NOTICE OF SPECIAL MEETING OF SHAREOWNERS
To be held on March 9, 2017
To the Shareowners of Rockwell Collins, Inc.:
We
are pleased to invite you to attend the special meeting of shareowners of Rockwell Collins, Inc., a Delaware corporation, which will be held at the Cedar Rapids Marriott,
1200 Collins Road NE, Cedar Rapids, Iowa, on March 9, 2017, at 8:30 a.m. (Central time) for the following purposes:
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1.
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Approve Share Issuance
. To vote on a proposal to issue Rockwell Collins common stock, par value $0.01 per
share, pursuant to the Agreement and Plan of Merger, dated as of October 23, 2016, by and among Rockwell Collins, Quarterback Merger Sub Corp. and B/E Aerospace, Inc., as the same
may be amended from time to time (which is referred to as the merger agreement), which is further described in the sections titled "The Merger" and "The Merger Agreement," beginning on pages 57 and
128, respectively, and a copy of which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice, which is referred to as the Share Issuance proposal; and
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2.
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Adjournment or Postponement of the Special Meeting
. To vote on a proposal to approve the adjournment of
the Rockwell Collins special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting
to approve the Share Issuance proposal, which is referred to as the Rockwell Collins Adjournment proposal.
Rockwell
Collins will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement
thereof by or at the direction of the Rockwell Collins board of directors. Please refer to the joint proxy statement/prospectus of which this notice is a part for further information with respect to
the business to be transacted at the Rockwell Collins special meeting.
The
Rockwell Collins board of directors has fixed the close of business on January 18, 2017 as the record date for the Rockwell Collins special meeting. Only Rockwell Collins
shareowners of record at that time are entitled to receive notice of, and to vote at, the Rockwell Collins special meeting or any adjournment or postponement thereof. A complete list of such
shareowners will be available for inspection by any Rockwell Collins shareowner for any purpose germane to the special meeting during ordinary business hours for the 10 days preceding the
Rockwell Collins special meeting at 400 Collins Road NE, Cedar Rapids, Iowa. The eligible Rockwell Collins shareowner list will also be available at the Rockwell Collins special meeting
for examination by any shareowner of record present at such meeting.
Completion
of the merger is conditioned on approval of the share issuance by the Rockwell Collins shareowners, which requires the affirmative vote of holders of a majority of the votes
cast by shares of Rockwell Collins common stock represented (in person or by proxy) at the Rockwell Collins special meeting.
The Rockwell Collins board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement, declared the
merger agreement advisable and in
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the best interest of Rockwell Collins and its shareowners, and unanimously recommends that Rockwell Collins shareowners vote:
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"FOR" the Share Issuance proposal; and
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"FOR" the proposal to approve the adjournment of the Rockwell Collins special meeting to a later date or dates, if
necessary or appropriate, to permit further solicitation of proxies.
Your vote is very important regardless of the number of shares of Rockwell Collins common stock that you own. Whether or not you expect to attend the Rockwell
Collins special meeting in person, to ensure your representation at the Rockwell Collins special meeting, we urge you to submit a proxy to vote your shares as promptly as possible by
(i) visiting the Internet site listed on the Rockwell Collins proxy card, (ii) calling the toll-free number listed on the Rockwell Collins proxy card or (iii) submitting your
Rockwell Collins proxy card by mail by using the provided self-addressed, stamped envelope.
Submitting a proxy will not prevent you from voting in person, but it will help to
secure a quorum and avoid added solicitation costs. Any eligible holder of Rockwell Collins stock who is present at the Rockwell Collins special meeting may vote in person, thereby revoking any
previous proxy. In addition, a proxy may also be revoked in writing before the Rockwell Collins special meeting in the manner described in the accompanying document. If your shares are held in the
name of a broker, bank or other nominee, please follow the instructions on the voting instruction card furnished by the broker, bank or other nominee. If you hold shares through the Rockwell Collins
Retirement Savings Plan and are an employee of Rockwell Collins with regular computer access as an integral part of your job
duties, you will receive an email with instructions on how to vote the shares you hold through the plan. If you hold shares through the Rockwell Collins Retirement Savings Plan and are not an
employee, or you are an employee but do not have regular computer access as an integral part of your job duties, you can vote by following the instructions described in (i), (ii) or (iii) above.
The
enclosed joint proxy statement/prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the Rockwell Collins
special meeting. We urge you to carefully read this joint proxy statement/prospectus, including any documents incorporated by reference herein, and the annexes in their entirety. If you have any
questions concerning the merger or this joint proxy statement/prospectus, would like additional copies or need help voting your shares of Rockwell Collins common stock, please contact Rockwell
Collins' proxy solicitor:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10024
Phone: (877) 825-8772
Banks & Brokers: (212) 750-5833
By
Order of the Rockwell Collins, Inc. Board of Directors,
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Robert J. Perna
Secretary
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Cedar Rapids, Iowa
February 3, 2017
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B/E AEROSPACE, INC.
1400 Corporate Center Way
Wellington, Florida 33414-2105
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on March 9, 2017
To the Stockholders of B/E Aerospace, Inc.:
We
are pleased to invite you to attend the special meeting of stockholders of B/E Aerospace, Inc., a Delaware corporation, which will be held at the Hilton Palm Beach Airport,
150 Australian Avenue, West Palm Beach, Florida, 33406-1473, on March 9, 2017, at 10:00 a.m. (Eastern time) for the following purposes:
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1.
-
Adoption of the merger agreement
. To vote on a proposal to adopt the Agreement and Plan of Merger, dated
as of October 23, 2016, by and among Rockwell Collins, Inc., Quarterback Merger Sub Corp. and B/E Aerospace, as amended from time to time (which is referred to as the merger agreement),
which is further described in the sections titled "The Merger" and "The Merger Agreement," beginning on pages 57 and 128, respectively, and a copy of which is attached as Annex A to the
joint proxy statement/prospectus accompanying this notice, which is referred to as the Merger proposal;
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2.
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Advisory Vote Regarding Merger-Related Compensation
. To vote on an advisory (non-binding) proposal to
approve the compensation that may be paid or become payable to B/E Aerospace's named executive officers that is based on or otherwise related to the proposed transactions, which is referred to as the
Merger-Related Compensation proposal; and
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3.
-
Adjournment or Postponement of the Special Meeting
. To vote on a proposal to approve the adjournment of
the B/E Aerospace special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to
approve the Merger proposal, which is referred to as the B/E Aerospace Adjournment proposal.
B/E
Aerospace will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement thereof
by or at the direction of the B/E Aerospace board of directors. Please refer to the joint proxy statement/prospectus of which this notice is a part for further information with respect to the business
to be transacted at the B/E Aerospace special meeting.
The
B/E Aerospace board of directors has fixed the close of business on January 18, 2017 as the record date for the B/E Aerospace special meeting. Only B/E Aerospace stockholders
of record at that time are entitled to receive notice of, and to vote at, the B/E Aerospace special meeting or any adjournment or postponement thereof. A complete list of such stockholders will be
available for inspection by any B/E Aerospace stockholder for any purpose germane to the special meeting during ordinary business hours for the 10 days preceding the B/E Aerospace special
meeting at B/E Aerospace's offices at 1400 Corporate Center Way, Wellington, Florida 33414. The eligible
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B/E Aerospace
stockholder list will also be available at the B/E Aerospace special meeting for examination by any stockholder of record present at such meeting.
Completion
of the merger is conditioned on adoption of the merger agreement by the B/E Aerospace stockholders, which requires the approval of a majority of the issued and
outstanding shares of B/E Aerospace common stock entitled to vote at the B/E Aerospace special meeting.
The B/E Aerospace board of directors has unanimously approved the merger and the merger agreement, declared the merger agreement advisable and in the best
interest of B/E Aerospace and its stockholders, and unanimously recommends that B/E Aerospace stockholders vote:
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"FOR" the proposal to adopt the merger agreement;
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"FOR" the approval, on an advisory (non-binding) basis, of the compensation that may be paid or become payable to B/E
Aerospace's named executive officers that is based on or otherwise relates to the proposed transactions; and
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"FOR" the proposal to approve the adjournment of the B/E Aerospace special meeting to a later date or dates, if
necessary or appropriate, to permit further solicitation of proxies.
Your vote is very important regardless of the number of shares of B/E Aerospace common stock that you own. Whether or not you expect to attend the B/E Aerospace
special meeting in person, to ensure your representation at the B/E Aerospace special meeting, we urge you to submit a proxy to vote your shares as promptly as possible by (i) visiting the
Internet site listed on the B/E Aerospace proxy card, (ii) calling the toll-free number listed on the B/E Aerospace proxy card or (iii) submitting your B/E Aerospace proxy card by mail
by using the provided self-addressed, stamped envelope.
Submitting a proxy will not prevent you from voting in person, but it will help to secure a quorum and avoid added
solicitation costs. Any eligible holder of B/E Aerospace stock who is present at the B/E Aerospace special meeting may vote in person, thereby revoking any previous proxy. In addition, a proxy
may also be revoked in writing before the B/E Aerospace special meeting in the manner described in the accompanying document. If your shares are held in the name of a broker, bank or other nominee, or
through the B/E Aerospace 401(k) Plan, please follow the instructions on the voting instruction card furnished by the broker, bank or other nominee, or your plan administrator.
The
enclosed joint proxy statement/prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the B/E Aerospace special
meeting. We urge you to carefully read this joint proxy statement/prospectus, including any documents incorporated by reference herein, and the annexes in their entirety. If you have any questions
concerning the merger or this joint proxy statement/prospectus, would like additional copies or need help voting your shares of B/E Aerospace common stock, please contact B/E Aerospace's proxy
solicitor:
Georgeson LLC
1290 Avenue of the Americas, 9th Floor
New York, New York 10104
Shareholders, Banks and Brokers:
Call Toll-Free: (800) 509-0917
Email: BEAerospace@Georgeson.com
By
Order of the B/E Aerospace, Inc. Board of Directors,
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Ryan M. Patch
Secretary
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Wellington, Florida
February 3, 2017
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REFERENCES TO ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates by reference important business and financial information about Rockwell Collins and B/E
Aerospace from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a listing of the documents incorporated by reference into this joint proxy
statement/prospectus, see "Where You Can Find More Information" beginning on page 198.
You
can obtain any of the documents incorporated by reference into this joint proxy statement/prospectus by requesting them in writing or by telephone from Innisfree M&A Incorporated,
Rockwell Collins' proxy solicitor, or Georgeson LLC, B/E Aerospace's proxy solicitor, at the following addresses and telephone numbers:
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For Rockwell Collins Stockholders:
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For B/E Aerospace Stockholders:
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Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
(877) 825-8772 (toll-free)
(212) 750-5833 (collect)
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Georgeson LLC
1290 Avenue of the Americas, 9th Floor
New York, New York 10104
(800) 509-0917 (toll-free)
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To receive timely delivery of the documents in advance of the special meetings, you should make your request no later than March 2, 2017, which is five
business days before the special meetings.
You
may also obtain any of the documents incorporated by reference into this joint proxy statement/prospectus without charge through the Securities and Exchange Commission website at
www.sec.gov
. In
addition, you may obtain copies of documents filed by Rockwell Collins with the SEC on Rockwell Collins' Internet website at
http://www.rockwellcollins.com under the tab "Investor Relations" and then under the heading "SEC Filings" or by contacting Rockwell Collins' Investor Relations at Rockwell Collins, 400 Collins Road
NE, Cedar Rapids, Iowa 52498 or by calling (319) 295-7575. You may also obtain copies of documents filed by B/E Aerospace with the SEC on B/E Aerospace's Internet website at
http://www.beaerospace.com under the tab "Investor Relations," then under the tab "Reports & SEC Filings" or by contacting B/E Aerospace's Investor Relations at
B/E Aerospace, Inc., 1400 Corporate Center Way, Wellington, Florida or by calling (561) 791-5000.
We
are not incorporating the contents of the websites of the SEC, Rockwell Collins, B/E Aerospace or any other entity into this joint proxy statement/prospectus. We are providing
the information about how you can obtain certain documents that are incorporated by reference into this joint proxy statement/prospectus at these websites only for your convenience.
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS
The following questions and answers briefly address some commonly asked questions about the merger and each of the
Rockwell Collins and B/E Aerospace special meetings. They may not include all the information that is important to stockholders of Rockwell Collins and B/E Aerospace. Stockholders should carefully
read this entire joint proxy statement/prospectus, including the annexes and the other documents referred to or incorporated by reference herein.
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Q:
-
What is the merger?
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A:
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Rockwell
Collins, Inc., which is referred to as Rockwell Collins, and B/E Aerospace, Inc., which is referred to as B/E Aerospace, have entered into an
Agreement and Plan of Merger, dated as of October 23, 2016, which (as the same may be amended from time to time) is referred to as the merger agreement. A copy of the merger agreement is
attached as Annex A to this joint proxy statement/prospectus. The merger agreement contains the terms and conditions of the proposed business combination of Rockwell Collins and B/E Aerospace.
Under the merger agreement, subject to satisfaction or (to the extent permitted by law) waiver of the conditions to the merger set forth in the merger agreement and described hereinafter, Quarterback
Merger Sub Corp., a wholly owned subsidiary of Rockwell Collins, which is referred to as Merger Sub, will merge with and into B/E Aerospace, with B/E Aerospace continuing as the surviving corporation
and a wholly owned subsidiary of Rockwell Collins, in a transaction which is referred to as the merger.
-
Q:
-
Why am I receiving these materials?
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A:
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Rockwell
Collins and B/E Aerospace are sending these materials to their respective stockholders to help them decide how to vote their shares of Rockwell Collins or
B/E Aerospace common stock, as the case may be, with respect to the merger and other matters to be considered at their respective special meetings.
The
merger cannot be completed unless Rockwell Collins stockholders approve the issuance of Rockwell Collins common stock in the merger and B/E Aerospace stockholders adopt the merger agreement. Each
of Rockwell Collins and B/E Aerospace is holding a special meeting of its stockholders to vote on the proposals necessary to complete the merger. Information about these special meetings, the merger
and the other business to be considered by stockholders at each of the special meetings is contained in this joint proxy statement/prospectus.
This
joint proxy statement/prospectus constitutes both a joint proxy statement of Rockwell Collins and B/E Aerospace and a prospectus of Rockwell Collins. It is a joint proxy statement because each of
the boards of directors of Rockwell Collins and B/E Aerospace are soliciting proxies from their respective stockholders. It is a prospectus because Rockwell Collins will issue shares of its common
stock in exchange for outstanding shares of B/E Aerospace common stock in the merger.
-
Q:
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What will B/E Aerospace stockholders receive in the merger?
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A:
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If
the merger is completed, B/E Aerospace stockholders (other than (i) Rockwell Collins, B/E Aerospace and Merger Sub and (ii) any stockholders
holding shares of B/E Aerospace common stock with respect to which appraisal rights are properly demanded and not withdrawn under the General Corporation Law of the State of Delaware) will receive
$34.10 per share in cash, without interest, and a fraction of a validly issued, fully paid and non-assessable share of Rockwell Collins common stock with a value of $27.90 per share, subject to
adjustment pursuant to the terms of the merger agreement, for each share of B/E Aerospace common stock. The precise fraction of a share of Rockwell Collins common stock into which each share of B/E
Aerospace common stock will be converted, which is referred to as the exchange ratio, will be determined based upon the Rockwell Collins stock price, as described in more detail in "The Merger
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AgreementMerger
Consideration to be Received by B/E Aerospace Stockholders" beginning on page 128. If the Rockwell Collins stock price is greater than or equal to $77.41 and less
than or equal to $89.97, the exchange ratio will be equal to the quotient of (a) $27.90 divided by (b) the Rockwell Collins stock price, which, in each case, will result in the stock
consideration having a value equal to $27.90. If the Rockwell Collins stock price is less than $77.41 or greater than $89.97, a two-way collar mechanism will apply pursuant to which, (1) if the
Rockwell Collins stock price is greater than $89.97, the exchange ratio will be fixed at 0.3101 and the value of the stock consideration will be more than $27.90, and (2) if the Rockwell
Collins stock price is less than $77.41, the exchange ratio will be fixed at 0.3604 and the value of the stock consideration will be less than $27.90.
All
fractional shares of Rockwell Collins common stock that would otherwise be issued to a B/E Aerospace stockholder as part of the merger consideration will be aggregated to create whole
shares of Rockwell Collins common stock that will be issued to B/E Aerospace stockholders as part of the merger consideration. If a fractional share of Rockwell Collins common stock remains payable to
a B/E Aerospace stockholder after aggregating all fractional shares of Rockwell Collins common stock payable to such B/E Aerospace stockholder, then such B/E Aerospace stockholder will be paid, in
lieu of such remaining fractional share of Rockwell Collins common stock, an amount in cash, without interest, rounded down to the nearest cent, equal to the product of (x) the amount of the
fractional share interest in a share of Rockwell Collins common stock to which such holder would otherwise be entitled (rounded to three decimal places) and (y) the Rockwell Collins stock
price.
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Q:
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How will Rockwell Collins pay the cash component of the merger consideration?
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A:
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Rockwell
Collins' obligation to complete the merger is not conditioned upon its obtaining financing. Rockwell Collins anticipates that approximately
$3.6 billion will be required to pay the aggregate cash portion of the merger consideration to the B/E Aerospace stockholders. Rockwell Collins intends to fund the cash component of the merger
through sources of debt financing.
For
a more complete description of sources of funding for the merger and related costs, see "The MergerSource of Funding for the Merger" beginning on page 123.
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Q:
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When do Rockwell Collins and B/E Aerospace expect to complete the transaction?
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A:
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Rockwell
Collins and B/E Aerospace are working to complete the transaction as soon as practicable. We currently expect that the transaction will be completed in the
spring of 2017. Neither Rockwell Collins nor B/E Aerospace can predict, however, the actual date on which the transaction will be completed because it is subject to conditions beyond each company's
control, including the necessary regulatory approvals.
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Q:
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What am I being asked to vote on, and why is this approval necessary?
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A:
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Rockwell
Collins stockholders are being asked to vote on the following proposals:
1. to
approve the issuance of Rockwell Collins common stock, par value $0.01 per share, pursuant to the merger agreement, which is referred to as the Share Issuance
proposal; and
2. to
approve any proposal to adjourn the Rockwell Collins special meeting from time to time, if necessary or appropriate, to solicit additional proxies in the event there
are not sufficient votes at the time of the special meeting to approve the Share Issuance proposal, which is referred to as the Rockwell Collins Adjournment proposal.
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Approval
of the Share Issuance proposal by Rockwell Collins stockholders is required to complete the merger.
B/E
Aerospace stockholders are being asked to vote on the following proposals:
1. to
adopt the merger agreement, which is referred to as the Merger proposal;
2. to
approve, on an advisory basis, the merger-related compensation arrangements of B/E Aerospace's named executive officers, which is referred to as the
Merger-Related Compensation proposal; and
3. to
approve any proposal to adjourn the B/E Aerospace special meeting from time to time, if necessary or appropriate, to solicit additional proxies in the event there are
not sufficient votes at the time of the special meeting to approve the Merger proposal, which is referred to as the B/E Aerospace Adjournment proposal.
Approval
of the Merger proposal by B/E Aerospace stockholders is required for completion of the merger.
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Q:
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What vote is required to approve each proposal at the Rockwell Collins Special Meeting?
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A:
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The Share Issuance proposal
: The affirmative vote of holders of a majority of the votes cast by shares of
Rockwell Collins common stock represented (in person or by proxy) at the Rockwell Collins special meeting is required to approve the Share Issuance proposal, which is referred to as the Rockwell
Collins Stockholder Approval.
The Rockwell Collins Adjournment proposal
: The affirmative vote of holders of a majority of the shares of Rockwell Collins common stock
represented (in person or by proxy) at the Rockwell Collins special meeting and entitled to vote on the proposal, whether or not a quorum is present, is required to approve the Rockwell Collins
Adjournment proposal.
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Q:
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What vote is required to approve each proposal at the B/E Aerospace Special Meeting?
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A:
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The Merger proposal
: The affirmative vote of holders of a majority of the issued and outstanding shares
of B/E Aerospace common stock is required to approve the Merger proposal, which is referred to as the B/E Aerospace Stockholder Approval.
The Merger-Related Compensation proposal
: The affirmative vote of holders of a majority of the votes cast by stockholders entitled to vote
on the proposal that are present in person or represented by proxy, assuming a quorum, is required to approve the Merger-Related Compensation proposal. Because the vote on the Merger-Related
Compensation proposal is advisory only, it will not be binding on B/E Aerospace. Accordingly, if the Merger proposal is approved and the merger is completed, the merger-related compensation will be
payable to B/E Aerospace's named executive officers, subject only to the conditions applicable thereto, regardless of the outcome of the approval of the Merger-Related Compensation proposal.
The B/E Aerospace Adjournment proposal
: The affirmative vote of holders of a majority of the votes cast by B/E Aerospace stockholders
present in person or represented by proxy, whether or not a quorum is present is required to approve the B/E Aerospace Adjournment proposal. If a quorum is present, the affirmative vote of holders of
a majority of the votes cast by the shares of B/E Aerospace common stock represented (in person or by proxy) at the B/E Aerospace special meeting and entitled to vote on the proposal is required to
approve the B/E Aerospace Adjournment proposal.
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Q:
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What happens if the non-binding advisory proposal to approve compensation that will or may be paid or provided by B/E Aerospace to its named
executive officers in connection with the merger is not approved?
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A:
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Approval,
on an advisory (non-binding) basis, of compensation that will or may be paid or provided by B/E Aerospace to its named executive officers in connection with
the merger is not a condition to completion of the merger. The vote is an advisory vote and is not binding. If the merger is completed, B/E Aerospace expects to pay "compensation in connection with
the merger" to its named executive officers.
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Q:
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What constitutes a quorum?
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A:
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The
presence at the Rockwell Collins special meeting, in person or by proxy, of the holders of a majority of the shares of Rockwell Collins common stock issued and
outstanding on the record date for the Rockwell Collins special meeting will constitute a quorum for the transaction of business at the Rockwell Collins special meeting. The presence at the B/E
Aerospace special meeting, in person or by proxy, of the holders of a majority of B/E Aerospace votes entitled to be cast by stockholders entitled to vote on the record date for the B/E Aerospace
special meeting will constitute a quorum for the transaction of business at the B/E Aerospace special meeting. Abstentions (which are described below) will count for the purpose of determining the
presence of a quorum for the transaction of business at each special meeting.
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Q:
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How does the Rockwell Collins Board recommend that I vote?
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A:
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The
board of directors of Rockwell Collins, which is referred to as the Rockwell Collins Board, unanimously recommends that holders of Rockwell Collins common stock
vote "
FOR
" the Share Issuance proposal and "
FOR
" the Rockwell Collins Adjournment proposal.
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Q:
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How does the B/E Aerospace Board recommend that I vote?
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A:
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The
board of directors of B/E Aerospace, which is referred to as the B/E Aerospace Board, unanimously recommends that B/E Aerospace stockholders vote
"
FOR
" the Merger proposal and "
FOR
" the B/E Aerospace Adjournment proposal. In addition, the B/E
Aerospace Board unanimously recommends that holders of B/E Aerospace common stock vote "
FOR
" the Merger-Related Compensation proposal to approve, on an
advisory (non-binding) basis, any "golden parachute" compensation arrangement that may be paid or become payable to B/E Aerospace's named executive officers that is based on or otherwise relates to
the merger or contemplated by the merger agreement.
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Q:
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What do I need to do now?
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A:
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After
carefully reading and considering the information contained in this joint proxy statement/prospectus, please vote your shares as soon as possible so that your
shares will be represented at your respective company's special meeting. Please follow the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if
your shares are held in the name of your broker, bank or other nominee.
Please do not submit your B/E Aerospace stock certificates at this time. If the merger is completed, you will receive instructions for surrendering your B/E Aerospace stock
certificates in exchange for shares of Rockwell Collins common stock from the exchange agent.
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Q:
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How do I vote?
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A:
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If
you are a stockholder of record of Rockwell Collins as of January 18, 2017, which is referred to as the Rockwell Collins record date, or a stockholder of
B/E Aerospace as of January 18, 2017, which is referred to as the B/E Aerospace record date, you may submit your proxy before your respective company's special meeting in one of the following
ways:
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Telephone votinguse the toll-free number shown on your proxy card;
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Via the Internetvisit the website shown on your proxy card to vote via the Internet; or
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Mailcomplete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.
If
you are a stockholder of record, you may also cast your vote in person at your respective company's special meeting.
If
your shares are held in "street name," through a broker, bank or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. "Street name"
stockholders who wish to vote at the meeting will need to obtain a "legal proxy" form from their broker, bank or other nominee.
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Q:
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How do I vote my shares of B/E Aerospace common stock held through B/E Aerospace's 401(k) Plan?
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A:
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If
you hold shares of B/E Aerospace common stock through B/E Aerospace's 401(k) Plan, you may vote your shares by telephone, mail or via the Internet as described
above. If you vote your shares by telephone or via the Internet, your voting instructions must be received before 11:59 p.m. (Eastern time) on March 6, 2017 in order for you to instruct
B/E Aerospace's 401(k) Plan trustee how to vote your shares. If you vote your shares by mail, your voting instructions must be received before 6:00 p.m. (Eastern time) on March 6, 2017
in order for you to instruct B/E Aerospace's 401(k) Plan trustee how to vote your shares. If you hold shares through B/E Aerospace's 401(k) Plan and do not timely submit your voting instructions by
this deadline, your applicable shares will be voted in the same proportion to the shares held in B/E Aerospace's 401(k) Plan for which votes were cast.
If
you hold shares of B/E Aerospace common stock through B/E Aerospace's 401(k) Plan, you may attend the B/E Aerospace special meeting. However, shares held through B/E Aerospace's 401(k) Plan can
only be voted as described in the above paragraph, and cannot be voted in person at the B/E Aerospace special meeting.
-
Q:
-
How do I vote my shares of Rockwell Collins common stock held through the Rockwell Collins Retirement Savings
Plan?
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A:
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If
you hold shares of Rockwell Collins common stock through the Rockwell Collins Retirement Savings Plan, you may vote your shares by telephone, mail or via the
Internet as described above. If you hold shares through the Rockwell Collins Retirement Savings Plan and are an employee of Rockwell Collins, you will receive an email with instructions on how to vote
the shares you hold through the plan. If you vote your shares by telephone or via the Internet, your voting instructions must be received before 11:59 p.m. (Central time) on March 5,
2017 in order for you to instruct the Rockwell Collins Retirement Savings Plan trustee how to vote your shares. If you vote your shares by mail, your voting instructions must be received by
March 5, 2017 in order for you to instruct the Rockwell Collins Retirement Savings Plan trustee how to vote your shares. If you hold shares through the Rockwell Collins Retirement Savings Plan
and do not timely submit your voting
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instructions
by this deadline, your applicable shares will be voted in the same proportion to the shares held in the Rockwell Collins Retirement Savings Plan for which votes were cast.
If
you hold shares of Rockwell Collins common stock through the Rockwell Collins Retirement Savings Plan, you may attend the Rockwell Collins special meeting. However, shares held through the Rockwell
Collins Retirement Savings Plan can only be voted as described in the above paragraph, and cannot be voted in person at the Rockwell Collins special meeting.
-
Q:
-
If my shares are held in "street name" by a broker, bank or other nominee, will my broker, bank or other nominee vote my shares for
me?
-
A:
-
If
your shares are held in "street name" in a stock brokerage account or by a broker, bank or other nominee, you must provide the record holder of your shares with
instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning
a proxy card directly to Rockwell Collins or B/E Aerospace or by voting in person at your respective company's special meeting unless you provide a "legal proxy," which you must obtain from your
broker, bank or other nominee. Your broker, bank or other nominee is obligated to provide you with a voting instruction card for you to use.
Brokers
who hold shares in street name for a beneficial owner of those shares typically have the authority to vote in their discretion on "routine" proposals when they have not received instructions
from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters determined to be "non-routine" without specific instructions from
the beneficial owner. It is expected that all proposals to be voted on at the Rockwell Collins and B/E Aerospace special meetings are such "non-routine" matters. Broker non-votes occur when a broker
or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power.
If
you are a Rockwell Collins stockholder and you do not instruct your broker, bank or other nominee on how to vote your shares:
-
-
your broker, bank or other nominee may not vote your shares on the Share Issuance proposal, which broker non-votes, if any, will have no effect
on the vote count for such proposal (assuming a quorum is present); and
-
-
your broker, bank or other nominee may not vote your shares on the Rockwell Collins Adjournment proposal, which broker non-votes, if any, will
have no effect on the vote count for such proposal (regardless of whether a quorum is present).
If
you are a B/E Aerospace stockholder and you do not instruct your broker, bank or other nominee on how to vote your shares:
-
-
your broker, bank or other nominee may not vote your shares on the Merger proposal, which broker non-votes, if any, will have the same effect
as a vote AGAINST such proposal;
-
-
your broker, bank or other nominee may not vote your shares on the Merger-Related Compensation proposal, which broker non-votes, if any, will
have no effect on the vote count for such proposal (assuming a quorum is present); and
-
-
your broker, bank or other nominee may not vote your shares on the B/E Aerospace Adjournment proposal, which broker non-votes, if any, will
have no effect on the vote count for such proposal (regardless of whether a quorum is present).
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-
Q:
-
When and where are the Rockwell Collins and B/E Aerospace special meetings of stockholders? What must I bring to attend the special
meeting?
-
A:
-
The
special meeting of Rockwell Collins stockholders will be held at the Cedar Rapids Marriott, 1200 Collins Road NE, Cedar Rapids, Iowa on March 9,
2017 at 8:30 a.m. (Central time). Subject to space availability, all Rockwell Collins stockholders as of the Rockwell Collins record date, or their duly appointed proxies, may attend the
meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 8:00 a.m. (Central time).
The
special meeting of B/E Aerospace stockholders will be held at the Hilton Palm Beach Airport, 150 Australian Avenue, West Palm Beach, Florida, 33406-1473 on March 9, 2017 at
10:00 a.m. (Eastern time). Subject to space availability, all B/E Aerospace stockholders as of the B/E Aerospace record date, or their duly appointed proxies, may attend the meeting. Since
seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 9:30 a.m. (Eastern time).
If
you wish to attend your respective company's special meeting, you must bring photo identification. If you hold your shares through a broker, bank or other nominee, you must also bring proof of
ownership such as the voting instruction form from your broker or other nominee or an account statement.
-
Q:
-
What if I fail to vote or abstain?
-
A:
-
For
purposes of each of the Rockwell Collins special meeting and the B/E Aerospace special meeting, an abstention occurs when a stockholder attends the applicable
special meeting in person and does not vote or returns a proxy with an "abstain" instruction.
Rockwell Collins
Share Issuance proposal
: An abstention will have the same effect as a vote "AGAINST" the Share Issuance proposal. If a Rockwell Collins
stockholder is not present in person at the Rockwell Collins special meeting and does not respond by proxy, it will have no effect on the vote count for the Share Issuance proposal.
Rockwell Collins Adjournment proposal
: An abstention will have the same effect as a vote "AGAINST" the Rockwell Collins Adjournment
proposal. If a Rockwell Collins stockholder is not present in person at the Rockwell Collins special meeting and does not respond by proxy, it will have no effect on the vote count for the Rockwell
Collins Adjournment proposal (assuming a quorum is present).
B/E Aerospace
Merger proposal
: An abstention will have the same effect as a vote cast "AGAINST" the Merger proposal. If a B/E Aerospace stockholder is
not present in person at the B/E Aerospace special meeting and does not respond by proxy, it will have the effect of a vote cast "AGAINST" such proposal.
Merger-Related Compensation proposal
: An abstention will have no effect on the vote count for the Merger-Related Compensation proposal. If
a B/E Aerospace stockholder is not present in person at the B/E Aerospace special meeting and does not respond by proxy, it will have no effect on the vote count for the Merger-Related Compensation
proposal (assuming a quorum is present).
B/E Aerospace Adjournment proposal
: An abstention will have no effect on the vote count for the B/E Aerospace Adjournment proposal. If a
B/E Aerospace stockholder is not present in person at
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the
B/E Aerospace special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal (assuming a quorum is present).
-
Q:
-
What will happen if I return my proxy or voting instruction card without indicating how to vote?
-
A:
-
If
you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the Rockwell Collins common stock represented
by your proxy will be voted as recommended by the Rockwell Collins Board with respect to that proposal or the B/E Aerospace common stock represented by your proxy will be voted as recommended by the
B/E Aerospace Board with respect to that proposal, as applicable. Unless a Rockwell Collins stockholder or a B/E Aerospace stockholder, as applicable, checks the box on its proxy card to
withhold discretionary authority, the applicable proxy holders may use their discretion to vote on other matters relating to the Rockwell Collins special meeting or B/E Aerospace special meeting, as
applicable.
-
Q:
-
What if I hold shares of both Rockwell Collins common stock and B/E Aerospace common stock?
-
A:
-
If
you are a stockholder of both Rockwell Collins and B/E Aerospace, you will receive two separate packages of proxy materials. A vote as a B/E Aerospace stockholder
will not constitute a vote as a Rockwell Collins stockholder and vice versa. Therefore, please sign, date and return all proxy cards that you receive, whether from Rockwell Collins or B/E Aerospace,
or vote as both a Rockwell Collins stockholder and as a B/E Aerospace stockholder by Internet or telephone.
-
Q:
-
May I change or revoke my vote after I have delivered my proxy or voting instruction card?
-
A:
-
Yes.
If you are a record holder, you may change or revoke your vote before your proxy is voted at the Rockwell Collins or B/E Aerospace special meeting as described
herein. You may do this in one of the following four ways:
-
-
by sending a notice of revocation to the corporate secretary of Rockwell Collins or B/E Aerospace, as applicable;
-
-
by logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by
calling the telephone number specified on your proxy card, in each case if you are eligible to do so;
-
-
by sending a completed proxy card bearing a later date than your original proxy card; or
-
-
by attending the Rockwell Collins or B/E Aerospace special meeting, as applicable, and voting in person.
If
you choose any of the first three methods, you must take the described action no later than the beginning of the applicable special meeting.
If
your shares are held in an account at a broker, bank or other nominee or through B/E Aerospace's 401(k) Plan or the Rockwell Collins Retirement Savings Plan and you have delivered your
voting instruction card or otherwise given instruction on how to vote your shares to your broker, bank or other nominee or your plan administrator, you should contact your broker, bank or other
nominee or your plan administrator to change your vote.
-
Q:
-
What are the U.S. federal income tax consequences of the merger?
-
A:
-
The
exchange of B/E Aerospace common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, a U.S. holder (as
defined in "The MergerU.S. Federal Income Tax Consequences") of B/E Aerospace common stock who receives the merger consideration in exchange for such U.S. holder's shares of B/E Aerospace
common
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stock
generally will recognize taxable gain or loss in an amount equal to the difference, if any, between (i) the sum of the fair market value of the Rockwell Collins common stock and the
amount of cash, including cash in lieu of fractional shares, received in the merger and (ii) such U.S. holder's adjusted tax basis in the shares of B/E Aerospace common stock exchanged
therefor. If you are a non-U.S. holder (as defined in "The MergerU.S. Federal Income Tax Consequences"), the merger generally will not result in tax to you under U.S. federal income tax
laws unless you have certain connections with the United States.
For
a more complete description of the U.S. federal income tax consequences of the merger, see "The MergerU.S. Federal Income Tax Consequences" beginning on page 125.
This joint proxy statement/prospectus contains a general discussion of United States federal income tax consequences of the merger. This description does not address any
non-U.S. tax consequences, nor does it pertain to state, local or other tax consequences. Consequently, you are urged to contact your own tax advisor to determine the particular tax consequences to
you of the merger.
-
Q:
-
Do I have appraisal rights in connection with the transaction?
-
A:
-
Under
Delaware law, Rockwell Collins stockholders will not be entitled to exercise any appraisal rights in connection with the merger or any other transaction
described in this joint proxy statement/prospectus.
Subject
to the closing of the merger, record holders of B/E Aerospace common stock who do not vote in favor of the adoption of the merger agreement and otherwise comply fully with the requirements and
procedures of Section 262 of the General Corporation Law of the State of Delaware, which is referred to as the DGCL, may exercise their rights of appraisal, which generally entitle stockholders
to receive a lump sum cash payment equal to the fair value of their B/E Aerospace common stock exclusive of any element of value arising from the accomplishment or expectation of the merger.
The "fair value" could be higher or lower than, or the same as, the merger consideration. A detailed description of the appraisal rights and procedures available to B/E Aerospace stockholders
is included in
"The MergerAppraisal Rights" beginning on page 119. The full text of Section 262 of the DGCL is attached as Annex E to this joint proxy statement/prospectus.
-
Q:
-
What will happen to my B/E Aerospace stock-based awards?
-
A:
-
Treatment of B/E Aerospace Restricted Stock Awards and RSU Awards
Upon
completion of the merger, each outstanding award of B/E Aerospace restricted stock and each B/E Aerospace restricted stock unit award that in each case was granted prior to the date of the merger
agreement will (i) become fully vested and, to the extent such award is subject to performance conditions, such performance conditions will be deemed satisfied at the maximum level and
(ii) be cancelled and converted into the right to receive a lump sum cash payment per share of B/E Aerospace common stock underlying such award equal to the value of the per share merger
consideration, less any applicable withholding taxes. Upon completion of the merger, except for outstanding restricted stock unit awards granted to the executive officers of B/E Aerospace in
November 2016, consistent with past practice, which will be cancelled and converted into a cash payment pursuant to their terms, each outstanding award of B/E Aerospace restricted stock and each B/E
Aerospace restricted stock unit award that in each case was granted on or following the date of the merger agreement will be assumed by Rockwell Collins and converted into a Rockwell Collins award of
restricted stock or restricted stock unit award, as applicable, which will vest subject to the grantee's continued service with Rockwell Collins or its affiliates through each applicable vesting date
(with any performance conditions that were
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applicable
to the B/E Aerospace award deemed satisfied at target level performance and following the closing, the converted Rockwell Collins award subject only to time-based vesting) covering a number
of shares of Rockwell Collins common stock (rounded down to the nearest whole share) determined by multiplying the number of shares of B/E Aerospace that were subject to the B/E Aerospace award
by a ratio of the value of the merger consideration divided by the Rockwell Collins stock price (with the value of the stock consideration portion of the merger consideration determined by multiplying
the number of such shares of Rockwell Collins common stock by the Rockwell Collins stock price).
Treatment of B/E Aerospace Stock Units
Each
stock unit credited to the account of any current or former director under the B/E Aerospace Amended and Restated Non-Employee Directors Stock and Deferred Compensation Plan that is outstanding
immediately prior to the effective time of the merger, which is referred to as the effective time, will be converted into the right to receive the merger consideration.
For
a more complete description of the treatment of outstanding restricted stock unit awards granted to the executive officers of B/E Aerospace in November 2016, see "The MergerInterests
of Directors and Executive Officers in the Merger" beginning on page 102.
Any
applicable withholding taxes resulting from this treatment will be satisfied by reducing the amount of cash, if any, that would otherwise be provided to holders of such awards. If no cash is to be
provided to a holder of such an award or if the amount of cash that would otherwise be provided to a holder of such awards is not sufficient to cover the applicable withholding taxes, then the number
of shares of Rockwell Collins common stock that would otherwise be provided to the holder in accordance with the terms described above will be reduced to the extent necessary to cover the shortfall.
-
Q:
-
What happens if I sell my shares of B/E Aerospace common stock after the record date but before the B/E Aerospace special
meeting?
-
A:
-
The
record date for the B/E Aerospace special meeting (the close of business on January 18, 2017) is earlier than the date of the B/E Aerospace special meeting
and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of B/E Aerospace common stock after the record date but before the date of the B/E
Aerospace special meeting, you will retain your right to vote at the B/E Aerospace special meeting. However, you will not have the right to receive the merger consideration to be received by B/E
Aerospace stockholders in the merger. In order to receive the merger consideration, you must hold your shares through completion of the merger.
-
Q:
-
What happens if I sell my Rockwell Collins shares after the record date but before the Rockwell Collins special
meeting?
-
A:
-
The
record date for the Rockwell Collins special meeting (the close of business on January 18, 2017) is earlier than the date of the Rockwell Collins special
meeting. If you sell or otherwise transfer your Rockwell Collins common shares after the record date but before the date of the Rockwell Collins special meeting, you will retain your right to vote at
the Rockwell Collins special meeting.
-
Q:
-
Whom should I contact if I have any questions about the proxy materials or voting?
-
A:
-
If
you have any questions about the proxy materials, or if you need assistance submitting your proxy or voting your shares or need additional copies of this joint
proxy statement/prospectus or
14
Table of Contents
the
enclosed proxy card, you should contact the proxy solicitation agent for the company in which you hold shares.
If
you are a Rockwell Collins stockholder, you should contact Innisfree M&A Incorporated, the proxy solicitation agent for Rockwell Collins, at (877) 825-8772 or (212) 750-5833 (bankers
and brokers call collect).
If
you are a B/E Aerospace stockholder, you should contact Georgeson LLC, the proxy solicitation agent for B/E Aerospace, at (800) 509-0917 (toll free).
15
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SUMMARY
This summary highlights selected information contained in this joint proxy statement/prospectus and does not contain all
the information that may be important to you. Rockwell Collins and B/E Aerospace urge you to read carefully this joint proxy statement/prospectus in its entirety, including the annexes. Additional,
important information, which Rockwell Collins and B/E Aerospace also urge you to read, is contained in the documents incorporated by reference into this joint proxy statement/prospectus. See "Where
You Can Find More Information" beginning on page 198. Unless stated otherwise, all references in this joint proxy statement/prospectus to Rockwell Collins are to Rockwell Collins, Inc.,
all references to B/E Aerospace are to B/E Aerospace, Inc. and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of October 23, 2016, by and
among Rockwell Collins, Inc., Quarterback Merger Sub Corp. and B/E Aerospace, Inc., a copy of which is attached as Annex A to this joint proxy
statement/prospectus.
The Parties
Rockwell Collins
Rockwell Collins designs, produces and supports communications and aviation systems for commercial and military customers and provides
information management services through voice and data communication networks and solutions worldwide. The integrated system solutions and products Rockwell Collins provides to its served markets are
oriented around a set of core competencies: communications, navigation, automated flight control, displays/surveillance, simulation and training, integrated electronics and information management
systems. Rockwell Collins also provides a wide range of services and support to its customers through a worldwide network of service centers, including equipment repair and overhaul, service parts,
field service engineering, training, technical information services and aftermarket used equipment sales. The structure of Rockwell Collins' business allows it to leverage these core competencies
across markets and applications to bring high value solutions to its customers.
Rockwell
Collins serves a worldwide customer base through its three operating segments: Commercial Systems, Government Systems and Information Management Services. The Commercial Systems
segment supplies aviation electronics systems, products and services to customers located throughout the world. The customer base consists of original equipment manufacturers of commercial air
transport, business and regional aircraft, commercial airlines and business aircraft operators. The Government Systems segment provides a broad range of electronic products, systems and services to
customers including the U.S. Department of Defense, various ministries of defense, other government agencies and defense contractors around the world. These products, systems and services support
airborne, precision weapon, ground and maritime applications on new equipment as well as in retrofit and upgrade applications designed to extend the service life and enhance the capability of existing
aircraft, vehicle and weapon platforms. The Information Management Services segment provides communications services, systems integration and security solutions across the aviation, airport, rail and
nuclear security markets to customers located around the world. The customer base includes commercial airlines, business aircraft operators, the U.S. Federal Aviation Administration (FAA), airport and
critical infrastructure operators and major passenger and freight railroads.
Rockwell
Collins serves a broad range of customers worldwide, including the U.S. Department of Defense, U.S. Coast Guard, civil agencies, airports, defense contractors, foreign
ministries of defense, manufacturers of commercial helicopters, manufacturers of commercial air transport, business and regional aircraft, commercial airlines, fractional and other business jet
operators, the FAA, critical infrastructure operators and major passenger and freight railroads. Rockwell Collins markets its systems, products and services directly to its customers through an
internal marketing and sales force. In addition, it utilizes a worldwide dealer network to distribute its products and international sales representatives to assist with international sales and
marketing. In 2016, various branches of the U.S.
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Government,
both directly and indirectly through subcontracts, accounted for 33% of Rockwell Collins' total sales.
Rockwell
Collins' executive offices are located at 400 Collins Road NE, Cedar Rapids, Iowa 52498 and its telephone number is (319) 295-1000. Rockwell Collins' website address is
www.rockwellcollins.com. Information contained on Rockwell Collins' website does not constitute part of this joint proxy statement/prospectus. Rockwell Collins' stock is publicly traded on the New
York Stock Exchange, which is referred to as the NYSE, under the ticker symbol "COL."
B/E Aerospace
B/E Aerospace is a world leading manufacturer of aircraft cabin interior products. B/E Aerospace designs, develops and manufactures a broad
range of products for both commercial aircraft and business jets. B/E Aerospace's manufactured products include aircraft cabin seating, lighting systems, oxygen systems, food and beverage preparation
and storage equipment, galley systems, and modular lavatory systems. B/E Aerospace also provides cabin interior reconfiguration, program management and certification services. B/E Aerospace sells and
supports its products through its own global direct sales and product support organization.
B/E
Aerospace's commercial aircraft segment includes seating products, interior systems, and engineering services for commercial aircraft, and brazing technologies and electronic systems
for the commercial and military aerospace markets. B/E Aerospace has the design and engineering capabilities to create and manufacture highly customized products tailored to customers' unique
preferences. As an industry leading manufacturer of interior systems for both narrow- and wide-body aircraft, B/E Aerospace supplies food and beverage preparation equipment, galleys and galley
air chillers, cabin lighting, oxygen systems and passenger service units (PSUs), lavatories, and water and waste systems. B/E Aerospace services also include optimizing cabin layout and installing
crew rest compartments. Additionally, B/E Aerospace is a market leader in the design, engineering, and manufacturing of customized, fully integrated thermal management, power conversion, and
interconnect solutions that address complex power management requirements. Revenues for the commercial aircraft segment in the third quarter of 2016 were $578.8 million.
B/E
Aerospace's business jet segment manufactures products that include a complete line of business jet seating and divan products, super first class environments, lighting systems, air
valves, water and waste systems, oxygen delivery systems, and de-icing systems. B/E Aerospace is internationally recognized as a leading supplier of business jet products and services for leading
prominent business jet manufacturers and completion centers. Revenues for the business jet segment in the third quarter of 2016 were $153.9 million.
B/E
Aerospace was founded by Amin and Bob Khoury in 1987 upon the acquisition of Bach Engineering. After acquiring EECO, Inc. in 1989, the company's name was changed to B/E
Avionics. B/E Aerospace became a public company listed on The NASDAQ Stock Market, which is referred to as the NASDAQ, in April 1990. In 1992, B/E Aerospace acquired the assets of PTC
Aerospace, Inc. and Aircraft Products Company, transforming B/E Aerospace into a cabin interiors provider, and the company's name became "B/E Aerospace, Inc." Over the next 10 years,
acquisitions of interior equipment companies established B/E Aerospace as a broad based provider of interior equipment. Over the following decade, B/E Aerospace consolidated and integrated the
acquired businesses, developed a global direct sales and customer support organization and developed into a global market leading manufacturer of aircraft cabin interior equipment. In 2014, the
Consumables Management
Segment, which consisted of B/E Aerospace's aerospace distribution and energy services businesses, was spun-off to form KLX, Inc., which is referred to as KLX.
B/E
Aerospace's executive offices are located at 1400 Corporate Center Way, Wellington Florida, 33414, its website address is www.beaerospace.com, and its phone number is
(561) 791-5000.
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Information
contained on B/E Aerospace's website does not constitute part of this joint proxy statement/prospectus. B/E Aerospace common stock is listed on the NASDAQ, trading under the symbol "BEAV."
Merger Sub
Merger Sub, a wholly owned subsidiary of Rockwell Collins, is a Delaware corporation incorporated on October 19, 2016 for the purpose of
effecting the merger. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement, including the preparation of
applicable regulatory filings in connection with the merger. The principal executive offices of Merger Sub are located at 400 Collins Road NE, Cedar Rapids, Iowa 52498.
The Transaction
Merger Agreement
On October 23, 2016, Rockwell Collins, B/E Aerospace and Merger Sub entered into the merger agreement, which provides that, subject to
the terms and conditions of the merger agreement and in accordance with the DGCL, Merger Sub will merge with and into B/E Aerospace, with B/E Aerospace continuing as the surviving corporation and a
wholly owned subsidiary of Rockwell Collins.
Amendment to Tax Sharing Agreement
In connection with entry into the merger agreement, B/E Aerospace and KLX entered into a first amendment to the Tax Sharing and Indemnification
Agreement, dated as of December 15, 2014, which is referred to as the KLX tax sharing agreement. The KLX tax sharing agreement was originally entered into in connection with B/E Aerospace's
contribution of assets to KLX, B/E Aerospace's repayment of certain debt obligations with the proceeds of a cash distribution from KLX, and B/E Aerospace's distribution of the stock of KLX, all in
December of 2014, in transactions intended to qualify for tax-free treatment under Sections 355, 361 and 368(a)(1)(D) of the U.S. Internal Revenue Code of 1986, as amended, which transactions,
collectively, are referred to as the KLX spin-off and which tax treatment is referred to as the KLX spin-off tax treatment. Among other things, the KLX tax sharing agreement sets forth the allocation
between B/E Aerospace and KLX of liabilities for taxes arising prior to, as a result of, and subsequent to the KLX spin-off and certain related restructuring transactions and sets out certain
restrictions on the activities of both B/E Aerospace and KLX following the KLX spin-off.
The
amendment to the KLX tax sharing agreement modifies a requirement under the KLX tax sharing agreement relating to the ability of B/E Aerospace to enter into certain transactions
after the KLX spin-off. In satisfaction of this modified requirement, B/E Aerospace provided KLX with an opinion that B/E Aerospace received from its tax advisor, Shearman &
Sterling LLP, which is referred to as
Shearman & Sterling, relating to the impact of the merger on the KLX spin-off tax treatment. In addition, pursuant to the terms of the amendment to the KLX tax sharing agreement, KLX
delivered a representation letter to Shearman & Sterling, for purposes of such opinion. This opinion relies on certain representations, assumptions, undertakings and covenants, from KLX,
B/E Aerospace and Rockwell Collins and the conclusion set forth in the opinion may be adversely affected if one or more of the representations and assumptions is incorrect or one or more of the
undertakings and covenants is not complied with.
Consideration to be Received in the Merger by B/E Aerospace Stockholders
At the effective time, each share of B/E Aerospace common stock that is issued and outstanding immediately prior to the effective time (other
than (i) shares of B/E Aerospace common stock owned
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or
held directly or indirectly by Rockwell Collins, B/E Aerospace (including as treasury stock) or Merger Sub, which will be cancelled immediately prior to the effective time, and (ii) shares
of B/E Aerospace common stock with respect to which appraisal rights are properly demanded and not withdrawn under Section 262 of the DGCL) will be converted into the right to receive
$34.10 in cash, without interest, which is referred to as the cash consideration, and a fraction of a validly issued, fully paid and non-assessable share of Rockwell Collins common stock having a
value equal to $27.90 (subject to adjustment based upon a two-way collar mechanism), which is referred to as the stock consideration. The exchange ratio will be determined based upon the Rockwell
Collins stock price, as described in more detail in "The Merger AgreementMerger Consideration to be Received by B/E Aerospace Stockholders" beginning on page 128. If the
Rockwell Collins stock price is greater than or equal to $77.41 and less than or equal to $89.97, the exchange ratio will be equal to the quotient of (a) $27.90 divided by (b) the
Rockwell Collins stock price, which, in each case, will result in the stock consideration having a value equal to $27.90. If the Rockwell Collins stock price is less than $77.41 or greater than
$89.97, then the two-way collar mechanism will apply pursuant to which, (1) if the Rockwell Collins stock price is greater than $89.97, the exchange ratio will be fixed at 0.3101 and
the value of the stock consideration will be more than $27.90, and (2) if the Rockwell Collins stock price is less than $77.41, the exchange ratio will be fixed at 0.3604 and the value of the
stock consideration will be less than $27.90. Upon the completion of the merger, based on minimum and maximum exchange ratios of 0.3101 and 0.3604, the estimated number of shares of Rockwell Collins
common stock issuable as a portion of the merger consideration is between 31.1 million shares and 36.1 million shares, which will result in former B/E Aerospace stockholders holding
approximately 19.2% to 21.7% of the outstanding Rockwell Collins common stock, based on the number of outstanding shares of common stock and outstanding stock-based awards of Rockwell Collins and B/E
Aerospace as of January 26, 2017. For more details on the shares of Rockwell Collins common stock and other consideration to be received by B/E Aerospace stockholders, see "The Merger
AgreementMerger Consideration to be Received by B/E Aerospace Stockholders" beginning on page 128 of this joint proxy statement/prospectus.
All
fractional shares of Rockwell Collins common stock that would otherwise be issued to a B/E Aerospace stockholder as part of the merger consideration will be aggregated to
create whole shares of Rockwell Collins common stock that will be issued to B/E Aerospace stockholders as part of the merger consideration. If a fractional share of Rockwell Collins common stock
remains payable to a B/E Aerospace stockholder after aggregating all fractional shares of Rockwell Collins common stock payable to such B/E Aerospace stockholder, then such B/E Aerospace
stockholder will be paid, in lieu of such remaining fractional share of Rockwell Collins common stock, an amount in cash, without interest, rounded down to the nearest cent, equal to the product of
(x) the amount of the fractional share interest in a share of Rockwell Collins common stock to which such holder would otherwise be entitled (rounded to three decimal places) and (y) the
Rockwell Collins stock price.
Treatment of Stock-Based Awards
B/E Aerospace
Treatment of B/E Aerospace Restricted Stock Awards and RSU Awards
Upon completion of the merger, each outstanding award of B/E Aerospace restricted stock and each B/E Aerospace restricted stock unit award that
in each case was granted prior to the date of the merger agreement will (i) become fully vested and, to the extent such award is subject to performance conditions, such performance conditions
will be deemed satisfied at the maximum level and (ii) be cancelled and converted into the right to receive a lump sum cash payment per share of B/E Aerospace common stock underlying such award
equal to the value of the per share merger consideration, less any applicable withholding taxes. Upon completion of the merger, except for outstanding restricted stock unit awards granted to the
executive officers of B/E Aerospace in November 2016, consistent with past
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practice,
which will be cancelled and converted into a cash payment pursuant to their terms, each outstanding award of B/E Aerospace restricted stock and each B/E Aerospace restricted stock
unit award that in each case was granted on or following the date of the merger agreement will be assumed by Rockwell Collins and converted into a Rockwell Collins award of restricted stock or
restricted stock unit award, as applicable, which will vest subject to the grantee's continued service with Rockwell Collins or its affiliates through each applicable vesting date (with any
performance conditions that were applicable to the B/E Aerospace award deemed satisfied at target level performance and, following the closing, the converted Rockwell Collins award subject only to
time-based vesting) covering a number of shares of Rockwell Collins common stock (rounded down to the nearest whole share) determined by multiplying the number of shares of B/E Aerospace that were
subject to the B/E Aerospace award by a ratio of the value of the merger consideration divided by the Rockwell Collins stock price (with the value of the stock consideration portion of the merger
consideration determined by multiplying the number of such shares of Rockwell Collins common stock by the Rockwell Collins stock price).
Treatment of B/E Aerospace Stock Units
Each stock unit credited to the account of any current or former director under the B/E Aerospace Amended and Restated Non-Employee Directors
Stock and Deferred Compensation Plan that is outstanding immediately prior to the effective time of the merger, which is referred to as the effective time, will be converted into the right to receive
the merger consideration.
For
a more complete description of the treatment of outstanding restricted stock unit awards granted to the executive officers of B/E Aerospace in November 2016, see "The
MergerInterests of Directors and Executive Officers in the Merger" beginning on page 102.
Rockwell Collins
The merger will not affect Rockwell Collins' stock-based awards. All such awards will remain outstanding subject to the same terms and
conditions that are applicable to such stock-based awards prior to the merger.
Rockwell Collins Board of Directors Following Completion of the Merger
The merger agreement provides that Rockwell Collins will take all necessary corporate action so that, upon and after the effective time, the
size of the Rockwell Collins Board will be increased by two members to a total of eleven, and two individuals selected by B/E Aerospace who meet Rockwell Collins' independence criteria and are
otherwise reasonably acceptable to Rockwell Collins will be appointed to the Rockwell Collins Board. One such individual will serve as a member of the class of directors of the Rockwell Collins Board
with terms expiring in 2018, and the other will serve as a member of the class of directors of the Rockwell Collins Board with terms expiring in 2020. Pursuant to this provision of the merger
agreement, John T. Whates and Richard G. Hamermesh, both members of the B/E Aerospace Board, were selected by B/E Aerospace to be appointed to the Rockwell Collins Board and are expected to serve as
members of the class of directors of the Rockwell Collins Board with terms expiring in 2018 and 2020, respectively. Other than such additional directors, no changes to the Rockwell Collins Board are
expected in connection with the consummation of the merger.
For
a more complete description of the directors and executive officers of the surviving corporation, see "The MergerGovernance of Rockwell Collins Following Completion of
the Merger" beginning on page 101.
Headquarters
Upon completion of the transaction, Rockwell Collins' headquarters will remain in Cedar Rapids, Iowa.
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Recommendations of the Rockwell Collins Board of Directors
After careful consideration, the Rockwell Collins Board unanimously recommends that holders of Rockwell Collins common stock
vote:
-
-
"FOR" the Share Issuance proposal; and
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"FOR" the Rockwell Collins Adjournment proposal.
For
further discussion of the Rockwell Collins Board's reasons for the transaction and the recommendations of the Rockwell Collins Board, see "The MergerRockwell Collins
Board of Directors' Recommendations and Its Reasons for the Transaction" beginning on page 66.
Recommendations of the B/E Aerospace Board of Directors
After careful consideration, the B/E Aerospace Board unanimously recommends that holders of B/E Aerospace common stock
vote:
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-
"FOR" the Merger proposal;
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"FOR" the Merger-Related Compensation proposal to approve, on an advisory (non-binding) basis, any "golden parachute"
compensation arrangement that may be paid or become payable to B/E Aerospace's named executive officers that is based on or otherwise relates to the merger or contemplated by the merger agreement;
and
-
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"FOR" the B/E Aerospace Adjournment proposal.
For
a more complete description of the B/E Aerospace Board's reasons for the transaction and the recommendation of the B/E Aerospace Board, see "The MergerB/E Aerospace
Board of Directors' Recommendations and Its Reasons for the Transaction" beginning on page 70.
Opinions of Financial Advisors
Rockwell Collins' Financial Advisor
Opinion of J.P. Morgan Securities LLC
Rockwell Collins retained J.P. Morgan Securities LLC, which is referred to as J.P. Morgan, to act as its financial advisor in connection
with the proposed merger. At the meeting of the Rockwell Collins Board on October 21, 2016, J.P. Morgan rendered its oral opinion to the Rockwell Collins Board that, as of such date and based
upon and subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid by Rockwell Collins was fair, from a financial point of view, to Rockwell Collins. The
oral opinion was subsequently confirmed in writing by delivery of J.P. Morgan's written opinion dated October 23, 2016.
The full text of the written opinion of J.P. Morgan, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as
Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is
qualified in its entirety by reference to the full text of such opinion. Rockwell Collins stockholders are urged to read the opinion in its entirety. J.P. Morgan's opinion was addressed to the
Rockwell Collins Board (in its capacity as such) in connection with and for the purposes of its evaluation of the merger, was directed only to the fairness, from a financial point of view, to Rockwell
Collins of the merger consideration to be paid by Rockwell Collins and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the merger consideration
to the holders of any class of securities, creditors or other constituencies of Rockwell Collins or as to the underlying decision by Rockwell Collins to engage in the merger. The issuance of J.P.
Morgan's opinion was approved by a fairness committee of J.P. Morgan.
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The opinion does not constitute a recommendation to any stockholder of Rockwell Collins as to how such stockholder should vote with respect to the merger or any other matter.
B/E Aerospace's Financial Advisors
Opinion of Citigroup Global Markets Inc.
On October 23, 2016, Citigroup Global Markets Inc., which is referred to as Citigroup, delivered to the B/E Aerospace Board a
written opinion dated October 23, 2016, to the effect that, as of such date and based on and subject to the assumptions made, procedures followed, matters considered and limitations and
qualifications set forth in the written opinion, each as described in greater detail in the section entitled "The MergerOpinions of B/E Aerospace's Financial Advisors" beginning on
page 82, the merger consideration to be received by the holders of outstanding shares of common stock of B/E Aerospace, other than shares of B/E Aerospace common stock held by holders who are
entitled to, and properly demand, appraisal of their shares of B/E Aerospace common stock and shares of B/E Aerospace common stock that are owned, directly or indirectly, by Rockwell Collins, B/E
Aerospace (as treasury shares or otherwise) or Merger Sub (collectively, referred to as the excluded holders) in the merger was fair, from a financial point of view, to such holders. Citigroup's
opinion, the issuance of which was authorized by Citigroup's fairness opinion committee, was provided to the B/E Aerospace Board in connection with its evaluation of the merger and was limited to the
fairness, from a financial point of view, as of the date of Citigroup's opinion, to the holders of outstanding shares of common stock of B/E Aerospace (other than excluded holders) of the merger
consideration to be received by such holders in the merger.
Citigroup's opinion does not address any other aspects or implications of the merger and does not constitute a recommendation to any stockholder as to how such
stockholder should vote or act on any matters relating to the merger. The summary of Citigroup's opinion contained in this joint proxy statement/prospectus is qualified in its entirety by reference to
the full text of the opinion. We encourage you to read the full text of Citigroup's written opinion, which is attached to this joint proxy statement/prospectus as Annex C and sets forth, among
other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of review undertaken.
Opinion of Goldman, Sachs & Co.
On October 23, 2016, Goldman, Sachs & Co., which is referred to as Goldman Sachs, delivered to the B/E Aerospace Board a
written opinion dated October 23, 2016, to the effect that, as of such date and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid to
the holders (other than Rockwell Collins and its affiliates) of outstanding shares of common stock of B/E Aerospace pursuant to the merger agreement was fair from a financial point of view to such
holders.
The full text of the written opinion of Goldman Sachs, dated October 23, 2016, which sets forth assumptions made, procedures followed, matters considered
and limitations on the review undertaken in connection with the opinion, is attached as Annex D. Goldman Sachs provided its opinion for the information and assistance of the B/E Aerospace Board
in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of B/E Aerospace common stock should vote with respect to the merger or any
other matter.
Interests of Directors and Executive Officers in the Merger
The directors and executive officers of B/E Aerospace have interests in the merger that are in addition to their interests as stockholders of
B/E Aerospace generally. These interests include, but are not limited to, continued employment of certain executive officers with the surviving company,
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indemnification
and insurance for current and former directors and executive officers, transaction bonuses for certain executive officers and the treatment in the merger of B/E Aerospace
restricted stock units, restricted stock awards and other equity-based awards held by these directors and executive officers (including accelerated vesting of B/E Aerospace restricted stock
units and restricted stock awards immediately upon the effective time). Certain B/E Aerospace executive officers are, by reason of their respective employment agreements with B/E Aerospace,
entitled to severance payments and other benefits immediately upon the consummation of the merger (certain other executive officers are entitled to severance payments and benefits upon a qualifying
termination of employment following the merger). In addition, Richard G. Hamermesh and John T. Whates, both members of the B/E Aerospace Board, will be appointed to the Rockwell
Collins Board. The B/E Aerospace Board was aware of these interests and considered them, among other matters, in approving the merger agreement and in determining to recommend that B/E Aerospace
stockholders adopt the merger agreement.
U.S. Federal Income Tax Consequences of the Merger
The exchange of B/E Aerospace common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes.
Accordingly, a U.S. holder (as defined in "The MergerU.S. Federal Income Tax Consequences" beginning on page 125) of B/E Aerospace common stock who receives the merger
consideration in exchange for such U.S. holder's shares of B/E Aerospace common stock generally will recognize taxable gain or loss in an amount equal to the difference, if any, between
(i) the sum of the fair market value of the Rockwell Collins common stock and the amount of cash, including cash in lieu of fractional shares, received in the merger and (ii) such U.S.
holder's adjusted tax basis in the shares of B/E Aerospace common stock exchanged therefor. If you are a non-U.S. holder, the merger generally will not result in tax to you under U.S. federal income
tax laws unless you have certain connections with the United States.
This joint proxy statement/prospectus contains a general discussion of United States federal income tax consequences of the merger. This description does not
address any non-U.S. tax consequences, nor does it pertain to state, local or other tax consequences. Consequently, you are urged to contact your own tax advisor to determine the particular tax
consequences to you of the merger.
Accounting Treatment of the Merger
The merger will be accounted for as an acquisition of B/E Aerospace by Rockwell Collins under the acquisition method of accounting in accordance
with accounting principles generally accepted in the U.S., which is referred to as GAAP.
Appraisal Rights
Under Delaware law, Rockwell Collins stockholders will not be entitled to any appraisal rights in connection with the merger or any other
transactions described in this joint proxy statement/prospectus.
Under
Delaware law, if the merger is completed, record holders of B/E Aerospace common stock who do not vote in favor of the adoption of the merger agreement and who otherwise properly
exercise their appraisal rights will be entitled to seek appraisal for, and obtain payment in cash for the judicially determined fair value of, their shares of B/E Aerospace common stock, in lieu of
receiving the merger consideration. The "fair value" could be higher or lower than, or the same as, the merger consideration. The relevant provisions of the DGCL are included as Annex E to this
joint proxy statement/prospectus. B/E Aerospace stockholders are encouraged to read these provisions carefully and in their entirety. Moreover, due to the complexity of the procedures for exercising
the right to seek appraisal, B/E Aerospace stockholders who are considering exercising that right are encouraged to seek the advice of legal counsel. Failure to comply strictly with these provisions
may result in loss of the right of appraisal. For a more complete description of B/E Aerospace stockholders' appraisal rights, see "The MergerAppraisal Rights" beginning on
page 119.
