sc14d9
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
Merrimac Industries, Inc.
(Name of Subject
Company)
Merrimac Industries,
Inc.
(Name of Person Filing
Statement)
Common Stock, par value $.01 per share
(Title of Class of
Securities)
590262101
(CUSIP Number of Class of
Securities)
Mason N. Carter
Chairman, President and Chief Executive Officer
41 Fairfield Place
West Caldwell, NJ 07006
(973) 575-1300
(Name, address and telephone
number of person authorized to receive notices
and communications on behalf of
the persons filing statement)
With a copy to:
David H. Landau, Esq.
Katten Muchin Rosenman LLP
575 Madison Avenue
New York, NY 10022
(212) 940-8800
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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Item 1.
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Subject
Company Information.
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Name and
Address
The name of the subject company is Merrimac Industries, Inc., a
Delaware corporation (Merrimac or the
Company). The address of Merrimacs principal
executive offices is 41 Fairfield Place, West Caldwell, NJ
07006, and Merrimacs telephone number is
(973) 575-1300.
Securities
This Solicitation/Recommendation Statement on
Schedule 14D-9
(together with the exhibits and annexes hereto, this
Statement) relates to the common stock, par value
$.01 per share, of Merrimac (collectively, the
Shares). As of December 22, 2009 there were
2,997,456 Shares issued and outstanding.
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Item 2.
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Identity
and Background of Filing Person.
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Name and
Address
Merrimac is the person filing this Statement. Merrimacs
name, business address and business telephone number set forth
in Item 1, under the heading Name and Address,
are incorporated herein by reference.
Tender
Offer
This Statement relates to the tender offer by Crane Merger Co.,
a Delaware corporation (Purchaser), and a
wholly-owned subsidiary of Crane Co., a Delaware corporation
(Parent), disclosed in the Tender Offer Statement on
Schedule TO (together with the exhibits thereto, as amended
from time to time, the Schedule TO), filed by
Purchaser and Parent with the Securities and Exchange Commission
(the SEC) on January 5, 2010, pursuant to which
Purchaser is offering to purchase all of the issued and
outstanding Shares at a price per Share of $16.00, net to the
holder thereof in cash, without interest thereon (the
Offer Price), subject to any required withholding of
taxes, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated January 5, 2010 (the
Offer to Purchase), and the related Letter of
Transmittal (the Letter of Transmittal, which,
together with the Offer to Purchase, as each may be amended or
supplemented from time to time, constitute the
Offer). The Offer to Purchase and Letter of
Transmittal are filed as Exhibits (a)(1) and (a)(2) hereto and
are incorporated herein by reference.
The Offer is being made pursuant to an Agreement and Plan of
Merger, dated as of December 23, 2009 (as such agreement
may be amended and in effect from time to time, the Merger
Agreement), by and among Parent, Purchaser and Merrimac.
The Merger Agreement provides, among other things, that
following the consummation of the Offer and subject to the terms
and conditions set forth in the Merger Agreement and in
accordance with the General Corporation Law of the State of
Delaware (the DGCL), Purchaser will merge with and
into Merrimac (the Merger). As a result of the
Merger, at the effective time of the Merger (the Effective
Time), each issued and outstanding Share (other than
Shares that are held by Parent, Purchaser, any direct or
indirect wholly-owned subsidiary or affiliate of Parent or
Purchaser or by Merrimac or by stockholders, if any, who
properly exercise their appraisal rights under the DGCL) that is
not tendered pursuant to the Offer will be cancelled and
converted into the right to receive an amount in cash equal to
the Offer Price. Following the Effective Time, Merrimac will
continue as a wholly-owned subsidiary of Parent. A copy of the
Merger Agreement is filed as Exhibit (e)(1) hereto and is
incorporated herein by reference and descriptions of it
contained herein are qualified in their entirety by reference to
the Merger Agreement.
The initial expiration date for the Offer is 12:00 midnight, New
York City time, on February 2, 2010, subject to extension
in certain circumstances as required or permitted by the Merger
Agreement and applicable law.
As set forth in the Schedule TO, Purchasers principal
address is 100 First Stamford Place, Stamford, Connecticut
06902, and Purchasers telephone number is
(203) 363-7300.
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Item 3.
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Past
Contacts, Transactions, Negotiations and
Agreements.
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Conflicts
of Interest
Except as set forth in this Item 3 or in the Information
Statement of Merrimac that is attached to this Statement as
Annex I and incorporated herein by reference (the
Information Statement) or as otherwise incorporated
by reference herein, as of the date hereof, there are no
material agreements, arrangements or understandings or any
actual or potential conflicts of interest between Merrimac or
its affiliates and (i) Merrimacs executive officers,
directors or affiliates or (ii) Parent, Purchaser or their
respective executive officers, directors or affiliates. The
Information Statement is being furnished to Merrimacs
stockholders pursuant to Section 14(f) of the Securities
Exchange Act of 1934, as amended (the Exchange Act),
and
Rule 14f-1
promulgated under the Exchange Act, in connection with
Purchasers right to designate persons to the Board of
Directors of Merrimac (the Merrimac Board) other
than at a meeting of the stockholders of Merrimac.
In the case of each plan or agreement discussed below to which
the terms
change-in-control
or
change-of-control
apply, the consummation of the Offer would constitute a
change-in-control
or
change-of-control,
as applicable.
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(a)
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The
Subject Company, its Executive Officers, Directors or
Affiliates
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Arrangements
with Current Executive Officers, Directors and Affiliates of
Merrimac
Merrimacs executive officers, the members of the Merrimac
Board and affiliates of Merrimac may be deemed to have interests
in the transactions contemplated by the Merger Agreement that
may be different from or in addition to those of Merrimac
stockholders generally. These interests may create potential
conflicts of interest. The Merrimac Board was aware of these
interests and considered them, among other matters, in reaching
its decision to approve the Merger Agreement and the
transactions contemplated by the Merger Agreement.
Cash
Consideration Payable Pursuant to Offer
If Merrimacs executive officers, directors and affiliates
tender the Shares that they own for purchase pursuant to the
Offer, they will receive the same cash consideration per Share
on the same terms and conditions as the other stockholders of
Merrimac. As of December 22, 2009, Merrimacs
executive officers, directors and affiliates beneficially owned
in the aggregate 1,126,012 Shares (excluding stock options
and unvested restricted stock awards with respect to the
Shares). If the executive officers, directors and affiliates
were to tender all 1,126,012 Shares beneficially owned by
them for purchase pursuant to the Offer and those Shares were
accepted for purchase and purchased by Purchaser, the executive
officers, directors and affiliates would receive an aggregate of
approximately $18,016,192 in cash. Each of E.I. DuPont de
Nemours and Company (through its subsidiary, DuPont Chemical and
Energy Operations, Inc.), an affiliate of the Company which has
designated Timothy McCann as its designee to the Merrimac Board,
Mason N. Carter, the Companys Chairman, President and
Chief Executive Officer, Edward H. Cohen, a director
of the Company, Ludwig G. Kuttner, a director of the Company,
along with certain of Mr. Kuttners affiliates,
Fernando L. Fernandez, a director of the Company, Harold J.
Raveché, a director of the Company, Arthur A. Oliner, a
director of the Company, and Joel H. Goldberg, a director of the
Company (collectively, the Signing Stockholders),
who collectively own approximately 37% of the outstanding
Shares, have entered into separate Tender and Voting Agreements
(the Tender Agreements) with Parent, Purchaser and
the Company dated as of the date of the Merger Agreement
pursuant to which the Signing Stockholders have agreed to tender
into the Offer all Shares owned by them and not to withdraw any
such Shares previously tendered except as provided for in the
Tender Agreements. The Tender Agreements, a form of which is
filed as Exhibit (e)(2) hereto and is incorporated herein by
reference, are described in more detail in Item 4, under
the heading Intent to Tender.
Merrimac
Stock Options and Restricted Stock Awards
The terms of Merrimacs equity incentive plans provide that
when Purchaser accepts Shares for payment in the Offer, each of
the outstanding and unexercised options to purchase Shares, that
were not previously vested, shall vest in full and become fully
exercisable. The Merger Agreement also provides that immediately
following to the Effective Time, options to purchase Shares,
including stock options held by Merrimacs executive
officers and
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directors, will be cancelled and the holders of such options
will be eligible to receive a lump sum cash payment equal to
$16.00 less the exercise price per Share for the option
multiplied by the number of Shares issuable under the option. As
of December 22, 2009, Merrimacs executive officers
and directors held vested options to purchase an aggregate of
159,123 Shares, with exercise prices ranging from $5.15 to
$17.00 per Share and a weighted average exercise price of $9.28
per Share, and unvested options to purchase an aggregate of
154,177 Shares, with exercise prices ranging from $5.15 to
$10.40 per Share and a weighted average exercise price of $7.99
per Share. In the event a stock option has an exercise price per
Share equal to or greater than $16.00, the option will be
cancelled, without any consideration being payable in respect
thereof.
The terms of Merrimacs equity incentive plans further
provide that when Purchaser accepts Shares for payment in the
Offer, each unvested restricted stock award (Restricted
Stock Award) with respect to the Shares that was not
previously vested, including Restricted Stock Awards held by
Merrimacs directors, will vest and such Shares will have
the right to receive the Offer Price at the Effective Time. As
of December 22, 2009, Merrimacs executive officers
and directors held an aggregate of 18,000 unvested Restricted
Stock Awards with respect to 18,000 Shares.
In connection with the approval by the Merrimac Board of the
Merger Agreement, the Offer and the Merger on December 23,
2009, the Compensation Committee of the Merrimac Board (composed
solely of independent directors in accordance with
the requirements of
Rule 14d-10(d)(2)
under the Exchange Act and the instructions thereto) approved,
in accordance with the non-exclusive safe harbor provisions
contained in
Rule 14d-10
under the Exchange Act, among other things, each of foregoing
arrangements as an employment compensation, severance or
other employee benefit arrangement within the meaning of
Rule 14d-10(d)(2)
under the Exchange Act.
The acceleration of vesting and cancellation of Merrimac stock
options, the acceleration of vesting of Restricted Stock Awards
and the related cash payments to the holders of such options and
Restricted Stock Awards are in addition to any benefits
following a
change-in-control
or
change-of-control
under any of the agreements or arrangements described below.
Summary
of Benefits Payable in Connection with the Merger
The table below assumes consummation of the Merger followed by
the occurrence of associated triggering events (such as
termination of employment). The table below sets forth the
amounts payable upon consummation of the Merger to the
Companys Chief Executive Officer and the Companys
two most highly compensated executive officers other than the
Chief Executive Officer (each, a NEO) and all other
executive officers as a group, in connection with: (1) the
acceleration and cash-out of stock options and Restricted Stock
Awards; (2) the payment of Mr. Carters bonus in
connection with the sale of the Company; (3) the settlement
of the Companys obligations under Mr. Carters
employment agreement in the event Mr. Carter is terminated
without cause by the Company, or Mr. Carter
terminates his employment for good reason, in each
case, following the consummation of the Offer, and (4) the
provision of benefits payable under the Companys Amended
and Restated Severance Plan, as amended (the Severance
Plan), in the event a NEO (other than Mr. Carter) is
terminated without cause by the Company, or the
executive terminates his employment for good reason,
in each case, following the consummation of the Offer. The table
does not ascribe a value to certain health and life insurance
related benefits to which NEOs may be entitled following
termination of employment.
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Upon Change-in-Control
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Upon Termination
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Previously
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Mason N.
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Vested
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Accelerated
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Carter
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Employment
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Severance
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Named Executive Officers
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Options(1)
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Options(1)
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Bonus(2)
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Agreement(3)
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Plan
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Mason N. Carter, Chairman, President and Chief Executive Officer
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$
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379,850
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$
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352,950
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$
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1,037,326
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$
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1,034,412
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$
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Reynold K. Green, Vice President and Chief Operating Officer
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$
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166,882
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$
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144,888
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$
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390,000
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J. Robert Patterson, Chief Financial Officer
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$
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$
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81,700
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$
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360,000
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All Other Executive Officers (5 Persons)
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$
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228,035
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$
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354,872
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$
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1,442,706
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(1) |
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All Company stock options outstanding immediately prior to the
Effective Time will become fully vested (if not previously
vested), and, at the time the Merger is consummated, each such
stock option will be cancelled and the holder of each such stock
option will receive an amount of cash determined by multiplying
(x) the excess of $16.00 over the applicable exercise price
per Share of such stock option by (y) the number of Shares
subject to such stock option. Amounts shown reflect stock
options vested as of December 22, 2009. |
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Represents Mr. Carters bonus to be received as a
result of a sale of the Company. |
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Includes a three year car allowance as provided for in
Mr. Carters employment agreement with the Company. |
The table below sets forth the amounts payable upon consummation
of the Merger to the Companys Non-Employee Directors
pursuant to the cash-out of such Directors outstanding
stock options and Restricted Stock Awards, and assume
consummation of the Merger.
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Cash-Out of Stock Options(1)
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Restricted Stock Awards(2)
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Previously
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Previously Vested
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Accelerated
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Vested Stock
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Accelerated Stock
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Non-Employee Directors
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Options
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Options
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Awards
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Awards
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Edward H. Cohen
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$
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53,000
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$
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44,000
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$
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48,000
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$
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48,000
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Fernando L. Fernandez
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$
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53,000
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$
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44,000
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$
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48,000
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$
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48,000
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Joel H. Goldberg
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$
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53,000
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$
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44,000
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$
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48,000
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$
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48,000
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Ludwig G. Kuttner
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$
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19,000
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$
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44,000
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$
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24,000
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$
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48,000
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Timothy P. McCann
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$
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9,000
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$
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39,000
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$
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$
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Arthur A. Oliner
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$
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53,000
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$
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44,000
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$
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48,000
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$
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48,000
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Harold J. Raveché
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$
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53,000
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$
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44,000
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$
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48,000
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$
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48,000
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(1) |
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All Company stock options outstanding immediately prior to the
Effective Time will become fully vested (if not previously
vested), and, following the consummation of the Merger, each
stock such option will be cancelled and the holder of each such
stock option will receive an amount of cash determined by
multiplying (x) the excess of $16.00 over the applicable
exercise price per Share of such stock option by (y) the
number of Shares subject to such stock option. Amounts shown
reflect stock options vested as of December 22, 2009. |
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All Company Restricted Stock Awards will vest (if not previously
vested) immediately prior to the Effective Time and following
the consummation of the Merger will be cancelled and converted
into the right to receive the Offer Price. Amounts shown reflect
Restricted Stock Awards vested as of December 22, 2009. |
Employment
Agreement with Mason N. Carter
The Company has an Employment Agreement, dated April 11,
2006 (the Employment Agreement), with Mason N.
Carter, the Chairman, President and Chief Executive Officer of
the Company, which provides that Mr. Carters annual
base salary is $332,000. The initial term of the Employment
Agreement ends on December 31, 2010, and will be renewable
for successive
12-month
periods unless terminated pursuant to the terms of the
Employment Agreement. In addition, Mr. Carter will be
eligible to participate in the Companys medical benefits,
life insurance, 401(k) and similar programs generally available
to employees. Mr. Carter will also be eligible to
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participate in the Companys stock purchase, stock option,
and long term incentive plans, and to receive bonuses, in the
sole discretion of the Compensation Committee of the Merrimac
Board. The Company will maintain a $500,000 term life insurance
policy for Mr. Carters beneficiaries.
Under the Employment Agreement, Mr. Carter will be entitled
to receive a Special Retirement Benefit of $75,000
per year if the Company achieves pre-tax earnings of
$9 million in the aggregate over the three fiscal years
prior to his retirement at or over age 65 (the
Performance Target). In addition, Mr. Carter
would receive the Special Retirement Benefit if the Company
terminates him without cause, if he resigns for good
reason, or his employment is terminated as a result of a
disability, and in any such case the Company has
also achieved the Performance Target. During the term and for a
period of three years following such retirement or termination
(Restrictive Period), and for as long as
Mr. Carter is receiving the Special Retirement Benefit,
Mr. Carter is bound to a confidentiality, non-competition
and non-solicitation agreement with us. However, if after the
Restrictive Period, Mr. Carter gives written notice to the
Company of his forfeiture of the Special Retirement Benefit,
Mr. Carter would be released from the non-competition and
non-solicitation agreement.
In addition, the Employment Agreement provides various payments
and benefits upon Mr. Carters termination of
employment with the Company due to his death or
disability (as defined in the Employment Agreement),
Mr. Carters termination of employment by the Company
with or without cause (as defined in the Employment Agreement)
and termination of employment by Mr. Carter for good
reason (as defined in the Employment Agreement). If
Mr. Carters employment is terminated within
12 months following a change in control (as
defined in the Employment Agreement), Mr. Carter will
receive, payments and benefits that are in lieu of those
payments and benefits available to Mr. Carter upon
termination of employment in the absence of a change in control.
If Mr. Carters employment terminates due to his
death, the Company will provide to Mr. Carters estate
all salary and benefits accrued by Mr. Carter but unpaid as
of the date of his death.
If Mr. Carters employment terminates due to his
disability, the Company will provide to Mr. Carter all
salary and benefits accrued by Mr. Carter but unpaid as of
the date of termination. The Company will pay Mr. Carter
his Special Retirement Benefit to the extent that the conditions
for payment of such benefit have been met. Mr. Carter has a
disability for purposes of the Employment Agreement
if, as a result of physical or mental illness or injury,
Mr. Carter is unable to perform the essential duties of his
position for a period of 90 consecutive work days or for a
period of 120 non-consecutive work days in a
12-month
period, or poses a direct threat to his own safety and health or
that of others and there is no reasonable accommodation that can
be provided by the Company that would allow Mr. Carter to
perform the essential functions of his position as determined
under applicable law.
If the Company terminates Mr. Carters employment for
cause, the Company will provide to Mr. Carter
all salary and benefits accrued by Mr. Carter but unpaid as
of the date of termination. For purposes of the Employment
Agreement, cause means Mr. Carters:
(i) willful failure to perform his normal and customary
duties for an extended period for any reason, other than due to
disability; (ii) gross negligence or willful misconduct,
including, without limitation, fraud, embezzlement or
intentional misrepresentation; (iii) commission of, or
indictment or conviction for, a felony; (iv) willful
engagement in competitive activities against the Company,
including, without limitation, purposely aiding a competitor;
(v) misappropriation of a material opportunity of the
Company; or (vi) violation of any material provision of the
Employment Agreement, and in each case Mr. Carter has
failed to cure such act (if curable as determined by the
Merrimac Board) within ten days after receipt of written notice
from the Company of such act or, if reasonable under the
circumstances, such additional period of time during which
Mr. Carter is using his best efforts to so cure, not to
exceed 30 days in the aggregate.
