any amendment
under this Article, this Agreement shall be modified in accordance therewith,
such amendment shall form a part of this Agreement for all purposes and every
Holder shall be bound thereby.
ARTICLE VII
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 7.1 COMPANY MAY CONSOLIDATE, ETC.
(a) The Company shall not consolidate with or merge into any
other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless:
(1) in case the Company shall consolidate with or merge
into any other Person or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, the Person
formed by such consolidation or into which the Company is merged
or the Person that acquires by conveyance or transfer, or that
leases, the properties and assets of the Company substantially as
an entirety (the "Surviving Person") shall expressly assume
payment of amounts on all the CVRs and the performance of every
duty and covenant of this Agreement on the part of the Company to
be performed or observed; and
(2) the Company has delivered to the Representative an
Officer's Certificate, stating that such consolidation, merger,
conveyance, transfer or lease complies with this Article VII and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
(b) For purposes of this Section 7.1, "convey, transfer or
lease its properties and assets substantially as an entirety" shall mean
properties and assets contributing in the aggregate at least 80% of the
Company's total consolidated revenues as reported in the Company's last
available periodic financial report (quarterly or annual, as the case may
be).
SECTION 7.2 SUCCESSOR SUBSTITUTED. Upon any consolidation of or merger
by the Company with or into any other Person, or any conveyance, transfer or
lease of the properties and assets substantially as an entirety to any Person in
accordance with Section 7.1, the Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if the Surviving Person had been named as
the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under this
Agreement and the CVRs.
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SG\13666.3
MILTOPE GROUP, INC.
By: /s/ XXXXXX X. XXXXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and CEO
MILTOPE CORPORATION
By: /s/ XXXXXX X. XXXXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and CEO
VISION TECHNOLOGIES KINETICS, INC.
By: /s/ XXXX XXXXXX
--------------------------------------
Name: Xxxx Xxxxxx
Title: Authorized Representative
GREAT UNIVERSAL INCORPORATED
By: /s/ XXXXX XXX GUY
--------------------------------------
Name: Xxxxx Xxx Guy
Title: President and CEO
S-1