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Regulatory Approvals
The merger is subject to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to as the
HSR Act, which prevents Rockwell Collins and B/E Aerospace from completing the merger until required information and materials are furnished to the Antitrust Division of the Department of
Justice, which is referred to as the DOJ, and the Federal Trade Commission, which is referred to as the FTC, and the HSR Act waiting period is terminated or expires. On November 7, 2016,
Rockwell Collins and B/E Aerospace filed the requisite notification and report forms under the HSR Act with the DOJ and the FTC. The required 30-day waiting period under the HSR Act expired at 11:59
Eastern time on December 7, 2016.
The
merger is also subject to antitrust review by governmental authorities in several foreign jurisdictions in which the companies have a sufficient market presence to require filings.
The parties are making filings in Europe, China, the Philippines, South Korea and Turkey.
Although
we expect that all regulatory clearances and approvals will be obtained, we cannot assure you that these clearances and approvals will be timely obtained or obtained under the
terms of the merger agreement at all or that the granting of these clearances and approvals will not involve the imposition of additional conditions on the completion of the merger, including the
requirement to divest assets, or require changes to the terms of the merger agreement. These conditions or changes could result in the conditions to the merger not being satisfied.
For a more complete description of regulatory approvals relating to the merger, see "The MergerRegulatory Approvals Required for the Merger"
beginning on page 116.
Litigation Relating to the Merger
In connection with the merger, three putative class action lawsuits were filed by three different purported B/E Aerospace stockholders. The
lawsuits allege, among other things, that the Form S-4 filed by Rockwell Collins on November 23, 2016 misstates and/or omits material information. Two of the lawsuits assert
claims against B/E Aerospace and the members of the B/E Aerospace Board; the other lawsuit asserts claims against B/E Aerospace, the members of the B/E Aerospace Board, Rockwell Collins and Merger
Sub. The lawsuits seek to enjoin the merger, to recover damages and
other relief. For a more detailed description of litigation in connection with the merger, see "The MergerLitigation Relating to the Merger" beginning on page 124.
Conditions to Completion of the Merger
The parties expect to complete the merger after all of the conditions to the merger in the merger agreement are satisfied or waived, including
after Rockwell Collins and B/E Aerospace receive stockholder approval of the Share Issuance proposal and the Merger proposal, respectively, at their respective special meetings and receive all
required regulatory approvals. The parties currently expect to complete the transaction in the spring of 2017. However, it is possible that factors outside of each company's control could require them
to complete the transaction at a later time or not to complete it at all.
Conditions to the Obligations of the Parties to Complete the Merger
The obligations of each of Rockwell Collins, Merger Sub and B/E Aerospace to complete the merger are subject to the satisfaction or (to
the extent permitted by law) waiver of the following conditions:
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Rockwell Collins having obtained the Rockwell Collins Stockholder Approval, and B/E Aerospace having obtained the B/E Aerospace
Stockholder Approval;
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-
-
the shares of Rockwell Collins common stock to be issued in connection with the merger having been approved for listing on the NYSE, subject to
official notice of issuance;
-
-
the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part having become effective under
the Securities Act of 1933, as amended, which is referred to as the Securities Act, and not being the subject of any stop order or any legal, administrative or other similar proceedings or actions by
or before the SEC seeking a stop order;
-
-
any applicable waiting period (and any extension thereof) under the HSR Act relating to the consummation of the merger having expired or early
termination thereof having been granted, and any authorization or consent from a governmental authority required to be obtained with respect to the merger under any antitrust laws in Europe, China,
the Philippines, South Korea or Turkey having been obtained and remaining in full force and effect (for a more complete description of the governmental filings and consents required for the merger,
see "The MergerRegulatory Approvals Required for the Merger" beginning on page 116); and
-
-
no governmental authority having issued or entered any order or enacted any law after the date of the merger agreement having the effect of
enjoining or otherwise prohibiting the consummation of the merger or the other transactions contemplated by the merger agreement.
Conditions to the Obligations of Each of Rockwell Collins and Merger Sub to Complete the Merger
In addition, the obligations of each of Rockwell Collins and Merger Sub to complete the merger are subject to the satisfaction or (to the extent
permitted by law) waiver of the following conditions:
-
-
the representations and warranties of B/E Aerospace set forth in the merger agreement with respect to (i) capitalization being
true and correct in all respects (other than
de minimis
inaccuracies) and (ii) outstanding equity awards, corporate authorization of the merger
agreement, required stockholder approval of adoption of the merger agreement and the transactions contemplated by the merger agreement, the inapplicability of anti-takeover laws, brokers and
transaction-related fees and expenses, opinions from financial advisors and the valid and binding nature of B/E Aerospace's amendment to the KLX tax sharing agreement being true and correct in
all material respects, without giving effect to qualifications in such representations and warranties with respect to materiality or material adverse effects on B/E Aerospace, in the case of
clauses (i) and (ii), as of the closing date of the merger, which is referred to as the closing date (or, in the case of representations and warranties made as of a specific date, as of such
date), with the representations and warranties listed in clauses (i) and (ii) referred to as the B/E Aerospace fundamental representations and warranties;
-
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all other representations and warranties of B/E Aerospace set forth in the merger agreement (other than the B/E Aerospace
fundamental representations and warranties), without giving effect to qualifications in such representations and warranties with respect to materiality or material adverse effects on
B/E Aerospace, being true and correct as of the closing date (or, in the case of representations and warranties made as of a specific date, as of such date), except where failure to be true and
correct, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on B/E Aerospace;
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B/E Aerospace having performed or complied in all material respects with its obligations under the merger agreement required to be
performed or complied with on or prior to the closing of the merger;
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since the date of the merger agreement, no event, occurrence, development or change having occurred that had or would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on B/E Aerospace;
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Rockwell Collins having received a certificate from an executive officer of B/E Aerospace certifying that the above conditions have been
satisfied; and
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Rockwell Collins having received a written opinion from Rockwell Collins' tax counsel, referred to as the Rockwell Collins Tax Advisor Opinion
(or, if Rockwell Collins' tax counsel advises that it will not deliver a written opinion, from both B/E Aerospace's tax counsel and another nationally recognized law firm reasonably acceptable
to Rockwell Collins and B/E Aerospace, referred to as the additional tax counsel), to the effect that the merger will not cause the KLX spin-off to fail to qualify for the KLX spin-off tax
treatment.
Conditions to the Obligation of B/E Aerospace to Complete the Merger
In addition, the obligation of B/E Aerospace to complete the merger is subject to the satisfaction or (to the extent permitted by law)
waiver of the following conditions:
-
-
the representations and warranties of Rockwell Collins and Merger Sub set forth in the merger agreement with respect to
(i) capitalization being true and correct in all respects (other than de minimis inaccuracies) and (ii) outstanding equity awards, capitalization of Merger Sub, corporate authorization
of the merger agreement, required stockholder approval of the issuance of Rockwell Collins common stock in connection with the merger, brokers and transaction-related fees and expenses and opinions
from financial advisors being true and correct in all material respects, without giving effect to qualifications in such representations and warranties with respect to materiality or material adverse
effects on Rockwell Collins, in the case of clauses (i) and (ii), as of the closing date (or, in the case of representations and warranties made as of a specific date, as of such date), with
the representations and warranties listed in clauses (i) and (ii) referred to as the Rockwell Collins fundamental representations and warranties;
-
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all other representations and warranties of Rockwell Collins and Merger Sub set forth in the merger agreement (other than the Rockwell Collins
fundamental representations and warranties), without giving effect to qualifications in such representations and warranties with respect to materiality or material adverse effects on Rockwell Collins,
being true and correct as of the closing date (or, in the case of representations and warranties made as of a specific date, as of such date), except where failure to be true and correct, individually
or in the aggregate, has had or would reasonably be expected to have a material adverse effect on Rockwell Collins;
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Rockwell Collins and Merger Sub having performed or complied in all material respects with each of their respective obligations required under
the merger agreement to be performed or complied with on or prior to the closing of the merger;
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since the date of the merger agreement, no event, occurrence, development or change having occurred that had or would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on Rockwell Collins;
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B/E Aerospace having received a certificate from an executive officer of Rockwell Collins certifying that the above conditions have been
satisfied; and
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B/E Aerospace having received a written opinion from B/E Aerospace's tax counsel, referred to as the B/E Aerospace Tax
Advisor Opinion (or, if B/E Aerospace's tax counsel advises that it will not deliver a written opinion, the Rockwell Collins Tax Advisor Opinion and a similar opinion from the additional tax
counsel), to the effect that the merger will not cause the KLX spin-off to fail to qualify for the KLX spin-off tax treatment.
To
the extent permitted by law, the conditions set forth in the merger agreement may be waived by Rockwell Collins or B/E Aerospace subject to the agreement of the other party in
certain
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circumstances.
For a more complete description of the conditions to the merger, see "The Merger AgreementConditions to the Merger" beginning on page 148.
Treatment of B/E Aerospace's Existing Debt; Financing
In connection with the merger, the parties intend to terminate B/E Aerospace's existing revolving credit facility and term loan facility.
Rockwell
Collins' obligation to complete the merger is not conditioned upon its obtaining financing. Rockwell Collins anticipates that approximately $3.6 billion will be required
to pay the aggregate cash portion of the merger consideration to the B/E Aerospace stockholders and approximately $2.1 billion to refinance B/E Aerospace's existing debt. Rockwell Collins
intends to fund the cash component of the merger consideration and refinance the acquired debt through new sources of debt financing. Upon the closing of the acquisition, Rockwell Collins expects to
have approximately $8 billion in total debt.
For
a more complete description of sources of funding for the merger, see "The MergerSource of Funding for the Merger" beginning on page 123.
Timing of the Transaction
The transaction is expected to be completed in the spring of 2017. However, it is possible that factors outside of each company's control could
require them to complete the merger at a later time or not to complete the merger at all.
No Solicitation
In the merger agreement, each of Rockwell Collins and B/E Aerospace has agreed:
-
-
to immediately cease and terminate, and to use reasonable best efforts to cause its officers, directors and other representatives to cease and
terminate all existing discussions, negotiations and communications with any person or entity with respect to acquisition proposals from any person or entity, including proposals to acquire 20% or
more of such party's voting power, consolidated assets, revenues or net income, as further described under "The Merger AgreementCovenants and AgreementsNo Solicitation"
beginning on page 141;
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not to, and not to authorize any of its representatives to, directly or indirectly initiate, seek, solicit, knowingly encourage or knowingly
induce or take any other action reasonably expected to lead to an acquisition proposal, engage in negotiations or discussions with or provide any non-public information to any person or entity
relating to an acquisition proposal or grant any waiver or release under any standstill or other agreement (unless either party's board of directors determines in good faith that refusing to grant
such waiver or release would be inconsistent with its fiduciary duties under applicable law);
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not to provide access (and within one business day of the date of the merger agreement, to terminate any such access) to any third party to any
data room containing any of such party's information; and
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within two business days of the date of the merger agreement, to demand the return or destruction of all confidential, non-public information
and materials and all other information and materials related to any acquisition proposal that have been provided to third parties that have entered into confidentiality agreements relating to a
possible acquisition proposal with the referenced party or any of its subsidiaries.
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The
merger agreement includes certain exceptions to the non-solicitation covenant such that, prior to obtaining the B/E Aerospace Stockholder Approval or the Rockwell Collins
Stockholder Approval, as applicable, the parties may take actions prohibited by the above limitations regarding an unsolicited acquisition proposal. Also, the applicable party's board of directors
may, subject to complying with certain specified procedures, including providing the other party with a chance to negotiate, and, in certain circumstances, payment of a termination fee as described
below, (i) change its recommendation in favor of the merger and the transactions contemplated by the merger agreement, or terminate the merger agreement, in order to enter into a definitive
agreement regarding an unsolicited acquisition proposal that is determined to be a "superior proposal," or (ii) change its recommendation in favor of the merger and the transactions
contemplated by the merger agreement in response to an "intervening event" that becomes known after the date of the merger agreement but prior to receipt of the applicable stockholder approval, in
each case, to the extent failure to do so would be inconsistent with its fiduciary duties under applicable law. For a more complete description of the limitations on solicitation of acquisition
proposals from third parties and the ability of each company's board of
directors to change its recommendation for the transaction, see "The Merger AgreementCovenants and AgreementsNo Solicitation" beginning on page 141.
Termination of the Merger Agreement; Termination Fees
The merger agreement may be terminated at any time prior to the effective time, before or after approval is obtained from the stockholders of
Rockwell Collins or B/E Aerospace, as follows:
-
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by the mutual written consent of Rockwell Collins and B/E Aerospace;
-
-
by either Rockwell Collins or B/E Aerospace if:
-
-
the merger has not been consummated on or before 5:00 p.m. (New York time) on October 21, 2017, except where the
party seeking to terminate the merger agreement for this reason has failed to perform or comply with any of its obligations under the merger agreement and such failure has been the principal cause or
resulted in the failure of the consummation of the merger by such date, this termination right being referred to as the End Date Termination Right;
-
-
any governmental authority has issued or entered any final, non-appealable order or enacted any law after the date of the merger
agreement that has the effect of permanently restraining, enjoining or otherwise prohibiting the merger or the other transactions contemplated by the merger agreement, except where the issuance of
such order was proximately caused by the failure of the party seeking to terminate the merger agreement for this reason to perform or comply with any of its obligations under the merger agreement;
-
-
the Rockwell Collins Stockholder Approval has not been obtained upon a vote taken at the duly convened Rockwell Collins special
meeting or at any adjournment or postponement of such meeting; or
-
-
the B/E Aerospace Stockholder Approval has not been obtained upon a vote taken at the duly convened B/E Aerospace
special meeting or at any adjournment or postponement of such meeting;
-
-
by B/E Aerospace:
-
-
if Rockwell Collins or Merger Sub breaches or fails to perform any of their respective representations, warranties, covenants or
other agreements set forth in the merger agreement, resulting in the failure of a closing condition regarding (i) the accuracy of Rockwell Collins' representations or warranties (treating for
this purpose the representation
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and
warranty made by Rockwell Collins regarding the truth and accuracy of the representations contained in the representation letter delivered at the signing of the merger agreement relating to the
continued qualification of the KLX spin-off for the KLX spin-off tax treatment, which is referred to as the Rockwell Collins Signing Representation Letter as a Rockwell Collins fundamental
representation and warranty in the event that the B/E Aerospace Tax Advisor Opinion and either the Rockwell Collins Tax Advisor Opinion or the similar opinion of the additional tax counsel
cannot be delivered) or (ii) the performance or compliance in all material respects with their respective obligations under the merger agreement required to be performed or complied with on or
prior to the closing of the merger, and, in each case, such breach or failure to perform is incapable of being cured prior to 5:00 p.m. (New York
time) on October 21, 2017 or, if capable of being cured, will not have been cured prior to the earlier of 5:00 p.m. (New York time) on October 21, 2017 or the date that is
30 days after delivery of notice by B/E Aerospace to Rockwell Collins of such breach or failure to perform, except that B/E Aerospace will not have the right to terminate the
merger agreement for this reason if B/E Aerospace is then in material breach of any of its material obligations under the merger agreement, resulting in the failure of a closing condition
regarding its performance or compliance with its obligations under the merger agreement required to be performed or complied with on or prior to the closing of the merger, the termination right
described in this bullet point being referred to as the B/E Aerospace Breach Termination Right;
-
-
prior to receipt of the Rockwell Collins Stockholder Approval, if Rockwell Collins makes an adverse recommendation change, as
described further in "The Merger AgreementCovenants and AgreementsAdverse Recommendation Change and Termination" beginning on page 142, fails to include in this joint
proxy statement/prospectus its recommendation to approve the Share Issuance proposal or materially violates or breaches its non-solicitation obligations, the termination right described in this bullet
point being referred to as the B/E Aerospace Recommendation Change Termination Right;
-
-
prior to receipt of the B/E Aerospace Stockholder Approval, in order for B/E Aerospace to enter into a definitive
agreement with respect to a superior proposal to the extent permitted by and subject to the applicable terms and provisions of the non-solicitation provisions, as described further under "The Merger
AgreementCovenants and AgreementsAdverse Recommendation Change and Termination" beginning on page 142; or
-
-
if the closing condition regarding delivery of the B/E Aerospace Tax Advisor Opinion (or, if applicable, delivery of both
the Rockwell Collins Tax Advisor Opinion and a similar opinion from the additional tax counsel) is not satisfied within 20 business days of the satisfaction or waiver of all other closing conditions
(other than those conditions that by their terms cannot be satisfied prior to the closing of the merger, but which conditions would be satisfied or would be capable of being satisfied if the closing
of the merger occurred as of such date), the termination right described in this bullet point being referred to as the B/E Aerospace Tax Opinion Termination Right.
-
-
by Rockwell Collins if:
-
-
B/E Aerospace breaches or fails to perform any of its representations, warranties, covenants or other agreements set forth
in the merger agreement, resulting in the failure of a closing condition regarding (i) the accuracy of B/E Aerospace's representations or warranties (treating for this purpose the
representation and warranty made by B/E Aerospace regarding the truth and accuracy of the representations contained in the representation letter delivered at signing of the merger agreement
relating to the KLX spin-off's continued qualification for the KLX spin-off tax treatment, which is referred to as the B/E Aerospace
29
Table of Contents
Signing
Representation Letter, as a B/E Aerospace fundamental representation and warranty in the event the Rockwell Collins Tax Advisor Opinion and either the B/E Aerospace Tax Advisor
Opinion or the similar opinion of the additional tax counsel cannot be delivered) or (ii) the performance or compliance in all material respects with B/E Aerospace's obligations under
the merger agreement required to be performed or complied with on or prior to the closing of the merger, and, in each case, such breach or failure to perform is incapable of being cured prior to
5:00 p.m. (New York time) on October 21, 2017 or, if capable of being cured, will not have been cured prior to the earlier of 5:00 p.m. (New York time) on October 21, 2017
or the date that is 30 days after delivery of notice by Rockwell Collins to B/E Aerospace of such breach or failure to perform, except that Rockwell Collins will not have the right to
terminate the merger agreement for this reason if Rockwell Collins is then in material breach of any of its material obligations under the merger agreement, resulting in the failure of a closing
condition regarding its performance or compliance with its obligations under the merger agreement required to be performed or complied with on or prior to the closing of the merger, the termination
right described in this bullet point being referred to as the Rockwell Collins Breach Termination Right;
-
-
prior to receipt of the B/E Aerospace Stockholder Approval, B/E Aerospace makes an adverse recommendation change, as
described further in "The Merger AgreementCovenants and AgreementsAdverse Recommendation Change and Termination" beginning on page 142, fails to include in this joint
proxy statement/prospectus its recommendation to approve the Merger proposal or materially violates or breaches its non-solicitation obligations, the termination right described in this bullet point
being referred to as the Rockwell Collins Recommendation Change Termination Right;
-
-
prior to receipt of the Rockwell Collins Stockholder Approval, in order for Rockwell Collins to enter into a definitive agreement
with respect to a superior proposal to the extent permitted by and subject to the applicable terms and provisions of the non-solicitation provisions, as described further under "The Merger
AgreementCovenants and AgreementsAdverse Recommendation Change and Termination" beginning on page 142; or
-
-
the closing condition regarding delivery to Rockwell Collins of the Rockwell Collins Tax Advisor Opinion (or, if applicable,
delivery of both the B/E Aerospace Tax Advisor Opinion and a similar opinion from the additional tax counsel) is not satisfied within 20 business days of the satisfaction or waiver of all other
closing conditions (other than those conditions that by their terms cannot be satisfied prior to the closing of the merger, but which conditions would be satisfied or would be capable of being
satisfied if the closing of the merger occurred as of such date), the termination right described in this bullet point being referred to as the Rockwell Collins Tax Opinion Termination Right.
If
the merger agreement is terminated as described above, the merger agreement will be null and void and of no effect, without liability on the part of any party and the rights and
obligations of any party will cease, except that, obligations with respect to certain provisions of the merger agreement will survive the termination of the merger agreement,
including:
-
-
no termination will relieve any party of any liability or damages resulting from any intentional breach of the merger agreement prior to such
termination or fraud, in which case the aggrieved party will be entitled to all remedies available at law or in equity, including liability for damages (taking into account all relevant factors,
including the loss of the benefit of the merger, any lost stockholder premium, any lost synergies, the time value of money and any benefit to the breaching party or its stockholders arising from such
intentional breach or fraud); and
30
Table of Contents
-
-
the confidentiality agreement entered into by Rockwell Collins and B/E Aerospace in connection with entering into the merger and the
provisions of the merger agreement with respect to the effect of termination, termination fees, and general provisions of interpretation and construction will survive any termination of the merger
agreement.
The
merger agreement provides for termination fees in connection with a termination of the merger agreement under the following circumstances:
-
-
B/E Aerospace will pay to Rockwell Collins $200 million:
-
-
on the date of the consummation of the applicable acquisition proposal, if Rockwell Collins terminates the merger agreement
pursuant to the Rockwell Collins Breach Termination Right on the basis of a breach of a covenant or agreement contained in the merger agreement or either party terminates the agreement pursuant to the
End Date Termination Right or failure of B/E Aerospace to obtain the B/E Aerospace Stockholder Approval, and, in any such case, prior to the termination of the merger agreement (or prior
to the Rockwell Collins special meeting in the event of failure of B/E Aerospace to obtain the B/E Aerospace Stockholder Approval), an acquisition proposal (with regard to 50% of the
voting power, consolidated assets, revenues or net income of the applicable party) made after the date of the merger agreement is publicly disclosed and not publicly withdrawn and, within
12 months of such termination, B/E Aerospace consummates an acquisition proposal or enters into a definitive agreement with respect to an acquisition proposal that is ultimately
consummated (regardless of when consummation occurs);
-
-
immediately prior to or simultaneously with termination, if B/E Aerospace terminates the merger agreement in order to enter
into a definitive agreement with respect to a superior proposal in accordance with the non-solicitation provisions; or
-
-
promptly, and in no event later than three business days after termination, if Rockwell Collins terminates the merger agreement
pursuant to the Rockwell Collins Recommendation Change Termination Right.
-
-
Rockwell Collins will pay to B/E Aerospace $300 million:
-
-
on the date of the consummation of the applicable acquisition proposal, if B/E Aerospace terminates the merger agreement
pursuant to the B/E Aerospace Breach Termination Right on the basis of a breach of a covenant or agreement contained in the merger agreement or either party terminates the agreement pursuant to
the End Date Termination Right or failure of Rockwell Collins to obtain the Rockwell Collins Stockholder Approval, and, in any such case, prior to the termination of the merger agreement (or prior to
the B/E Aerospace special meeting in the event of failure of Rockwell Collins to obtain the Rockwell Collins Stockholder Approval), an acquisition proposal (with regard to 50% of the voting
power, consolidated assets, revenues or net income of the applicable party) made after the date of the merger agreement is publicly disclosed and not publicly withdrawn and, within 12 months of
such termination, Rockwell Collins consummates an acquisition proposal or enters into a definitive agreement with respect to an acquisition proposal that is ultimately consummated (regardless of when
consummation occurs);
-
-
immediately prior to or simultaneously with termination, if Rockwell Collins terminates the merger agreement in order to enter
into a definitive agreement with respect to a superior proposal in accordance with the non-solicitation provisions; or
-
-
promptly, and in no event later than three business days after termination, if B/E Aerospace terminates the merger
agreement pursuant to the B/E Aerospace Recommendation Change Termination Right.
31
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In
no event will Rockwell Collins or B/E Aerospace be required to pay a termination fee if such party has already paid a termination fee, and no termination fee will be payable
more than once.
In
addition to the termination fees described above, the merger agreement provides for expense reimbursements in connection with the termination of the merger agreement under the
following circumstances:
-
-
B/E Aerospace will reimburse Rockwell Collins for reasonable and documented out-of-pocket costs and expenses incurred by Rockwell
Collins, including all fees and expenses incurred by Rockwell Collins in connection with the financing of the merger and the fees and expenses of advisors incurred by Rockwell Collins in connection
with the merger agreement and the transactions contemplated by the merger agreement, in an amount not to exceed $85 million:
-
-
if the merger agreement is terminated (i) by either Rockwell Collins or B/E Aerospace due to failure of
B/E Aerospace to obtain the B/E Aerospace Stockholder Approval, (ii) by B/E Aerospace pursuant to the B/E Aerospace Tax Opinion Termination Right, (iii) by
Rockwell Collins pursuant to the Rockwell Collins Breach Termination Right or (iv) by Rockwell Collins pursuant to the Rockwell Collins Tax Opinion Termination Right and, in the case of this
clause (iv), either (1) a breach or inaccuracy in the B/E Aerospace Signing Representation Letter causes the Rockwell Collins Tax Advisor Opinion not to be delivered (and either
the B/E Aerospace Tax Advisor Opinion or the opinion of the additional tax counsel is not delivered for any reason) or (2) B/E Aerospace fails to comply with its obligations under
the covenant in the merger agreement related to certain tax matters.
-
-
Rockwell Collins will reimburse B/E Aerospace for reasonable and documented out-of-pocket costs and expenses incurred by
B/E Aerospace, including all fees and expenses of advisors incurred by B/E Aerospace in connection with the merger agreement and the transactions contemplated by the merger agreement, in
an amount not to exceed $56 million:
-
-
if the merger agreement is terminated by either Rockwell Collins or B/E Aerospace due to failure of Rockwell Collins to
obtain the Rockwell Collins Stockholder Approval.
Payment
of the expense reimbursements by either party does not affect the other party's right to receive any applicable termination fees, but does reduce on a dollar-for-dollar basis any
termination fee that becomes due and payable to such other party under the terms of the merger agreement.
The
right of either party to receive the applicable termination fee and expense reimbursement, in circumstances in which the applicable termination fee or expense reimbursement is owed,
is the sole and exclusive monetary remedy of the receiving party against the other party and its subsidiaries and representatives for all losses and damages suffered as a result of the failure of the
consummation of the transactions contemplated by the merger agreement to be consummated or failure to perform under the merger agreement or otherwise, except (i) in the event of
(a) termination due to failure of a party to include its required recommendation under the merger agreement in this joint proxy statement/prospectus or due to breach of such party's
non-solicitation obligations, (b) intentional breach of the covenant in the merger agreement related to certain tax matters or fraudulent breach of either party's representations and warranties
under the merger agreement related to their respective tax representation letters or (c) the right of each party to receive the applicable termination fee less the applicable expense
reimbursement under certain circumstances and (ii) that any party that fails to timely pay any termination fee or expense reimbursement due pursuant to the merger agreement will be obligated to
pay any costs and expenses in connection with any suit brought by the other party that results in a judgment against the delinquent party for the payment of such termination fee and expense
reimbursement.
For
a more complete description of each party's termination rights and the related termination fee obligations, see "The Merger AgreementTermination" beginning on
page 150 and "The Merger
32
Table of Contents
AgreementEffect
of TerminationTermination Fees and Expense Reimbursements" beginning on page 152.
Matters to be Considered at the Special Meetings
Rockwell Collins
At the Rockwell Collins special meeting, Rockwell Collins stockholders will be asked to consider and vote
upon:
-
-
the Share Issuance proposal; and
-
-
the Rockwell Collins Adjournment proposal.
Stockholder
approval of the Share Issuance proposal is required to complete the merger.
The
affirmative vote of holders of a majority of the votes cast by the shares of Rockwell Collins common stock represented (in person or by proxy) at the Rockwell Collins special meeting
is required to approve the Share Issuance proposal.
The
affirmative vote of holders of a majority of the shares of Rockwell Collins common stock represented (in person or by proxy) at the Rockwell Collins special meeting and entitled to
vote on the
proposal, whether or not a quorum is present, is required to approve the Rockwell Collins Adjournment proposal.
The Rockwell Collins Board unanimously recommends that Rockwell Collins stockholders vote "FOR" both of the proposals set forth above, as more fully described
under "Rockwell Collins Proposals" beginning on page 165.
B/E Aerospace
At the B/E Aerospace special meeting, B/E Aerospace stockholders will be asked to consider and vote
upon:
-
-
the Merger proposal;
-
-
the Merger-Related Compensation proposal; and
-
-
the B/E Aerospace Adjournment proposal.
Stockholder
approval of the Merger proposal is required for completion of the merger.
The
affirmative vote of holders of a majority of the shares of B/E Aerospace common stock issued and outstanding on the record date for the B/E Aerospace special meeting is
required to approve the Merger proposal.
The
affirmative vote of holders of a majority of the votes cast by shares of B/E Aerospace common stock represented (in person or by proxy) at the B/E Aerospace special
meeting and entitled to vote on such proposal is required to approve the Merger-Related Compensation proposal.
The
affirmative vote of holders of a majority of the votes cast by holders of shares of B/E Aerospace common stock represented (in person or by proxy) at the B/E Aerospace
special meeting, whether or not there is a quorum, is required to approve the B/E Aerospace Adjournment proposal.
The B/E Aerospace Board unanimously recommends that B/E Aerospace stockholders vote "FOR" all of the proposals set forth above, as more fully
described under "B/E Aerospace Proposals" beginning on page 172.
33
Table of Contents
Voting by Rockwell Collins and B/E Aerospace Directors and Executive Officers
As of the record date, directors and executive officers of Rockwell Collins and their affiliates owned and were entitled to vote 363,896 shares
of Rockwell Collins common stock, representing approximately less than 1% of the total voting power of the shares of Rockwell Collins common stock outstanding on that date. It is currently expected
that Rockwell Collins' directors and executive officers will vote their shares of Rockwell Collins common stock in favor of each of the proposals to be considered at the Rockwell Collins special
meeting, although none of them have entered into any agreements obligating them to do so.
As
of the record date, directors and executive officers of B/E Aerospace and their affiliates owned and were entitled to vote 269,296 shares of B/E Aerospace common stock,
representing less than 1% of the
total voting power of the shares of B/E Aerospace common stock outstanding on that date. It is currently expected that B/E Aerospace's directors and executive officers will vote their
shares of B/E Aerospace common stock in favor of each of the proposals to be considered at the B/E Aerospace special meeting, although none of them have entered into any agreements
obligating them to do so. The number of shares reflected above does not include shares subject to outstanding unvested restricted stock awards or shares underlying unvested restricted stock units. For
information with respect to restricted stock awards and restricted stock units, please see "Treatment of Restricted Stock Awards" and "Treatment of Restricted Stock Units"
beginning on page 103 and page 104, respectively.
Risk Factors
You should also carefully consider the risks that are described in the section entitled "Risk Factors" beginning on page 46.
34
Table of Contents
SELECTED HISTORICAL FINANCIAL DATA
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ROCKWELL COLLINS
The following table presents selected historical consolidated financial data for Rockwell Collins as of and for the fiscal years ended on the
Friday closest to September 30. For ease of presentation, September 30 is utilized to represent the fiscal year-end date. Fiscal year 2014 was a 53-week fiscal year, while 2016, 2015,
2013 and 2012 were 52-week fiscal years. The statement of operations data for the fiscal years ended September 30, 2016, 2015 and 2014 and the balance sheet data as of September 30, 2016
and 2015 have been obtained from Rockwell Collins' audited consolidated financial statements included in Rockwell Collins' Annual Report on Form 10-K for the fiscal year ended
September 30, 2016, which is incorporated by reference into this joint proxy statement/prospectus. The statement of operations data for the fiscal years ended September 30, 2013 and 2012
and the balance sheet data as of September 30, 2014, 2013 and 2012 have been derived from Rockwell Collins' audited consolidated financial statements for such years, which have not been
incorporated into this document by reference.
The
information set forth below is not necessarily indicative of future results and should be read together with the other information contained in Rockwell Collins' Annual Report on
Form 10-K for the fiscal year ended September 30, 2016, including sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and
consolidated financial statements and related notes therein. See the section entitled "Where You Can Find More Information" beginning on page 198 of this joint proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended September 30
|
|
(in millions, except per share data and ratios)
|
|
2016(a)
|
|
2015(b)
|
|
2014(c)
|
|
2013(d)
|
|
2012(e)
|
|
Total sales
|
|
$
|
5,259
|
|
$
|
5,244
|
|
$
|
4,979
|
|
$
|
4,474
|
|
$
|
4,531
|
|
Income from continuing operations
|
|
$
|
727
|
|
$
|
694
|
|
$
|
618
|
|
$
|
630
|
|
$
|
589
|
|
Net income
|
|
$
|
728
|
|
$
|
686
|
|
$
|
604
|
|
$
|
632
|
|
$
|
609
|
|
Cash dividends declared per common share
|
|
$
|
1.32
|
|
$
|
1.26
|
|
$
|
1.20
|
|
$
|
1.20
|
|
$
|
1.08
|
|
Basic income from continuing operations per common share
|
|
$
|
5.57
|
|
$
|
5.25
|
|
$
|
4.57
|
|
$
|
4.62
|
|
$
|
4.05
|
|
Diluted income from continuing operations per common share
|
|
$
|
5.50
|
|
$
|
5.19
|
|
$
|
4.52
|
|
$
|
4.56
|
|
$
|
4.01
|
|
Total Assets
|
|
$
|
7,707
|
|
$
|
7,304
|
|
$
|
7,005
|
|
$
|
5,397
|
|
$
|
5,310
|
|
Long-term Debt, Net
|
|
$
|
1,382
|
|
$
|
1,680
|
|
$
|
1,663
|
|
$
|
563
|
|
$
|
779
|
|
Ratio of earnings to fixed charges(f)
|
|
|
11
|
|
|
12
|
|
|
12
|
|
|
18
|
|
|
17
|
|
-
(a)
-
Income
from continuing operations includes a $24 million income tax benefit from the retroactive reinstatement of the previously expired Federal Research and
Development Tax Credit and a $41 million income tax benefit due to the release of a valuation allowance for a U.S. capital loss carryforward. In addition, income from continuing operations
includes $31 million of restructuring and asset impairment charges ($45 million before income taxes).
-
(b)
-
Income
from continuing operations includes a $22 million income tax benefit from the retroactive reinstatement of the previously expired Federal Research and
Development Tax Credit and a $16 million income tax benefit related to the remeasurement of certain prior year tax positions.
-
(c)
-
Income
from continuing operations includes $18 million of restructuring, pension settlement and transaction costs ($25 million before income taxes).
Income from continuing operations also includes a $9 million gain ($10 million before income taxes) resulting from the sale of a business. On December 23, 2013, Rockwell Collins
acquired Radio Holding, Inc. for $1.405 billion. This
35
Table of Contents
acquisition
was funded through a combination of new long-term debt and short-term commercial paper borrowings.
-
(d)
-
Net
income includes a $19 million income tax benefit related to the retroactive reinstatement of the previously expired Federal Research and Development Tax
Credit. Short-term debt includes commercial paper borrowings incurred to fund a portion of Rockwell Collins' share repurchase program and also includes $200 million related to debt that matured
in December 2013.
-
(e)
-
Net
income includes $38 million of net restructuring and asset impairment charges ($58 million before income taxes), primarily related to employee
severance costs and certain customer bankruptcy charges. Net income also includes a $19 million income tax benefit related to the favorable resolution of certain tax matters in 2012.
-
(f)
-
In
computing the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes, adjusted for income or loss
attributable to minority interests in subsidiaries, undistributed earnings of less than majority owned subsidiaries and fixed charges excluding capitalized interest. Fixed charges are defined as
interest on borrowings (whether expensed or capitalized) and that portion of rental expense applicable to interest.
36
Table of Contents
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF B/E AEROSPACE
The following table presents selected historical consolidated financial data for B/E Aerospace as of and for the fiscal years ending
December 31, 2015, 2014, 2013, 2012 and 2011 and as of and for the nine months ended September 30, 2016 and 2015. The statement of earnings data for the fiscal years ending
December 31, 2015, 2014 and 2013 and the balance sheet data as of December 31, 2015 and 2014 have been derived from B/E Aerospace audited consolidated financial statements
included in B/E Aerospace's Annual Report on Form 10-K for the fiscal year ended December 31, 2015,
which is incorporated by reference into this joint proxy statement/prospectus. The statement of earnings data for the fiscal years ended December 31, 2012 and 2011 and the balance sheet data as
of December 31, 2013, 2012 and 2011 have been derived from B/E Aerospace's audited consolidated financial statements for such years, which have not been incorporated into this document
by reference. The financial data as of and for the nine months ended September 30, 2016 and 2015 have been derived from B/E Aerospace's unaudited condensed consolidated financial
statements included in B/E Aerospace's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, which is incorporated by reference into this joint proxy
statement/prospectus.
The
information set forth below is not necessarily indicative of future results and should be read together with the other information contained in B/E Aerospace's Annual Report on
Form 10-K for the fiscal years ended December 31, 2015 and B/E Aerospace's Quarterly Report on Form 10-Q for the nine months ended September 30, 2016, including the section
entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes therein. See the section entitled "Where
You Can Find More Information" beginning on page 198 of this joint proxy statement/prospectus.
37
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30
|
|
Year Ended December 31
|
|
(in millions, except per share data)
|
|
2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
Statement of Earnings data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from continuing operations
|
|
$
|
2,203
|
|
|
2,070
|
|
$
|
2,730
|
|
$
|
2,599
|
|
$
|
2,203
|
|
$
|
1,914
|
|
$
|
1,556
|
|
Earnings from continuing operations, net of income taxes(1)
|
|
|
251
|
|
|
202
|
|
|
286
|
|
|
58
|
|
|
195
|
|
|
80
|
|
|
75
|
|
Discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
171
|
|
|
154
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings
|
|
$
|
251
|
|
$
|
202
|
|
$
|
286
|
|
$
|
105
|
|
$
|
366
|
|
$
|
234
|
|
$
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
2.49
|
|
$
|
1.94
|
|
$
|
2.75
|
|
$
|
0.55
|
|
$
|
1.89
|
|
$
|
0.78
|
|
$
|
0.74
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
0.45
|
|
|
1.65
|
|
|
1.51
|
|
|
1.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
2.49
|
|
$
|
1.94
|
|
$
|
2.75
|
|
$
|
1.00
|
|
$
|
3.54
|
|
$
|
2.29
|
|
$
|
2.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
2.48
|
|
$
|
1.93
|
|
$
|
2.73
|
|
$
|
0.55
|
|
$
|
1.88
|
|
$
|
0.77
|
|
$
|
0.74
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
0.45
|
|
|
1.64
|
|
|
1.50
|
|
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
2.48
|
|
$
|
1.93
|
|
$
|
2.73
|
|
$
|
1.00
|
|
$
|
3.52
|
|
$
|
2.27
|
|
$
|
2.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet Data:(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
126
|
|
$
|
164
|
|
$
|
154
|
|
$
|
293
|
|
$
|
638
|
|
$
|
514
|
|
$
|
304
|
|
Total assets
|
|
|
3,349
|
|
|
3,195
|
|
|
3,141
|
|
|
3,173
|
|
|
5,634
|
|
|
5,028
|
|
|
3,776
|
|
Long-term debt, net of current maturities
|
|
|
2,036
|
|
|
2,033
|
|
|
2,034
|
|
|
2,147
|
|
|
1,927
|
|
|
1,924
|
|
|
1,221
|
|
Stockholders' equity
|
|
|
191
|
|
|
88
|
|
|
56
|
|
|
10
|
|
|
2,609
|
|
|
2,179
|
|
|
1,873
|
|
-
(1)
During
the year ended December 31, 2014, B/E Aerospace incurred a loss on debt extinguishment of $244 million related to unamortized debt issue costs
and fees and expenses related to the repurchase of B/E Aerospace's 5.25 percent and 6.875 percent notes in connection with the KLX spin-off. During the year ended
December 31, 2012, B/E Aerospace incurred a loss on debt extinguishment of $82 million related to unamortized debt issue costs and fees and expenses related to the repurchase of B/E
Aerospace's 8.5 percent notes.
(2)
On
December 16, 2014, B/E Aerospace completed the KLX spin-off. As a result, B/E Aerospace's assets, liabilities and stockholders' equity decreased by
$4,410 million, $1,783 million and $2,627 million, respectively.
(3)
Certain
amounts for prior years have been reclassified to conform to the current presentation.
38
Table of Contents
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma condensed combined financial information gives effect to the merger and the related financing
transactions as described in the section entitled "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page 173 of this joint proxy statement/prospectus. The selected unaudited
pro forma condensed combined balance sheet data as of September 30, 2016 give effect to the merger as if it occurred on September 30, 2016, which was the end of Rockwell Collins' 2016
fiscal year. The selected unaudited pro forma condensed combined statements of income data for the year ended September 30, 2016, give effect to the merger as if it occurred on
October 1, 2015, the first day of Rockwell Collins' 2016 fiscal year. Rockwell Collins and B/E Aerospace have different fiscal year ends. As a consequence, the B/E Aerospace historical
results have been aligned to more closely conform to the fiscal periods of Rockwell Collins as further described in the section entitled "Unaudited Pro Forma Condensed Combined Financial Statements"
beginning on page 173 of this joint proxy statement/prospectus.
The
selected pro forma data have been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial statements of the combined
company appearing elsewhere in this joint proxy statement/prospectus and the accompanying notes to the pro forma financial statements. In addition, the pro forma financial statements were based on,
and should be read in conjunction with, the historical consolidated financial statements and related notes of Rockwell Collins and B/E Aerospace for the applicable periods, which have been
incorporated in this joint proxy statement/prospectus by reference. See the sections entitled "Unaudited Pro Forma Condensed Combined Financial Statements" and "Where You Can Find More Information"
beginning on page 173 and page 198, respectively, of this joint proxy statement/prospectus for additional information.
|
|
|
|
|
(in millions, except per share amounts)
|
|
Year Ended
September 30, 2016
|
|
Pro Forma Statement of Income Data:
|
|
|
|
|
Total sales
|
|
$
|
8,119
|
|
Income from continuing operations
|
|
|
797
|
|
Income from continuing operations per common share:
|
|
|
|
|
Basic
|
|
$
|
4.93
|
|
Diluted
|
|
|
4.88
|
|
Weighted average common shares outstanding:
|
|
|
|
|
Basic
|
|
|
161.5
|
|
Diluted
|
|
|
163.3
|
|
|
|
|
|
|
(in millions)
|
|
As of
September 30, 2016
|
|
Pro Forma Balance Sheet Data:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
626
|
|
Total assets
|
|
|
18,084
|
|
Long-term debt, net
|
|
|
7,082
|
|
Total equity
|
|
|
4,858
|
|
39
Table of Contents
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
The following table summarizes unaudited per share data (i) for Rockwell Collins and B/E Aerospace on a historical basis,
(ii) for Rockwell Collins on a pro forma combined basis giving effect to the merger and (iii) on a pro forma combined equivalent basis calculated by multiplying the pro forma combined
data by an exchange ratio of 0.3101, which is calculated as if the Rockwell Collins stock price were equal to the Rockwell Collins' closing stock price on January 26, 2017, the most recent
practicable date for which such information was available. The actual exchange ratio will be adjusted to reflect changes in the price of Rockwell Collins common stock prior to the closing of the
merger as described in the section entitled "The Merger AgreementMerger Consideration to be Received by B/E Aerospace Stockholders" beginning on page 128 this joint proxy
statement/prospectus. These computations exclude the $34.10 per share cash portion of the merger consideration.
The
unaudited pro forma per share information reflects the merger and related transactions as if they had occurred on October 1, 2015 in the case of income from continuing
operations per share, and as if they had occurred on September 30, 2016 in the case of book value per share. The information in the table is based on, and should be read together with, the
historical financial information of Rockwell Collins and B/E Aerospace which is incorporated by reference in this joint proxy statement/prospectus and the financial information contained under
"Unaudited Pro Forma Condensed Combined Financial Statements," "Selected Historical Financial DataSelected Historical Consolidated Financial Data of Rockwell Collins" and "Selected
Historical Financial DataSelected Historical Consolidated Financial Data of B/E Aerospace" beginning on page 173, page 35, and page 37, respectively. See the
section entitled "Where You Can Find More Information" beginning on page 198 of this joint proxy statement/prospectus.
The
unaudited pro forma combined per share data is presented for illustrative purposes only and is not necessarily indicative of actual or future financial position or results of
operations that would have been realized if the proposed merger had been completed as of the dates indicated or will be realized upon the completion of the proposed merger. The summary pro forma
information is preliminary, based on initial estimates of the fair value of assets acquired (including intangible assets) and liabilities assumed, and is subject to change as more information
regarding the fair values are obtained, which changes could be materially different than the initial estimates.
Both
Rockwell Collins and B/E Aerospace declared and paid dividends during the periods presented. For more information on dividends of Rockwell Collins and B/E Aerospace,
see the section
40
Table of Contents
entitled
"Comparative Per Share Market Price and Dividend Information" beginning on page 42 of this joint proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Rockwell
Collins
|
|
Historical
B/E Aerospace
|
|
Pro Forma
Combined
|
|
Equivalent
Basis
Pro Forma
Combined
|
|
Income from continuing operations per basic common share attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended September 30, 2016
|
|
$
|
5.57
|
|
$
|
3.31
|
|
$
|
4.93
|
|
$
|
1.53
|
|
Income from continuing operations per diluted common share attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended September 30, 2016
|
|
$
|
5.50
|
|
$
|
3.28
|
|
$
|
4.88
|
|
$
|
1.51
|
|
Cash dividends per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended September 30, 2016
|
|
$
|
1.32
|
|
$
|
0.82
|
|
|
N/A
|
(1)
|
|
N/A
|
(1)
|
Book value per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2016
|
|
$
|
15.96
|
|
$
|
1.88
|
|
$
|
30.09
|
|
$
|
9.33
|
|
-
(1)
-
Pro
forma combined dividends per share is not presented, as the dividend per share for Rockwell Collins will be determined by the Rockwell Collins Board following
completion of the merger.
41
Table of Contents
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Rockwell Collins Market Price and Dividend Information
Rockwell Collins common stock is listed on the NYSE under the symbol "COL." The following table sets forth the high and low prices per share for
Rockwell Collins common stock and cash dividends declared for the periods indicated, each rounded to the nearest whole cent. Rockwell Collins' fiscal year ends on the Friday closest to
September 30.
|
|
|
|
|
|
|
|
|
|
|
|
|
High
($)
|
|
Low
($)
|
|
Dividend
($)
|
|
Fiscal Year 2017:
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
96.55
|
|
|
78.54
|
|
|
0.33
|
|
Fiscal Year 2016:
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
93.89
|
|
|
78.15
|
|
|
0.33
|
|
Second Quarter
|
|
|
95.11
|
|
|
82.26
|
|
|
0.33
|
|
Third Quarter
|
|
|
93.20
|
|
|
76.03
|
|
|
0.33
|
|
Fourth Quarter
|
|
|
94.98
|
|
|
81.04
|
|
|
0.33
|
|
Fiscal Year 2015:
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
81.90
|
|
|
71.89
|
|
|
0.30
|
|
Second Quarter
|
|
|
86.60
|
|
|
72.35
|
|
|
0.30
|
|
Third Quarter
|
|
|
97.49
|
|
|
83.00
|
|
|
0.30
|
|
Fourth Quarter
|
|
|
99.37
|
|
|
92.22
|
|
|
0.33
|
|
Following
the completion of the merger, the declaration of dividends will be at the discretion of Rockwell Collins Board and will be determined after consideration of various factors,
including earnings, cash requirements, the financial condition of Rockwell Collins, government regulations and other factors deemed relevant by Rockwell Collins Board.
B/E Aerospace Market Price and Dividend Information
B/E Aerospace common stock is listed on the NASDAQ under the symbol "BEAV." The following table sets forth the high and low prices per
share for B/E Aerospace common stock (2014 adjusted to reflect the KLX spin-off) and cash dividends declared for the periods indicated, each rounded to the nearest whole cent.
B/E Aerospace's fiscal year ends on December 31.
|
|
|
|
|
|
|
|
|
|
|
|
|
High
($)
|
|
Low
($)
|
|
Dividend
($)
|
|
Fiscal Year 2016:
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
48.03
|
|
|
36.38
|
|
|
0.21
|
|
Second Quarter
|
|
|
50.89
|
|
|
42.57
|
|
|
0.21
|
|
Third Quarter
|
|
|
52.87
|
|
|
44.29
|
|
|
0.21
|
|
Fourth Quarter
|
|
|
60.45
|
|
|
49.46
|
|
|
0.21
|
|
Fiscal Year 2015:
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
64.58
|
|
|
55.13
|
|
|
0.19
|
|
Second Quarter
|
|
|
64.38
|
|
|
54.34
|
|
|
0.19
|
|
Third Quarter
|
|
|
55.85
|
|
|
42.65
|
|
|
0.19
|
|
Fourth Quarter
|
|
|
49.41
|
|
|
40.39
|
|
|
0.19
|
|
The
payment of future dividends is at the discretion of the B/E Aerospace Board. Under the merger agreement, B/E Aerospace may only continue to pay its regular quarterly
cash dividends of $0.21 per share consistent with past practice.
42
Table of Contents
Comparison of Rockwell Collins and B/E Aerospace Market Prices and Implied Value of Merger Consideration
The following table sets forth the closing sale price per share of Rockwell Collins common stock and B/E Aerospace common stock as
reported on the NYSE and the NASDAQ,
respectively, as of October 21, 2016, the last trading day prior to the public announcement of the merger and on January 26, 2017, the last practicable trading day before the filing of
this joint proxy statement/prospectus with the SEC. The table also shows the estimated implied value of the per share consideration proposed for each share of B/E Aerospace common stock as of
the same two days. This implied value was calculated by multiplying the closing prices of shares of Rockwell Collins common stock on those dates by the exchange ratio of 0.3101 (based on the closing
price of Rockwell Collins' common stock as of the close of business on January 26, 2017, the most recent practicable date for which such information was available) and adding the cash portion
of the merger consideration of $34.10 per share, without interest. The market prices of Rockwell Collins common stock and B/E Aerospace common stock will fluctuate before the special meetings
and before the merger is completed. The exchange ratio may be adjusted to reflect changes in the Rockwell Collins stock price prior to the closing of the merger, and the number of shares of Rockwell
Collins common stock to be issued as part of the stock consideration (and, in turn, the value of the merger consideration to be received in exchange for each share of B/E Aerospace common
stock) may fluctuate with the market value of Rockwell Collins common stock until the last trading day before the merger is complete.
|
|
|
|
|
|
|
|
|
|
|
|
|
Rockwell Collins
Common Stock
|
|
B/E Aerospace
Common Stock
|
|
Implied Per Share Value
of Merger Consideration
|
|
October 21, 2016
|
|
$
|
84.46
|
|
$
|
50.61
|
|
$
|
62.00
|
|
January 26, 2017
|
|
$
|
91.26
|
|
$
|
61.72
|
|
$
|
62.40
|
|
The
market prices of Rockwell Collins common stock and B/E Aerospace common stock have fluctuated since the date of the announcement of the merger agreement and will continue to
fluctuate from the date of this joint proxy statement/prospectus to the date of the Rockwell Collins and B/E Aerospace special meetings and the date the merger is completed and thereafter. No
assurance can be given concerning the market prices of Rockwell Collins common stock or B/E Aerospace common stock before completion of the merger or Rockwell Collins common stock after
completion of the merger. The exchange ratio may be adjusted to reflect changes in the price of the Rockwell Collins common stock prior to the closing of the merger, and the number of shares of
Rockwell Collins common stock to be issued as part of the stock consideration (and, in turn, the value of the merger consideration to be received in exchange for each share of B/E Aerospace
common stock) when received by B/E Aerospace stockholders after the merger is completed could be greater than, less than or the same as shown in the table above. Accordingly, stockholders are
advised to obtain current market quotations for Rockwell Collins common stock and B/E Aerospace common stock in deciding whether to vote for adoption of the merger agreement or the issuance of
shares of Rockwell Collins common stock, as applicable.
43
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This communication contains "forward-looking" statements as that term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements regarding the proposed acquisition of
B/E Aerospace by Rockwell Collins. All statements, other than historical facts, including statements regarding the expected timing of the closing of the proposed transaction; the ability of the
parties to complete the proposed transaction considering the various closing conditions; the expected benefits of the proposed transaction such as improved operations, enhanced revenues and cash flow,
growth potential, market profile and financial strength; the competitive ability and position of the combined company following completion of the proposed transaction; and any assumptions underlying
any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes
identified by the words "may," "will," "should," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "could," "project,"
"predict," "continue," "target" or other similar words or expressions. Forward-looking statements are based upon current plans, estimates and expectations that are subject
to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those
indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved.
Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among other things:
-
-
that one or more closing conditions to the transaction, including certain regulatory approvals, may not be satisfied or waived, on a timely
basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the proposed transaction, may require conditions, limitations or
restrictions in connection with such approvals or that the required approval by the stockholders of each of Rockwell Collins and B/E Aerospace may not be obtained;
-
-
the risk that the proposed transaction may not be completed in the time frame expected by Rockwell Collins or B/E Aerospace, or at all;
-
-
unexpected costs, charges or expenses resulting from the proposed transaction;
-
-
uncertainty of the expected financial performance of the combined company following completion of the proposed transaction;
-
-
failure to realize the anticipated benefits of the proposed transaction, including as a result of delay in completing the proposed transaction
or integrating the businesses of Rockwell Collins and B/E Aerospace;
-
-
the ability of the combined company to implement its business strategy;
-
-
difficulties and delays in achieving synergies and cost savings of the combined company;
-
-
inability to retain and hire key personnel;
-
-
the occurrence of any event that could give rise to termination of the proposed transaction;
-
-
the risk that stockholder litigation in connection with the proposed transaction may affect the timing or occurrence of the contemplated merger
or result in significant costs of defense, indemnification and liability;
-
-
risks associated with the financing of the proposed transaction;
-
-
evolving legal, regulatory and tax regimes;
44
Table of Contents
-
-
changes in general economic and/or industry specific conditions; and
-
-
other risk factors as detailed from time to time in Rockwell Collins' and B/E Aerospace's reports filed with the SEC, including Rockwell
Collins' and B/E Aerospace's respective annual reports on Form 10-K, periodic quarterly reports on Form 10-Q, periodic current reports on Form 8-K and other documents filed with
the SEC, including the risks and uncertainties set forth in or incorporated by reference into this joint proxy statement/prospectus in the section entitled "Risk Factors" beginning on page 46.
Any
forward-looking statements speak only as of the date of this communication. Neither Rockwell Collins nor B/E Aerospace undertakes any obligation to update any forward-looking
statements, whether as a result of new information or development, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on any of these
forward-looking statements.
45
Table of Contents
RISK FACTORS
In addition to the other information included and incorporated by reference into this joint proxy statement/prospectus,
including, among other things, the matters addressed in the section entitled "Cautionary Note Regarding Forward-Looking Statements" beginning on page 44, you should carefully consider the
following risk factors before deciding whether to vote for the proposal to adopt the merger agreement, in the case of B/E Aerospace stockholders, or for the proposal to approve the issuance of the
shares of Rockwell Collins common stock forming part of the merger consideration, in the case of Rockwell Collins stockholders. In addition, you should read and consider the risks associated with each
of the businesses of B/E Aerospace and Rockwell Collins because these risks will relate to the combined company following the completion of the merger. Descriptions of some of these risks can be found
in the Rockwell Collins annual report on Form 10-K for the fiscal year ended September 30, 2016 and the B/E Aerospace annual report on Form 10-K for the fiscal year ended
December 31, 2015, as such risks may be updated or supplemented in each company's subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are
incorporated by reference into this joint proxy statement/prospectus. You should also consider the other information in this document and the other documents incorporated by reference into this
document. See the section entitled "Where You Can Find More Information" beginning on page 198.
Risks Related to the Merger
The merger is subject to conditions, some or all of which may not be satisfied, or completed on a timely
basis, if at all. Failure to complete the merger could have material adverse effects on Rockwell Collins and B/E Aerospace.
The completion of the merger is subject to a number of conditions, including, among other things, receipt of the Rockwell Collins Stockholder
Approval, receipt of the B/E Aerospace Stockholder Approval and receipt of certain other regulatory approvals, which make the completion and timing of the completion of the merger uncertain. See the
section entitled "The Merger AgreementConditions to the Merger," beginning on page 148, for a more detailed discussion. Also, either Rockwell Collins or B/E Aerospace may terminate
the merger agreement if the merger has not been consummated by 5:00 p.m. (New York time) on October 21, 2017, except that this right to terminate the merger agreement will not be
available to any party whose failure to perform or comply with any of its obligations under the merger agreement has been the principal cause of or resulted in the failure of the closing of the merger
to have occurred on or before that date.
If
the merger is not completed, Rockwell Collins' and B/E Aerospace's respective ongoing businesses may be materially adversely affected and, without realizing any of the benefits of
having completed the merger, Rockwell Collins and B/E Aerospace will be subject to a number of risks, including the following:
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-
the market price of Rockwell Collins common stock or B/E Aerospace common stock could decline;
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Rockwell Collins or B/E Aerospace could owe substantial termination fees to the other party under certain circumstances;
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if the merger agreement is terminated and the Rockwell Collins Board or the B/E Aerospace Board seeks another business combination, Rockwell
Collins stockholders and B/E Aerospace stockholders cannot be certain that Rockwell Collins or B/E Aerospace will be able to find a party willing to enter into a transaction on terms equivalent to or
more attractive than the terms that the other party has agreed to in the merger agreement;
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time and resources, financial and other, committed by Rockwell Collins' and B/E Aerospace's respective management to matters relating to the
merger could otherwise have been devoted to pursuing other beneficial opportunities for their respective companies;
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Rockwell Collins or B/E Aerospace may experience negative reactions from the financial markets or from their respective customers or employees;
and
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Rockwell Collins and B/E Aerospace may be required to pay their respective costs relating to the merger, such as legal, accounting, financial
advisory and printing fees, whether or not the merger is completed.
In
addition, if the merger is not completed, Rockwell Collins or B/E Aerospace could be subject to litigation related to any failure to complete the merger or related to any enforcement
proceeding commenced against Rockwell Collins or B/E Aerospace to perform their respective obligations under the merger agreement. The materialization of any of these risks could materially and
adversely impact Rockwell Collins and B/E Aerospace's respective ongoing businesses.
Similarly,
delays in the completion of the merger could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with uncertainty
about completion of the merger.
The merger agreement contains provisions that limit each party's ability to pursue alternatives to the
merger, could discourage a potential competing acquiror of either Rockwell Collins or B/E Aerospace from making a favorable alternative transaction proposal and, in specified circumstances, could
require either party to pay substantial termination fees to the other party.
The merger agreement contains certain provisions that restrict each of Rockwell Collins' and B/E Aerospace's ability to, among other
things, initiate, seek, solicit, knowingly encourage, knowingly induce or take any other action reasonably expected to lead to, or engage in negotiations or discussions relating to, or approve or
recommend, any third-party acquisition proposal. Further, even if the Rockwell Collins Board withdraws or qualifies its recommendation with respect to the issuance of Rockwell Collins common stock
forming part of the merger consideration or if the B/E Aerospace Board withdraws or qualifies its recommendation with respect to the adoption of the merger agreement, in each case as permitted by the
merger agreement, unless the merger agreement has also been terminated in accordance with its terms, Rockwell Collins or B/E Aerospace, as the case may be, will still be required to submit each of the
Share Issuance proposal and the Merger proposal, as applicable, to a vote at their special meeting of stockholders. In addition, following receipt by Rockwell Collins or B/E Aerospace, as the case may
be, of any third-party acquisition proposal that constitutes a "superior proposal," the other party will have an opportunity to offer to modify the terms of the transactions contemplated by the merger
agreement before the board of directors of the receiving party may withdraw or qualify its recommendation with respect to the Share Issuance proposal or the Merger proposal, as applicable, in favor of
such superior proposal, as described further under "The Merger AgreementCovenants and AgreementsNo Solicitation" beginning on page 141.
In
some circumstances, upon termination of the merger agreement, Rockwell Collins could be required to pay a termination fee of $300 million to B/E Aerospace and B/E Aerospace
could be required to pay a termination fee of $200 million to Rockwell Collins. For further discussion, see the section entitled "The Merger
AgreementTermination;Effect of Termination;Termination Fees and Expense Reimbursements" beginning on page 152.
These
provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of Rockwell Collins or B/E
Aerospace or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash or market value than the
per share cash or market value proposed to be received or realized in the merger. In particular, a termination fee, if applicable, may be substantial, and could result in a potential third-party
acquiror or merger partner proposing to pay a lower price to the Rockwell Collins stockholders or B/E Aerospace stockholders than it might otherwise have proposed to pay absent such a fee.
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If
the merger agreement is terminated and either Rockwell Collins or B/E Aerospace determines to seek another business combination, Rockwell Collins or B/E Aerospace, as applicable, may
not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger.
The merger is subject to the expiration or termination of applicable waiting periods and the receipt of
approvals, consents or clearances from regulatory authorities that may impose conditions that could have an adverse effect on B/E Aerospace, Rockwell Collins or the combined company or, if not
obtained, could prevent completion of the merger.
Before the merger may be completed, any applicable waiting period (and any extension thereof) under the HSR Act relating to the consummation of
the merger must have expired or been terminated, and any authorization or consent from a governmental authority required to be obtained with respect to the merger in certain other applicable foreign
antitrust laws must have been obtained. In deciding whether to grant the required regulatory authorization or consent, the relevant governmental entities will consider the effect of the merger on
competition within their relevant jurisdiction. The terms and conditions of the authorizations and consents that are granted may impose requirements, limitations or costs or place restrictions on the
conduct of the combined company's business. Under the merger agreement, Rockwell Collins and B/E Aerospace have agreed to use their reasonable best efforts to obtain such authorizations and consents
and therefore may be required to comply with conditions or limitations imposed by governmental authorities, except that Rockwell Collins will not be required to agree to sell, divest, lease, license,
transfer, dispose of or otherwise encumber or impair its ability to own or operate any of its or B/E Aerospace's assets or properties if such action would require the divestiture or holding separate
of any assets of Rockwell Collins or B/E Aerospace or any of their subsidiaries representing more than $175 million of annual revenue generated in the 2015 calendar year.
In
addition, regulators may impose conditions, terms, obligations or restrictions in connection with their authorization of or consent to the merger, and such conditions, terms,
obligations or restrictions may delay completion of the merger or impose additional material costs on or materially limit the revenues of the combined company following the completion of the merger or
may hinder the anticipated benefits of the merger. There can be no assurance that regulators will choose not to impose such conditions, terms, obligations or restrictions, and, if imposed, such
conditions, terms, obligations or restrictions may delay or lead to the abandonment of the merger. For a more detailed description of the regulatory review process, see the section entitled "The
MergerRegulatory Approvals Required for the Merger" beginning on page 116.
The value of the stock portion of the merger consideration is subject to changes based on fluctuations in the
value of Rockwell Collins common stock, and B/E Aerospace stockholders may receive stock consideration with a value that, at the time received, is less than $27.90 per share of B/E Aerospace common
stock.
The market value of Rockwell Collins common stock will fluctuate during the period before the date of the Rockwell Collins and B/E Aerospace
special meetings, during the 20 trading day period that the exchange ratio will be based upon, and the time between the last day of the 20 trading day period and the time B/E Aerospace stockholders
receive merger consideration in the form of Rockwell Collins common stock, as well as thereafter.
Upon
completion of the merger, each issued and outstanding share of B/E Aerospace common stock will be converted into the right to receive the merger consideration, which is equal to
$34.10 in cash, without interest, and a fraction of a share of Rockwell Collins common stock having a value equal to $27.90, subject to adjustment based upon a two-way collar mechanism as described
below. If the Rockwell Collins stock price is greater than or equal to $77.41 and less than or equal to $89.97, the exchange ratio will be equal to the quotient of (i) $27.90 divided by
(ii) the Rockwell Collins stock
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price,
which, in each case, will result in the stock consideration having a value equal to $27.90. If Rockwell Collins stock price is greater than $89.97, the exchange ratio will be fixed at 0.3101
and the value of the stock consideration will be more than $27.90, and if the Rockwell Collins stock price is less than $77.41, the exchange ratio will be fixed at 0.3604 and the value of the stock
consideration will be less than $27.90. Accordingly, the actual number of shares and the value of Rockwell Collins common stock delivered to B/E Aerospace stockholders will depend on the Rockwell
Collins stock price, and the value of the shares of Rockwell Collins common stock delivered for each such share of B/E Aerospace common stock may be greater than, less than or equal to $27.90.
It
is impossible to accurately predict the market price of Rockwell Collins common stock at the effective time or during the period over which the Rockwell Collins stock price is
calculated and therefore impossible to accurately predict the number or value of the shares of Rockwell Collins common stock that B/E Aerospace stockholders will receive in the merger. You should
obtain current market quotations for shares of Rockwell Collins common stock.
Each party is subject to business uncertainties and contractual restrictions while the proposed merger is
pending, which could adversely affect each party's business and operations.
In connection with the pendency of the merger, it is possible that some customers, suppliers and other persons with whom Rockwell Collins or B/E
Aerospace has a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with Rockwell Collins or B/E
Aerospace, as the case may be, as a result of the merger, which could negatively affect Rockwell Collins' or B/E Aerospace's respective revenues, earnings and cash flows, as well as the market price
of Rockwell Collins common stock or B/E Aerospace common stock, regardless of whether the merger is completed.
Under
the terms of the merger agreement, B/E Aerospace is subject to certain restrictions on the conduct of its business prior to completing the merger which may adversely affect its
ability to execute certain of its business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or incur capital
expenditures. Such limitations could adversely affect B/E Aerospace's business and operations prior to the completion of the merger.
Under
the terms of the merger agreement, Rockwell Collins is subject to a more limited set of restrictions on the conduct of its business prior to completing the merger which may
adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to amend its organizational documents, pay dividends and issue shares of Rockwell
Collins common stock. Such limitations could adversely affect Rockwell Collins' business and operations prior to the completion of the merger.