If Mr. Carter terminates his employment for good
reason or the Company terminates Mr. Carters
employment without cause, the Company will provide
Mr. Carter with the following payments and benefits
(i) his then applicable base salary beginning six months
plus one day after the date of termination until the later of
(A) the end of the term of the Employment Agreement plus
six months and one day and (B) the date which is
12 months after the date of termination plus six months and
one day, (ii) continued group medical coverage, under the
Companys group medical plan in effect from time to time,
on the same terms as provided to the Companys other
executives until the later of (A) the end of the term of
the Employment Agreement plus six months and one day and
(B) the date which is 12 months after the date of
termination plus six months and one day, (iii) if
applicable, the
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Special Retirement Benefit, (iv) in the case of an
automobile owned or leased by Mr. Carter, the car allowance
provided under the Employment Agreement, payable beginning six
months plus one day after the date of termination until the
earlier of (A) 12 months after the date of termination
plus six months and one day and (B) the end of the term of
the Employment Agreement plus six months and one day, or, in the
case of an automobile owned or leased by the Company, use of
such automobile from the date of termination until the earlier
of (A) 12 months after the date of termination and
(B) the end of the then current term, (v) the option
to assume any remaining lease payments of the automobile
provided under the Employment Agreement, assuming the leased
automobile is one of the Companys automobiles, or to
purchase such automobile in accordance with the terms of its
lease, (vi) a payment in lieu of any bonus (the
In-Lieu Bonus) in an amount equal to the average of
Mr. Carters annual bonuses, if any, for the two
fiscal years ended immediately prior to the termination, which
payment shall be made in respect of each period of
12 months remaining during the term of the Employment
Agreement, and a
pro-rated
amount shall be paid in respect of any period of less than
12 months, payable at the time that other annual bonuses
are paid to our other executives (or if no annual bonus is paid
during a particular year, in December of the applicable year)
and in accordance with Section 409A of the Internal Revenue
Code of 1986, as amended (the Code), and
(vii) notwithstanding the terms of any of our option plans,
all unvested stock options to purchase shares of the our common
stock granted by the Company and held by Mr. Carter as of
the date of termination (the Executive Options)
under any of the Companys option plans shall immediately
vest and be exercisable in accordance with their terms and,
notwithstanding the terms of any of our incentive plans, all
restricted stock awarded under any incentive plans held by
Mr. Carter (Executive Restricted Stock) shall
be vested and free of restrictions. For purposes of the
Employment Agreement, good reason means a material
diminution of Mr. Carters duties and responsibilities
or a substantial reduction in Mr. Carters
compensation and benefits.
If, within 12 months of a change in control,
Mr. Carter terminates his employment for good reason or the
Company terminates Mr. Carters employment without
cause, in lieu of the payments and benefits described above, the
Company will provide Mr. Carter with the following payments
and benefits: (i) the greater of (x) three times his
then applicable base salary and (y) the base salary from
the date of termination to the end of the term of the Employment
Agreement, payable over a
12-month
period beginning six months plus one day after the date of
termination, (ii) continued group medical coverage, under
our group medical plan in effect from time to time, on the same
terms as provided to our other executives until the later of
(A) the third anniversary of the date of termination and
(B) the end of the term of the Employment Agreement,
(iii) if applicable, the Special Retirement Benefit,
(iv) in the case of an automobile owned or leased by
Mr. Carter, the car allowance provided under the agreement,
payable beginning six months plus one day after the date of
termination until the later of (A) the third anniversary of
the date of termination plus six months and one day and
(B) the end of the term of the Employment Agreement plus
six months and one day, or, in the case of an automobile owned
or leased by the Company, use of such automobile from the date
of termination until the later of (A) the third anniversary
of the date of termination and (B) the end of the term of
the Employment Agreement, (v) the option to assume any
remaining lease payments of the automobile provided under the
Employment Agreement or to purchase such automobile in
accordance with the terms of its lease, and (vi) three
times the In-Lieu Bonus, payable over a
12-month
period beginning six months plus one day after the date of
termination. In the event of a change in control, all Executive
Options shall immediately vest and be exercisable in accordance
with their terms and the Executive Stock shall be vested and
free of restrictions. In the event that these payment or
benefits give rise to the excise tax payable by Mr. Carter
under Section 4999 of the Code, the Company will reduce the
amount of such payments by the minimum amount necessary to avoid
payment of the excise tax.
Under the Employment Agreement, the term change in
control means (i) the Company is merged or
consolidated with, or, in any transaction or series of
transactions, all or substantially all of the Companys
business or assets shall be sold or otherwise acquired by,
another corporation or entity and, as a result thereof, the
Companys stockholders immediately prior thereto shall not
have at least 50% or more of the combined voting power of the
surviving, resulting or transferee corporation or entity;
(ii) any person (as that term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended from time to time) who is not an affiliate of
the Company or a 5% or more holder, in each case as of the date
of this the Employment Agreement, is or becomes the beneficial
owner (as that term is used in Section 13(d) of said Act
and the applicable rules and regulations thereof) of the Shares
entitled to cast more than 25% of the votes at the time entitled
to be cast generally for the election of directors; or
(iii) more than 50% of the members of the Merrimac Board
shall not be Continuing Directors.
6
Continuing Directors means the Companys
directors (A) who were members of the Merrimac Board on
January 1, 2006 or (B) who subsequently became the
Companys directors and who were elected or designated to
be candidates for election as nominees of the Merrimac Board, or
whose election or nomination for election by the Companys
stockholders was otherwise approved, by a vote of a majority of
the Continuing Directors then on the Merrimac Board).
The summary of Mr. Carters employment agreement
contained herein is qualified by reference to his employment
agreement, which is filed herewith as Exhibit (e)(3) and is
incorporated herein by reference.
Mason
N. Carter Bonus
On December 10, 2009, the Merrimac Board approved a cash
bonus for Mr. Carter (which is in addition to any amounts
Mr. Carter would receive under the Employment Agreement
upon the termination of his employment under certain
circumstances following a change in control) in the
event the Companys then on- going process of investigating
strategic alternatives resulted in the sale of the Company or a
similar transaction. Mr. Carters bonus is based on a
percentage of the sale price of the Company, as follows:
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If the purchase price for the Company is more than $9.00 per
fully diluted share but less than $12.00 per fully diluted
share, a bonus equal to 1% of the total purchase paid for the
Company or its shares.
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If the purchase price for the Company is $12.00 or more per
fully diluted share but less than $15.00 per fully diluted
share, a bonus pro-rated on a linear basis of 1% to 2% of the
total purchase price for the Company or its shares.
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If the purchase price for the Company is $15.00 or more per
fully diluted share, a bonus equal to 2% of the total purchase
price paid for the Company or its shares.
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Assuming the completion of the transactions contemplated by the
Merger Agreement, Mr. Carter will be paid $1,037,326 in
cash based upon the Offer Price of $16.00 per Share.
Amended
and Restated Severance Plan
On March 29, 2006, the Compensation Committee of the
Merrimac Board adopted the Severance Plan, which replaces the
previous plan adopted in September 2003, for key executives
designated from time to time by the Compensation Committee,
including the NEOs, with the exception of Mr. Carter.
On December 13, 2007, the Merrimac Board amended the
Severance Plan to provide that any determinations to be made by
the Compensation Committee pursuant to the Severance Plan will
instead be made by the Merrimac Board on the recommendation of
the Compensation Committee. The Severance Plan provides, among
other things, that if an executive is terminated by the Company
without cause and other than on account of the
executives death or disability, or if the
executive resigns for good reason (as such terms are
defined in the Severance Plan) within 12 months following a
change in control (as defined therein), the Company,
or a successor of the Company, is obligated to pay to the
executive one or two times (as recommended by the Compensation
Committee and approved by the Merrimac Board) his annual
base salary (as defined in the Severance Plan) and to
continue to provide health insurance benefits for 24 months
(to the extent not covered by any new employer). However, to the
extent that any payments made under the Severance Plan would
otherwise be subject to the excise tax imposed under the Golden
Parachute Payment provisions of Section 4999 of the Code,
the Company will reduce the amount of such payments by the
minimum amount necessary to avoid being subject to such excise
tax.
For purposes of the Severance Plan, an executives
annual base salary is the executives regular
basic annual compensation prior to any reduction under a salary
reduction agreement pursuant to Section 401(k) or
Section 125 of the Code, and will not include (without
limitation) cost of living allowances, fees, retainers,
reimbursements, bonuses, incentive awards, prizes or similar
payments. The executive has a disability for
purposes of the Severance Plan if, as result of physical or
mental illness or injury, the executive is unable to perform the
essential duties of his or her position for a period of 90
consecutive days or for a period of 120 non-consecutive days in
any 12-month
period, or poses a direct threat to the safety and health of the
executive or others and there is no reasonable accommodation
that the Company can make that would allow the executive to
perform the essential functions of the executives position
as determined by applicable law.
7
All payments under the Severance Plan will be payable at such
times as recommended by the Compensation Committee and approved
by the Merrimac Board provided that all such payments are made
prior to the later of (1) March 15 of the calendar year
following the year in which the termination occurs and
(2) two and one-half months after the end of the
Companys year end in which such termination occurred. All
payments will be made so as to comply with Section 409A of
the Code. In connection with any payment under the Severance
Plan, the Compensation Committee may recommend and the Merrimac
Board may require that the executive enter into
non-competition/non-solicitation and confidentiality agreements
as it deems appropriate. If an executive has entered into an
agreement with the Company, which agreement covers the subject
matter of the Severance Plan, such agreement will govern so that
the executive will not be entitled to payments under both the
agreement and the Severance Plan.
For purposes of the Severance Plan, change in
control shall mean and be deemed to have occurred if:
(i) the Company has merged or consolidated with, or, in any
transaction or series of transactions, all or substantially all
of the Companys business or assets shall be sold or
otherwise acquired by, another corporation or entity and, as a
result thereof, the Companys stockholders immediately
prior thereto shall not have at least 50% or more of the
combined voting power of the surviving, resulting or transferee
corporation or entity, (ii) any person (as that term is
used in Sections 13(d) and 14(d) of the Exchange Act) who
is not an affiliate of the Company or a 5% or more holder, in
each case as of January 1, 2006, is or becomes the
beneficial owner (as that term is used in Section 13(d) of
the Exchange Act) of the Shares entitled to cast more than 25%
of the votes at the time entitled to be cast generally for the
election of directors, or (iii) more than 50% of the
members of the Merrimac Board shall not be continuing
directors. Under the Severance Plan, continuing
directors are our directors (i) who were members of
the Merrimac Board on January 1, 2006, or (ii) who
subsequently became our directors and who were elected or
designated to be candidates for election as nominees of the
Merrimac Board, or whose election or nomination for election by
the Companys stockholders was otherwise approved, by a
vote of a majority of the continuing directors then on the
Merrimac Board.
Under the Severance Plan, cause means the
executives (1) willful failure to perform his or her
normal and customary duties for an extended period of time for
any reason, other than disability, (ii) gross negligence or
willful misconduct, including but not limited to fraud,
embezzlement or intentional misrepresentation,
(iii) commission of, or indictment or conviction for, a
felony, (iv) misappropriation of a material opportunity of
the Company, (v) willfully engaging in competitive
activities against the Company or purposely aiding a competitor
of the Company, or (vi) violation of any fiduciary duty
owed to the Company or any subsidiaries or any material
provision of any agreement the executive has with the Company or
any subsidiary and, in each case, the executive has failed to
cure the violation (if curable as determined by the Company)
within ten days after receipt of written notice from the Company
of such violation or, if reasonable under the circumstances,
such additional period of time during which the executive is
using his best efforts to so cure, not to exceed 30 days in
the aggregate.
In addition, the Severance Plan defines good reason
to mean the occurrence (without the executives prior
express written consent) of any one of the following acts, or
failures to act: (i) a material diminution of the duties
and responsibilities of the executive, (ii) a substantial
reduction in compensation or benefits of the executive,
(iii) any failure by the Company to comply with any of the
provisions of the Severance Plan, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by Company promptly after receipt of
notice thereof given by the executive, (iv) any purported
termination of the executives employment which is not
pursuant to a notice of termination under the
Severance Plan (citing specific provisions of the Severance Plan
relied upon in the termination and detain the facts and
circumstances claimed to provide a basis thereof), or
(v) the relocation of our principal executive offices where
the executive works at a location more than 25 miles from
its location on the date of the adoption of the Severance Plan
or the Company requiring the executive to be based anywhere
other than the Companys principal executive offices.
The Merrimac Board may amend or terminate the Severance Plan in
whole or in part at any time upon notice to all of the
participating executives; provided, however, that, subsequent to
a change in control or during the period of 180 days prior
to a change in control, no such amendment which could adversely
affect the rights of any executive nor any termination shall
become effective until the expiration of one year following the
change in control.
8
The summary of the Severance Plan contained herein is qualified
by reference to the Severance Plan, which is filed herewith as
Exhibit (e)(4) and the amendment thereto is filed herewith as
Exhibit (e)(5), each of which is incorporated herein by
reference.
Indemnification
of Officers and Directors
Section 102 of the DGCL allows a corporation to eliminate
the personal liability of directors of a corporation to the
corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the
director breached his duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or knowingly violated a
law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware law or obtained an improper
personal benefit. Article Seventh of Merrimacs
Certificate of Incorporation provides that no director shall be
personally liable for any monetary damages for any breach of
fiduciary duty as a director, except to the extent that the DGCL
prohibits the elimination or limitation of liability of
directors for breach of fiduciary duty.
Section 145 of the DGCL provides that a corporation has the
power to indemnify a director, officer, employee or agent of the
corporation and certain other persons serving at the request of
the corporation in related capacities against amounts paid and
expenses incurred in connection with an action or proceeding to
which he is or is threatened to be made a party by reason of
such position, if such person shall have acted in good faith and
in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal
proceeding, if such person had no reasonable cause to believe
his conduct was unlawful; provided that, in the case of actions
brought by or in the right of the corporation, indemnification
is limited to expenses and no indemnification shall be made with
respect to any matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court or the Delaware Court of
Chancery determines that such indemnification is proper under
the circumstances.
In addition, Merrimac maintains insurance on behalf of its
directors and officers insuring them against liability asserted
against them in their capacities as directors or officers or
arising out of such status.
The Merger Agreement provides that for a period of six years
after completion of the Merger, Parent shall (and Parent shall
cause the surviving corporation to) indemnify and hold harmless
each current and former officer and director of the Company or
its subsidiaries (collectively, the Indemnified
Parties), from and against all claims, losses,
liabilities, damages, judgments, inquiries, fines and fees,
costs and expenses, including actual attorneys fees and
disbursements incurred in connection with any proceeding,
whether civil, criminal, administrative or investigative,
arising out of or pertaining to the fact that the Indemnified
Party is or was an officer, director or fiduciary of the Company
or its subsidiaries at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to
the fullest extent that the Company would be permitted under
applicable law and required under the Companys Certificate
of Incorporation or Bylaws (or, as relevant, those of the
applicable subsidiary) as at the date of the Merger Agreement.
In addition, the Merger Agreement provides that except as may be
required by applicable law, for a period of six years from the
Effective Time, all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to
the Effective Time and rights to advancement of expenses
relating thereto now existing in favor of any Indemnified Party
as provided in the Companys Certificate of Incorporation
or Bylaws (or, as relevant, those of the applicable subsidiary)
or in any indemnification agreement between such Indemnified
Party and the Company or its subsidiaries shall survive the
Merger and continue in full force and effect, and for a period
of six years from the Effective Time, shall not be amended,
repealed or otherwise modified in any manner that would
adversely affect any right thereunder of any such Indemnified
Party.
The Merger Agreement also provides prior to the Effective Time,
Parent shall obtain one or more prepaid tail
insurance policies for the persons who, as of the date hereof,
are covered by the Companys and its subsidiaries
existing directors and officers insurance policies
(D&O Insurance), with a claims period of at
least six years from the Effective Time with terms and
conditions (including scope and coverage amounts) that are,
taken as a whole, at least as favorable as the Companys
and its subsidiaries existing D&O Insurance, for
claims arising from facts or events that occurred at or prior to
the Effective Time, covering without limitation the transactions
contemplated by the Merger Agreement. However, the aggregate
premium for such tail insurance policies that
9
Parent shall be required to expend shall not exceed 300% of the
annual D&O Insurance premium for the Companys and its
subsidiaries 2009 fiscal year.
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(b)
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The
Offeror, its Executive Officers, Directors or
Affiliates
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The
Merger Agreement
The summary of the Merger Agreement and the descriptions of the
terms and conditions of the Offer and related procedures and
withdrawal rights contained in the Offer, which is being filed
as an exhibit to the Schedule TO, are incorporated in this
Statement by reference. Such summary and description are
qualified in their entirety by reference to the Merger
Agreement, which has been filed as Exhibit (e)(1) to this
Statement and is incorporated herein by reference.
The Merger Agreement governs the contractual rights between the
Company, Parent and Purchaser in relation to the Offer and the
Merger. The Merger Agreement has been filed as an exhibit to
this Statement to provide you with information regarding the
terms of the Merger Agreement and is not intended to modify or
supplement any factual disclosures about the Company or Parent
in the Companys or Parents public reports filed with
the SEC. In particular, the Merger Agreement and this summary of
terms are not intended to be, and should not be relied upon as,
disclosures regarding any facts or circumstances relating to the
Company or Parent. The representations and warranties have been
negotiated with the principal purpose of establishing the
circumstances in which Purchaser may have the right not to
consummate the Offer, or a party may have the right to terminate
the Merger Agreement, if the representations and warranties of
the other party prove to be untrue due to a change in
circumstance or otherwise, and allocate risk between the
parties, rather than establish matters as facts. The
representations and warranties may also be subject to a
contractual standard of materiality different from those
generally applicable to stockholders.
Confidentiality
Agreement
In connection with the process leading to the execution of the
Merger Agreement, the Company and Parent entered into a
Confidentiality Agreement dated as of September 10, 2009
(the Confidentiality Agreement). Pursuant to the
Confidentiality Agreement, as a condition to being furnished
confidential information by the Company, Parent agreed, among
other things, to not (i) for a period of twelve months,
solicit for employment any member of the Companys senior
management and (ii) for a period of eighteen months from
the date of the agreement, not seek to effect or participate in
any acquisition of Shares, any business combination involving
the Company, any recapitalization or restructuring of the
Company or any solicitation of proxies or consents to vote any
voting securities of the Company, join any group with respect to
any of the Companys securities, seek to control or
influence the Merrimac Board or the Companys executive
officers, or enter into any arrangements with respect to the
foregoing.
Exclusivity
Agreement
In connection with the process leading to the execution of the
Merger Agreement, the Company and Parent entered into a Letter
Agreement, dated as of December 10, 2009 (the
Exclusivity Agreement). Pursuant to the Exclusivity
Agreement, the Company granted Parent the exclusive right to
negotiate a definitive written agreement to acquire the Company
from the date of the Exclusivity Agreement through the earliest
of (i) 5:00 p.m. Eastern Standard Time on
December 23, 2009, (ii) the time the Company received
written notice from Parent that it was terminating negotiations
with the Company and (iii) the date of execution of a
definitive written agreement with respect to Parents
proposed acquisition of the Company (the Negotiation
Period). During the Negotiation Period, the Company was
not permitted to solicit or engage in discussions regarding
third party proposals to acquire the Company.
