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Plan Of Merger
6 Months Ended
Jul. 02, 2011
Plan Of Merger  
Plan Of Merger

2. Plan of Merger

 

On June 13, 2011, the Company entered into an agreement and plan of merger (the "Merger Agreement") with Honeywell International Inc. ("Honeywell"), a Delaware corporation, and Egret Acquisition Corp., a Georgia corporation and a wholly-owned subsidiary of Honeywell ("Purchaser").  Under the terms of the Merger Agreement, Purchaser agreed to commence a tender offer (the "Offer") to purchase all of the issued and outstanding shares of common stock, $0.10 par value, of the Company (the "Shares") at a price of $33.00 per share (the "Offer Price") in cash.  Upon successful completion of the Offer, the Purchaser will merge with and into the Company (the "Merger") and the Company will become a wholly owned subsidiary of Honeywell.  At the effective time of the Merger, each remaining outstanding Share not tendered in the Offer and for which dissenter's rights have not been perfected will be converted into the right to receive cash in an amount equal to the Offer Price. All unvested stock options representing the right to purchase Shares will vest and become exercisable prior to the acceptance for purchase of Shares in the Offer.  At the effective time of the Merger, each then outstanding option will be cancelled and will represent the right to receive an amount in cash equal to the excess, if any, of the Offer Price over the exercise price of such option.  In addition, immediately prior to the time of the acceptance for purchase of Shares in the Offer, each share of restricted stock under the Company's equity incentive plans that is outstanding shall become fully vested. The Company's Board of Directors has unanimously approved the Merger Agreement and has recommended that shareholders tender their Shares into the Offer.   EMS and Honeywell will continue to operate separately until the transaction closes.  The Merger Agreement is subject to customary closing conditions and is expected to close in the third quarter of 2011.

 

The Offer commenced on June 27, 2011 and is scheduled to expire at 5:30 p.m., New York City time, on August 19, 2011, unless further extended or earlier terminated.  Purchaser will accept and promptly pay for each Share validly tendered, and not withdrawn, in accordance with the terms of the Offer.  The Purchaser's obligation to accept for payment and pay for all Shares validly tendered pursuant to the Offer is subject to (i) the condition that the number of Shares validly tendered and not withdrawn represents at least a majority of the total number of Shares outstanding at the expiration of the Offer on a fully diluted basis, and (ii) the satisfaction or waiver of other customary closing conditions as set forth in the Merger Agreement, including the receipt of necessary regulatory approval. 

 

The Company has granted to Purchaser an irrevocable option, which Purchaser, subject to certain conditions, may exercise after the consummation of the Offer (including any subsequent offering period), to purchase such number of newly additional Shares at the Offer Price from the Company such that, when added to the Shares already owned by Honeywell, Purchaser and their subsidiaries at the time of such exercise, constitutes one more Share than 90% of the total number of Shares outstanding on a fully diluted basis (the "Top-up Option").  The Top-Up Option is intended to expedite the timing of the completion of the Merger.  If the Purchaser acquires more than 90% of the outstanding Shares in the Offer or through exercise of the Top-Up Option, it will complete the Merger through the "short form" procedures available under Georgia law, which would not require the Company to hold a meeting of its shareholders to vote on the adoption of the Merger Agreement.  In the event that Purchaser does not hold at least 90% of the outstanding Shares following the consummation of the Offer and the exercise of the Top-Up Option, the Company must obtain the approval of its shareholders to consummate the Merger.  In this event, the Merger agreement would require the Company to call and convene a shareholder meeting to obtain this approval, and Honeywell and Purchaser would vote all of the Shares owned by them (including Shares acquired pursuant of the Offer) in favor of the adoption of the Merger Agreement and the consummation of the Merger.

 

Effective upon the consummation of the Offer, the Purchaser will be entitled to designate a number of directors, rounded up to the next whole number, on the Company's Board of Directors equal to the product of (i) the total number of directors on the Company's Board of Directors and (ii) the percentage that the number of Shares beneficially owned by Honeywell or Purchaser bears to the number of Shares then outstanding, but in no event less than a majority of the number of directors.  However, Honeywell, Purchaser and the Company shall use their reasonable best efforts to ensure that after the consummation of the Offer, at least three independent directors currently serving on the Company's Board of Directors shall continue to be on the Company's Board of Directors until the effective time of the Merger. The Merger Agreement contains customary representations and warranties by the Company, Purchaser and Honeywell.  The Merger Agreement also contains customary covenants and agreements, including with respect to the operation of the business of the Company and its subsidiaries between the signing of the Merger Agreement and the closing of the Merger, restrictions on the solicitation of alternative acquisition proposals by the Company, changing the Board's recommendation to the transaction, entering into another acquisition transaction, governmental filings and approvals, and other matters. 

 

The Merger Agreement contains certain termination rights for the Company, Purchaser and Honeywell, including in the event that the Company terminates the agreement in order to accept a superior proposal.  In connection with the termination of the Merger Agreement under specified circumstances, including with respect to the Company's entry into an agreement with respect to a superior proposal, the Company may be required to pay Honeywell a termination fee equal to $19.6 million.  In addition, in the event of termination of the Merger Agreement relating to Honeywell's failure to agree to certain required or requested actions in connection with obtaining antitrust clearance and subject to other specified conditions, Honeywell may be required to pay the Company a termination fee equal to $19.6 million. However, Honeywell has satisfied the competition law condition of the Merger Agreement so this is unlikely to occur. 

 

The foregoing description of the Offer, Merger and Merger Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to (i) the Merger Agreement, a copy of which is filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the SEC on June 13, 2011 and incorporated herein by reference, and is included to provide investors with information regarding its terms, and (ii) the information contained in the Tender Offer Statement on Schedule TO filed by Purchaser on June 27, 2011, as amended from time to time, and the Solicitation/Recommendation Statement on Schedule 14D-9 filed by us with the SEC on June 27, 2011, as amended from time to time.