Each
of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the merger.
Uncertainties associated with the merger may cause a loss of management personnel and other key employees
which could adversely affect the future business and operations of the combined company.
Rockwell Collins and B/E Aerospace are dependent on the experience and industry knowledge of their officers and other key employees to execute
their business plans. The combined company's success after the completion of the merger will depend in part upon the ability of Rockwell Collins and B/E Aerospace to retain certain key
management personnel and employees. Prior to completion of the merger, current and prospective employees of Rockwell Collins and B/E Aerospace may experience uncertainty about their roles
within the combined company following the completion of the merger, which may have an adverse effect on the ability of each of Rockwell Collins and B/E Aerospace to attract or retain key management
and other key personnel. In addition, no assurance can
be given that the combined company will be able to attract or retain key management personnel and other key
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employees
of Rockwell Collins and B/E Aerospace to the same extent that Rockwell Collins and B/E Aerospace have previously been able to attract or retain their own employees.
Litigation filed against Rockwell Collins, B/E Aerospace, Merger Sub and the members of the B/E Aerospace
Board could prevent or delay the consummation of the merger or result in the payment of damages following completion of the merger.
In connection with the merger, three putative class action lawsuits were filed by three different purported B/E Aerospace stockholders. Two of
the lawsuits assert claims against B/E Aerospace and the members of the B/E Aerospace Board; the other lawsuit asserts claims against B/E Aerospace, the members of the B/E Aerospace Board, Rockwell
Collins and Merger Sub. The lawsuits seek to enjoin the merger, recover damages and other relief. For a more detailed description of litigation in connection with the merger, see "The
MergerLitigation Relating to the Merger."
The
outcome of these lawsuits is uncertain. One of the conditions to the closing of the merger is that no governmental authority has issued or entered any order after the date of the
merger agreement having the effect of enjoining or otherwise prohibiting the consummation of the merger or the other transactions contemplated by the merger agreement, and these lawsuits seek an order
enjoining consummation of the merger. If the cases are not resolved, these lawsuits could prevent or delay completion of the merger and result in substantial costs to Rockwell Collins and B/E
Aerospace, including, but not limited to, costs associated with the indemnification of directors and officers. The defense or settlement of any lawsuit or claim that remains unresolved at the time the
merger is completed may adversely affect Rockwell Collins' and B/E Aerospace's business, financial condition, results of operations and cash flows.
The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is
presented for illustrative purposes only and may not be reflective of the operating results and financial condition of the combined company following completion of the merger.
The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes
only and is not necessarily indicative of what the combined company's actual financial position or results of operations would have been had the merger been completed on the dates indicated. The
unaudited pro forma condensed combined financial information is subject to a number of assumptions, and does not take into account any synergies related to the proposed transaction. Further, the
combined company's actual results and financial position after the merger may differ materially and adversely from the unaudited pro forma condensed combined financial data that is included in this
joint proxy statement/prospectus. The unaudited pro forma condensed combined financial information has been prepared with the expectation, as of the date of this joint proxy statement/prospectus, that
Rockwell Collins will be identified as the acquirer under GAAP and reflects adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed. The
final acquisition accounting will be based upon the actual purchase price and the fair value of the assets and liabilities of the party that is determined to be the acquiree under GAAP as of the date
of the completion of the merger. In addition, subsequent to the closing date, there will be further refinements of the acquisition accounting as additional information becomes available. Accordingly,
the final acquisition accounting may differ materially from the pro forma condensed combined financial information reflected in this document. For further discussion, see "Unaudited Pro Forma
Condensed Combined Financial Statements" beginning on page 173.
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Completion of the merger will trigger change in control or other provisions in certain agreements to which
B/E Aerospace is a party, which may have an adverse impact on the combined company's business and results of operations.
The completion of the merger will trigger change in control and other provisions in certain agreements to which B/E Aerospace is a party. If
Rockwell Collins and B/E Aerospace are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the
agreements or seeking monetary damages. Even if Rockwell Collins and B/E Aerospace are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the
agreements on terms less favorable to B/E Aerospace or the combined company. Any of the foregoing or similar developments may have an adverse impact on the combined company's business and results of
operations.
The Rockwell Collins common stock to be received by B/E Aerospace stockholders upon completion of the merger
will have different rights from shares of B/E Aerospace common stock.
Upon completion of the merger, B/E Aerospace stockholders will no longer be stockholders of B/E Aerospace but will instead become
stockholders of Rockwell Collins and their rights as Rockwell Collins stockholders will be governed by the terms of Rockwell Collins' certificate of incorporation and by-laws. The terms of Rockwell
Collins' certificate of incorporation and by-laws are in some respects materially different than the terms of B/E Aerospace's certificate of incorporation and by-laws, which currently govern the
rights of B/E Aerospace stockholders.
For
a more complete description of the different rights associated with shares of B/E Aerospace common stock and shares of Rockwell Collins common stock, see "Comparison of Rights of
Stockholders of Rockwell Collins and B/E Aerospace" beginning on page 187.
The merger could result in significant liability to Rockwell Collins and B/E Aerospace if the merger causes
the KLX spin-off to fail to qualify for the KLX spin-off tax treatment.
At the time of the KLX spin-off, B/E Aerospace received an opinion of Shearman & Sterling to the effect that, subject to the limitations
and assumptions set forth therein, the KLX spin-off that occurred in December 2014 will qualify for the KLX spin-off tax treatment, which generally means a transaction tax-free to B/E Aerospace and
its stockholders under the U.S. federal income tax rules for spin-offs in Section 355 of the Code and related provisions. If, however, the KLX spin-off were to fail to qualify for the KLX
spin-off tax treatment, B/E Aerospace would be subject to tax on substantial gain as if B/E Aerospace had sold the KLX common stock in a taxable sale for its fair market value at the time of the KLX
spin-off. In addition, if the KLX spin-off failed to qualify for tax-free treatment, each B/E Aerospace stockholder at the time of the KLX spin-off would be treated as if it had received a
distribution from B/E Aerospace in an amount equal to the fair market value of the KLX common stock that they received; this distribution generally would be taxed as a dividend to the extent of the
stockholder's pro rata share of B/E Aerospace's current and accumulated earnings and profits at the time of the KLX spin-off and then treated as a non-taxable return of capital to the extent of the
stockholder's basis in the B/E Aerospace common stock and finally as capital gain from the sale or exchange of B/E Aerospace common stock.
Under
current U.S. federal income tax law, the KLX spin-off would fail to qualify for the KLX spin-off tax treatment if the KLX spin-off was determined to have been used by B/E Aerospace
principally as a device for the distribution of earnings and profits by, for example, facilitating a taxable sale of the stock of B/E Aerospace or KLX through a planned or intended change-in-control
transaction identified prior to the KLX spin-off rather than principally to achieve one or more valid corporate business purposes.
Furthermore, even if the KLX spin-off were otherwise to qualify for tax-free treatment under Section 355 and related provisions of the Code, it would be taxable to B/E
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Aerospace
(but not to B/E Aerospace's stockholders) under Section 355(e) of the Code, if the KLX spin-off was determined to be part of a plan (or series of related transactions) pursuant
to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in B/E Aerospace or KLX.
If
it is determined that the KLX spin-off fails to qualify for the KLX spin-off tax treatment as a result of the merger (for example, if the merger is viewed as part of a plan or series
of related transactions that includes the KLX spin-off or the KLX spin-off is found to have been used principally as a device for the distribution of earnings and profits), or because of the failure
of the KLX spin-off to initially qualify for the KLX spin-off tax treatment, B/E Aerospace could incur significant tax liabilities. Because B/E Aerospace will be a wholly owned subsidiary of Rockwell
Collins following the consummation of the merger, any such tax liabilities of B/E Aerospace could also adversely affect Rockwell Collins. If the KLX spin-off fails to qualify for the KLX spin-off tax
treatment, this may also result in adverse tax consequences to stockholders of B/E Aerospace at the time of the KLX spin-off because they would be taxed on the distribution of KLX stock as
described above.
In
connection with the signing of the merger agreement, Rockwell Collins and B/E Aerospace each received an opinion from their respective counsel, Skadden, Arps, Slate, Meagher &
Flom LLP, which is referred to as Skadden, and Shearman & Sterling to the effect that the merger will not cause the KLX spin-off to fail to qualify for the KLX spin-off tax treatment.
The merger is conditioned upon receipt by Rockwell Collins and B/E Aerospace of tax opinions to the same effect at the time of the consummation of the merger; provided, however, that if either party's
tax counsel indicates it is unwilling or unable to deliver a tax opinion at the time of the consummation of the merger, the tax opinion condition of either Rockwell Collins or B/E Aerospace may be
satisfied by such party's receipt of similar tax opinions from both the other party's tax counsel and the additional tax counsel.
The
tax opinions received by Rockwell Collins and B/E Aerospace in connection with the signing of the merger agreement rely on certain representations, assumptions, undertakings and
covenants, and the opinions to be delivered at the consummation of the merger will be based on similar representations, assumptions, undertakings and covenants, including representation letters from
each of Rockwell Collins and B/E Aerospace. These representations relate to, among other items, confirming the accuracy of the representations and warranties originally made with respect to the KLX
spin-off, along with compliance with covenants, the actions taken in pursuit of the corporate business purposes of the KLX spin-off, the interaction of the parties, and business developments since the
KLX spin-off. If any of the factual representations in any of the representation letters, or any of the assumptions in the tax opinions is untrue or incomplete, an undertaking or covenant is not
complied with or the facts upon which a tax opinion is based are materially different from the facts at the time of the merger, the
opinions may not be valid. Moreover, opinions of counsel are not binding on the IRS or the courts. As a result, the conclusions expressed in the tax opinions could be challenged by the IRS, and a
court may sustain such a challenge. None of Rockwell Collins, B/E Aerospace or KLX has requested a ruling from the IRS regarding the impact of the merger on the qualification of the KLX spin-off for
the KLX spin-off tax treatment.
Risks Relating to the Combined Company after Completion of the Merger
The combined company may be unable to successfully integrate the businesses of Rockwell Collins and
B/E Aerospace and realize the anticipated benefits of the merger.
The success of the merger will depend, in part, on the combined company's ability to successfully combine the businesses of Rockwell Collins and
B/E Aerospace, which currently operate as independent public companies, and realize the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from
the combination. If the combined company is unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be
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realized
fully or at all, or may take longer to realize than expected and the value of the Rockwell Collins common stock may be harmed. Additionally, credit rating agencies may take negative credit
rating actions against the combined company if the credit metrics and other rating criteria used by the credit rating agencies to rate debt no longer support Rockwell Collins' current credit ratings,
which would be negatively impacted due to the additional debt Rockwell Collins expects to incur to finance the transaction.
The
merger will involve the integration of B/E Aerospace's business with Rockwell Collins' existing business, which is a complex, costly and time-consuming process. Rockwell Collins and
B/E Aerospace have not previously completed a transaction comparable in size or scope to the proposed merger. The integration of the two companies may result in material challenges, including, without
limitation:
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the diversion of management's attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result
of the devotion of management's attention to the merger;
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managing a larger combined company;
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maintaining employee morale and retaining key management and other employees;
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the possibility of faulty assumptions underlying expectations regarding the integration process;
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retaining existing business and operational relationships and attracting new business and operational relationships;
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consolidating corporate and administrative infrastructures and eliminating duplicative operations;
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coordinating geographically separate organizations;
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unanticipated issues in integrating information technology, communications and other systems; and
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unforeseen expenses or delays associated with the merger.
Many
of these factors will be outside of the combined company's control and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and
diversion of management's time and energy, which could materially affect the combined company's financial position, results of operations and cash flows.
Rockwell
Collins and B/E Aerospace are currently permitted to conduct only limited planning for the integration of the two companies following the merger and have not yet determined the
exact nature of how the businesses and operations of the two companies will be combined after the merger. The actual integration may result in additional and unforeseen expenses, and the anticipated
benefits of the integration plan may not be realized on a timely basis, if at all.
Rockwell Collins stockholders and B/E Aerospace stockholders will have a reduced ownership and voting
interest after the merger and will exercise less influence over the policies of the combined company than they now have on the policies of Rockwell Collins and B/E Aerospace, respectively.
Rockwell Collins stockholders presently have the right to vote in the election of the Rockwell Collins Board and on other matters affecting
Rockwell Collins. B/E Aerospace stockholders presently have the right to vote in the election of the B/E Aerospace Board and on other matters affecting B/E Aerospace. Immediately
after the merger is completed, it is expected that current Rockwell Collins stockholders will own approximately 80.8% of the combined company's common stock outstanding and current B/E Aerospace
stockholders will own approximately 19.2% of the combined company's common stock outstanding.
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As
a result, current Rockwell Collins stockholders and current B/E Aerospace stockholders will have less influence on the policies of the combined company than they now have on the
policies of Rockwell Collins and B/E Aerospace, respectively.
The future results of the combined company may be adversely impacted if the combined company does not
effectively manage its expanded operations following the completion of the merger.
Following the completion of the merger, the size of the combined company's business will be significantly larger than the current size of either
Rockwell Collins' or B/E Aerospace's respective businesses. The combined company's ability to successfully manage this expanded business will depend, in part, upon management's ability to design and
implement strategic initiatives that address not only the integration of two discrete companies, but also the increased scale and scope of the combined business with its associated increased costs and
complexity. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated
from the merger.
The combined company is expected to incur substantial expenses related to the completion of the merger and
the integration of Rockwell Collins and B/E Aerospace.
There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including purchasing,
accounting and finance, sales, payroll, pricing, revenue recognition, marketing, employee benefits, legal and compliance, strategic and financial planning, information technology and treasury. In
addition, the businesses of Rockwell Collins and B/E Aerospace will continue to maintain a presence in Cedar Rapids, Iowa and Wellington, Florida, respectively. The substantial majority of
these costs will be non-recurring expenses related to the merger (including financing of the merger and the refinancing of certain indebtedness), facilities and systems consolidation costs. The
combined company may incur additional costs to maintain employee morale and to retain key employees. Rockwell Collins and B/E Aerospace will also incur transaction fees and costs related to
formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs and time delays. Additionally, as a result of the merger, rating
agencies may take negative actions with regard to the combined company's credit ratings, which may increase the combined company's costs in connection with the financing of the merger and its future
cost of capital. These incremental transaction and merger-related costs may exceed the savings the combined company expects to achieve from the elimination of duplicative costs and the realization of
other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs.
The combined company will be significantly more leveraged than Rockwell Collins is currently.
In connection with the merger, the combined company intends to seek approximately $5.9 billion in additional indebtedness. The combined
company will have consolidated indebtedness of approximately $8.0 billion, which is greater than the current indebtedness of Rockwell Collins prior to the merger. The increased indebtedness and
higher debt-to-total capitalization ratio of the combined company in comparison to that of Rockwell Collins on a historical basis may have the effect, among other things, of reducing the flexibility
of Rockwell Collins to respond to changing business and economic conditions, requiring the combined company to use substantial amounts of cash flow to acquire indebtedness, increasing borrowing costs
and placing the combined company in a disadvantage compared to its competitors with less leverage.
For
a more complete description of the financial impact of the combined company's indebtedness, see "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on
page 173.
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The financing arrangements that Rockwell Collins has entered into in connection with the merger contain
restrictions and limitations that could, under certain circumstances, significantly impact its ability to operate its business.
Rockwell Collins intends to incur significant new indebtedness in connection with the merger. The agreements governing the indebtedness that it
will incur in connection with the merger contain covenants that, among other things, may, under certain circumstances, place limitations on the dollar amounts paid or other actions relating
to:
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-
consolidating with or merging into any other corporation or conveying or transferring its properties and assets substantially as an entirety;
-
-
incurring secured debt;
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-
entering into sale and leaseback transactions; and
-
-
designating subsidiaries as restricted or unrestricted.
Such
agreements also require the combined company to maintain a debt-to-capitalization ratio, which may further limit the combined company's discretion in the operation of its business
following the merger. Such agreements also contain additional restrictive covenants. Various risks, uncertainties and events beyond the combined company's control could affect its ability to comply
with the covenants contained in its debt agreements. Failure to comply with any of the covenants in its existing or future financing agreements could result in a default under those agreements and
under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements. Under these circumstances, Rockwell Collins
might not have sufficient funds or other resources to satisfy all of its obligations. In addition, the limitations imposed by financing agreements on the combined company's ability to incur additional
debt and to take other actions might significantly impair its ability to obtain other financing.
The market price of the combined company's common stock may be affected by factors different from those
affecting the price of Rockwell Collins or B/E Aerospace common stock.
Upon completion of the merger, holders of Rockwell Collins common stock and B/E Aerospace common stock will be holders of common stock of
Rockwell Collins. As the businesses of Rockwell Collins and B/E Aerospace are different, the results of operations as well as the price of the combined company's common stock may in the future be
affected by factors different from those factors affecting Rockwell Collins and B/E Aerospace as independent stand-alone companies. The combined company will face additional risks and uncertainties
that Rockwell Collins or B/E Aerospace may currently not be exposed to as independent companies.
The market price of Rockwell Collins' common stock may decline as a result of the merger.
The market price of Rockwell Collins common stock may decline as a result of the merger if, among other things, the combined company is unable
to achieve the expected growth in earnings, or if the operational cost savings estimates in connection with the integration of Rockwell Collins' and B/E Aerospace's businesses are not realized,
or if the transaction costs related to the merger are greater than expected, or if the financing related to the transaction is on unfavorable terms. The market price also may decline if the combined
company does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the merger on the combined company's
financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.
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Other Risk Factors of Rockwell Collins and B/E
Aerospace
Rockwell
Collins' and B/E Aerospace's businesses are and will be subject to the risks described above. In addition, Rockwell Collins and B/E Aerospace are, and will
continue to be, subject to the risks described in the Rockwell Collins annual report on Form 10-K for the fiscal year ended September 30, 2016 and the B/E Aerospace annual report on
Form 10-K for the fiscal year ended December 31, 2015, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with
the SEC and incorporated by reference into this joint proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 198 for the location of information incorporated by
reference into this joint proxy statement/prospectus.
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THE MERGER
The following is a discussion of the transaction and the material terms of the merger agreement between Rockwell Collins
and B/E Aerospace. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Annex A to this joint proxy statement/prospectus and incorporated by
reference herein.
Background of the Merger
As part of B/E Aerospace's ongoing strategic planning process, members of the B/E Aerospace Board and members of B/E Aerospace senior management
periodically review and assess B/E Aerospace's operations, financial performance and competitive position, as well as industry trends and potential strategic initiatives. In addition, members
of B/E Aerospace senior management meet with members of the B/E Aerospace Board in the ordinary course of business to discuss strategic alternatives in order to enhance stockholder value, including,
among other things, business combinations, acquisitions, divestitures, dividends and share repurchases. In connection with these reviews and assessments, from time to time, the B/E Aerospace Board and
members of B/E Aerospace senior management enlist the assistance of financial advisors and outside legal advisors.
As
part of Rockwell Collins' ongoing strategic planning process, members of the Rockwell Collins Board and members of Rockwell Collins senior management periodically review and assess
Rockwell Collins' operations, financial performance and competitive position, as well as industry trends and potential strategic initiatives to accelerate growth. As part of this process, Rockwell
Collins considered a number of alternatives to expand and strengthen its business. Given Rockwell Collins' strong position in the products and services that it currently serves, Rockwell Collins
determined to focus its consideration of possible growth opportunities on businesses that were adjacent to Rockwell Collins current products and services. Rockwell Collins evaluated the possibility of
expanding channels or capabilities, but determined that adding products and services that would build on Rockwell Collins' existing strong customer relationships would be a more efficient and lower
risk path.
Accordingly,
in early 2015, Rockwell Collins undertook an initiative to assess the desirability of expanding the industry segments addressed by Rockwell Collins. This initiative involved
a strategic assessment of Rockwell Collins' capabilities and customer relationships. Starting with approximately 80 companies that fit a general set of criteria, potential targets were analyzed
against these criteria. In considering potential acquisition targets, Rockwell Collins considered a number of factors and qualities with respect to potential acquisition targets, including the
technical differentiation of their respective products and services, the similarity of regulatory regimes in which they operated, their leadership position in the segments that they served, their
customer relationships and reputation and their full product life cycle capability. At Rockwell Collins' board meeting in June 2015, a short list of potential targets, which included B/E Aerospace,
was presented. In subsequent board meetings in November 2015, April 2016 and June 2016, the candidates were evaluated against changing market conditions and assessed fit. The short list of targets
evaluated by the Rockwell Collins Board at these meetings varied from 2 to 4 companies. Changes in the composition of the list were made based on Rockwell Collins' ongoing valuation analysis and
consideration of market conditions, as well as Rockwell Collins' assessment of the potential target's receptivity to a potential sale transaction. B/E Aerospace remained an acquisition candidate of
interest throughout this time.
The
following chronology sets forth a summary of the material events leading up to the execution of the merger agreement.
In
January 2016, a representative of a company, referred to as Party A, contacted Mr. Amin J. Khoury, Executive Chairman of B/E Aerospace, seeking to arrange a meeting. In the
ordinary course of business, B/E Aerospace senior management met with Party A from time to time to discuss, generally, the ongoing business relationship between the parties. In advance of this
particular meeting,
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representatives
of Party A requested to include a member of its business development team at such meeting, to which B/E Aerospace senior management agreed. In mid-February 2016, Mr. Khoury met
with representatives of Party A. During this meeting, the parties discussed, among other things, their businesses, their business relationship and general market trends. Party A did not make any
specific inquiries with respect to a potential transaction involving B/E Aerospace at or following such meeting.
In
February 2016, based on Citigroup's prior financial advisory work for Rockwell Collins, representatives of Rockwell Collins contacted representatives of Citigroup to inquire about
exploring a potential transaction in the aircraft interiors industry. Following that initial discussion on February 8, Rockwell Collins contacted representatives of Citigroup and expressed
preliminary interest in exploring a potential transaction with B/E Aerospace.
In
late February 2016, Mr. Jeffrey MacLauchlan, Senior Vice President of Corporate Development of Rockwell Collins, contacted Mr. Joseph Lower, Chief Financial Officer of
B/E Aerospace, to arrange a meeting. On February 29, 2016, Messrs. MacLauchlan and Lower met to discuss market conditions and industry trends. In addition, Mr. MacLauchlan
discussed the complementary nature of Rockwell Collins' and B/E Aerospace's respective businesses. At the conclusion of the meeting, Messrs. MacLauchlan and Lower agreed to stay in touch and to
potentially continue their conversation at a future date. Following the meeting, Mr. Lower informed other members of B/E Aerospace senior management about the meeting.
In
April 2016, a company, which, together with its parent company is referred to as Party B, called Mr. Khoury to arrange a meeting that would include, among others, a senior
executive of Party B. Mr. Khoury notified the B/E Aerospace Board of such request. On May 11, 2016, representatives of B/E Aerospace senior management met with representatives of Party B
to explore potential strategic alternatives, including an investment in B/E Aerospace by Party B or a combination of B/E Aerospace and Party B. Shortly thereafter, Party B informed B/E Aerospace
senior management that it was not prepared to make an investment in, or further explore a strategic transaction with, B/E Aerospace.
Between
February and June 2016, Rockwell Collins senior management continued to evaluate potential targets and their relative merits. Rockwell Collins senior management provided a status
report of this process to the Rockwell Collins Board at its April 2016 meeting. At the June 2016 meeting of the Rockwell Collins Board, Rockwell Collins senior management provided a further update on
its evaluation and recommended to the Rockwell Collins Board that Rockwell Collins engage more formally with B/E Aerospace to consider the potential for a transaction.
On
or about June 27, 2016, Mr. Kelly Ortberg, Chairman, President and Chief Executive Officer of Rockwell Collins, contacted Mr. Khoury telephonically.
Mr. Khoury and Mr. Ortberg discussed the complementary nature of Rockwell Collins' and B/E Aerospace's respective businesses, as well as the prospect of a potential transaction involving
the two companies. At the conclusion of the conversation, Mr. Ortberg advised that Mr. MacLauchlan would contact Mr. Lower to schedule a face-to-face meeting to continue the
discussions.
On
July 7, 2016, B/E Aerospace and Rockwell Collins executed a mutual non-disclosure agreement. Following execution of the agreement, representatives of senior management of
Rockwell Collins and B/E Aerospace scheduled a meeting for July 20, 2016.
On
July 20, 2016, representatives of senior management of B/E Aerospace (Messrs. Khoury and Lower and Mr. Werner Lieberherr, President and Chief Executive Officer of
B/E Aerospace) and Rockwell Collins (Messrs. Ortberg and MacLauchlan, and Mr. Patrick Allen, Senior Vice President and Chief Financial Officer of Rockwell Collins) met at B/E Aerospace's
headquarters in Wellington, Florida to discuss the prospect of a potential transaction involving the two companies. Each party presented portions of their investor relations materials, which included
publicly available information about each company's respective financial and operational results, business and product lines. In addition, B/E Aerospace and Rockwell Collins discussed potential areas
of cost and revenue synergies
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that
were identified by each party. Rockwell Collins expressed an interest in continuing discussions to further explore the potential combination benefits. The parties agreed that if further
discussions were held, advisors could be helpful in refining these estimates and approaches.
On
July 28, 2016, the B/E Aerospace Board met in Boston, Massachusetts in connection with the regularly scheduled annual meeting of stockholders of B/E Aerospace. At this meeting,
among other matters, B/E Aerospace senior management provided an overview of the recent interest expressed by Party A, Party B and Rockwell Collins in connection with a potential transaction involving
B/E Aerospace. Following conversations amongst the B/E Aerospace Board and B/E Aerospace senior
management, the B/E Aerospace Board directed B/E Aerospace senior management to explore potential strategic alternatives with assistance from independent financial advisors.
Subsequent
to the B/E Aerospace Board meeting, the parties agreed to meet to continue discussions and to include financial and legal advisors going forward.
On
August 9, 2016, senior management of B/E Aerospace and Rockwell Collins met in New York to continue preliminary discussions regarding a potential transaction involving the two
companies and discussed the expectations for the meeting with advisors to occur the following day.
On
August 10, 2016, representatives of senior management of B/E Aerospace and Rockwell Collins, together with representatives from Shearman & Sterling LLP, which is
referred to as Shearman & Sterling, outside counsel to B/E Aerospace, Citigroup, as financial advisor to B/E Aerospace, Goldman Sachs, as financial advisor to B/E Aerospace, Skadden,
outside counsel to Rockwell Collins, and J.P. Morgan, as financial advisor to Rockwell Collins, met at the offices of Shearman & Sterling. At the meeting, representatives of senior management
of B/E Aerospace and Rockwell Collins discussed their respective businesses. In addition, B/E Aerospace senior management discussed the financial outlook of B/E Aerospace and potential cost and
revenue synergies that could be achieved in connection with a potential combination of B/E Aerospace and Rockwell Collins. At the conclusion of the meeting, senior management of B/E Aerospace and
Rockwell Collins agreed to perform additional due diligence and financial analyses with their respective representatives, and to meet again following such additional diligence and analyses to further
explore the prospects of a potential combination.
On
August 15, 2015, the executive committee of the Rockwell Collins Board met telephonically. At the meeting, Rockwell Collins senior management provided the committee with an
update on the potential acquisition of B/E Aerospace, including the meetings between the two parties on August 9 and August 10, 2016.
On
August 16, 2016, the B/E Aerospace Board met telephonically. Present at the meeting were members of B/E Aerospace senior management and representatives from Shearman &
Sterling, Citigroup and Goldman Sachs. At the meeting, B/E Aerospace senior management discussed the B/E Aerospace five-year plan that had previously been distributed to the B/E Aerospace Board
and answered questions from members of the B/E Aerospace Board regarding the assumptions and inputs of the plan. The five-year plan, which had been prepared in connection with B/E Aerospace senior
management's evaluation of a potential transaction with Rockwell Collins, included information related to revenue, earnings before interest and income tax, earnings before interest, tax, depreciation
and amortization and free cash flow for the periods set forth therein. B/E Aerospace senior management then provided an update with respect to the ongoing discussions between B/E Aerospace and
Rockwell Collins, including a report on the meetings between the two parties on August 9 and August 10, 2016.
Also
at this meeting, representatives of Citigroup and Goldman Sachs discussed certain aspects of the transaction and advised the B/E Aerospace Board that it was expected that any
transaction would
include consideration consisting of a significant Rockwell Collins stock component. Representatives of Shearman & Sterling discussed with the B/E Aerospace Board, among other things, its
fiduciary duties under Delaware law in the context of a transaction process.
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Following
these discussions, representatives of Citigroup and Goldman Sachs were then excused from the meeting to allow the B/E Aerospace Board to discuss formally engaging both
Citigroup and Goldman Sachs as joint financial advisors. Representatives from each of Citigroup and Goldman Sachs were then asked to return to the meeting at separate times to answer specific
questions about their respective relationships with Rockwell Collins.
At
the conclusion of the meeting, the B/E Aerospace Board authorized B/E Aerospace senior management to proceed with negotiations with Rockwell Collins and to provide the B/E Aerospace
five-year plan to Rockwell Collins in order to facilitate further discussions. In addition, the B/E Aerospace Board authorized B/E Aerospace senior management to formally retain both Citigroup
and Goldman Sachs as joint financial advisors in connection with the consideration and review of strategic alternatives by the B/E Aerospace Board. On September 6, 2016, Citigroup and Goldman
Sachs each executed engagement letters with B/E Aerospace to provide financial advisory services to B/E Aerospace in connection with the consideration and review of strategic alternatives by the
B/E Aerospace Board.
On
August 22, 2016, representatives of senior management of B/E Aerospace and Rockwell Collins met to further discuss the prospect of a potential transaction. The parties also
discussed their respective business plans, including each company's five-year plan, and presented certain legal, financial and operational information to each other.
On
September 2, 2016, the corporate strategy and finance committee and the executive committee of the Rockwell Collins Board met telephonically in a joint meeting. Present at the
meeting were members of Rockwell Collins senior management and representatives from Skadden and J.P. Morgan. At the meeting, Rockwell Collins senior management provided an update with respect to the
potential acquisition of B/E Aerospace, including a review of the process followed by Rockwell Collins senior management to identify suitable acquisition candidates and a review of B/E Aerospace's
financial and market profile, the impact of the potential acquisition on the companies' combined business portfolio and potential cost synergies. Representatives of J.P. Morgan discussed
J.P. Morgan's preliminary financial analysis perspectives with respect to the potential transaction. Rockwell Collins senior management then reviewed with the committees, and obtained their
concurrence on, the terms of a proposed preliminary, non-binding indication of interest for the potential transaction.
Later
on September 2, 2016, Rockwell Collins delivered a preliminary, non-binding indication of interest to B/E Aerospace, pursuant to which Rockwell Collins proposed to acquire
100% of the common stock of B/E Aerospace for a per share purchase price of between $58 and $60, to be paid 50% in cash and 50% in shares of Rockwell Collins common stock.
On
September 5, 2016, following preliminary discussions with B/E Aerospace senior management, representatives of Citigroup and Goldman Sachs were directed to contact
representatives of J.P. Morgan to inform J.P. Morgan that B/E Aerospace senior management believed that the B/E Aerospace Board would likely view Rockwell Collins' proposal as not sufficiently
attractive and would likely be unwilling to engage in further discussions based on the valuation included in the proposal.
On
September 7, 2016, the B/E Aerospace Board met at the offices of Shearman & Sterling. Also present at the meeting were members of B/E Aerospace senior management and
representatives from Shearman & Sterling, Citigroup and Goldman Sachs. At the meeting, B/E Aerospace senior management updated the B/E Aerospace Board with respect to the performance and
outlook of B/E Aerospace, other general market conditions that impact B/E Aerospace's businesses, and other factors viewed as relevant in determining whether B/E Aerospace should further
consider the Rockwell Collins proposal or other strategic alternatives. Following that discussion, B/E Aerospace senior management, together with its financial advisors, provided a general summary of
the September 2, 2016 non-binding indication of interest, and representatives of Citigroup and Goldman Sachs provided their
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preliminary
financial analysis with respect to B/E Aerospace and Rockwell Collins and an overview of preliminary discussions with J.P. Morgan with respect to the proposal.
The
B/E Aerospace Board, together with senior management and its advisors, then engaged in a detailed discussion on how to best facilitate a process that would be in the best interests
of B/E Aerospace and its stockholders. The B/E Aerospace Board and B/E Aerospace senior management discussed possible strategic alternatives available to maximize stockholder
value, including executing B/E Aerospace's organic business plan, alternative capital structures and capital deployment priorities, potential strategic acquisitions or an alternative business
combination. B/E Aerospace senior management and the B/E Aerospace Board then discussed the current environment in the aerospace industry, including the trends in consolidation and
competition, and the likely effect of these factors on B/E Aerospace. Following these discussions, the B/E Aerospace Board did not believe that other strategic alternatives would likely
be as attractive as a potential transaction with Rockwell Collins (assuming more favorable terms could be negotiated).
B/E
Aerospace senior management then provided an overview of its prior discussions with Party A and Party B regarding a potential transaction involving B/E Aerospace, and noted that
neither such
discussions resulted in an express or implied indication of interest from Party A or Party B that such companies were prepared to pursue a potential transaction involving B/E Aerospace.
The B/E Aerospace Board then asked one of its directors that had a previous relationship with (and from time to time speaks to representatives of) a potential strategic partner, referred to as
Party C, to contact Party C to gauge its interest in a potential transaction involving B/E Aerospace. Following the meeting and in response to the inquiry made by a member of the B/E Aerospace Board,
Party C advised that it was not interested in pursuing a transaction with B/E Aerospace.
Representatives
of Citigroup and Goldman Sachs then provided an overview of potential transaction partners (other than Rockwell Collins) that may have both a strategic rationale and the
financial wherewithal to consummate a transaction with B/E Aerospace. These potential acquirers included companies currently serving the aerospace and defense markets as well as financial buyers. As
part of these discussions, the B/E Aerospace Board discussed whether other parties should be contacted in light of Rockwell Collins' proposal and discussed the likelihood that any other parties would
be interested in a strategic transaction involving B/E Aerospace on the same or similar terms to the Rockwell Collins proposal. Based upon these discussions, the prior contacts with Party A and
Party B (and subject to the result of the inquiry to be made to Party C), and advice from the financial advisors, the B/E Aerospace Board determined that such transaction partners
would not likely be able to consummate a transaction with B/E Aerospace that would provide equal or greater value to B/E Aerospace stockholders as compared to a potential transaction with
Rockwell Collins (assuming more favorable terms could be negotiated). As such, the B/E Aerospace Board determined not to expand its search for strategic alternatives with other third parties to avoid
the risk of losing momentum with what was viewed as the most attractive strategic alternative.
The
B/E Aerospace Board, together with B/E Aerospace senior management and its advisors, then engaged in an extensive discussion regarding a potential transaction with Rockwell Collins.
Following these discussions, the B/E Aerospace Board determined that Rockwell Collins' proposal was, as then proposed, not yet sufficiently attractive from a financial point of view, but that further
discussion with Rockwell Collins was warranted. The B/E Aerospace Board authorized Citigroup and Goldman Sachs to advise J.P. Morgan that B/E Aerospace found the Rockwell Collins proposal to be
not sufficiently attractive and to provide guidance with respect to elements of the proposal that would need to be improved.
On
September 8, 2016, representatives of Citigroup and Goldman Sachs advised representatives of J.P. Morgan of the outcome of the B/E Aerospace Board meeting on
September 7, 2016, and the need to improve the economic terms of the proposal by Rockwell Collins in order for B/E Aerospace to further consider a potential combination.
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On
September 14, 2016, the Rockwell Collins Board met in person for a regularly scheduled board meeting at Rockwell Collins' headquarters in Cedar Rapids, Iowa. Present at the
meeting were members of Rockwell Collins senior management and representatives from Skadden and J.P. Morgan. At the meeting, representatives of Skadden discussed with the Rockwell Collins Board, among
other things, its fiduciary duties under Delaware law in the context of a potential acquisition of B/E Aerospace. Rockwell Collins senior management provided an update with respect to the
potential acquisition of B/E Aerospace, including a review of the process followed by management to identify suitable acquisition candidates and a review of B/E Aerospace's financial and market
profile, the impact of the potential acquisition on the companies' combined business portfolio and potential cost synergies. Rockwell Collins senior management then presented preliminary valuation
perspectives regarding B/E Aerospace and reviewed the terms of the preliminary, non-binding indication of interest submitted to B/E Aerospace on September 2, 2016 and B/E Aerospace's response
to such indication of interest. Rockwell Collins senior management then reviewed with the Rockwell Collins Board possible revisions to the terms of its indication of interest. The preliminary
valuation perspectives regarding B/E Aerospace presented by Rockwell Collins senior management and the possible revisions to the terms of the September 12, 2016 indication of interest
included the merger consideration (including a cash and stock mix) set forth in the merger agreement.
On
September 16, 2016, representatives of J.P. Morgan, at Rockwell Collins' direction, indicated to representatives of Citigroup and Goldman Sachs that Rockwell Collins remained
interested in a transaction and was prepared, subject to additional diligence, to negotiate a transaction (i) in a price range of $61 to $62 per share, consisting of 50% cash and 50% shares of
Rockwell Collins common stock, subject to a price collar, (ii) with termination fees payable by each company under certain circumstances of $200 million and (iii) whereby one
director designated by B/E Aerospace would be appointed to the Rockwell Collins Board.
Between
September 16, 2016 and September 27, 2016, each of B/E Aerospace and Rockwell Collins continued to perform additional due diligence on the other party, including a
telephonic due diligence session that was held on September 25, 2016 among B/E Aerospace, Rockwell Collins and their respective financial advisors.
On
September 20, 2016, members of the B/E Aerospace Board met telephonically with representatives of B/E Aerospace senior management, Shearman & Sterling, Citigroup and
Goldman Sachs, during which B/E Aerospace senior management, together with its financial advisors, provided an update on negotiations between B/E Aerospace and Rockwell Collins and reviewed the
revised terms of the proposed transaction conveyed to Citigroup and Goldman by J.P. Morgan on September 16, 2016.
On
September 21, 2016, the compensation committee of the B/E Aerospace Board, consulted with Gibson, Dunn & Crutcher LLP, which is referred to as Gibson Dunn,
regarding the possible engagement of Gibson Dunn as independent legal counsel to assist the compensation committee in its evaluation of certain compensation matters related to a potential transaction.
Specifically, as previously disclosed in B/E Aerospace's public filings, since 2013, the B/E Aerospace Board and the compensation committee determined that they would favorably consider the grant of
transaction bonuses to the top named executive officers of B/E Aerospace in the event of a change in control transaction, which bonuses would be in addition to amounts payable under the employment
agreements with each executive. The final determination of the structure and the specific amount of such bonuses was deferred by the
compensation committee until such time as B/E Aerospace might become involved in active transaction negotiations. The compensation committee determined to retain Gibson Dunn, negotiated the terms of
the Gibson Dunn engagement, and ultimately executed an engagement letter with Gibson Dunn on September 30, 2016.
On
September 27, 2016, representatives of B/E Aerospace and Rockwell Collins senior management, as well as representatives from Shearman & Sterling, Citigroup, Goldman
Sachs, Skadden
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and
J.P. Morgan met at the offices of Shearman & Sterling. Following several rounds of negotiations, the parties reached a tentative agreement, subject to further due diligence, the negotiation
of other material transaction terms and the negotiation of acceptable definitive documentation and board approval, on the following terms: (i) Rockwell Collins would acquire 100% of the common
stock of B/E Aerospace for $62 per share, with the consideration consisting of 50% cash and 50% shares of Rockwell Collins common stock, subject to a two-way 7.5% collar; (ii) the
termination fee payable by Rockwell Collins to B/E Aerospace under certain circumstances would be $300 million and the termination fee payable by B/E Aerospace to Rockwell Collins under certain
circumstances would be $200 million; (iii) Rockwell Collins would add two directors designated by B/E Aerospace to the Rockwell Collins Board; and (iv) certain B/E Aerospace
compensation and benefits related matters. Based upon Rockwell Collins' director qualification requirements, John T. Whates and Richard G. Hamermesh, both members of the B/E Aerospace Board, were
identified as the likely B/E Aerospace designees.
On
September 27, 2016, members of Rockwell Collins senior management contacted Mr. Lieberherr to discuss Mr. Lieberherr's willingness to remain with the combined
company following the closing of the potential merger. Mr. Lieberherr retained Latham & Watkins LLP, which is referred to as Latham & Watkins, to advise him regarding the terms of any future
employment with the combined company. Mr. Lieberherr subsequently informed B/E Aerospace senior management of the possibility that he would continue to work for the combined company following
closing of the potential merger.
On
September 29, 2016, B/E Aerospace opened a virtual data room and invited Rockwell Collins and its representatives to review due diligence materials relating to B/E Aerospace
included therein.
On
September 30, 2016, Skadden distributed an initial draft of the merger agreement to Shearman & Sterling.
On
September 30, 2016, J.P. Morgan, at Rockwell Collins' request, provided due diligence materials relating to Rockwell Collins to Citigroup and Goldman Sachs, which in turn
provided these materials to B/E Aerospace for due diligence review. The due diligence materials included Rockwell Collin's strategic plan and related projections.
Between
September 30, 2016 and October 23, 2016, Rockwell Collins' and B/E Aerospace's legal counsels negotiated the terms and conditions of the merger agreement,
including, among other things, representations and warranties, covenants relating to conduct of business and regulatory approvals, tax matters relating to the KLX spin-off, the treatment of various
pre- and post-closing compensation-related matters, closing conditions and termination rights and fees.
Between
October 1, 2016 and October 21, 2016, Mr. Lieberherr and his counsel, Latham & Watkins, negotiated terms of a future employment agreement with Rockwell
Collins and Skadden. In the course of these negotiations, Rockwell Collins and Mr. Lieberherr discussed a possible leadership role in the combined company and ultimately agreed that Mr. Lieberherr
would serve as an Executive Vice President of Rockwell Collins and the Chief Operating Officer of Rockwell Collins' aircraft interior systems business unit. On October 21, 2016,
Mr. Lieberherr and Rockwell Collins executed and delivered an employment agreement. Later that same day, Mr. Lieberherr notified B/E Aerospace senior management that he had entered into
such employment agreement.
On
October 3, 2016, Rockwell Collins hosted a telephonic due diligence call with B/E Aerospace and its financial advisors during which Rockwell Collins answered various questions
regarding Rockwell Collins, its strategic plan and projections and the related due diligence materials previously provided.
On
October 5, 2016, J.P. Morgan, at Rockwell Collins' request, provided additional due diligence materials relating to Rockwell Collins to Citigroup and Goldman Sachs, which in
turn provided these
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materials
to B/E Aerospace for due diligence review. The diligence materials included Rockwell Collins' plans for the merger and an initial draft of the Rockwell Collins rating agency presentation.
On
October 7, 2016, Rockwell Collins and representatives from J.P. Morgan met with S&P and Moody's to provide an overview of the potential transaction between B/E Aerospace and
Rockwell Collins.
On
October 12, 2016, the Rockwell Collins Board met telephonically. Present at the meeting were members of Rockwell Collins senior management and representatives from Skadden and
J.P. Morgan. Rockwell Collins senior management reviewed in detail the potential acquisition of B/E Aerospace, including the strategic rationale for the transaction, the estimated cost synergies
expected to be achieved in the transaction, B/E Aerospace's projected financial forecasts and pro forma financial forecasts of the combined companies, the proposed financing of the transaction, the
results of the financial and legal due diligence review performed on B/E Aerospace and various tax considerations relating to the KLX spin-off. Representatives of Skadden reviewed the terms of the
proposed draft merger agreement for the transaction. Representatives of J.P. Morgan discussed J.P. Morgan's preliminary financial analyses with respect to the transaction.
On
October 13, 2016, the B/E Aerospace Board met telephonically. B/E Aerospace senior management provided the B/E Aerospace Board with an update on negotiations between
B/E Aerospace and Rockwell Collins, including the status of negotiations with respect to certain key contractual terms, the status of the mutual due diligence process and certain timing
considerations. Mr. Khoury advised that Rockwell Collins was interested in retaining Mr. Lieberherr, and confirmed Mr. Lieberherr's willingness to remain with the combined company
pursuant to the terms of an employment agreement to be negotiated and executed at or immediately prior to signing.
On
October 13, 2016, following four telephonic meetings of the compensation committee with the participation of its independent advisors, Gibson Dunn and Pearl Meyer &
Partners, LLC (which also included a presentation from senior management's outside counsel, Freshfields Bruckhaus Deringer LLP, and senior management's outside consulting and tax
advisory firm, Golden Parachute Tax Solutions LLC), the compensation committee recommended for approval by the B/E Aerospace Board, and the B/E Aerospace Board (with Mr. Khoury
abstaining) approved, the payment and terms of transaction bonuses for Messrs. Khoury, Lieberherr, Lower and Patch.
On
October 18, 2016, representatives of J.P. Morgan, at Rockwell Collins' direction, contacted representatives of Citigroup and Goldman Sachs to convey Rockwell Collins' intent to
revise the proposed mix of consideration, consisting of 55% cash (i.e., $34.10) and 45% stock (i.e., shares of Rockwell Collins common stock having a value equal to $27.90), subject to a
two-way 7.5% collar.
On
October 21, 2016, the Rockwell Collins Board met at the offices of Skadden in New York. Present at the meeting were members of Rockwell Collins senior management and
representatives from Skadden and J.P. Morgan. Rockwell Collins senior management updated the Rockwell Collins Board on the results of the additional financial analysis and due diligence performed on
B/E Aerospace and the status of negotiations with B/E Aerospace. The reports on the additional financial analysis and due diligence presented by Rockwell Collins senior management included a review of
B/E Aerospace's change of control payments, a review of the anticipated synergies from the transaction and an assessment of certain B/E Aerospace employee and customer relations matters. Rockwell
Collins senior management also reviewed in detail the proposed financing of the transaction, including the terms of the proposed bridge commitment for a portion of the cash consideration.
Representatives of Skadden reviewed, among other things, the terms of the draft merger agreement, a copy of which previously had been provided to the Rockwell Collins Board along with a summary of the
material terms of the merger agreement. Representatives of J.P. Morgan reviewed J.P. Morgan's financial analyses with respect
to the proposed transaction and rendered J.P. Morgan's oral opinion to the Rockwell Collins Board that, as of such date and based upon and subject to the factors and assumptions set forth in its
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opinion,
the merger consideration to be paid by Rockwell Collins was fair, from a financial point of view, to Rockwell Collins. (The oral opinion was subsequently confirmed in writing by delivery of
J.P. Morgan's written opinion dated October 23, 2016.) Following extensive discussion, the Rockwell Collins Board unanimously approved the merger agreement and the transactions
contemplated thereby and unanimously approved and adopted resolutions authorizing the transaction and related matters.
On
October 21, 2016, the B/E Aerospace Board met at the offices of Shearman & Sterling. B/E Aerospace senior management updated the B/E Aerospace Board on the status
of negotiations with Rockwell Collins and the results of the financial and legal due diligence performed on Rockwell Collins. Representatives of Shearman & Sterling reviewed, among other
things, the terms of the draft merger agreement, a copy of which previously had been provided to the B/E Aerospace Board along with a summary of the material terms of the merger agreement.
Representatives
of Citigroup and Goldman Sachs presented their updated financial analyses with respect to B/E Aerospace and Rockwell Collins.
Representatives
of Citigroup then advised the B/E Aerospace Board that, based on Citigroup's current understandings and subject to review of the execution version of the merger agreement
and future developments, Citigroup expected to be able to render an opinion to the B/E Aerospace Board, as of the date of the merger agreement and to the effect that, as of that date and based upon
and subject to the factors and assumptions described therein, the merger consideration to be paid to the holders (other than Rockwell Collins and its affiliates) of outstanding shares of common stock
of B/E Aerospace pursuant to the merger agreement is fair from a financial point of view to such holders.
Representatives
of Goldman Sachs then advised the B/E Aerospace Board that, based on Goldman Sachs' current understandings and subject to review of the execution version of the merger
agreement and future developments, Goldman Sachs expected to be able to render an opinion to the B/E Aerospace Board, as of the date of the merger agreement and to the effect that, as of that
date and based upon and subject to the factors and assumptions described therein, the merger consideration to be paid to the holders (other than Rockwell Collins and its affiliates) of outstanding
shares of common stock of B/E Aerospace pursuant to the merger agreement is fair from a financial point of view to such holders.
The
B/E Aerospace Board and its advisors engaged in an extended discussion of the potential transaction and the proposed terms and conditions of the merger agreement, considering a
number of factors, including the comparative likelihood of consummation of the potential transaction, the opportunities presented by the potential transaction, the recent and historical market prices
for B/E Aerospace common stock and Rockwell Collins common stock and the fact that the stock portion of the merger consideration would be subject to a two-way 7.5% collar. The B/E Aerospace
Board then reviewed the proposed resolutions authorizing the execution of the merger agreement. After carefully considering the merger agreement and the proposed resolutions, it was the consensus of
the B/E Aerospace Board that the merger was in the best interests of B/E Aerospace's stockholders and, subject to an acceptable outcome in the negotiation of the final issues under the merger
agreement, including certain tax matters, the ability of a party to terminate the agreement and the applicable fees payable in connection therewith, and certain other matters, the B/E Aerospace Board
agreed that it was prepared to approve and adopt such proposed resolutions and authorized B/E Aerospace senior management to continue to negotiate and to finalize the merger agreement.
On
the evening of October 21, 2016, representatives of Shearman & Sterling, Citigroup, Goldman Sachs, Skadden and J.P. Morgan met at the offices of Shearman &
Sterling to negotiate the final terms of the potential transaction.
On
the morning of October 22, 2016, the B/E Aerospace Board reconvened for a telephonic meeting with B/E Aerospace senior management and Shearman & Sterling. At the
meeting, B/E Aerospace senior management provided an update with respect to the negotiation of the terms and
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conditions
of the potential transaction with Rockwell Collins, the remaining issues related thereto and the proposed resolution of such issues. Following a discussion, the B/E Aerospace Board
authorized B/E Aerospace senior management to continue to negotiate and finalize the definitive transaction documents in accordance with the proposed terms discussed at the meeting.
On
October 22, 2016, representatives of senior management of B/E Aerospace and Rockwell Collins and their respective advisors continued to negotiate the final terms and conditions
of the merger agreement and related transactions.
On
the morning of October 23, 2016, Shearman & Sterling circulated an execution version of the merger agreement to the B/E Aerospace Board, B/E Aerospace senior management,
Citigroup and Goldman Sachs. Later that morning, by written consent, the B/E Aerospace Board confirmed that the merger was in the best interests of B/E Aerospace's stockholders, unanimously approved
and adopted the merger agreement and the transactions contemplated thereby and unanimously approved and adopted the resolutions authorizing the transaction and related matters. The B/E Aerospace Board
received a
written opinion, dated October 23, 2016, from each of Citigroup and Goldman Sachs to the effect that, as of that date and based upon and subject to the factors and assumptions set forth in such
opinion, the merger consideration to be paid to the holders (other than Rockwell Collins and its affiliates) of outstanding shares of common stock of B/E Aerospace pursuant to the merger agreement was
fair from a financial point of view to such holders.
On
the same day, each of B/E Aerospace, Rockwell Collins and Merger Sub executed and delivered the merger agreement. Thereafter, B/E Aerospace and Rockwell Collins issued a joint press
release announcing the merger.
Rockwell Collins Board of Directors' Recommendations and Its Reasons for the Transaction
On October 21, 2016, the Rockwell Collins Board unanimously (i) approved the merger agreement and the transactions contemplated by
the merger agreement; (ii) determined that the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Rockwell Collins and
Rockwell Collins' stockholders; (iii) directed that the Share Issuance proposal be submitted to a vote of Rockwell Collins' stockholders; and (iv) recommended that the stockholders of
Rockwell Collins vote "
FOR
" the Share Issuance proposal.
In
evaluating the merger agreement and the transactions contemplated by the merger agreement, the Rockwell Collins Board consulted with Rockwell Collins' management and legal and
financial advisors and, in reaching its determinations, the Rockwell Collins Board considered a variety of factors with respect to the merger and the other transactions contemplated by the merger
agreement, including the specific reasons described above under "Risk Factors" and "Background of the Merger" beginning on page 46 and page 57, respectively, and the factors
listed below.
-
-
The merger would significantly increase Rockwell Collins' scale and diversify its product portfolio, customer mix and geographic presence;
-
-
The merger would combine market leaders with complementary capabilities in avionics and interior products that also have a shared reputation
for innovation, quality and on-time delivery and a common customer base, including OEMs, airlines and lessors;
-
-
The combination of B/E Aerospace and Rockwell Collins would accelerate technological leadership in integrated digital airplanes in that it
uniquely positions Rockwell Collins to provide a more integrated solution to meet the digital demands of the commercial airplane;
-
-
The merger would substantially increase Rockwell Collins' buyer-furnished equipment and aftermarket exposure by providing it with a large
revenue stream tied to passenger traffic growth and airline profitability with a substantial aftermarket component, which would serve to balance Rockwell Collins' current cyclical exposure to OEM
production rates;
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-
-
The combination of B/E Aerospace's leading business jet aircraft cabin interior products with Rockwell Collins' dealer network and owner and
maintenance databases would facilitate creation of a private aircraft interiors aftermarket, which is a significant new opportunity;
-
-
The expectation is that the combined company would achieve approximately $160 million of identified cost synergies from, among other
things, the elimination of corporate and public company costs, manufacturing consolidation, information technology consolidation and supply chain leveraging, and would have improved pre-tax earnings
of approximately $60 to $90 million per year for the first six years after the acquisition due to certain conforming purchase accounting adjustments related to capitalized development costs
related to seller furnished equipment contracts;
-
-
The merger would significantly enhance Rockwell Collins' financial profile by accelerating Rockwell Collins' free cash flow growth and would be
accretive to Rockwell Collins' earnings per share in the first full fiscal year following the acquisition;
-
-
The fact that the stock portion of the merger consideration is based upon a floating exchange ratio and subject to a two-way 7.5% collar, which
provides protection against fluctuations in the market price of Rockwell Collins common stock between the date of the merger agreement and the date of the completion of the merger;
-
-
The Rockwell Collins Board's knowledge of Rockwell Collins' business, operations, financial condition, earnings and prospects and its knowledge
of B/E Aerospace's business, operations, financial condition, earnings and prospects, taking into account B/E Aerospace's publicly-filed information and the results of Rockwell Collins' due diligence
review of B/E Aerospace;
-
-
The long-term and recent historical trading prices of Rockwell Collins common stock and B/E Aerospace common stock and the amount of the
merger consideration;
-
-
The expectation that the combined company will benefit from the experienced management teams of Rockwell Collins and B/E Aerospace;
-
-
The commitments by both Rockwell Collins and B/E Aerospace to complete the merger, as set forth in the merger agreement, and the belief of the
Rockwell Collins Board that the transaction does not present significant regulatory concerns that would impact the ability to complete the merger;
-
-
The Rockwell Collins Board's review of Rockwell Collins' and B/E Aerospace's business, strategies, current and projected financial condition,
current earnings and earnings prospects;
-
-
The oral opinion of J.P. Morgan rendered to the Rockwell Collins Board on October 21, 2016, that, as of such date and based upon and
subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid by Rockwell Collins was fair, from a financial point of view, to Rockwell Collins, as more fully
described in the section entitled "Opinion of Rockwell Collins' Financial Advisor" beginning on page 74. The oral opinion was subsequently confirmed in writing by delivery of J.P.
Morgan's written opinion dated October 23, 2016. The full text of the written opinion of J.P. Morgan, which sets forth the assumptions made, matters considered and limits on the review
undertaken, is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference, and Rockwell Collins' stockholders are urged to read this written opinion in
its entirety;
-
-
The current environment in the aerospace industry, including the trend of consolidation and increased competition; and
-
-
The merger will be subject to the approval of Rockwell Collins' stockholders.
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The
Rockwell Collins Board also specifically considered the terms of the merger agreement, including the following:
-
-
The termination fee payable by B/E Aerospace to Rockwell Collins if B/E Aerospace terminates the merger agreement to pursue a competing
transaction with a third party or in certain other circumstances;
-
-
That if Rockwell Collins were to receive a takeover proposal from a third party that provided superior value to Rockwell Collins and its
stockholders, Rockwell Collins and the Rockwell Collins Board would be able, under circumstances described in the merger agreement, to consider such superior proposal and the Rockwell Collins Board
may change its recommendation that Rockwell Collins stockholders vote in favor of the Share Issuance proposal and/or terminate the merger agreement;
-
-
Rockwell Collins' ability, under circumstances described in the merger agreement, to provide information to and engage in discussions or
negotiations with a third party that makes an unsolicited bona fide written takeover proposal;
-
-
The ability of the Rockwell Collins Board, subject to certain conditions, to change its recommendation supporting the merger in response to an
intervening event if the Rockwell Collins Board determines that failure to take such action would be inconsistent with its fiduciary duties;
-
-
Rockwell Collins' obligation to consummate the transaction is subject to the condition that Rockwell Collins has received an opinion regarding
the effect of the transaction on the tax-free nature of the KLX spin-off; and
-
-
The customary nature of Rockwell Collins' other representations, warranties and covenants in the merger agreement.
The
Rockwell Collins Board weighed the foregoing against a number of potentially negative factors, including:
-
-
The risk of not being able to realize all of the anticipated cost savings and operational synergies between Rockwell Collins and B/E Aerospace
and the risk that other anticipated benefits might not be realized;
-
-
The challenges inherent in the combination of two businesses of the size and complexity of Rockwell Collins and B/E Aerospace;
-
-
The costs associated with the completion of the merger and the realization of the benefits expected to be obtained in connection with the
merger, including management's time and energy and potential opportunity cost;
-
-
The risks that the merger may not be completed and the challenges in absorbing the effect of any failure to complete the merger, including
stockholder and market reactions, as well as the diversion of management's attention from ongoing business concerns;
-
-
The fact that the value of the merger consideration payable to B/E Aerospace stockholders could increase in the event that the price of
Rockwell Collins common stock increases more than 7.5% prior to completion of the merger;
-
-
The restrictions on the conduct of Rockwell Collins' business during the period between the execution of the merger agreement and the
completion of the merger;
-
-
The risk that regulatory agencies may not approve the merger or may impose terms and conditions on their approvals that adversely affect the
business and financial results of the combined company as more fully described under "Regulatory Approvals Required for the Merger" beginning on page 116;
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-
-
The termination fee payable by Rockwell Collins to B/E Aerospace if Rockwell Collins terminates the merger agreement to pursue a competing
transaction with a third party or in certain other circumstances;
-
-
The fact that Rockwell Collins will be required to reimburse B/E Aerospace for its expenses up to $56 million if the merger
agreement is terminated by either party because the Rockwell Collins stockholders did not approve the share issuance for the transaction;
-
-
The fact that the merger agreement does not preclude a third party from making an unsolicited proposal for a competing transaction with
B/E Aerospace and that, under certain circumstances more fully described in the sections "The Merger AgreementCovenants and AgreementsNo Solicitation" beginning on
page 141 and "The Merger AgreementCovenants and AgreementsAdverse Recommendation Change and Termination" beginning on page 142, B/E Aerospace may furnish
non-public information to and enter into discussions with such third party regarding the competing transaction and the B/E Aerospace Board may withdraw or modify its recommendations to
B/E Aerospace stockholders regarding the transaction and may terminate the merger agreement to enter into a competing transaction under certain circumstances;
-
-
The fact that certain senior executives of B/E Aerospace would receive substantial payments in connection with the merger;
-
-
The fact that B/E Aerospace could have substantial liabilities if the merger causes the KLX spin-off to fail to qualify for the KLX spin-off
tax treatment;
-
-
The risk that the Rockwell Collins stockholders do not approve the Share Issuance proposal;
-
-
The fact that Rockwell Collins' obligation to complete the transaction is not conditioned upon the ability of Rockwell Collins to obtain
financing for the cash portion of the consideration;
-
-
The risk of litigation related to the transaction; and
-
-
The risks of the type and nature described under "Risk Factors" beginning on page 46 and the matters described under "Cautionary Note
Regarding Forward-Looking Statements" beginning on page 44.
This
discussion of the information and factors considered by the Rockwell Collins Board in reaching its conclusions and recommendation includes the principal factors considered by the
Rockwell Collins Board, but is not intended to be exhaustive and may not include all of the factors considered by the Rockwell Collins Board. In view of the wide variety of factors considered in
connection with its evaluation of the transaction, and the complexity of these matters, the Rockwell Collins Board did not find it useful and did not attempt to quantify, rank or assign any relative
or specific weights to the various factors that it considered in reaching its determination to approve the transaction, including the share issuance, and to make its recommendation to Rockwell Collins
stockholders. Rather, the Rockwell Collins Board viewed its decisions as being based on the totality of the information presented to it and the factors it considered, including its discussions with,
and questioning of, members of Rockwell Collins' management and Rockwell Collins' advisors, as well as its experience and history. In addition, individual members of the Rockwell Collins Board may
have assigned different weights to different factors.
The
Rockwell Collins Board unanimously determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best interests of Rockwell
Collins and its stockholders and approved the merger agreement. Accordingly, the Rockwell Collins Board unanimously recommends that Rockwell Collins stockholders vote
"
FOR
" the Share Issuance proposal at the Rockwell Collins special meeting.
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B/E Aerospace Board of Directors' Recommendations and Its Reasons for the Transaction
On October 23, 2016, the B/E Aerospace Board unanimously (i) approved and declared advisable the merger agreement and the
transactions contemplated by the merger agreement; (ii) determined that the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of
B/E Aerospace and B/E Aerospace's stockholders; (iii) directed that the Merger proposal be submitted to a vote of B/E Aerospace's stockholders; and (iv) recommended
that the stockholders of B/E Aerospace vote "
FOR
" the Merger proposal.
In
evaluating the merger agreement and the transactions contemplated by the merger agreement, the B/E Aerospace Board consulted with B/E Aerospace's management and legal
and financial advisors and, in reaching its determinations, the B/E Aerospace Board considered a variety of factors with respect to the merger and the other transactions contemplated by the
merger agreement, including the specific reasons described above under "Risk Factors" and "Background of the Merger" beginning on page 46 and page 57, respectively, and the
factors listed below.
-
-
The merger would combine market leaders with complementary capabilities in avionics and interior products that also have a shared reputation
for innovation, quality and on-time delivery and a common customer base, including OEMs, airlines and lessors;
-
-
The combination of B/E Aerospace and Rockwell Collins would accelerate technological leadership in integrated digital airplanes in that it
uniquely positions Rockwell Collins to provide a more integrated solution to meet the digital demands of the commercial airplane;
-
-
The merger would substantially increase Rockwell Collins' buyer-furnished equipment and aftermarket exposure by providing it with a large
revenue stream tied to passenger traffic growth and airline profitability with a substantial aftermarket component, which would serve to balance Rockwell Collins' current cyclical exposure to OEM
production rates, which additional value would accrue to B/E Aerospace stockholders in connection with the stock portion of the consideration to be received by B/E Aerospace stockholders;
-
-
The combination of B/E Aerospace's leading business jet aircraft cabin interior products with Rockwell Collins' dealer network and owner and
maintenance databases would facilitate creation of a private aircraft interiors aftermarket, which is a significant new opportunity;
-
-
The expectation is that the combined company would achieve approximately $160 million of identified cost synergies from, among other
things, the elimination of corporate and public company costs, manufacturing consolidation, information technology consolidation and supply chain leveraging, and would have improved pre-tax earnings
of approximately $60 to $90 million per year for the first six years after the acquisition due to certain conforming purchase accounting adjustments related to capitalized development costs
related to seller furnished equipment contracts;
-
-
The merger would significantly enhance Rockwell Collins' financial profile by accelerating Rockwell Collins' free cash flow growth and would be
accretive to Rockwell Collins' earnings per share in the first full fiscal year following the acquisition, thereby adding value to the stock portion of the consideration received by
B/E Aerospace stockholders;
-
-
The fact that the merger consideration consists of cash, providing B/E Aerospace stockholders with certainty of value and liquidity upon
completion of the merger, along with a significant stock component, which would result in B/E Aerospace stockholders immediately prior to the merger holding approximately 20.3% of the common
stock of Rockwell Collins immediately following completion of the merger, thus providing B/E Aerospace stockholders with meaningful participation in the upside potential of a larger, more
diversified company;
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-
-
The fact that the stock portion of the merger consideration is based upon a floating exchange ratio and subject to a two-way 7.5% collar, which
provides protection against fluctuations in the market price of Rockwell Collins common stock between the date of the merger agreement and the date of the completion of the merger;
-
-
The fact that the value of the merger consideration payable to B/E Aerospace stockholders could increase in the event that the price of
Rockwell Collins common stock increases more than 7.5% prior to completion of the merger;
-
-
The B/E Aerospace Board's knowledge of B/E Aerospace's business, operations, financial condition, earnings and prospects and its knowledge of
Rockwell Collins' business, operations, financial condition, earnings and prospects, taking into account Rockwell Collins' publicly-filed information and the results of B/E Aerospace's due
diligence review of Rockwell Collins;
-
-
The long-term and recent historical trading prices of B/E Aerospace common stock and Rockwell Collins common stock and the amount of the merger
consideration;
-
-
The implied value of the merger consideration at the offer price of $62 per share of B/E Aerospace stock represented:
-
-
a 34% premium to B/E Aerospace's closing share price of $46.34 as of July 20, 2016, the initial formal meeting between the
parties regarding a potential transaction;
-
-
a 22% premium to B/E Aerospace's closing share price of $50.65 as of October 20, 2016;
-
-
a 23% premium to B/E Aerospace's trailing 30-day volume-weighted average price of $50.61 as of October 20, 2016; and
-
-
a 28% premium to B/E Aerospace's trailing 90-day volume-weighted average price of 48.30 as of October 20, 2016;
-
-
The offer price of $62 per share of B/E Aerospace stock represented a multiple of 13.6 times EV/EBITDA of B/E Aerospace for the last 12
months ending September 30, 2016;
-
-
45% of the merger consideration would be in stock, which will allow B/E Aerospace's stockholders to participate in the future
performance of the combined company;
-
-
The expectation that the combined company will benefit from the experienced management teams of B/E Aerospace and Rockwell Collins;
-
-
The commitments by both B/E Aerospace and Rockwell Collins to complete the merger, as set forth in the merger agreement, and the belief of the
B/E Aerospace Board that the transaction does not present significant regulatory concerns that would impact the ability to complete the merger;
-
-
The risks and uncertainties associated with, and inherent in, maintaining B/E Aerospace's existence as an independent company;
-
-
The B/E Aerospace Board's review of B/E Aerospace's and Rockwell Collins' business, strategies, current and projected financial condition,
current earnings and earnings prospects;
-
-
The written opinions of Citigroup and Goldman Sachs delivered to the B/E Aerospace Board on October 23, 2016, that, as of such
date and based upon and subject to the factors and assumptions set forth in the opinion, the merger consideration to be paid to the holders (other than Rockwell Collins and its affiliates) of
B/E Aerospace common stock in the merger was fair, from a financial point of view, to such stockholders, as more fully described below under the caption "Opinions of
B/E Aerospace's Financial Advisors" beginning on page 82. The full text of the written opinions of Citigroup and Goldman Sachs, each dated October 23, 2016, which set
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forth,
among other things, the assumptions made, matters considered and qualifications and limitations on the reviews undertaken in rendering their opinions, are attached as Annex C and
Annex D, respectively, to this joint proxy statement/prospectus, and are incorporated herein by reference;
-
-
The current environment in the aerospace industry, including the trends in consolidation and increased competition, and the potential financial
impact of such trends on B/E Aerospace in the future;
-
-
The merger will be subject to the approval of B/E Aerospace's stockholders and that, in this regard, B/E Aerospace's directors and executive
officers do not own a sufficient interest in B/E Aerospace common stock, in the aggregate, to influence substantially the outcome of such stockholder vote; and
-
-
B/E Aerospace stockholders who do not vote to adopt the merger agreement and approve the merger and who follow certain prescribed procedures
are entitled to appraisal rights under Delaware law.