Representation
on the Merrimac Board
The Merger Agreement provides that after Purchaser accepts for
payment any Shares tendered, and not properly withdrawn pursuant
to the Offer (the Acceptance Date), Parent will be
entitled to designate such number of directors, rounded up to
the next whole number, on the Merrimac Board equal to the
product of (i) the total
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number of directors on the Merrimac Board (giving effect to the
directors designated by Parent and including directors
continuing to serve as directors of the Company) multiplied by
(ii) the percentage that the aggregate number of Shares
beneficially owned by Parent, Purchaser or any of their
affiliates bears to the aggregate number of Shares then
outstanding (the Board Percentage). Under the terms
of the Merger Agreement, The Company will promptly take, at the
Companys expense, any lawful action necessary to effect
any such election. The Merrimac Board, following the Acceptance
Date and subject to any limitations imposed by NYSE AMEX Rules,
will also cause (x) each committee of the Merrimac Board,
(y) if requested by Parent, the board of directors of each
of the Companys subsidiaries and (z) if requested by
Parent, each committee of such board of directors of each of the
Companys subsidiaries to include persons designated by
Parent constituting the Board Percentage of each such committee
or board as Parents designees constitute on the Merrimac
Board. After the Acceptance Date and prior to the Effective
Time, the Merrimac Board will always have at least two directors
(the Independent Directors) who were directors of
the Company on the date of the Merger Agreement and who are
neither officers of the Company nor designees, affiliates or
associates of Parent. In addition, any time directors designated
by Parent are elected or appointed to the Merrimac Board and
prior to the Effective Time, the affirmative vote of a majority
of the Independent Directors shall be required to
(i) authorize any contract between the Company and any of
its subsidiaries, on the one hand, and Parent, Purchaser and any
of their affiliates (other than the Company and any of its
subsidiaries), on the other hand, (ii) amend or terminate
the Merger Agreement on behalf of the Company, (iii) use or
waive any of the Companys rights or remedies under the
Merger Agreement, (iv) extend the time for performance of
Parents or Purchasers obligations under the Merger
Agreement or (v) take any other action by the Company in
connection with the Merger Agreement or the transactions
contemplated hereby required to be taken by the Merrimac Board.
The foregoing summary concerning representation on the Merrimac
Board does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which has been
filed as Exhibit (e)(1) hereto and is incorporated herein by
reference.
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Item 4.
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The
Solicitation or Recommendation.
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Recommendation
of the Merrimac Board
On December 23, 2009, after careful consideration and a
thorough review of the Offer with its outside legal counsel and
a thorough review of a financial analysis and related opinion
from Americas Growth Capital, LLC
(Americas), the Merrimac Board, at a meeting
duly called and held, by unanimous vote of all directors present
at the meeting, with Mr. Carter recusing himself from such
vote, and, following such vote, the unanimous vote of all
directors present at the meeting, including Mr. Carter:
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determined that the terms of the Offer, the Merger and the other
transactions contemplated by the Merger Agreement are fair to
and in the best interests of the Company and its stockholders,
and declared the Merger Agreement advisable;
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approved the execution, delivery and performance of the Merger
Agreement and the consummation of the transactions contemplated
thereby, including the Tender Agreements, the Offer and the
Merger;
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recommended that the stockholders of the Company accept the
Offer, tender their Shares to Purchaser pursuant to the Offer
and, if applicable, approve and adopt the Merger Agreement and
the Merger (the Recommendation);
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rendered the restrictions on business combinations contained in
Section 203 of the DGCL inapplicable to the Tender
Agreements, the Offer, the Merger Agreements Agreement and the
other transactions contemplated thereby, including the Merger;
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approved an amendment to the Companys Rights Agreement (as
defined in Item 8 of this Statement) rendering the Rights
Agreement inapplicable to the Tender Agreements, the Offer, the
Merger Agreement and the other transactions contemplated
thereby, including the Merger and the Tender Agreements;
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resolved to make the Recommendation to the stockholders of the
Company and directing that, to the extent required by the DGCL,
the Merger Agreement be submitted for adoption by the
stockholders of the Company at a meeting of the Companys
stockholders; and
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elected that the Offer and the Merger, to the extent of the
Merrimac Boards power and authority and to the extent
permitted by law, not be subject to any moratorium,
control share acquisition, business
combination, fair price or other form of
anti-takeover laws.
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A letter to Merrimacs stockholders communicating the
Merrimac Boards recommendation and the press release
announcing the Offer are attached hereto as Exhibits (a)(3) and
(a)(4), respectively.
Reasons
for the Recommendation that Merrimac Stockholders Accept the
Offer
Background
The following chronology summarizes the key meetings and events
that led to the signing of the Merger Agreement. During this
period, representatives of the Company held many conversations,
both by telephone and in person, about possible strategic
alternatives. The chronology below covers only the key events
leading up to the Merger Agreement and does not purport to
catalogue every conversation among representatives of the
Company or between representatives of the Company and other
parties.
In the course of evaluating the direction of the Companys
business, the Merrimac Board periodically considers various
strategic options to maximize shareholder value through
profitable revenue growth and efficiency gains, as well as
through possible acquisitions of other businesses, commercial
alliance arrangements and strategic combinations with other
companies. During the relevant time periods discussed below, the
Merrimac Board had only one employee director
Mr. Carter, the Companys Chairman, President and
Chief Executive Officer.
At a meeting of the Merrimac Board on June 26, 2008 at
which the Companys strategic direction was discussed, the
independent directors of Merrimac (constituting all directors
other than Mr. Carter) determined to instruct
Mr. Carter to explore the Companys strategic
alternatives, including a sale, merger, joint venture or
investment.
At a meeting of the Merrimac Board on September 17, 2008,
the Merrimac Board concluded that the sense of the Merrimac
Board was to proceed with an approach to focus the
Companys business efforts on military and space
applications and reduce its business efforts on speculative
commercial investments in an effort and to enhance profitability
to better position the Company for a possible strategic
transaction.
From September 2008 through mid-2009, the Companys
management focused its business efforts on military and space
applications and reduced its business efforts in speculative
commercial applications in an effort to enhance the
profitability of the Company.
From May 2009 through August 2009, Mr. Carter, as part of
his exploration of strategic alternatives, initiated contact
with six large potential strategic acquirors, each of which had
business interests in the space or defense fields and also
focused on RF/microwave technology with regard to a potential
transaction with the Company. Between May 20, 2009 and
September 10, 2009, the Company entered into separate
confidentiality agreements with five of the six potential
strategic acquirors which provided, among other things, that the
parties may disclose confidential and proprietary information in
evaluating a strategic transaction.
On August 25, 2009, the Merrimac Board held a telephonic
meeting and discussed, among other things, pursuing a
transaction for the Company to be acquired by one of the
potential strategic acquirors contacted by Mr. Carter. At
this meeting, the Merrimac Board authorized Mr. Carter to
continue his discussions with the group of large potential
strategic acquirors he had contacted. Mr. Carter focused on
contacting potential strategic acquirors, as potential financial
acquirors were not expected to be competitive relative to
potential strategic acquirors.
On September 3, 2009, Mr. Carter contacted David
Bender, President of Parents Aerospace and Electronics
Group regarding the Companys intention to pursue a
strategic combination or sale transaction. At
Mr. Benders suggestion, Mr. Carter then
contacted Curtis Robb, Parents Vice President of Business
Development, to discuss the Companys intention to pursue a
strategic combination or sale transaction.
12
On September 10, 2009, the Company and Parent executed the
Confidentiality Agreement.
On September 23, 2009, representatives of Parent held a
meeting with Mr. Carter and several of the Companys
other executive officers at the Companys offices in West
Caldwell, New Jersey to discuss the Companys business.
During September 2009 and October 2009, Mr. Carter
continued to engage in discussions with the four other potential
strategic acquirors that had executed confidentiality agreements
with the Company.
On October 8, 2009, representatives of Parent met with
Mr. Carter and several other of the Companys
executive officers at the Companys offices in West
Caldwell, New Jersey to further discuss the Companys
business, operations, financial results and prospects.
On October 13, 2009, representatives of Parent met with
Mr. Carter and several other of the Companys
executive officers at the Companys offices in Costa Rica
to discuss the Companys Costa Rican operations, personnel
and prospects.
On October 23, 2009, the Company opened an electronic data
room wherein the five potential strategic acquirors that had
executed confidentiality agreements could review extensive
documentation pertaining to the Company and its subsidiaries.
On November 4, 2009, Mr. Carter met with Eric Fast,
the Chief Executive Officer of Parent, in New York City to
discuss Parents possible acquisition of the Company and
the potential strong alignment of cultures and business
philosophies of the Company and Parent.
On November 10, 2009, the Merrimac Board met telephonically
during which meeting Mr. Carter provided an update to the
Merrimac Board on the potential strategic acquirors due
diligence review and his continuing discussions with them.
On November 24, 2009, representatives from Parent met with
several of the Companys senior financial personnel at the
Companys offices in West Caldwell, New Jersey to discuss
the Companys internal controls and procedures and
accounting.
In late November, 2009, Mr. Carter engaged in discussions
with each of Parent and one of the potential strategic
acquirors, which we refer to as Party A, to discuss the timing
of the presentation of their bids to the Company. The three
other potential strategic acquirors who executed confidentiality
agreements declined to further participate in the Companys
process.
On December 4, 2009, the Company sent a process letter to
each of Parent and Party A instructing them as to certain
procedures to follow in pursuing a possible acquisition of the
Company. In such letter, the Company provided that an offer for
the acquisition of 100% of the Shares be submitted to the
Company no later than Tuesday, December 8, 2009 with a view
toward a definitive merger agreement being executed no later
than December 23, 2009.
On December 8, 2009, Parent submitted an offer to the
Company to purchase all of the outstanding Shares for a cash
price of $14.50 per share. Parents offer was not subject
to any financing or contingencies, other than Parent and the
Company reaching mutual agreement on the terms and conditions of
a merger agreement that would be subject to the customary
closing conditions to a tender offer and merger. Parents
offer indicated that it did not see any reason why a definitive
merger agreement could not be negotiated and executed by
December 23, 2009. Parents offer was also conditioned
on the Company entering into the Exclusivity Agreement
(described in Item 3 of this Statement) with Parent, which
would end on December 23, 2009.
Also on December 8, 2009, Party A submitted an indication
of interest to acquire all of the outstanding Shares assuming an
enterprise value for the Company in the range of
$53 million $58 million, which did not
include a definitive per Share offer price. Party As
indication of interest was conditioned on the completion of its
due diligence review.
On December 9, 2009, Mr. Carter spoke telephonically
with Mr. Robb and informed Mr. Robb that Parents
offer was not competitive.
On December 9, 2009, Mr. Carter spoke on more than one
occasion with a representative of Party A in an attempt to
clarify Party As indication of interest. During such
conversations, a representative of Party A informed
13
Mr. Carter that he should assume that Party As
indication of interest was at the top end of its previously
submitted range. Such representative also informed
Mr. Carter that Party A would be unable to make a more firm
offer or negotiate and execute a definitive merger agreement by
December 23, 2009.
On December 10, 2009, in a telephone conversation between
Mr. Carter and Mr. Robb, Mr. Robb informed
Mr. Carter that Parent would increase its offer to $16.00
per Share, which Mr. Robb stated was Parents best and
final offer.
On December 10, 2009, the Merrimac Board held a meeting. At
such meeting the Merrimac Board approved the payment of a bonus
to Mr. Carter (without Mr. Carter participating in the
discussion or approval) in the event of a sale of the Company,
which is described in Item 3 of this Statement. At such
meeting, the Merrimac Board then discussed Parents revised
offer and Party As indication of interest. After an
extensive discussion of Parents revised offer and Party
As indication of interest, the Merrimac Board authorized
Mr. Carter and Katten Muchin Rosenman LLP, the
Companys outside legal counsel, to negotiate a definitive
merger agreement with Parent based on the terms set forth in its
revised offer and authorized entering into the Exclusivity
Agreement.
Subsequent to the Merrimac Board meeting on December 10,
2009 and before the Company entered into the Exclusivity
Agreement, Mr. Carter informed a representative of Party A
of the Merrimac Boards decision not to move forward with
Party A. Later on December 10, 2009, Mr. Carter and
such representative again spoke by phone, during which
conversation such representative did not increase or make more
firm Party As indication of interest. On the early evening
of December 10, 2009, the Company and Parent executed the
Exclusivity Agreement.
On December 15, 2009, the Merrimac Board retained
Americas to provide a financial analysis and opinion with
respect to the fairness of Parents offer.
On December 15, 2009, K&L Gates LLP, counsel to
Parent, delivered a draft of a definitive merger agreement and a
draft form of tender and voting agreement to Katten Muchin
Rosenman LLP.
From December 15, 2009 through December 23, 2009,
Katten Muchin Rosenman LLP and K&L Gates LLP negotiated the
terms of a definitive merger agreement and the related ancillary
documents.
On the morning of December 23, 2009, the Merrimac Board met
telephonically with representatives of Americas and Katten
Muchin Rosenman LLP participating. Katten Muchin Rosenman LLP
reviewed with the Merrimac Board its fiduciary duties when
considering the offer from Parent. A representative of
Americas presented its analysis of the Offer Price from
Parent and delivered its oral opinion, which opinion was
subsequently confirmed by delivery of a written opinion, dated
December 23, 2009, to the effect that, as of the date and
based upon and subject to the factors, assumptions, limitations
and other considerations described in the written opinion, the
merger consideration to be received by holders of Shares
pursuant to the Merger Agreement with Parent was fair, from a
financial point of view, to such holders. Katten Muchin Rosenman
LLP then reviewed with the Merrimac Board the terms of the
Merger Agreement with Parent. At that time Mr. Carter
recused himself from the meeting due to the bonus payment he
would receive in the event of the sale of the Company. After an
extensive discussion of the terms of the Merger Agreement, by
unanimous vote of all directors then present at the meeting
(excluding Mr. Carter) and, following such vote, the
unanimous vote of all directors present at the meeting,
including Mr. Carter, the Merrimac Board
(i) determined that the terms of the Offer, the Merger and
the other transactions contemplated by the Merger Agreement with
Parent are fair to and in the best interests of the Company and
its stockholders, and declared the Merger Agreement with Parent
advisable; (ii) approved the execution, delivery and
performance of the Merger Agreement with Parent and the
consummation of the transactions contemplated thereby, including
the Tender Agreements, the Offer and the Merger;
(iii) recommended that the stockholders of the Company
accept the Offer, tender their Shares to Purchaser pursuant to
the Offer and, if applicable, approve and adopt the Merger
Agreement and the Merger (the Recommendation);
(iv) rendered the restrictions on business combinations
contained in Section 203 of the DGCL inapplicable to the
Tender Agreements, the Offer, the Merger Agreement and the other
transactions contemplated thereby, including the Merger;
(v) approved an amendment to the Companys Rights
Agreement rendering it inapplicable to the Tender Agreements,
the Offer, the Merger Agreement and the other transactions
contemplated thereby, including the Merger; (vi) resolved
to make the Recommendation to the stockholders of the Company
and directing that, to the extent required by the DGCL, the
Merger Agreement be submitted for adoption by the stockholders
of the Company at a
14
meeting of the Companys stockholders; and
(vii) elected that the Offer and the Merger, to the extent
of the Merrimac Boards power and authority and to the
extent permitted by law, not be subject to any
moratorium, control share acquisition,
business combination, fair price or
other form of anti-takeover laws.
On the afternoon of December 23, 2009, the Company and
Parent and their respective legal advisors finalized the Merger
Agreement, the disclosure schedules thereto and the other
ancillary documents, and the definitive Merger Agreement and the
related ancillary documents, including the Tender Agreements,
were executed by Parent, Purchaser, the Company and the other
parties thereto. After the closing of the U.S. financial
markets on December 23, 2009, the Company and Parent issued
a joint press release announcing the execution of the Merger
Agreement.
Reasons
for the Transaction and Recommendation of the Merrimac
Board
After evaluating the factors referred to below, consulting with
its legal counsel and reviewing the financial analysis and
related opinion from Americas, the Merrimac Board, at a
meeting duly called and held, by unanimous vote of all
directors, with Mr. Carter recusing himself from such vote,
present at the meeting and, following such vote, the unanimous
vote of all directors present at the meeting, including
Mr. Carter, unanimously declared the Offer, the Merger and
the other transactions contemplated by the Merger Agreement
advisable and fair to and in the best interests of Merrimac and
its stockholders and unanimously approved the Merger Agreement
and the transactions contemplated thereby, including the Offer
and the Merger.
THE MERRIMAC BOARD UNANIMOUSLY RECOMMENDS THAT
MERRIMACS STOCKHOLDERS TENDER THEIR SHARES TO
PURCHASER IN THE OFFER.
Factors
Considered by the Merrimac Board
In connection with reaching the recommendation described above,
the Merrimac Board concluded that the Offer is fair to, and in
the best interest of, the stockholders of Merrimac. In reaching
this determination and conclusion, the Merrimac Board considered
a number of factors, including the following:
1. Strategic Alternatives to Sale
Transaction. Throughout the process that the
Merrimac Board conducted to evaluate strategic alternatives
available to the Company, the Merrimac Board considered possible
alternatives to the proposed transaction with Parent, including
continuing to execute on its strategic plan as an independent
company. The Merrimac Board concluded (after taking into account
the current and historical financial condition, results of
operations, competitive position, business prospects,
opportunities and strategic objectives of the Company, including
the potential risks involved in achieving those prospects and
objectives) that the Offer Price is greater than the long-term
value inherent in the Company as a stand-alone entity.
2. Solicitation of Other Parties Prior to the Execution
of the Merger Agreement. The Merrimac Board
considered that the Companys Chief Executive Officer had
discussions with numerous third parties in connection with the
Merrimac Boards strategic review process, and determined
that Parents offer was the most attractive offer for the
Companys stockholders resulting from that process.
3. Americas Financial Analysis and
Opinion. The Merrimac Board took into account the
financial analysis of Americas and its opinion dated
December 23, 2009 (the full text of which is filed herewith
as Exhibit (e)(7) and included in Annex II hereto and
incorporated by reference herein) to the effect that, as of the
date of the opinion and based on and subject to the matters
stated therein, the Offer Price was fair, from a financial point
of view, to holders of Shares (other than Parent and its
affiliates). The financial analysis and opinion of
Americas are described below in the section Opinion
of Americas.
4. Transaction Financial Terms/Relation to Certain
Market Prices. The Merrimac Board considered the
relationship of the Offer Price to the historical market prices
of the Shares. The Offer Price of $16.00 per Share represents a
premium of approximately 79% over the closing price per Share on
December 16, 2009, the day before the Company filed a
Form 8-K
with the SEC disclosing its on-going process of investigating
strategic alternatives and a potential bonus payment to be made
to Mr. Carter in the event of a sale of the Company, and a
premium of approximately 40% over the closing price per Share on
December 22, 2009, the
15
final trading day before the Merrimac Board approved the Merger
Agreement. In addition, the Offer Price represents a premium of
approximately 70% over the average closing price of the Shares
for the 20 trading days prior to December 23, 2009.
5. Costs Associated with Remaining a Public
Company. The Merrimac Board considered that the
significant costs associated with being a publicly traded
company were as a percentage of its revenues disproportionately
large when compared to those of many of its competitors.
6. Timing and Certainty of
Completion. The Merrimac Board considered the
anticipated timing and degree of certainty of consummation of
the Offer, including the structure of the transaction as a
tender offer for all Shares. This transaction structure may
enable the Companys stockholders to receive the Offer
Price and obtain the benefits of the transaction more promptly
than might be the case in other transaction structures.
7. Limited Conditions to
Consummation. The Merrimac Board considered the
fact that the obligation of Parent to consummate the Offer is
subject to a limited number of conditions, with no financing
condition. Moreover, Parent and Purchaser have represented that
they have the financial resources to consummate the Offer and
the Merger.
8. Ability to Respond to Certain Unsolicited Takeover
Proposals. The Merrimac Board considered the
Companys ability under certain circumstances to engage in
negotiations or discussions with, and to provide information to,
any third party that, after the date of the Merger Agreement,
were to make a bona fide competing acquisition proposal.