The
B/E Aerospace Board also specifically considered the terms of the merger agreement, including the following:
-
-
The lack of a financing condition to Rockwell Collins' obligation to complete the merger;
-
-
The termination fee payable by Rockwell Collins to B/E Aerospace if Rockwell Collins terminates the merger agreement to pursue a competing
transaction with a third party or in certain other circumstances;
-
-
That if B/E Aerospace were to receive a takeover proposal from a third party that provided superior value to B/E Aerospace and its
stockholders, B/E Aerospace and the B/E Aerospace Board would be able, under certain circumstances described in the merger agreement, to consider such superior proposal and the B/E Aerospace Board may
change its recommendation that B/E Aerospace stockholders vote in favor of the Merger proposal and/or terminate the merger agreement;
-
-
B/E Aerospace's ability, under circumstances described in the merger agreement, to provide information to and engage in discussions or
negotiations with a third party that makes an unsolicited bona fide written takeover proposal;
-
-
The ability of the B/E Aerospace Board, subject to certain conditions, to change its recommendation supporting the merger in response to an
intervening event if the B/E Aerospace Board determines that failure to take such action would be inconsistent with its fiduciary duties; and
-
-
The customary nature of B/E Aerospace's other representations, warranties and covenants in the merger agreement.
The
B/E Aerospace Board weighed the foregoing against a number of potentially negative factors, including:
-
-
The fact that the value of the merger consideration payable to B/E Aerospace stockholders could decrease in the event that the price of
Rockwell Collins common stock decreases more than 7.5% prior to completion of the merger;
-
-
The restrictions on the conduct of B/E Aerospace's business during the period between the execution of the merger agreement and the completion
of the merger;
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-
-
The costs associated with the completion of the merger and the realization of the benefits expected to be obtained in connection with the
merger, including management's time and energy and potential opportunity cost;
-
-
The risk that the merger may not be completed and the challenges in absorbing the effect of any failure to complete the merger, including
stockholder and market reactions, as well as the diversion of management's attention from ongoing business concerns;
-
-
The risk that regulatory agencies may not approve the merger or may impose terms and conditions on their approvals that adversely affect the
business and financial results of the combined company as more fully described under "Regulatory Approvals Required for the Merger" beginning on page 116;
-
-
The merger agreement does not preclude a third party from making an unsolicited proposal for a competing transaction with Rockwell Collins and
that, under certain circumstances more fully described in the sections "The Merger AgreementCovenants and AgreementsNo Solicitation" beginning on page 141 and "The
Merger AgreementCovenants and AgreementsAdverse Recommendation Change and Termination" beginning on page 142, Rockwell Collins may furnish non-public information to
and enter into discussions with such third party regarding the competing transaction and the Rockwell Collins Board may withdraw or modify its recommendations to Rockwell Collins stockholders
regarding the merger and may terminate the merger agreement to enter into a competing transaction under certain circumstances;
-
-
The termination fee payable by B/E Aerospace to Rockwell Collins if B/E Aerospace terminates the merger agreement to pursue a competing
transaction with a third party or in certain other circumstances;
-
-
The risk that the B/E Aerospace stockholders do not approve the Merger proposal;
-
-
The risk that B/E Aerospace will be required to reimburse Rockwell Collins for its expenses up to $85 million if the merger agreement is
terminated by either party because the B/E Aerospace stockholders do not approve the Merger proposal;
-
-
The challenges inherent in the combination of two businesses of the size and complexity of B/E Aerospace and Rockwell Collins;
-
-
The risk of litigation related to the transaction;
-
-
The risk of not being able to realize all of the anticipated cost savings and operational synergies between B/E Aerospace and Rockwell Collins
and the risk that other anticipated benefits might not be realized; and
-
-
The risks of the type and nature described under "Risk Factors," beginning on page 46 and the matters described under "Cautionary Note
Regarding Forward-Looking Statements" beginning on page 44.
This
discussion of the information and factors considered by the B/E Aerospace Board in reaching its conclusions and recommendation includes the principal factors considered by
the B/E Aerospace Board, but is not intended to be exhaustive and may not include all of the factors considered by the B/E Aerospace Board. In view of the wide variety of factors
considered in connection with its evaluation of the merger and the other transactions contemplated by the merger agreement, and the complexity of these matters, the B/E Aerospace Board did not
find it useful and did not attempt to quantify, rank or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the merger and the
other transactions contemplated by the merger agreement, and to make its recommendation to B/E Aerospace stockholders. Rather, the
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B/E Aerospace
Board viewed its decisions as being based on the totality of the information presented to it and the factors it considered, including its discussions with, and questioning of,
members of B/E Aerospace's management and B/E Aerospace's advisors, as well as its experience and history. In addition, individual members of the B/E Aerospace Board may have
assigned different weights to different factors.
Certain
of B/E Aerospace's directors and executive officers have financial interests in the merger that are different from, or in addition to, those of B/E Aerospace's
stockholders generally. The B/E Aerospace Board was aware of and considered these potential interests, among other matters, in evaluating the merger and in making its recommendation to
B/E Aerospace stockholders. For a discussion of these interests, see "Interests of Directors and Executive Officers in the Merger" beginning on page 102.
The
B/E Aerospace Board unanimously determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best interests of
B/E Aerospace and its stockholders and approved the merger agreement. Accordingly, the B/E Aerospace Board
unanimously recommends that B/E Aerospace stockholders vote "
FOR
" the Merger proposal at the B/E Aerospace special meeting.
Opinion of Rockwell Collins' Financial Advisor
Pursuant to an engagement letter dated October 6, 2016, Rockwell Collins retained J.P. Morgan as its financial advisor in connection with
the merger.
At
the meeting of the Rockwell Collins Board on October 21, 2016, J.P. Morgan rendered its oral opinion to the Rockwell Collins Board that, as of such date and based upon and
subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid by Rockwell Collins was fair, from a financial point of view, to Rockwell Collins. J.P. Morgan has
confirmed its October 21, 2016 oral opinion by delivering its written opinion to the Rockwell Collins Board, dated October 23, 2016, that, as of such date, the merger consideration to be
paid by Rockwell Collins was fair, from a financial point of view, to Rockwell Collins.
The full text of the written opinion of J.P. Morgan, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as
Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is
qualified in its entirety by reference to the full text of such opinion. Rockwell Collins stockholders are urged to read the opinion in its entirety. J.P. Morgan's opinion was addressed to the
Rockwell Collins Board (in its capacity as such) in connection with and for the purposes of its evaluation of the merger, was directed only to the fairness, from a financial point of view, to Rockwell
Collins of the merger consideration to be paid by Rockwell Collins and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the merger consideration
to the holders of any class of securities, creditors or other constituencies of Rockwell Collins or as to the underlying decision by Rockwell Collins to engage in the merger. The issuance of J.P.
Morgan's opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any stockholder of Rockwell Collins as to how such stockholder should vote
with respect to the merger or any other matter.
In
arriving at its opinion, J.P. Morgan, among other things:
-
-
reviewed a draft dated October 23, 2016 of the merger agreement;
-
-
reviewed certain publicly available business and financial information concerning B/E Aerospace and Rockwell Collins and the industries in
which they operate;
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-
-
compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies
J.P. Morgan deemed relevant and the consideration received for such companies;
-
-
compared the financial and operating performance of B/E Aerospace and Rockwell Collins with publicly available information concerning certain
other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of B/E Aerospace common stock and Rockwell Collins common stock and certain publicly traded securities
of such other companies;
-
-
reviewed certain internal financial analyses and forecasts prepared by the managements of B/E Aerospace and Rockwell Collins relating to
their respective businesses and by Rockwell Collins relating to B/E Aerospace's business, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to
result from the merger, which are referred to as the Synergies; and
-
-
performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of
its opinion.
In
addition, J.P. Morgan held discussions with certain members of the management of B/E Aerospace and Rockwell Collins with respect to certain aspects of the merger, the past and
current business
operations of B/E Aerospace and Rockwell Collins, the financial condition and future prospects and operations of B/E Aerospace and Rockwell Collins, the effects of the merger on the financial
condition and future prospects of Rockwell Collins, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In
giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan
by B/E Aerospace and Rockwell Collins or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (and did not assume responsibility or liability for independently
verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan
evaluate the solvency of B/E Aerospace or Rockwell Collins under any applicable laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts
provided to J.P. Morgan or derived therefrom, including the Synergies, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and
judgments by management as to the expected future results of operations and financial condition of B/E Aerospace and Rockwell Collins to which such analyses or forecasts relate. J.P. Morgan expressed
no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the merger and the other transactions contemplated by the
merger agreement will have the tax consequences described in discussions with, and materials furnished to J.P. Morgan by, representatives of Rockwell Collins, and will be consummated as described in
the merger agreement, and that the definitive merger agreement would not differ in any material respects from the draft thereof furnished to J.P. Morgan. J.P. Morgan also assumed that the
representations and warranties made by Rockwell Collins and B/E Aerospace in the merger agreement and the related agreements were and will be true and correct in all respects material to J.P. Morgan's
analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to Rockwell Collins with respect to such issues. J.P. Morgan further assumed that all
material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on B/E Aerospace or Rockwell Collins or on
the contemplated benefits of the merger.
J.P.
Morgan's opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion.
J.P. Morgan's opinion noted that subsequent developments may affect J.P. Morgan's opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan's
opinion is
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limited
to the fairness, from a financial point of view, of the merger consideration to be paid by Rockwell Collins, and J.P. Morgan has expressed no opinion as to the fairness of any merger
consideration to the holders of any class of securities, creditors or other constituencies of Rockwell Collins or as to the underlying decision by Rockwell Collins to engage in the merger.
Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the merger, or any class of such
persons relative to the merger consideration to be paid by Rockwell Collins or with respect to the fairness of any such
compensation. J.P. Morgan expressed no opinion as to the price at which Rockwell Collins common stock or B/E Aerospace common stock will trade at any future time.
The
terms of the merger agreement, including the exchange ratio, were determined through arm's length negotiations between Rockwell Collins and B/E Aerospace, and the decision to enter
into the merger agreement was solely that of the Rockwell Collins Board and the B/E Aerospace board of directors. J.P. Morgan's opinion and financial analyses constituted only one of the many factors
considered by the Rockwell Collins Board in its evaluation of the merger and should not be viewed as determinative of the views of the Rockwell Collins Board or management with respect to the merger
or the merger consideration.
In
accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to the Rockwell Collins Board and
contained in the presentation delivered to the Rockwell Collins Board in connection with the rendering of such opinion and does not purport to be a complete description of the analyses or data
presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully
understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative
description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan's analyses.
B/E Aerospace Financial Analyses
Public Trading Multiples
Using
publicly available information, J.P. Morgan compared selected financial and market data of B/E Aerospace with similar data for selected publicly traded companies
that J.P. Morgan deemed relevant for purposes of analysis. The companies selected by J.P. Morgan were as follows:
-
-
HEICO Corporation;
-
-
Meggitt PLC;
-
-
Rockwell Collins, Inc.;
-
-
TransDigm Group Inc.; and
-
-
Zodiac Aerospace.
These
companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan's analysis, may be
considered similar to those of B/E Aerospace based on business sector participation, operational characteristics and financial metrics. Using publicly available information, J.P. Morgan calculated,
for each selected company, (i) the multiple of enterprise value as of October 20, 2016 to estimated EBITDA (which means earnings before interest, tax, depreciation and amortization) for
calendar year 2017, or EV/EBITDA 2017E, and (ii) the multiple of closing share price as of October 20, 2016 to estimated earnings per share for calendar year 2017, or P/E 2017E, based on
Wall Street analysts' consensus
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estimates
and FactSet data. This analysis indicated the following EV/EBITDA 2017E and P/E 2017E multiples:
|
|
|
|
|
|
|
|
|
|
EV/EBITDA
2017E
|
|
P/E
2017E
|
|
HEICO Corporation
|
|
|
13.5x
|
|
|
24.2x
|
|
Meggitt PLC
|
|
|
9.7x
|
|
|
12.1x
|
|
Rockwell Collins, Inc.
|
|
|
9.8x
|
|
|
14.6x
|
|
TransDigm Group Inc.
|
|
|
13.7x
|
|
|
19.7x
|
|
Zodiac Aerospace
|
|
|
12.9x
|
|
|
19.7x
|
|
Based
on the results of this analysis and other factors that J.P. Morgan considered relevant, J.P. Morgan selected a multiple reference range for EV/EBITDA 2017E of 10.0x - 13.5x
and a multiple reference range for P/E 2017E of 12.0x - 19.5x.
After
applying such ranges to Rockwell Collins management's estimate of the EBITDA and EPS, respectively, for B/E Aerospace for calendar year 2017 in the adjusted B/E Aerospace forecast,
the analysis indicated the following implied per share equity value ranges for B/E Aerospace common stock, rounded to the nearest $0.25:
|
|
|
|
|
|
|
|
|
|
Implied Per Share
Equity Value
Range of
B/E Aerospace
Common Stock
|
|
|
|
Low
|
|
High
|
|
EV/EBITDA 2017E
|
|
$
|
45.00
|
|
$
|
67.25
|
|
P/E 2017E
|
|
$
|
43.75
|
|
$
|
71.00
|
|
The
ranges of implied per share equity values for B/E Aerospace common stock were compared to the closing share price of $50.65 of B/E Aerospace common stock as of October 20,
2016, and the offer price of $62.00 per share of B/E Aerospace common stock, which consists of $34.10 in cash consideration and shares of Rockwell Collins common stock with a value of $27.90 in stock
consideration, subject to adjustment as described in detail in "The Merger AgreementMerger Consideration to be Received by B/E Aerospace Stockholders" beginning on page 128 of this
joint proxy statement/prospectus.
Transaction Multiples Analysis
Using
publicly available information, J.P. Morgan examined selected transactions involving businesses that J.P. Morgan considered to be analogous to B/E Aerospace's
business or aspects thereof for purposes of analysis. These transactions were selected, among other reasons, because the businesses involved in these transactions share similar business
characteristics to B/E Aerospace based on business
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sector
participation, operational characteristics and financial metrics. Specifically, J.P. Morgan reviewed the following transactions:
|
|
|
|
|
|
|
|
|
|
|
|
Month/Year
Announced
|
|
Acquiror
|
|
Target/Seller
|
|
TV/ LTM
EBITDA
|
|
LTM P / E
|
|
August 2015
|
|
Berkshire Hathaway Inc.
|
|
Precision Castparts Corp.
|
|
|
12.3x
|
|
|
21.3x
|
|
March 2015
|
|
RBC Bearings Incorporated
|
|
Sargent Aerospace & Defense
|
|
|
13.3x/11.2x
|
(1)
|
|
N/A
|
|
March 2015
|
|
Alcoa Inc.
|
|
RTI International Metals Inc.
|
|
|
13.1x
|
|
|
39.8x
|
|
June 2014
|
|
Alcoa Inc.
|
|
Firth Rixson Ltd.
|
|
|
14.3x/15.0x
|
(2)
|
|
N/A
|
|
December 2013
|
|
Textron Inc.
|
|
Beechcraft Corp.
|
|
|
9.9x
|
|
|
N/A
|
|
November 2012
|
|
Precision Castparts Corp.
|
|
Titanium Metals Corp.
|
|
|
13.3x
|
|
|
28.1x
|
|
September 2011
|
|
United Technologies Corp.
|
|
Goodrich Corporation
|
|
|
12.9x
|
|
|
22.4x
|
|
September 2010
|
|
TransDigm Group Inc.
|
|
McKechnie Aerospace Holdings Inc.
|
|
|
12.9x
|
|
|
N/A
|
|
March 2010
|
|
Triumph Group, Inc.
|
|
Vought Aircraft Industries, Inc.
|
|
|
5.8x
|
(3)
|
|
8.5x
|
|
July 2007
|
|
The Carlyle Group
|
|
Sequa Corporation
|
|
|
12.0x
|
|
|
31.1x
|
|
March 2007
|
|
JLL Partners Inc.
|
|
McKechnie Aerospace
|
|
|
11.9x
|
|
|
N/A
|
|
March 2007
|
|
Meggitt-USA Inc.
|
|
K&F Industries Holdings, Inc.
|
|
|
10.7x
|
|
|
19.5x
|
|
December 2006
|
|
Eaton Corporation
|
|
AT Holdings Corporation
|
|
|
11.0x
|
|
|
N/A
|
|
-
(1)
-
11.2x
multiple includes adjustment for tax benefits of approximately $78 million.
-
(2)
-
15.0x
multiple adjusted for earn out consideration of approximately $150 million.
-
(3)
-
Reflects
pro forma adjusted EBITDA, which includes acquiror-provided acquisition and purchase accounting adjustments.
J.P.
Morgan calculated, for each selected transaction, (i) the multiple of the transaction value to the target company's EBITDA for the 12-month period prior to the announcement
of the applicable transaction, or TV/ LTM EBITDA, and (ii) the multiple of the per share offer price in the transaction to the earnings per share of the target company or the equity value in
the transaction to the net income for the 12-month period prior to the announcement of the applicable transaction, or LTM P/E.
Based
on the results of this analysis and other factors that J.P. Morgan considered relevant, J.P. Morgan selected a multiple reference range of 10.0x - 14.0x for TV/ LTM EBITDA
and a multiple reference range of 20.0x - 30.0x for LTM P/E.
After
applying such ranges to figures provided by B/E Aerospace for LTM EBITDA and LTM EPS, respectively, for B/E Aerospace for the 12-month period ended September 30,
2016, the analysis indicated the following implied per share equity value ranges for B/E Aerospace common stock, rounded to the nearest $0.25:
|
|
|
|
|
|
|
|
|
|
Implied Per Share
Equity Value
Range of
B/E Aerospace
Common Stock
|
|
|
|
Low
|
|
High
|
|
TV/ LTM EBITDA
|
|
$
|
40.50
|
|
$
|
64.25
|
|
LTM P/E
|
|
$
|
65.75
|
|
$
|
98.75
|
|
The
ranges of implied per share equity values for B/E Aerospace common stock were compared to the closing price of $50.65 per share of B/E Aerospace common stock on October 20,
2016, and the offer price of $62.00 per share of B/E Aerospace common stock.
Discounted Cash Flow Analysis
J.P.
Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per share for B/E Aerospace common stock.
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Table of Contents
J.P.
Morgan calculated the unlevered free cash flows that B/E Aerospace is expected to generate (i) during the fourth quarter of calendar year 2016 through calendar year 2021
based upon the adjusted B/E Aerospace forecast and (ii) during calendar years 2022 through 2026 based upon extrapolations from the adjusted B/E Aerospace forecast reviewed and approved by
Rockwell Collins management. J.P. Morgan calculated a range of terminal values for B/E Aerospace at the end of the projection period by applying terminal growth rates, based on J.P. Morgan's
professional judgment given the nature of B/E Aerospace, its business and its industry, ranging from 2.5% to 3.5%. The unlevered free cash flows and the range of terminal values were then
discounted to present values using discount rates
ranging from 7.5% to 8.5%, which were chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of B/E Aerospace. The present values of the unlevered free cash flows and the
range of terminal values were then adjusted for B/E Aerospace's net debt and divided by the fully diluted shares outstanding of B/E Aerospace. The discounted cash flow analysis indicated an implied
per share equity value range for B/E Aerospace common stock, rounded to the nearest $0.25, of $53.50 to $78.25.
The
range of implied per share equity values for B/E Aerospace common stock was compared to the closing price of $50.65 per share of B/E Aerospace common stock on October 20,
2016, and the offer price of $62.00 per share of B/E Aerospace common stock.
Rockwell Collins Financial Analysis
Discounted Cash Flow Analysis
J.P.
Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per share for Rockwell Collins common stock.
J.P.
Morgan calculated the unlevered free cash flows that Rockwell Collins is expected to generate (i) during fiscal years 2017 through 2021 based upon the Rockwell Collins
stand-alone management forecast and (ii) during fiscal years 2022 through 2026 based upon extrapolations from the Rockwell Collins stand-alone management forecast reviewed and approved by
Rockwell Collins management. J.P. Morgan calculated a range of terminal values for Rockwell Collins at the end of the projection period by applying terminal growth rates, based on J.P. Morgan's
professional judgment given the nature of Rockwell Collins, its business and its industry, ranging from 2.0% to 3.0% to the unlevered free cash flows excluding pension contributions, to which a 0%
terminal growth rate was applied per Rockwell Collins management instruction. The unlevered free cash flows and the range of terminal values were then discounted to present values using discount rates
ranging from 7.5% to 8.5%, which were chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of Rockwell Collins. The present values of the unlevered free cash flows and
the range of terminal values were then adjusted for Rockwell Collins' net debt and divided by the fully diluted shares outstanding of Rockwell Collins. The discounted cash flow analysis indicated an
implied per share equity value range for Rockwell Collins common stock, rounded to the nearest $0.25, of $98.25 to $136.75.
Potential Value Creation AnalysisIntrinsic Value Approach
J.P. Morgan prepared a value creation analysis that compared the implied equity value derived from J.P. Morgan's discounted cash flow analysis
of Rockwell Collins on a standalone basis to Rockwell Collins stockholders' pro forma ownership of the implied equity value of the combined company.
The
pro forma combined company equity value was equal to: (i) Rockwell Collins' standalone discounted cash flow value of $15.1 billion (calculated using a 2.5% terminal
growth rate and 8.0% discount rate, representing the midpoint of the terminal growth rate and discount rate ranges, respectively, applied in the discounted cash flow analysis for Rockwell Collins
described above), plus (ii) B/E Aerospace's standalone discounted cash flow value of $6.5 billion (calculated using a 3.0% terminal growth rate and an 8.0% discount rate, representing
the midpoint of the terminal growth rate
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and
discount rate ranges, respectively, applied in the discounted cash flow analysis for B/E Aerospace described above), plus (iii) the discounted cash flow value of Rockwell Collins management
expectations of after-tax synergies totaling $1.8 billion (calculated using a 3.0% terminal growth rate and an 8.0% discount rate representing the midpoint of the terminal growth rate and
discount rate ranges, respectively), less (iv) cash consideration of $3.8 billion (which includes the retirement of certain B/E Aerospace restricted stock units, transaction costs
and change of control expenses). J.P. Morgan then calculated the implied pro forma equity value of the combined company attributable to Rockwell Collins stockholders based on the implied equity
ownership percentage of 80% by Rockwell Collins stockholders implied by the exchange ratio in the consideration (assuming Rockwell Collins' closing share price as of October 20, 2016) and the
number of Rockwell Collins diluted shares outstanding on a standalone basis (based on information as of September 30, 2016 per Rockwell Collins management). J.P. Morgan then compared the result
to the implied equity value of Rockwell Collins on a standalone basis indicated by the discounted cash flow analysis of Rockwell Collins (described above) whereby the discount rates used were chosen
by J.P. Morgan based upon an analysis of the weighted average cost of capital of Rockwell Collins. The value creation analysis indicated an implied pro forma equity value of $15.6 billion
attributable to Rockwell Collins stockholders and implied pro forma accretion in implied equity value to Rockwell Collins stockholders of 3.4% higher than the implied equity value on a standalone
basis indicated by the discounted cash flow analysis of Rockwell Collins.
HOUSEHOLDING OF JOINT PROXY STATEMENT/PROSPECTUS
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. As permitted
by the Exchange Act, only one copy of this joint proxy statement/prospectus is being delivered to stockholders residing at the same address, unless stockholders have notified the company whose shares
they hold of their desire to receive multiple copies of the joint proxy statement/prospectus. 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 joint proxy statement/prospectus, or if you are
receiving multiple copies of this joint proxy statement/prospectus and wish to receive only one, please contact the company whose shares you hold at their address identified below. Each of Rockwell
Collins and B/E Aerospace will promptly deliver, upon oral or written request, a separate copy of this joint proxy statement/prospectus to any stockholder residing at an address to which only one copy
was mailed. Requests for additional copies should be directed to: Rockwell Collins, Inc., 400 Collins Road NE, Cedar Rapids, Iowa 52498, Attn: Shareowner Relations, or contact Rockwell Collins
by telephone at (319) 295-4045, or to B/E Aerospace, Inc., 1400 Corporate Center Way, Wellington, Florida, 33414 or contact B/E Aerospace Investor Relations by telephone at
(561) 791-5000.
WHERE YOU CAN FIND MORE INFORMATION
Rockwell Collins and B/E Aerospace file 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., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 or 202-942-8090 for further information on the public reference room. The SEC also maintains an Internet website that contains reports, proxy statements and other information
regarding issuers, including Rockwell Collins and B/E Aerospace, who file electronically with the SEC. The
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Table of Contents
address
of that site is
www.sec.gov
. The information contained on the SEC's website is expressly not incorporated by reference into this joint proxy
statement/prospectus.
Rockwell
Collins has filed with the SEC a registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part. The registration statement
registers the shares of Rockwell Collins common stock to be issued to B/E Aerospace stockholders in connection with the merger. The registration statement, including the attached exhibits and annexes,
contains additional relevant information about Rockwell Collins and B/E Aerospace, respectively. The rules and regulations of the SEC allow Rockwell Collins and B/E Aerospace to omit certain
information included in the registration statement from this joint proxy statement/prospectus.
In
addition, the SEC allows Rockwell Collins and B/E Aerospace to disclose important information to you by referring you to other documents filed separately with the SEC. This
information is considered to be a part of this joint proxy statement/prospectus, except for any information that is superseded by information included directly in this joint proxy statement/prospectus
or incorporated by reference subsequent to the date of this joint proxy statement/prospectus as described below.
This
joint proxy statement/prospectus incorporates by reference the documents listed below that Rockwell Collins and B/E Aerospace have previously filed with the SEC. They contain
important information about the companies and their financial condition.
Rockwell Collins SEC Filings
-
-
Proxy Statement on Schedule 14A, filed December 15, 2016;
-
-
Annual report on Form 10-K for the year ended September 30, 2016, filed with the SEC on November 15, 2016;
-
-
Current reports on Form 8-K filed with the SEC on October 24, 2016 (two reports), October 27, 2016 and December 22,
2016 (other than the portions of those documents not deemed to be filed pursuant to the rules promulgated under the Exchange Act); and
-
-
Description of Rockwell Collins' common stock, contained in Item 11 of Rockwell Collins' Registration Statement on Form 10, as
amended (File No. 001-16445), filed with the SEC on June 15, 2001.
B/E Aerospace SEC Filings
-
-
Annual report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 25, 2016;
-
-
Quarterly reports on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on April 27, 2016, for the quarter
ended June 30, 2016, filed with the SEC on July 29, 2016 and for the quarter ended September 30, 2016, filed with the SEC on October 28, 2016;
-
-
Current reports on Form 8-K filed with the SEC on February 2, 2016, April 26, 2016, July 26, 2016,
October 24, 2016 (two reports) and October 26, 2016 (other than the portions of those documents not deemed to be filed pursuant to the rules promulgated under the Exchange Act);
-
-
Description of B/E Aerospace's common stock, contained in B/E Aerospace's Registration Statement on Form S-3 (File
No. 333-210957), filed with the SEC on April 27, 2016; and
-
-
Description of Employee Stock Purchase Plan, contained in B/E Aerospace's Form 11-K, filed with the SEC on June 24, 2016.
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To
the extent that any information contained in any report on Form 8-K, or any exhibit thereto, was furnished to, rather than filed with, the SEC, such information or exhibit is
specifically not incorporated by reference.
In
addition, Rockwell Collins and B/E Aerospace incorporate by reference any future filings they make with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
after the date of this joint proxy statement/prospectus and before the date of the Rockwell Collins special meeting and the B/E Aerospace special meeting (excluding any current reports on
Form 8-K to the extent disclosure is furnished and not filed). Those documents are considered to be a part of this joint proxy statement/prospectus, effective as of the date they are filed. In
the event of conflicting information in these documents, the information in the latest filed document should be considered correct.
You
can obtain any of the other documents listed above from the SEC, through the SEC's website at the address indicated above, or from Rockwell Collins or B/E Aerospace, as applicable,
by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:
|
|
|
By Mail:
|
|
By Mail:
|
Rockwell Collins
|
|
B/E Aerospace
|
400 Collins Road NE
|
|
1400 Corporate Center Way
|
Cedar Rapids, Iowa 52498
|
|
Wellington, Florida 33414-2105
|
Telephone: (319) 295-1000
|
|
Telephone: (561) 791-5000
|
These
documents are available from Rockwell Collins or B/E Aerospace, as the case may be, without charge, excluding any exhibits to them unless the exhibit is specifically listed as an
exhibit to the registration statement of which this joint proxy statement/prospectus forms a part. You can also find information about Rockwell Collins and B/E Aerospace at their Internet
websites at
www.rockwellcollins.com
and
www.beaerospace.com
, respectively. Information contained on
these websites does not constitute part of this joint proxy statement/prospectus.
You
may also obtain documents incorporated by reference into this document by requesting them in writing or by telephone from Innisfree M&A Incorporated, Rockwell Collins' proxy
solicitor, or Georgeson LLC, B/E Aerospace's proxy solicitor, at the following addresses and telephone numbers:
|
|
|
For Rockwell Collins Stockholders:
|
|
For B/E Aerospace Stockholders:
|
Innisfree M&A Incorporated
|
|
Georgeson LLC
|
501 Madison Avenue, 20th Floor
|
|
1290 Avenue of the Americas, 9th Floor
|
New York, New York 10022
|
|
New York, New York 10104
|
(877) 825-8772 (toll-free)
|
|
(800) 509-0917 (toll-free)
|
(212) 750-5833 (collect)
|
|
|
If
you are a stockholder of B/E Aerospace or Rockwell Collins and would like to request documents, please do so by March 2, 2017 to receive them before your respective company's
special meeting. If you request any documents from Rockwell Collins or B/E Aerospace, Rockwell Collins or B/E Aerospace, as applicable, will mail them to you by first class mail, or another equally
prompt means, within one business day after Rockwell Collins or B/E Aerospace, as the case may be, receives your request.
This
joint proxy statement/prospectus is a prospectus of Rockwell Collins and is a joint proxy statement of Rockwell Collins and B/E Aerospace for the Rockwell Collins special meeting
and the B/E Aerospace special meeting. Neither Rockwell Collins nor B/E Aerospace has authorized anyone to give any information or make any representation about the merger or Rockwell Collins
or B/E Aerospace that is different from, or in addition to, that contained in this joint proxy statement/
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prospectus
or in any of the materials that Rockwell Collins or B/E Aerospace has incorporated by reference into this joint proxy statement/prospectus. Therefore, if anyone does give you information of
this sort, you should not rely on it. This joint proxy statement/prospectus is dated February 3, 2017. You should not assume that the information is accurate as of any date other than that
date, and neither its mailing to B/E Aerospace stockholders or Rockwell Collins stockholders nor the issuance of shares of Rockwell Collins common stock in the merger will create any implication to
the contrary.
201
Table of Contents
Annex A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
By and Among
ROCKWELL COLLINS, INC.,
QUARTERBACK MERGER SUB CORP.
and
B/E AEROSPACE, INC.
Dated as of October 23, 2016
Table of Contents
TABLE OF CONTENTS
A-i
Table of Contents
A-ii
Table of Contents
A-iii
Table of Contents
INDEX OF DEFINED TERMS
|
|
|
Term
|
|
Section
|
Additional Tax Counsel
|
|
5.15(i)
|
Affiliate
|
|
Appendix A
|
Agreement
|
|
Preamble
|
Anti-Corruption Laws
|
|
3.20(a)
|
Antitrust Laws
|
|
3.5(b)
|
Aviation Regulations
|
|
3.19
|
Book-Entry Shares
|
|
2.1(a)(ii)
|
Business Day
|
|
Appendix A
|
Bylaws
|
|
3.1
|
Canceled Shares
|
|
2.1(a)(i)
|
Capitalization Date
|
|
3.2(a)
|
Cash Consideration
|
|
2.1(a)(ii)
|
Certificate of Incorporation
|
|
3.1
|
Certificate of Merger
|
|
1.3
|
Certificates
|
|
2.1(a)(ii)
|
Closing
|
|
1.2
|
Closing Date
|
|
1.2
|
Code
|
|
Appendix A
|
Company
|
|
Preamble
|
Company Acquisition Proposal
|
|
Appendix A
|
Company Adverse Recommendation Change
|
|
5.6(c)
|
Company Benefit Plan
|
|
3.12(a)
|
Company Board
|
|
Recitals
|
Company Closing Representation Letter
|
|
5.15(b)
|
Company Common Stock
|
|
2.1(a)(i)
|
Company Disclosure Letter
|
|
Appendix A
|
Company DSU Award
|
|
2.3(c)
|
Company Equity Awards
|
|
Appendix A
|
Company Equity Plan
|
|
Appendix A
|
Company ERISA Affiliate
|
|
Appendix A
|
Company ESPP
|
|
Appendix A
|
Company Expenses
|
|
7.3(d)
|
Company Fundamental Representations
|
|
6.2(a)
|
Company Intervening Event
|
|
Appendix A
|
Company Leased Real Property
|
|
3.16(b)
|
Company Material Adverse Effect
|
|
Appendix A
|
Company Material Contract
|
|
3.14(a)
|
Company Option
|
|
Appendix A
|
Company Owned Real Property
|
|
3.16(a)
|
Company Permits
|
|
3.10(a)
|
Company Preferred Stock
|
|
3.2(a)
|
Company Real Property
|
|
3.16(b)
|
Company Recommendation
|
|
Appendix A
|
Company Related Parties
|
|
7.3(f)
|
Company Restricted Stock Award
|
|
2.3(a)
|
Company RSU Award
|
|
2.3(b)
|
Company SEC Documents
|
|
3.6(a)
|
Company Signing Representation Letter
|
|
Appendix A
|
A-iv
Table of Contents
|
|
|
Term
|
|
Section
|
Company Stockholder Approval
|
|
3.4
|
Company Stockholders' Meeting
|
|
5.3(b)
|
Company Superior Proposal
|
|
Appendix A
|
Company Tax Counsel
|
|
Appendix A
|
Company Termination Fee
|
|
Appendix A
|
Confidentiality Agreement
|
|
Appendix A
|
Consent
|
|
3.5(b)
|
Continuation Period
|
|
5.11(a)
|
Contract
|
|
Appendix A
|
Control
|
|
Appendix A
|
Covered Employees
|
|
5.11(a)
|
Customs & International Trade Authorizations
|
|
Appendix A
|
Customs & International Trade Laws
|
|
Appendix A
|
D&O Indemnified Parties
|
|
5.8(a)
|
Delaware Secretary of State
|
|
Appendix A
|
DGCL
|
|
Recitals
|
Dissenting Shares
|
|
2.5
|
EDGAR
|
|
III
|
Effective Time
|
|
1.3
|
Environmental Laws
|
|
Appendix A
|
Equity Award Exchange Ratio
|
|
Appendix A
|
ERISA
|
|
Appendix A
|
Exchange Act
|
|
Appendix A
|
Exchange Agent
|
|
2.2(a)
|
Exchange Fund
|
|
2.2(a)
|
Exchange Ratio
|
|
Appendix A
|
Existing Credit Agreement
|
|
Appendix A
|
FAA
|
|
3.19
|
FCPA
|
|
Appendix A
|
Financing Source
|
|
Appendix A
|
Foreign Plan
|
|
Appendix A
|
Form S-4
|
|
3.11
|
GAAP
|
|
Appendix A
|
Governmental Authority
|
|
Appendix A
|
Hazardous Materials
|
|
Appendix A
|
HSR Act
|
|
Appendix A
|
Indebtedness
|
|
Appendix A
|
Intellectual Property Rights
|
|
3.15(b)
|
IRS
|
|
Appendix A
|
Joint Proxy Statement
|
|
3.11
|
KLX
|
|
Appendix A
|
KLX Closing Representation Letter
|
|
Appendix A
|
KLX Contribution
|
|
Appendix A
|
KLX Debt Repayment
|
|
Appendix A
|
KLX Distribution
|
|
Appendix A
|
KLX External Spin-Off
|
|
Appendix A
|
KLX Internal Restructuring
|
|
Appendix A
|
KLX Signing Representation Letter
|
|
Appendix A
|
KLX Spin-Off Tax Treatment
|
|
Appendix A
|
KLX Tax Sharing Agreement
|
|
3.13(e)
|
A-v
Table of Contents
|
|
|
Term
|
|
Section
|
KLX TSA Amendment
|
|
3.28(a)
|
Knowledge
|
|
Appendix A
|
Labor Agreement
|
|
3.12(j)
|
Law
|
|
Appendix A
|
Lien
|
|
Appendix A
|
Merger
|
|
Recitals
|
Merger Consideration
|
|
2.1(a)(ii)
|
Merger Sub
|
|
Preamble
|
NASDAQ
|
|
Appendix A
|
Non-Employee Directors Plan
|
|
2.3(c)
|
NYSE
|
|
4.5(b)
|
OFAC
|
|
Appendix A
|
Order
|
|
Appendix A
|
Parent
|
|
Preamble
|
Parent Acquisition Proposal
|
|
Appendix A
|
Parent Adverse Recommendation Change
|
|
5.7(c)
|
Parent Benefit Plan
|
|
Appendix A
|
Parent Board
|
|
Recitals
|
Parent Closing Representation Letter
|
|
5.15(c)
|
Parent Common Stock
|
|
Recitals
|
Parent Disclosure Letter
|
|
Appendix A
|
Parent Equity Awards
|
|
Appendix A
|
Parent ERISA Affiliate
|
|
Appendix A
|
Parent Expenses
|
|
7.3(c)
|
Parent Fundamental Representations
|
|
6.3(a)
|
Parent Intervening Event
|
|
Appendix A
|
Parent Material Adverse Effect
|
|
Appendix A
|
Parent Material Contract
|
|
4.14
|
Parent Organizational Documents
|
|
Appendix A
|
Parent Permits
|
|
4.10(a)
|
Parent Recommendation
|
|
Appendix A
|
Parent Related Parties
|
|
7.3(f)
|
Parent Retention Awards
|
|
5.11(i)
|
Parent SEC Documents
|
|
4.6(a)
|
Parent Signing Representation Letter
|
|
Appendix A
|
Parent Stock Issuance
|
|
Recitals
|
Parent Stock Price
|
|
Appendix A
|
Parent Stockholder Approval
|
|
4.4
|
Parent Stockholders' Meeting
|
|
5.3(c)
|
Parent Superior Proposal
|
|
Appendix A
|
Parent Tax Counsel
|
|
Appendix A
|
Parent Termination Fee
|
|
Appendix A
|
Payoff Letter
|
|
5.14
|
Permitted Lien
|
|
Appendix A
|
Person
|
|
Appendix A
|
Proceedings
|
|
Appendix A
|
Release
|
|
Appendix A
|
Representative
|
|
Appendix A
|
Sanctioned Country
|
|
Appendix A
|
Sanctioned Person
|
|
Appendix A
|
A-vi
Table of Contents
|
|
|
Term
|
|
Section
|
Sanctions
|
|
Appendix A
|
Sarbanes-Oxley Act
|
|
Appendix A
|
SEC
|
|
Appendix A
|
Securities Act
|
|
Appendix A
|
Securities Laws
|
|
Appendix A
|
Security
|
|
Appendix A
|
Security Clearances
|
|
Appendix A
|
Subsidiary
|
|
Appendix A
|
Surviving Corporation
|
|
1.1
|
Tax
|
|
Appendix A
|
Tax Returns
|
|
Appendix A
|
Taxes
|
|
Appendix A
|
Termination Date
|
|
7.1(b)(i)
|
Trading Day
|
|
Appendix A
|
Treasury Regulations
|
|
Appendix A
|
VWAP
|
|
Appendix A
|
A-vii
Table of Contents
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 23, 2016 (this "
Agreement
"), is made by and among
Rockwell Collins, Inc., a Delaware corporation ("
Parent
"), Quarterback Merger Sub Corp., a Delaware corporation and a wholly owned Subsidiary of
Parent ("
Merger Sub
"), and B/E Aerospace, Inc., a Delaware corporation (the "
Company
"). Defined
terms used in this Agreement have the respective meanings ascribed to them herein.
W
I
T
N
E
S
S
E
T
H
:
WHEREAS,
the respective boards of directors of Parent, Merger Sub and the Company have unanimously approved the acquisition of the Company by Parent upon the terms and
subject to the conditions and limitations set forth in this Agreement;
WHEREAS,
the respective boards of directors of the Company (the "
Company Board
"), Parent (the "
Parent
Board
") and Merger Sub have unanimously approved and declared advisable this Agreement and the transactions contemplated by this Agreement, including the merger of Merger Sub
with and into the Company, with the Company surviving as a direct or indirect wholly owned Subsidiary of Parent (the "
Merger
"), upon the terms and
subject to the conditions and limitations set forth in this Agreement and in accordance with the General Corporation Law of the State of Delaware (the
"
DGCL
");
WHEREAS,
the Company Board has, subject to
Section 5.6
, unanimously resolved to recommend that the Company's stockholders approve
the adoption of this Agreement;
WHEREAS,
the Parent Board has, subject to
Section 5.7
, unanimously resolved to recommend that Parent's stockholders approve the
issuance of shares of Parent common stock, par value $0.01 per share (the "
Parent Common Stock
"), in connection with the Merger (the
"
Parent Stock Issuance
"); and
WHEREAS,
each of Parent, Merger 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 representations, warranties and covenants and subject to the conditions herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1
The Merger.
Upon the terms and subject to the conditions of this Agreement, and in
accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into
the Company, whereupon the separate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation of the Merger and a direct or indirect, wholly owned Subsidiary of
Parent (the "
Surviving Corporation
").
Section 1.2
The Closing.
Subject to the provisions of
Article VI
, the closing of the Merger (the
"
Closing
") shall take place at 10:00 a.m. (local time) on a date to be specified by the parties hereto, but no later than the second (2nd)
Business Day after the satisfaction or waiver of the conditions set forth in
Article VI
(other than those conditions that by their terms are to
be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), unless another time, date or place is agreed to in writing by the parties hereto (such date being the
"
Closing Date
"). The Closing shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 155 North Wacker Drive, Chicago,
Illinois.
Section 1.3
Effective Time.
Concurrently with the Closing, the Company shall cause a certificate of
merger with respect to the Merger (the "
Certificate of
Merger
") to be executed and filed with the
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Delaware
Secretary of State as provided under the DGCL. The Merger shall become effective at the time the Certificate of Merger has been duly filed with the Delaware Secretary of State or at such
other date and time as is agreed between Parent and the Company and specified in the Certificate of Merger (such date and time being hereinafter referred to as the "
Effective
Time
"). The Merger shall have the effects set forth in this Agreement and the applicable provisions of the DGCL.
Section 1.4
Certificate of Incorporation/Charter; Bylaws.
(a) The
Certificate of Incorporation, as in effect immediately prior to the Effective Time, shall be amended in its entirety as set forth in
Exhibit A
hereto and, as so amended, shall be the certificate of
incorporation of the Surviving Corporation, until thereafter amended as provided
by Law and such certificate of incorporation and, in each case, subject to
Section 5.8
.
(b) The
bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation, except as to the name of the Surviving
Corporation, which shall be "B/E Aerospace, Inc.", until thereafter amended as provided by Law, the certificate of incorporation of the Surviving Corporation and such bylaws and, in each
case, subject to
Section 5.8
.
Section 1.5
Board of Directors; Officers.
The members of the board of directors of Merger Sub
immediately prior to the Effective Time shall, from and after the Effective Time, be the members of the board
of directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving
Corporation, in each case to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until the earlier of their death, resignation or removal or until
their respective successors are duly elected, designated or qualified.
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
Section 2.1
Effect on Securities.
(a)
Effect of Merger.
At the Effective Time, by virtue of the Merger and without any action on the part of
the Company, Parent, Merger Sub or the holders of any securities of the
Company or Merger Sub:
(i)
Cancellation of Company Securities.
Each share of common stock, par value $0.01 per share, of the Company
(the "
Company Common Stock
") held by the Company as treasury stock or held, directly or indirectly, by Parent or Merger Sub immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to exist, and no consideration or payment shall be delivered in exchange therefor or in respect thereof (such shares,
"
Canceled Shares
").
(ii)
Conversion of Company Securities.
Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than Canceled Shares and Dissenting Shares) shall be converted into the right to receive, in accordance with the terms of this Agreement, (A) $34.10 per share
in cash, without interest, from Parent (such amount of cash, the "
Cash Consideration
") and (B) a number of validly issued, fully paid and
non-assessable shares of Parent Common Stock equal to the Exchange Ratio (and, if applicable, cash in lieu of fractional shares of Parent Common Stock payable in accordance with
Section 2.1(c)
,
such shares of Parent Common Stock and any such cash in lieu of fractional shares, together with the Cash Consideration, the
"
Merger Consideration
"). Each share of Company Common Stock to be converted into the right to receive the Merger Consideration as provided in this
Section 2.1(a)(ii)
shall no longer be outstanding and shall be
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automatically
canceled and shall cease to exist, and the holders of certificates (the "
Certificates
") or book-entry shares
("
Book-Entry Shares
"), which immediately prior to the Effective Time represented such Company Common Stock, shall cease to have any rights with respect
to such Company Common Stock other than the right to receive, upon surrender of such Certificates or Book-Entry Shares in accordance with
Section 2.2
, the Merger Consideration.
(iii)
Conversion of Merger Sub Capital Stock.
Each share of common stock, par value $0.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one (1) fully paid share of common stock, par value $0.01 per share, of the Surviving
Corporation and constitute the only outstanding shares of capital stock of the Surviving Corporation.
(b)
Adjustments.
Without limiting the other provisions of this Agreement, if at any time during the period
between the date of this Agreement and the Effective Time, any change in
the number or type of outstanding shares of Parent Common Stock or Company Common Stock shall occur as a result of a reclassification, recapitalization, exchange, stock split (including a reverse
stock split), combination or readjustment of shares or any stock dividend or stock distribution with a record date during such period, the Merger Consideration and any other similarly dependent items,
as the case may be, shall be appropriately adjusted to provide the same economic effect as contemplated by this Agreement prior to such event. Nothing in this
Section 2.1(b)
shall be construed to
permit any party to take any action that is otherwise prohibited or restricted by any other provision of
this Agreement.
(c)
Fractional Shares.
No certificate or scrip representing fractional shares of Parent Common Stock shall
be issued upon the conversion of Company Common Stock pursuant to
Section 2.1(a)(ii)
, and such fractional share interests shall not entitle the owner thereof to any Parent Common Stock or to vote
or to any other
rights of a holder of Parent Common Stock. All fractional shares that a single record holder of Company Common Stock would be otherwise entitled to receive shall be aggregated and calculations shall
be rounded to three (3) decimal places. In lieu of any such fractional shares, each holder of Company Common Stock who would otherwise be entitled to such fractional shares shall be entitled to
an amount in cash, without interest, rounded down to the nearest cent, equal to the product of (i) the amount of the fractional share interest in a share of Parent Common Stock to which such
holder would, but for this
Section 2.1(c)
, be entitled under
Section 2.1(a)(ii)
and
(ii) the Parent Stock Price. As soon as practicable after the determination of the amount of cash, if any, to be paid to holders of Company Common Stock in lieu of any fractional share
interests in Parent Common Stock, the Exchange Agent shall make available such amount, without interest, to the holders of Company Common Stock entitled to receive such cash. The payment of cash in
lieu of fractional share interests pursuant to this
Section 2.1(c)
is not a separately bargained-for consideration.
Section 2.2
Exchange of Certificates.
(a)
Designation of Exchange Agent; Deposit of Exchange Fund.
Prior to the Closing, Parent shall enter into
a customary exchange agreement with a nationally recognized financial institution designated by Parent and
reasonably acceptable to the Company (the "
Exchange Agent
") for the payment of the Merger Consideration as provided in
Section 2.1(a)(ii)
. At or prior
to the Effective Time, Parent shall deposit or cause to be deposited with the Exchange Agent, for exchange in
accordance with this
Article II
through the Exchange Agent, (i) book-entry shares (or certificates if requested) representing the full
number of whole shares of Parent Common Stock issuable pursuant to
Section 2.1(a)(ii)
in exchange for outstanding shares of Company Common Stock
and (ii) cash in an aggregate amount necessary to pay the Cash Consideration portion of the Merger Consideration, and Parent shall, after the Effective Time on the appropriate payment date, if
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applicable,
provide or cause to be provided to the Exchange Agent any dividends or other distributions payable on such shares of Parent Common Stock pursuant to
Section 2.2(d)
(such shares of Parent Common
Stock and Cash Consideration provided to the Exchange Agent, together with any dividends or other
distributions with respect thereto, the "
Exchange Fund
"). For purposes of the deposit, Parent shall assume that there will not be any fractional shares
of Parent Common Stock. Parent shall make available to Exchange Agent, for addition to the Exchange Fund, from time to time as needed, cash
sufficient to pay cash in lieu of fractional shares in accordance with
Section 2.1(c)
. In the event the Exchange Fund shall at any time be
insufficient to make the payments contemplated by
Section 2.1(a)(ii)
, Parent shall promptly deposit, or cause to be deposited, additional funds
with the Exchange Agent in an amount which is equal to the deficiency in the amount required to make such payment. The Exchange Fund shall not be used for any purpose other than to fund payments
pursuant to
Section 2.1
, except as expressly provided for in this Agreement.
(b) As
promptly as practicable following the Effective Time and, in no event later than the fifth (5
th
) Business Day thereafter, Parent shall cause the
Exchange Agent to mail to each holder of record of a Certificate or Book-Entry Share that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (i) a
letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates or Book-Entry Shares, as applicable, shall pass only upon proper delivery of
the Certificates (or affidavits of loss in lieu thereof) or Book-Entry Shares to the Exchange Agent, and which shall be in the form and have such other provisions as Parent may reasonably specify) and
(ii) instructions (which instructions shall be in the form and have such other provisions as Parent and Company may reasonably specify) for use in effecting the surrender of the Certificates or
Book-Entry Shares in exchange for (A) cash in an amount equal to the Cash Consideration multiplied by the number of shares of Company Common Stock previously represented by such Certificates or
Book-Entry Shares, (B) the number of shares of Parent Common Stock (which shall be in book-entry form unless a certificate is requested) representing, in the aggregate, the whole number of
shares that such holder has the right to receive in respect of such Certificates or Book-Entry Shares pursuant to
Section 2.1(a)(ii)
,
(C) any dividends or other distributions payable pursuant to
Section 2.2(d)
and (D) cash in lieu of fractional shares of Parent
Common Stock payable pursuant to
Section 2.1(c)
.
(c) Upon
surrender of a Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share for cancellation to the Exchange Agent, together with a letter of transmittal
duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate or Book-Entry
Share shall be entitled to receive in exchange therefor, and Parent shall cause the Exchange Agent to pay and deliver in exchange therefor as promptly as reasonably practicable, (i) cash in an
amount equal to the Cash Consideration multiplied by the number of shares of Company Common Stock previously represented by such Certificate or Book-Entry Shares, (ii) the number of shares of
Parent Common Stock (which shall be in book-entry form unless a certificate is requested) representing, in the aggregate, the whole number of shares that such holder has the right to receive in
respect of such Certificate or Book-Entry Shares pursuant to
Section 2.1(a)(ii)
, (iii) any dividends or other distributions payable
pursuant to
Section 2.2(d)
and (iv) cash in lieu of fractional shares of Parent Common Stock payable pursuant to
Section 2.1(c)
, and the
Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share so surrendered shall be forthwith canceled. Until
surrendered as contemplated by this
Section 2.2(c)
, each Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share shall be deemed,
from and after the Effective Time, to represent only the right to receive the applicable Merger Consideration as contemplated by this
Section 2.2(c)
and any dividends or other distributions payable
pursuant to
Section 2.2(d)
. The Exchange Agent shall accept such Certificates (or affidavits of loss in lieu thereof) or Book-Entry Shares upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose to
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effect
an orderly exchange thereof in accordance with normal exchange practices. No interest shall be paid or accrued for the benefit of holders of the Certificates or Book-Entry Shares on the cash
payable upon the surrender of the Certificates or Book-Entry Shares.
(d)
Distributions with Respect to Unexchanged Shares.
Subject to applicable Law, following surrender of a
Certificate (or affidavit of loss in lieu thereof) or Book-Entry Shares for cancellation to the Exchange
Agent, there shall be paid to the holder of the Parent Common Stock issued in exchange for such Certificate or Book-Entry Shares, without interest, (i) at the time of delivery of such Parent
Common Stock by the Exchange Agent pursuant to
Section 2.2(c)
, the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such shares of Parent Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such delivery of such Parent Common Stock by the Exchange Agent pursuant to
Section 2.2(c)
, and a payment
date subsequent to such delivery of such Parent Common Stock by the Exchange Agent pursuant to
Section 2.2(c)
, payable with respect to such
shares of Parent Common Stock.
(e) In
the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, payment of the appropriate amount of
Merger Consideration (and any dividends or other distributions with respect to Parent Common Stock as contemplated by
Section 2.2(d)
) may be made
to a Person other than the Person in whose name the Certificate or Book-Entry Share so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for
transfer (and accompanied by all documents reasonably required by the Exchange Agent) or such Book-Entry Share shall be properly transferred 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 Book-Entry Share or establish to the satisfaction of Parent that such Tax
has been paid or is not applicable.
(f)
Termination of Exchange Fund.
Any portion of the Exchange Fund which remains undistributed to the
holders of the Certificates or Book-Entry Shares for one (1) year after the Effective
Time shall be delivered to Parent or its designee upon demand, and any such holders prior to the Merger who have not theretofore complied with this
Article II
shall thereafter look only to Parent
as general creditor thereof for payment of their claims for Merger Consideration and any dividends or distributions with respect to Parent
Common Stock as contemplated by
Section 2.2(d)
.
(g)
No Liability.
None of Parent, Merger Sub, the Company or the Exchange Agent shall be liable to any
Person in respect of any shares of Parent Common Stock (or dividends or
distributions with respect thereto) or cash held in the Exchange Fund delivered to a Governmental Authority pursuant to any applicable abandoned property, escheat or similar Law. If any Certificate or
Book-Entry Share shall not have been surrendered immediately prior to the date on which any Merger Consideration in respect of such Certificate or Book-Entry Share would otherwise escheat to or become
the property of any Governmental Authority, any such Merger Consideration in respect of such Certificate or Book-Entry Share shall, to the extent permitted by applicable Law, become the property of
Parent free and clear of all claims or interest of any Person previously entitled thereto.
(h)
Investment of Exchange Fund.
The Exchange Agent shall invest any cash included in the Exchange Fund as
directed by Parent;
provided
that no
such investment shall relieve Parent or the Exchange Agent from making the payments required by this
Article II
, and following any losses Parent
shall promptly provide additional funds to the Exchange Agent for the benefit of the holders of Company Common Stock in the amount of such losses. Any interest or income produced by such investments
will be payable to Parent or its designee as directed by Parent.
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(i)
Withholding.
Parent and the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration and any amounts otherwise payable pursuant to this Agreement
to any former holder of Company Common Stock or holder of Company Equity Awards such amounts as Parent or the Exchange Agent are required to deduct and withhold with respect to the making of such
payment under the Code or any provision of applicable Tax Law. Any amounts so withheld shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such
deduction and withholding was made by Parent or the Exchange Agent.
Section 2.3
Company Equity Awards
.
(a)
Treatment of Company Restricted Stock Awards.
Except as set forth in
Section 2.3(a)(ii)
, Parent shall not assume any award of Company Common Stock
subject to time-based, performance or other vesting or lapse restrictions (each a "
Company Restricted Stock Award
") or substitute for any Company
Restricted Stock Award any similar award of Parent Common Stock, in connection with the Merger.
(i) As
of immediately prior to the Effective Time, (A) each Company Restricted Stock Award that was granted prior to the date of this Agreement and that remains
outstanding immediately prior to the Effective Time, shall, to the extent not vested, become fully vested;
provided
that to the extent that such award
is subject to performance conditions, any performance conditions shall be deemed to have been satisfied at the maximum level and (B) each Company Restricted Stock Award shall be canceled
without any action on the part of any holder or beneficiary thereof in consideration for the right to receive a lump sum cash payment with respect thereto equal to the product of (1) the Merger
Consideration and (2) the number of shares of Company Common Stock represented by such Company Restricted Stock Award, less any applicable withholding or other Taxes or other amounts required
by applicable Law to be withheld;
provided
,
further
, that notwithstanding anything to the contrary
contained in this Agreement, any payment in respect of any Company Restricted Stock Award which immediately prior to such cancellation was treated as "deferred compensation" subject to
Section 409A of the Code shall be made on the applicable settlement date for such Company Restricted Stock Award if required in order to comply with Section 409A of the Code. For the
purpose of the preceding sentence, the portion of the Merger Consideration that consists of shares of Parent Common Stock shall be converted to a lump sum cash payment equal to the product of
(x) the number of such shares of Parent Common Stock and (y) the Parent Stock Price.
(ii) Except
as provided in
Section 2.3(a)(ii) of the Company Disclosure Letter
, as of immediately prior to the
Effective Time each Company Restricted Stock Award that is granted by the Company on or following the date of this Agreement and that remains outstanding immediately prior to the Effective Time,
shall, without any action on the part of the holders thereof, be assumed by Parent and converted into a restricted stock award of Parent covering that number of shares of Parent Common Stock (rounded
down to the nearest whole share) equal to the product obtained by multiplying (A) the number of shares of Company Common Stock subject to the Company Restricted Stock Award immediately prior to
the Effective Time by (B) the Equity Award Exchange Ratio;
provided
that to the extent that such Company Restricted Stock Award is subject to
performance conditions, any performance conditions shall be deemed to have been satisfied at the target level performance with respect to the applicable performance period and shall be subject to the
time-based vesting schedule applicable to such Company Restricted Stock Award and will be settled as provided in the award agreement applicable to such Company Restricted Stock Award, subject only to
the continued service of the grantee with the Surviving Corporation, Parent or an Affiliate through each applicable vesting date (except to the extent that the applicable award agreement provides for
accelerated vesting in connection with termination of service or a
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change
in control occurring after the Effective Time) but shall not be subject to any performance metrics following the Effective Time.
(b)
Treatment of Company RSU Awards.
Except as set forth in
Section 2.3(b)(ii)
below, Parent shall not assume any restricted stock unit awards,
including any stock unit held under the Company 2010 Deferred Compensation Plan (each a "
Company RSU Award
"), or substitute for any Company RSU Award
any similar award for Parent Common Stock, in connection with the Merger.
(i) As
of immediately prior to the Effective Time, (A) each Company RSU Award subject to time-based, performance or other vesting restrictions that was granted prior
to the date of this Agreement and that remains outstanding immediately prior to the Effective Time, shall, to the extent not vested, become fully vested;
provided
that to the extent that such award is
subject to performance conditions, any performance conditions shall be deemed to have been satisfied at
the maximum level and (B) each such Company RSU Award, whether payable in cash or shares of Company Common Stock, shall be canceled without any action on the part of any holder or beneficiary
thereof in consideration for the right to receive a lump sum cash payment with respect thereto equal to the product of (1) the Merger Consideration and (2) the number of shares of
Company Common Stock represented by such Company RSU Award, less any applicable withholding or other Taxes or other amounts required by applicable Law to be withheld;
provided
,
further
, that notwithstanding anything to the contrary contained in this Agreement, any
payment in respect of any such Company RSU Award which immediately prior to such cancellation was treated as "deferred compensation" subject to Section 409A of the Code shall be made on the
applicable settlement date for such Company RSU Award if required in order to comply with Section 409A of the Code. For the purpose of the preceding sentence, the portion of the Merger
Consideration that consists of shares of Parent Common Stock shall be converted to a lump sum cash payment equal to the product of (x) the number of such shares of Parent Common Stock and
(y) the Parent Stock Price.
(ii) Except
as provided in
Section 2.3(b)(ii) of the Company Disclosure Letter
, as of immediately prior to the
Effective Time each Company RSU Award that is granted by the Company on or following the date of this Agreement and that remains outstanding immediately prior to the Effective Time, shall, without any
action on the part of the holders thereof, be assumed by Parent and converted into a restricted stock unit award of Parent covering that number of shares of Parent Common Stock (rounded down to the
nearest whole share) equal to the product obtained by multiplying (A) the number of shares of Company Common Stock subject to the Company RSU Award immediately prior to the Effective Time by
(B) the Equity Award Exchange Ratio;
provided
that to the extent that such Company RSU Award is subject to performance conditions, any
performance conditions shall be deemed to have been satisfied at the target level performance with respect to the applicable performance period and shall be subject to the time-based vesting schedule
applicable to such Company RSU Award and will be settled as provided in the award agreement applicable to such Company RSU Award, subject only to the continued service of the grantee with the
Surviving Corporation, Parent or an Affiliate through each applicable vesting date (except to the extent that the applicable award agreement provides for accelerated vesting in connection with
termination of service or a change in control occurring after the Effective Time) but shall not be subject to any performance metrics following the Effective Time.
(c)
Treatment of Company DSU Awards.
Each stock unit credited to the account of any current or former
non-employee director (or beneficiary thereof) under the B/E Aerospace, Inc. Amended and
Restated Non-Employee Directors Stock and Deferred Compensation Plan (the "
Non-Employee Directors Plan
") that is payable in shares of Company Common
Stock (each a "
Company DSU Award
") and is outstanding as of immediately prior to the Effective Time shall be
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immediately
converted into the right to receive at the Effective Time the Merger Consideration, less any applicable withholding or other Taxes or other amounts required by applicable Law to be
withheld;
provided
that notwithstanding anything to the contrary contained in this Agreement, any payment in respect of any Company DSU Award which
immediately prior to such cancellation was treated as "deferred compensation" subject to Section 409A of the Code shall be made on the applicable settlement date for such Company DSU Award if
required in order to comply with Section 409A of the Code.
(d)
Company ESPP.
Except to the extent it is otherwise determined by Parent and communicated to the Company
prior to the Effective Time that the Company ESPP should continue in
effect under its current terms, promptly following the date of this Agreement upon confirmation by Parent prior to such action being taken, the Company Board (or, if applicable, any committee thereof
administering the Company ESPP) shall adopt such resolutions or take such other necessary actions such that (i) with respect to any Option Period(s) (as such term is defined in the Company
ESPP) outstanding as of the date of this Agreement under the Company ESPP, such Option Period(s) shall terminate and each Option (as such term is defined in the Company ESPP) shall be deemed to have
been exercised upon the earlier to occur of (A) the day that is four (4) complete Trading Days prior to the Effective Time or (B) the date on which such Option Period(s) would
otherwise end, and no additional Option Period(s) shall commence under such Company ESPP after the date of this Agreement; (ii) no individual participating in the Company ESPP shall be
permitted to (A) increase the amount of his, her or its rate of payroll contributions thereunder from the rate in effect as of the date of this Agreement, or (B) except to the extent
required by applicable Law, make separate non-payroll contributions to the Company ESPP on or following the date of this Agreement; (iii) no individual who is not participating in the Company
ESPP as of the date of this Agreement may commence participation in the Company ESPP following the date of this Agreement; and (iv) subject to the consummation of the Merger, the Company ESPP
shall terminate, effective immediately prior to the Effective Time.
(e)
Company Actions.
Prior to the Effective Time, the Company shall provide such notice, if any, to the
extent required under the terms of the Company Equity Plan, obtain any
necessary consents, adopt applicable resolutions, amend the terms of the Company Equity Plan or any outstanding awards, and take all other appropriate actions to give effect to the transactions
contemplated herein. To the extent such notice or actions are required, the Company shall provide Parent with documentation evidencing the completion of the foregoing actions (the form and substance
of such documentation shall be subject to review and approval by Parent, such approval not to be unreasonably withheld, conditioned or delayed) not later than the Business Day preceding the Effective
Time.
Section 2.4
Lost Certificates
.
If any Certificate shall have been lost, stolen or destroyed, then upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration to which the holder thereof is entitled pursuant to this
Article II
.