9. Ability to Terminate the Merger Agreement to Accept a
Superior Proposal. The Merrimac Board considered
the Companys ability, following possible receipt of a
competing acquisition proposal after the date of the Merger
Agreement (but prior to the acceptance of the Shares in the
Offer) that is more favorable from a financial point of view to
the Companys stockholders, to change its recommendation
with respect to the Offer and the Merger and terminate the
Merger Agreement if certain conditions are satisfied, including
that the competing proposal is bona fide, that the Company has
complied with applicable provisions of the Merger Agreement,
that (after consulting with the Companys outside counsel
and a financial advisor) the Board determines in good faith that
the proposal is more favorable to the Companys
stockholders from a financial point of view and is reasonably
likely to be completed on the terms proposed on a timely basis
and that the failure to pursue the proposal would be
inconsistent with the Merrimac Boards fiduciary duties to
the stockholders of the Company, notwithstanding that the
Company would be required to pay Parent a termination fee and
expenses of $3,000,000 in the aggregate.
10. Form of the Consideration; Taxable
Transaction. The Merrimac Board considered the
form of consideration to be paid to holders of Shares in the
Offer and the Merger, and the certainty of value of such cash
consideration compared to stock, particularly in the recent
volatile markets although, depending on the number of Shares
tendered, there may not be sufficient Shares available for
Parent to reach the short form merger threshold. The Merrimac
Board was aware that the consideration received by holders of
Shares in the Offer and Merger would be taxable to some holders
for federal income tax purposes.
11. Possible Short Form Merger. The
Merrimac Board took into account that the Merger Agreement
grants Purchaser the right, if the Offer is consummated, to
potentially purchase enough authorized but unissued Shares
through the
Top-Up
Option (as defined in Item 8 of this Statement) to effect a
short form merger to acquire the remaining equity of
the Company pursuant to Section 253 of the DGCL, without
additional approval of the Merrimac Board. Such may only be
exercised if it would permit Purchaser to exercise a short-form
merger. The Merrimac Board noted that because of the Minimum
Condition (as defined in the Merger Agreement), the Offer cannot
succeed unless a majority of the Shares are tendered.
12. Appraisal Rights. The Merrimac Board
considered the fact that stockholders who do not tender their
Shares under the circumstances described in the Offer and who
have not voted in favor of the merger will have the right to
demand appraisal of the fair value of their Shares under the
DGCL.
16
13. Negotiations with Parent. The
Merrimac Board considered the discussions with Parent, including
their respective advisors, and the judgment of Mr. Carter
and the Merrimac Board that the Offer Price was the highest
price that Parent would be willing to pay.
In addition to the reasons set forth above, the Merrimac Board
considered the following potentially negative reasons not to
consummate the Offer and the Merger:
1. Discouraging Other Prospective
Buyers. The Merrimac Board considered that
entering into a definitive agreement with Parent, and that
certain provisions of the Merger Agreement, such as the
non-solicitation and termination fee provisions, may have the
effect of discouraging other prospective buyers from pursuing a
more advantageous business combination with the Company.
2. Transaction Costs. The Merrimac Board
considered the significant costs involved in connection with
entering into the Merger Agreement and completing the Offer and
the Merger and the related disruptions to the operation of the
Companys business, including the risk that the operations
of the Company would be disrupted by employee concerns or
departures, or changes to or termination of the Companys
relationships with its customers, suppliers
and/or
distributors, following announcement of the Offer and the Merger.
3. Interim Restrictions on Business. The
Merrimac Board considered that, pursuant to the Merger
Agreement, the Company is required to obtain Parents
consent before it can take a variety of actions during the
period of time between the signing of the Merger Agreement and
the Effective Time.
4. Effect of Failure to Complete
Transactions. The Merrimac Board considered the
potential adverse effect on the Companys business, stock
price and ability to attract and retain key management personnel
if the Offer and the Merger were announced but not consummated.
5. Failure to Remain an Independent Public
Company. The Merrimac Board considered the
opportunities for growth and the potential for increased
stockholder value if Merrimac were to remain an independent
company with publicly traded equity securities and the fact that
Merrimacs stockholders will not participate in any
potential future appreciation of Merrimacs value.
6. Interests of Management. The Merrimac
Board considered the fact that some of the Companys
executives may have interests in the Offer and the Merger that
are different from, or in addition to, those of the
Companys stockholders, as a result of agreements and
arrangements referred to in Item 3 of this Statement.
The Board concluded, however, that many of these risks could be
managed or mitigated by the Company or were unlikely to have a
material effect on the Company, the Offer or the Merger and
that, overall, the risks, uncertainties, restrictions and
potentially negative reasons not to consummate the Offer and the
Merger were outweighed by the potential benefits of the Offer
and the Merger.
The Merrimac Board did not assign relative weights to the
foregoing reasons or determine that any factor was of particular
importance. Rather, the members of the Board viewed their
position and recommendation as being based on the totality of
the information presented to and considered by them. Individual
members of the Merrimac Board may have given different weight to
different factors.
The foregoing discussion of reasons considered by the Merrimac
Board is not meant to be exhaustive but includes the material
reasons considered by the Merrimac Board in approving the Merger
Agreement and the transactions contemplated by the Merger
Agreement and in recommending that stockholders accept the
Offer, tender their Shares and approve the Merger Agreement and
the Merger.
Opinion
of Americas
The Merrimac Board retained Americas to evaluate the
fairness, from a financial point of view, to the holders of the
common stock of the Company, of the $16.00 cash consideration to
be received by such holders, other than Parent, Purchaser and
their respective affiliates, pursuant to the terms and subject
to the conditions set forth in the Merger Agreement.
In connection with providing the opinion to the Merrimac Board
in connection with the transactions contemplated by the Merger
Agreement (the Transaction) Americas received
a fee from the Company for
17
such services pursuant to the terms of the engagement letter
with the Company, dated as of December 15, 2009.
Americas has not provided any other services to the
Company in connection with the Transaction and has not received
any other fees from the Company except for the services as
described above.
On December 23, 2009, at a meeting of the Merrimac Board
held to evaluate the cash consideration and Transaction,
Americas rendered to the Merrimac Board an oral opinion,
which opinion was confirmed by delivery of a written opinion
dated December 23, 2009, to the effect that, as of that
date and based on and subject to the matters described in its
opinion, the $16.00 per share cash consideration to be received
by holders of the common stock of the Company (other than
Parent, Purchaser and their respective affiliates) was fair,
from a financial point of view, to such holders.
The full text of Americas written opinion, which
describes, among other things, the procedures followed,
assumptions made, matters considered and limitations on the
scope of review undertaken, is attached as Annex II.
Americas opinion expressed herein was provided to the
Merrimac Board for its information in connection with its
evaluation of the $16.00 per share cash consideration from a
financial point of view, does not address any other aspect of
the Transaction and is not intended to be and does not
constitute a recommendation to any shareholder as to whether
such shareholder should tender shares in the Transaction or how
such shareholder should vote or act on any matters relating to
the Transaction. Holders of the Shares are encouraged to read
this opinion carefully in its entirety. The summary of
Americas opinion below is qualified in its entirety by
reference to the full text of the opinion.
In arriving at its opinion, Americas:
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reviewed a draft of the Merger Agreement dated December 23,
2009 (the Draft Agreement);
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reviewed certain publicly available information, including SEC
filings, for the Company and certain other relevant financial
and operating data furnished to Americas by the
Companys management;
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reviewed certain internal financial analyses, historical
financials, financial forecasts, reports and other information
concerning the Company, prepared by the management of the
Company and conducted a discounted cash flow analysis of the
Company;
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held discussions with certain members of the management of the
Company concerning the historical and current business
operations, financial condition and prospects of the Company and
such other matters Americas deemed relevant;
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analyzed certain financial, stock market and other publicly
available information relating to the businesses of other
companies whose operations Americas considered relevant in
evaluating those of the Company and considered, to the extent
publicly available, the financial terms of certain other
transactions which Americas considered relevant in
evaluating the Transaction;
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reviewed the financial terms of the Transaction as described in
the Draft Agreement in relation to; among other things, the
historical and projected earnings and other operating data of
the Company; and the capitalization and financial condition of
the Company; and
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reviewed and considered such other information, financial
studies, analyses and investigations and such other factors that
Americas deemed relevant for the purposes of this opinion.
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In conducting the review and arriving at Americas opinion,
Americas has, with the Merrimac Boards consent,
assumed and relied, without independent investigation or
verification, upon the accuracy and completeness of all
financial and other information provided to Americas by
the Company in any form, written or oral, or which is otherwise
publicly available. Americas has not undertaken or assumed
any responsibility for the accuracy, completeness or
reasonableness of, or independently verified, such information.
In addition, Americas has not conducted nor has
Americas assumed any obligation to conduct any physical
inspection of the properties or facilities of the Company.
Americas has further relied upon the assurance of
management of the Company that they are unaware of any facts
that would make the information provided to Americas
incomplete or misleading in any material respect. Americas
has, with the Merrimac Boards consent, assumed that the
financial forecasts which Americas examined were
reasonably prepared by the management of the Company on bases
reflecting the best
18
currently available estimates and good faith judgments of such
managements as to the future performance of the Company.
Americas has assumed that the final form of the Merger
Agreement will be substantially similar to the last Draft
Agreement, without material alteration or waiver thereof.
Americas has relied, at the Merrimac Boards
direction, without independent verification, upon the assessment
of the management of the Company as to the products and product
candidates of the Company and the risks associated with such
products and product candidates.
Americas has not made or obtained any independent
evaluations, valuations or appraisals of the assets or
liabilities of the Company, nor has Americas been
furnished with such materials. Americas has not made any
review of or sought or obtained advice of legal counsel
regarding legal matters relating to the Company, and
Americas understands that the Company has relied and will
rely only on the advice of legal counsel to the Company as to
such matters. Americas services to the Company in
connection with the Transaction have been comprised solely of
rendering an opinion as to the fairness, from a financial point
of view, to the holders of Company Common Stock of the $16.00
per share cash consideration to be paid to such holders.
Americas opinion is necessarily based upon economic and
market conditions and other circumstances as they exist and can
be evaluated by Americas on the date hereof. It should be
understood that although subsequent developments may affect
Americas opinion, except as agreed to with the Company,
Americas does not have or undertake any obligation to
update, revise or reaffirm its opinion.
For purposes of rendering the opinion Americas has
assumed, in all respects material to the analysis, that the
representations and warranties of each party contained in the
Draft Agreement are true and correct, that each party will
perform all of the covenants and agreements required to be
performed by it under the Merger Agreement and that all
conditions to the consummation of the Transaction will be
satisfied without waiver thereof. Americas has also
assumed that all governmental, regulatory and other consents and
approvals contemplated by the Draft Agreement will be obtained
and that in the course of obtaining any of those consents no
restrictions will be imposed or waivers made that would have an
adverse effect on the contemplated benefits of the Transaction.
Americas expresses no view as to and Americas
opinion does not address any terms or other aspects or
implications of the Transaction (other than the cash
consideration to the extent expressly specified herein) or any
aspects or implications of any other agreement, arrangement or
understanding to be entered into in connection with, or
otherwise contemplated by, the Transaction. Americas also
expresses no view as to, and Americas 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 Transaction.
Americas has not been requested, and Americas did
not, solicit third party indications of interest in the possible
acquisition of all or a part of the Company, nor was
Americas requested to consider, and Americas opinion
does not in any manner address and should not be construed to
address, the Companys underlying business decision to
effect the Transaction or the relative merits of the Transaction
or alternative business strategies that may be available to the
Company.
The following is a summary of the material financial analyses
reviewed with the Merrimac Board on December 23, 2009 in
connection with Americas opinion. Americas did
not attribute any particular weight to any analysis, methodology
or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis
and factor; accordingly, Americas analyses must be
considered as a whole. Considering any portion of such analyses
and of the factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the
process underlying the conclusions expressed herein. In all
such analysis, Americas relied on the Companys
unaffected stock price at its December 16, 2009
closing which is the closing price prior to the Companys
public announcement in an
8-K filing
that on December 10, 2009, the Merrimac Board approved a
bonus for Mason N. Carter, the Chairman, President and
Chief Executive Officer of the Company, in the event that the
on-going process of investigating strategic alternatives for the
company results in a sale of the Company or similar transaction.
19
Stock
Value Premium Analysis
Americas reviewed publicly available information for
selected completed merger or acquisition transactions to
determine the premiums paid in the transactions over recent
trading prices of the target companies prior to announcement of
the transaction. Americas selected these transactions by
applying the following criteria:
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transactions announced after January 1, 2008;
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merger and acquisition transactions below $500 million in
enterprise value;
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public technology company target;
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change in control;
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North American transactions.
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Americas performed its analysis on sixty-five transactions
that satisfied the criteria. This analysis indicated implied per
share equity value reference ranges for the Company of
approximately $12.11 to $12.86 per Share, as compared to the
$16.00 per Share cash consideration.
Comparable
Public Companies Analysis
Americas reviewed financial and stock market information
of the Company and the following six selected publicly traded
companies with similar products, similar operating and financial
characteristics and servicing similar markets:
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CPI International, Inc.
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Applied Signal Technology, Inc.
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Anaren Inc.
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Herley Industries Inc.
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Spectrum Control Inc.
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Micronetics Inc.
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Americas reviewed, among other things, enterprise values
of the selected companies, calculated as fully diluted equity
value based on closing stock prices on December 21, 2009,
plus debt, minority interest and preferred stock, less cash and
equivalents, as a multiple of latest 12 months, calendar
year 2009 estimated and calendar year 2010 estimated revenue and
earnings before interest, taxes, depreciation and amortization,
referred to as EBITDA. Americas then applied a selected
range for latest 12 months, calendar year 2009 estimated
and calendar year 2010 estimated revenue multiples of 1.0x to
1.1x and estimated EBITDA multiples of 6.0x to 7.3x derived from
the selected companies to corresponding data of the Company.
Estimated financial data of the selected companies were based on
publicly available research analysts estimates. Estimated
financial data of the Company were based on estimates of the
Companys management. This analysis indicated an implied
per share equity value reference range for the Company of
approximately $11.86 to $17.03 per Share, as compared to the
$16.00 per Share cash consideration.
Although the selected companies were used for comparison
purposes, none of those companies is directly comparable to the
Company. Accordingly, an analysis of the results of such a
comparison is not purely mathematical, but instead involves
complex considerations and judgments concerning differences in
historical and projected financial and operating characteristics
of the selected companies and other factors that could affect
the public trading value of the selected companies or the
Company.
20
Selected
Precedent Transactions Analysis
Americas reviewed the transaction values of the following
5 transactions involving similar businesses with disclosed
financial metrics. Due to global asset valuation adjustments
over the course of 2008, Americas only used
2008-2009
precedents:
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Acquiror
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Target
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Microsemi Corp.
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Endwave Defense Systems, Inc.
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Teledyne Technologies Inc.
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Filtronic Defence Ltd.
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Comtech Telecommunications Corp.
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Radyne Corp.
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Anaren Inc.
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M.S. Kennedy Corporation
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TriQuint Semiconductor, Inc.
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WJ Communications Inc.
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Americas reviewed, among other things, transaction values
in the selected transactions, calculated as the purchase prices
paid for the target companies, as a multiple of latest
12 months revenue and EBITDA. Americas then applied
latest 12 months revenue and EBITDA multiples of 1.3x and
8.6x, respectively, derived from the selected transactions to
the Companys EBITDA for the latest 12 months ended
October 3, 2009. Financial data of the selected
transactions were based on publicly available information at the
time of announcement of the relevant transaction. Financial data
of the Company were based on publicly available information.
This analysis indicated an implied per share equity value
reference range for the Company of approximately $13.55 to
$18.05 per Share, as compared to the $16.00 per Share cash
consideration.
Although the selected transactions were used for comparison
purposes, none of those transactions is directly comparable to
the merger and none of the companies in those transactions is
directly comparable to the Company. Accordingly, an analysis of
the results of such a comparison is not purely mathematical, but
instead involves complex considerations and judgments concerning
differences in historical financial and operating
characteristics of the companies involved and other factors that
could affect the acquisition value of such companies or the
Company.
Discounted
Cash Flow Analysis
Americas performed a discounted cash flow analysis to
calculate the estimated present value of the standalone, free
cash flows that the Company could generate during the
Companys fiscal years 2010 through 2014 based on
managements forecast. Estimated terminal values for the
Company were calculated by applying terminal value multiples of
5.5x to 6.5x to the Companys fiscal year 2014 estimated
EBITDA. The cash flows and terminal values were then discounted
to present value using discount rates ranging from 18% to 26%.
This analysis indicated implied per share equity value reference
ranges for the Company of approximately $14.70 to $16.57 per
Share, as compared to the $16.00 per Share cash consideration.
Intent to
Tender
In connection with the Merger Agreement, the Signing
Stockholders each entered into separate Tender Agreements, dated
as of December 23, 2009, with Parent, Purchaser and the
Company. The following summary of certain provisions of the
Tender Agreements are qualified in their entirety by reference
to the Tender Agreements themselves, which are incorporated
herein by reference. We have filed a copy of the form of Tender
Agreement as Exhibit (e)(2) hereto. Stockholders and other
interested parties should read the Tender Agreement for a more
complete description of the provisions summarized below.
The Tender Agreements require each Signing Stockholder to, among
other things, (i) tender or cause to be tendered in the
Offer all Shares beneficially owned or subsequently acquired,
(ii) not withdraw the Shares tendered by it, him or her in
the Offer prior to the termination of the Offer, the termination
of the Merger Agreement or any adjustment to the terms and
conditions of the Merger Agreement (other than an adjustment
following which the terms of the Offer are no less favorable to
the Signing Stockholders and the consideration for Shares
tendered in the Offer is the highest consideration paid to any
stockholder for Shares tendered in the Offer) (such adjustment,
an Adverse Amendment) and (iii) vote in favor
of adoption and approval of the Merger Agreement and the
21
transactions contemplated by the Merger Agreement, and against
any proposal opposing to or in competition with the consummation
of the Merger or the transactions contemplated by the Merger
Agreement.
The Tender Agreements will terminate upon the earlier of
(i) the effective time of the Merger, (ii) the
termination or expiration of the Offer without Purchaser
purchasing all of the Shares tendered pursuant to the Offer in
accordance with its terms, (iii) the termination of the
Merger Agreement in accordance with its terms, and (iv) an
Adverse Amendment.
To the best knowledge of the Company, as of the date of this
Statement, each of the Signing Stockholders and each other
executive officer of the Company who owns Shares presently
intends to tender in the Offer all Shares that they own of
record or beneficially, other than Shares, if any, that they may
have the right to purchase by exercising stock options, Shares,
if any, that if tendered would cause them to incur liability
under the short-swing profits provisions of the Securities
Exchange Act of 1934, as amended, or Shares, if any, which are
restricted Shares.
|
|
Item 5.
|
Persons/Assets,
Retained, Employed, Compensated or Used.
|
The Merrimac Board retained Americas to provide financial
analysis and an opinion regarding the consideration offered by
Parent for the Shares. Pursuant to an engagement letter with
Americas, dated as of December 15, 2009, the Company
agreed to pay Americas $250,000 upon its delivery of an
opinion to the Merrimac Board regarding the fairness to the
Companys stockholders, from a financial point of view, of
the consideration to be paid for the Shares in the Offer and the
Merger. In addition, the Company agreed to indemnify
Americas against certain liabilities arising out of its
engagement, subject to certain limitations. The Company also
agreed to reimburse Americas for reasonable expenses
incurred in connection with its engagement, including reasonable
legal fees.