Section 2.5
Dissenting Shares
.
Notwithstanding anything in this Agreement to the contrary, to the extent that holders of Company Common Stock are entitled to appraisal rights under Section 262 of the DGCL,
shares of Company Common Stock issued and outstanding immediately prior to the Effective Time and held by a holder who has properly exercised and perfected his or her demand for appraisal rights under
Section 262 of the DGCL and not effectively withdrawn or lost such holder's rights to appraisal (the "
Dissenting Shares
"), shall not be converted
into the right to receive the Merger Consideration, but the holders of such Dissenting Shares shall be entitled to receive such consideration as shall be determined pursuant to Section 262 of
the DGCL (it being understood and
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acknowledged
that at the Effective Time, such Dissenting Shares shall no longer be outstanding, shall automatically be canceled and shall cease to exist and such holder shall cease to have any rights
with respect thereto other than the right to receive the "fair value" of such Dissenting Shares as determined in accordance with Section 262 of the DGCL);
provided
,
however
, that if any such holder shall have failed to perfect or shall have effectively
withdrawn or lost his, her or its right to appraisal and payment under the DGCL (whether occurring before, at or after the Effective Time), such holder's shares of Company Common Stock shall thereupon
be deemed to have been converted as of the Effective Time into the right to receive the Merger Consideration, without any interest thereon, and such shares shall not be deemed to be Dissenting Shares.
The Company shall give prompt notice to Parent of any demands for appraisal of any shares of Company Common Stock, withdrawals of such demands and any other instruments served pursuant to the DGCL
received by the Company relating to appraisal demands, and Parent shall have the right to participate in all negotiations and Proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent
of Parent, make any payment with respect to or settle or compromise or offer to settle or compromise any such demand or Proceeding, or agree to do any of the foregoing.
Section 2.6
Transfers; No Further Ownership Rights
.
After the Effective Time, there shall be no registration of transfers on the stock transfer books of the Company of shares of Company Common Stock that were outstanding immediately prior
to the Effective Time. If Certificates or Book-Entry Shares are presented to the Surviving Corporation, Parent or the Exchange Agent for transfer following the Effective Time, they shall be canceled
against delivery of the applicable Merger Consideration, as provided for in
Section 2.1(a)(ii)
, for each share of Company Common Stock formerly
represented by such Certificates or Book-Entry Shares.
Section 2.7
Further Action
.
If, at any time after the Effective Time any further action is determined by Parent or the Surviving Corporation to be necessary or desirable to carry out the purposes of this Agreement
or to vest the Surviving Corporation or Parent with full right, title and possession of and to all rights and property of Merger Sub and the Company with respect to the Merger, the officers and
managers of Parent shall be fully authorized (in the name of Merger Sub, the Company, the Surviving Corporation and otherwise) to take such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as disclosed in the Company SEC Documents filed with (or furnished to) the SEC by the Company on or after December 31,
2014 and prior to the date of this Agreement (but in each case excluding any risk factor disclosure contained under the heading "Risk Factors" (other than any factual information contained therein) or
in any "forward-looking statements" legend or in any similarly non-specific, predictive or forward-looking statements) and to the extent publicly available on the SEC's Electronic Data Gathering
Analysis and Retrieval System ("
EDGAR
") or (ii) as
disclosed in the Company Disclosure Letter, the Company hereby represents and warrants to Parent and Merger Sub as follows:
Section 3.1
Organization; Qualification
.
Each of the Company and its Subsidiaries is a legal entity duly organized and validly existing under the laws of the jurisdiction of its incorporation, formation or organization, as
applicable, and has the requisite corporate or similar power and authority to conduct its business as it is now being conducted and to own, lease and operate its properties and assets in the manner in
which its properties and assets are currently operated, except where the failure to be so validly existing and authorized has not been, and would not reasonably be expected to be, individually or in
the aggregate, materially adverse to the Company and its Subsidiaries, taken as a whole. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the character or location of the property owned, leased or
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operated
by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing has not
had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company's Amended and Restated Certificate of Incorporation (the
"
Certificate of Incorporation
") and Amended and Restated Bylaws (the "
Bylaws
"), each as amended as of
the date of this Agreement, have been made available to Parent and are currently in effect, and the Company is not in violation of any of the provisions thereof, and the organizational or governing
documents of each of the Company's Subsidiaries, each as amended as of the date of this Agreement, are currently in effect, and none of such Subsidiaries is in violation of any of the respective
provisions thereof, except, in each case, where such failure or violation has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company
and its Subsidiaries, taken as a whole.
Section 3.2
Capitalization; Subsidiaries
.
(a) As
of the close of business on October 17, 2016 (the "
Capitalization Date
"), the authorized capital stock of the
Company consisted of (i) 200,000,000 shares of Company Common Stock, 101,603,153 of which were issued and outstanding (including outstanding Company Restricted Stock Awards representing
1,480,641 shares of Company Common Stock) and 5,964,264 of which were held by the Company as treasury stock, and (ii) 1,000,000 shares of preferred stock of the Company, par value $0.01 per
share ("
Company Preferred Stock
"), no shares of which were outstanding. There are no other classes of capital stock of the Company and no bonds,
debentures, notes or other Indebtedness of the Company having the right to vote (or convertible into or exercisable for securities having the right to vote) on any matters on which holders of capital
stock of the Company may vote authorized, issued or outstanding. As of the close of business on the Capitalization Date, there were (A) no outstanding Company Options to purchase shares of
Company Common Stock, (B) outstanding Company Restricted
Stock Awards representing 1,480,641 shares of Company Common Stock; (C) outstanding Company RSU Awards representing 265,191 shares of Company Common Stock, which amount may be increased to a
maximum of 386,226 shares of Company Common Stock based on the satisfaction of performance conditions set forth in the applicable award agreements; (D) outstanding Company DSU Awards
representing 42,813 shares of Company Common Stock; (E) 320,508 shares of Company Common Stock reserved for future issuance under the Company ESPP; and (F) 4,532,252 shares of Company
Common Stock reserved for future issuance under the Company Equity Plan. From the close of business on the Capitalization Date through the date of this Agreement, there have been no issuances of
(i) any Company Common Stock, Company Preferred Stock or any other equity or voting interests in the Company other than issuances of shares of Company Common Stock pursuant to the exercise,
vesting or settlement, as applicable, of the Company Equity Awards outstanding as of the close of business on the Capitalization Date in accordance with the terms of such Company Equity Awards or
under the Company ESPP in accordance with its terms and (ii) any Company Equity Awards or any other equity or equity-based awards.
(b) All
of the issued and outstanding shares of Company Common Stock have been, and all of the shares of Company Common Stock that may be issued pursuant to the Company
Equity Awards, the Company Equity Plan or the Company ESPP will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued and are, or will be when issued,
fully paid, nonassessable and free of preemptive rights. The Company has made available to Parent or its counsel accurate and complete copies of the Company Equity Plan and the forms of stock option,
restricted stock and restricted stock unit agreements evidencing the Company Equity Awards and, other than differences with respect to the number of shares of Company Common Stock covered thereby, the
grant date, the exercise price, regular vesting schedule and expiration date applicable thereto, no such stock option, restricted stock or restricted stock unit agreement
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contains
material terms that are not consistent with, or in addition to, such forms.
Section 3.2(b) of the Company Disclosure Letter
sets forth,
as of the close of business on the Capitalization Date, each outstanding Company Equity Award and to the extent applicable, the name of the holder thereof, the number of shares of Company Common Stock
issuable thereunder (including target and maximum numbers for Company Equity Awards subject to performance-based vesting), the grant date, the vesting date, whether or not it is subject to
performance-based vesting and the Company Equity Plan pursuant to which the award was made. Each grant of Company Equity Awards was made in accordance with the terms of the Company Equity Plan, the
Exchange Act and all other applicable Laws, including the NASDAQ Listing Rules. All of the outstanding Company Common Stock has been sold pursuant to an effective registration statement filed under
the federal securities Laws or an appropriate exemption therefrom.
(c) As
of the date of this Agreement, other than as set forth in
Section 3.2(a)
, there are no (i) existing
options, warrants, calls, preemptive rights, subscriptions or other rights, restricted stock awards, restricted stock unit awards, convertible securities, agreements, arrangements or commitments of
any kind obligating the Company or any of its Subsidiaries to issue, transfer, register or sell, or cause to be issued, transferred, registered or sold, any shares of capital stock or other equity
interests of the Company or any of its Subsidiaries or securities convertible into or exchangeable for such shares or other equity interests, or obligating the Company to grant, extend or enter into
such options, warrants, calls, preemptive, subscriptions or other rights, restricted stock awards, restricted stock unit awards, convertible securities, agreements, arrangements or commitments,
(ii) outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock or other equity interests the Company or any of its
Subsidiaries, or any securities representing the right to purchase or otherwise receive any capital stock or other equity interests of the Company or any of its Subsidiaries, (iii) stockholder
agreements, voting trusts or similar agreements with any Person to which the Company or any of its Subsidiaries is party (A) restricting the transfer of the capital stock or other equity
interests of the Company or any of its Subsidiaries or (B) affecting the voting rights of capital stock or other equity interests of the Company or any of its Subsidiaries, or
(iv) outstanding or authorized equity or equity-based compensation awards, including any equity appreciation rights, security-based performance units, "phantom" stock, profit-participation or
other security rights issued by the Company or any of its Subsidiaries, or other agreements, arrangements or commitments of any character (contingent or otherwise) to which the Company or any of its
Subsidiaries is party, in each case pursuant to which any Person is entitled to receive any payment from the Company based in whole or in part on the value of any capital stock or other equity
interests of the Company or any of its Subsidiaries.
(d) Each
Subsidiary of the Company existing on the date of this Agreement is listed on
Section 3.2(d) of the Company Disclosure
Letter
. Except as set forth on
Section 3.2(d) of the Company Disclosure Letter
, the Company owns, beneficially and of
record, directly or indirectly, all of the issued and outstanding company, partnership, corporate or similar (as applicable) ownership, voting or similar interests in each such Subsidiary, free and
clear of all Liens, and all company, partnership, corporate or similar (as applicable) ownership, voting or similar interests of each of the Subsidiaries are duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights. Except for the Subsidiaries listed on
Section 3.2(d) of the Company Disclosure Letter
and investments in marketable securities and cash equivalents, none of the Company nor any of its Subsidiaries (i) owns directly or indirectly any shares of capital stock or other equity
interests, or any securities or obligations convertible into or exchangeable or exercisable for such shares or equity interests, in any Person or (ii) has any obligation or has made any
commitment to acquire any shares of capital stock or other equity interests in any Person or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in
any Person.
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Section 3.3
Authority Relative to Agreement
.
(a) The
Company has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and, subject (in the case of the Merger)
to obtaining the Company Stockholder Approval, to consummate the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement by the Company, and the
consummation by the Company of the transactions contemplated by this Agreement, have been duly and validly authorized by all necessary corporate action by the Company, and (in the case of the Merger,
except for the (i) receipt of the Company Stockholder Approval and (ii) filing of the Certificate of Merger with the Delaware Secretary of State) no other corporate action or proceeding
on the part of the Company is necessary to authorize the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated by
this Agreement. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery of this Agreement by the other parties hereto, constitutes a
legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that (A) such enforcement may be subject to applicable bankruptcy,
insolvency (including all Laws related to fraudulent transfers), reorganization, moratorium or other similar Laws, now or hereafter in effect, affecting creditors' rights and remedies generally and
(B) the remedies of specific performance and
injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any Proceeding therefor may be brought.
(b) The
Company Board has, by resolutions unanimously adopted by the Company Board, (i) approved this Agreement and the transactions contemplated by this Agreement,
(ii) determined that this Agreement and the transactions contemplated by this Agreement are advisable and in the best interests of the Company and the Company's stockholders,
(iii) directed that the adoption of this Agreement be submitted to a vote at the Company Stockholders' Meeting and (iv) resolved to make the Company Recommendation;
provided
that any change,
modification or rescission of such Company Recommendation by the Company Board in accordance with this Agreement shall not be
a breach of the representation in this clause (iv). As of the date of this Agreement, none of the aforesaid actions by the Company Board have been amended, rescinded or modified.
Section 3.4
Vote Required
.
Assuming the accuracy of the representations and warranties in
Section 4.26
, the adoption of this Agreement and the approval of
transactions contemplated by this Agreement by the holders of at least a majority of the outstanding shares of Company Common Stock entitled to vote thereon at the Company Stockholders' Meeting (the
"
Company Stockholder Approval
") is the only vote of holders of securities of the Company that is required in connection with the consummation of the
transactions contemplated by this Agreement.
Section 3.5
No Conflict; Required Filings and Consents
.
(a) Neither
the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated by this Agreement, nor
compliance by the Company with any of the applicable terms or provisions of this Agreement, will (i) violate any provision of the Company's Certificate of Incorporation or Bylaws or the
certificate of incorporation or bylaws (or equivalent organizational documents) of any Subsidiary of the Company, (ii) assuming that the Consents, registrations, declarations, filings and
notices referenced in
Section 3.5(b)
have been obtained or made and (in the case of the Merger) the Company Stockholder Approval has been
received, conflict with or violate any Law applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected or
(iii) violate, conflict with or result in any breach of any provision of, or loss of any benefit, or constitute a default (with or without notice or lapse of time, or both) under, give rise to
any right of termination, acceleration or cancellation of or require the
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Consent
of, notice to or filing with any third party pursuant to any of the terms or provisions of any Contract to which the Company or any of its Subsidiaries is a party or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected, or result in the creation of a Lien, other than any Permitted Lien, upon any of the property or assets of the Company or any of
its Subsidiaries, other than, in the case of clauses (ii) and (iii), any such conflict, violation, breach, default, termination, acceleration, cancellation or Lien that (A) has not had,
and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or (B) would not impair in any material respect the ability of the Company to
perform its obligations under this Agreement or to consummate the Merger, or would not prevent or materially delay the consummation of any of the Merger and the other transactions contemplated by this
Agreement.
(b) No
consent, approval, license, permit, order or authorization (a "
Consent
") of, registration, declaration or filing with
or notice to any Governmental Authority is required to be obtained or made by or with respect to the Company or any of its Subsidiaries in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated by this Agreement, other than (i) applicable requirements of and filings with the SEC under the Exchange Act or the
Securities Act (including the filing with the SEC of the Form S-4 and the Joint Proxy Statement), (ii) the filing of the Certificate of Merger with the Delaware Secretary of State,
(iii) applicable requirements under corporation, state securities or "blue sky" laws of various states, (iv) compliance with applicable rules and regulations of the NYSE and NASDAQ,
(v) such other items required solely by reason of the participation of Parent in the transactions contemplated by this Agreement, (vi) compliance with and filings or notifications under
the HSR Act and any other applicable United States or foreign competition, antitrust, merger control or investment Laws (together with the HSR Act, "
Antitrust
Laws
") and (vii) such other Consents, registrations, declarations, filings or notices the failure of which to be obtained or made (A) has not had, and would not
reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or (B) would not impair in any material respect the ability of the Company to perform its
obligations under this Agreement or to consummate the Merger, or would not prevent or materially delay the consummation of any of the Merger and the other transactions contemplated by this Agreement.
Section 3.6
Company SEC Documents; Financial Statements
.
(a) Since
December 31, 2014, the Company has timely filed with (or furnished to) the SEC all forms, reports, schedules, statements, exhibits and other documents
(including exhibits, financial statements and schedules thereto and all other information incorporated therein and amendments and supplements thereto) required by it to be filed (or furnished) under
the Exchange Act or the Securities Act (collectively, the "
Company SEC Documents
"). As of its filing (or furnishing) date or, if amended prior to the
date of this Agreement, as of the date of the last such amendment, each Company SEC Document complied in all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be. As of its filing date or, if amended prior to the date of this Agreement, as of the date of the last such amendment, each Company SEC Document filed pursuant to
the Exchange Act did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. Each Company SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the
Securities Act, as of the date such registration statement or amendment became effective prior to the date of this Agreement, did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make the statements made therein not misleading. As of the date of this Agreement, there are no amendments or modifications to
the Company SEC Documents that were
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required
to be filed with (or furnished to) the SEC prior to the date of this Agreement, but that have not yet been filed with (or furnished to) the SEC. No Subsidiary of the Company is subject to the
periodic reporting requirements of the Exchange Act. All of the audited financial statements and unaudited interim financial statements of the Company included in the Company SEC Documents
(i) comply in all material respects with the applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; (ii) have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto and except, in the case of the unaudited interim statements, as may be
permitted under Form 10-Q of the Exchange Act); and (iii) fairly present in all material respects the financial position, the stockholders' equity, the results of operations and cash
flows of the Company and its consolidated Subsidiaries as of the times and for the periods referred to therein (except as may be indicated in the notes thereto and subject, in the case of unaudited
interim financial statements, to normal and recurring year-end adjustments).
(b) The
Company has heretofore furnished to Parent complete and correct copies of all comment letters from the SEC since December 31, 2014 through the date of this
Agreement with respect to any of the Company SEC Documents, together with all written responses of the Company thereto. As of the date of this Agreement, there are no outstanding or unresolved
comments in comment letters received from the SEC staff with respect to any of the Company SEC Documents, and, to the Knowledge of the Company, none of the Company SEC Documents are subject to ongoing
SEC review.
(c) The
Company is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act and the applicable listing and governance rules and
regulations of NASDAQ.
(d) The
Company maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) designed to provide
reasonable assurance regarding the reliability of the Company's financial reporting and the preparation of financial statements for external purposes in conformity with GAAP. The Company has evaluated
the effectiveness of the Company's internal control over financial reporting and, to the extent required by applicable Law, presented in any applicable Company SEC Document that is a report on
Form 10-K or Form 10-Q or any amendment thereto its conclusions about the effectiveness of the internal control over financial reporting as of the end of the period covered by such
report or amendment based on such evaluation. Based on the Company's most recent evaluation of internal control over financial reporting prior to the date of this Agreement, (i) the Company has
no "significant deficiencies" or "material weaknesses" (as such terms are defined in Auditing Standard No. 5 of the Public Company Accounting Oversight Board, as in effect on the date of this
Agreement) in the design or operation of 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 (ii) 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.
(e) The
Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed to ensure that all information
required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC, and that all such information is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure and to make the
certifications of the chief executive officer and chief financial officer of the Company required under the Exchange Act with respect to such reports.
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(f) To
the Knowledge of the Company, as of the date of this Agreement, there are no SEC inquiries or investigations, other inquiries or investigations by Governmental
Authorities or internal investigations pending or threatened, in each case regarding any accounting practices of the Company or any of its Subsidiaries or any malfeasance by any director or executive
officer of the Company or any of its Subsidiaries. Since December 31, 2014 through the date of this Agreement, there have been no material internal investigations regarding accounting or
revenue recognition discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer or general counsel, the Company Board or any committee thereof.
(g) Each
of the principal executive officer of the Company and the principal financial officer of the Company (or each former principal executive officer of the Company and
each former principal financial officer of the Company, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of
the Sarbanes-Oxley Act with respect to the Company SEC Documents, and the statements contained in such certifications are true and accurate. For purposes of this Agreement, "principal executive
officer" and "principal financial officer" shall
have the meanings given to such terms in the Sarbanes-Oxley Act. The Company does not have, and has not arranged any, outstanding "extensions of credit" to directors or executive officers within the
meaning of Section 402 of the Sarbanes-Oxley Act.
(h) Since
December 31, 2014, (i) neither the Company nor any of its Subsidiaries has received any written or, to the Knowledge of the Company, oral complaint,
allegation, assertion or claim regarding accounting, internal accounting controls, auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries, or unlawful
accounting or auditing matters with respect to the Company or any of its Subsidiaries and (ii) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the
Company or any of its Subsidiaries, has reported evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by the Company or any of its Subsidiaries or any of their
respective officers, directors, employees or agents to the Company Board or any committee thereof or to the general counsel or chief executive officer of the Company pursuant to the rules of the SEC
adopted under Section 307 of the Sarbanes-Oxley Act, except, in each case, as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to
the Company and its Subsidiaries, taken as a whole.
(i) Neither
the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any
similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated
affiliate, on the other hand), including any structured finance, special purpose or limited purpose entity or Person, or any "off-balance sheet arrangements" (as defined in Item 303(a) of
Regulation S-K under the Securities Act), where the result, purpose or effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, the
Company or any of its Subsidiaries in the Company SEC Documents (including any audited financial statements and unaudited interim financial statements of the Company included therein).
Section 3.7
Absence of Certain Changes or Events
.
Since December 31, 2014 through the date of this Agreement, (a) except in connection with the transactions contemplated by this Agreement, the respective businesses of the
Company and its Subsidiaries have been conducted in the ordinary course of business consistent with past practice and (b) there has not been any event, development or state of circumstances
that has had, or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 3.8
No Undisclosed Liabilities
.
Except for liabilities or obligations (a) as (and to the extent) reflected, disclosed or reserved against in the Company's financial statements (or the notes
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thereto)
included in the Company SEC Documents prior to the date of this Agreement, (b) incurred in the ordinary course of business consistent with past practice since June 30, 2016,
(c) incurred in connection with the transactions contemplated by this Agreement or (d) that have not had, and would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect, none of the Company or any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent, absolute or otherwise and
whether or not required to be reflected on a consolidated balance sheet of the Company (or the notes thereto) in accordance with GAAP.
Section 3.9
Litigation
.
As of the date of this Agreement, (a) there is no Proceeding pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries or any asset or
property of the Company or any of its Subsidiaries, and (b) neither the Company nor any of its Subsidiaries nor any asset or property of the Company or any of its Subsidiaries is subject to a
continuing Order, in each case, that (i) has been, or would reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a
whole or (ii) would reasonably be expected to, individually or in the aggregate, impair in any material respect the ability of the Company to perform its obligations under this Agreement or to
consummate the Merger, or prevent or materially delay the consummation of any of the Merger and the other transactions contemplated by this Agreement.
Section 3.10
Permits; Compliance with Laws
.
(a) (i)
The Company and its Subsidiaries are in possession of all material franchises, grants, licenses, permits, easements, variances, exemptions, consents, certificates,
approvals, registrations, clearances, orders and other authorizations necessary for the Company and its Subsidiaries to own, lease and operate their respective properties and assets and to carry on
their respective businesses as now being conducted, under and pursuant to all applicable Laws (the "
Company Permits
"), (ii) all such Company
Permits are in full force and effect and (iii) as of the date of this Agreement, no suspension, cancellation, withdrawal or revocation thereof is pending or, to the Knowledge of the Company,
threatened, except where the failure to be in possession of, failure to be in full force and effect or the suspension, cancellation, withdrawal or revocation thereof has not had, and would not
reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) Since
December 31, 2014, the Company and its Subsidiaries have been and are in compliance with (i) all applicable Laws and (ii) all Company Permits,
except where any failure to be in such compliance has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(c) Since
December 31, 2014 through the date of this Agreement, none of the Company or any of its Subsidiaries or, to the Knowledge of the Company, any of their
respective directors, officers or employees, has received any written or, to the Knowledge of the Company, oral notification from a Governmental Authority asserting that the Company or any of its
Subsidiaries is not in compliance with any Laws or Company Permits, except where any failure to be in such compliance has not had, and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.11
Information Supplied
.
None of the information supplied or to be supplied by or on behalf of the Company or any of its Subsidiaries for inclusion or incorporation by reference in (a) the Form S-4
to be filed with the SEC by Parent in connection with the registration under the Securities Act of the shares of Parent Common Stock to be issued in the Merger (as amended or supplemented from time to
time, the "
Form S-4
") will, at the time the Form S-4 is filed with the SEC, and at any time it is amended or supplemented or at the time
it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein, in light of the circumstances under
which they are made, not misleading and (b) the joint proxy
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statement
to be sent to the stockholders of Parent relating to the Parent Stockholders' Meeting and to the stockholders of the Company relating to the Company Stockholders' Meeting (the
"
Joint Proxy Statement
") will, at the date it, or any amendment or supplement to it, is mailed to stockholders of the Company and stockholders of Parent
and at the time of the Company Stockholders' Meeting and at the time of the Parent Stockholders' Meeting, contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they are made, not misleading (except that no representation or warranty is made by the Company regarding such portions thereof that
relate expressly to Parent or any of its Subsidiaries, including Merger Sub, or to statements made therein based on information supplied by or on behalf of Parent or Merger Sub for inclusion or
incorporation by reference therein). The Joint Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
Section 3.12
Employee Benefit Plans; Labor
.
(a)
Section 3.12(a) of the Company Disclosure Letter
sets forth a true and complete list, as of the date of this
Agreement, of (i) each material "employee benefit plan" (as such term is defined in Section 3(3) of ERISA), whether written or unwritten, that the Company, any of its Subsidiaries or any
Company ERISA Affiliate adopted, maintains, sponsors, participates in, is a party or contributes to or with respect to which the Company or any of its Subsidiaries, taken as a whole, could reasonably
be expected to have any material liability; and (ii) each other material employment or employee benefit plan, program, practice, policy, arrangement or agreement, whether written or unwritten,
including any
equity option, equity purchase, equity appreciation right or other equity or equity-based incentive, cash bonus or incentive compensation, employment, change in control, retention, retirement or
supplemental retirement, deferred compensation, profit-sharing, unemployment, severance, termination pay, welfare, hospitalization or medical, life, accidental death and dismemberment, long- or
short-term disability, fringe benefit or other similar compensation or employee benefit plan, program, practice, policy, arrangement or agreement for any current or former employee or director of, or
other individual service provider to, the Company or any of its Subsidiaries that does not constitute an "employee benefit plan" (as defined in Section 3(3) of ERISA, whether or not ERISA
applies), that the Company or any of its Subsidiaries adopted, maintains, sponsors, participates in, is a party or contributes to, or with respect to which the Company or any of its Subsidiaries could
reasonably be expected to have any liability (each, a "
Company Benefit Plan
"). With respect to each Company Benefit Plan, the Company has made available
to Parent a true and complete copy of (i) such Company Benefit Plan and all material amendments thereto (including a written description of the material provisions of each unwritten Company
Benefit Plan), (ii) each trust, insurance, annuity or other funding Contract, (iii) the most recent financial statements and actuarial or other valuation reports, (iv) the three
most recent annual reports on Form 5500, (v) the most recent determination letter (or, if applicable, advisory or opinion letter) from the IRS, (vi) the most recent summary plan
description and any material modification and (vii) all material notices given to such Company Benefit Plan, the Company or any Company ERISA Affiliate by the IRS, United States Department of
Labor, Pension Benefit Guarantee Corporation or other Governmental Authority.
(b) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) each of the Company
Benefit Plans has been established, adopted, operated, maintained and administered in accordance with its terms and applicable Laws, including ERISA and the Code, (ii) all payments and
contributions required to be made under the terms of any Company Benefit Plan and applicable Laws have been timely made or accrued or otherwise adequately reserved to the extent required by and in
accordance with GAAP and (iii) none of the Company or any of its Subsidiaries or, to the Knowledge of the Company, any third party, has engaged in any non-exempt "prohibited transaction"
(within the meaning of Section 4975 of the Code or Section 406 of ERISA) with respect to any Company Benefit Plan that would result in the imposition of any liability to the Company or
any of its Subsidiaries.
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(c) Each
Company Benefit Plan intended to be qualified under Section 401(a) of the Code has either received a favorable determination letter from the IRS with respect
to such Company Benefit Plan as to its qualified status under the Code, or with respect to a prototype Company Benefit Plan, the prototype sponsor has received a favorable IRS opinion letter, or the
Company Benefit Plan or prototype sponsor has remaining a period of time under applicable Code regulations or pronouncements of the IRS in which to apply for such a letter and make any amendments
necessary to obtain a favorable determination or opinion as to the qualified status of each such Company Benefit Plan. To the Knowledge of the Company, no event has occurred since the most recent
determination or opinion letter or application therefor relating to any such Company Benefit Plan and no condition exists that has been or would reasonably be expected to adversely affect the
qualified status of any such Company Benefit Plan or result in the imposition of any liability, penalty or tax under ERISA or the Code that is, individually or in the aggregate, material to the
Company and its Subsidiaries, taken as a whole.
(d) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, neither the Company nor any
Company ERISA Affiliate operates, maintains, contributes to, is required to contribute to or sponsors (or has in the past six (6) years established, operated, maintained, contributed to, was
required to contribute to or sponsored) (i) a "multiemployer plan" (as defined in Section 3(37) of ERISA), (ii) a "multiple employer plan" (within the meaning of
Section 413(c) of the Code), (iii) a "single-employer plan" (within the meaning of
Section 4001(a)(15) of ERISA), or (iv) a "multiple employer welfare arrangement" (within the meaning of Section 3(40) of ERISA). Except as would be, or reasonably be expected to
be, individually or in the aggregate, a material liability to the Company and its Subsidiaries, taken as a whole, no Subsidiary or connected or associated Person has now or at any time participated
in, maintained or been liable to contribute to a defined benefit pension plan for the benefit or in respect of any employee or former employee. Neither the Company nor any Company ERISA Affiliate has
incurred, or reasonably expects to incur, directly or indirectly, any liability under Title IV of ERISA or related provisions of the Code that has been or would reasonably be expected to be,
individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole, and that has not been satisfied in full, other than liability for premiums due to the Pension Benefit
Guaranty Corporation (which premiums have been paid when due) and no condition exists that presents a material risk of incurring such liability. All pension liabilities have been accrued for and fully
reflected as a liability in the Company's financial statements in accordance with GAAP.
(e) To
the Knowledge of the Company, no employee of the Company or any Subsidiary has any claim or right to an early retirement benefit for which the Company or any
Subsidiary may be liable following the transfer of their employment to the Company or applicable Subsidiary pursuant to the English Transfer of Undertakings (Protection of Employment)
Regulations 1981 or 2006.
(f) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, as of the date of this
Agreement there are no pending, or, to the Knowledge of the Company, threatened Proceedings, disputes or claims (other than routine claims for benefits) against or affecting any Company Benefit Plan,
by any employee or beneficiary covered under such Company Benefit Plan, as applicable, or otherwise involving such Company Benefit Plan.
(g) Neither
the execution or delivery of nor performance of the Company's obligations under this Agreement nor the consummation of the Merger will, either alone or in
conjunction with any other event (including any termination of employment upon or following the consummation of the Merger), (i) entitle any current or former director or employee of, or
individual service provider to, the Company or any of its Subsidiaries to any payment or benefit (or result in the funding of any such payment or benefit), except as expressly provided in this
Agreement, (ii) increase the
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amount
or value of any benefit or compensation otherwise payable or required to be provided to any such director, employee or individual service provider, (iii) accelerate the time of payment,
funding or vesting of amounts due any such director, employee or individual service provider or, except as provided
for in this Agreement, (iv) result in any "excess parachute payment" (within the meaning of Section 280G of the Code) becoming due to any current or former employee or other individual
service provider of the Company or any of its Subsidiaries or (v) limit or restrict the right of Parent, the Surviving Corporation, the Company or any of its Subsidiaries to merge, amend or
terminate any Company Benefit Plan (other than any requirement to obtain the signature of a counterparty to amend, modify or terminate such Company Benefit Plan).
(h) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, none of the Company or any of
its Subsidiaries has any obligations for post-termination health, welfare or life insurance benefits under any Company Benefit Plan (other than for continuation coverage required to be provided
pursuant to Section 4980B of the Code) or coverage in which the full cost of such benefit is borne entirely by the former employee (or such former employee's eligible dependents or
beneficiaries).
(i) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, each Foreign Plan
(i) has been established, operated, maintained and administered in compliance with its terms and operated in compliance with all applicable Laws; (ii) if required to be registered or
approved by a non-U.S. Governmental Authority, has been registered or approved and has been maintained in good standing with applicable regulatory authorities, and, to the Knowledge of the Company, no
event has occurred since the date of the most recent approval or application therefor relating to any such Foreign Plan that would reasonably be expected to adversely affect any such approval or good
standing; (iii) that is intended to qualify for special Tax treatment meets all requirements for such treatment; (iv) is fully funded or fully insured on an ongoing and termination or
solvency basis (determined using reasonable actuarial assumptions) in compliance with applicable Laws; and (v) is not subject to any pending or, to the Knowledge of the Company, threatened
claims by or on behalf of any participant in any Foreign Plan, or otherwise involving any such Foreign Plan or the assets of any Foreign Plan, other than routine claims for benefits.
(j) Neither
the Company nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, Contract or other labor-related agreement,
arrangement or understanding with a labor or trade union, or labor organization or works council (each a "
Labor Agreement
"), nor is any such Labor
Agreement presently being negotiated, nor, to the Knowledge of the Company, are there any employees of the Company or any of its Subsidiaries represented by a labor or trade union, labor organization
or works council. The Company has made available to Parent a true and complete copy of each Labor Agreement and all material amendments thereto. There are no organizing activities, representation
campaigns, certification proceedings or petitions seeking a representation proceeding pending or, to the Knowledge of the Company, threatened by or with respect to any of the employees of the Company
or any of its Subsidiaries. Since December 31, 2014, there has not been any, and there are no pending or, to the Knowledge of the Company, threatened strikes, walkouts, lockouts, slowdowns or
other labor stoppages against or affecting the Company or its Subsidiaries.
(k) The
Company and its Subsidiaries are, and since December 31, 2014 have been, in compliance with the terms of the Company Benefits Plans, any applicable Labor
Agreement and all applicable Laws respecting or relating to recruitment, employment and employment practices, and agency and other workers, including all Laws respecting terms and conditions of
employment, health and safety, wages and hours, child labor, immigration, employment discrimination, disability rights or benefits, equal
opportunity, plant closures and layoffs, affirmative action, workers' compensation, labor relations, employee leave issues and unemployment insurance, except where
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failure
to comply has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(l) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its
Subsidiaries have been in compliance with all Laws applicable to "workers" (as defined in the English Employment Rights Act 1996), and "contractors" or "subcontractors" (in each case, as defined by
Executive Order 11246).
(m) Prior
to the date of this Agreement, the Company and its Subsidiaries have satisfied any pre-signing legal or contractual requirement to provide notice to, or to enter
into any consultation procedure with, any labor union, labor organization or works council, which is representing any employee, in connection with the execution of this Agreement or the transactions
contemplated by this Agreement.
(n) To
the Knowledge of the Company, no employee of the Company or any of its Subsidiaries who is an officer for purposes of Section 16 of the Exchange Act is in any
respect in violation of any term of any employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, non-competition agreement, restrictive covenant or other
obligation (i) to the Company or its Subsidiaries or (ii) to a former employer relating (A) to the right to be employed by the Company or its Subsidiaries or (B) to the
material misuse of trade secrets or proprietary information. No employee of the Company or any of its Subsidiaries who is an officer for purposes of Section 16 of the Exchange Act has given
notice of intent to terminate or, to the Knowledge of the Company, intends to terminate his or her employment with the Company or any of its Subsidiaries.
Section 3.13
Taxes
.
(a) The
Company and each of its Subsidiaries have (i) timely filed or caused to be timely filed (taking into account any extension of time within which to file) all
material Tax Returns required to be filed by any of them and all such filed Tax Returns (taking into account all amendments thereto) are true, complete and accurate in all material respects and
(ii) paid all material Taxes due and owing (whether
or not shown on such Tax Returns), except, in the case of clause (ii) hereof, with respect to Taxes contested in good faith by appropriate Proceedings and for which adequate reserves or
accruals have been established in accordance with GAAP.
(b) The
unpaid Taxes of the Company and its Subsidiaries did not, as of the date of their most recent consolidated financial statements included in the Company SEC Documents
prior to the date of this Agreement, materially exceed the reserve or accrual for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of such consolidated financial statements (rather than in any notes thereto). Since the date of their most recent consolidated financial statements, none of the Company
or any of its Subsidiaries has incurred any material liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice.
(c) As
of the date of this Agreement, there are no pending, threatened in writing or ongoing audits, examinations, investigations or other Proceedings by any Governmental
Authority in respect of material Taxes of or with respect to the Company or any of its Subsidiaries. None of the Company or any of its Subsidiaries has waived any statute of limitations with respect
to material Taxes or agreed to any extension of time with respect to a material Tax assessment or deficiency. No written claim has been made by any Governmental Authority in a jurisdiction where the
Company or any of its Subsidiaries does not currently file a Tax Return that it is or may be subject to taxation by that jurisdiction in respect of Taxes that would be covered by or the subject
of such
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Tax
Return, nor has any such assertion been threatened or proposed in writing and received by the Company or any of its Subsidiaries.
(d) All
Taxes that the Company or any of its Subsidiaries are or were required by Law to withhold or collect have been duly and timely withheld or collected in all material
respects on behalf of its respective employees, independent contractors or other third parties and, have been timely paid to the proper Governmental Authority or other Person or properly set aside in
accounts for this purpose.
(e) None
of the Company or any of its Subsidiaries has ever been a member of a consolidated, combined or unitary Tax group (other than such a group the common parent of
which is the Company or any of its Subsidiaries), and, except with respect to the Tax Sharing and Indemnification Agreement, dated as of December 15, 2014, by and between KLX and the Company,
as amended as of the date
hereof by the KLX TSA Amendment (the "
KLX Tax Sharing Agreement
"), none of the Company or any of its Subsidiaries has any liability for Taxes of any
other Person (other than Taxes of the Company or any Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar provision of foreign, state or local law), as a transferee or
successor, by Contract or otherwise.
(f) Except
with respect to the KLX Tax Sharing Agreement, none of the Company or any of its Subsidiaries is a party to or is bound by any Tax sharing, Tax allocation or Tax
indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among the Company and its Subsidiaries or customary commercial Contracts entered into in
the ordinary course of business, the principal subject matter of which is not Taxes) that will not be terminated on or before the Closing Date without any future liability to the Company or its
Subsidiaries.
(g) There
are no Liens for a material amount of Taxes on any of the assets of the Company or any of its Subsidiaries other than Permitted Liens.
(h) None
of the Company or any of its Subsidiaries has participated in or been a party to a transaction that, as of the date of this Agreement, constitutes a "listed
transaction" that is required to be reported to the IRS pursuant to Section 6011 of the Code and applicable Treasury Regulations thereunder.
(i) Except
for the KLX External Spin-Off and the KLX Internal Restructuring, within the last two (2) years, none of the Company or any of its Subsidiaries has been a
party to any transaction intended to qualify under Section 355 of the Code.
(j) Without
regard to the Merger, to the Knowledge of the Company, the KLX External Spin-Off qualified for the KLX Spin-Off Tax Treatment.
(k) Without
regard to the Merger, to the Knowledge of the Company, the KLX Internal Restructuring qualified for the Tax treatment of the KLX Internal Restructuring
originally reported on the relevant Tax Returns of the Company, KLX or applicable Subsidiary of either.
(l) The
Company and its Subsidiaries are and have been, and to the Knowledge of the Company, KLX is and has been, in compliance with the KLX Tax Sharing Agreement in all
material respects.
Section 3.14
Material Contracts
.
(a)
Section 3.14(a) of the Company Disclosure Letter
sets forth a complete and correct list, as of the date of this
Agreement, of each Company Material Contract, a complete and correct copy of each of which has been made available to Parent. For purposes of this Agreement, "
Company Material
Contract
" means any Contract to which the Company or any of its Subsidiaries is a party
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or
to or by which any asset or property of the Company or any of its Subsidiaries is bound or affected, except for this Agreement, that:
(i) is
a Contract with a vendor providing for payments of more than $25,000,000 in the past twelve (12) months or expected to require payments of more than
$25,000,000 within twelve (12) months of the date of this Agreement (it being understood that the Company is not making any representation or warranty as to the actual amount of future payments
to be paid under any such Contract);
(ii) is
a Contract with a customer providing for payments of more than $50,000,000 in the past twelve (12) months or expected to require payments of more than
$50,000,000 within twelve (12) months of the date of this Agreement (it being understood that the Company is not making any representation or warranty as to the actual amount of future payments
to be received under any such Contract);
(iii) constitutes
a "material contract" (as such term is defined in item 601(b)(10) of Regulation S-K under the Securities Act) of the Company and its
Subsidiaries, taken as a whole, and is required to be filed with the SEC;
(iv) is
a joint venture, strategic alliance, partnership, shareholder or similar Contract that is material to the operation of the Company and its Subsidiaries, taken as a
whole;
(v) is
a management or service consulting Contract providing for annual payments of more than $2,500,000;
(vi) is
an agency, sales, marketing, commission, export, customs, distribution, advertising, dealer, franchise, international or domestic sales representative or similar
Contract providing for annual payments of more than $15,000,000;
(vii) is
a Contract (other than those between or among the Company and any of its Subsidiaries) relating to Indebtedness of the Company (whether outstanding or as may be
incurred) in an amount in excess of $25,000,000;
(viii) is
a Contract (other than those between or among the Company or any of its Subsidiaries) relating to Indebtedness of a third party owed to the Company or any of its
Subsidiaries providing for annual payments of more than $25,000,000;
(ix) creates
future payment obligations, including settlement agreements, outside the ordinary course of business in excess of $50,000,000
(x) is
an agreement under which the Company or any of its Subsidiaries has granted any Person registration rights (including demand and piggy-back registration rights);
(xi) with
respect to any business that is material to the Company and its Subsidiaries, taken as a whole, is a Contract that (A) obligates the Company or any of its
Subsidiaries to conduct such business on an exclusive basis with any third party, or (B) upon consummation of the Merger, will obligate Parent or any of its Subsidiaries to conduct such
business with any third party on an exclusive basis;
(xii) is
a material Contract with any Governmental Authority;
(xiii) is
a non-competition or non-solicitation Contract or any other Contract that, in each case, materially limits (A) the manner in which, or the localities in
which, any material business of the Company and its Subsidiaries, taken as a whole, is or has a right to be conducted or (B) the types of businesses that the Company and its Subsidiaries, taken
as a whole, conduct or have a right to conduct;
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(xiv) is
a Contract relating to the acquisition or disposition of any business or operations (whether by merger, sale of stock, sale of assets, consolidation or otherwise)
entered into within the past three (3) years, for aggregate consideration under such Contract in excess of $50,000,000;
(xv) is
any license, consent to use, non-assertion, coexistence or similar Contract concerning Intellectual Property Rights or software used by the Company or any of its
Subsidiaries (other than non-customized software subject to customary "shrink-wrap" or "click-through" type Contracts) that (A) provides for annual payments of more than $25,000,000 or
(B) grants an exclusive license or similar exclusive right to use to any third party that is material to the Company and its Subsidiaries, taken as a whole;
(xvi) is
a material hedging, derivative or similar Contract (including interest rate, currency or commodity swap agreements, cap agreements, collar agreements and any
similar Contract designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices);
(xvii) each
"single source" supply Contract that is material to the business of the Company and its Subsidiaries, taken as a whole, are supplied to the Company or any of its
Subsidiaries from an exclusive source;
(xviii) is
a Contract granting a right of first refusal or first negotiation to any third party over any material assets of the Company or any of its Subsidiaries, taken as
a whole; or
(xix) is
a Contract with KLX or any of its Subsidiaries.
(b) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, none of the Company or any of
its Subsidiaries is in breach of or default (or, with the giving of notice or lapse of time or both, would be in default) under the terms of, and none has taken any action resulting in the termination
of, acceleration of performance required by, or resulting in a right of termination or acceleration under, any Company Material Contract. As of the date of this Agreement, to the Knowledge of the
Company, no other party to any Company Material Contract is in breach of or default (or, with the giving of notice or lapse of time or both, would be in default) under the terms of, and none has taken
any action resulting in the termination of, acceleration of performance required by, or resulting in a right of termination or acceleration under, any Company Material Contract. Each Company Material
Contract is (i) a valid and binding obligation of the Company or its Subsidiary that is a party thereto, as applicable, and, to the Knowledge of the Company, the other parties thereto,
(
provided
that (A) such enforcement may be subject to applicable bankruptcy, insolvency (including all Laws related to fraudulent transfers),
reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors' rights and remedies generally and (B) the remedies of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any Proceeding therefor may be brought) and (ii) in full force and
effect.
(c) No
(i) current or former officer or director of the Company; (ii) beneficial owner of five percent (5%) or more of any voting securities of
the Company; or (iii) any "affiliate" or "associate" of any such Person, has any interest in any Contract or property (real or personal, tangible or intangible), used in, or pertaining to the
business of the Company or any of its Subsidiaries, which interest would be required to be disclosed pursuant to Item 404(a) of Regulation S-K promulgated by the SEC and that has not
been so disclosed in the Company SEC Documents.
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Section 3.15
Trademarks, Patents and Copyrights
.
(a) Except
as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a
whole, the applications for and registrations of Intellectual Property Rights owned by the Company or its Subsidiaries are (i) free and clear of all Liens (other than Permitted Liens) and
(ii) in effect, subsisting and, to the Knowledge of the Company, valid.
(b) To
the Knowledge of the Company, except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company
and its Subsidiaries, taken as a whole, the Company and its Subsidiaries own, validly license or have the right to use in the manner currently used, all patents, trademarks, trade names, copyrights,
Internet domain names, service marks, know-how, trade secrets and other intellectual property rights, and any registrations and applications therefor (the "
Intellectual
Property Rights
") that are used in the respective businesses of the Company and its Subsidiaries.
(c) To
the Knowledge of the Company, except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company
and its Subsidiaries, taken as a whole, the conduct of the respective businesses of the Company and its Subsidiaries as currently conducted does not infringe upon, misappropriate or otherwise violate
any Intellectual Property Rights of any other Person. As of the date of this Agreement, there is no claim for any such infringement, misappropriation or other violation pending or, to the Knowledge of
the Company, threatened, except for any such infringement, misappropriation or other violation that has not been, and would not reasonably be expected to be, individually or in the aggregate,
materially adverse to the Company and its Subsidiaries, taken as a whole. To the Knowledge of the Company, no other Person is infringing, misappropriating or otherwise violating any Intellectual
Property Right that is material to the respective businesses of the Company and its Subsidiaries as currently conducted, except for any such infringement, misappropriation or other violation that has
not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a whole.
(d) To
the Knowledge of the Company, there have been no material security breaches in the information technology systems of the Company and its Subsidiaries or the
information technology systems of any other Persons to the extent used by or on behalf of the Company and its Subsidiaries. Since December 31, 2014, except as has not been, and would not
reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a whole, the Company and its Subsidiaries have at all times complied
with all applicable Laws, as well as their own rules, policies and procedures, relating to privacy, data protection and the collection, retention, protection and use of personal information.
(e) The
representations and warranties set forth in this
Section 3.15
and
Section 3.12(n)
are the only representations and warranties being made by the
Company in this Agreement with respect to any infringement,
misappropriation or other violation of Intellectual Property Rights.
Section 3.16
Real and Personal Property
.
(a)
Section 3.16(a) of the Company Disclosure Letter
sets forth a complete and accurate list of all real property
owned by the Company or any of its Subsidiaries (collectively, the "
Company Owned Real Property
").
(b)
Section 3.16(b) of the Company Disclosure Letter
sets forth a complete and accurate list of each lease pursuant to
which the Company or any of its Subsidiaries leases, subleases or licenses an interest in real property from any other Person (whether as a tenant, subtenant or pursuant to other occupancy
arrangements) (collectively, the "
Company Leased Real Property
" and together with the Company Owned Real Property, the "
Company
Real Property
").
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(c) Except
as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a
whole, the Company and its Subsidiaries (as applicable) have (i) good title to, or valid leasehold interests in, all of their respective properties and assets, free and clear of all Liens,
except for Permitted Liens and (ii) exclusive possession of all Company Leased Real Property, other than any use and occupancy rights granted to third party owners, tenants or licensees
pursuant to agreements with respect to such Company Leased Real Property, entered into in the ordinary course of business.
(d) Each
lease, sublease or license for Company Leased Real Property is a valid and binding obligation of the Company or any of its Subsidiaries that is a party thereto, as
applicable, and to the Knowledge of the Company, the other parties thereto, except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to
the Company and its Subsidiaries, taken as a whole;
provided
that (i) such enforcement may be subject to applicable bankruptcy, insolvency
(including all Laws related to fraudulent transfers), reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors' rights and remedies generally and
(ii) the remedies of specific performance and injunctive relief and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any
Proceeding therefor may be brought.
(e) As
of the date of this Agreement, except as has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Company and its
Subsidiaries, taken as a whole, none of the Company or any of its Subsidiaries has received any written communication from, or given any written communication to, or to the Knowledge of the Company,
received or given any other type of communication from or to, any other party to a lease for Company Leased Real Property or any lender, alleging that the Company, any of its Subsidiaries or such
other party, as the case may be, is in default under such lease.
(f) Except
as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a
whole, no Person, other than the Company or a Subsidiary of the Company, possesses, uses or occupies all or any portion of any Company Real Property. There are no outstanding options or rights of
first refusal to purchase the Company Owned Real Property. Neither the Company nor any Subsidiary of the Company is a party to any agreement, right of first offer, right of first refusal or option
with respect to the purchase or sale of any real property or interest therein. There are no pending or, to the Knowledge of the Company, threatened Proceedings to take all or any portion of the
Company Real Property or any interest therein by eminent domain or any condemnation proceeding (or the jurisdictional equivalent thereof) or any sale or disposition in lieu thereof.
Section 3.17
Environmental
.
Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole:
(a) the
Company and its Subsidiaries are in compliance with all applicable Environmental Laws, including possessing and complying with the terms of all Company Permits
required for their operations under applicable Environmental Laws;
(b) as
of the date of this Agreement, there is no Proceeding or Order pending or, to the Knowledge of the Company, threatened pursuant to any Environmental Law against the
Company or any of its Subsidiaries;
(c) as
of the date of this Agreement, none of the Company or any of its Subsidiaries has received notice or a request for information alleging that the Company or any of its
Subsidiaries has been or is in actual or potential violation of any applicable Environmental Law or otherwise may be liable under any applicable Environmental Law, which violation or liability is
unresolved;
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(d) there
have been no Releases of Hazardous Materials on or underneath any location that is reasonably likely to result in an obligation by the Company or any of its
Subsidiaries to remediate such Releases pursuant to applicable Environmental Law or otherwise result in liability to the Company or any of its Subsidiaries pursuant to applicable Environmental Law
with respect to such Releases; and
(e) the
Company has delivered or otherwise made available for inspection to the Parent copies of any Phase I or II environmental site assessments in the possession of
the Company or any of its Subsidiaries pertaining to (i) any unresolved claims arising under or related to any Environmental Law; (ii) any Hazardous Materials in, on, beneath or adjacent
to any property currently or formerly owned, operated or leased by the Company or any of its Subsidiaries; or (iii) the Company's or any of its Subsidiaries' compliance with applicable
Environmental Laws.
Section 3.18
Customers and Suppliers
.
None of the ten (10) largest customers (by revenue) of the businesses of the Company and its Subsidiaries during the twelve (12) months prior to the date of this Agreement,
the ten (10) largest suppliers (by cost) of the businesses of the Company and its Subsidiaries during the twelve (12) months prior to the date of this Agreement or the ten
(10) largest "single source" suppliers (by cost) of the businesses of the Company and its Subsidiaries during the twelve (12) months prior to the date of this Agreement has canceled or
otherwise terminated, or to the Knowledge of the Company, threatened in writing to cancel or otherwise terminate, its relationship with the Company or any of its Subsidiaries or to materially decrease
the quantity of products or services purchased from or sold to, respectively, the Company or any of its Subsidiaries since December 31, 2015, outside of ordinary cyclical fluctuations in
business from the placing and fulfillment of Contracts.
Section 3.19
Product Warranty; Aviation Regulation Compliance
.
Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a whole,
(a) each product manufactured, sold, leased or delivered by the Company or any of its Subsidiaries has been in substantial conformity with all applicable contractual specifications and all
express and implied warranties made by the Company or any of its Subsidiaries (except to the extent non-conformity is not material or otherwise consented to by a customer), and neither the Company nor
any of its Subsidiaries has any liability for replacement or repair thereof or other damages in connection therewith, (b) the Company and each of its Subsidiaries (i) is in compliance
with all applicable Laws prescribed by the U.S. Federal Aviation Administration ("
FAA
") under Title 14 of the Code of Federal Regulations and similar
Laws prescribed by foreign aviation authorities (such Laws, including those prescribed by the FAA, collectively, "
Aviation Regulations
"),
(ii) has not violated, been subject to an investigation with respect to or made voluntary disclosures with respect to potential violations of any Aviation Regulations during the last two
(2) years and (iii) has not been cited by the FAA or foreign aviation authorities for any material discrepancies or violations during inspections or audits during the last two
(2) years. Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a whole, the
Company has not received any Air Worthiness Directives (as such term is defined in the Federal Aviation Regulations, 14 C.F.R. § 39, as amended) issued by the FAA (or, with respect
to such issuances by any foreign aviation Governmental Authority, the foreign equivalent thereof) pursuant to which a known safety deficiency was found in any of the products of the Company or any of
its Subsidiaries at any time during the last two (2) years, and no such Air Worthiness Directives are pending.
Section 3.20
Foreign Corrupt Practices Act; Anti-Corruption
.
(a) Since
October 1, 2013, to the Knowledge of the Company, none of the Company or its Subsidiaries, nor any director, officer, employee or agent of the Company, has
directly or indirectly made, offered to make, or attempted to make any contribution, gift, bribe, rebate, payoff, influence
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payment,
kickback or other payment to any Person, private or public, regardless of what form, whether in money, property or services, in violation of the FCPA, the U.S. Travel Act, the U.K. Bribery
Act 2010, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions or any other applicable Law relating to anti-corruption or anti-bribery
(collectively, the "
Anti-Corruption Laws
"). Without limiting the foregoing, to the Knowledge of the Company, none of the Company or its Subsidiaries,
nor any director, officer, employee, stockholder (solely to the extent acting on behalf of the Company) or agent of the Company, has directly or indirectly offered or given anything of value to
(i) any foreign official, any foreign political party or official thereof or any candidate for political office or (ii) any Person, while knowing that all or a portion of such thing of
value will be offered, given or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof or to any candidate for foreign political office for the
purpose of the following: (A) influencing any act or decision of such foreign official, political party, party official or candidate in his, her or its official capacity, including influencing
such foreign official, political party, party official or candidate to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official or candidate,
or securing any improper advantage or (B) inducing such foreign official, political party, party official or candidate to use his, her or its influence with a foreign Governmental Authority or
instrumentality thereof to affect or influence any act or decision of such Governmental Authority or instrumentality, in order to assist the Company or any Subsidiaries in obtaining or retaining
business for or with, or directing business to, any Person.
(b) To
the Knowledge of the Company, neither the Company nor any of its Subsidiaries (i) is under external or internal investigation for any material violation of the
Anti-Corruption Laws, (ii) has received any notice or other communication (in writing or otherwise) from any Governmental Authority regarding any material violation of, or failure to comply
with, any Anti-Corruption Laws or (iii) is the subject of any internal complaint, audit or review process regarding a material violation of the Anti-Corruption Laws.
(c) The
Company and its Subsidiaries maintain an adequate system or systems of internal controls reasonably designed to (i) ensure compliance with the Anti-Corruption
Laws and (ii) prevent and detect violations of the Anti-Corruption Laws.
Section 3.21
Customs and International Trade Laws
.
(a) Since
October 1, 2013, the Company and its Subsidiaries have been in compliance with all applicable Customs & International Trade Laws and there are no
unresolved formal claims concerning the liability of any of the Company or its Subsidiaries under such Laws. Without limiting the foregoing, (i) at all times since October 1, 2013, the
Company and its Subsidiaries and, to the Knowledge of the Company,
Persons acting on their behalf have obtained all import and export licenses and all other Consents required for the export, import or reexport of goods, services, software and technology required for
the operation of the respective businesses of the Company and its Subsidiaries, including Customs & International Trade Authorizations; (ii) since October 1, 2013, no Governmental
Authority has initiated any Proceedings or imposed any civil or criminal fine, penalty, seizure, forfeiture, revocation of a Customs & International Trade Authorization, debarment or denial of
future Customs & International Trade Authorizations against any of the Company or its Subsidiaries or any of their respective directors, officers or, to the Knowledge of the Company, employees
or agents, of the Company or any of its Subsidiaries (in their capacity as such) in connection with any actual or alleged violation of any applicable Customs & International Trade Laws; and
(iii) to the Knowledge of the Company, since October 1, 2013, there have been no investigations, written claims or written requests for information by a Governmental Authority with
respect to the Company's and its Subsidiaries' Customs & International Trade Authorizations and compliance with applicable Customs & International Trade
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Laws,
except, in each case, as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a whole.
(b) Neither
the Company nor any of its Subsidiaries, and no director, officer or, to the Knowledge of the Company, employee thereof (i) is a Sanctioned Person; or
(ii) has pending or, to the Knowledge of the Company, threatened claims against it with respect to Sanctions.
(c) Each
of the Company and its Subsidiaries and any director, officer or, to the Knowledge of the Company, employee thereof (i) is in compliance in all material
respects with, and, since October 1, 2013, has not materially violated any Sanctions; and (ii) has in place adequate controls and systems reasonably designed to ensure compliance with
applicable Laws pertaining to Sanctions in each of the jurisdictions in which the Company or any of its Subsidiaries do or in the past have done business.
Section 3.22
Government Contracts
.
Section 3.22 of the Company Disclosure Letter
sets forth a correct and complete list of Security Clearances held by the Company,
any of its Subsidiaries and any of their respective Affiliates. To the Knowledge of the Company, there are no facts that are reasonably likely to give rise to the revocation of any Security Clearance
of the Company, any of its Subsidiaries or any of their respective Affiliates. The Company, its Subsidiaries and their respective Affiliates are in compliance with applicable requirements relating to
their respective Security Clearances, including those specified in the Industrial Security Regulation (DOD 5220.22-R) and the National Industrial Security Program Operating Manual (DOD 5220.22-M),
except, in each case, as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a whole.
Section 3.23
Insurance
.
Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries, taken as a whole,
(a) the Company and its Subsidiaries have paid, or caused to be paid, all premiums due under all insurance policies of the Company and its Subsidiaries, and all such insurance policies are in
full force and effect, (b) as of the date of this Agreement, none of the Company or any of its Subsidiaries has received written notice (i) that they are in default with respect to any
obligations under such policies or (ii) of cancellation or termination with respect to any such policies, or refusal or denial of any coverage, reservation of rights or rejection of any claim
under any such policies, in each case that is held by, or for the benefit of, the Company or any of its Subsidiaries.
Section 3.24
Takeover Statutes
.
The Company Board has taken such actions and votes as are necessary to render the provisions of any "fair price," "moratorium," "control share acquisition" or any other takeover or
anti-takeover statute or similar federal or state Law (including Section 203 of the DGCL) inapplicable to this Agreement, the Merger or any other transactions contemplated by this Agreement.
Section 3.25
Brokers
.
No investment banker, broker or finder other than Citigroup Global Markets Inc. and Goldman, Sachs & Co., the fees and expenses of each of which will be paid by the
Company, is entitled to any investment banking, brokerage, finder's or similar fee or commission in connection with this Agreement or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of its Affiliates. True, correct and complete copies of all the engagement letters between the Company and each of Goldman,
Sachs & Co. and Citigroup Global Markets Inc. have been made available to Parent.
Section 3.26
Opinion of Financial Advisors
.
The Company Board has received the opinion of each of Citigroup Global Markets Inc. and Goldman, Sachs & Co., dated as of the date of this Agreement, to the effect
that, as of the date of this Agreement, and based upon and subject to the qualifications, limitations and assumptions set forth in each such opinion, respectively, the Merger Consideration to be paid
to the holders of shares of Company Common Stock (other than Canceled Shares and Dissenting Shares) pursuant to this Agreement is fair, from a financial point of view, to such holders. Promptly after
the date of this Agreement, true, correct and complete copies of such opinions will be made available to Parent for informational purposes only.
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Section 3.27
Company Tax Representation Letters
.
As of the date of this Agreement, the representations, warranties and covenants in the Company Signing Representation Letter and, to the Knowledge of the Company, in the KLX Signing
Representation Letter, are true and correct in all material respects.
Section 3.28
KLX Tax Sharing Agreement Amendment
.
(a) The
First Amendment to the Tax Sharing and Indemnification Agreement between the Company and KLX, in the form provided to Parent as of the date hereof (the
"
KLX TSA Amendment
"), has been entered into by Company and KLX prior to the execution of this Agreement and remains a valid and binding obligation of
Company and KLX, in full force and effect. The Company has delivered a copy of the opinion of Shearman & Sterling LLP to KLX that is a Qualified Supplemental Tax Opinion (as defined in
the KLX Tax Sharing Agreement) in form and substance reasonably satisfactory to KLX in accordance with the KLX TSA Amendment.
(b) The
Company has delivered, or caused to be delivered, a copy of the KLX Signing Representation Letter to Parent prior to the execution of this Agreement.
Section 3.29
No Other Representations or Warranties
.
Except for (a) the representations and warranties contained in this
Article III
and (b) the representations,
warranties and covenants contained in the Company Signing Representation Letter and the Company Closing Representation Letter, neither the Company nor any other Person on behalf of the Company makes
any express or implied representation or warranty with respect to the Company or any of its Subsidiaries or any other information provided to Parent or Merger Sub in connection with the transactions
contemplated by this Agreement, including the accuracy, completeness or timeliness thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except (i) as disclosed in the Parent SEC Documents filed with (or furnished to) the SEC by Parent on or after December 31, 2014
and prior to the date of this Agreement (but in each case excluding any risk factor disclosure contained under the heading "Risk Factors" (other than any factual information contained therein) or in
any "forward-looking statements" legend or in any similarly non-specific, predictive or forward-looking statements) and to the extent publicly available on
EDGAR or (ii) as disclosed in the Parent Disclosure Letter, Parent and Merger Sub hereby, jointly and severally, represent and warrant to the Company as follows:
Section 4.1
Organization; Qualification.
Each of Parent and Merger Sub is a corporation duly organized
and validly existing under the laws of the State of Delaware and has the requisite corporate power
and authority to conduct its business as it is now being conducted and to own, lease and operate its properties and assets in the manner in which its properties and assets are currently operated,
except where the failure to be so validly existing and authorized has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its
Subsidiaries, taken as a whole. Each of Parent and Merger Sub is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the character or location of the
property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and
in good standing has not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. The Parent Organizational Documents have been made
available to the Company and are currently in effect, and neither Parent nor Merger Sub, as applicable, is in violation of any of the provisions thereof, except where such failure or violation has not
been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a whole.
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Section 4.2
Capitalization; Subsidiaries
.
(a) As
of the close of business on the Capitalization Date, the authorized capital stock of Parent consisted of (i) 1,000,000,000 shares of Parent Common Stock,
143,777,488 of which were issued and outstanding and 13,587,492 of which were held by Parent as treasury stock, and (ii) 25,000,000 shares of preferred stock of Parent, without par value, no
shares of which were outstanding. There are no other classes of capital stock of Parent and no bonds, debentures, notes or other Indebtedness of Parent having the right to vote (or convertible into or
exercisable for securities having the right to vote) on any matters on which holders of capital stock of Parent may vote authorized, issued or outstanding. As of the close of business on the
Capitalization Date, there were (A) outstanding options to purchase 3,893,821 shares of Parent Common Stock and (B) outstanding Parent Equity Awards (other than options to purchase
Parent Common Stock) representing 756,217 shares of Parent Common Stock.
(b) All
of the issued and outstanding shares of Parent Common Stock have been, and all of the shares of Parent Common Stock that may be issued pursuant to the Parent Equity
Awards, the Parent 2015 Long-Term Incentives Plan or the Parent Employee Stock Purchase Plan will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued,
and, along with the shares of Parent Common Stock issuable pursuant to this Agreement (subject to obtaining the Parent Stockholder Approval), are, or will be when issued, fully paid, nonassessable and
free of preemptive
rights. All of the outstanding Parent Common Stock has been sold pursuant to an effective registration statement filed under the federal securities Laws or an appropriate exemption therefrom.
(c) As
of the date of this Agreement, other than as set forth in
Section 4.2(a)
, there are no (i) existing
options, warrants, calls, preemptive rights, subscriptions or other rights, restricted stock awards, restricted stock unit awards, convertible securities, agreements, arrangements or commitments of
any kind obligating Parent to issue, transfer, register or sell, or cause to be issued, transferred, registered or sold, any shares of capital stock of Parent or securities convertible into or
exchangeable for such shares, or obligating Parent to grant, extend or enter into such options, warrants, calls, preemptive, subscriptions or other rights, restricted stock awards, restricted stock
unit awards, convertible securities, agreements, arrangements or commitments, (ii) outstanding obligations of Parent to repurchase, redeem or otherwise acquire any capital stock of Parent or
any securities representing the right to purchase or otherwise receive any capital stock of Parent, (iii) stockholder agreements, voting trusts or similar agreements with any Person to which
Parent is a party (A) restricting the transfer of the capital stock of Parent or (B) affecting the voting rights of capital stock of Parent or (iv) outstanding or authorized
equity or equity-based compensation awards, including any equity appreciation rights, security-based performance units, "phantom" stock, profit-participation or other security rights issued by Parent,
or other agreements, arrangements or commitments of any character (contingent or otherwise) to which Parent is party, in each case pursuant to which any Person is entitled to receive any payment from
Parent based in whole or in part on the value of any capital stock of Parent.
(d) All
of the issued and outstanding capital stock of Merger Sub is, and at the Effective Time will be, owned by Parent or a direct or indirect wholly owned Subsidiary of
Parent. Merger Sub has no outstanding options, warrants, rights or any other agreements pursuant to which any Person other than Parent may acquire any equity security of Merger Sub.
(e) The
number of shares of authorized Parent Common Stock that have not been issued, subscribed for or otherwise committed to be issued is at least equal to the number of
shares of Parent Common Stock to be issued pursuant to this Agreement.
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Section 4.3
Authority Relative to Agreement
.