The above summary of the relationship between Merrimac and
Americas is not intended to be complete and exhaustive and
such summary is qualified in its entirety by reference to the
Opinion of Americas Growth Capital, LLC
attached as Annex II to this Statement and incorporated
herein by reference.
Except as described above, neither Merrimac nor any other person
acting on its behalf currently intends to employ, retain or
compensate any other person to make solicitations or
recommendations to Merrimacs stockholders on its behalf in
connection with the Offer or the other transactions contemplated
by the Merger Agreement.
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|
Item 6.
|
Interest
in Securities of the Subject Company.
|
Other than as set forth below, as of December 23, 2009, no
transaction in Shares has been effected during the past
60 days by Merrimac or any subsidiary of Merrimac or, to
the knowledge of Merrimac, by any executive officer, director or
affiliate of Merrimac.
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|
|
|
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|
|
|
|
|
|
|
|
Date of
|
|
Number of
|
|
|
Price per
|
|
|
Nature of
|
Identity of Person
|
|
Transaction
|
|
Shares
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|
Share
|
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|
Transaction
|
|
James J. Logothetis
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|
11/16/2009
|
|
|
2,500
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|
|
$
|
8.38
|
|
|
Exercise of stock options
|
James J. Logothetis
|
|
11/16/2009
|
|
|
100
|
|
|
$
|
9.33
|
|
|
Sale of stock
|
James J. Logothetis
|
|
11/16/2009
|
|
|
300
|
|
|
$
|
9.31
|
|
|
Sale of stock
|
James J. Logothetis
|
|
11/16/2009
|
|
|
100
|
|
|
$
|
9.30
|
|
|
Sale of stock
|
James J. Logothetis
|
|
11/16/2009
|
|
|
2,000
|
|
|
$
|
9.3001
|
|
|
Sale of stock
|
Jayson Hahn
|
|
11/19/2009
|
|
|
2,500
|
|
|
$
|
8.38
|
|
|
Exercise of stock options
|
Jayson Hahn
|
|
11/19/2009
|
|
|
900
|
|
|
$
|
9.2122
|
|
|
Sale of stock
|
Jayson Hahn
|
|
11/19/2009
|
|
|
1,600
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|
|
$
|
9.20
|
|
|
Sale of stock
|
From time to time during the 60 days prior to the date of
this Statement and in the ordinary course, Merrimac issued an
aggregate of 5,000 Shares to holders of options to purchase
Shares upon the exercise of such options by the holders thereof,
with an exercise price of $8.38 per Share. In addition during
the 60 days prior to the date of this Statement, the
Company did not grant or issue any Shares of restricted stock
under Merrimacs 2006 Non-Employee Directors Stock
Plan or any stock options under any of the Companys equity
incentive plans.
22
|
|
Item 7.
|
Purposes
of the Transaction and Plans or Proposals.
|
Except as set forth in this Statement, Merrimac is not
undertaking or engaged in any negotiations in response to the
Offer that relate to:
|
|
|
|
|
a tender offer or other acquisition of Merrimacs
securities by Merrimac, any of its subsidiaries or any other
person;
|
|
|
|
an extraordinary transaction, such as a merger, reorganization
or liquidation, involving Merrimac or any of its subsidiaries;
|
|
|
|
a purchase, sale or transfer of a material amount of assets of
Merrimac or any of its subsidiaries; or
|
|
|
|
a material change in the present dividend rate or policy, or
indebtedness or capitalization of Merrimac.
|
Except as set forth in this Statement, there are no
transactions, board resolutions, agreements in principle or
signed contracts entered into in response to the Offer that
relate to one or more of the matters referred to in this
Item 7.
|
|
Item 8.
|
Additional
Information.
|
Information
Statement
The Information Statement attached as Annex I hereto is
being furnished in connection with the possible designation by
Purchaser, pursuant to the Merger Agreement, of certain persons
to be appointed to the Merrimac Board, other than at a meeting
of Merrimacs stockholders as described in Item 3
above and in the Information Statement, and is incorporated
herein by reference.
Top-Up
Option
Pursuant to the Merger Agreement and subject to the terms and
conditions thereof and applicable law, the Company has granted
to Purchaser an option (the
Top-Up
Option) to purchase a number of Shares (not to exceed
19.9% of the Companys then outstanding Shares), that, when
added to the number of Shares owned by Purchaser immediately
prior to such exercise, shall constitute at least one Share more
than 90% of the number of Shares outstanding after such
exercise. The
Top-Up
Option may be exercised once during the 20 business day period
following the consummation of the Offer. The per Share exercise
price of the
Top-Up
Option is equal to the Offer Price. The
Top-Up
Option is intended to expedite the timing of the completion of
the Merger by effecting the Merger pursuant to Delawares
short form merger statute. Following the Offer and,
if necessary, the exercise of the
Top-Up
Option, if Purchaser does not own at least 90% of the Shares, a
vote of the stockholders of Merrimac will be required to
consummate the Merger. In such case, the approval of the Merger
at a meeting of the stockholders of Merrimac would be assured
because of Purchasers ownership of at least a majority of
the Shares following completion of the Offer.
Vote
Required to Approve the Merger and DGCL
Section 253
The Merrimac Board has approved the Offer, the Merger and the
Merger Agreement in accordance with the DGCL. Under
Section 253 of the DGCL, if Purchaser acquires, pursuant to
the Offer or otherwise, including the issuance by the Company of
Shares upon the exercise by Purchaser of the
Top-Up
Option, at least 90% of the outstanding Shares, Purchaser will
be able to effect a short-form merger under the DGCL, which
means that Purchaser may effect the Merger without any further
action by or vote of the Companys stockholders. If
Purchaser acquires, pursuant to the Offer or otherwise, less
than 90% of the outstanding Shares, the affirmative vote of the
holders of a majority of the outstanding Shares will be required
under the DGCL to effect the Merger. In such case, the approval
of the Merger at a meeting of the stockholders of Merrimac would
be assured because of Purchasers ownership of at least a
majority of the Shares following completion of the Offer.
23
State
Takeover Laws
Merrimac is incorporated under the laws of the State of Delaware
and subject to Section 203 of the DGCL. In general,
Section 203 prevents an interested stockholder
from engaging in a business combination with a
Delaware corporation for a period of three years following the
time such person became an interested stockholder, unless, among
other exceptions, the business combination is
approved by the board of directors of such corporation in a
prescribed manner prior to such time such person becomes an
interested stockholder or the interested
stockholder acquires at least 85% of such
corporations outstanding voting stock in the transaction
in which it became an interested stockholder. A business
combination includes, among other things, a merger or
consolidation involving the corporation and the interested
stockholder and the sale of more than 10% of the assets of
the corporation. In general, an interested
stockholder is any entity or person beneficially owning
15% or more of a corporations outstanding voting stock and
any entity or person controlling or controlled by or under
common control with such entity or person.
In accordance with the provisions of Section 203, the
Merrimac Board has approved the Merger Agreement and the
transactions contemplated thereby and has taken all appropriate
action so that the restrictions on business combinations set
forth in Section 203, with respect to Merrimac, will not be
applicable to Purchaser by virtue of such actions.
Regulatory
Approvals
Under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the related
rules and regulations that have been issued by the Federal Trade
Commission (the FTC), certain acquisition
transactions may not be consummated until specified information
and documentary material has been furnished for review by the
FTC and the Antitrust Division of the Department of Justice and
specified waiting period requirements have been satisfied.
Parent and the Company have determined that these requirements
do not apply to Parents and Purchasers acquisition
of the Shares in the Offer.
The Company is not aware of any other filings, approvals or
other actions by or with any governmental authority or
administrative or regulatory agency that would be required for
Purchasers acquisition or ownership of the Shares.
The
Rights Agreement
Concurrent with the execution of the Merger Agreement, the
Company and American Stock Transfer &
Trust Company, LLC, as Rights Agent (the Rights
Agent), executed the tenth amendment (the
Amendment) to the Companys Rights Agreement
(the Rights Agreement), dated as of March 9,
1999, as amended as of June 9, 1999, April 7, 2000,
October 26, 2000, February 21, 2001, February 28,
2002, September 18, 2002, December 13, 2004,
March 14, 2007 and March 19, 2009, which provides that
none of (i) approval, execution, delivery
and/or
adoption of the Merger Agreement, (ii) the acceptance for
payment or purchase by Purchaser of Shares pursuant to the
Offer, (iii) the exercise of the
Top-Up
Option, (iv) the consummation of any other transactions
contemplated by the Merger Agreement, including, but not limited
to, the Offer and the Merger or (v) the announcement of any
of the Merger Agreement, the Offer, the Merger or any other
transactions contemplated by the Merger Agreement, will result
in the rights becoming exercisable or in Parent or its
affiliates and associates being deemed an Acquiring
Person or any of the foregoing events resulting in a
Shares Acquisition Date or Distribution
Date under the Rights Agreement. The Rights Agreement
terminated in accordance with its terms on December 31,
2009.
The foregoing summary of the Amendment does not qualify by
reference to the Amendment, which is filed herewith as Exhibit
(e)(6) and is incorporated herein by reference.
Appraisal
Rights
No appraisal rights are available to holders of Shares in
connection with the Offer. However, if the Merger is
consummated, holders of Shares who have not tendered their
Shares in the Offer and have not voted in favor of the Merger
(if a vote of stockholders is taken) will have certain rights
under the DGCL to dissent and demand appraisal of, and to
receive payment in cash of the fair value of their Shares. If
the Merger occurs, holders of Shares will be
24
told how to demand appraisal of their Shares. Holders of
Shares who perfect those rights by complying with the procedures
set forth in Section 262 of the DGCL will have the fair
value of their Shares (exclusive of any element of value arising
from the accomplishment of expectation of the Merger) determined
by the Delaware Court of Chancery and will be entitled to
receive a cash payment equal to such fair value from the
surviving corporation in the Merger. In addition such
dissenting holders of Shares would be entitled to receive
payment of a fair rate of interest from the date of consummation
of the Merger on the amount determined to be the fair value of
their Shares (the Dissenting Shares). If any holder
of Shares who demands appraisal under Section 262 of the
DGCL fails to perfect, or effectively withdraws or loses her,
his or its rights to appraisal as provided in the DGCL, the
Shares of such stockholder will be converted into the right to
receive the price per Share paid in the Merger in accordance
with the Merger Agreement. A stockholder may withdraw a demand
for appraisal by delivering to the Company a written withdrawal
of the demand for appraisal by the date set forth in the
appraisal notice to be delivered to the holders of the Shares as
provided in the DGCL.
In determining the fair value of the Dissenting Shares, the
court is required to take into account all relevant factors.
Accordingly, the determination could be based upon
considerations other than, or in addition to, the market value
of the Shares, including, among other things, asset values and
earning capacity. In Weinberger v. UOP, Inc., the Delaware
Supreme Court stated that proof of value by any techniques
or methods which are generally considered acceptable in the
financial community and otherwise admissible in court
should be considered in an appraisal proceeding. The
Weinberger Court also noted that, under Section 262,
fair value is to be determined exclusive of any element of
value arising from the accomplishment or expectation of the
Merger. In Cede & Co. v. Technicolor,
Inc., however, the Delaware Supreme Court stated that, in
the context of a two-step cash merger, to the extent that
value has been added following a change in majority control
before cash-out, it is still value attributable to the going
concern, to be included in the appraisal process. As a
consequence, the fair value determined in any appraisal
proceeding could be more or less than the consideration to be
paid in the Offer and the Merger.
Parent may cause the surviving corporation in the Merger to
argue in an appraisal proceeding that, for purposes of such
proceeding, the fair value of each Dissenting Share is less than
the price paid in the Offer and the Merger. In this regard,
holders of Shares should be aware that opinions of investment
banking firms as to the fairness from a financial point of view
of the consideration payable in a merger are not opinions as to
fair value under Section 262 of the DGCL.
The foregoing summary is not intended to be complete and is
qualified in its entirety by reference to Section 262 of
the DGCL.
25
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
(a)(1)
|
|
|
Offer to Purchase dated January 5, 2010 (incorporated
herein by reference to Exhibit (a)(1)(A) to Purchasers
Tender Offer Statement on Schedule TO, filed by Parent and
Purchaser with respect to Merrimac on January 5, 2010).
|
|
(a)(2)
|
|
|
Form of Letter of Transmittal (incorporated herein by reference
to Exhibit (a)(1)(B) to the Schedule TO, filed by Parent
and Purchaser with respect to Merrimac on January 5, 2010).
|
|
(a)(3)
|
|
|
Letter to Stockholders of Merrimac, dated January 5, 2010.*
|
|
(a)(4)
|
|
|
Joint Press Release, dated December 23, 2009, issued by
Parent and Merrimac (incorporated herein by reference to the
Joint Press Release filed under the cover of
Schedule 14D-9
by Merrimac on December 23, 2009).
|
|
(a)(5)
|
|
|
Information Statement Pursuant to Section 14(f) of the
Exchange Act and
Rule 14f-1
thereunder (incorporated herein by reference to Annex I
hereto).
|
|
(a)(6)
|
|
|
Form of Notice of Guaranteed Delivery (incorporated herein by
reference to Exhibit (a)(1)(C) to the Schedule TO).
|
|
(a)(7)
|
|
|
Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and other Nominees (incorporated herein by
reference to Exhibit (a)(1)(D) to the Schedule TO).
|
|
(a)(8)
|
|
|
Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and other Nominees
(incorporated herein by reference to Exhibit (a)(1)(E) to the
Schedule TO).
|
|
(a)(9)
|
|
|
Form of Summary Advertisement as published on January 5,
2010 in The New York Times (incorporated herein by reference to
Exhibit (a)(5)(B) to the Schedule TO).
|
|
(e)(1)
|
|
|
Agreement and Plan of Merger, dated as of December 23,
2009, by and among Parent, Purchaser and Merrimac (incorporated
herein by reference to Exhibit 2.1 to Merrimacs
Current Report on
Form 8-K
dated December 23, 2009).
|
|
(e)(2)
|
|
|
Form of Tender and Voting Agreement, by and among Parent,
Purchaser, Merrimac, and each of the following: DuPont Chemical
and Energy Operations, Inc.; Mason Carter; Edward Cohen; Ludwig
Kuttner, K Holdings, LLC and Hampshire Investments, Limited;
Fernando Fernandez; Harold Raveche; Arthur Oliner and Frieda
Oliner; and Joel Goldberg (incorporated herein by reference to
Exhibit 10.1 to Merrimacs Current Report on
Form 8-K
dated December 23, 2009).
|
|
(e)(3)
|
|
|
Employment Agreement, dated April 11, 2006, by and between
Merrimac and Mason N. Carter (incorporated herein by reference
to Exhibit 10.1 to Merrimacs Current Report on
Form 8-K
dated April 14, 2006).
|
|
(e)(4)
|
|
|
Merrimac Severance Plan, as adopted March 29, 2006
(incorporated herein by reference to Exhibit 10(z) to
Merrimacs Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005).
|
|
(e)(5)
|
|
|
First Amendment to the Severance Plan, effective as of
December 13, 2007 (incorporated herein by reference to
Exhibit 10(x) to Merrimacs Annual Report on
Form 10-K
for the fiscal year ended December 29, 2007).
|
|
(e)(6)
|
|
|
Amendment No. 10 to Merrimacs Rights Agreement, dated
as of December 23, 2009, between Merrimac and American
Stock Transfer & Trust Company, LLC (incorporated
by reference to Exhibit 4.1 to Merrimacs Current
Report on
Form 8-K
dated December 23, 2009).
|
|
(e)(7)
|
|
|
Opinion of Americas Growth Capital, LLC to the Merrimac
Board, dated December 23, 2009 (included as Annex II
hereto).*
|
|
(g)
|
|
|
None.
|
|
|
|
* |
|
Filed herewith and included in the copy of the
Schedule 14D-9
mailed to Merrimacs stockholders. |
26
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is
true, complete and correct.
Name: Mason N. Carter
|
|
|
|
Title:
|
Chairman, President and Chief Executive Officer
|
Date: January 5, 2010
27
ANNEX I
MERRIMAC
INDUSTRIES, INC.
41 FAIRFIELD PLACE
West Caldwell, NJ 07006
INFORMATION
STATEMENT PURSUANT TO SECTION 14(f) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14f-1
THEREUNDER
This Information Statement is being mailed on or about
January 5, 2010 to holders of record of common stock, par
value $.01 per share (the Shares), of Merrimac
Industries, Inc., a Delaware corporation (Merrimac
or the Company), as a part of the
Solicitation/Recommendation Statement on
Schedule 14D-9
(the
Schedule 14D-9)
of Merrimac with respect to the tender offer (the
Offer) by Crane Merger Co., a Delaware corporation
(Purchaser), and wholly-owned subsidiary of Crane
Co., a Delaware corporation (Parent), for all of the
issued and outstanding Shares. Unless the context indicates
otherwise, in this Information Statement, we use the terms
us, we and our to refer to
Merrimac. You are receiving this Information Statement in
connection with the possible election of persons designated by
Parent to at least a majority of the seats on the Board of
Directors of Merrimac (the Merrimac Board). This
designation is to be made pursuant to an Agreement and Plan of
Merger, dated as of December 23, 2009, as such may be
amended from time to time (the Merger Agreement), by
and among Parent, Purchaser and Merrimac.
Pursuant to the Merger Agreement, Purchaser commenced a cash
tender offer on January 5, 2010, to purchase all of the
issued and outstanding Shares at a purchase price per Share of
$16.00 net to the holder thereof in cash, without interest
thereon, subject to any required withholding of taxes, upon the
terms and subject to the conditions set forth in the Offer to
Purchase, dated January 5, 2010 (as amended or supplemented
from time to time, the Offer to Purchase) and the
related Letter of Transmittal (the Offer reflected by such Offer
to Purchase and Letter of Transmittal, together with any
amendments or supplements thereto, collectively constitute the
Offer). Unless extended in accordance with the terms
and conditions of the Merger Agreement, the Offer is scheduled
to expire at 12:00 A.M., New York time, on February 2,
2010, at which time if all conditions to the Offer have been
satisfied or waived, Purchaser will purchase all Shares validly
tendered pursuant to the Offer and not properly withdrawn.
Copies of the Offer to Purchase and the accompanying Letter of
Transmittal have been mailed with the
Schedule 14D-9
to stockholders of Merrimac and are filed as exhibits to the
Schedule 14D-9
filed by Merrimac with the Securities and Exchange Commission
(the SEC) on January 5, 2010.
The Merger Agreement provides that upon the acceptance for
payment of, and payment by Purchaser for, Shares pursuant to the
Offer representing at least a majority of Shares outstanding on
a fully diluted basis, and as long as Purchaser directly or
indirectly beneficially owns not less than a majority of the
issued and outstanding Shares, Parent shall be entitled to
designate such number of members of the Merrimac Board as will
give Parent, subject to compliance with applicable law,
representation on the Merrimac Board equal to that number of
directors, rounded up to the next whole number, that is the
product of (i) the total number of directors on the
Merrimac Board (giving effect to the directors designated by
Parent and including directors continuing to serve as directors
of the Company) multiplied by (ii) the percentage that the
aggregate number of Shares beneficially owned by Parent,
Purchaser or any of their affiliates bears to the aggregate
number of Shares then outstanding. As a result, Purchaser will
have the ability to designate a majority of the Merrimac Board
following consummation of the Offer.
This Information Statement is required by Section 14(f) of
the Securities Exchange Act of 1934, as amended (the
Exchange Act), and
Rule 14f-1
thereunder in connection with the appointment of
Purchasers designees to the Merrimac Board. You are urged
to read this Information Statement carefully. You are not,
however, required to take any action. The information contained
in this Information Statement, including information
incorporated herein by reference, concerning Parent and
Parents designees has been furnished to Merrimac by
Parent, and Merrimac assumes no responsibility for the accuracy
or completeness of such information.
I-1
PARENT
DESIGNEES
Parent has informed Merrimac that Parent will choose its
designees for the Merrimac Board from the list of persons set
forth below. In the event that additional designees of Parent
are required in order to constitute a majority of the Merrimac
Board, such additional designees will be selected by Parent from
among the executive officers and directors of Parent listed in
Schedule I of the Offer to Purchase, which is incorporated
herein by reference. The following table, prepared from
information furnished to Merrimac by Parent, sets forth, with
respect to each individual who may be designated by Parent as
one of its designees, the name, age of the individual as of
January 4, 2010, present principal occupation and
employment history during the past five years.
Parent has informed Merrimac that none of the individuals listed
below has, during the past five years, (i) been convicted
in a criminal proceeding, (ii) been a party to any judicial
or administrative proceeding that resulted in a judgment, decree
or final order enjoining the person from future violations of,
or prohibiting activities subject to, U.S. federal or state
securities laws, or a finding of any violation of
U.S. federal or state securities laws, (iii) filed a
petition under Federal bankruptcy laws or any state insolvency
laws or has had a receiver appointed to the persons
property or (iv) been subject to any judgment, decree or
final order enjoining the person from engaging in any type of
business practice.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Current Principal Occupation and Employment History
|
|
David E. Bender
|
|
|
50
|
|
|
Group President, Electronics of Parent
|
|
|
|
|
|
|
President, Electronics Group of Crane Aerospace &
Electronics segment of Parent since December 2005. Vice
President, Operations, Aerojet General Corporation, a division
of GenCorp, from 2004 to 2005. Executive Vice President GDX
Automotive, a division of GenCorp, from 2003 to 2004.
|
Adam J. Bottenfield
|
|
|
49
|
|
|
Vice President of Parent
|
|
|
|
|
|
|
Vice President, Microwave Systems Solutions, Crane Electronics
Group since February 2008. Director, Avionics for North America,
Barco, Inc., February 2007 to February 2008. Director of
Business Development, Herley Industries, April 2004 to February
2007. Vice President, Engineering, Herley Industries
Lancaster Division, 1997 to April 2004.
|
Augustus I. duPont
|
|
|
58
|
|
|
Vice President, General Counsel and Secretary of Parent
|
|
|
|
|
|
|
Vice President, General Counsel and Secretary of Parent since
1996.
|
Eric C. Fast
|
|
|
60
|
|
|
Director, President and Chief Executive Officer of Parent
|
|
|
|
|
|
|
President and Chief Executive Officer of Parent since April
2001. President and Chief Operating Officer of Parent from
September 1999 to April 2001. Other directorships: Automatic
Data Processing Inc.; National Integrity Life Insurance.
|
Timothy J. MacCarrick
|
|
|
44
|
|
|
Vice President, Finance and Chief Financial Officer of Parent
|
|
|
|
|
|
|
Vice President, Finance and Chief Financial Officer of Parent
since July 2008. Corporate Vice President and Vice President,
Finance, Xerox North America from 2006 to July 2008; Chief
Financial Officer, Xerox Europe from 2003 to 2006.
|
Curtis P. Robb
|
|
|
55
|
|
|
Vice President, Business Development of Parent
|
|
|
|
|
|
|
Vice President, Business Development and Strategic Planning of
Parent since June 2005. From 2003 to 2005, founder and Managing
Director of Robb Associates, LLP (financial advisory services).
|
Parent has advised Merrimac that none of the designees listed
above is currently a director of, or holds any position with,
Merrimac. Parent has advised Merrimac that none of the designees
listed above or any of his or her affiliates (i) has a
familial relationship with any director or executive officer of
Merrimac or (ii) has been involved in
I-2
any transactions with Merrimac or any of its directors, officers
or affiliates that are required to be disclosed pursuant to the
rules and regulations of the SEC, except as may be disclosed
herein.
CERTAIN
INFORMATION CONCERNING MERRIMAC
The authorized capital stock of Merrimac consists of
20,000,000 shares of common stock, par value $.01 per
share, and 1,000,000 shares of preferred stock, par value
$.01 per share. As of December 22, 2009, there were
2,997,456 shares of Merrimac common stock issued and
outstanding and there were no shares of preferred stock issued
or outstanding.
The common stock is the only class of voting securities of
Merrimac outstanding that is entitled to vote at a meeting of
stockholders of Merrimac. Each share of Merrimac common stock
entitles the record holder to one vote on all matters submitted
to a vote of the stockholders.
Beneficial
Ownership of Directors, Executive Officers and Certain
Stockholders
The following table sets forth, as of December 23, 2009,
information concerning the Shares owned by (i) persons
known by us who are beneficial owners of more than five percent
of the Common Stock (ii) each of the Companys
directors and the Companys Chief Executive Officer and the
Companys two most highly compensated executive officers
other than the Chief Executive Officer (the Named
Executive Officers), and (iii) all of our directors
and executive officers as a group, that was either provided to
us by the person or is publicly available from filings made with
the Securities and Exchange Commission (the SEC).
None of our directors or executive officers have pledged their
Shares as security.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
|
|
Beneficial
|
|
|
Name and Address
|
|
Ownership (Direct
|
|
|
of Beneficial Owners
|
|
Except as Noted)
|
|
Percent of Class
|
|
Crane Co.
|
|
|
1,103,765
|
(1)
|
|
|
36.82
|
%
|
100 First Stamford Place
Stamford, Connecticut 06902
|
|
|
|
|
|
|
|
|
E.I. DuPont de Nemours and Company
|
|
|
528,413
|
(2)
|
|
|
17.63
|
%
|
1007 Market Street
Wilmington, DE 19898
|
|
|
|
|
|
|
|
|
Ludwig G. Kuttner
|
|
|
308,999
|
(3)
|
|
|
10.30
|
%
|
Hampshire Investments, Limited
K Holdings, LLC
627 Plank Road
Keene, VA 22946
|
|
|
|
|
|
|
|
|
Lehman Brothers Bankhaus AG (i. Ins.)
|
|
|
260,041
|
(4)
|
|
|
8.68
|
%
|
Rathenauplatz 1
60313 Frankfurt am Main
Germany
|
|
|
|
|
|
|
|
|
Arthur A. Oliner
|
|
|
188,067
|
(5)
|
|
|
6.26
|
%
|
11 Dawes Road
Lexington, MA 02421
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP
|
|
|
166,605
|
(6)
|
|
|
5.56
|
%
|
1299 Ocean Avenue
Santa Monica, CA 90401
|
|
|
|
|
|
|
|
|
Joel H. Goldberg
|
|
|
72,524
|
(7)
|
|
|
2.41
|
%
|
c/o C.C.I.
/ SK Associates, Inc.
1767 Morris Avenue
Union, NJ 07083
|
|
|
|
|
|
|
|
|
I-3
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
|
|
Beneficial
|
|
|
Name and Address
|
|
Ownership (Direct
|
|
|
of Beneficial Owners
|
|
Except as Noted)
|
|
Percent of Class
|
|
Mason N. Carter
|
|
|
57,500
|
(8)
|
|
|
1.88
|
%
|
c/o Merrimac
Industries, Inc.
|
|
|
|
|
|
|
|
|
41 Fairfield Place
West Caldwell, NJ 07006
|
|
|
|
|
|
|
|
|
Edward H. Cohen
|
|
|
24,499
|
(9)
|
|
|
*
|
|
c/o Katten
Muchin Rosenman LLP
575 Madison Avenue
New York, NY 10022
|
|
|
|
|
|
|
|
|
Harold J. Raveché
|
|
|
10,758
|
(10)
|
|
|
*
|
|
c/o Stevens
Institute of Technology
Castle Point on Hudson
Hoboken, NJ 07030
|
|
|
|
|
|
|
|
|
Fernando L. Fernandez
|
|
|
10,499
|
(11)
|
|
|
*
|
|
2159 El Amigo Road
Del Mar, CA 92014
|
|
|
|
|
|
|
|
|
Timothy P. McCann
|
|
|
833
|
(12)
|
|
|
*
|
|
c/o DuPont
Electronic Technologies
14 T.W. Alexander Drive
Research Triangle Park, NC 27709
|
|
|
|
|
|
|
|
|
Reynold K. Green
|
|
|
41,245
|
(13)
|
|
|
1.36
|
%
|
c/o Merrimac
Industries, Inc.
|
|
|
|
|
|
|
|
|
41 Fairfield Place
West Caldwell, NJ 07006
|
|
|
|
|
|
|
|
|
J. Robert Patterson
|
|
|
0
|
|
|
|
*
|
|
c/o Merrimac
Industries, Inc.
|
|
|
|
|
|
|
|
|
41 Fairfield Place
West Caldwell, NJ 07006
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (15 persons)
|
|
|
757,822
|
(14)
|
|
|
24.00
|
%
|
|
|
|
|
|
In accordance with
Rule 13d-3
of the Securities Exchange Act of 1934, a person is deemed to be
the beneficial owner of securities if such person has or shares
voting power or investment power with respect to such securities
or has the right to acquire beneficial ownership within
60 days. |
|
* |
|
The percentage of shares beneficially owned does not exceed 1%
of the class. |
|
(1) |
|
Parent and Purchaser may be deemed to share the voting and
investment power of all shares beneficially owned by certain
officers, directors and principal stockholders of Merrimac,
pursuant to the respective Tender and Voting Agreements, dated
as of December 23, 2009, among Parent, Purchaser and each
such officer, director and principal stockholder, whereby such
officers, directors and principal stockholders have agreed to
tender such shares in the Offer and to vote such shares in favor
of the Merger. |
|
(2) |
|
Consists of shares owned by DuPont Chemical and Energy
Operations, Inc. (DCEO). |
|
(3) |
|
250,000 shares of Common Stock are held directly by K
Holdings, LLC and 50,000 are held directly by Hampshire
Investments, Limited. Mr. Kuttner is the principal member
of K Holdings, LLC and owns 80% of the outstanding interests in
Hampshire Investments, Limited. Information as to shares of
Common Stock beneficially owned by Mr. Kuttner, K Holdings,
LLC and Hampshire Investments, Limited is as set forth in a
Schedule 13D/A filed with the SEC on December 29,
2009. Includes 2,499 shares subject to stock options that
are exercisable currently or within 60 days. |
|
(4) |
|
Information as to the shares of Common Stock beneficially owned
by Lehman Brothers Bankhaus AG (i. Ins.) is as of
December 31, 2008, as set forth in a
Form 13-G
filed with the SEC on October 23, 2009. |
I-4
|
|
|
(5) |
|
Includes 7,499 shares subject to stock options that are
exercisable currently or within 60 days, and
9,528 shares owned by Dr. Oliners wife. |
|
(6) |
|
Information as to the shares of Common Stock beneficially owned
by Dimensional Fund Advisors LP is as of December 31,
2008 as set forth in a
Form 13-G
filed with the SEC on February 9, 2009. |
|
(7) |
|
Includes 7,499 shares subject to stock options that are
exercisable currently or within 60 days. |
|
(8) |
|
Includes 57,500 shares subject to stock options that are
exercisable currently or within 60 days. |
|
(9) |
|
Includes 7,499 shares subject to stock options that are
exercisable currently or within 60 days. |
|
(10) |
|
Includes 7,499 shares subject to stock options that are
exercisable currently or within 60 days. |
|
(11) |
|
Includes 7,499 shares subject to stock options that are
exercisable currently or within 60 days. |
|
(12) |
|
Timothy P. McCann disclaims beneficial ownership of the shares
owned by DCEO. Includes 833 shares subject to stock options
that are exercisable currently or within 60 days. |
|
(13) |
|
Includes 24,916 shares subject to stock options that are
exercisable currently or within 60 days. |
|
(14) |
|
Includes 160,223 shares subject to stock options that are
exercisable currently or within 60 days, 1,100 of which are
owned by the wife of Jayson Hahn, an executive officer of the
Company. |
CURRENT
DIRECTORS AND EXECUTIVE OFFICERS OF MERRIMAC
The following table sets forth certain information with respect
to each director. There is no arrangement or understanding
between any director or nominee and any other person pursuant to
which such person was selected as a director or nominee except
with respect to Timothy P. McCann, who serves as a director
pursuant to an agreement between DuPont Electronic Technologies
and the Company, which was entered into on February 28,
2002. The Companys Certificate of Incorporation provides
that the Merrimac Board shall consist of three classes of
directors with overlapping three-year terms. One class of
directors is to be elected each year with terms extending to the
third succeeding annual meeting of stockholders. The three
directors in Class I, Fernando L. Fernandez, Joel H.
Goldberg and Ludwig G. Kuttner, the three directors in
Class II, Edward H. Cohen, Arthur A. Oliner and Harold J.
Raveché, and the two directors in Class III, Mason N.
Carter and Timothy P. McCann, are serving terms expiring at the
time of our annual meetings in 2012, 2010 and 2011,
respectively, and until their respective successors have been
duly elected and qualified.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director of the
|
|
Name
|
|
Age
|
|
|
Company Since
|
|
|
Class I:
|
|
|
|
|
|
|
|
|
Fernando L. Fernandez
|
|
|
71
|
|
|
|
2003
|
|
Joel H. Goldberg
|
|
|
66
|
|
|
|
1997
|
|
Ludwig G. Kuttner
|
|
|
63
|
|
|
|
2006
|
|
Class II:
|
|
|
|
|
|
|
|
|
Edward H. Cohen
|
|
|
71
|
|
|
|
1998
|
|
Arthur A. Oliner
|
|
|
88
|
|
|
|
1961
|
|
Harold J. Raveché
|
|
|
66
|
|
|
|
2001
|
|
Class III:
|
|
|
|
|
|
|
|
|
Mason N. Carter
|
|
|
63
|
|
|
|
1995
|
|
Timothy P. McCann
|
|
|
52
|
|
|
|
2008
|
|
I-5
The following table sets forth certain information with respect
to each of our executive officers.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Current Position
|
|
Mason N. Carter
|
|
|
63
|
|
|
Chairman of the Board, President and Chief Executive Officer
|
J. Robert Patterson
|
|
|
52
|
|
|
Vice President Finance, Chief Financial Officer,
Treasurer and Secretary
|
Reynold K. Green
|
|
|
51
|
|
|
Vice President and Chief Operating Officer
|
Jayson E. Hahn
|
|
|
42
|
|
|
Vice President, Information Technology and Chief Information
Officer
|
James J. Logothetis
|
|
|
50
|
|
|
Vice President and Chief Technology Officer
|
Adriana Mazza
|
|
|
58
|
|
|
Vice President, Human Resources
|
Michael Pelenskij
|
|
|
49
|
|
|
Vice President, Manufacturing
|
Paul Skolnick
|
|
|
46
|
|
|
Vice President, Business Development
|
Biographical information concerning the directors and executive
officers of Merrimac is set forth below.
Mason N. Carter has served as Chairman of the Board since
July 24, 1997, and President and Chief Executive Officer
since December 16, 1996.
Edward H. Cohen is counsel to the law firm of Katten Muchin
Rosenman LLP, with which he has been affiliated since 1963. He
is a director of Phillips-Van Heusen Corporation, Franklin
Electronic Publishers, Inc., and Gilman & Ciocia, Inc.
Fernando L. Fernandez is self-employed and provides consulting
and director services to companies. From 2001 through January
2005, he was professor and the Director of Institute Technology
Initiatives at Stevens Institute of Technology in Hoboken, New
Jersey. Previously, from May 1998 to January 2001, he was
Director of the Defense Advanced Research Projects Agency
(DARPA), the central research and development organization of
the Department of Defense. Prior to his tenure at DARPA,
Dr. Fernandez held the position of President and Chairman
of the Board of Directors for AETC Inc., a firm specializing in
environmental surveillance, which he founded in 1994. Prior to
this position, he was President and Chairman of the Board of
Directors of Areté Associates, a Los Angeles-based
applied research firm that Dr. Fernandez founded in 1976.
Joel H. Goldberg has been Chairman and Chief Executive Officer
of Career Consultants, Inc., a management consulting firm, and
SK Associates, a search firm, located in Union, New Jersey,
since 1972. Dr. Goldberg is a director of Modells,
Inc., an advisor to the New Jersey Sports and Exposition
Authority and a member of the Advisory Council for Sports
Management of Seton Hall University. He was also a consultant to
the New York Giants, the New Jersey Nets and the Ottawa Senators
professional sports teams.
Ludwig G. Kuttner was President and Chief Executive Officer of
Hampshire Group, Limited, a holding company that markets apparel
for men and women, from 1979 to 1992 and from 1994 through 2006.
He continues to serve as Managing Member of Hampshire
Investments, Inc. and K Holdings, LLC, two investment companies.
Previously, he served in various capacities in the textile
industry and as an owner and developer of real property.
Timothy P. McCann has been Vice President and General
Manager DuPont Electronic Technologies since June
2007. Prior to that, Mr. McCann was DuPont Engineering
Polymers Global Director Marketing Sales and
Development, and Regional Director DuPont
Engineering Polymers, Americas, since August 2005. Between
November 1999 and August 2005, Mr. McCann served as Global
Business Director for various DuPont divisions, including
Fluoropolymers,
Nafion®
and Engineering Polymers. Mr. McCann has been employed by
DuPont in several capacities since joining DuPont in 1980.
Arthur A. Oliner has been Professor Emeritus of Electrophysics
at Polytechnic University (formerly Polytechnic Institute of
Brooklyn) since 1990. Prior to that, he was head of its
Electrical Engineering Department from 1966 until 1974, and was
the Director of its Microwave Research Institute from 1967 to
1982. After 1982, he returned to teaching and conducting
research programs in microwave integrated circuits until his
retirement in 1990. He was elected a member of the National
Academy of Engineering, a Fellow of the IEEE, the AAAS, and the
I-6
British IEE, and he received an honorary doctorate from the
University of Rome, Italy. Dr. Oliner is the author of
almost 300 published papers and three books. He has received
many awards, including two gold medals, for his contributions to
the microwave field. He has been an engineering consultant for
such companies as IBM, Boeing, Raytheon, Hughes and Rockwell.
Harold J. Raveché has been President of the Stevens
Institute of Technology since 1988. Prior to that, he was the
Dean of Rensselaer Polytechnic Institute from 1985 until 1988.
He was a member of the U.S. Trade and Technology missions
to Israel in 1998, Brazil in 1999 and Korea and Taiwan in 2000.
Mr. Patterson has been Vice President, Finance, Chief
Financial Officer and Treasurer since joining Merrimac on
December 11, 2008 and was appointed Secretary on
March 18, 2009. Prior to joining Merrimac,
Mr. Patterson was the Chief Financial Officer of Third Wave
Business Systems from March 2008 to September 2008. From
December 2000 through March 2008 Mr. Patterson served as
Vice President, Chief Financial Officer and Treasurer of IFTH
Acquisition Corp., formerly InfoTech USA Inc., where he also
served as their Secretary from January 2006 to March 2008.