(a) Each
of Parent and Merger Sub have all necessary corporate power and authority to execute, deliver and perform their respective obligations under this Agreement and,
subject (in the case of the issuance of shares of Parent Common Stock in connection with the Merger) to obtaining the Parent Stockholder Approval, to consummate the transactions contemplated by this
Agreement. The execution, delivery and performance of this Agreement by Parent and Merger Sub, and the consummation by Parent and
Merger Sub of the transactions contemplated by this Agreement, have been duly and validly authorized by all necessary corporate action by Parent and Merger Sub, and (in the case of the Parent Stock
Issuance, except for the (i) receipt of the Parent Stockholder Approval and (ii) filing of the Certificate of Merger with the Delaware Secretary of State) no other corporate action or
proceeding on the part of Parent or Merger Sub is necessary to authorize the execution, delivery and performance of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger
Sub of the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery of this
Agreement by the other parties hereto, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its
terms, except that (A) such enforcement may be subject to applicable bankruptcy, insolvency (including all Laws related to fraudulent transfers), reorganization, moratorium or other similar
Laws, now or hereafter in effect, affecting creditors' rights and remedies generally and (B) the remedies of specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which any Proceeding therefor may be brought.
(b) The
Parent Board and the board of directors of Merger Sub have, by resolutions unanimously adopted thereby, (i) approved this Agreement and the transactions
contemplated by this Agreement, (ii) determined that this Agreement and the transactions contemplated by this Agreement are advisable and in the best interests of Parent and Merger Sub and
their respective stockholders, as applicable, (iii) in the case of the Parent Board, directed that the Parent Stock Issuance be submitted to a vote at the Parent Stockholders' Meeting and
(iv) in the case of the Parent Board, resolved to make the Parent Recommendation;
provided
that any change, modification or rescission of such
Parent Recommendation by the Parent Board in accordance with this Agreement shall not be a breach of the representation in this clause (iv). Parent, acting in its capacity as the sole
stockholder of Merger Sub, has approved and adopted this Agreement. As of the date of this Agreement, none of the aforesaid actions by the Parent Board or the board of directors of Merger Sub have
been amended, rescinded or modified.
Section 4.4
Vote Required
.
The approval by a majority of votes cast at the Parent Stockholders' Meeting of the Parent Stock Issuance (the "
Parent Stockholder
Approval
") is the only vote of holders of securities of Parent that is required in connection with the consummation of the transactions contemplated by this Agreement.
Section 4.5
No Conflict; Required Filings and Consents
.
(a) Neither
the execution and delivery of this Agreement by Parent and Merger Sub nor the consummation by Parent and Merger Sub of the transactions contemplated by this
Agreement, nor compliance by Parent and Merger Sub with any of the applicable terms or provisions of this Agreement, will (i) violate any provision of the Parent Organizational Documents,
(ii) assuming that the Consents, registrations, declarations, filings and notices referenced in
Section 4.5(b)
have been obtained or made
and (in the case of the Parent Stock Issuance) the Parent Stockholder Approval has been received, conflict with or violate any Law applicable to Parent or Merger Sub or by which any property or asset
of Parent or Merger Sub is bound or affected or (iii) violate, conflict with or result in any breach of any provision of, or loss of any benefit, or constitute a
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default
(with or without notice or lapse of time, or both) under, give rise to any right of termination, acceleration or cancellation of or require the Consent of, notice to or filing with any third
party pursuant to any of the terms or provisions of any Contract to which Parent or Merger Sub is a party or by which any property or asset of Parent or Merger Sub is bound or affected, or result in
the creation of a Lien, other than any Permitted Lien, upon any of the property or assets of Parent or Merger Sub, other than, in the case of clauses (ii) and (iii), any such conflict,
violation, breach, default, termination, acceleration, cancellation or Lien that (A) has not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect or (B) would not impair in any material respect the ability of Parent or Merger Sub to perform their respective obligations under this Agreement or to consummate the
Merger, or would not prevent or materially delay the consummation of any of the Merger and the other transactions contemplated by this Agreement.
(b) No
Consent of, registration, declaration or filing with or notice to any Governmental Authority is required to be obtained or made by or with respect to Parent or Merger
Sub in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated by this Agreement, other than (i) applicable requirements
of and filings with the SEC under the Exchange Act or the Securities Act (including the filing with the SEC of the Form S-4 and the Joint Proxy Statement), (ii) the filing of the
Certificate of Merger with the Delaware Secretary of State, (iii) applicable requirements under corporation, state securities or "blue sky" laws of various states, (iv) compliance with
applicable rules and regulations of NASDAQ and the New York Stock Exchange (the "
NYSE
"), (v) such other items required solely by reason of the
participation of the Company in the transactions contemplated by this Agreement, (vi) compliance with and filings or notifications under Antitrust Laws and (vii) such other Consents,
registrations, declarations, filings or notices the failure of which to be obtained or made (A) has not had, and would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect or (B) would not impair in any material respect the ability of Parent or Merger Sub to perform their respective obligations under this Agreement or to consummate
the Merger, or would not prevent or materially delay the consummation of any of the Merger and the other transactions contemplated by this Agreement.
Section 4.6
Parent SEC Documents; Financial Statements
.
(a) Since
December 31, 2014, Parent has timely filed with (or furnished to) the SEC all forms, reports, schedules, statements, exhibits and other documents (including
exhibits, financial statements and schedules thereto and all other information incorporated therein and amendments and supplements thereto) required by it to be filed (or furnished) under the Exchange
Act or the Securities Act (collectively, the "
Parent SEC Documents
"). As of its filing (or furnishing) date or, if amended prior to
the date of this Agreement, as of the date of the last such amendment, each Parent SEC Document complied in all material respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be. As of its filing date or, if amended prior to the date of this Agreement, as of the date of the last such amendment, each Parent SEC Document filed pursuant to the
Exchange Act did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. Each Parent SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the
Securities Act, as of the date such registration statement or amendment became effective prior to the date of this Agreement, did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make the statements made therein not misleading. As of the date of this Agreement, there are no amendments or modifications to
Parent SEC Documents that were required to be filed with (or furnished to) the SEC prior to the date of this Agreement, but that
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have
not yet been filed with (or furnished to) the SEC. No Subsidiary of Parent is subject to the periodic reporting requirements of the Exchange Act. All of the audited financial statements and
unaudited interim financial statements of Parent included in Parent SEC Documents (i) comply in all material respects with the applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; (ii) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the
notes thereto and except, in the case of the unaudited interim statements, as may be permitted under Form 10-Q of the Exchange Act); and (iii) fairly present in all material respects the
financial position, the stockholders' equity, the results of operations and cash flows of Parent and its consolidated Subsidiaries as of the times and for the periods referred to therein (except as
may be indicated in the notes thereto and subject, in the case of unaudited interim financial statements, to normal and recurring year-end adjustments).
(b) Parent
has heretofore furnished to the Company complete and correct copies of all comment letters from the SEC since December 31, 2014 through the date of this
Agreement with respect to any of the Parent SEC Documents, together with all written responses of Parent thereto. As of the date of this Agreement, there are no outstanding or unresolved comments in
comment letters received from the SEC staff with respect to any of Parent SEC Documents, and, to the Knowledge of Parent, none of Parent SEC Documents are subject to ongoing SEC review.
(c) Parent
is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act and the applicable listing and governance rules and regulations
of the NYSE.
(d) Parent
maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) designed to provide
reasonable assurance regarding the reliability of Parent's financial reporting and the preparation of financial statements for external purposes in conformity with GAAP. Parent has evaluated the
effectiveness of Parent's internal control over financial reporting and, to the extent required by applicable Law, presented in any applicable Parent SEC Document that is a report on Form 10-K
or Form 10-Q or any amendment thereto its conclusions about the effectiveness of the internal control over financial reporting as of the end of the period covered by such report or amendment
based on such evaluation. Based on Parent's most recent evaluation of internal control over financial reporting prior to the date of this Agreement, (i) Parent has no "significant deficiencies"
or "material weaknesses" (as such terms are defined in Auditing Standard No. 5 of the Public Company Accounting Oversight Board, as in effect on the date of this Agreement) in the design or
operation of internal control over financial reporting that are reasonably likely to adversely affect Parent's ability to record, process, summarize and report financial information and
(ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent's internal control over financial reporting.
(e) Parent
maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed to ensure that all information
required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and
forms of the SEC, and that all such information is accumulated and communicated to Parent's management as appropriate to allow timely decisions regarding required disclosure and to make the
certifications of the chief executive officer and chief financial officer of Parent required under the Exchange Act with respect to such reports.
(f) To
the Knowledge of Parent, as of the date of this Agreement, there are no SEC inquiries or investigations, other inquiries or investigations by Governmental Authorities
or internal investigations pending or threatened, in each case regarding any accounting practices of Parent or any of its Subsidiaries or any malfeasance by any director or executive officer of Parent
or any of
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its
Subsidiaries. Since December 31, 2014 through the date of this Agreement, there have been no material internal investigations regarding accounting or revenue recognition discussed with,
reviewed by or initiated at the direction of the chief executive officer, chief financial officer or general counsel, the Parent Board or any committee thereof.
(g) Each
of the principal executive officer of Parent and the principal financial officer of Parent (or each former principal executive officer of Parent and each former
principal financial officer of Parent, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley
Act with respect to Parent SEC Documents, and the statements contained in such certifications are true and accurate. For purposes of this Agreement, "principal executive officer" and "principal
financial officer" shall have the meanings given to such terms in the Sarbanes-Oxley Act. Parent does not have, and has not arranged any, outstanding "extensions of credit" to directors or executive
officers within the meaning of Section 402 of the Sarbanes-Oxley Act.
(h) Since
December 31, 2014, (i) neither Parent nor any of its Subsidiaries has received any written, or, to the Knowledge of Parent, oral complaint,
allegation, assertion or claim regarding accounting, internal accounting controls, auditing practices, procedures, methodologies or methods of Parent or any of its Subsidiaries, or unlawful accounting
or auditing matters with respect to Parent or any of its Subsidiaries and (ii) no attorney representing Parent or any of its Subsidiaries, whether or not employed by Parent or any of its
Subsidiaries, has reported evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by Parent or any of its Subsidiaries or any of their respective officers,
directors, employees or agents to the Parent Board or any committee thereof or to the general counsel or chief executive officer of Parent pursuant to the rules of the SEC adopted under
Section 307 of the Sarbanes-Oxley Act, except, in each case, as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its
Subsidiaries, taken as a whole.
(i) Neither
Parent nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar
Contract (including any Contract or arrangement relating to any transaction or relationship between or among Parent and any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, on
the other hand), including any structured finance, special purpose or limited purpose entity or Person, or any "off-balance sheet arrangements" (as defined in Item 303(a) of
Regulation S-K under the Securities Act), where the result, purpose or effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, Parent
or any of its Subsidiaries in Parent SEC Documents (including any audited financial statements and unaudited interim financial statements of Parent included therein).
Section 4.7
Absence of Certain Changes or Events
.
Since December 31, 2014 through the date of this Agreement, (a) except in connection with the transactions contemplated by this Agreement, the respective businesses of
Parent and its Subsidiaries have been conducted in the ordinary course of business consistent with past practice and (b) there has not been any event, development or state of circumstances that
has had, or would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.8
No Undisclosed Liabilities
.
Except for liabilities or obligations (a) as (and to the extent) reflected, disclosed or reserved against in Parent's financial statements (or the notes thereto) included in the
Parent SEC Documents prior to the date of this Agreement, (b) incurred in the ordinary course of business consistent with past practice since June 30, 2016, (c) incurred in
connection with the transactions contemplated by this Agreement or (d) that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material
Adverse Effect, none of Parent or any of its Subsidiaries has any liabilities or obligations of any nature, whether or not
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accrued,
contingent, absolute or otherwise and whether or not required to be reflected on a consolidated balance sheet of Parent (or the notes thereto) in accordance with GAAP.
Section 4.9
Litigation
.
As of the date of this Agreement, (a) there is no Proceeding pending or, to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries or any asset or property
of Parent or any of its Subsidiaries, and (b) neither Parent nor any of its Subsidiaries nor any asset or property of Parent or any of its Subsidiaries is subject to a continuing Order, in each
case, that (i) has been, or would reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a whole or (ii) would
reasonably be expected to, individually or in the aggregate, impair in any material respect the ability of Parent to perform its obligations under this Agreement or to consummate the Merger, or
prevent or materially delay the consummation of any of the Merger and the other transactions contemplated by this Agreement.
Section 4.10
Permits; Compliance with Laws
.
(a) (i)
Parent and its Subsidiaries are in possession of all material franchises, grants, licenses, permits, easements, variances, exemptions, consents, certificates,
approvals, registrations, clearances, orders and other authorizations necessary for Parent and its Subsidiaries to own, lease and operate their respective properties and assets and to carry on their
respective businesses as now being conducted under and pursuant to all applicable Laws (the "
Parent Permits
"), (ii) all such Parent Permits are
in full force and effect and (iii) as of the date of this Agreement, no suspension, cancellation, withdrawal or revocation thereof is pending or, to the Knowledge of Parent, threatened, except
where the failure to be in possession of, failure to be in full force and effect or the suspension, cancellation, withdrawal or revocation thereof has not had, and would not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) Since
December 31, 2014, Parent and its Subsidiaries have been and are in compliance with (i) all applicable Laws and (ii) all Parent Permits,
except where any failure to be in such compliance has not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(c) Since
December 31, 2014 through the date of this Agreement, none of Parent or any of its Subsidiaries or, to the Knowledge of Parent, any of their respective
directors, officers or employees, has received any written or, to the Knowledge of Parent, oral notification from a Governmental Authority asserting that Parent or any of its Subsidiaries is not in
compliance with any Laws or Parent Permits, except where any failure to be in such compliance has not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
Section 4.11
Information Supplied
.
None of the information supplied or to be supplied by or on behalf of Parent or any of its Subsidiaries for inclusion or incorporation by reference in (a) the Form S-4
will, at the time the Form S-4 is filed with the SEC, and at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein, in light of the circumstances under which they are made, not misleading and (b) the Joint Proxy Statement will,
at the date it, or any amendment or supplement to it, is mailed to stockholders of the Company and stockholders of Parent and at the time of the Company Stockholders' Meeting and at the time of the
Parent Stockholders' Meeting, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are
made, not misleading (except that no representation or warranty is made by Parent regarding such portions thereof that relate expressly to the Company or any of its Subsidiaries, or to statements made
therein based on information supplied by or on behalf of the Company or any of its Subsidiaries for inclusion or incorporation by reference therein). The Joint Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder.
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Section 4.12
Employee Benefit Plans
.
(a) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, (i) each of the Parent
Benefit Plans has been established, adopted, operated, maintained and administered in accordance with its terms and applicable Laws, including ERISA and the Code, (ii) all payments and
contributions required to be made under the terms of any Parent Benefit Plan and applicable Laws have been timely made or accrued or otherwise adequately reserved to the extent required by and in
accordance with GAAP and (iii) none of Parent or any of its Subsidiaries or, to the Knowledge of Parent, any third party, has engaged in any non-exempt "prohibited transaction" (within the
meaning of Section 4975 of the Code or Section 406 of ERISA) with respect to any Parent Benefit Plan that would result in the imposition of any liability to Parent or any of its
Subsidiaries.
(b) Each
Parent Benefit Plan intended to be qualified under Section 401(a) of the Code has either received a favorable determination letter from the IRS with respect
to such Parent Benefit Plan as to its qualified status under the Code, or with respect to a prototype Parent Benefit Plan, the prototype sponsor has received a favorable IRS opinion letter, or the
Parent Benefit Plan or prototype sponsor
has remaining a period of time under applicable Code regulations or pronouncements of the IRS in which to apply for such a letter and make any amendments necessary to obtain a favorable determination
or opinion as to the qualified status of each such Parent Benefit Plan. To the Knowledge of Parent, no event has occurred since the most recent determination or opinion letter or application therefor
relating to any such Parent Benefit Plan and no condition exists that has been or would reasonably be expected to adversely affect the qualified status of any such Parent Benefit Plan or result in the
imposition of any liability, penalty or tax under ERISA or the Code that is, individually or in the aggregate, material to Parent and its Subsidiaries, taken as a whole.
(c) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, neither Parent nor any Parent
ERISA Affiliate operates, maintains, contributes to, is required to contribute to or sponsors (or has in the past six (6) years established, operated, maintained, contributed to, was required
to contribute to or sponsored) (i) a "multiemployer plan" (as defined in Section 3(37) of ERISA), (ii) a "multiple employer plan" (within the meaning of Section 413(c) of
the Code), (iii) a "single-employer plan" (within the meaning of Section 4001(a)(15) of ERISA), or (iv) a "multiple employer welfare arrangement" (within the meaning of
Section 3(40) of ERISA).
(d) Except
as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, as of the date of this Agreement
there are no claims pending, or, to the Knowledge of Parent, threatened Proceedings, disputes or claims (other than routine claims for benefits) against or affecting any Parent Benefit Plan, by any
employee or beneficiary covered under such Parent Benefit Plan, as applicable, or otherwise involving such Parent Benefit Plan.
(e) Parent
and its Subsidiaries are, and since December 31, 2014 have been, in compliance with all applicable Laws respecting or relating to recruitment, employment
and employment practices, and agency and other workers, including all Laws respecting terms and conditions of employment, health and safety, wages and hours, child labor, immigration, employment
discrimination, disability rights or benefits, equal opportunity, plant closures and layoffs, affirmative action, workers' compensation, labor relations, employee leave issues and unemployment
insurance, except where failure to comply has not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(f) To
the Knowledge of Parent, no employee of Parent or any of its Subsidiaries who is an officer for purposes of Section 16 of the Exchange Act is in any respect in
violation of any term of
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any
employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, non-competition agreement, restrictive covenant or other obligation (i) to Parent or its
Subsidiaries or (ii) to a former employer relating (A) to the right to be employed by Parent or its Subsidiaries or (B) to the material misuse of trade secrets or proprietary
information. No employee of Parent or any of its Subsidiaries who is an officer for purposes of Section 16 of the Exchange Act has given notice of intent to terminate or, to the Knowledge of
Parent, intends to terminate his or her employment with Parent or any of its Subsidiaries.
Section 4.13
Taxes
.
(a) Parent
and each of its Subsidiaries have (i) timely filed or caused to be timely filed (taking into account any extension of time within which to file) all
material Tax Returns required to be filed by any of them and all such filed Tax Returns (taking into account all amendments thereto) are true, complete and accurate in all material respects and
(ii) paid all material Taxes due and owing (whether or not shown on such Tax Returns), except, in the case of clause (ii) hereof, with respect to Taxes contested in good faith by
appropriate Proceedings and for which adequate reserves or accruals have been established in accordance with GAAP.
(b) The
unpaid Taxes of Parent and its Subsidiaries did not, as of the date of their most recent consolidated financial statements included in the Parent SEC Documents prior
to the date of this Agreement, materially exceed the reserve or accrual for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of such consolidated financial statements (rather than in any notes thereto). Since the date of their most recent consolidated financial statements, neither Parent nor
any of its Subsidiaries has incurred any material liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice.
(c) As
of the date of this Agreement, there are no pending, threatened in writing or ongoing audits, examinations, investigations or other Proceedings by any Governmental
Authority in respect of material Taxes of or with respect to Parent or any of its Subsidiaries. Neither Parent nor any of its Subsidiaries has waived any statute of limitations with respect to
material Taxes or agreed to any extension of time with respect to a material Tax assessment or deficiency. No written claim has been made by any Governmental Authority in a jurisdiction where Parent
or any of its Subsidiaries does not currently file a Tax Return that it is or may be subject to taxation by that jurisdiction in respect of Taxes that would be covered by or the subject of such
Tax Return, nor has any such assertion been threatened or proposed in writing and received by Parent or any of its Subsidiaries.
(d) All
Taxes that Parent or any of its Subsidiaries are or were required by Law to withhold or collect have been duly and timely withheld or collected in all material
respects on behalf of its respective employees, independent contractors or other third parties and, have been timely paid to the proper Governmental Authority or other Person or properly set aside in
accounts for this purpose.
(e) Neither
Parent nor any of its Subsidiaries has ever been a member of a consolidated, combined or unitary Tax group (other than such a group the common parent of which is
Parent or any of its Subsidiaries), and neither Parent nor any of its Subsidiaries has any liability for Taxes of any other Person (other than Taxes of Parent or any Subsidiary) under Treasury
Regulation Section 1.1502-6 (or any similar provision of foreign, state or local law), as a transferee or successor, by Contract or otherwise.
(f) Neither
Parent nor any of its Subsidiaries is a party to or is bound by any Tax sharing, Tax allocation or Tax indemnification agreement or arrangement (other than such
an agreement or arrangement exclusively between or among Parent and its Subsidiaries or customary commercial Contracts entered into in the ordinary course of business, the principal subject matter of
which is
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not
Taxes) that will not be terminated on or before the Closing Date without any future liability to the Company or its Subsidiaries.
(g) There
are no Liens for a material amount of Taxes on any of the assets of Parent or any of its Subsidiaries other than Permitted Liens.
(h) Neither
Parent nor any of its Subsidiaries has participated in or been a party to a transaction that, as of the date of this Agreement, constitutes a "listed
transaction" that is required to be reported to the IRS pursuant to Section 6011 of the Code and applicable Treasury Regulations thereunder.
(i) Within
the last two (2) years, neither Parent nor any of its Subsidiaries has been a party to any transaction intended to qualify under Section 355 of the
Code.
(j) As
of the date of this Agreement, the representations, warranties and covenants in the Parent Signing Representation Letter are true and correct in all material
respects.
Section 4.14
Material Contracts
.
Except as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, none of Parent or any of its Subsidiaries is in
breach of or default (or, with the giving of notice or lapse of time or both, would be in default) under the terms of, and none has taken any action resulting in the termination of, acceleration of
performance required by, or resulting in a right of termination or acceleration under, any Contract material to Parent and its Subsidiaries, taken as a whole (each a "
Parent
Material Contract
"). As of the date of this Agreement, to the Knowledge of Parent, no other party to any Parent Material Contract is in breach of or default (or, with the
giving of notice or lapse of time or both, would be in default) under the terms of, and none has taken any action resulting in the termination of, acceleration of performance required by, or resulting
in a right of termination or acceleration under, any Parent Material Contract. Each Parent Material Contract is (a) a valid and binding obligation of Parent or its Subsidiary that is a party
thereto, as applicable, and, to the Knowledge of Parent, the other parties thereto, (
provided
that (i) such enforcement may be subject to
applicable bankruptcy, insolvency (including all Laws related to fraudulent transfers), reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors' rights and
remedies generally and (ii) the remedies of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court
before which any Proceeding therefor may be brought) and (b) in full force and effect.
Section 4.15
Trademarks, Patents and Copyrights
.
(a) Except
as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a
whole, the applications for and registrations of Intellectual Property Rights owned by Parent or its Subsidiaries are (i) free and clear of all Liens (other than Permitted Liens) and
(ii) in effect, subsisting and, to the Knowledge of Parent, valid.
(b) To
the Knowledge of Parent, except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its
Subsidiaries, taken as a whole, Parent and its Subsidiaries own, validly license or have the right to use in the manner currently used, all Intellectual Property Rights that are used in the respective
businesses of Parent and its Subsidiaries.
(c) To
the Knowledge of Parent, except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its
Subsidiaries, taken as a whole, the conduct of the respective businesses of Parent and its Subsidiaries as currently conducted does not infringe upon, misappropriate or otherwise violate any
Intellectual Property Rights of any other Person. As of the date of this Agreement, there is no claim for any
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such
infringement, misappropriation or other violation pending or, to the Knowledge of Parent, threatened, except for any such infringement, misappropriation or other violation that has not been, and
would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a whole. To the Knowledge of Parent, no other Person is
infringing, misappropriating or otherwise violating any Intellectual Property Right that is material to the respective businesses of Parent and its Subsidiaries as currently conducted, except for any
such infringement, misappropriation or other violation that has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its
Subsidiaries, taken as a whole.
(d) To
the Knowledge of Parent, there have been no material security breaches in the information technology systems of Parent and its Subsidiaries or the information
technology systems of any other Persons to the extent used by or on behalf of Parent and its Subsidiaries. Since December 31, 2014, except as has not been, and would not reasonably be expected
to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a whole, Parent and its Subsidiaries have at all times complied with all applicable Laws, as well
as their own rules, policies and procedures, relating to privacy, data protection and the collection, retention, protection and use of personal information.
(e) The
representations and warranties set forth in this
Section 4.15
and
Section 4.12(f)
are the only representations and warranties being made by
Parent in this Agreement with respect to any infringement,
misappropriation or other violation of Intellectual Property Rights.
Section 4.16
Real and Personal Property
.
Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a whole, Parent and its
Subsidiaries (as applicable) have good title to, or valid leasehold interests in, all of their respective properties and assets, free and clear of all Liens, except for Permitted Liens.
Section 4.17
Environmental
.
Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, material to Parent and its Subsidiaries, taken as a whole:
(a) Parent
and its Subsidiaries are in compliance with all applicable Environmental Laws, including possessing and complying with the terms of all Parent Permits required
for their operations under applicable Environmental Laws;
(b) as
of the date of this Agreement, there is no Proceeding or Order pending or, to the Knowledge of Parent, threatened pursuant to any Environmental Law against Parent or
any of its Subsidiaries;
(c) as
of the date of this Agreement, none of Parent or any of its Subsidiaries has received notice or a request for information alleging that Parent or any of its
Subsidiaries has been or is in actual or potential violation of any applicable Environmental Law or otherwise may be liable under any applicable Environmental Law, which violation or liability is
unresolved; and
(d) there
have been no Releases of Hazardous Materials on or underneath any location that is reasonably likely to result in an obligation by Parent or any of its
Subsidiaries to remediate such Releases pursuant to applicable Environmental Law or otherwise result in liability to Parent or any of its Subsidiaries pursuant to applicable Environmental Law with
respect to such Releases.
Section 4.18
Customers and Suppliers
.
None of the ten (10) largest customers (by revenue) of the businesses of Parent and its Subsidiaries during the twelve (12) months prior to the date of this Agreement, the
ten (10) largest suppliers (by cost) of the businesses of Parent and its Subsidiaries during the twelve (12) months prior to the date of this Agreement or the ten (10) largest
"single source" suppliers (by cost) of the businesses of Parent and its Subsidiaries during the twelve (12) months prior to the date of this Agreement has canceled or otherwise terminated, or
to the
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Knowledge
of Parent, threatened in writing to cancel or otherwise terminate, its relationship with Parent or any of its Subsidiaries or to materially decrease the quantity of products or services
purchased from or sold to, respectively, Parent or any of its Subsidiaries since December 31, 2015, outside of ordinary cyclical fluctuations in business from the placing and fulfillment of
Contracts.
Section 4.19
Aviation Regulation Compliance
.
Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a whole, Parent and each
of its Subsidiaries (a) is in compliance with all applicable Aviation Regulations, (b) has not violated, been subject to an investigation with respect to or made voluntary disclosures
with respect to potential violations of any Aviation Regulations during the last two (2) years and (c) has not been cited by the FAA or foreign aviation authorities for any material
discrepancies or violations during inspections or audits during the last two (2) years. Except as has not been, and would not reasonably be expected to be, individually or in the aggregate,
materially adverse to Parent and its Subsidiaries, taken as a whole, Parent has not received any Air Worthiness Directives (as such term is defined in the Federal Aviation Regulations, 14 C.F.R.
§ 39, as amended) issued by the FAA (or, with respect to such issuances by any foreign aviation Governmental Authority, the foreign equivalent thereof) pursuant to which a known
safety deficiency was found in any products of Parent or any of its Subsidiaries at any time during the last two (2) years, and no such Air Worthiness Directives are pending.
Section 4.20
Foreign Corrupt Practices Act; Anti-Corruption
.
(a) Since
October 1, 2013, to the Knowledge of Parent, none of Parent or its Subsidiaries, nor any director, officer, employee or agent of Parent, has directly or
indirectly made, offered to make, or attempted to make any contribution, gift, bribe, rebate, payoff, influence payment, kickback or other payment to any Person, private or public, regardless of what
form, whether in money, property or services, in violation of the Anti-Corruption Laws. Without limiting the foregoing, none of Parent or its Subsidiaries, nor, to the Knowledge of Parent or its
Subsidiaries, any director, officer, employee, stockholder (solely to the extent acting on behalf of Parent) or agent of Parent, has directly or indirectly offered or given anything of value to
(i) any foreign official, any foreign political party or official thereof or any candidate for political office or (ii) any Person, while knowing that all or a portion of such thing of
value will be offered, given or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof or to any candidate for foreign political office for the
purpose of the following: (A) influencing any act or decision of such foreign official, political party, party official or candidate in his, her or its official capacity, including influencing
such foreign official, political party, party official or candidate to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official or candidate,
or securing any improper advantage or (B) inducing such foreign official, political party, party official or candidate to use his, her or its influence with a foreign Governmental Authority, or
instrumentality thereof, to affect or influence any act or decision of such Governmental Authority or instrumentality, in order to assist Parent or any Subsidiaries in obtaining or retaining business
for or with or directing business to, any Person.
(b) To
the Knowledge of Parent, neither Parent nor any of its Subsidiaries (i) is under external or internal investigation for any material violation of the
Anti-Corruption Laws, (ii) has received any notice or other communication (in writing or otherwise) from any Governmental Authority regarding any material violation of, or failure to comply
with, any Anti-Corruption Laws or (iii) is the subject of any internal complaint, audit or review process regarding a material violation of the Anti-Corruption Laws.
(c) Parent
and its Subsidiaries maintain an adequate system or systems of internal controls reasonably designed to (i) ensure compliance with the Anti-Corruption Laws
and (ii) prevent and detect violations of the Anti-Corruption Laws.
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Section 4.21
Customs and International Trade Laws
.
(a) Since
October 1, 2013, Parent and its Subsidiaries have been in compliance with all Customs & International Trade Laws and there are no unresolved formal
claims concerning the liability of any of Parent or its Subsidiaries under such Laws. Without limiting the foregoing, (i) at all times since October 1, 2013 Parent and its Subsidiaries
and, to the Knowledge of Parent, Persons acting on their behalf have obtained all import and export licenses and all other Consents required for the export, import or reexport of goods, services,
software and technology required for the operation of the respective businesses of Parent and its Subsidiaries, including Customs & International Trade Authorizations; (ii) since
October 1, 2013, no Governmental Authority has initiated any Proceedings or imposed any civil or criminal fine, penalty, seizure, forfeiture, revocation of a Customs & International
Trade Authorization, debarment or denial of future Customs & International Trade Authorizations against any of Parent or its Subsidiaries or any of their respective directors, officers or, to
the Knowledge of Parent, employees or agents, of Parent or any of its Subsidiaries (in their capacity as such) in connection with any actual or alleged violation of any applicable Customs &
International Trade Laws; and (iii) to the Knowledge of Parent, since October 1, 2013, there have been no investigations, written claims or written requests for information by a
Governmental Authority with respect to Parent's and its Subsidiaries' Customs & International Trade Authorizations and compliance with applicable Customs & International
Trade Laws, except, in each case, as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a whole.
(b) Neither
Parent nor any of its Subsidiaries, and no director, officer or, to the Knowledge of Parent, employee thereof (i) is a Sanctioned Person; or
(ii) has pending or, to the Knowledge of Parent, threatened claims against it with respect to Sanctions.
(c) Each
of Parent and its Subsidiaries and any director, officer or, to the Knowledge of Parent, employee thereof (i) is in compliance in all material respects with,
and, since October 1, 2013, has not materially violated any Sanctions; and (ii) has in place adequate controls and systems reasonably designed to ensure compliance with applicable Laws
pertaining to Sanctions in each of the jurisdictions in which Parent or any of its Subsidiaries do or in the past have done business.
Section 4.22
Insurance
.
Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, materially adverse to Parent and its Subsidiaries, taken as a whole,
(a) Parent and its Subsidiaries have paid, or caused to be paid, all premiums due under all insurance policies of Parent and its Subsidiaries, and all such insurance policies are in full force
and effect, (b) as of the date of this Agreement, none of Parent or any of its Subsidiaries has received written notice (i) that they are in default with respect to any obligations under
such policies or (ii) of cancellation or termination with respect to any such policies, or refusal or denial of any coverage, reservation of rights or rejection of any claim under any such
policies, in each case that is held by, or for the benefit of, Parent or any of its Subsidiaries.
Section 4.23
Brokers
.
No investment banker, broker or finder other than J.P. Morgan Securities LLC, the fees and expenses of which will be paid by Parent, is entitled to any investment banking,
brokerage, finder's or similar fee or commission in connection with this Agreement or the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Merger
Sub.
Section 4.24
Opinion of Financial Advisor
.
Parent has received the opinion of J.P. Morgan Securities LLC, dated as of the date of this Agreement, to the effect that, as of the date of such opinion, on the basis of and
subject to the factors, qualifications, limitations and assumptions set forth in such opinion, the Merger Consideration to be paid by Parent in the proposed Merger is fair, from a
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financial
point of view, to Parent. Promptly after the date of this Agreement, a true, correct and complete copy of such opinion will be made available to the Company for informational purposes only.
Section 4.25
Financing
.
Parent and Merger Sub collectively will have, as of the Closing Date, sufficient cash to consummate the Merger and the other transactions contemplated by this Agreement that require
payment on the Closing Date. The obligations of Parent and Merger Sub hereunder are not subject to any condition regarding Parent's, Merger Sub's or any other Person's ability to obtain financing for
the Merger and the other transactions contemplated by this Agreement.
Section 4.26
Share Ownership
.
None of Parent, Merger Sub or any of their Affiliates has been, at any time during the three (3) years preceding the date of this Agreement, an "interested stockholder" of the
Company, as defined in Section 203 of the DGCL. As of the date of this Agreement, none of Parent, Merger Sub or their respective Affiliates owns (directly or indirectly, beneficially or of
record) any Company Common Stock and none of Parent, Merger Sub or any of their respective Affiliates holds any rights to acquire any Company Common Stock except pursuant to this Agreement (in each
case other than
de minimis
holdings held by directors and officers of Parent or any of its Subsidiaries).
Section 4.27
Management Agreements
.
Other than this Agreement and the amendments to the employment agreements referenced in
Section 4.27 to the Parent Disclosure
Letter
, as of the date of this Agreement, there are no Contracts, undertakings, commitments, agreements or obligations or understandings between Parent or Merger Sub or any of
their Affiliates, on the one hand, and any member of the Company's management or the Company Board, on the other hand, relating in any way to the transactions contemplated by this Agreement or the
operations of the Company after the Effective Time.
Section 4.28
No Other Representations or Warranties
.
Except for (a) the representations and warranties contained in this
Article IV
and (b) the representations,
warranties and covenants contained in the Parent Signing Representation Letter and the Parent Closing Representation Letter, none of Parent, Merger Sub nor any other Person on behalf of Parent or
Merger Sub makes any express or implied representation or warranty with respect to Parent or any of its Subsidiaries or any other information provided to the Company in connection with the
transactions contemplated by this Agreement, including the accuracy, completeness or timeliness thereof.
COVENANTS AND AGREEMENTS
Section 5.1
Conduct of Business by the Company Pending the Merger
.
The Company covenants and agrees that, between the date of this Agreement and the earlier of the Effective Time and the date, if any, on which this Agreement is terminated in accordance
with
Section 7.1
, except (A) as may be required by Law, (B) as may be agreed in writing by Parent (which consent shall not be
unreasonably withheld, delayed or conditioned), (C) as may be expressly contemplated or permitted pursuant to this Agreement or (D) as set forth on
Section 5.1 of the Company Disclosure Letter
, (x) the Company shall, and shall cause its Subsidiaries to, conduct the business of the
Company and its Subsidiaries in the ordinary course of business and in a manner consistent with past practice and, to the extent consistent therewith, use reasonable best efforts to preserve its
assets and business organization and maintain its existing relationships with material customers, suppliers, distributors, regulators and business partners, and (y) the Company shall not, and
shall cause its Subsidiaries not to, directly or indirectly:
(a) amend
the Certificate of Incorporation or the Bylaws of the Company (or such equivalent organizational or governing documents of any of its Subsidiaries);
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(b) adjust,
split, combine, subdivide, reclassify, redeem, repurchase or otherwise acquire or amend the terms of the Company's or any of its Subsidiaries' capital stock or
other equity interests or any options, equity or equity-based compensation, warrants, convertible securities or other rights of any kind to acquire any shares of the Company's or any of its
Subsidiaries' capital stock or other equity interests;
(c) issue,
sell, pledge, dispose, encumber, grant or authorize the same with respect to, any shares of the Company's or its Subsidiaries' capital stock or other equity
interests, or any options, equity or equity-based compensation, warrants, convertible securities or other rights of any kind to acquire any shares of the Company's or any of its Subsidiaries' capital
stock or other equity interests;
provided
,
however
, that the Company may issue shares (i) upon
the settlement of any Company RSU Award or Company DSU Award outstanding as of the date of this Agreement or (ii) pursuant to the terms of the Company ESPP in effect immediately prior to the
date of this Agreement;
(d) except
with respect to the regular quarterly cash dividends of $0.21 per share, with record and payment dates for such dividends consistent with past practice, declare,
set aside, authorize, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to the Company's or any of its Subsidiaries' capital stock or other
equity interests, other than cash dividends
and distributions paid by any Subsidiary of the Company to the Company or any wholly owned Subsidiary of the Company;
(e) (i)
establish, adopt, enter into any new, amend, terminate, or take any action to accelerate rights under, any Company Benefit Plan or plan, program, policy, practice,
agreement or arrangement that would be a Company Benefit Plan if it had been in effect on the date of this Agreement, except to the extent required pursuant to any Company Benefit Plan;
(ii) grant or pay, or commit to grant or pay, any bonus, incentive or profit-sharing award or payment; (iii) increase, or commit to increase, the amount of the wages, salary, bonuses,
commissions, fringe benefits, severance or other compensation (including equity or equity-based compensation, whether payable in stock, cash or other property), benefits or remuneration payable to any
current or former employee or director of, or individual service provider to, the Company or any Subsidiary of the Company, except for annual increases in base salaries to employees whose annual base
compensation is below $150,000, in the ordinary course of business and in amounts and at such times as is consistent with past practice; (iv) take any action (other than actions contemplated by
this Agreement) to accelerate any payment or benefit, the vesting of any equity or equity-based award or the funding of any payment or benefit, payable or to become payable to any current or former
employee or director of, or individual service provider to, the Company or any Subsidiary of the Company; (v) except pursuant to, or as contemplated by, any agreement set forth on
Section 3.12(j) of the Company
Disclosure Letter
, enter into any employment, severance, change in control, retention, individual consulting or
similar agreement with any current or former employee or director of, or individual service provider to, the Company or any Subsidiary of the Company (other than offer letters that provide for at-will
employment without any severance, retention or change in control benefits for newly hired employees or individual service providers who are hired in the ordinary course of business and whose annual
base compensation does not exceed $225,000 individually), (vi) communicate with the employees of the Company or any Subsidiary of the Company regarding the compensation, benefits or other
treatment they will receive following the Effective Time, unless such communications are consistent with the terms provided herein; or (vii) except as may be required by GAAP, materially change
any actuarial or other assumptions used to calculate funding obligations with respect to any Company Benefit Plan or materially change the manner in which contributions to such plans are made or the
basis on which such contributions are determined;
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(f) hire,
engage, promote or terminate (other than for cause) any employee or other individual service provider who is or would be entitled to receive annual base
compensation of $225,000 or more;
(g) except
as contemplated by the Company ESPP in effect as of the date of this Agreement, grant, confer or award equity or equity-based compensation, options, convertible
securities, restricted stock, restricted stock units, deferred stock units or other rights to acquire any of the Company's or its Subsidiaries' capital stock or other equity interests;
(h) make
any loan or advance (other than travel and similar advances to its employees in the ordinary course of business) to any Person in excess of $50,000 in the
aggregate;
(i) forgive
any loans or advances to any officers, employees or directors of the Company or its Subsidiaries, or any of their respective Affiliates, or change its existing
borrowing or lending arrangements for or on behalf of any of such Persons pursuant to an employee benefit plan or otherwise, except in the ordinary course of business in connection with relocation
activities of any employees of the Company or its Subsidiaries;
(j) acquire
(including by merger, consolidation or acquisition of stock or assets) any corporation, partnership, limited liability company, joint venture, other business
organization or any division or all or any material portion of the assets, business or properties of any other Person, in each case, for aggregate consideration in excess of $20,000,000;
(k) sell,
pledge, dispose of, transfer, abandon, lease, license, mortgage, incur any Lien (other than Permitted Liens) (including pursuant to a sale-leaseback transaction or
an asset securitization transaction) on or otherwise transfer or encumber any material portion of the assets, business, properties or rights of the Company or any of its Subsidiaries (other than
licenses of Intellectual Property Rights in the ordinary course of business consistent with past practice), except (i) sales of inventory in the ordinary course of business and consistent with
past practice, (ii) transfers among the Company and its Subsidiaries or (iii) disposition of obsolete assets or expired inventory;
(l) (i)
pay, discharge or satisfy any Indebtedness that has a prepayment cost, "make whole" amount, prepayment penalty or similar obligation (other than (A) the
payment, discharge or satisfaction, required pursuant to the terms of the Company's Existing Credit Agreement as in effect as of the date of this Agreement and (B) Indebtedness incurred by the
Company or its wholly owned Subsidiaries and owed to the Company or its wholly owned Subsidiaries) or (ii) cancel any material Indebtedness (individually or in the aggregate) or waive or amend
any claims or rights of substantial value;
(m) (i)
incur, create, assume or otherwise become liable for any Indebtedness or guarantee any such Indebtedness of any Person (other than a wholly owned Subsidiary of the
Company), including the issuance of any debt security and the assumption or guarantee of obligations of any Person or issue or sell any debt securities or options, warrants, calls or other rights to
acquire any debt securities of the Company or any of its Subsidiaries' (except for (A) Indebtedness or guarantees for drawdowns with respect to the Company's revolving credit facility under its
Existing Credit Agreement in the ordinary course of business consistent with past practice and (B) Indebtedness owed to the Company or its wholly owned Subsidiaries) or (ii) make any
loans, advances or capital contributions to, or investments in, any other Person (other than to or in the Company or any direct or indirect wholly owned Subsidiary of the Company);
(n) terminate,
enter into, agree to any material amendment or modification of or renew or waive any material rights under any Company Material Contract or any Contract
relating to Company Leased Real
Property, in each case other than Company Material Contracts of the type described in
Sections 3.14(a)(i)
,
(ii)
,
(v)
,
(vi)
,
(xii)
or
(xv)
in the ordinary course of business consistent with
past practice;
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(o) modify,
extend or enter into any Labor Agreement, except as required pursuant to an applicable Contract in effect as of the date of this Agreement;
(p) make
any material change to its methods of accounting, except as required by GAAP (or any interpretation thereof), Regulation S-X of the Exchange Act or a
Governmental Authority or quasi-Governmental Authority (including the Financial Accounting Standards Board or any similar organization);
(q) make
or agree to make any capital expenditure exceeding $25,000,000 in the aggregate in any calendar quarter;
(r) write
up, write down or write off the book value of any material assets, except to the extent required by GAAP;
(s) release,
compromise, assign, settle or agree to settle any Proceeding (including any Proceeding relating to this Agreement or the Merger and the other transactions
contemplated by this Agreement with adverse parties other than the other parties hereto) or insurance claim, other than settlements that result solely in monetary obligations involving payment
(without the admission of wrongdoing) by the Company or any of its Subsidiaries of (i) the amounts specifically reserved in accordance with GAAP with respect to such Proceeding on the Company's
consolidated financial statements for the year ending December 31, 2015 or (ii) an amount not greater than $5,000,000 in the aggregate;
(t) fail
to maintain in effect the existing material insurance policies covering the Company and its Subsidiaries and their respective properties, assets and businesses;
(u) announce,
implement or effect any facility closing, lay-off, early retirement programs, severance programs or reductions in force affecting employees of the Company or
any of its Subsidiaries, other than any such action not giving rise to more than $250,000 in severance and other liability related to such action;
(v) cancel,
dedicate to the public, disclaim, forfeit, reexamine or abandon without filing a substantially identical counterpart in the same jurisdiction with the same
priority or allow to lapse (except with respect to patents expiring in accordance with their terms) any Intellectual Property Rights material to the Company;
(w) (i)
make or change any material Tax election or change any method of Tax accounting; (ii) file any material amended Tax Return; (iii) settle or compromise
any audit or Proceeding unless such settlement or compromise does not result in a Tax liability that materially exceeds the liability with respect to such audit or Proceeding recorded or reflected in
the Company SEC Documents prior to the date hereof; (iv) agree to an extension or waiver of the statute of limitations with respect to a material amount of Taxes; (v) enter into any
"closing agreement" within the meaning of Section 7121 of the Code (or any similar provision of state, local or non-U.S. Law) with respect to any material Tax; or (vi) surrender any
right to claim a material Tax refund;
(x) take
(or knowingly fail to take) any action, including consenting to any action pursuant to the KLX Tax Sharing Agreement that would cause (i) the KLX External
Spin-Off to fail to qualify for the KLX Spin-Off Tax Treatment or (ii) the KLX Internal Restructuring to fail to qualify for the Tax treatments originally reported on the relevant Tax Returns
of the Company, KLX or any applicable Subsidiary of either;
(y) merge
or consolidate the Company or any of its Subsidiaries with any third party or adopt a plan of complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization of the Company or any of its Subsidiaries; or
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(z) enter
into any agreement to do, or adopt any resolutions in support of, any of the foregoing.
Section 5.2
Conduct of Business by Parent Pending the Merger
.
Parent covenants and agrees that, between the date of this Agreement and the earlier of the Effective Time and the date, if any, on which this Agreement is terminated in accordance with
Section 7.1
, except (A) as may be required by Law, (B) as may be agreed in writing by the Company (which consent shall not be
unreasonably withheld, delayed or conditioned), (C) as may be expressly contemplated or permitted pursuant to this Agreement or (D) as set forth in
Section 5.2 of the Parent Disclosure Letter
, (x) Parent shall conduct its business in the ordinary course of business and in a manner
consistent with past practice and, to the extent consistent therewith, use reasonable best efforts to preserve its assets and business organization and maintain its existing relationships with
material customers, suppliers, distributors, regulators and business partners, and (y) Parent shall not, directly or indirectly:
(a) amend
the Parent Organizational Documents in a manner that would be adverse to the Company or its stockholders or would, or would reasonably be expected to, have the
effect of delaying or preventing the consummation of the Merger or the other transactions contemplated by this Agreement;
(b) increase
the size of the Parent Board;
(c) except
with respect to quarterly cash dividends paid in the ordinary course, consistent with past practice, subject to increase by no more than twenty-five percent (25%)
on a quarterly basis, declare, set aside, authorize, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to its capital stock or other equity
interests;
(d) adopt
a plan of complete or partial liquidation or dissolution;
(e) adjust,
split, combine, subdivide or reclassify Parent's capital stock; or
(f) issue
or sell any shares of Parent Common Stock representing more than five percent (5%) of the issued and outstanding shares of Parent Common Stock as of the date of
this Agreement;
provided
,
however
, that Parent may issue or sell shares of Parent Common Stock pursuant
to Parent Equity Awards, the Parent 2015 Long-Term Incentives Plan, the Parent Employee Stock Purchase Plan and any other Parent Benefit Plan; or
(g) enter
into any agreement to do, or adopt any resolutions in support of, any of the foregoing.
Section 5.3
Preparation of the Form S-4 and the Joint Proxy Statement; Stockholder Meetings
.
(a) As
promptly as practicable after the execution of this Agreement (but in any event, no more than thirty (30) days following the date hereof, unless the parties
otherwise agree to another time period), Parent and the Company shall jointly prepare, and Parent and the Company, as applicable, shall cause to be filed with the SEC the Joint Proxy Statement in
preliminary form. Parent shall prepare (and consider the Company's comments in good faith) and cause to be filed with the SEC within thirty (30) days after the execution of this Agreement, the
Form S-4, in which the Joint Proxy Statement will be included as a prospectus, in connection with the registration under the Securities Act of the Parent Common Stock to be issued in the
Merger. Each of Parent and the Company shall use its reasonable best efforts to (i) cause the Form S-4 and the Joint Proxy Statement to comply with the applicable rules and regulations
promulgated by the SEC, (ii) have the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing (including by responding to comments from the
SEC), and, prior to the effective date of the Form S-4, take all action reasonably required to be taken under any applicable state securities Laws in connection with the Parent Stock Issuance
and (iii) keep the Form S-4 effective through the Closing Date in order to permit the consummation of the Merger. Each of Parent and
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the
Company shall furnish all information as may be reasonably requested by the other in connection with any such action and the preparation, filing and distribution of the Form S-4 and the
Joint Proxy Statement. As promptly as practicable after the Form S-4 shall have become effective, each of Parent and the Company shall use its reasonable best efforts to cause the Joint Proxy
Statement to be mailed to its respective stockholders. No filing of, or amendment or supplement to, the Form S-4 will be made by Parent, and no filing of, or amendment or supplement to, the
Joint Proxy Statement will be made by Parent or the Company, in each case without providing the other party with a reasonable opportunity to review and comment thereon. If, at any time prior to the
Effective Time, any information relating to Parent of the Company or any of their respective Affiliates, directors or officers, should be discovered by Parent or the Company which should be set forth
in an amendment or supplement to either the Form S-4 or the Joint Proxy Statement, so that either such document would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the circumstances under which they 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 prepared and, following a reasonable opportunity for the other party (and its counsel) to review
and comment on such amendment or supplement, promptly filed with the SEC and, to the extent required by applicable Law, disseminated to the stockholders of Parent and the Company. Subject to
applicable Law, each party shall notify the other promptly of the time when the Form S-4 has become effective, of the issuance of any stop order or suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for offering or sale in any jurisdiction, or of the receipt of any comments from the SEC or the staff of the SEC and of any request by the SEC or
the staff of the SEC for amendments or supplements to the Joint Proxy Statement or the Form S-4 or for additional information and shall supply each other with copies of all correspondence
between either party or any of its Representatives, on the one hand, and
the SEC or its staff, on the other hand, with respect to the Joint Proxy Statement, the Form S-4 or the Merger.
(b) Subject
to the earlier termination of this Agreement in accordance with
Section 7.1
, the Company shall, as soon as
practicable following the effectiveness of the Form S-4, duly call, give notice of, convene (on a date selected by the Company in consultation with Parent, which date is intended to be the date
of the Parent Stockholders' Meeting) and hold a meeting of its stockholders (the "
Company Stockholders' Meeting
") for the purpose of seeking the Company
Stockholder Approval, and shall submit such proposal to such holders at the Company Stockholders' Meeting and shall not submit any other proposal to such holders in connection with the Company
Stockholders' Meeting without the prior written consent of Parent. The Company in consultation with Parent shall set a record date for Persons entitled to notice of, and to vote at, the Company
Stockholders' Meeting and shall not change such record date without the prior written consent of Parent and shall not adjourn or otherwise postpone or delay such Company Stockholders' Meeting without
the prior written consent of Parent. If the Company Board has not made a Company Adverse Recommendation Change, the Company shall, through the Company Board, make the Company Recommendation, and shall
include such Company Recommendation in the Joint Proxy Statement, and use its reasonable best efforts to (i) solicit from its stockholders proxies in favor of the adoption of this Agreement and
(ii) take all other action necessary or advisable to secure the Company Stockholder Approval. Notwithstanding any Company Adverse Recommendation Change, unless this Agreement is terminated in
accordance with its terms, the obligations of the parties hereunder shall continue in full force and effect and such obligations shall not be affected by the commencement, public proposal, public
disclosure or communication to the Company of any Company Acquisition Proposal (whether or not a Company Superior Proposal).
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(c) Subject
to the earlier termination of this Agreement in accordance with
Section 7.1
, Parent shall, as soon as
practicable following the effectiveness of the Form S-4, duly call, give notice of, convene (on a date selected by Parent in consultation with the Company, which date is intended to be the date
of the Company Stockholders' Meeting) and hold a meeting of its stockholders (the "
Parent Stockholders' Meeting
") for the purpose of seeking the Parent
Stockholder Approval, and shall submit such proposal to such holders at the Parent Stockholders' Meeting and shall not submit any other proposal to such holders in connection with the Parent
Stockholders' Meeting without the prior written consent of the Company. Parent in consultation with the Company shall set a record date for Persons entitled to notice of, and to vote at, the Parent
Stockholders' Meeting and shall not change such record date without the prior written consent of the Company and shall not adjourn or otherwise postpone or delay such Parent Stockholders' Meeting
without the prior written consent of the Company. If the Parent Board has not made a Parent Adverse Recommendation Change, Parent shall, through the Parent Board, make the Parent Recommendation, and
shall include such Parent Recommendation in the Joint Proxy Statement, and use its reasonable best efforts to (i) solicit from its stockholders proxies in favor of the Parent Stock Issuance and
(ii) take all other action necessary or advisable to secure the Parent Stockholder Approval. Notwithstanding any Parent Adverse Recommendation Change, unless this Agreement is terminated in
accordance with its terms, the obligations of the parties hereunder shall continue in full force and effect and such obligations shall not be affected by the commencement,
public proposal, public disclosure or communication to Parent of any Parent Acquisition Proposal (whether or not a Parent Superior Proposal).
(d) The
Company and Parent will use their respective reasonable best efforts to hold the Company Stockholders' Meeting and the Parent Stockholders' Meeting on the same date
and as soon as practicable after the date of this Agreement.
Section 5.4
Appropriate Action; Consents; Filings
.
(a) Subject
to the terms and conditions of this Agreement, the parties hereto will cooperate with each other and use (and will cause their respective Subsidiaries to use)
their respective reasonable best efforts to consummate the transactions contemplated by this Agreement and to cause the conditions to the Merger set forth in
Article VI
to be satisfied as promptly
as reasonably practicable, including using reasonable best efforts to accomplish the following as promptly
as reasonably practicable: (i) the obtaining of all actions or non-actions, consents, approvals, registrations, waivers, permits, authorizations, orders, expirations or terminations of waiting
periods, and other confirmations from any Governmental Authority or other Person that are or may become necessary, proper or advisable in connection with the consummation of the transactions
contemplated by this Agreement, including the Merger; (ii) the preparation and making of all registrations, filings, forms, notices, petitions, statements, submissions of information,
applications and other documents (including filings with Governmental Authorities) that are or may become necessary, proper or advisable in connection with the consummation of the transactions
contemplated by this Agreement, including the Merger; (iii) the taking of all steps as may be necessary, proper or advisable to obtain an approval from, or to avoid a Proceeding by, any
Governmental Authority or other Person in connection with the consummation of the transactions contemplated by this Agreement, including the Merger; (iv) the defending of any lawsuits or other
Proceedings, whether judicial or administrative, challenging this Agreement or that would otherwise prevent or materially delay the consummation of the transactions contemplated by this Agreement,
including the Merger, performed or consummated by each party in accordance with the terms of this Agreement, including seeking to have any stay or temporary restraining order entered by any court or
other Governmental Authority vacated or reversed; and (v) the execution and delivery of any additional instruments that are or may become reasonably necessary, proper or advisable to consummate
the transactions contemplated by this Agreement,
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including
the Merger, and to carry out fully the purposes of this Agreement. Each of the parties hereto shall, in consultation and cooperation with the other parties and as promptly as reasonably
practicable (and in no event later than ten (10) Business Days following the date that this Agreement is executed),
make and not withdraw (without the other parties' consent) its respective filings under the HSR Act, and thereafter make any other applications and filings as reasonably determined by the Company and
Parent under other applicable Antitrust Laws with respect to the transactions contemplated by this Agreement as promptly as practicable, but in no event later than as required by Law. Parent shall pay
all filing fees and other charges for the filings required under any Antitrust Law by the Company and Parent. Notwithstanding anything to the contrary contained in this Agreement, without the prior
written consent of Parent, none of the Company or any of its Subsidiaries or Affiliates will grant or offer to grant any accommodation or concession (financial or otherwise), or make any payment, to
any third party in connection with seeking or obtaining its consent (such consent not to be unreasonably withheld, conditioned or delayed) to the transactions contemplated by this Agreement.
(b) In
connection with and without limiting the efforts referenced in this
Section 5.4
, each of the parties hereto
will (i) furnish to the other such necessary information and reasonable assistance as the other may request in connection with the preparation of any governmental filings, submissions or other
documents; (ii) give the other reasonable prior notice of any such filing, submission or other document and, to the extent reasonably practicable, of any communication with or from any
Governmental Authority regarding the transactions contemplated by this Agreement, and permit the other to review and discuss in advance, and consider in good faith the views, and secure the
participation, of the other in connection with any such filing, submission, document or communication; (iii) and cooperate in responding as promptly as reasonably practicable to any
investigation or other inquiry from a Governmental Authority or in connection with any Proceeding initiated by a Governmental Authority or private party, including immediately informing the other
party of any such investigation, inquiry or Proceeding, and consulting in advance before making any presentations or submissions to a Governmental Authority, or, in connection with any Proceeding
initiated by a private party, to any other Person. In addition, each of the parties hereto will give reasonable prior notice to and consult with the other in advance of any meeting, conference or
substantive communication with any Governmental Authority, or, in connection with any Proceeding by a private party, with any other Person, and to the extent not prohibited by applicable Law or by the
applicable Governmental Authority or other Person, and to the extent reasonably practicable, not participate or attend any meeting or conference, or engage in any substantive communication, with any
Governmental Authority or such other Person in respect of the transactions contemplated by this Agreement without the other party, and in the event one party is prohibited from, or unable to
participate, attend or engage in, any such meeting, conference or substantive communication, keep such party apprised with respect thereto. Each party shall furnish to the other copies of all
substantive filings, submissions, correspondence and communications between it and its Affiliates and their respective Representatives, on the one hand, and any Governmental Authority or members of
any Governmental Authority's staff (or any other Person in connection with any Proceeding initiated by a private party), on the other hand, with respect to the transactions contemplated by this
Agreement. Each party may, as it deems advisable and necessary, reasonably designate material provided to the other party as "Outside Counsel Only Material," and also may redact the material as
necessary to (A) remove personally sensitive information; (B) remove references concerning valuation, (C) comply with contractual arrangements, (D) address legal privilege
or other confidentiality concerns, or (E) comply with applicable Law.
(c) The
parties shall consult with each other with respect to obtaining all permits and Consents necessary to consummate the transactions contemplated by this Agreement,
including the Merger.
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(d) Notwithstanding
anything in this Agreement to the contrary, none of Parent or any of its Affiliates shall be required to agree to or proffer to sell, divest, lease,
license, transfer, dispose of or otherwise encumber or impair Parent's or any of its Affiliates' ability to own or operate any assets or properties of Parent or any of its Affiliates (including for
the avoidance of doubt, any equity or other interests in the Company) or any assets or properties of the Company or any of its Affiliates if such action would require the divestiture or holding
separate (or any other remedy) of or with respect to any assets of Parent, the Company or any of their Affiliates or Subsidiaries representing, in the aggregate, more than $175,000,000 of annual
revenue generated between January 1, 2015 and December 31, 2015.
(e) Parent
and Merger Sub agree that, between the date of this Agreement and the earlier of the Effective Time and the termination of this Agreement in accordance with
Section 7.1
, each of Parent and Merger
Sub shall not, and shall ensure that none of their Subsidiaries shall, consummate, or enter into any
agreement providing for, any acquisition, divestiture or merger that would reasonably be expected to materially delay or prevent the consummation of the transactions contemplated by this Agreement.
Section 5.5
Access to Information; Confidentiality.
(a) Upon
reasonable notice, the Company shall (and shall cause each of its Subsidiaries to) afford reasonable access to Parent's Representatives, during normal business
hours and upon reasonable notice throughout the period from the date of this Agreement to the Effective Time (or until the earlier termination of this Agreement in accordance with
Section 7.1
), to
the personnel, advisors, properties, books and records of the Company and its Subsidiaries and, during such period, shall (and
shall cause each of its Subsidiaries to) furnish reasonably promptly to such Representatives all information concerning the business, properties and personnel of the Company and its Subsidiaries, and
to provide copies thereof, as may reasonably be requested;
provided, however
, that nothing herein shall require the Company or any of its Subsidiaries
to disclose any information to Parent or Merger Sub if such disclosure would, in the reasonable judgment of the Company, (i) violate applicable Law or the provisions of any agreement to which
the Company or any of its Subsidiaries is a party or (ii) jeopardize any attorney-client or other legal privilege;
provided
,
further
,
however
, that in each such case, the Company shall cooperate with Parent to enable Parent and
Parent's Representatives to enter into appropriate confidentiality, joint defense or similar documents or arrangements so that Parent and Parent's Representatives may have access to such information.
No investigation or access permitted pursuant to this
Section 5.5(a)
shall affect or be deemed to modify any representation, warranty, covenant
or agreement made by the Company hereunder. All information furnished by the Company, its Subsidiaries and the Company's officers, employees and other Representatives pursuant to this
Section 5.5(a)
shall be kept confidential in accordance with the Confidentiality Agreement.
(b) Upon
reasonable notice, Parent shall (and shall cause each of its Subsidiaries and Merger Sub to) afford to Representatives of the Company reasonable access, during
normal business hours and upon reasonable notice throughout the period from the date of this Agreement the Effective Time (or until the earlier termination of this Agreement in accordance with
Section 7.1
), to the personnel, advisors, properties, books and records of Parent and its Subsidiaries and, during such period, shall (and shall
cause each of its Subsidiaries to) furnish reasonably promptly to such Representatives all information concerning the business, properties and personnel of Parent and its Subsidiaries, and to provide
copies thereof, as may reasonably be requested;
provided
,
however
, that nothing herein shall require
Parent or any of its Subsidiaries to disclose any information to the Company if such disclosure would, in the reasonable judgment of Parent, (i) violate applicable Law or the provisions of any
agreement to which Parent or any of its Subsidiaries is a party or (ii) jeopardize any attorney-client or other legal privilege;
provided
,
further
,
however
, that in each such case, Parent shall cooperate with the Company to enable the Company
and the Company's
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Representatives
to enter into appropriate confidentiality, joint defense or similar documents or arrangements so that the Company and the Company's Representatives may have access to such information.
No investigation or access permitted pursuant to this
Section 5.5(b)
shall affect or be deemed to modify any representation, warranty, covenant
or agreement made by Parent or Merger Sub hereunder. All information furnished by the Company, its Subsidiaries, Merger Sub and Parent's officers, employees and other Representatives pursuant to this
Section 5.5(b)
shall be kept confidential in accordance with the Confidentiality Agreement.
Section 5.6
No Solicitation by the Company.
(a) From
the date of this Agreement until the earlier of the Effective Time and the termination of this Agreement in accordance with
Section 7.1
, except as provided in
Section 5.6(b)
or
Section 5.6(d)
, (i) the Company shall immediately cease, and shall instruct and use its reasonable best efforts to cause its officers,
directors and other Representatives to cease, and cause to be terminated all existing discussions, negotiations and communications with any Persons or entities with respect to any Company Acquisition
Proposal (other than the transactions contemplated by this Agreement); (ii) the Company shall not, and shall not authorize or permit any of its Representatives to, directly or indirectly
through another Person, (A) initiate, seek, solicit, knowingly encourage (including by way of furnishing any non-public information) or knowingly induce or take any other action which would
reasonably be expected to lead to a Company Acquisition Proposal, (B) engage in negotiations or discussions with, or provide any non-public information or non-public data to, any Person (other
than Parent or any of its Affiliates or Representatives) relating to any Company Acquisition Proposal or grant any waiver or release under any standstill or other agreement (except that if the Company
Board determines in good faith that the failure to grant any waiver or release would be inconsistent with its fiduciary duties under applicable Law, the Company may waive any such standstill provision
in order to permit a third party to make a Company Acquisition Proposal) or (C) resolve to do any of the foregoing; (iii) the Company shall not provide and shall, within
one (1) Business Day of the date of this Agreement, terminate access of any third party to any data room (virtual or actual) containing any of the Company's information; and
(iv) within two (2) Business Days after the date of this Agreement, the Company shall demand the return or destruction of all confidential, non-public information and materials and all
other information and materials related to any Company Acquisition Proposal that have been provided to third parties that have entered into confidentiality agreements relating to a possible Company
Acquisition Proposal with the Company or any of its Subsidiaries.
(b) Notwithstanding
the foregoing, at any time prior to obtaining the Company Stockholder Approval, if the Company receives a bona fide written Company Acquisition Proposal
from a third party that was not initiated, sought, solicited, knowingly encouraged, knowingly induced or otherwise procured in violation of this Agreement, then the Company may (i) contact the
Person who has made such
Company Acquisition Proposal in order to clarify the terms of such Company Acquisition Proposal so that the Company Board (or any committee thereof) may inform itself about such Company Acquisition
Proposal, (ii) furnish information concerning its business, properties or assets to such Person pursuant to a confidentiality agreement with confidentiality terms that, taken as a whole, are
not materially less favorable to the Company than those contained in the Confidentiality Agreement and (iii) negotiate and participate in discussions and negotiations with such Person
concerning such Company Acquisition Proposal, in the case of clauses (ii) and (iii), if the Company Board determines in good faith that such Company Acquisition Proposal constitutes or is
reasonably likely to constitute or result in a Company Superior Proposal. The Company (A) shall promptly (and in any case within twenty-four (24) hours) provide Parent notice
(1) of the receipt of any Company Acquisition Proposal, which notice shall include a complete, unredacted copy of such Company Acquisition
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Proposal,
and (2) of any inquiries, proposals or offers received by, any requests for non-public information from, or any discussions or negotiations initiated or continued (or sought to be
initiated or continued) with, the Company or any of its Representatives concerning a Company Acquisition Proposal, and disclose the identity of the other party (or parties) and the material terms of
such inquiry, offer, proposal or request and, in the case of written materials, provide copies of such materials, (B) shall promptly (and in any case within
twenty-four (24) hours) make available to Parent copies of all written materials provided by the Company to such party but not previously made available to Parent and (C) shall
keep Parent informed on a reasonably prompt basis (and, in any case, within twenty-four (24) hours of any significant development) of the status and material details (including
amendments and proposed amendments) of any such Company Acquisition Proposal or other inquiry, offer, proposal or request.