Mr. Green was appointed Vice President and Chief Operating
Officer on January 1, 2005. He had been Vice President and
General Manager since November 2002. He was Vice President and
General Manager of the RF Microwave Products Group since January
2000. He was Vice President, Sales from March 1997 to January
2000 and Vice President of Manufacturing from April 1996 to
March 1997. He was a member of the Board of Directors from April
1996 to May 1997 and did not seek re-election to the Board.
Mr. Hahn was appointed Vice President, Information
Technology and Chief Information Officer in October 2000, after
serving as Director, Network Services since June 1998. He served
as Manager, Network Services from June 1997 to June 1998 and was
Information Technology Support Specialist from December 1996 to
June 1997.
Mr. Logothetis was appointed Vice President and Chief
Technology Officer in March 2002. Mr. Logothetis was
appointed Vice President,
Multi-Mix®
Engineering in May 1998, after rejoining Merrimac in January
1997 to serve as Director, Advanced Technology. Prior to
rejoining Merrimac, he served as a director for Electromagnetic
Technologies, Inc. in 1995 and became Vice President of
Microwave Engineering at such corporation in 1996. From 1984
through 1994, Mr. Logothetis had various engineering
positions with Merrimac including Group Manager, Engineering.
Mrs. Mazza was appointed Vice President, Human Resources in
December 2005, after serving as our Manager of Human Resources
from September 2002 to December 2005. She joined us in May 2000,
serving in various human resource capacities until September
2002. Prior to joining Merrimac, she worked for Monroe Systems
for Business, a division of Litton Industries; Exxon Office
Systems, a division of Exxon Corporation and did private
consulting work in both profit and nonprofit capacities.
Mr. Pelenskij was appointed Vice President, Manufacturing
in January 2000 after serving as our Director of Manufacturing
from January 1999 to January 2000. Prior to January 1999,
Mr. Pelenskij held the positions of Manager of Screened
Components, RF Design Engineer, and District Sales Manager since
joining us in 1993.
Mr. Skolnick was appointed Vice President, Business
Development in June 2008 after serving as both Vice President
and Director of Sales since joining Merrimac in September 2006.
From 1997 to 2006 Mr. Skolnick held Global Account Manager
and Marketing Director positions at Epcos, Inc.
Family
Relationships
There are no family relationships between our directors and
executive officers.
BOARD OF
DIRECTORS AND CORPORATE GOVERNANCE INFORMATION
Committees
During the fiscal year that ended on January 2, 2010, the
Merrimac Board held nine meetings. Each director attended at
least 75% of the aggregate number of meetings of the Merrimac
Board and of the committees on which
I-7
such director served during fiscal year 2009. All of the current
directors attended the Companys 2009 Annual meeting.
The Merrimac Board has a standing Audit Committee, Compensation
Committee, Management Committee, and Governance and Nominating
Committee. Certain of the directors also sit on our advisory
Technology Strategy Committee.
The Audit Committee currently consists of Mr. E. Cohen
(chair) and Dr. Raveché, each of whom is independent
as defined in Section 803(A) of the AMEX listing standards.
The Audit Committees function is to provide assistance to
the Merrimac Board in fulfilling the Merrimac Boards
oversight functions relating to the quality and integrity of our
financial reports, monitor our financial reporting process and
internal control system, and perform such other activities
consistent with its charter and our By-laws as the Committee or
the Merrimac Board deems appropriate. The Audit Committee
produces an annual report for inclusion in our proxy statement.
The Audit Committee is directly responsible for the appointment,
compensation and oversight of the work of the independent
registered public accounting firm (including resolution of
disagreements between our management and the independent
registered public accounting firm regarding financial reporting)
for the purpose of preparing or issuing an audit report or
related work. The Audit Committee must pre-approve all audit and
non-audit services to be provided to us by our independent
registered public accounting firm. The Committee carries out all
functions required by the AMEX, the SEC and the federal
securities laws. The Merrimac Board has determined that
Mr. E. Cohen, in addition to being independent,
is an audit committee financial expert as defined in
the SECs
Regulation S-K,
Item 407(d). Mr. E. Cohens biographical
information is on page I-6. During fiscal year 2009, the
Audit Committee held seven meetings. The Audit Committees
charter is available on our website at www.merrimacind.com.
The Compensation Committee is comprised of Dr. Goldberg
(chair), Mr. E. Cohen and Dr. Raveché, each of
whom is independent as defined in Section 803(A) of the
AMEX listing standards. The purpose of the Compensation
Committee is to oversee the responsibilities relating to
compensation of our executives, administer our equity based
employee incentive benefit plans and produce a report on
executive compensation for inclusion in our proxy statement. The
Compensation Committee may not delegate its authority. The
Compensation Committee also relies in part on the
recommendations of Mr. Carter in setting the compensation
of executive officers reporting to him. During fiscal year 2009,
the Compensation Committee held one meeting. The Compensation
Committees charter is available on our website at
www.merrimacind.com.
Messrs. Carter and E. Cohen currently serve on the
Management Committee. The Management Committee recommends to the
Board the strategic business direction for us and evaluates the
impact of current changes in the business environment in which
we operate. During fiscal year 2009, the Management Committee
did not meet.
The Governance and Nominating Committee is comprised of
Mr. E. Cohen (chair), Dr. Goldberg and
Dr. Raveché, each of whom is independent as defined in
Section 803(A) of the AMEX listing standards. This
Committee is responsible for (1) identifying and
recommending to the Merrimac Board individuals qualified to
become Merrimac Board and Committee members;
(2) maintaining that a majority of the Merrimac Board
members are independent and that all the members of the Audit,
Compensation and Governance and Nominating Committees are
independent as required; (3) developing and recommending to
the Merrimac Board a set of corporate governance principles
applicable to us; and (4) addressing corporate governance
issues and recommending proposals and actions for the Merrimac
Boards consideration. We have not paid any third party a
fee to assist in the process of identifying and evaluating
candidates for director. During fiscal year 2009, the Governance
and Nominating Committee held one meeting. The Governance and
Nominating Committees charter is available on our website
at www.merrimacind.com.
The Technology Strategy Committee (which was formed in December
2005) is comprised of Dr. Fernandez (chair),
Dr. Oliner, and Dr. Raveché. The Technology
Strategy Committee advises the Board regarding progress in the
development of our
Multi-Mix®
technologies, prioritizing our efforts in this area, identifying
investment needs and opportunities, and educating customers on
the capabilities of the
Multi-Mix®
technologies. During fiscal year 2009, the Technology Strategy
Committee held three meetings.
I-8
Communicating
with our Merrimac Board Members
Any stockholder or other interested party who desires to
communicate with our Chairman of the Board or any of the other
members of the Merrimac Board may do so by writing to: Board of
Directors,
c/o Chairman
of the Board of Directors, Merrimac Industries, Inc., 41
Fairfield Place, West Caldwell, NJ 07006. Communications may be
addressed to the Chairman of the Board, an individual director,
a Board Committee, the non-management directors or the full
Merrimac Board. Communications received by the Chairman of the
Board will then be distributed to the appropriate directors
unless the Chairman determines that the information submitted
constitutes spam, lewd material
and/or
communications offering to buy or sell products or services.
REPORT OF
THE AUDIT COMMITTEE OF THE MERRIMAC BOARD
Our management has the primary responsibility for the financial
statements and the reporting process, including our system of
internal controls and disclosure controls and procedures. The
independent registered public accounting firm audits our
financial statements and expresses an opinion on the financial
statements based on the audit. The Audit Committee oversees on
behalf of the Merrimac Board (i) our accounting and
financial reporting processes and (ii) the audits of our
financial statements.
We met and held discussions with management and J.H. Cohn LLP,
our independent registered public accounting firm for fiscal
2008. Management represented to us that our consolidated
financial statements for the fiscal year ended January 3,
2009 were prepared in accordance with accounting principles
generally accepted in the United States. We reviewed and
discussed the consolidated financial statements with both
management and J.H. Cohn LLP. We also discussed with J. H.
Cohn LLP the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit
Committees).
We discussed with J.H. Cohn LLP the overall scope and plans for
the audit. We met with J.H. Cohn LLP, with and without
management, to discuss the results of their examination, their
evaluation of our internal controls, and the overall quality of
our financial reporting.
We discussed with J.H. Cohn LLP their independence from
management and us, and received J.H. Cohn LLPs written
disclosures and letter required by the Public Company Accounting
Oversight Board regarding the independent registered public
accounting firms communications with the Audit Committee
concerning independence.
Based on the foregoing, we recommended that the audited
consolidated financial statements be included in our Annual
Report on
Form 10-K
for the fiscal year ended January 3, 2009, for filing with
the SEC.
Audit Committee
Edward H. Cohen, Chair and Audit Committee Financial Expert
Harold J. Raveché
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 2009, our General Counsel, Katten Muchin
Rosenman LLP, was paid $332,774 for providing us legal services.
Mr. E. Cohen, a director of the Company, is Counsel to the
firm of Katten Muchin Rosenman LLP but does not share in any
fees we pay to the firm.
During fiscal year 2009, we retained Career Consultants, Inc.
and SK Associates to perform executive searches and to provide
other related services. We paid an aggregate of $18,605 to these
companies during 2009. Dr. Goldberg, a director of the
Company, is the Chairman and Chief Executive Officer of each of
these companies.
DIRECTOR
INDEPENDENCE
During the year ended January 2, 2010, the Board has
determined that a majority of the Merrimac Board is independent
under the definition of independence and in compliance with the
listing standards of the NYSE AMEX
I-9
listing requirements. Based upon these standards, the Merrimac
Board has determined that all of the directors are independent,
with the exception of Mr. Carter, our Chairman, President
and Chief Executive Officer.
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and executive officers, and persons who
own more than ten percent of the Common Stock, to file with the
SEC initial reports of ownership and reports of changes in
ownership of Common Stock. Officers, directors and greater than
ten percent stockholders are required by SEC regulation to
furnish to us copies of all Section 16(a) reports they file.
To our knowledge, based solely on our review of the copies of
such reports furnished to us and written representations that no
other reports were required, our officers, directors and greater
than ten percent stockholders complied with these
Section 16(a) filing requirements with respect to the
Common Stock during the fiscal year ended January 2, 2010,
with the exception of James Logothetis, an officer of the
Company, who filed late Form 4s in June and November 2009
and Ludwig Kuttner, a director of the Company, who filed a late
Form 4 in April 2009.
EXECUTIVE
AND DIRECTOR COMPENSATION
Summary
Compensation Table for 2009 and 2008
The table below summarizes the total compensation earned by the
Named Executive Officers for the fiscal years ended
January 2, 2010 and January 3, 2009.
Mr. Carters compensation is determined pursuant to
his employment agreement with us, dated April 11, 2006.
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All Other
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Salary
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Option Awards
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Compensation
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Total
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Name and Principal Position
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Year
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($)
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($)(1)
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($)(2)
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($)
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Mason N. Carter
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2009
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332,010
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18,200
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28,961
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379,171
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Chairman, President
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2008
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338,394
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34,889
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373,283
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and Chief Executive Officer
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Reynold K. Green
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2009
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195,000
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7,800
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14,364
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217,164
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Vice President and
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2008
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198,750
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19,104
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217,854
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Chief Operating Officer
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J. Robert Patterson
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2009
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180,000
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5,200
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8,159
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193,359
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Vice President, Finance
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2008
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11,770
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12,000
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23,770
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and Chief Financial Officer
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(1) |
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The fair value of each of the options and purchase plan
subscription rights granted in 2009, 2008 and 2007 was estimated
on the date of grant using the Black-Scholes option valuation
model. For the years ended January 2, 2010, January 3,
2009 and December 29, 2007, the Company used the Simplified
Method to estimate the expected term of the expected life of
stock option grants as defined by Securities and Exchange
Commission Staff Accounting Bulletin No. 107 and 110
for each award granted. Expected volatility for the years ended
January 2, 2010, January 3, 2009 and December 29,
2007, is based on historical volatility levels of the
Companys common stock. The risk-free interest rate for the
years ended January 2, 2010, January 3, 2009 and
December 29, 2007 is based on the implied yield currently
available on U.S. Treasury zero coupon issues with the
remaining term equal to the expected term of the option granted. |
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The following weighted average assumptions were utilized: |
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2009
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2008
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2007
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Expected option life (years)
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6.0
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6.0
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5.7
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Expected volatility
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63.71
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%
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37.59
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%
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32.89
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%
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Risk-free interest rate
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2.53
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%
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3.14
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%
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4.53
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%
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Expected dividend yield
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0.00
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%
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0.00
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%
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0.00
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%
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I-10
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(2) |
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The following table describes each component of the All Other
Compensation column in the Summary Compensation Table. |
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Travel
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Car
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Life
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Disability
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Accident
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Fiscal
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Allowance
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Insurance
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Insurance
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Insurance
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Other(c)
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Totals
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Name
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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Mason N. Carter
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2009
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18,267
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(a)
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5,290
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5,263
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141
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28,961
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2008
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23,766
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(a)
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5,730
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5,252
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141
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34,889
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Reynold K. Green
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2009
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12,523
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(a)
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1,700
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141
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14,364
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2008
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17,263
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(a)
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1,700
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141
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19,104
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J. Robert Patterson
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2009
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8,018
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(b)
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141
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8,159
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2008
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12,000
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12,000
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(a) |
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Represents the lease value of the vehicle for fiscal years 2009
and 2008, and the respective insurance, gasoline, maintenance
and repair costs. |
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(b) |
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Represents auto allowance, gasoline, maintenance and repair
costs. |
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(c) |
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Represents consulting payments made to Mr. Patterson prior
to joining the Company. |
Compensation
of President and Chief Executive Officer
Employment
Agreement with Mason N. Carter
The Company has an Employment Agreement, dated April 11,
2006 (the Employment Agreement), with Mason N.
Carter, the Chairman, President and Chief Executive Officer of
the Company, which provides that Mr. Carters annual
base salary is $332,000. The initial term of the Employment
Agreement ends on December 31, 2010, and will be renewable
for successive
12-month
periods unless terminated pursuant to the terms of the
Employment Agreement. In addition, Mr. Carter will be
eligible to participate in the Companys medical benefits,
life insurance, 401(k) and similar programs generally available
to employees. Mr. Carter will also be eligible to
participate in the Companys stock purchase, stock option,
and long term incentive plans, and to receive bonuses, in the
sole discretion of the Compensation Committee of the Merrimac
Board. The Company will maintain a $500,000 term life insurance
policy for Mr. Carters beneficiaries.
Under the Employment Agreement, Mr. Carter will be entitled
to receive a Special Retirement Benefit of $75,000
per year if the Company achieves pre-tax earnings of
$9 million in the aggregate over the three fiscal years
prior to his retirement at or over age 65 (the
Performance Target). In addition, Mr. Carter
would receive the Special Retirement Benefit if the Company
terminates him without cause, if he resigns for good
reason, or his employment is terminated as a result of a
disability, and in any such case the Company has
also achieved the Performance Target. During the term and for a
period of three years following such retirement or termination
(Restrictive Period), and for as long as
Mr. Carter is receiving the Special Retirement Benefit,
Mr. Carter is bound to a confidentiality, non-competition
and non-solicitation agreement with us. However, if after the
Restrictive Period, Mr. Carter gives written notice to the
Company of his forfeiture of the Special Retirement Benefit,
Mr. Carter would be released from the non-competition and
non-solicitation agreement.
In addition, the Employment Agreement provides various payments
and benefits upon Mr. Carters termination of
employment with the Company due to his death or
disability (as defined in the Employment Agreement),
Mr. Carters termination of employment by the Company
with or without cause (as defined in the Employment Agreement)
and termination of employment by Mr. Carter for good
reason (as defined in the Employment Agreement). If
Mr. Carters employment is terminated within
12 months following a change in control (as
defined in the Employment Agreement), Mr. Carter will
receive, payments and benefits that are in lieu of those
payments and benefits available to Mr. Carter upon
termination of employment in the absence of a change in control.
If Mr. Carters employment terminates due to his
death, the Company will provide to Mr. Carters estate
all salary and benefits accrued by Mr. Carter but unpaid as
of the date of his death.
I-11
If Mr. Carters employment terminates due to his
disability, the Company will provide to Mr. Carter all
salary and benefits accrued by Mr. Carter but unpaid as of
the date of termination. The Company will pay Mr. Carter
his Special Retirement Benefit to the extent that the conditions
for payment of such benefit have been met. Mr. Carter has a
disability for purposes of the Employment Agreement
if, as a result of physical or mental illness or injury,
Mr. Carter is unable to perform the essential duties of his
position for a period of 90 consecutive work days or for a
period of 120 non-consecutive work days in a
12-month
period, or poses a direct threat to his own safety and health or
that of others and there is no reasonable accommodation that can
be provided by the Company that would allow Mr. Carter to
perform the essential functions of his position as determined
under applicable law.
If the Company terminates Mr. Carters employment for
cause, the Company will provide to Mr. Carter
all salary and benefits accrued by Mr. Carter but unpaid as
of the date of termination. For purposes of the Employment
Agreement, cause means Mr. Carters:
(i) willful failure to perform his normal and customary
duties for an extended period for any reason, other than due to
disability; (ii) gross negligence or willful misconduct,
including, without limitation, fraud, embezzlement or
intentional misrepresentation; (iii) commission of, or
indictment or conviction for, a felony; (iv) willful
engagement in competitive activities against the Company,
including, without limitation, purposely aiding a competitor;
(v) misappropriation of a material opportunity of the
Company; or (vi) violation of any material provision of the
Employment Agreement, and in each case Mr. Carter has
failed to cure such act (if curable as determined by the
Merrimac Board) within ten days after receipt of written notice
from the Company of such act or, if reasonable under the
circumstances, such additional period of time during which
Mr. Carter is using his best efforts to so cure, not to
exceed 30 days in the aggregate.
If Mr. Carter terminates his employment for good
reason or the Company terminates Mr. Carters
employment without cause, the Company will provide
Mr. Carter with the following payments and benefits
(i) his then applicable base salary beginning six months
plus one day after the date of termination until the later of
(A) the end of the term of the Employment Agreement plus
six months and one day and (B) the date which is
12 months after the date of termination plus six months and
one day, (ii) continued group medical coverage, under the
Companys group medical plan in effect from time to time,
on the same terms as provided to the Companys other
executives until the later of (A) the end of the term of
the Employment Agreement plus six months and one day and
(B) the date which is 12 months after the date of
termination plus six months and one day, (iii) if
applicable, the Special Retirement Benefit, (iv) in the
case of an automobile owned or leased by Mr. Carter, the
car allowance provided under the Employment Agreement, payable
beginning six months plus one day after the date of termination
until the earlier of (A) 12 months after the date of
termination plus six months and one day and (B) the end of
the term of the Employment Agreement plus six months and one
day, or, in the case of an automobile owned or leased by the
Company, use of such automobile from the date of termination
until the earlier of (A) 12 months after the date of
termination and (B) the end of the then current term,
(v) the option to assume any remaining lease payments of
the automobile provided under the Employment Agreement, assuming
the leased automobile is one of the Companys automobiles,
or to purchase such automobile in accordance with the terms of
its lease, (vi) a payment in lieu of any bonus (the
In-Lieu Bonus) in an amount equal to the average of
Mr. Carters annual bonuses, if any, for the two
fiscal years ended immediately prior to the termination, which
payment shall be made in respect of each period of
12 months remaining during the term of the Employment
Agreement, and a pro-rated amount shall be paid in respect of
any period of less than 12 months, payable at the time that
other annual bonuses are paid to our other executives (or if no
annual bonus is paid during a particular year, in December of
the applicable year) and in accordance with Section 409A of
the Internal Revenue Code of 1986, as amended (the
Code), and (vii) notwithstanding the terms of
any of our option plans, all unvested stock options to purchase
shares of the our common stock granted by the Company and held
by Mr. Carter as of the date of termination (the
Executive Options) under any of the Companys
option plans shall immediately vest and be exercisable in
accordance with their terms and, notwithstanding the terms of
any of our incentive plans, all restricted stock awarded under
any incentive plans held by Mr. Carter Executive
Restricted Stock) shall be vested and free of
restrictions. For purposes of the Employment Agreement,
good reason means a material diminution of
Mr. Carters duties and responsibilities or a
substantial reduction in Mr. Carters compensation and
benefits.