(c) Except
as permitted by
Section 5.6(d)
or
Section 5.6(e)
,
neither the Company Board nor any committee thereof shall (i) withdraw, qualify or modify, or publicly propose to withdraw, qualify or modify, the Company Recommendation, in each case in a
manner adverse to Parent or Merger Sub, (ii) approve or recommend any Company Acquisition Proposal or (iii) adopt or approve, or publicly propose to adopt or approve, or allow the
Company to execute or enter into, any binding or non-binding letter of intent, agreement in principle, memorandum of understanding, merger agreement, acquisition agreement, option agreement, joint
venture agreement, partnership agreement or other agreement, commitment, arrangement or understanding contemplating or otherwise in connection with, or that is intended to or would reasonably be
expected to lead to, any Company Acquisition Proposal (other than a confidentiality agreement pursuant to
Section 5.6(b)
) (any action described
in clauses (i) and (ii) of this sentence being referred to as a "
Company Adverse Recommendation Change
").
(d) If,
at any time prior to the receipt of the Company Stockholder Approval, the Company Board receives a Company Acquisition Proposal that the Company Board determines in
good faith constitutes
a Company Superior Proposal that was not initiated, sought, solicited, knowingly encouraged, knowingly induced or otherwise procured in violation of this Agreement, the Company Board may
(i) effect a Company Adverse Recommendation Change or (ii) cause the Company to terminate this Agreement pursuant to
Section 7.1(c)(iii)
in order to enter into a definitive agreement
providing for such Company Superior Proposal if (A) the Company Board
determines in good faith that the failure to take such action would be inconsistent with its fiduciary duties under applicable Law; (B) the Company has notified Parent in writing that it
intends to effect a Company Adverse Recommendation Change or terminate this Agreement; (C) if applicable, the Company has provided Parent a copy of the proposed definitive agreements between
the Company and the Person making such Company Superior Proposal; (D) for a period of four (4) days following the notice delivered pursuant to clause (B) of this
Section 5.6(d)
, the
Company shall have discussed and negotiated in good faith and made the Company's Representatives available to discuss and
negotiate in good faith (in each case to the extent Parent desires to negotiate) with Parent's Representatives any proposed modifications to the terms and conditions of this Agreement or the
transactions contemplated by this Agreement so that the failure to take such action would no longer be inconsistent with the Company Board's fiduciary duties under applicable Law (it being understood
and agreed that any amendment to any material term or condition of any Company Superior Proposal shall require a new notice and a new negotiation period that shall expire on the later to occur of
(1) two (2) days following delivery of such new notice from the Company to Parent and (2) the expiration of the original four (4)-day period described in clause (D) above);
and (E) no earlier than the end of such negotiation period, the Company Board shall have determined in good faith, after considering the terms of any proposed amendment or modification to this
Agreement, that (x) the Company Acquisition Proposal that is the subject of the notice described in clause (B) above still constitutes a Company Superior
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Proposal
and (y) the failure to take such action would still be inconsistent with its fiduciary duties under applicable Law.
(e) Other
than in connection with a Company Superior Proposal (which shall be subject to
Section 5.6(d)
and shall not
be subject to this
Section 5.6(e)
), prior to obtaining the Company Stockholder Approval the Company Board may take any action in response to a
Company Intervening Event prohibited by clause (i) of
Section 5.6(c)
, only if (i) the Company Board determines in good faith that
the failure to take such action would be inconsistent with its fiduciary duties under applicable Law; (ii) the Company has notified Parent in writing that it intends to effect such a Company
Adverse Recommendation Change pursuant to this
Section 5.6(e)
(which notice shall specify the facts and circumstances providing the basis of the
Company Intervening Event and for the Company Board's determination to effect a Company Adverse Recommendation Change in reasonable detail); (iii) for a period of four (4) days following
the notice delivered pursuant to clause (ii) of this
Section 5.6(e)
, the Company shall have discussed and negotiated in good faith and
made the Company's Representatives available to discuss and negotiate in good faith (in each case to the extent Parent desires to negotiate), with Parent's Representatives any proposed modifications
to the terms and conditions of this Agreement or the
transactions contemplated by this Agreement so that the failure to take such action would no longer be inconsistent with the Company Board's fiduciary duties under applicable Law (it being understood
and agreed that any material change to the relevant facts and circumstances shall require a new notice and a new negotiation period that shall expire on the later to occur of (A) two
(2) days following delivery of such new notice from the Company to Parent and (B) the expiration of the original four (4)-day period described above in this clause (iii)); and
(iv) no earlier than the end of such negotiation period, the Company Board shall have determined in good faith, after considering the terms of any proposed amendment or modification to this
Agreement, that the failure to take such action would still be inconsistent with its fiduciary duties under applicable Law.
(f) Nothing
contained in this Agreement shall prohibit the Company or the Company Board from (i) disclosing to its stockholders a position contemplated by
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, or from issuing a "stop, look and listen" statement pending disclosure of its position thereunder or (ii) making any
disclosure to its stockholders if the Company Board determines in good faith that the failure of the Company Board to make such disclosure would be inconsistent with its fiduciary duties under
applicable Law;
provided
,
however
, that (1) in no event shall this
Section 5.6(f)
affect the
obligations specified in
Section 5.6(d)
or
5.6(e)
and (2) any such disclosure (other than issuance by the Company of a "stop, look and listen" or
similar communication of the type
contemplated by Rule 14d-9(f) under the Exchange Act) that addresses or relates to the approval, recommendation or declaration of advisability by the Company Board with respect to this
Agreement or a Company Acquisition Proposal shall be deemed to be a Company Adverse Recommendation Change unless the Company Board in connection with such communication publicly states that its
recommendation with respect to this Agreement has not changed or refers to the prior recommendation of the Company Board, without disclosing any Company Adverse Recommendation Change.
Section 5.7
No Solicitation by Parent.
(a) From
the date of this Agreement until the earlier of the Effective Time and the termination of this Agreement in accordance with
Section 7.1
, except as provided in
Section 5.7(b)
or
Section 5.7(d)
, (i) Parent shall immediately cease, and shall instruct and use its reasonable best efforts to cause its officers,
directors and other Representatives to cease, and cause to be terminated all existing discussions, negotiations and communications with any Persons or entities with respect to any Parent Acquisition
Proposal (other than the transactions contemplated by this Agreement); (ii) Parent shall not, and shall not authorize or permit any of its Representatives to,
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directly
or indirectly through another Person, (A) initiate, seek, solicit, knowingly encourage (including by way of furnishing any non-public information), or knowingly induce or take any
other action which would reasonably be expected to lead to a Parent Acquisition Proposal, (B) engage in negotiations or discussions with, or provide any non-public information or non-public
data to, any Person (other than the Company or any of its Affiliates or Representatives) relating to any Parent Acquisition Proposal or grant any waiver or release under any standstill or other
agreement (except that if the Parent Board determines in good faith that the failure to grant any waiver or release would be inconsistent with its fiduciary duties under applicable Law, Parent may
waive any such standstill provision in order to permit a third party to make a Parent Acquisition Proposal) or (C) resolve to do any of the foregoing; (iii) Parent shall not provide and
shall, within one (1) Business Day of the date of this Agreement, terminate access of any third party to any data room (virtual or actual) containing any of Parent's information;
and (iv) within two (2) Business Days after the date of this Agreement, Parent shall demand the return or destruction of all confidential, non-public information and materials and
all other information and materials related to any Parent Acquisition Proposal that have been provided to third parties that have entered into confidentiality agreements relating to a possible Parent
Acquisition Proposal with Parent or any of its Subsidiaries.
(b) Notwithstanding
the foregoing, at any time prior to obtaining the Parent Stockholder Approval, if Parent receives a bona fide written Parent Acquisition Proposal from a
third party that was not initiated, sought, solicited, knowingly encouraged, knowingly induced or otherwise procured in violation of this Agreement, then Parent may (i) contact the Person who
has made such Parent Acquisition Proposal in order to clarify the terms of such Parent Acquisition Proposal so that the Parent Board (or any committee thereof) may inform itself about such Parent
Acquisition Proposal, (ii) furnish information concerning its business, properties or assets to such Person pursuant to a confidentiality agreement with confidentiality terms that, taken as a
whole, are not materially less favorable to Parent than those contained in the Confidentiality Agreement and (iii) negotiate and participate in discussions and negotiations with such Person
concerning such Parent Acquisition Proposal, in the case of clauses (ii) and (iii), if the Parent Board determines in good faith that such Parent Acquisition Proposal constitutes or is
reasonably likely to constitute or result in a Parent Superior Proposal. Parent (A) shall promptly (and in any case within twenty-four (24) hours) provide the Company notice
(1) of the receipt of any Parent Acquisition Proposal, which notice shall include a complete, unredacted copy of such Parent Acquisition Proposal, and (2) of any inquiries, proposals or
offers received by, any requests for non-public information from, or any discussions or negotiations initiated or continued (or sought to be initiated or continued) with, Parent or any of its
Representatives concerning a Parent Acquisition Proposal, and disclose the identity of the other party (or parties) and the material terms of such inquiry, offer, proposal or request and, in the case
of written materials, provide copies of such materials, (B) shall promptly (and in any case within twenty-four (24) hours) make available to the Company copies of all written materials
provided by Parent to such party but not previously made available to the Company and (C) shall keep the Company informed on a reasonably prompt basis (and, in any case, within twenty-four
(24) hours of any significant development) of the status and material details (including amendments and proposed amendments) of any such Parent Acquisition Proposal or other inquiry, offer,
proposal or request.
(c) Except
as permitted by
Section 5.7(d)
or
Section 5.7(e)
,
neither the Parent Board nor any committee thereof shall (i) withdraw, qualify or modify, or publicly propose to withdraw, qualify or modify, Parent Recommendation, in each case in a manner
adverse to the Company, (ii) approve or recommend any Parent Acquisition Proposal or (iii) adopt or approve, or publicly propose to adopt or approve, or allow Parent to execute or enter
into, any binding or non-binding letter of intent, agreement in principle, memorandum of understanding, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership
agreement or other agreement,
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commitment,
arrangement or understanding contemplating or otherwise in connection with, or that is intended to or would reasonably be expected to lead to, any Parent Acquisition Proposal (other than a
confidentiality agreement pursuant to
Section 5.7(b)
) (any action described in clauses (i) and (ii) of this sentence being referred
to as a "
Parent Adverse Recommendation Change
").
(d) If,
at any time prior to the receipt of Parent Stockholder Approval, the Parent Board receives a Parent Acquisition Proposal that the Parent Board determines in good
faith constitutes a Parent Superior Proposal that was not initiated, sought, solicited, knowingly encouraged, knowingly induced or otherwise procured in violation of this Agreement, the Parent Board
may (i) effect a Parent Adverse Recommendation Change or (ii) cause Parent to terminate this Agreement pursuant to
Section 7.1(d)(iii)
in order to enter into a definitive agreement
providing for such Parent Superior Proposal if (A) the Parent Board
determines in good faith that the failure to take such action would be inconsistent with its fiduciary duties under applicable Law; (B) Parent has notified the Company in writing that it
intends to effect a Parent Adverse Recommendation Change or terminate this Agreement; (C) if applicable, Parent has provided the Company a copy of the proposed definitive agreements between
Parent and the Person making such Parent Superior Proposal; (D) for a period of four (4) days following the notice delivered pursuant to clause (B) of this
Section 5.7(d)
, Parent
shall have discussed and negotiated in good faith and made Parent's Representatives available to discuss and negotiate in
good faith (in each case to the extent Company desires to negotiate) with the Company's Representatives any proposed modifications to the terms and conditions of this Agreement or the transactions
contemplated by this Agreement so that the failure to take such action would no longer be inconsistent with the Parent Board's fiduciary duties under applicable Law (it being understood and agreed
that any amendment to any material term or condition of any Parent Superior Proposal shall require a new notice and a new negotiation period that shall expire on the later to occur of (1) two
(2) days following delivery of such new notice from Parent to the Company and (2) the expiration of the original four (4)-day period described in clause (D) above); and
(E) no earlier than the end of such negotiation period, the Parent Board shall have determined in good faith, after considering the terms of any proposed amendment or modification to this
Agreement, that (x) the Parent Acquisition Proposal that is the subject of the notice described in clause (B) above still constitutes a Parent Superior Proposal and (y) the
failure to take such action would still be inconsistent with its fiduciary duties under applicable Law.
(e) Other
than in connection with a Parent Superior Proposal (which shall be subject to
Section 5.7(d)
and shall not
be subject to this
Section 5.7(e)
), prior to obtaining Parent Stockholder Approval the Parent Board may take any action in response to a Parent
Intervening Event prohibited by clause (i) of
Section 5.7(c)
, only if (i) the Parent Board determines in good faith that the
failure to take such action would be inconsistent with its fiduciary duties under applicable Law; (ii) Parent has notified the Company in writing that it intends to effect such a Parent Adverse
Recommendation Change pursuant to this
Section 5.7(e)
(which notice shall specify the facts and circumstances providing the basis of the Parent
Intervening Event and for the Parent Board's determination to effect a Parent Adverse Recommendation Change in reasonable detail); (iii) for a period of four (4) days following the
notice delivered pursuant to clause (ii) of this
Section 5.7(e)
, Parent shall have discussed and negotiated in good faith and made
Parent's Representatives available to discuss and negotiate in good faith (in each case to the extent Company desires to negotiate), with Company's Representatives any proposed modifications to the
terms and conditions of this Agreement or the transactions contemplated by this Agreement so that the failure to take such action would no longer be inconsistent with the Parent Board's fiduciary
duties under applicable Law (it being understood and agreed that any material change to the relevant facts and circumstances shall require a new notice and a new negotiation period that shall expire
on the later to occur of (A) two (2) days following delivery of such new notice from Parent to the Company and (B) the expiration of the original four (4)-day period described
above in this clause (iii)); and (iv) no earlier than the end of such negotiation period, the Parent Board shall have determined in good faith, after considering the terms of any
proposed amendment or modification to this Agreement, that the failure to take such action would still be inconsistent with its fiduciary duties under applicable Law.
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(f) Nothing
contained in this Agreement shall prohibit Parent or the Parent Board from (i) disclosing to its stockholders a position contemplated by
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, or from issuing a "stop, look and listen" statement pending disclosure of its position thereunder or (ii) making any
disclosure to its stockholders if the Parent Board determines in good faith that the failure of the Parent Board to make such disclosure would be inconsistent with its fiduciary duties under
applicable Law;
provided
,
however
, that (1) in no event shall this
Section 5.7(f)
affect the
obligations specified in
Section 5.7(d)
or
Section 5.7(e)
and (2) any such disclosure (other than issuance by Parent of a "stop, look and
listen" or similar communication of the
type contemplated by Rule 14d-9(f) under the Exchange Act) that addresses or relates to the approval, recommendation or declaration of advisability by the Parent Board with respect to this
Agreement or a Parent Acquisition Proposal shall be deemed to be a Parent Adverse Recommendation Change unless the Parent Board in connection with such communication publicly states that its
recommendation with respect to this Agreement has not changed or refers to the prior recommendation of the Parent Board, without disclosing any Parent Adverse Recommendation Change.
Section 5.8
Directors' and Officers' Indemnification and Insurance.
(a) Parent
and Merger Sub agree that all rights to indemnification and exculpation from liabilities, including advancement of expenses, for acts or omissions occurring at or
prior to the Effective Time now existing in favor of the current or former directors or officers of the Company (the "
D&O Indemnified Parties
") as
provided in the Certificate of Incorporation, the Bylaws or any indemnification Contract between such directors or officers and the Company (in each case, as in effect on the date of this Agreement)
shall survive the Merger and shall continue in full force and effect. For a period of six (6) years from the Effective Time, the Surviving Corporation shall, and Parent shall cause the
Surviving Corporation to, maintain in effect the exculpation, indemnification and advancement of expenses equivalent to the provisions of the Certificate of Incorporation and Bylaws as in effect
immediately prior to the Effective Time with respect to acts or omissions occurring prior to the Effective Time and shall not amend, repeal or otherwise modify any such provisions in any manner that
would adversely affect the rights thereunder of any D&O Indemnified Parties;
provided
,
however
, that all
rights to indemnification in respect of any action pending or asserted or any claim made within such period shall continue until the disposition of such action or resolution of such claim. From and
after the Effective Time, Parent shall guarantee and stand surety for, and shall cause the Surviving Corporation to honor, in accordance with their respective terms, each of the covenants contained in
this
Section 5.8
.
(b) Prior
to the Effective Time, the Company shall or, if the Company is unable to, Parent shall cause the Surviving Corporation as of or after the Effective Time to,
purchase a six (6)-year prepaid "tail" policy, with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under the Company's existing policies of
directors' and officers' liability insurance and fiduciary liability insurance, with respect to matters arising on or before the Effective Time (including in connection with this Agreement and the
transactions or actions contemplated by this Agreement), and Parent shall cause such policy to be maintained in full force and effect, for its full term, and cause all obligations thereunder to be
honored by the Surviving Corporation, and no other party shall have any further obligation to purchase or pay for insurance hereunder;
provided
,
however
,
that the Company shall not pay, and the Surviving Corporation shall not be required to pay, in excess of 300% of the last annual premium paid
by the Company prior to the date of this Agreement in respect of such "tail" policy. If the Company or the Surviving Corporation for any reason fail to obtain such "tail" insurance policies prior to,
as of or after the Effective Time, Parent shall, for a period of six (6) years from the Effective Time, cause the Surviving Corporation to maintain in effect the current policies of directors'
and officers' liability insurance and fiduciary liability insurance maintained by the Company with respect to
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matters
arising on or before the Effective Time;
provided
,
further
,
however
, that after the Effective Time, Parent
shall not be required to pay annual premiums in excess of 300% of the last annual premium paid by the
Company prior to the date of this Agreement in respect of the coverage required
to be obtained pursuant hereto, but in such case shall purchase as much coverage as reasonably practicable for such amount.
(c) The
covenants contained in this
Section 5.8
are intended to be for the benefit of, and shall be enforceable by,
each of the D&O Indemnified Parties and their respective heirs and shall not be deemed exclusive of any other rights to which any such Person is entitled, whether pursuant to Law, contract or
otherwise.
(d) In
the event that Parent or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, proper provision shall be made so that the successors or assigns of Parent or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this
Section 5.8
.
Section 5.9
Notification of Certain Matters.
Subject to applicable Law, the Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (a) the occurrence or
non-occurrence of any event whose occurrence or non-occurrence, as the case may be, would reasonably be expected to cause, in the case of the Company, any condition set forth in
Section 6.2
not to
be satisfied, or in the case of Parent, any condition set for the in
Section 6.3
not to be satisfied, at any time from the date of this Agreement to the Effective Time; (b) any notice or other
communication
received by such party from any Governmental Authority in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement, or from any Person alleging that the
consent of such Person is or may be required in connection with the Merger or the other transactions contemplated by this Agreement and (c) any claims, investigations or Proceedings commenced
or, to such party's Knowledge, threatened in writing against, relating to or involving or otherwise affecting such party or any of its Subsidiaries that relate to this Agreement, the Merger or the
other transactions contemplated by this Agreement. Notwithstanding anything in this Agreement to the contrary, no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties hereunder.
Section 5.10
Public Disclosure.
So long as this Agreement is in effect, neither Parent, nor the Company,
nor any of their respective Affiliates, will disseminate any press release or other
public announcement concerning this Agreement, the Merger or the other transactions contemplated by this Agreement, except as may be required by Law or the rules of a national securities exchange or
to the extent disclosed in or consistent with the Joint Proxy Statement or Form S-4, without the prior consent of each of the other parties hereto, which consent shall not be unreasonably
withheld, conditioned or delayed. The parties have agreed to the text of the joint press release announcing the execution of this Agreement. Notwithstanding the foregoing, without prior consent of the
other parties, each party (a) may communicate information that is not confidential information of any other party to financial analysts, investors and media representatives in a manner
consistent with its past practice in compliance with applicable Law and (b) may disseminate the information included in a press release or other document previously approved for external
distribution by the other parties. Notwithstanding any other provision of this Agreement, the requirements of this
Section 5.10
shall not apply
to (i) any such press release or public announcement if (A) the Company Board has effected any Company Adverse Recommendation Change in accordance with this Agreement or (B) the
Parent Board has effected a Parent Adverse Recommendation Change in accordance with this Agreement and (ii) any disclosure by the Company or Parent of any information concerning this Agreement,
the Merger or the other transactions contemplated by this Agreement in connection with a determination by (A) the Company in accordance with
Section 5.6(b)
or
Section 5.6(d)
that a Company Acquisition Proposal constitutes, or
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may
constitute, a Company Superior Proposal, (B) Parent in accordance with
Section 5.7(b)
of
Section 5.7(d)
that a Parent Acquisition Proposal
constitutes, or may constitute, a Parent Superior Proposal, or (C) any dispute between
the parties regarding this Agreement, the Merger or the transactions contemplated by this Agreement.
Section 5.11
Employee Benefits; Labor.
(a) For
purposes of this
Section 5.11
, (i) the term "
Covered
Employees
" shall mean employees who are actively employed by the Company or any of its Subsidiaries immediately prior to the Effective Time; and (ii) the term
"
Continuation Period
" shall mean the period beginning at the Effective Time and ending on December 31st of the year following the year in
which the Effective Time occurs.
(b) During
the Continuation Period, Parent shall, or shall cause a Subsidiary of Parent to, provide to the Covered Employees for so long as such Covered Employees remain
employees of Parent or any of its Subsidiaries during the Continuation Period, compensation (such term to include salary or base rate of compensation, annual cash bonus opportunities, commissions and
severance) and benefits that are in
the aggregate, no less favorable than the compensation (excluding any equity or equity-based compensation, retention, change of control, transaction or similar bonuses and nonqualified deferred
compensation) and benefits (excluding any defined benefit pension plan or retiree medical benefits) being provided by the Company or its Subsidiaries to Covered Employees immediately prior to the
Effective Time.
(c) In
the event any Covered Employee first becomes eligible to participate under any Parent Benefit Plan following the Effective Time, Parent shall, or shall cause a
Subsidiary of Parent to, for Covered Employees who become eligible during the calendar year including the Effective Time, use commercially reasonable efforts to (i) waive any preexisting
condition exclusions and waiting periods with respect to participation and coverage requirements applicable to any Covered Employee under any Parent Benefit Plan providing medical, dental or vision
benefits to the same extent such limitation would have been waived or satisfied under any similar Company Benefit Plan the Covered Employee participated in immediately prior to coverage under the
Parent Benefit Plan; and (ii) provide each Covered Employee with credit for any copayments and deductibles paid prior to the Covered Employee's coverage under any Parent Benefit Plan during the
plan year in which the Effective Time occurs, to the same extent such credit was given under any similar Company Benefit Plan that Covered Employee participated in immediately prior to coverage under
the Parent Benefit Plan, in satisfying any applicable deductible or out-of-pocket requirements under the Parent Benefit Plan for the plan year in which the Effective Time occurs.
(d) As
of the Effective Time, Parent shall recognize, or shall cause a Subsidiary of Parent to recognize, all service of each Covered Employee prior to the Effective Time,
to the Company (or any predecessor entities of the Company or any of its Subsidiaries) for vesting and eligibility purposes (but not for benefit accrual purposes under any defined benefit pension
plan) and for purposes of determining future vacation accruals and severance amounts to the same extent as such Covered Employee received, immediately before the Effective Time, credit for such
service under any similar Company Benefit Plan in which such Covered Employee participated immediately prior to the Effective Time;
provided
that
service of each Covered Employee prior to the Effective Times shall not be recognized for the purpose of any entitlement to participate in, or receive benefits with respect to, any
(i) non-elective employer contributions under any plan of Parent under Section 401(k) of the Code or (ii) Parent retiree medical program in which any Covered Employee participates
after the Effective Times. In no event shall anything contained in this
Section 5.11
result in any duplication of benefits for the same period of
service.
(e) In
the event that the employment of any of the Covered Employees specified on
Section 5.11(e) of the Company Disclosure
Letter
is terminated by the Company, Parent or a
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Subsidiary
of Parent other than for cause, as set forth in
Section 5.11(e) of the Company Disclosure Letter
, at or within a year following
Closing, Parent shall, or shall cause the Surviving Corporation to, provide severance benefits to such Covered Employee that are at least as favorable as those set forth on
Section 5.11(e) of the Company Disclosure
Letter
.
(f) Parent
shall cause the Surviving Corporation to perform the Company's obligations under the agreements set forth on
Section 5.11(f) of the
Company Disclosure Letter
subject to the terms of such agreements.
(g) The
Company and its Subsidiaries shall satisfy all legal or contractual requirements to provide notice to, or to carry out any consultation procedure with, any employee
or groups of employees of the Company or any of its Subsidiaries, or any labor or trade union, labor organization or works council, which is representing any employee of the Company or any of its
Subsidiaries, in connection with the transactions contemplated by this Agreement.
(h) After
the date of this Agreement and prior to the Effective Time, the Company (i) shall not terminate, except for cause, any of the employees of the Company or
any of its Subsidiaries listed on
Section 5.11(h) of the Company Disclosure Letter
, and (ii) shall notify Parent in writing as promptly as
practicable in the event that any employee listed on
Section 5.11(h) of the Company Disclosure Letter
has given, or has been given, notice of
termination of his or her employment.
(i) Parent
shall make grants of Parent cash retention awards ("
Parent Retention Awards
") to the Covered Employees listed on
Section 5.11(i) of the Company Disclosure
Letter
, with grant date values in the amounts set forth in the last column of such schedule, provided
that such Covered Employees are employees of Parent or a Subsidiary of Parent on the day following the Closing Date, which Parent Retention Awards shall vest 50% on the six-month anniversary of the
Closing Date and the remaining 50% on the first anniversary of the Closing Date;
provided
that the Covered Employee remains employed by Parent or a
Subsidiary of Parent through each such vesting date.
(j) The
parties hereto acknowledge and agree that all provisions contained in this
Section 5.11
with respect to
employees of the Company and its Subsidiaries are included for the sole benefit of the respective parties hereto and shall not create any right (i) in any other Person, including employees,
former employees, any participant or any beneficiary thereof, in any Company Benefit Plan, or (ii) to continued employment with the Company, Parent or their respective Subsidiaries or
Affiliates. Notwithstanding anything in this
Section 5.11
to the contrary, nothing in this Agreement, whether
express or implied, shall be treated as an amendment or other modification of any Company Benefit Plan or any other employee benefit plans of the Company, Parent or any of their respective
Subsidiaries or Affiliates or shall prohibit Parent or any of its Subsidiaries or Affiliates from amending or terminating any employee benefit plan.
Section 5.12
Merger Sub.
Parent will take all actions necessary to (a) cause Merger Sub to perform
its obligations under this Agreement and to consummate the Merger on the terms
and conditions set forth in this Agreement and (b) ensure that Merger Sub prior to the Effective Time shall not conduct any business, incur or guarantee any Indebtedness or make any
investments, other than as specifically contemplated by this Agreement.
Section 5.13
Rule 16b-3 Matters.
Prior to the Effective Time, Parent and the Company shall take
all such steps as may be reasonably necessary or advisable (to the extent permitted under
applicable Law and no-action letters issued by the SEC) to cause any dispositions of Company Common Stock (including derivative securities with respect to Company Common Stock) or acquisitions of
Parent Common Stock (including derivative securities with respect to Parent Common Stock) resulting from the transactions contemplated by this Agreement by each individual who is subject to the
reporting requirements of Section 16(a) of the Exchange Act with respect to the Company or will become subject
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to
such reporting requirements with respect to Parent, to be exempt under Rule 16b-3 promulgated under the Exchange Act, to the extent permitted by applicable Law.
Section 5.14
Repayment and Termination of Existing Credit Agreement.
At least one (1) Business Day
prior to the Closing Date, the Company shall deliver to Parent an executed copy of a customary payoff letter from the agents
under the Existing Credit Agreement in form and substance reasonably satisfactory to Parent relating to the repayment in full of all obligations thereunder or secured thereby, the termination of all
commitments in connection therewith and the release of all Liens securing the obligations thereunder (the "
Payoff Letter
"). The Company shall, and shall
cause its Subsidiaries to, deliver to Parent (or the agent under the Existing Credit Agreement, in the case of prepayment and termination notices) prior to the Closing, in form and substance
reasonably satisfactory to Parent, all the documents, filings and notices required for the termination of commitments under the Existing Credit Agreement and the release of all Liens securing the
obligations thereunder, including the filing of UCC releases, termination of control agreements, and delivery of possessory collateral, which shall in each case be subject to the occurrence of the
Closing and the repayment in full of all obligations then outstanding under the Existing Credit Agreement.
Section 5.15
Certain Tax Matters.
(a) Each
of the Company and Parent shall use its reasonable best efforts to obtain the Tax opinions described in
Section 6.2(e)
and
Section 6.3(e)
.
(b) Immediately
prior to Closing, the Company shall execute and deliver representation letters to Parent Tax Counsel, Company Tax Counsel and the Additional Tax Counsel (as
applicable) substantially in the form set forth in
Exhibit B
, with such changes, updates or refinements, jointly agreed to by each law firm that
is delivering an opinion described in
Sections 6.2(e)
or
6.3(e)
, as may be necessary to reflect
any changes in, or clarifications of, facts prior to the Closing (the "
Company Closing Representation Letter
").
(c) Immediately
prior to Closing, Parent shall execute and deliver representation letters to Parent Tax Counsel, Company Tax Counsel and the Additional Tax Counsel (as
applicable) substantially in the form set forth in
Exhibit C
, with such changes, updates or refinements, jointly agreed to by each law firm that
is delivering an opinion described in
Sections 6.2(e)
or
6.3(e)
, as may be necessary to reflect
any changes in, or clarifications of, facts prior to the Closing (the "
Parent Closing Representation Letter
").
(d) The
Company shall use its reasonable best efforts not to take or cause to be taken any action that would cause to be untrue (or fail to take or cause not to be taken any
action which inaction would cause to be untrue) any of the representations, warranties and covenants made in the Company Signing Representation Letter. As of the date of this Agreement, Company knows
of no reason why it would not able to deliver the Company Closing Representation Letter.
(e) Parent
shall use its reasonable best efforts not to take or cause to be taken any action that would cause to be untrue (or fail to take or cause not to be taken any
action which inaction would cause to be untrue) any of the representations, warranties and covenants made in the Parent Signing Representation Letter. As of the date of this Agreement, Parent knows of
no reason why it would not be able to deliver the Parent Closing Representation Letter.
(f) The
Company has received an opinion of Shearman & Sterling LLP, dated as of the date hereof, to the effect that, on the basis of the facts,
representations, assumptions, limitations and exclusions set forth or referred to in such opinion, the Merger will not cause the KLX External Spin-Off to fail to qualify for the KLX Spin-Off Tax
Treatment and such opinion has not been rescinded, revoked or modified. The parties acknowledge that in rendering the opinion described in this
Section 5.15(f)
, Shearman &
Sterling LLP has required and relied upon (and has incorporated by reference) reasonable and customary
representations, warranties and covenants, including the Parent Signing Representation Letter and the Company Signing Representation Letter.
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(g) Parent
has received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, dated as of the date hereof, to the effect that, on the basis of the facts,
representations, assumptions, limitations and exclusions set forth or referred to in such opinion, the Merger will not cause the KLX External Spin-Off to fail to qualify for the KLX Spin-Off Tax
Treatment and such opinion has not been rescinded, revoked or modified. The parties acknowledge that in rendering the opinion described in this
Section 5.15(g)
, Skadden, Arps, Slate,
Meagher & Flom LLP has required and relied upon (and has incorporated by reference)
reasonable and customary representations, warranties and covenants, including the Parent Signing Representation Letter and the Company Signing Representation Letter.
(h) The
Company shall deliver, or cause to be delivered, a copy of the KLX Closing Representation Letter, if any, to Parent prior to Closing;
provided
that Parent acknowledges and agrees that KLX is not
required to deliver a KLX Closing Representation Letter pursuant to the KLX TSA Amendment.
(i) Parent
and the Company shall use reasonable best efforts to jointly engage, promptly following the date hereof, one of the law firms set forth on Schedule 5.15(i)
or, if unable to engage any of such firms, such other law firm of recognized national standing expert in the matters at issue that is mutually acceptable to Parent and the Company (such selected firm,
the "
Additional Tax Counsel
") to serve as
the Additional Tax Counsel pursuant to this Agreement. Each of the Company and Parent agrees to pay fifty percent (50%) of the fees and expenses of the Additional Tax Counsel.
Section 5.16
Stock Exchange Listing.
Parent shall use
its reasonable best efforts to cause the shares of Parent Common Stock to be issued in connection with the Merger to be approved for listing on
the NYSE, subject to official notice of issuance, at or prior to the Effective Time.
Section 5.17
Parent's Financing Activities.
(a) Parent
and Merger Sub will keep the Company reasonably informed on a reasonably current basis of the status of material developments in respect of obtaining financing
for the Merger and the other transactions contemplated by this Agreement.
(b) Parent
and Merger Sub acknowledge and agree that the obtaining of the financing for the Merger and the other transactions contemplated by this Agreement is not a
condition to the Closing. For the avoidance of doubt, if financing for the Merger and the other transactions contemplated by this Agreement has not been obtained, Parent and Merger Sub shall continue
to be obligated, prior to any termination of this Agreement pursuant to
Section 7.1
and subject to the fulfillment or waiver of the conditions
set forth in
Article VI
, to complete the Merger and consummate the other transactions contemplated by this Agreement.
(c) Without
limiting the generality of
Section 5.4
, prior to 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, on a timely basis, upon the reasonable request of Parent, provide reasonable
cooperation that is customary in connection with the arrangement, marketing, syndication and consummation of debt and/or equity financing deemed reasonably necessary by Parent (including upon a
request to Parent by its financing sources) in connection with the transactions contemplated by this Agreement and consistent with transactions that are substantially similar to the transactions
contemplated by this Agreement, including, but not limited to, the following:
(i) furnishing,
or causing to be furnished, to Parent, (A) audited balance sheets for the fiscal years ended December 31, 2015, December 31, 2014 and
such further fiscal years ended at least ninety (90) days prior to the Closing Date, and audited statements of income and cash flows for the fiscal years ended December 31, 2015,
December 31, 2014, and December 31,
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2013
and such further fiscal years ended at least ninety (90) days prior to the Closing Date and (B) unaudited balance sheets and related statements of income and cash flows for each
fiscal quarter ended after the close of its most recent fiscal year which are no more than one hundred and thirty-five (135) days old at Closing, in the case of clauses (A) and (B),
prepared in accordance with GAAP and reviewed (SAS 100) by the Company's accountants (with such review (x) including a review of the financial statements for the corresponding period in the
previous fiscal year and (y) being conducted in accordance with applicable accounting standards), together with all other written historical financial information (and related management
discussion and analysis prepared in connection therewith) regarding the Company and its Affiliates as may be reasonably requested by Parent that may be required in order for Parent to complete and
deliver customary confidential information, bank or offering memoranda or prospectuses, in connection with such financing (other than portions customarily provided by financing sources), including the
information required under any commitment letter, engagement letter or definitive financing document in connection with the transactions contemplated by this Agreement or in connection with a
customary offering of securities;
(ii) providing
reasonable assistance to Parent for the preparation of pro forma financial information and projections required to consummate any such financing or to comply
with applicable Law;
(iii) using
reasonable best efforts to secure the consent of the independent accountants of the Company and its Subsidiaries related to the financial statements described in
this
Section 5.17
;
(iv) requesting
that the Company's and its Subsidiaries' independent accountants reasonably participate in drafting sessions and accounting due diligence sessions in
connection with the financing, including requesting that they provide customary comfort letters (including "negative assurance" comfort) with respect to financial information related to the Company
and its Subsidiaries, to the extent required in connection with the marketing and syndication of the financing or as are customarily required in an underwritten offering of securities;
(v) providing
reasonable assistance to Parent in its preparation of customary rating agency presentations, road show materials, customary bank or co-investor information
memoranda, prospectuses, bank syndication materials, credit agreements, offering memoranda, private placement memoranda, definitive financing documents (as well as customary certificates) and similar
or related documents customarily prepared in connection with financings of the type described in this
Section 5.17
, and which may incorporate by
reference periodic and current reports filed by the Company with the SEC;
(vi) reasonably
cooperating with customary marketing efforts of Parent for the financing, including causing its management team, with appropriate seniority and expertise,
and external auditors and advisors, to assist in preparation for and to participate in a reasonable number of meetings, presentations, road shows, due diligence sessions, drafting sessions, and
sessions with rating agencies, in each case, upon reasonable notice and at mutually agreeable dates and times;
(vii) using
reasonable best efforts to ensure that any syndication or marketing effort in connection with the financing benefits materially from any existing lending and
investment banking relationship of the Company and its Subsidiaries;
(viii) reasonably
cooperating with the Financing Sources in an evaluation of the assets of the Company or any of its Subsidiaries for the purpose of establishing collateral
arrangements in connection with the financing;
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(ix) using
reasonable best efforts to deliver to Parent, no later than three (3) Business Days prior to the Closing Date, any materials and documentation about the
Company and its Subsidiaries required under applicable "know your customer" and anti-money laundering Laws (including the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001);
(x) to
the extent the Company or any of its Subsidiaries will become a party to any definitive agreement in respect of the financing following the Effective Time, provide
(including using reasonable best efforts to obtain such documents from its advisors) customary certificates, corporate authorizations and other customary closing documents and definitive agreements as
may be reasonable requested by Parent or the Financing Sources;
(xi) informing
Parent promptly in writing if the Company Board or a committee thereof, the Company's chief financial officer or any other executive officer of the Company
concludes that any previously issued financial statements included or intended to be used in connection with the financing should no longer be relied upon;
(xii) informing
Parent promptly in writing if any member of the Company Board, the Company's chief financial officer or any other executive officer of the Company shall have
knowledge of any facts as a result of which a restatement of any of the Company's or its Subsidiaries' financial statements is required or reasonably likely; and
(xiii) reasonably
cooperating with Parent and the Financing Sources in connection with (A) Parent's efforts to obtain customary corporate ratings;
(B) assisting Parent in obtaining opinions of the Company's counsel; (C) providing customary authorization letters to the Financing Sources; (D) providing customary authorizations
for the use of the Company's logos; (E) providing access to documents and other information in connection with continuing due diligence investigations; and (F) the payoff of existing
Indebtedness of the Company, whether in the form of a tender offer, change of control offer, redemption, satisfaction and discharge, consent solicitation, or otherwise;
provided
that (1) neither the Company nor any of its Affiliates shall be required to pay any commitment or other similar fee in connection with
any financing to be obtained by Parent or any of Parent's Affiliates in connection with the transactions contemplated by this Agreement, (2) the effectiveness of any documentation executed by
the Company with respect thereto, and the attachment of any Lien to any assets of the Company or any of its Subsidiaries, shall be subject to the consummation of the Closing, (3) no director or
officer of any the Company shall be required to execute any agreement, certificate, document or instrument with respect to such financing that would be effective prior to the Closing (other than
certifications of the financial statements), (4) the Company, its controlled Affiliates and their respective Representatives shall be indemnified and held harmless by Parent from and against
any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with claims asserted by a Financing Source in
connection with the arrangement of such financing to the fullest extent permitted by Law and with appropriate contribution to the extent such indemnification is not available, other than to the extent
any such liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments or penalties are the result of the gross negligence, bad faith or willful misconduct of the Company, its
Affiliates or their respective Representatives, or such Person's material breach of this Agreement, or with respect to any material misstatement or omission in information provided hereunder by any of
the foregoing Persons for use in connection herewith or with the financing and (5) Parent shall promptly after termination of this Agreement in accordance with
Section 7.1
, upon written
request by the Company, reimburse the Company or any of its controlled Affiliates for all reasonable and documented
out-of-pocket costs or expenses actually incurred by each such Person in complying
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with
their respective covenants pursuant to this
Section 5.17
. Parent acknowledges and agrees that the obtaining of any such financing is not a
condition to the Closing.
(d) All
non-public or other confidential information regarding the Company or its Affiliates obtained by Parent, its Affiliates, the Financing Sources or their respective
Representatives, in each case pursuant to this
Section 5.17
, shall be kept confidential in accordance with the Confidentiality Agreement;
provided
that such information may be shared (i) on a non-public basis with prospective lenders and investors during syndication and marketing of
the financing in connection herewith and participants in the financing, in each case that enter into confidentiality arrangements customary for financing transactions of the same type as such
financing (including customary "click-through" confidentiality undertakings), and (ii) on a confidential basis with rating agencies;
provided
,
further
,
that the foregoing shall not prohibit such information from being included in bank or co-investor information memoranda, prospectuses, bank
syndication materials, offering memoranda and private placement memoranda (including under Rule 144A or a registered offering under the Securities Act). The Company hereby consents to the
reasonable use of the Company's and its Affiliates' trademarks, service marks and logos solely in connection with the financing for the Merger and the other transactions contemplated by this
Agreement;
provided
that such trademarks, service marks and logos are used in a manner that is not intended to or reasonably likely to harm or disparage
the Company or its Affiliates or the reputation or goodwill of the Company or its Affiliates, and on such other customary terms and conditions as shall be mutually agreed.
Section 5.18
Stock Exchange Delisting; 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 Laws and rules and policies of NASDAQ to cause the delisting of the Company and of the shares of Company Common Stock from
NASDAQ as promptly as practicable after the Effective Time and the deregistration of the shares of Company Common Stock under the Exchange Act as promptly as practicable after such delisting. The
Company shall not cause the Company Common Stock to be delisted from NASDAQ prior to the Effective Time. If the Surviving Corporation is required to file any quarterly or annual report by a filing
deadline that is imposed by the Exchange Act which falls on a date within the ten (10) days following the Closing Date, the Company will deliver to Parent at least five (5) Business Days
prior to the Closing a substantially final draft of any such annual or quarterly report reasonably likely to be required to be filed during such period.
Section 5.19
State Takeover Laws.
If any state takeover statute becomes or is deemed to become
applicable to the Company or the Merger or the other transactions contemplated by this Agreement,
then the Company Board shall take any and all actions necessary to render such statutes inapplicable to the foregoing.
Section 5.20
Stockholder Litigation.
The Company shall give Parent the opportunity to participate in
the defense or settlement of any stockholder litigation brought by any stockholder of the Company
against the Company and/or its directors or executive officers relating to the Merger and the other transactions contemplated by this Agreement, whether commenced prior to or after the execution and
delivery of this Agreement. The Company agrees that it shall not settle or offer to settle any litigation commenced prior to or after the date of this Agreement against the Company or any of its
directors or executive officers by any stockholder of the Company relating to this Agreement, the Merger, any other transaction contemplated by this Agreement or otherwise, without the prior written
consent of Parent.
Section 5.21
Resignations.
Prior to the Effective Time, upon Parent's request, the Company shall cause
any director of the Company and each subsidiary of the Company to execute and deliver
a letter effectuating his or her resignation as a director of such entity effective as of the Effective Time.
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Section 5.22
Board Membership.
Prior to the Effective Time, Parent shall take all necessary corporate
action so that, upon and after the Effective Time, (i) the size of the Parent Board
is increased by two (2) members to a total of eleven (11) members, (ii) an individual selected by the Company who meets Parent's independence criteria as in effect as of the date
of this Agreement and who is otherwise reasonably acceptable to Parent is appointed to the Parent Board as a member of the class of directors of the Parent Board with terms expiring in 2018 and
(iii) an individual selected by the Company who meets Parent's independence criteria as in effect as of the date of this Agreement and who is otherwise reasonably acceptable to Parent is
appointed to the Parent Board as a member of the class of directors of the Parent Board with terms expiring in 2020.
Section 5.23
Dividend Record Dates.
The Company shall coordinate with Parent to designate the record
dates and payment dates for the Company's quarterly dividends to coincide with the record dates
and payment dates for Parent's quarterly dividends, it being the intention of the parties that holders of Parent Common Stock and Company Common Stock shall not receive dividends twice for a
corresponding fiscal quarter of either Parent or the Company.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1
Conditions to the Obligations of Each Party.
The respective obligations of each party to
consummate the Merger and the other transactions contemplated by this Agreement are subject to the satisfaction or
(to the extent permitted by Law) waiver by the Company and Parent at or prior to the Closing of the following conditions:
(a) Parent
shall have obtained the Parent Stockholder Approval and the Company shall have obtained the Company Stockholder Approval;
(b) the
Parent Stock Issuance shall have been approved for listing on the NYSE, subject to official notice of issuance;
(c) the
Form S-4 shall have become effective under the Securities Act and shall not be the subject of any stop order or any Proceedings by or before the SEC seeking a
stop order;
(d) (i)
any applicable waiting period (and any extension thereof) under the HSR Act relating to the consummation of the Merger shall have expired or early termination
thereof shall have been granted and (ii) any authorization or consent from a Governmental Authority required to be obtained with respect to the Merger under any Antitrust Law as set forth on
Section 6.1(d) of the
Parent Disclosure Letter
hereto shall have been obtained and shall remain in full force and effect;
(e) no
Governmental Authority of competent jurisdiction shall have issued or entered any Order after the date of this Agreement, and no Law shall have been enacted or
promulgated after the date of this Agreement, in each case, that (whether temporary or permanent) is then in effect and has the effect of enjoining or otherwise prohibiting the consummation of the
Merger or the other transactions contemplated by this Agreement.
Section 6.2
Conditions to Obligations of Parent and Merger Sub to Effect the Merger.
The obligations of
Parent and Merger Sub to effect the Merger and the other transactions contemplated by this Agreement are subject to the satisfaction or (to
the extent permitted by Law) waiver by Parent at or prior to the Closing of the following additional conditions:
(a) each
of the representations and warranties of the Company (i) contained in
Section 3.2(a)
shall be true and
correct in all respects (other than
de minimis
inaccuracies) as of the Closing Date as though made on and as of the Closing Date (except to the extent
such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only),
(ii) contained in
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Sections 3.2(b)
,
3.2(c)
,
3.2(d)
,
3.3
,
3.4
,
3.24
,
3.25
,
3.26
and
3.28(a)
(together with
Section 3.2(a)
, the "
Company Fundamental Representations
") shall be true and correct in all
material respects, without giving effect to any materiality or "Company Material Adverse Effect" qualifications therein, as of the Closing Date as though made on and as of the Closing Date (except to
the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only)
and (iii) contained in this Agreement (other than the Company Fundamental Representations), without giving effect to any materiality or "Company Material Adverse Effect" qualifications therein,
shall be true and correct as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of a specific date, in
which case such representations and warranties shall be so true and correct as of such specific date only), except where the failure of such representations and warranties to be true and correct,
individually or in the aggregate, has not had, and would not reasonably be expected to have, a Company Material Adverse Effect;
(b) the
Company shall have performed or complied in all material respects with its obligations required under this Agreement to be performed or complied with on or prior to
the Closing;
(c) since
the date of this Agreement, there shall not have occurred any event, occurrence, development or change that has had or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect;
(d) Parent
shall have received a certificate signed by an executive officer of the Company certifying as to the matters set forth in
Section 6.2(a)
,
Section 6.2(b)
and
Section 6.2(c)
; and
(e) Parent
shall have received the written opinion of Parent Tax Counsel (or, if Parent Tax Counsel advises that it will not deliver a written opinion to Parent, a written
opinion from each of (i) Company Tax Counsel and (ii) the Additional Tax Counsel) as of the Closing Date to the effect that, on the basis of the facts, representations, assumptions,
limitations and exclusions set forth or referred to in such opinion, the Merger will not cause the KLX External Spin-Off to fail to qualify for the KLX Spin-Off Tax Treatment. In rendering the opinion
described in this
Section 6.2(e)
, Parent Tax Counsel (or Company Tax Counsel and Additional Tax Counsel) may require and rely upon (and may
incorporate by reference) reasonable and customary representations, warranties and covenants, including the Parent Closing Representation Letter and the Company Closing Representation Letter.
Section 6.3
Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company
to effect the Merger and the other transactions contemplated by this Agreement is subject to the satisfaction or (to the extent
permitted by Law) waiver by the Company at or prior to the Closing of the following additional conditions:
(a) each
of the representations and warranties of Parent and Merger Sub (i) contained in
Section 4.2(a)
shall
be true and correct in all respects (other than
de minimis
inaccuracies) as of the Closing Date as though made on and as of the Closing Date (except to
the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only),
(ii) contained in
Sections 4.2(b)
,
4.2(c)
,
4.2(d)
,
4.3
,
4.4
,
4.23
and
4.24
(together with
Section 4.2(a)
, the
"
Parent Fundamental Representations
") shall be true and correct in all material respects, without giving effect to any materiality or "Parent Material
Adverse Effect" qualifications therein, as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of a
specific date, in which case such representations and warranties shall be so true and correct as of such specific date only) and (iii) contained in this Agreement (other than the Parent
Fundamental Representations), without
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giving
effect to any materiality or "Parent Material Adverse Effect" qualifications therein, shall be true and correct as of the Closing Date as though made on and as of the Closing Date (except to
the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only),
except where the failure of such representations and warranties to be true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Parent Material
Adverse Effect;
(b) Parent
and Merger Sub shall have performed or complied in all material respects with each of their respective obligations required under this Agreement to be performed
or complied with on or prior to the Closing;
(c) since
the date of this Agreement, there shall not have occurred any event, occurrence, development or change that has had or would reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect;
(d) the
Company shall have received a certificate signed by an executive officer of Parent certifying as to the matters set forth in
Section 6.3(a)
,
Section 6.3(b)
and
Section 6.3(c)
; and
(e) the
Company shall have received the written opinion of Company Tax Counsel (or, if Company Tax Counsel advises that it will not deliver a written opinion to the Company,
a written opinion from each of (i) Parent Tax Counsel and (ii) Additional Tax Counsel) as of the Closing Date to the effect that, on the basis of the facts, representations, assumptions,
limitations and exclusions set forth or referred to in such opinion, the Merger will not cause the KLX External Spin-Off to fail to qualify for the KLX Spin-Off Tax Treatment. In rendering the opinion
described in this
Section 6.3(e)
, Company Tax Counsel (or Parent Tax Counsel and Additional Tax Counsel) may require and rely upon (and may
incorporate by reference) reasonable and customary representations, warranties and covenants, including the Company Closing Representation Letter and the Parent Closing Representation Letter.
Section 6.4
Frustration of Closing Conditions.
Neither Parent nor Merger Sub may rely on the failure of
any condition set forth in
Section 6.1
or
Section 6.2
to be satisfied if such failure was primarily caused by the failure of Parent or Merger Sub
to perform any of their respective
material obligations under this Agreement. The Company may not rely on the failure of any condition set forth in
Section 6.1
or
Section 6.3
to be
satisfied if such failure was primarily caused by its failure to perform any of its material obligations under this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1
Termination.
Notwithstanding anything contained in this Agreement to the contrary, this
Agreement may be terminated at any time prior to the Effective Time, whether before or
after the Company Stockholder Approval or Parent Stockholder Approval is obtained (except as otherwise expressly noted), as follows:
(a) by
mutual written consent of each of Parent and the Company; or
(b) by
either Parent or the Company, if:
(i) the
Merger shall not have been consummated on or before 5:00 p.m. (New York time) on October 21, 2017 (the "
Termination
Date
");
provided
that the right to terminate this Agreement pursuant to this
Section 7.1(b)(i)
shall not be available to any
party if the failure of such party to perform or comply with any of its obligations under this
Agreement has been the principal cause of or resulted in the failure of the Closing to have occurred on or before the Termination Date;
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(ii) prior
to the Effective Time, any Governmental Authority of competent jurisdiction shall have issued or entered any Order after the date of this Agreement or any Law
shall have been enacted or promulgated after the date of this Agreement that has the effect of permanently restraining, enjoining or otherwise prohibiting the Merger or other transactions contemplated
by this Agreement, and in the case of such an Order, such Order shall have become final and non-appealable;
provided
,
however
, that the right to terminate
this Agreement under this
Section 7.1(b)(ii)
shall not be
available to a party if the issuance of such Order was proximately caused by, or resulted in, the failure of such party, and in the case of Parent, including the failure of Merger Sub, to perform or
comply with any of its obligations under this Agreement;
(iii) the
Company Stockholder Approval shall not have been obtained upon a vote taken thereon at the Company Stockholders' Meeting duly convened therefor or at any
adjournment or postponement thereof; or
(iv) the
Parent Stockholder Approval shall not have been obtained upon a vote taken thereon at the Parent Stockholders' Meeting duly convened therefor or at any adjournment
or postponement thereof;
(c) by
the Company if:
(i) Parent
or Merger Sub shall have breached or failed to perform any of their respective representations, warranties, covenants or other agreements set forth in this
Agreement, which breach or failure to perform (A) would result in the failure of a condition set forth in
Section 6.3(a)
(treating for
this purpose
Section 4.13(j)
as a Parent Fundamental Representation under
Section 6.3(a)
,
but only if both Company Tax Counsel and either Parent Tax Counsel or Additional Tax Counsel cannot deliver the opinions described in
Section 6.3(e)
) or
Section 6.3(b)
and (B) is not capable of being cured by Parent
or Merger Sub, as applicable, by the Termination Date or, if capable of being cured, shall not have been cured by Parent or Merger Sub on or before the earlier of (x) the Termination Date and
(y) the date that is thirty (30) calendar days following the Company's delivery of written notice to Parent of such breach or failure to perform;
provided
that the Company shall not have the
right to terminate this Agreement pursuant to this
Section 7.1(c)(i)
if the Company is then in material breach of any of its material obligations under this Agreement so as to result in the
failure of a condition set forth in
Section 6.2(b)
;
(ii) at
any time prior to the receipt of the Parent Stockholder Approval, the Parent Board shall have (A) made a Parent Adverse Recommendation Change,
(B) failed to include in the Joint Proxy Statement the Parent Recommendation or (C) materially violated or breached any of its obligations under
Section 5.7
;
(iii) at
any time prior to receipt of the Company Stockholder Approval, in order for the Company to enter into a definitive agreement with respect to a Company Superior
Proposal to the extent permitted by, and subject to the applicable terms and conditions of,
Section 5.6(d)
;
provided
that prior to or simultaneously
with such termination, the Company pays or causes to be paid to Parent the Company Termination Fee; or
(iv) if
the condition set forth in
Section 6.3(e)
has not been satisfied within twenty (20) Business
Days following the date on which all conditions of the Closing were satisfied or waived, other than (A) the condition set forth in
Section 6.3(e)
and (B) those conditions that by their
terms cannot be satisfied prior to the Closing, but which conditions would be
satisfied or would be capable of being satisfied if the Closing occurred as of such date.
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(d) by
Parent if:
(i) the
Company shall have breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in this Agreement, which breach or
failure to perform (A) would result in the failure of a condition set forth in
Section 6.2(a)
(treating for this purpose
Section 3.27
as a
Company Fundamental Representation under
Section 6.2(a)
, but only if
both Parent Tax Counsel and either Company Tax Counsel or Additional Tax Counsel cannot deliver the opinions described in
Section 6.2(e)
) or
Section 6.2(b)
and (B) is not capable of being cured by the Company by the Termination Date or, if capable of being cured, shall not have
been cured by the Company on or before the earlier of (x) the Termination Date and (y) the date that is thirty (30) calendar days following Parent's delivery of written notice to
the Company of such breach or failure to perform;
provided
that Parent shall not have the right to terminate this Agreement pursuant to this
Section 7.1(d)(i)
if Parent or Merger Sub is then in material breach of any of its material obligations under this Agreement so as to result in
the failure of a condition set forth in
Section 6.3(b)
;
(ii) at
any time prior to the receipt of the Company Stockholder Approval, the Company Board shall have (A) made a Company Adverse Recommendation Change,
(B) failed to include in the Joint Proxy Statement the Company Recommendation or (C) materially violated or breached any of its obligations under
Section 5.6
;
(iii) at
any time prior to receipt of the Parent Stockholder Approval, in order for Parent to enter into a definitive agreement with respect to a Parent Superior Proposal to
the extent permitted by, and subject to the applicable terms and conditions of,
Section 5.7(d)
;
provided
that prior to or simultaneously with such
termination, Parent pays or causes to be paid to the Company the Parent Termination Fee; or
(iv) if
the condition set forth in
Section 6.2(e)
has not been satisfied within twenty (20) Business
Days following the date on which all conditions of the Closing were satisfied or waived, other than (A) the condition set forth in
Section 6.2(e)
and (B) those conditions that by their
terms cannot be satisfied prior to the Closing, but which conditions would be
satisfied or would be capable of being satisfied if the Closing occurred as of such date.
Section 7.2
Effect of Termination.
In the event that
this Agreement is terminated and the Merger abandoned pursuant to
Section 7.1
, written
notice thereof shall be given by the terminating party to the other party, specifying the provisions hereof pursuant to which such termination is made, and this Agreement shall forthwith become null
and void and of no effect without liability on the part of any party hereto, and all rights and obligations of any party hereto shall cease;
provided
,
however
, that, except as otherwise provided in
Section 7.3
or in any other provision of this
Agreement, no such termination shall relieve any party hereto of any liability or damages resulting from any intentional breach of this Agreement prior to such termination or fraud, in which case,
except as provided in
Section 7.3
, the aggrieved party shall be entitled to all remedies available at law or in equity, including liability for
damages determined taking into account all relevant factors, including the loss of the benefit of the Merger, any lost shareholder premium, any lost synergies, the time value of money and any benefit
to the breaching party or its shareholders arising from such intentional breach or fraud; and
provided
,
further
, that the Confidentiality Agreement, this
Section 7.2
,
Section 7.3
and
Article VIII
shall survive any termination of this Agreement
pursuant to
Section 7.1
. For purposes of this Agreement, "intentional breach" shall mean an action or omission taken or omitted to be taken that the
breaching party intentionally takes (or fails to take) and knows (or should reasonably have known) would, or would reasonably be expected to, cause a material breach of this Agreement.
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Section 7.3
Termination Fees.
(a) If
this Agreement is terminated by:
(i) Parent
pursuant to
Section 7.1(d)(i)
on the basis of a breach of a covenant or agreement contained in this
Agreement or either Parent or the Company pursuant to
Section 7.1(b)(i)
or
Section 7.1(b)(iii)
and in any such case (A) prior to such
termination (or prior to the Company Stockholders' Meeting in the case of
termination pursuant to
Section 7.1(b)(iii)
), a Company Acquisition Proposal that has been made after the date of this Agreement shall have been
publicly disclosed and not publicly withdrawn prior to such date and (B) within twelve (12) months after such termination, a Company Acquisition Proposal is consummated or the Company
enters into a definitive agreement with respect to a Company Acquisition Proposal, which transaction is thereafter consummated (regardless of when such transaction is consummated)
(
provided
,
however
, that for purposes of this
Section 7.3(a)(i)(B)
, the references to "twenty percent
(20%)" in the definition of Company Acquisition Proposal shall be deemed to be references
to "fifty percent (50%)");
(ii) the
Company pursuant to
Section 7.1(c)(iii)
; or
(iii) Parent
pursuant to
Section 7.1(d)(ii)
;
then,
in any such case, the Company shall pay, or cause to be paid, to Parent the Company Termination Fee.
Any
payments required to be made under this
Section 7.3(a)
shall be made by wire transfer of same-day funds to the account or
accounts designated by Parent, (x) in the case of clause (i) above, on the same day as the consummation of the transaction contemplated therein, (y) in the case of
clause (ii) above, immediately prior to or simultaneously with such termination and (z) in the case of clause (iii) above, promptly, but in no event later than three
(3) Business Days after the date of such termination.
(b) If
this Agreement is terminated by:
(i) the
Company pursuant to
Section 7.1(c)(i)
on the basis of a breach of a covenant or agreement contained in this
Agreement or either Parent or the Company pursuant to
Section 7.1(b)(i)
or
Section 7.1(b)(iv)
, and in any such case (A) prior to such
termination (or prior to the Parent Stockholders' Meeting in the case of
termination pursuant to
Section 7.1(b)(iv)
), a Parent Acquisition Proposal that has been made after the date of this Agreement shall have been
publicly disclosed and not publicly withdrawn prior to such date and (B) within twelve (12) months after such termination, a Parent Acquisition Proposal is consummated or Parent enters
into a definitive agreement with respect to a Parent Acquisition Proposal, which transaction is thereafter consummated (regardless of when such transaction is consummated)
(
provided
,
however
, that for purposes of this
Section 7.3(b)(i)(B)
, the references to "twenty percent
(20%)" in the definition of Parent Acquisition Proposal shall be deemed to be references
to "fifty percent (50%)");
(ii) Parent
pursuant to
Section 7.1(d)(iii)
; or
(iii) the
Company pursuant to
Section 7.1(c)(ii);
then,
in any such case, Parent shall pay, or cause to be paid, to the Company the Parent Termination Fee.
Any
payments required to be made under this
Section 7.3(b)
shall be made by wire transfer of same-day funds to the account or
accounts designated by the Company, (x) in the case of clause (i) above, on the same day as the consummation of the transaction contemplated therein, (y) in the case of
clause (ii) above, immediately prior to or simultaneously with such termination and (z) in the case of
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clause (iii)
above, promptly, but in no event later than three (3) Business Days after the date of such termination.
(c) In
the event this Agreement is terminated by (i) either Parent or the Company pursuant to
Section 7.1(b)(iii)
, (ii) the Company pursuant to
Section 7.1(c)(iv)
or
(iii) Parent pursuant to
Section 7.1(d)(i)
or
Section 7.1(d)(iv)
and any of
(A) (x) a breach or inaccuracy in any representation, warranty or covenant contained in
Section 3.27
and the fact or facts giving rise to
such breach or inaccuracy causes Parent Tax Counsel to be unwilling or unable to deliver the opinion described in
Section 6.2(e)
and
(y) either Company Tax Counsel or the Additional Tax Counsel is unwilling or unable to deliver the opinion described in
Section 6.2(e)
for
any reason or (B) the Company fails to comply with
Section 5.15
, then the Company shall pay Parent (by wire transfer of immediately
available funds) the reasonable and documented out-of-pocket costs and expenses, including all fees and expenses incurred in connection with the financing of the transactions contemplated by this
Agreement and the fees and expenses of counsel, accountants, investment bankers, experts and consultants, incurred by Parent and Merger Sub in connection with this Agreement and the transactions
contemplated by this Agreement in an amount not to exceed $85,000,000 (the "
Parent Expenses
");
provided
that any payment of the Parent Expenses shall not affect Parent's right to receive any Company Termination Fee otherwise due under
Section 7.3(a)
, but shall reduce, on a dollar-for-dollar basis,
any Company Termination Fee that becomes due and payable under
Section 7.3(a)
.
(d) In
the event this Agreement is terminated by either Parent or the Company pursuant to
Section 7.1(b)(iv)
, then
Parent shall pay the Company (by wire transfer of immediately available funds) the reasonable and documented out-of-pocket costs and expenses, including the fees and expenses of counsel, accountants,
investment bankers, experts and consultants, incurred by the Company in connection with this Agreement and the transactions contemplated by this Agreement in an amount not to exceed $56,000,000 (the
"
Company Expenses
");
provided
that any payment of the Company Expenses shall not affect the Company's
right to receive any Parent Termination Fee otherwise due under
Section 7.3(b)
, but shall reduce, on a dollar-for-dollar basis, any Parent
Termination Fee that becomes due and payable under
Section 7.3(b)
.
(e) Notwithstanding
anything to the contrary set forth in this Agreement, the parties agree that in no event shall either the Company or Parent be required to pay the
Company Termination Fee or the Parent Termination Fee, as applicable, on more than one occasion.
(f) Notwithstanding
anything to the contrary set forth in this Agreement, Parent's right to receive payment from the Company of the Company Termination Fee pursuant to
Section 7.3(a)
and/or the right to receive
payment of the Parent Expenses pursuant to
Section 7.3(c)
, shall, in circumstances in which the Company Termination Fee or Parent Expenses (as applicable) are owed, constitute the sole and
exclusive monetary remedy (other than (i) in the event of a termination pursuant to
Section 7.1(d)(ii)(B)
and
(C)
, (ii) in the event of an
intentional breach by the Company
of
Section 5.15
or a fraudulent breach of
Section 3.27
and (iii) Parent's right,
after having received the Parent Expenses, to receive the Company Termination Fee less the Parent Expenses in the circumstances expressly contemplated in
Section 7.3(a)
) of Parent and Merger Sub
against the Company and its Subsidiaries and any of their respective former, current or future general
or limited partners, stockholders, members, managers, directors, officers, employees, agents, Representatives or assignees (collectively, the "
Company Related
Parties
") for all losses and damages suffered as a result of the failure of the transactions contemplated by this Agreement to be consummated or for a breach or failure to
perform hereunder or otherwise, and upon payment of such amounts, none of the Company Related Parties shall have any further liability or obligation relating to or arising out of this Agreement or the
transactions contemplated by this Agreement (except that the Company shall also be obligated with respect to any amounts owing pursuant to
Section 7.3(g)
). Notwithstanding anything to the contrary
set forth in this Agreement,
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the
Company's right to receive payment from Parent of the Parent Termination Fee pursuant to
Section 7.3(b)
and/or the right to receive payment
of the Company Expenses pursuant to
Section 7.3(d)
, shall, in circumstances in which the Parent Termination Fee or Company Expenses (as
applicable) are owed, constitute the sole and exclusive monetary remedy (other than (i) in the event of a termination pursuant to
Section 7.1(c)(ii)(B)
and
(C)
, (ii) in the event of an intentional breach by Parent of
Section 5.15
or a fraudulent breach of
Section 4.13(j)
and (iii) the Company's
right, after having received the Company Expenses, to receive the Parent Termination Fee less the Company Expenses in the circumstances expressly contemplated in
Section 7.3(b)
) of the Company
against Parent and its Subsidiaries and any of their respective former, current or future general or limited
partners, stockholders, members, managers, directors, officers, employees, agents, Representatives or assignees (collectively, the "
Parent Related
Parties
") for all losses and damages suffered as a result of the failure of the transactions contemplated by this Agreement to be consummated or for a breach or failure to
perform hereunder or otherwise, and upon payment of such amounts, none of the Parent Related Parties shall have any further liability or obligation relating to or arising out of this Agreement or the
transactions contemplated by this Agreement (except that Parent shall also be obligated with respect to any amounts owing pursuant to
Section 7.3(g)
).
(g) Each
of the parties hereto acknowledges that (i) the agreements contained in this
Section 7.3
are an
integral part of the transactions contemplated by this Agreement, and (ii) without these agreements, the parties would not enter into this Agreement; accordingly, if the Company or Parent, as
applicable, fails to timely pay any amount due pursuant to this
Section 7.3
and, in order to obtain such payment, Parent or the Company, as
applicable, commences a suit that results in a judgment against the other for the payment of any amount set forth in this
Section 7.3
, the
Company or Parent, as applicable, shall pay the other its costs and expenses in connection with such suit (including reasonable attorneys' fees), together with interest on such amount at an annual
rate equal to the prime rate as published in The Wall Street
Journal in effect on the date such payment was required to be made through the date such payment was actually received, or such lesser rate as is the maximum permitted by applicable Law.
Section 7.4
Amendment.
This Agreement may be amended by mutual agreement of the parties hereto in
writing at any time before or after receipt of the Company Stockholder Approval or
Parent Stockholder Approval;
provided
,
however
, that after the Company Stockholder Approval or Parent
Stockholder Approval has been obtained, there shall not be any amendment that by applicable Law or in accordance with the rules of any stock exchange requires further approval by the stockholders of
the Company or Parent, as applicable, without such further approval of such stockholders nor any amendment or change not permitted under applicable Law;
provided
,
further
, that no amendment to this Agreement shall be made that would adversely affect the
rights of the Financing Sources as set forth in this
Section 7.4
or
Sections 8.8
,
8.13
or
8.14
without the prior written consent of the Financing Sources.
Section 7.5
Extension; Waiver.
At any time prior to the Effective Time, subject to applicable Law, any
party hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall only be valid if set forth in an instrument in writing signed by the party or parties
to be bound thereby. Notwithstanding the foregoing, no failure or delay by the Company, Parent or Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.1
Non-Survival of Representations and Warranties.
The representations, warranties and
agreements in this Agreement and in any certificate delivered pursuant hereto shall terminate at the Effective Time;
provided
,
however
, that this
Section 8.1
shall
not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time.
Section 8.2
Expenses.
Except as expressly set forth herein (including
Section 7.3
), all expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses, whether or not the Merger is consummated.
Section 8.3
Notices.
All notices, consents and other communications hereunder shall be in writing and
shall be given (and shall be deemed to have been duly given upon receipt) by hand
delivery, by prepaid overnight courier (providing written proof of delivery) or by confirmed facsimile transmission or electronic mail, addressed as follows:
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Rockwell Collins, Inc.
400 Collins Road N.E.
Cedar Rapids, IA 52498
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Phone:
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(319) 263-0212
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Fax:
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(319) 295-3599
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Email:
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robert.perna@rockwellcollins.com
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Attention:
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Robert Perna
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Skadden, Arps, Slate, Meagher & Flom LLP
155 North Wacker Drive
Chicago, Illinois 60606
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Phone:
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(312) 407-0700
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Fax:
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(312) 407-0411
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Email:
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Charles.Mulaney@skadden.com;
Richard.Witzel@skadden.com
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Attention:
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Charles W. Mulaney, Jr.
Richard C. Witzel, Jr.
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B/E Aerospace, Inc.
1400 Corporate Center Way
Wellington, FL 33414
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Phone:
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(561) 791-5000 x1405
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Fax:
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(561) 791-3966
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Email:
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ryan_patch@beaerospace.com
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Attention:
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Ryan Patch
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Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022
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Phone:
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(212) 848-4000
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Fax:
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(212) 848-7179
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Email:
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ccondon@shearman.com
rkatz@shearman.com
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Attention:
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Creighton O'M. Condon
Robert M. Katz
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or
to such other address, electronic mail address or facsimile number for a party as shall be specified in a notice given in accordance with this
Section 8.3
;
provided
that any notice received by facsimile transmission or electronic mail or
otherwise at the addressee's location on any Business Day after 5:00 P.M. (addressee's local time) or on any day that is not a Business Day shall be deemed to have been received at
9:00 A.M. (addressee's local time) on the next Business Day;
provided
,
further
, that notice of
any change to the address or any of the other details specified in or pursuant to this
Section 8.3
shall not be deemed to have been received
until, and shall be deemed to have been received upon, the later of the date specified in such notice or the date that is five (5) Business Days after such notice would otherwise be deemed to
have been received pursuant to this
Section 8.3
.
Section 8.4
Interpretation; Certain Definitions.
(a) The
parties have participated collectively in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises,
this Agreement shall be construed as if drafted collectively by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
(b) The
words "hereof," "herein," "hereby," "hereunder" and "herewith" and words of similar import shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to articles, sections, paragraphs, exhibits, annexes and schedules are to the articles, sections and paragraphs of, and exhibits, annexes and schedules to, this
Agreement, unless otherwise specified, and the table of contents and headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the phrase "without limitation." Words describing the singular
number shall be deemed to include the
plural and vice versa, words denoting any gender shall be deemed to include all genders, words denoting natural persons shall be deemed to include business entities and vice versa and references to a
Person are also to its permitted successors and assigns. The phrases "the date of this Agreement" and "the date hereof" and terms or phrases of similar import shall be deemed to refer to
October 23, 2016, unless the context requires otherwise. References to any information or document being "made available" or "furnished" and words of similar import shall include such
information or document having been posted to the online data room hosted on behalf of the Company by Merrill Corporation at https://us1.merrillcorp.com/bidder/index_frame.do?projectId=219685 prior to
the date of this Agreement. Terms defined in the text of this Agreement have such meaning throughout this Agreement, unless otherwise indicated in this Agreement, and all terms defined in this
Agreement shall have the meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. Any Law defined or referred to herein or in any
agreement or instrument that is referred to herein means such Law as from time to time amended, modified or supplemented, including (in the case of statutes) by succession of comparable
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successor
Laws (
provided
that for purposes of any representations and warranties contained in this Agreement that are made as of a specific date or
dates, references to any statute shall be deemed to refer to such statute, as amended, and to any rules or regulations promulgated thereunder, in each case, as of such date). All references to
"dollars" or "$" refer to currency of the United States.
Section 8.5
Severability.
If any term, provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon
such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable manner in order that the Merger be consummated as originally contemplated to the fullest extent possible.
Section 8.6
Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation of Law or
otherwise) without the prior written consent of the other parties hereto, except that any Merger Sub may assign any or all of its rights, interests and obligations hereunder to one or more direct or
indirect wholly owned Subsidiaries of Parent, or a combination thereof so long as such assignment would not delay, impair or prevent consummation of the Merger or otherwise have a Parent Material
Adverse Effect and Parent continues to remain liable for all of such obligations as if no such assignment had occurred. Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective permitted successors and assigns. Any attempted assignment in violation of this
Section 8.6
shall be null and void.
Section 8.7
Entire Agreement.
This Agreement (including the exhibits, annexes and appendices hereto)
constitutes, together with the Confidentiality Agreement, the Company Disclosure Letter and
the Parent Disclosure Letter, the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject
matter hereof.
Section 8.8
No Third-Party Beneficiaries.
This Agreement is not intended to and shall not confer upon
any Person other than the parties hereto any rights or remedies hereunder;
provided
,
however
, that it is specifically intended that (a) the D&O
Indemnified Parties (with
respect to
Section 5.8
and this
Section 8.8
from and after the Effective Time),
(b) from and after the Effective time, the holders of Company Common Stock and Company Equity Awards (with respect to
Article II
) and
(c) each Financing Source (solely with respect to this
Section 8.8
and
Sections 7.4
,
8.13
and
8.14
hereof) are each
intended third-party beneficiaries hereof.
Section 8.9
Governing Law.
This Agreement and all Proceedings (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the actions of Parent, Merger
Sub or the Company in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without giving
effect to any choice or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the
State of Delaware.
Section 8.10
Specific Performance.
The parties agree that irreparable damage for which monetary damages,
even if available, would not be an adequate remedy, would occur in the event that any party
hereto does not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate this Agreement) in accordance with its specified terms or
otherwise breach such provisions. Accordingly, the parties acknowledge and agree that, prior to any termination of this Agreement in accordance with
Section 7.1
, the parties shall be entitled to an
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injunction,
specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which
they are entitled at law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other
party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or
injunction.
Section 8.11
Consent to Jurisdiction.
(a) Each
of the parties hereto hereby, with respect to any legal claim or Proceeding arising out of this Agreement or the transactions contemplated by this Agreement,
(i) expressly and irrevocably submits, for itself and with respect to its property, generally and unconditionally, to the exclusive jurisdiction of the Delaware Court of Chancery and any
appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of
Delaware), (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such courts, (iii) agrees that it will not
bring any claim or Proceeding relating to this Agreement or the transactions contemplated by this Agreement except in such courts and (iv) irrevocably waives, to the fullest extent it may
legally and effectively do so, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, any objection which it may now or hereafter have to the laying of venue of any
claim or Proceeding arising out of or relating to this Agreement. Notwithstanding the foregoing, each of Parent, Merger Sub and the Company agrees that a final and nonappealable judgment in any
Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
(b) Each
party irrevocably consents to the service of process in any claim or Proceeding with respect to this Agreement and the transactions contemplated by this Agreement
or for recognition and enforcement of any judgment in respect hereof brought by any other party hereto may be made by mailing copies thereof by registered or certified United States mail, postage
prepaid, return receipt requested, to its address as specified in or pursuant to
Section 8.3
and such service of process shall be sufficient to
confer personal jurisdiction over such party in such claim or Proceeding and shall otherwise constitute effective and binding service in every respect.
Section 8.12
Counterparts.
This Agreement may be executed in multiple counterparts, all of which shall
together be considered one and the same agreement. Delivery of an executed signature
page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
Section 8.13
WAIVER OF JURY TRIAL.
EACH OF PARENT, MERGER SUB AND THE COMPANY
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) BETWEEN ANY OF THEM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, MERGER SUB OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF, INCLUDING WITH RESPECT TO ANY PROCEEDING OR COUNTERCLAIM THAT INVOLVES THE FINANCING SOURCES.
Section 8.14
Certain Claims.
(a) Notwithstanding
anything to the contrary contained in this Agreement, each of the parties hereto agrees that it will not bring or support any Proceeding (whether based
on contract, tort or otherwise) against the Financing Sources in any way relating to this Agreement or the Merger,
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including
any dispute arising out of or relating in any way to any commitment letter, engagement letter or definitive financing document in connection with the transactions contemplated by this
Agreement or the performance thereof, in any forum other than the Supreme Court of the State of New York, County of New York, or, if under applicable Law, exclusive jurisdiction is vested in the
federal courts, the United States District Court for the Southern District of New York (and appellate courts thereof). The parties hereto further agree that all of the provisions of
Section 8.13
relating to waiver of jury trial shall apply to any Proceeding referenced in this
Section 8.14(a)
.
(b) Notwithstanding
anything to the contrary contained in this Agreement, each of the parties hereto agrees that all Proceedings (whether based on contract, tort or
otherwise) against the Financing Sources in any way relating to this Agreement or the Merger, including any dispute arising out of or relating in any way to any commitment letter, engagement letter or
definitive financing document in connection with the transactions contemplated by this Agreement, or the performance thereof, shall be governed by and construed in accordance with, the Laws of the
State of New York;
provided
,
however
, that on or prior to the Closing Date, the definitions of Company
Material Adverse Effect and the representations set forth in this Agreement shall, for the purposes of any commitment letter, engagement letter or definitive financing document in connection with the
transactions contemplated by this Agreement, be governed by, and construed in accordance with, the Laws of the State of Delaware,
without giving effect to any choice or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the State of Delaware.
(c) Notwithstanding
anything to the contrary contained in this Agreement, the Company agrees that neither it nor any of its Representatives or Affiliates shall have any
rights or claims against any Financing Source in connection with or related to this Agreement, the Merger or any commitment letter, engagement letter or definitive financing document in connection
with the transactions contemplated by this Agreement, or any alternative financing in connection therewith. In addition, no Financing Source shall have any liability or obligation to the Company or
any of the Company's Affiliates or Representatives in connection with or related to this Agreement, the Merger or any commitment letter, engagement letter or definitive financing document in
connection with the transactions contemplated by this Agreement, including for any consequential, special, exemplary, punitive or indirect damages (including any loss of profits, business or
anticipated savings) or damages of a tortious nature. Nothing in this
Section 8.14(c)
shall modify or alter the rights of Parent under any
commitment letter, engagement letter or definitive financing document in connection with the transactions contemplated by this Agreement between or among Parent and any of its Subsidiaries and any
Financing Source entered into in connection with or as contemplated by this Agreement, and in the event of a conflict between the foregoing and any provision in any commitment letter, engagement
letter or any such definitive financing documentation, as applicable, the provisions of such commitment letter, engagement letter or definitive financing documentation, as applicable, shall govern and
control.
(d) In
executing any certificate or other documentation in connection with this Agreement, directors, officers and employees of Parent and the Company are acting in their
corporate capacities and are not assuming personal liability in connection therewith.
[
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers
thereunto duly authorized.
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ROCKWELL COLLINS, INC.
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By:
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/s/ ROBERT K. ORTBERG
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Name:
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Robert K. Ortberg
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Title:
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Chairman, President and Chief Executive Officer
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[
Signature Page to Merger Agreement
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QUARTERBACK MERGER SUB CORP.
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By:
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/s/ ROBERT PERNA
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Name:
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Robert Perna
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Title:
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Vice President
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[
Signature Page to Merger Agreement
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B/E AEROSPACE, INC.
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By:
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/s/ AMIN J. KHOURY
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Name:
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Amin J. Khoury
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Title:
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Executive Chairman of the Board
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[
Signature Page to Merger Agreement
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Table of Contents
APPENDIX A
DEFINITIONS
As used in this Agreement, the following terms shall have the following meanings:
"
Affiliate
" shall mean, with respect to any Person, any individual, partnership, corporation, entity or other Person that directly, or
indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, the first Person specified.
"
Business Day
" shall mean any day other than a Saturday, Sunday or a day on which all banking institutions in New York, New York are
authorized or obligated by Law or executive order to close.
"
Code
" shall mean the Internal Revenue Code of 1986, as amended.
"
Company Acquisition Proposal
" shall mean a proposal or offer from any Person providing for any (i) merger, consolidation, share
exchange, business combination, recapitalization or similar transaction involving the Company, pursuant to which any such Person would own or control, directly or indirectly, twenty percent (20%) or
more of the voting power of the Company, (ii) sale or other disposition, directly or indirectly, of assets of the Company (including the capital stock or other equity interests of any of its
Subsidiaries) or any Subsidiary of the Company representing twenty percent (20%) or more of the consolidated assets, revenues or net income of the Company and its Subsidiaries taken as a whole,
(iii) issuance or sale or other disposition of capital stock or other equity interests representing twenty percent (20%) or more of the voting power of the Company, (iv) tender offer,
exchange offer or any other transaction or series of transactions in which any Person will acquire, directly or indirectly, beneficial ownership or the right to acquire beneficial ownership of capital
stock or other equity interests representing twenty percent (20%) or more of the voting power of the Company or (v) any related combination of the foregoing.
"
Company Disclosure Letter
" shall mean the disclosure letter delivered by the Company to Parent simultaneously with the execution of this
Agreement.
"
Company Equity Awards
" shall mean the Company Options, Company Restricted Stock Awards, Company RSU Awards and Company DSU Awards.
"
Company Equity Plan
" shall mean the BE Aerospace, Inc. 2005 Long-Term Incentive Plan, as amended from time to time, and any other
equity or equity-based plan, program, or arrangement of the Company or any of its Subsidiaries or any predecessor thereof, other than the Company ESPP.
"
Company ERISA Affiliate
" shall mean any Person under common control with the Company within the meaning of Section 414(b),
Section 414(c), Section 414(m) or Section 414(o) of the Code, and the regulations issued thereunder.
"
Company ESPP
" shall mean the B/E Aerospace, Inc. Amended and Restated 1994 Employee Stock Purchase Plan, as amended from time to
time.
"
Company Intervening Event
" means a material event or circumstance that was not known to the Company Board on the date of this Agreement
(or if known, the consequences of which were not known to the Company Board as of the date of this Agreement), which event or circumstance, or any consequence thereof, becomes known to the Company
Board prior to the Company Stockholder Approval;
provided
,
however
, that in no event shall any inquiry,
offer or proposal that constitutes or
would reasonably be expected to lead to a Company Acquisition Proposal constitute a Company Intervening Event.
"
Company Material Adverse Effect
" shall mean any event, occurrence, development or change that has a material adverse effect on the
business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole;
provided
,
however
, that none of the following
(or the
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results
thereof) shall constitute or be taken into account in determining whether a Company Material Adverse Effect shall have occurred: (i) changes in general economic, financial market,
regulatory, business, financial, political, geopolitical, credit or capital market conditions, including interest or exchange rates; (ii) general changes or developments in any of the
industries or markets, or in the business conditions in the geographic regions, in which the Company or any of its Subsidiaries operate (or applicable portions or segments of such industries or
markets); (iii) changes in any applicable U.S. Laws or accounting regulations or principles or interpretations thereof; (iv) any change in the price or trading volume of the Company's
securities or other financial instruments or change in the Company's credit rating, in and of itself (
provided
that the facts or occurrences giving rise
to or contributing to such change that are not otherwise excluded from the definition of "Company Material Adverse Effect" may be taken into account in determining whether a Company Material Adverse
Effect has occurred); (v) any failure by the Company to meet its internal or published projections, budgets, plans or forecasts of its revenues, earnings or other financial performance or
results of operation or any published analyst or other third party estimates or expectations of the Company's revenue, earnings or other financial performance or results of operations for any period,
in and of itself (
provided
that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the
definition of "Company Material Adverse Effect" may be taken into account in determining whether a Company Material Adverse Effect has occurred); (vi) any outbreak or escalation of hostilities
or war or any act of terrorism, or any acts of God, weather-related events, fires or natural disasters; (vii) any action taken or not taken at the express written request of Parent after the
date of this Agreement; or (viii) the public announcement or pendency of the Merger or the other transactions contemplated by this Agreement or the identity of Parent;
provided
that if the facts,
circumstances, events, changes, occurrences or effects set forth in clauses (i) through (iii) and
(vi) above have a material disproportionate impact on the Company and its Subsidiaries, taken as a whole, relative to the other participants in the industries in which the Company and its
Subsidiaries operate, such facts, circumstances, events, changes, occurrences or efforts may be taken into account in determining whether a Company Material Adverse Effect has occurred.
"
Company Option
" shall mean each option to purchase shares of Company Common Stock.
"
Company Recommendation
" shall mean the recommendation of the Company Board that the stockholders of the Company adopt this Agreement and
approve the transactions contemplated by this Agreement, including the Merger.
"
Company Signing Representation Letter
" shall mean the representation letter executed by the Company on or prior to the date of this
Agreement and delivered to Parent Tax Counsel and Company Tax Counsel, attached hereto as Exhibit D.
"
Company Superior Proposal
" shall mean a bona fide written Company Acquisition Proposal
(
provided
that for purposes of this definition, references to twenty percent (20%) in the definition of "Company Acquisition Proposal" shall be deemed
to be references to fifty percent (50%)) which the Company Board determines in good faith (i) to be reasonably likely to be consummated if accepted and (ii) to be more favorable to the
Company's stockholders from a financial point of view than the Merger and the other transactions contemplated by this Agreement, in each case, taking into account at the time of determination all
relevant circumstances, including the various legal, financial and regulatory aspects of the proposal, all the terms and conditions of such proposal and this Agreement, and any changes to the terms of
this Agreement offered by Parent in response to such Company Acquisition Proposal.
"
Company Tax Counsel
" shall mean Shearman & Sterling LLP or such other nationally recognized law firm as the Company may
select.
"
Company Termination Fee
" shall mean $200,000,000.00.
Appendix A-2
Table of Contents
"
Confidentiality Agreement
" shall mean the confidentiality agreement, dated July 7, 2016, between Parent and the Company.
"
Contract
" shall mean any binding written contract, subcontract, lease, sublease, conditional sales contract, purchase order, sales order,
license, indenture, note, bond, loan, instrument, understanding, permit, concession, franchise, commitment, partnership, limited liability company or other agreement.
"
Control
" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities or partnership or other interests, by Contract or otherwise. The terms "Controlling" and "Controlled by" shall have correlative
meanings.
"
Customs & International Trade Authorizations
" shall mean any and all licenses, registrations, and approvals required pursuant to
the Customs & International Trade Laws for the lawful export or import of goods, software, technology, technical data, and services and international financial transactions.
"
Customs & International Trade Laws
" shall mean the applicable export control, sanctions, import, customs and trade, anti-bribery,
and anti-boycott Laws of any jurisdiction in which the Company or any of its Subsidiaries is incorporated or does business, including the UK Bribery Act 2010, the Tariff Act of 1930, as amended, and
other applicable Laws, administered or enforced by the U.S. Department of Commerce, U.S. International Trade Commission, U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement,
and their predecessor agencies; the Export Administration Act of 1979, as amended; the Export Administration Regulations, including related restrictions with regard to transactions involving Persons
on the U.S. Department of Commerce Denied Persons List, Unverified List or Entity List; the Arms Export Control Act, as amended; the International Traffic in Arms Regulations, including related
restrictions with regard to transactions involving Persons on the Debarred List; the International Emergency Economic Powers Act, as amended; the Trading With the Enemy Act, as amended; the Iran
Sanctions Act, as amended, the National Defense Authorization Act for Fiscal Year 2012, the National Defense Authorization Act for Fiscal Year 2013, and the embargoes and restrictions administered by
OFAC; Executive Orders regarding embargoes and restrictions on transactions with designated countries and entities, including Persons designated on OFAC's list of Specially Designated Nationals and
Blocked Persons, and Persons designated on the U.S. Department of State sanctions lists; the anti-boycott Laws administered by the U.S. Department of Commerce; and the anti-boycott Laws administered
by the U.S. Department of the Treasury.
"
Delaware Secretary of State
" shall mean the Secretary of State of the State of Delaware.
"
Environmental Laws
" shall mean all applicable and legally enforceable Laws relating to pollution or protection of the environment,
natural resources or human health and safety, including Laws relating to Releases of Hazardous Materials and the manufacture, processing, distribution, use, treatment, storage, Release, transport or
handling of Hazardous Materials, including the Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
§6901 et seq.), the Safe Drinking Water Act (42 U.S.C. §3000(f) et seq.), the Toxic Substances Control Act (15 U.S.C. §2601 et seq.), the Clean Air Act (42 U.S.C.
§7401 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. §2701 et seq.), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
§9601 et seq.), the Endangered Species Act of 1973 (16 U.S.C. §1531 et seq.), and other similar foreign, state and local statutes, in effect as of the date of this Agreement.
"
Equity Award Exchange Ratio
" means the quotient obtained by dividing (i) the Merger Consideration by (ii) the Parent Stock
Price;
provided
that the value of the portion of the Merger Consideration that consists of shares of Parent Common Stock shall be determined by
multiplying (x) the number of such shares of Parent Common Stock by (y) the Parent Stock Price.
Appendix A-3
Table of Contents
"
ERISA
" shall mean the Employee Retirement Income Security Act of 1974, as amended.
"
Exchange Act
" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"
Exchange Ratio
" shall mean the following (in each case rounded to four decimal places): (i) if the Parent Stock Price is an amount
greater than $89.97, then the Exchange Ratio is 0.3101; (ii) if the Parent Stock Price is an amount greater than or equal to $77.41 but less than or equal to $89.97, then the Exchange Ratio
shall be an amount equal to the quotient obtained by dividing (x) $27.90 by (y) the Parent Stock Price; and (iii) if the Parent Stock Price is less than $77.41, then the Exchange
Ratio is 0.3604.
"
Existing Credit Agreement
" shall mean the Credit Agreement, dated as of December 16, 2014, among the Company, as Borrower,
JPMorgan Chase Bank, N.A., as Administrative Agent, Citigroup Global Markets Inc. and Goldman Sachs Bank USA, as Syndication Agents, Credit Suisse AG, Cayman Islands Branch, TD Bank,
N.A., Royal Bank of Canada, Deutsche Bank Securities Inc., Barclays Bank PLC, Bank of Tokyo-Mitsubishi UFJ, Ltd. and Capital One Business Credit Corp., as Documentation Agents,
and certain lenders party thereto, as amended prior to the date of this Agreement.
"
FCPA
" shall mean the U.S. Foreign Corrupt Practices Act of 1977, as amended.
"
Financing Source
" shall mean, in its capacity as such, any agent, arranger, lender, underwriter, purchaser, noteholder or other debt or
equity financing source providing a commitment to provide or arrange all or part of the financing pursuant to any commitment letter, engagement letter or any definitive financing documents in
connection with the transactions contemplated by this Agreement, or any alternative financing in connection therewith (whether debt or equity and whether public or private), including any joinder
agreements, indentures or credit agreements entered into pursuant thereto or related thereto, and their respective Affiliates, and such agent's, arranger's, lender's, underwriter's, purchaser's,
noteholder's or other debt or equity financing source's (and their respective Affiliates') equityholders, members, employees, officers, directors, attorneys, agents, advisors or Representatives, and
their respective successors and permitted assigns.
"
Foreign Plan
" shall mean Company Benefit Plans that are subject to any Law other than U.S., federal, state or local law.
"
GAAP
" shall mean the United States generally accepted accounting principles.
"
Governmental Authority
" shall mean any United States (federal, state or local) or foreign government, or any governmental, regulatory,
judicial or administrative authority, agency or commission.
"
Hazardous Materials
" shall mean any material, substance, chemical or waste (or combination thereof) that (i) is listed, defined,
designated, regulated or classified as hazardous, toxic, radioactive, dangerous, a pollutant, a contaminant, petroleum, oil or words of similar meaning or effect under any Law relating to pollution,
waste or the environment or (ii) can form the basis of any liability under any Law relating to pollution, waste or the environment.
"
HSR Act
" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"
Indebtedness
" shall mean (i) any indebtedness or other obligation for borrowed money, whether current, short-term or long-term and
whether secured or unsecured, (ii) any indebtedness evidenced by a note, bond, debenture or other Security or similar instrument, (iii) any liabilities or obligations with respect to
interest rate swaps, collars, caps and similar hedging obligations, (iv) any capitalized lease obligations, (v) any direct or contingent obligations under letters of credit, bankers'
acceptances, bank
Appendix A-4
Table of Contents
guarantees,
surety bonds and similar instruments, each to the extent drawn upon and paid, (vi) any obligation to pay the deferred purchase price of property or services (other than trade
accounts payable in the ordinary course of business) and (vii) guarantees in respect of clauses (i) through (vi) including guarantees of another Person's Indebtedness or any
obligation of another Person which is secured by assets of the Company or any of its Subsidiaries or Parent or any of its Subsidiaries, as applicable.
"
IRS
" shall mean the United States Internal Revenue Service.
"
KLX
" shall mean KLX, Inc., a Delaware corporation.
"
KLX Closing Representation Letter
" shall mean the representation letter executed by KLX and delivered to Shearman & Sterling,
dated as of the Closing Date, described in Section 7.3(f) of the KLX Tax Sharing Agreement.
"
KLX Contribution
" shall have the same meaning as the term "Contribution" in the KLX Tax Sharing Agreement.
"
KLX Debt Repayment
" shall have the same meaning as the term "Debt Repayment" in the KLX Tax Sharing Agreement.
"
KLX Distribution
" shall have the same meaning as the term "Distribution" in the KLX Tax Sharing Agreement.
"
KLX External Spin-Off
" shall have the same meaning as the term "External Spin-Off" in the KLX Tax Sharing Agreement.
"
KLX Internal Restructuring
" shall have the same meaning as the term "Internal Restructuring" in the KLX Tax Sharing Agreement.
"
KLX Signing Representation Letter
" shall mean the representation letter executed by KLX on or prior to the date of this Agreement and
delivered to Shearman & Sterling LLP pursuant to the KLX TSA Amendment.
"
KLX Spin-Off Tax Treatment
" shall mean the qualification of (i) the KLX Contribution and the KLX Distribution, taken together, as
a reorganization under Section 368(a)(1)(D) of the Code pursuant to which no gain or loss was recognized by the Company or KLX under Sections 357, 361 and 1032 of the Code with each of
the Company and KLX as a party to the reorganization, (ii) the KLX Debt Repayment as a transfer under Section 361(b)(3) of the Code such that no gain was recognized by the Company upon
the receipt of cash proceeds in connection with the KLX Contribution and (iii) the KLX Distribution for nonrecognition of gain or loss under Sections 355 and 361 of the Code.
"
Knowledge
" shall mean the actual knowledge of each of the following officers and employees of the Company or Parent, as applicable, after
reasonable inquiry by each such person: (i) for the Company: Amin J. Khoury, Werner Lieberherr, Joseph T. Lower and Ryan M. Patch; and (ii) for Parent: Robert K. Ortberg, Patrick E.
Allen and Robert J. Perna.
"
Law
" shall mean any domestic, federal, state, municipal, local, national, supranational or foreign statute or law (whether statutory or
common law), constitution, code, ordinance, rule, regulation, order, writ, judgment, decree, binding directive (including those of any applicable self-regulatory organization), arbitration award,
agency requirement or any other enforceable requirement of any Governmental Authority.
"
Lien
" shall mean liens, claims, mortgages, encumbrances, pledges, security interests, easements or charges of any kind.
"
NASDAQ
" shall mean The NASDAQ Stock Market.
"
OFAC
" shall mean the Office of Foreign Assets Control of the U.S. Department of the Treasury.
Appendix A-5
Table of Contents
"
Order
" shall mean any decree, order, judgment, injunction, temporary restraining order or other order in any
Proceeding by or with any Governmental Authority.
"
Parent Acquisition Proposal
" shall mean a proposal or offer from any Person providing for any (i) merger, consolidation, share
exchange, business combination, recapitalization or similar transaction involving Parent, pursuant to which any such Person would own or control, directly or indirectly, twenty percent (20%) or more
of the voting power of Parent, (ii) sale or other disposition, directly or indirectly, of assets of Parent (including the capital stock or other equity interests of any of its Subsidiaries) or
any Subsidiary of Parent representing twenty percent (20%) or more of the consolidated assets, revenues or net income of Parent and its Subsidiaries taken as a whole, (iii) issuance or sale or
other disposition of capital stock or other equity interests representing twenty percent (20%) or more of the voting power of Parent, (iv) tender offer, exchange offer or any other transaction
or series of transactions in which any Person will acquire, directly or indirectly, beneficial ownership or the right to acquire beneficial ownership of capital stock or other equity interests
representing twenty percent (20%) or more of the voting power of Parent or (v) any related combination of the foregoing, in the case of each of (i) through (v) above, a condition
of which is that the transactions contemplated by this Agreement do not occur or that could only be completed if the transactions contemplated by this Agreement do not occur.
"
Parent Benefit Plan
" shall mean (i) each material "employee benefit plan" (as such term is defined in Section 3(3) of
ERISA), whether written or unwritten, that Parent, any of its Subsidiaries or any Parent ERISA Affiliate adopted, maintains, sponsors, participates in, is a party or contributes to or with respect to
which Parent or any of its Subsidiaries could reasonably be expected to have any material liability; and (ii) each other material employment or employee benefit plan, program, practice, policy,
arrangement or agreement, whether written or unwritten, including any equity option, equity purchase, equity appreciation right or other equity or equity-based incentive, cash bonus or incentive
compensation, employment, change in control, retention, retirement or supplemental retirement, deferred compensation, profit-sharing, unemployment, severance, termination pay, welfare, hospitalization
or medical, life, accidental death and dismemberment, long- or short-term disability, fringe benefit or other similar compensation or employee benefit plan, program, practice, policy, arrangement or
agreement for any current or former employee or director of, or other individual service provider to, Parent or any of its Subsidiaries that does not constitute an "employee benefit plan" (as defined
in Section 3(3) of ERISA), that Parent or any of its Subsidiaries adopted, maintains, sponsors, participates in, is a party or contributes to, or with respect to which Parent or any of its
Subsidiaries could reasonably be expected to have any liability.
"
Parent Disclosure Letter
" shall mean the disclosure letter delivered by Parent to the Company simultaneously with the execution of this
Agreement.
"
Parent Equity Awards
" shall mean options to purchase Parent Common Stock, restricted stock awards subject to time-based or other vesting
or lapse restrictions, restricted stock unit awards subject to time-based, performance or other vesting or lapse restrictions or performance shares subject to time-based, performance or other vesting
or lapse restrictions.
"
Parent ERISA Affiliate
" shall mean any Person under common control with Parent within the meaning of Section 414(b),
Section 414(c), Section 414(m) or Section 414(o) of the Code, and the regulations issued thereunder.
"
Parent Intervening Event
" means a material event or circumstance that was not known to the Parent Board on the date of this Agreement (or
if known, the consequences of which were not known to the Parent Board as of the date of this Agreement), which event or circumstance, or any consequence thereof, becomes known to the Parent Board
prior to the Parent Stockholder Approval;
provided
,
however
, that in no event shall any inquiry, offer
or proposal that constitutes or would reasonably be expected to lead to a Parent Acquisition Proposal constitute a Parent Intervening Event.
Appendix A-6
Table of Contents
"
Parent Material Adverse Effect
" shall mean any event, occurrence, development or change that has a material adverse effect on the
business, financial condition or results of operations of Parent and its Subsidiaries, taken as a whole;
provided
,
however
, that none of the following (or
the results thereof) shall constitute or be taken into account in determining whether a Parent Material Adverse
Effect shall have occurred: (i) changes in general economic, financial market, regulatory, business, financial, political, geopolitical, credit or capital market conditions, including interest
or exchange rates; (ii) general changes or developments in any of the industries or markets, or in the business conditions in the geographic regions, in which Parent or any of its Subsidiaries
operate (or applicable portions or segments of such industries or markets); (iii) changes in any applicable U.S. Laws or accounting regulations or principles or interpretations thereof;
(iv) any change in the price or trading volume of Parent's securities or other financial instruments or change in Parent's credit rating, in and of itself
(
provided
that the facts or occurrences giving rise to or contributing to such change that are not otherwise excluded from the definition of "Parent
Material Adverse Effect" may be taken into account in determining whether a Parent Material Adverse Effect has occurred); (v) any failure by Parent to meet its internal or published
projections, budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operation or any published analyst or other third party estimates or expectations of
Parent's revenue, earnings or other financial performance or results of operations for any period, in and of itself (
provided
that the facts or
occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of "Parent Material Adverse Effect" may be taken into account in determining whether a
Parent Material Adverse Effect has occurred); (vi) any outbreak or escalation of hostilities or war or any act of terrorism, or any acts of God, weather-related events, fires or natural
disasters; (vii) any action taken or not taken at the express written request of the Company after the date of this Agreement; or (viii) the public announcement or pendency of the Merger
or the other transactions contemplated by this Agreement or the identity of the Company;
provided
that if the facts, circumstances, events, changes,
occurrences or effects set forth in clauses (i) through (iii) and (vi) above have a material disproportionate impact on Parent and its Subsidiaries, taken as a whole, relative to
the other participants in the industries in which Parent and its Subsidiaries operate, such facts, circumstances, events, changes, occurrences or efforts may be taken into account in determining
whether a Parent Material Adverse Effect has occurred.
"
Parent Organizational Documents
" shall mean the certificate of incorporation and bylaws, each as amended as of the date of this
Agreement, of each of Parent and Merger Sub.
"
Parent Recommendation
" shall mean the recommendation of the Parent Board that the stockholders of Parent approve the Parent Stock
Issuance.
"
Parent Signing Representation Letter
" shall mean the representation letter executed by Parent on or prior to the date of this Agreement
and delivered to Parent Tax Counsel and Company Tax Counsel, attached hereto as Exhibit E.
"
Parent Stock Price
" shall mean the average VWAP of Parent Common Stock for the twenty (20) consecutive Trading Days ending
immediately prior to the Closing Date, starting with the opening of trading on the first such Trading Day to the closing of the last Trading Day prior to the Closing Date.
"
Parent Superior Proposal
" shall mean a bona fide written Parent Acquisition Proposal
(
provided
that for purposes of this definition, references to twenty percent (20%) in the definition of "Parent Acquisition Proposal" shall be deemed to
be references to fifty percent (50%)) which the Parent Board determines in good faith (i) to be reasonably likely to be consummated if accepted and (ii) to be more favorable to Parent's
stockholders from a financial point of view than the Merger and the other transactions contemplated by this Agreement, in each case, taking into account at the time of determination all relevant
circumstances, including the various legal, financial and regulatory aspects of
Appendix A-7
Table of Contents
the
proposal, all the terms and conditions of such proposal and this Agreement, and any changes to the terms of this Agreement offered by the Company in response to such Parent Acquisition Proposal.
"
Parent Tax Counsel
" shall mean Skadden, Arps, Slate, Meagher & Flom LLP or such other nationally recognized law firm as
Parent may select.
"
Parent Termination Fee
" shall mean $300,000,000.00.
"
Permitted Lien
" shall mean (i) any Lien for Taxes not yet due or that are being contested in good faith by appropriate Proceedings
and for which adequate accruals or reserves have been established in accordance with GAAP, (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen,
repairmen and other similar Liens incurred in the ordinary course of business, or that are not yet due or that are being contested in good faith by appropriate Proceedings and for which adequate
accruals or reserves have been established in accordance with GAAP, (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation,
unemployment insurance or other types of social security or foreign equivalents, (iv) zoning, building codes, and other land use Laws regulating the use or occupancy of leased real property or
the activities conducted thereon that are imposed by any Governmental Authority having jurisdiction over such leased real property and that are not violated in any material respect by the current use
and operation of such leased real property or the operation of the business of the Company and its Subsidiaries, (v) with respect to all leased real property, all Liens encumbering the interest
of the fee owner or any superior lessor, sublessor or licensor, (vi) Liens or other imperfections of title, if any, that would not reasonably be expected to be, individually or in the
aggregate, material to a Person and its Subsidiaries, taken as a whole, including Liens for any supplemental Taxes or assessments not shown by public records, including refinancings thereof,
(vii) in the case of Intellectual Property Rights, licenses of rights entered into in the ordinary course of business, (viii) any other Liens that will be released on or prior to the
Closing Date and (ix) the replacement, extension or renewal of any of the foregoing.
"
Person
" shall mean an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity
or organization, including a Governmental Authority.
"
Proceedings
" shall mean legal, administrative, arbitral or other proceedings, suits, actions, investigations, examinations, claims,
hearings, charges, complaints, indictments or litigations.
"
Release
" shall mean any actual or threatened release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal,
dispersal, leaching or migration of Hazardous Materials, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or real property.
"
Representative
" shall mean, with respect to any Person, such Person's Affiliates and its and their respective officers, directors,
managers, partners, employees, accountants, counsel, financial advisors, consultants and other advisors or representatives and, with respect to Parent, its Financing Sources.
"
Sanctioned Country
" shall mean, at any time, a country or territory which is itself the subject or target of comprehensive Sanctions (at
the time of this Agreement, Crimea, Cuba, Iran, North Korea, Sudan and Syria).
"
Sanctioned Person
" shall mean any Person that is the target of Sanctions, including, (i) any Person listed in any
Sanctions-related list of designated Persons maintained by OFAC or the U.S. Department of State, the United Nations Security Council, the European Union, Her majesty's Treasury of the United Kingdom,
Switzerland or any European Union member state, (ii) any Person located, organized or resident in a Sanctioned Country, or (iii) any Person 50% or more owned or otherwise controlled by
any such Person or Persons described in the foregoing clauses (i) and (ii).
"
Sanctions
" shall mean economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S.
government through OFAC or the U.S. Department of
Appendix A-8
Table of Contents
State,
the United Nations Security Council, the European Union or any European Union member state, Her Majesty's Treasury of the United Kingdom or Switzerland.
"
Sarbanes-Oxley Act
" shall mean the Sarbanes-Oxley Act of 2002, as amended.
"
SEC
" shall mean the United States Securities and Exchange Commission.
"
Securities Act
" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"
Securities Laws
" shall mean the Securities Act, the Exchange Act, state securities or "blue sky" laws, all similar foreign securities
laws and the rules and regulations promulgated thereunder.
"
Security
" shall mean, with respect to any Person, any series of common stock, preferred stock and any other equity securities or capital
stock of such Person (including interests convertible into or exchangeable or exercisable for any equity interest in any such series of common stock, preferred stock, and any other equity securities
or capital stock of such Person), however described and whether voting or non-voting.
"
Security Clearances
" shall mean all personnel and facility security clearances required for access to information classified pursuant to
Executive Order 13526 or similar Order that is necessary for operation of a Person's business as presently conducted.
"
Subsidiary
" of a Person shall mean any other Person with respect to which the first Person (i) has the right to elect a majority
of the board of directors or other Persons performing similar functions or (ii) beneficially owns more than fifty percent (50%) of the voting stock (or of any other form of voting or
controlling equity interest in the case of a Person that is not a corporation), in each case, directly or indirectly through one or more other Persons.
"
Tax
" or "
Taxes
" shall mean any and all taxes, fees, levies, duties, tariffs, imposts, and
other similar charges (together with any and all interest, penalties and additions to tax) imposed by any Governmental Authority, including taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth, and
taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes.
"
Tax Returns
" shall mean returns, reports and information statements, including any schedule or attachment thereto, with respect to Taxes
required to be filed with the IRS or any other Governmental Authority.
"
Trading Day
" shall mean any day on which the NYSE is open for trading;
provided
that a
"Trading Day" only includes those days that have a scheduled closing time of 4:00 PM New York City time.
"
Treasury Regulations
" shall mean regulations promulgated by the IRS under the Code.
"
VWAP
" shall mean, for any Trading Day, the volume-weighted average price per share of Parent Common Stock on the NYSE (as reported by
Bloomberg L.P. or, if not reported therein, in another authoritative source mutually selected by the Company and Parent).
Appendix A-9
Table of Contents
Exhibit A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
B/E AEROSPACE, INC.
FIRST
: The name of the corporation is B/E Aerospace, Inc. (the "
Corporation
").
SECOND
: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County of
New Castle,
Delaware 19801. The name of its registered agent at that address is The Corporation Trust Company.
THIRD
: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the
General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the "
DGCL
").
FOURTH
: The total number of shares of stock which the Corporation shall have authority to issue is 1,000 shares of Common Stock, each
having a par
value of one cent ($0.01).
FIFTH
: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and
for further
definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
(1) The
business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
(2) The
directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the By-Laws of the Corporation.
(3) The
number of directors of the Corporation shall be as from time to time fixed by, or in the manner provided in, the By-Laws of the Corporation. Election of directors
need not be by written ballot unless the By-Laws so provide.
(4) In
addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Certificate of Incorporation, and any By-Laws adopted by the
stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.
SIXTH
: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be
kept (subject to any provision contained in the DGCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the
Corporation.
SEVENTH
: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
EIGHTH
: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, in the
manner now or hereafter prescribed herein and by the laws of the State of Delaware, all rights conferred upon stockholders herein are granted subject to this reservation.
1
Table of Contents
NINTH
: With respect to acts or omissions occurring at or prior to the effective time of the merger between the the Corporation and
Quarterback Merger
SubCorp. (the "Effective Time"), this Corporation shall, to the maximum extent permitted from time to time under the law of the State of Delaware, indemnify and, upon request, advance expenses to any
person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was or has agreed to be a director or officer of this Corporation prior to the Effective Time or while a director or officer is or was serving, prior to the
Effective Time, at the request of this Corporation as a director, officer, partner, trustee, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, against expenses (including attorney's fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with the
investigation, preparation to defend or defense of such action, suit, proceeding or claim; provided, however, that the foregoing shall not require this Corporation to indemnify or advance expenses to
any person in connection with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person. Such indemnification shall not be exclusive of other indemnification rights
arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any person seeking
indemnification under this Article 9 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. Any repeal or modification
of the foregoing provisions of this Article 9 shall not adversely affect any right or protection of a director or officer of this Corporation with respect to any acts or omissions of such
director or officer occurring prior to such repeal or modification.
TENTH
: With respect to acts or omissions occurring at or prior to the Effective Time, a director of this Corporation shall not be
liable to this
Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that exculpation from liabilities is not permitted under the Delaware General
Corporation Law as in effect at the time such liability is determined. Any repeal or modification of the foregoing provisions of this Article 10 shall not adversely affect any right or
protection of a director or officer of this Corporation with respect to any acts or omissions of such director or officer occurring prior to such repeal or modification.
*
* * * *
2
Table of Contents
Annex B
October 23,
2016
The
Board of Directors
Rockwell Collins, Inc.
400 Collins Road N.E.
Cedar Rapids, Iowa 52498
Members
of the Board of Directors:
You
have requested our opinion as to the fairness, from a financial point of view, to Rockwell Collins, Inc. (the "Company") of the consideration to be paid by the Company in the
proposed merger (the "Transaction") of Quarterback Merger Sub Corp., a wholly-owned subsidiary of the Company (the "Merger Subsidiary"), with B/E Aerospace, Inc. (the "Merger Partner").
Pursuant to the Agreement and Plan of Merger (the "Agreement"), among the Company, the Merger Subsidiary and the Merger Partner, the Merger Partner will become a wholly-owned subsidiary of the
Company, and each share of common stock, par value $0.01 per share, of the Merger Partner (the "Merger Partner Common Stock") issued and outstanding immediately prior to the effective time of the
Transaction (other than Canceled Shares (as defined in the Agreement) and Dissenting Shares (as defined in the Agreement)), will be converted into the right to receive consideration per share equal to
$34.10 in cash, without interest (the "Cash Consideration"), and that number of shares of common stock, par value $0.01 per share, of the Company (the "Company Common Stock") equal to the Exchange
Ratio (and, if applicable, cash in lieu of fractional shares of Parent Common Stock (as defined in the Agreement) payable in accordance with the Agreement) (such number of shares of Company Common
Stock and any such cash in lieu of fractional shares, together with the Cash Consideration, the "Consideration"). For purposes of the Agreement, the Exchange Ratio means the following (in each case
rounded to four decimal places): (i) if the Parent Stock Price (as defined in the Agreement) is an amount greater than $89.97, then the Exchange Ratio is 0.3101; (ii) if the Parent Stock
Price (as defined in the Agreement) is an amount greater than or equal to $77.41 but less than or equal to $89.97, then the Exchange Ratio shall be an amount equal to the quotient obtained by dividing
$27.90 by the Parent Stock Price (as defined in the Agreement); and (iii) if the Parent Stock Price (as defined in the Agreement) is less than $77.41, then the Exchange Ratio is 0.3604.
In
connection with preparing our opinion, we have (i) reviewed a draft dated October 23, 2016 of the Agreement; (ii) reviewed certain publicly available business and
financial information concerning the Merger Partner and the Company and the industries in which they operate; (iii) compared the proposed financial terms of the Transaction with the publicly
available financial terms of certain transactions involving companies we deemed relevant and the consideration received for such companies; (iv) compared the financial and operating performance
of the Merger Partner and the Company with publicly available information concerning certain other companies we deemed relevant and reviewed
the current and historical market prices of the Merger Partner Common Stock and the Company Common Stock and certain publicly traded securities of such other companies; (v) reviewed certain
internal financial analyses and forecasts prepared by the managements of the Merger Partner and the Company relating to their respective businesses and by the Company relating to the Merger Partner's
business, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the Transaction (the "Synergies"); and (vi) performed such
other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.
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In
addition, we have held discussions with certain members of the management of the Merger Partner and the Company with respect to certain aspects of the Transaction, the past and
current business operations of the Merger Partner and the Company, the financial condition and future prospects and operations of the Merger Partner and the Company, the effects of the Transaction on
the financial condition and future prospects of the Company, and certain other matters we believed necessary or appropriate to our inquiry.
In
giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with us by the Merger
Partner and the Company or otherwise reviewed by or for us. We have not independently verified any such information or its accuracy or completeness and, pursuant to our engagement letter with the
Company, we did not assume any obligation to undertake any such independent verification. We have not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor have
we evaluated the solvency of the Merger Partner or the Company under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts
provided to us or derived therefrom, including the Synergies, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and
judgments by management as to the expected future results of operations and financial condition of the Merger Partner and the Company to which such analyses or forecasts relate. We express no view as
to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. We have also assumed that the Transaction and the other transactions contemplated by the Agreement
will have the tax consequences described in discussions with, and materials furnished to us by, representatives of the Company, and will be consummated as described in the Agreement, and that the
definitive Agreement will not differ in any material respects from the draft thereof furnished to us. We have also assumed that the representations and warranties made by the Company and the Merger
Partner in the Agreement and the related agreements are and will be true and correct in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the
assessments made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the
consummation of the Transaction will be obtained without any adverse effect on the Merger Partner or the Company or on the contemplated benefits of the Transaction.
Our
opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It should be understood that
subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of
view, of the Consideration to be paid by the Company in the proposed Transaction and we express no opinion as to the fairness of the Consideration to the holders of any class of securities, creditors
or other constituencies of the Company or as to the underlying decision by the Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any
compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the Consideration to be paid by the Company in the Transaction or with
respect to the fairness of any such compensation. We are expressing no opinion herein as to the price at which the Company Common Stock or the Merger Partner Common Stock will trade at any future
time.
We
have acted as financial advisor to the Company with respect to the proposed Transaction and will receive a fee from the Company for our services, a substantial portion of which will
become payable only if the proposed Transaction is consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. During the two years
preceding the date of this letter, we and our affiliates have had commercial or investment banking relationships with the Company and the Merger Partner for which we and such affiliates have received
customary
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compensation.
Such services during such period have included acting as joint bookrunner and joint lead arranger on the Company's revolving credit facility in February 2016; as joint lead arranger and
joint bookrunner on the Merger Partner's credit facilities in December 2014 and in May 2016; as lead arranger and lead-left bookrunner on credit facilities of KLX Inc., an entity that was spun
out of the Merger Partner in December 2014 ("KLX"), in December 2014 and May 2015; as lead bookrunner on an offering of debt securities of KLX in November 2014; and as financial advisor to the Merger
Partner in connection with the spin-off of KLX in December 2014. We and our affiliates also provided asset management services to the Company during such period. In addition, our commercial banking
affiliate is an agent bank and a lender under outstanding credit facilities of the Company, the Merger Partner and of KLX, for which it receives customary compensation or other financial benefits. We
anticipate that we and our affiliates will arrange and/or provide financing to the Company in connection with the Transaction for customary compensation. In addition, we and our affiliates hold, on a
proprietary basis, less than 1% of the outstanding common stock of each of the Company and the Merger Partner. In the ordinary course of our businesses, we and our affiliates may actively trade the
debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of the Company or the Merger Partner for our own account or for the accounts of customers
and, accordingly, we may at any time hold long or short positions in such securities or other financial instruments.
On
the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Consideration to be paid by the Company in the proposed Transaction is fair, from a
financial point of view, to the Company.
The
issuance of this opinion has been approved by a fairness opinion committee of J.P. Morgan Securities LLC. This letter is provided to the Board of Directors of the Company (in
its capacity as such) in connection with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any shareholder of the Company as to how such
shareholder should vote with respect to the Transaction or any other matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose
whatsoever except with our prior written approval. This opinion may be reproduced in full in any registration, proxy or information statement relating to the Transaction which the Company must, under
any applicable law, file with any government agency or distribute to its shareholders and where such filing must include this opinion. This opinion may not otherwise be disclosed publicly in any
manner without our prior written approval.
Very
truly yours,
J.P.
MORGAN SECURITIES LLC
B-3
ANNEX C
388
Greenwich St
New York, NY 10013
October 23,
2016
The
Board of Directors
B/E Aerospace, Inc.
1400 Corporate Center Way
Wellington, FL 33414
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 of B/E Aerospace, Inc., a Delaware corporation ("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 the Agreement and Plan of Merger, dated as of
October 23, 2016 (the "Merger Agreement"), among Rockwell Collins, Inc., a Delaware corporation ("Parent"), Quarterback Merger Sub Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and Company. As more fully described in the Merger Agreement, (i) Merger Sub will be merged with and into Company (the "Merger") and (ii) each
outstanding share of the common stock, par value $0.01 per share, of Company ("Company Common Stock"), other than shares of Company Common Stock held by holders who are entitled to and properly demand
appraisal of their shares of Company Common Stock and shares of Company Common Stock that are owned, directly or indirectly, by Parent, Company (as treasury shares or otherwise) or Merger Sub (such
holders, collectively, "Excluded Holders"), will be converted into the right to receive $34.10 in cash (the "Cash Consideration") and that number of shares (and cash in lieu of any fraction thereof)
of common stock, par value $0.01 per share ("Parent Common Stock"), of Parent equal to (a) if the Parent Stock Price (as defined in the Merger Agreement) is greater than $89.97, 0.3101;
(b) if the Parent Stock Price is greater than or equal to $77.41 but less than or equal to $89.97, the quotient (rounded to four decimal places) obtained by dividing (x) $27.90 by
(y) the Parent Stock Price; and (c) if the Parent Stock Price is less than $77.41, 0.3604 (the "Stock Consideration"; together with the Cash Consideration, the "Merger Consideration").
In
arriving at our opinion, we reviewed the Merger Agreement and held discussions with certain senior officers, directors and other representatives and advisors of Company and certain
senior officers and other representatives and advisors of Parent concerning the businesses, operations and prospects of Company and Parent. We examined certain publicly available business and
financial information relating to Company and Parent as well as certain financial forecasts and other information and data relating to Company and Parent which were provided to or discussed with us by
the respective managements of Company and Parent, including information relating to the potential strategic implications and operational benefits (including the amount, timing and achievability
thereof) anticipated by the managements of Company and Parent to result from the Merger. 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 and Parent Common Stock; the historical and projected earnings and other operating data of Company and Parent;
and the capitalization and financial condition of Company and Parent. We considered, to the extent publicly available, the financial terms of certain other transactions which we considered relevant in
Citigroup Global Markets Inc.
C-1
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 Company and Parent. We also evaluated certain potential pro forma financial effects of the Merger on Parent. 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 managements of Company and Parent 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 Company and Parent provided to or otherwise reviewed by or discussed with
us, we have been advised by the respective managements of Company and Parent that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Company and Parent as to the future financial performance of Company and Parent, the potential strategic implications and operational benefits
anticipated to result from the Merger and the other matters covered thereby, and have assumed, with your consent, that the financial results (including the potential strategic implications and
operational benefits anticipated to result from the Merger) reflected in such forecasts and other information and data will be realized in the amounts and at the times projected.
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 Company, Parent or the contemplated benefits of the Merger. Our opinion, as set forth herein, relates to the relative values of Company and Parent. We are not
expressing any opinion as to what the value of the Parent Common Stock actually will be when issued pursuant to the Merger or the price at which the Parent Common Stock will trade at any time. We have
not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Company or Parent nor have we made any physical inspection of the
properties or assets of Company or Parent. Our opinion does not address the underlying business decision of Company to effect the Merger, the relative merits of the Merger as compared to any
alternative business strategies that might exist for Company or the effect of any other transaction in which 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 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 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 or acting (i) as financial advisor to Company in connection with Company's spin-off of KLX Inc. in December 2014, and (ii) as
lender, syndication agent, joint lead arranger and joint book-runner in connection with a term loan and revolving credit facility of Company. We and our affiliates in the past have also provided, and
currently provide, services to
C-2
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, acting as lender, syndication agent, joint lead arranger and joint book-runner in connection with two revolving credit facilities of Parent, as well as acting as lender in connection
with certain committed corporate credit card facilities of Parent. In the ordinary course of our business, we and our affiliates may actively trade or hold the securities of 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 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 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 to be received by the holders of Company Common Stock (other than Excluded Holders) in the Merger is fair, from a financial point of view, to such holders.
Very
truly yours,
CITIGROUP
GLOBAL MARKETS INC.
C-3
ANNEX D
200
West Street -- New York, NY 10282-2198
Tel: 212-902-1000 -- Fax: 212-902-3000
PERSONAL AND CONFIDENTIAL
October 23,
2016
Board
of Directors
B/E Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414-2105
Ladies
and Gentlemen:
You
have requested our opinion as to the fairness from a financial point of view to the holders (other than Rockwell Collins Inc. ("Parent") and its affiliates) of the outstanding
shares of common stock, par value $0.01 per share (the "Shares"), of B/E Aerospace, Inc. (the "Company") of the Merger Consideration (as defined below) to be paid to such holders pursuant to
the Agreement and Plan of Merger, dated as of October 23, 2016 (the "Agreement"), by and among Parent, Quarterback Merger Sub Corp., a wholly owned subsidiary of Parent ("Merger Sub"), and the
Company. Pursuant to the Agreement, Merger Sub will be merged with and into the Company (the "Merger") and each outstanding Share (other than Canceled Shares and Dissenting Shares (as defined in the
Agreement)) will be converted into $34.10 in cash (the "Cash Consideration") and that number of shares (and cash in lieu of any fraction thereof) of common stock, par value $0.01 per share ("Parent
Common Stock"), of Parent equal to (a) if the Parent Stock Price (as defined in the Agreement) is greater than $89.97, 0.3101; (b) if the Parent Stock Price is greater than or equal to
$77.41 but less than or equal to $89.97, the quotient (rounded to four decimal places) obtained by dividing $27.90 by the Parent Stock Price; and (c) if the Parent Stock Price is less than
$77.41, 0.3604 (the "Stock Consideration"; together with the Cash Consideration, the "Merger Consideration").
Goldman,
Sachs & Co. and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and
other financial and non-financial activities and services for various persons and entities. Goldman, Sachs & Co. and its affiliates and employees, and funds or other entities they manage
or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives,
loans, commodities, currencies, credit default swaps
and other financial instruments of the Company, Parent, any of their respective affiliates and third parties, or any currency or commodity that may be involved in the transaction contemplated by the
Agreement (the "Transaction"). We have acted as financial advisor to the Company in connection with, and have participated in certain of the negotiations leading to, the Transaction. We expect to
receive fees for our services in connection with the Transaction, the principal portion of which is contingent upon consummation of the Transaction, and the Company has agreed to reimburse certain of
our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. We have Securities and Investment Services Provided by Goldman, Sachs & Co.
provided certain financial advisory and/or underwriting services to the Company and/or its affiliates from time to time for which our Investment Banking Division has received, and may receive,
compensation, including having acted as book manager with respect to a private offering of KLX, Inc.'s, a former subsidiary of the Company, 5.875% Senior Notes due 2022 (aggregate principal
amount of $1,200,000,000) in November 2014; as lead arranger with respect to the Company's term loan (aggregate principal amount
D-1
of
$2,200,000,000) put in place in November 2014; as the Company's financial advisor in connection with the spin-off of KLX, Inc., in December 2014; and as a participant in the Company's
revolving credit facility (aggregate principal amount of $600,000,000) put in place in December 2014. We may also in the future provide financial advisory and/or underwriting services to the Company,
Parent and their respective affiliates for which our Investment Banking Division may receive compensation.
In
connection with this opinion, we have reviewed, among other things, the Agreement; annual reports to stockholders and Annual Reports on Form 10-K of the Company and Parent for
the five fiscal years ended December 31, 2015 and September 30, 2015, respectively; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company and
Parent; certain other communications from the Company and Parent to their respective stockholders; certain publicly available research analyst reports for the Company and for Parent; and certain
internal financial analyses and forecasts for the Company prepared by its management and for Parent prepared by its management, in each case, as approved for our use by the Company (the "Forecasts"),
and certain operating synergies projected by the managements of the Company and Parent to result from the Transaction, as approved for our use by the Company (the "Synergies"). We have also held
discussions with members of the senior managements of the Company and Parent regarding their assessment of the strategic rationale for, and the potential benefits of, the Transaction and the past and
current business operations, financial condition and future prospects of the Company and Parent; reviewed the reported price and trading activity for the Shares and shares of Parent Common Stock;
compared certain financial and stock market information for the Company and Parent with similar information for certain other companies the securities of which are publicly traded; reviewed the
financial terms of certain recent business combinations in the aerospace and defense industry and in other industries; and performed such other studies and analyses, and considered such other factors,
as we deemed appropriate.
For
purposes of rendering this opinion, we have, with your consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and
other information provided to, discussed with or reviewed by, us, without assuming any responsibility for
independent verification thereof. In that regard, we have assumed with your consent that the Forecasts and the Synergies have been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of the Company. We have not made an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other
off-balance-sheet assets and liabilities) of the Company or Parent or any of their respective subsidiaries and we have not been furnished with any such evaluation or appraisal. We have assumed that
all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or Parent or on the expected
benefits of the Transaction in any way meaningful to our analysis. We have assumed that the Transaction will be consummated on the terms set forth in the Agreement, without the waiver or modification
of any term or condition the effect of which would be in any way meaningful to our analysis.
Our
opinion does not address the underlying business decision of the Company to engage in the Transaction, or the relative merits of the Transaction as compared to any strategic
alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. This opinion addresses only the fairness from a financial point of view to the
holders (other than Parent and its affiliates) of Shares, as of the date hereof, of the Merger Consideration to be paid to such holders pursuant to the Agreement. We do not express any view on, and
our opinion does not address, any other term or aspect of the Agreement or Transaction or any term or aspect of any other agreement or instrument contemplated by the Agreement or entered into or
amended in connection with the Transaction, including, the fairness of the Transaction to, or any consideration received in connection therewith by, the holders of any other class of securities,
creditors, or other constituencies of the
D-2
Company;
nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or class of such persons, in connection
with the Transaction, whether relative to the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of Shares pursuant to the Agreement or otherwise. We are not
expressing any opinion as to the prices at which shares of Parent Common Stock will trade at any time or as to the impact of the Transaction on the solvency or viability of the Company or Parent or
the ability of the Company or Parent to pay their respective obligations when they come due. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and
the information made available to us as of, the date hereof and we assume no responsibility for updating, revising or reaffirming this opinion based on circumstances, developments or events occurring
after the date hereof. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its
consideration of the Transaction and such opinion does not constitute a recommendation as to how any holder of Shares should vote with respect to such Transaction or any other matter. This opinion has
been approved by a fairness committee of Goldman, Sachs & Co.
Based
upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration to be paid to the holders (other than Parent and its affiliates) of
Shares pursuant to the Agreement is fair from a financial point of view to such holders.
Very
truly yours,
(GOLDMAN,
SACHS & CO.)
D-3
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ANNEX E
Section 262 of the General Corporation Law of the State of Delaware
8 Del.C. § 262
§ 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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. Electronic Voting Instructions You can vote by the Internet or telephone! Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on March 8, 2017 for registered holders and March 6, 2017 if you are a plan participant. Vote by Internet Go to www.investorvote.com/BEAV Or scan the QR code with your smartphone Follow the steps outlined on the secure website Vote by telephone Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Vote on Proposals The Board of Directors unanimously recommends a vote FOR Proposal 1. 1. Adopt the Agreement and Plan of Merger, dated as of October 23, 2016, by and among Rockwell Collins, Inc., Quarterback Merger Sub Corp. and B/E Aerospace, Inc., as amended from time to time. + ForAgainst Abstain The Board of Directors unanimously recommends a vote FOR Proposal 2. 2. Approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to B/E Aerospaces named executive officers that is based on or otherwise relates to the proposed transactions. The Board of Directors unanimously recommends a vote FOR Proposal 3. 3. Approve any proposal to adjourn the B/E Aerospace special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve Proposal 1. To transact any other business that may properly come before the meeting or any adjournment thereof, this proxy will be voted at the discretion of the proxy holder. B Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below. Please sign this proxy card and return it promptly whether or not you expect to attend the meeting. You may nevertheless vote in person if you attend. Please sign as your name appears herein. Give full title if an Attorney, Executor, Administrator, Trustee, Guardian, etc. For an account in the name of two or more persons, each should sign, or if one signs, signer should attach evidence of authority. Date (mm/dd/yyyy) Please print date below. Signature 1 Please keep signature within the box. Signature 2 Please keep signature within the box. + 1 U P X 02HX9C Special Meeting Proxy Card X IMPORTANT SPECIAL MEETING INFORMATION
. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy B/E Aerospace, Inc. + SPECIAL MEETING March 9, 2017 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY. The undersigned hereby constitutes and appoints Messrs. Joseph T. Lower and Ryan M. Patch, or either of them, with full power of substitution to each, proxies to vote and act at the Special Meeting of Stockholders of B/E Aerospace, Inc. (the Company) to be held on March 9, 2017 at the Hilton Palm Beach Airport, 150 Australian Avenue, West Palm Beach, Florida 33406-1473 at 10:00 a.m. (Eastern Time) and at any adjournment thereof (the Meeting), upon and with respect to the number of shares of Common Stock, par value $0.01 per share that the undersigned would be entitled to vote if personally present. The undersigned hereby instructs such proxies, or their substitutes, to vote on those matters appearing on the reverse side hereof as specified by the undersigned and in such manner as they may determine on any other matter that may come before the Meeting, all as indicated in the accompanying Notice of Special Meeting and Joint Proxy Statement/Prospectus attached thereto, receipt of which is hereby acknowledged. All proxies heretofore given by the undersigned in respect of the Meeting are hereby revoked. Unless otherwise specified in the boxes provided on the reverse side hereof, this Proxy will be voted (1) FOR Proposal 1, (2) FOR Proposal 2, (3) FOR Proposal 3, and (4) in the discretion of the named proxies as to any other matter that may properly come up before the Meeting. CONTINUED AND TO BE VOTED ON REVERSE SIDE C Non-Voting Items Change of Address Please print new address below. Comments Please print your comments below. +