If, within 12 months of a change in control,
Mr. Carter terminates his employment for good reason or the
Company terminates Mr. Carters employment without
cause, in lieu of the payments and benefits described above, the
Company will provide Mr. Carter with the following payments
and benefits: (i) the greater of (x) three times his
I-12
then applicable base salary and (y) the base salary from
the date of termination to the end of the term of the Employment
Agreement, payable over a
12-month
period beginning six months plus one day after the date of
termination, (ii) continued group medical coverage, under
our group medical plan in effect from time to time, on the same
terms as provided to our other executives until the later of
(A) the third anniversary of the date of termination and
(B) the end of the term of the Employment Agreement,
(iii) if applicable, the Special Retirement Benefit,
(iv) in the case of an automobile owned or leased by
Mr. Carter, the car allowance provided under the agreement,
payable beginning six months plus one day after the date of
termination until the later of (A) the third anniversary of
the date of termination plus six months and one day and
(B) the end of the term of the Employment Agreement plus
six months and one day, or, in the case of an automobile owned
or leased by the Company, use of such automobile from the date
of termination until the later of (A) the third anniversary
of the date of termination and (B) the end of the term of
the Employment Agreement, (v) the option to assume any
remaining lease payments of the automobile provided under the
Employment Agreement or to purchase such automobile in
accordance with the terms of its lease, and (vi) three
times the In-Lieu Bonus, payable over a
12-month
period beginning six months plus one day after the date of
termination. In the event of a change in control, all Executive
Options shall immediately vest and be exercisable in accordance
with their terms and the Executive Stock shall be vested and
free of restrictions. In the event that these payment or
benefits give rise to the excise tax payable by Mr. Carter
under Section 4999 of the Code, the Company will reduce the
amount of such payments by the minimum amount necessary to avoid
payment of the excise tax.
Under the Employment Agreement, the term change in
control means (i) the Company is merged or
consolidated with, or, in any transaction or series of
transactions, all or substantially all of the Companys
business or assets shall be sold or otherwise acquired by,
another corporation or entity and, as a result thereof, the
Companys stockholders immediately prior thereto shall not
have at least 50% or more of the combined voting power of the
surviving, resulting or transferee corporation or entity;
(ii) any person (as that term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended from time to time) who is not an affiliate of
the Company or a 5% or more holder, in each case as of the date
of this the Employment Agreement, is or becomes the beneficial
owner (as that term is used in Section 13(d) of said Act
and the applicable rules and regulations thereof) of the Shares
entitled to cast more than 25% of the votes at the time entitled
to be cast generally for the election of directors; or
(iii) more than 50% of the members of the Merrimac Board
shall not be Continuing Directors. Continuing
Directors means the Companys directors (A) who
were members of the Merrimac Board on January 1, 2006 or
(B) who subsequently became the Companys directors
and who were elected or designated to be candidates for election
as nominees of the Merrimac Board, or whose election or
nomination for election by the Companys stockholders was
otherwise approved, by a vote of a majority of the Continuing
Directors then on the Merrimac Board).
The summary of Mr. Carters employment agreement
contained herein is qualified by reference to his employment
agreement, which is filed as Exhibit (e)(3) to the
Schedule 14D-9
and is incorporated herein by reference.
No other Named Executive Officer has an employment agreement
with us. Please refer to Potential Payments Upon Termination or
Change-In-Control
for such payments that may be made to our other Named Executive
Officers.
Outstanding
Equity Awards at Fiscal Year-End
The following table provides information on the current holdings
of outstanding equity awards by the Named Executive Officers.
This table shows unexercised exercisable (vested) and
unexercisable (unvested) option awards as of the fiscal year
ended January 2, 2010. No stock awards to any Named
Executive Officer were outstanding as of
I-13
January 2, 2010. The vesting schedule for the options held
at fiscal year end is disclosed by footnote to the following
table.
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Option Awards
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Number of
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|
|
|
Securities
|
|
Number of
|
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|
|
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|
|
Underlying
|
|
Securities
|
|
|
|
|
|
|
Unexercised
|
|
Underlying
|
|
Option
|
|
|
|
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Options
|
|
Unexercised Options
|
|
Exercise
|
|
Option
|
|
|
(#)
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(#)
|
|
Price
|
|
Expiration
|
Name
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Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Mason Carter
|
|
|
2,500
|
(1)
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|
|
|
|
|
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8.375
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|
|
2/22/10
|
|
|
|
|
35,000
|
(2)
|
|
|
|
|
|
|
9.520
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|
|
|
6/21/16
|
|
|
|
|
20,000
|
(3)
|
|
|
10,000
|
(3)
|
|
|
9.300
|
|
|
|
04/24/17
|
|
|
|
|
|
|
|
|
35,000
|
(4)
|
|
|
7.830
|
|
|
|
09/15/19
|
|
Reynold K. Green
|
|
|
8,250
|
(5)
|
|
|
|
|
|
|
9.040
|
|
|
|
03/27/15
|
|
|
|
|
10,000
|
(2)
|
|
|
|
|
|
|
9.520
|
|
|
|
06/21/16
|
|
|
|
|
6,666
|
(3)
|
|
|
3,334
|
(3)
|
|
|
9.300
|
|
|
|
04/24/17
|
|
|
|
|
|
|
|
|
15,000
|
(4)
|
|
|
7.830
|
|
|
|
09/15/19
|
|
J. Robert Patterson
|
|
|
|
|
|
|
10,000
|
(4)
|
|
|
7.830
|
|
|
|
09/15/19
|
|
|
|
|
(1) |
|
The grant date of this award was February 23, 2000. This
award vested on the one year anniversary of the grant date. |
|
(2) |
|
The grant date of this award was June 22, 2006. One-third
of each such option vests on each of the first, second and third
anniversaries of the grant date. |
|
(3) |
|
The grant date of this award was April 25, 2007. One-third
of each such option vests on each of the first, second and third
anniversaries of the grant date. |
|
(4) |
|
The grant date of this award was September 16, 2009.
One-third of each such option vests on each of the first, second
and third anniversaries of the grant date. |
|
(5) |
|
The grant date of this award was March 28, 2005. This award
vested on the one year anniversary of the grant date. |
Potential
Payments Upon Termination or
Change-In-Control
Mason
N. Carter Bonus
On December 10, 2009, the Merrimac Board approved a cash
bonus for Mr. Carter (which is in addition to any amounts
Mr. Carter would receive under the Employment Agreement
upon the termination of his employment under certain
circumstances following a change in control) in the
event the Companys then on-going process of investigating
strategic alternatives resulted in the sale of the Company or a
similar transaction. Mr. Carters bonus is based on a
percentage of the sale price of the Company, as follows:
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|
|
If the purchase price for the Company is more than $9.00 per
fully diluted share but less than $12.00 per fully diluted
share, a bonus equal to 1% of the total purchase paid for the
Company or its shares.
|
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|
|
If the purchase price for the Company is $12.00 or more per
fully diluted share but less than $15.00 per fully diluted
share, a bonus pro-rated on a linear basis of 1% to 2% of the
total purchase price for the Company or its shares.
|
|
|
|
If the purchase price for the Company is $15.00 or more per
fully diluted share, a bonus equal to 2% of the total purchase
price paid for the Company or its shares.
|
Assuming the completion of the transactions contemplated by the
Merger Agreement, Mr. Carter will be paid $1,037,326 in
cash based upon the purchase price of $16.00 per Share.
I-14
Amended
and Restated Severance Plan
On March 29, 2006, the Compensation Committee of the
Merrimac Board adopted the Amended and Restated Severance Plan,
as amended (the Severance Plan), which replaces the
previous plan adopted in September 2003, for key executives
designated from time to time by the Compensation Committee,
including the Named Executive Officers, with the exception of
Mr. Carter. On December 13, 2007, the Merrimac Board
amended the Severance Plan to provide that any determinations to
be made by the Compensation Committee pursuant to the Severance
Plan will instead be made by the Merrimac Board on the
recommendation of the Compensation Committee. The Severance Plan
provides, among other things, that if an executive is terminated
by the Company without cause and other than on
account of the executives death or disability,
or if the executive resigns for good reason (as such
terms are defined in the Severance Plan) within 12 months
following a change in control (as defined therein),
the Company, or a successor of the Company, is obligated to pay
to the executive one or two times (as recommended by the
Compensation Committee and approved by the Merrimac Board) his
annual base salary (as defined in the Severance
Plan) and to continue to provide health insurance benefits for
24 months (to the extent not covered by any new employer).
However, to the extent that any payments made under the
Severance Plan would otherwise be subject to the excise tax
imposed under the Golden Parachute Payment provisions of
Section 4999 of the Code, the Company will reduce the
amount of such payments by the minimum amount necessary to avoid
being subject to such excise tax.
For purposes of the Severance Plan, an executives
annual base salary is the executives regular
basic annual compensation prior to any reduction under a salary
reduction agreement pursuant to Section 401(k) or
Section 125 of the Code, and will not include (without
limitation) cost of living allowances, fees, retainers,
reimbursements, bonuses, incentive awards, prizes or similar
payments. The executive has a disability for
purposes of the Severance Plan if, as result of physical or
mental illness or injury, the executive is unable to perform the
essential duties of his or her position for a period of 90
consecutive days or for a period of 120 non-consecutive days in
any 12-month
period, or poses a direct threat to the safety and health of the
executive or others and there is no reasonable accommodation
that the Company can make that would allow the executive to
perform the essential functions of the executives position
as determined by applicable law.
All payments under the Severance Plan will be payable at such
times as recommended by the Compensation Committee and approved
by the Merrimac Board provided that all such payments are made
prior to the later of (1) March 15 of the calendar year
following the year in which the termination occurs and
(2) two and one-half months after the end of the
Companys year end in which such termination occurred. All
payments will be made so as to comply with Section 409A of
the Code. In connection with any payment under the Severance
Plan, the Compensation Committee may recommend and the Merrimac
Board may require that the executive enter into
non-competition/non-solicitation and confidentiality agreements
as it deems appropriate. If an executive has entered into an
agreement with the Company, which agreement covers the subject
matter of the Severance Plan, such agreement will govern so that
the executive will not be entitled to payments under both the
agreement and the Severance Plan.
For purposes of the Severance Plan, change in
control shall mean and be deemed to have occurred if:
(i) the Company has merged or consolidated with, or, in any
transaction or series of transactions, all or substantially all
of the Companys business or assets shall be sold or
otherwise acquired by, another corporation or entity and, as a
result thereof, the Companys stockholders immediately
prior thereto shall not have at least 50% or more of the
combined voting power of the surviving, resulting or transferee
corporation or entity, (ii) any person (as that term is
used in Sections 13(d) and 14(d) of the Exchange Act) who
is not an affiliate of the Company or a 5% or more holder, in
each case as of January 1, 2006, is or becomes the
beneficial owner (as that term is used in Section 13(d) of
the Exchange Act) of the Shares entitled to cast more than 25%
of the votes at the time entitled to be cast generally for the
election of directors, or (iii) more than 50% of the
members of the Merrimac Board shall not be continuing
directors. Under the Severance Plan, continuing
directors are our directors (i) who were members of
the Merrimac Board on January 1, 2006, or (ii) who
subsequently became our directors and who were elected or
designated to be candidates for election as nominees of the
Merrimac Board, or whose election or nomination for election by
the Companys stockholders was otherwise approved, by a
vote of a majority of the continuing directors then on the
Merrimac Board.
I-15
Under the Severance Plan, cause means the
executives (1) willful failure to perform his or her
normal and customary duties for an extended period of time for
any reason, other than disability, (ii) gross negligence or
willful misconduct, including but not limited to fraud,
embezzlement or intentional misrepresentation,
(iii) commission of, or indictment or conviction for, a
felony, (iv) misappropriation of a material opportunity of
the Company, (v) willfully engaging in competitive
activities against the Company or purposely aiding a competitor
of the Company, or (vi) violation of any fiduciary duty
owed to the Company or any subsidiaries or any material
provision of any agreement the executive has with the Company or
any subsidiary and, in each case, the executive has failed to
cure the violation (if curable as determined by the Company)
within ten days after receipt of written notice from the Company
of such violation or, if reasonable under the circumstances,
such additional period of time during which the executive is
using his best efforts to so cure, not to exceed 30 days in
the aggregate.
In addition, the Severance Plan defines good reason
to mean the occurrence (without the executives prior
express written consent) of any one of the following acts, or
failures to act: (i) a material diminution of the duties
and responsibilities of the executive, (ii) a substantial
reduction in compensation or benefits of the executive,
(iii) any failure by the Company to comply with any of the
provisions of the Severance Plan, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by Company promptly after receipt of
notice thereof given by the executive, (iv) any purported
termination of the executives employment which is not
pursuant to a notice of termination under the
Severance Plan (citing specific provisions of the Severance Plan
relied upon in the termination and detain the facts and
circumstances claimed to provide a basis thereof), or
(v) the relocation of our principal executive offices where
the executive works at a location more than 25 miles from
its location on the date of the adoption of the Severance Plan
or the Company requiring the executive to be based anywhere
other than the Companys principal executive offices.
The Merrimac Board may amend or terminate the Severance Plan in
whole or in part at any time upon notice to all of the
participating executives; provided, however, that, subsequent to
a change in control or during the period of 180 days prior
to a change in control, no such amendment which could adversely
affect the rights of any executive nor any termination shall
become effective until the expiration of one year following the
change in control.
The summary of the Severance Plan contained herein is qualified
by reference to the Severance Plan, which is filed as Exhibit
(e)(4) to the Schedule
14D-9 and
the amendment thereto is filed as Exhibit (e)(5) to the Schedule
14D-9, each
of which is incorporated herein by reference.
Director
Compensation Table
Each director who is not an employee of ours receives a monthly
directors fee of $1,500, plus an additional $500 for each
meeting of the Board and of any Committees of the Board
attended. In addition, the Chair of the Audit Committee receives
an annual fee of $2,500 for his services in such capacity. The
directors are also reimbursed for reasonable travel expenses
incurred in attending Board and Committee meetings.
In addition, pursuant to the 2006 Stock Option Plan, each
non-employee director is granted an option to purchase
2,500 shares of the Common Stock of the Company on the date
of each Annual Meeting of Stockholders. Such options have a
three-year vesting period. Each such grant has an exercise price
equal to the fair market value on the date of such grant and
will expire on the tenth anniversary of the date of the grant.
On June 24, 2009, non-qualified stock options to purchase
an aggregate of 17,500 shares were issued to seven
directors at an exercise price of $7.82 per share. Also on
June 24, 2009, pursuant to the 2006 Non-Employee
Directors Stock Plan, six directors each received a grant
of 1,500 shares of restricted stock at a fair market value
of $7.82 per share. One third of such restricted stock vests on
the anniversary of the grant date over a three-year period.
I-16
The table below summarizes the compensation of directors for
fiscal year 2009.
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|
Fees Earned
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|
|
|
|
|
|
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|
|
or Paid
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Stock
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|
Option
|
|
|
|
|
|
|
in Cash
|
|
Awards
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|
Awards
|
|
All Other
|
|
Total
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Name
|
|
($)
|
|
($)(1)(3)
|
|
($)(2)(3)
|
|
Compensation ($)
|
|
($)
|
|
Edward H. Cohen
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|
|
28,500
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|
|
|
9,746
|
|
|
|
5,684
|
|
|
|
|
|
|
|
43,930
|
|
Fernando L. Fernandez
|
|
|
23,000
|
|
|
|
9,746
|
|
|
|
5,684
|
|
|
|
|
|
|
|
38,430
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|
Joel H. Goldberg
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|
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23,000
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|
|
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9,746
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|
|
|
5,684
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|
|
|
18,605
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(4)
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|
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57,035
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|
Ludwig G. Kuttner
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22,000
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|
|
|
9,746
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|
|
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5,684
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|
|
|
|
|
|
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37,430
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Timothy P. McCann
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19,500
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(5)
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|
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|
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4,034
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|
|
|
|
|
|
|
23,534
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Arthur A. Oliner
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|
|
18,500
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|
|
|
9,746
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|
|
|
5,684
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|
|
|
36,000
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(6)
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|
|
69,930
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|
Harold J. Raveche
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|
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27,000
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|
|
|
9,746
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|
|
|
5,684
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|
|
|
|
|
|
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42,430
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|
|
|
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(1) |
|
In accordance with SFAS No. 123R, our charge to
earnings in fiscal year 2009 for each directors grant of
1,500 shares of restricted stock in 2009 was $2,281, or
$13,685 in the aggregate for six directors, our charge to
earnings in fiscal year 2009 for each directors grant of
1,500 shares of restricted stock in 2008 was $2,575, or
$15,450 in the aggregate for six directors and our charge to
earnings in fiscal year 2008 for each directors grant of
1,500 shares of restricted stock in 2007 was $4,890, or
$29,340 in the aggregate for six directors. This total value for
2009 was calculated by multiplying the number of shares of stock
at its fair market value of $7.82 per share, divided by a
36 month vesting period, and multiplying by seven, the
number of months in fiscal year 2009 that the grant covered,
added to the value calculated by multiplying the number of
shares of stock at its fair market value of $5.15 per share,
divided by a 36 month vesting period, and multiplying by
twelve, the number of months in fiscal year 2009 that the 2008
grant covered, added to the value calculated by multiplying the
number of shares of stock at its fair market value of $9.78 per
share, divided by a 36 month vesting period, and
multiplying by twelve, the number of months in fiscal year 2009
that the 2007 grant covered. This charge is based on the market
values of the restricted stock when issued, amortized over three
years of service. |
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(2) |
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Each of the directors received options to purchase
2,500 shares, which were granted on June 24, 2009. The
fair value of each directors award granted pursuant to the
2006 Stock Option Plan was $11,575 at $4.63 per share, using the
Black-Scholes method in accordance with SFAS No. 123R. Each
of the directors received options to purchase 2,500 shares,
which were granted on June 26, 2008. The fair value of each
directors award granted pursuant to the 2006 Stock Option
Plan was $5,350 at $2.14 per share, using the Black-Scholes
method in accordance with SFAS No. 123R. Each of the
directors received options to purchase 2,500 shares, which
were granted on June 20, 2007. The fair value of each
directors award granted pursuant to the 2006 Stock Option
Plan was $4,950 at $1.98 per share, using the Black-Scholes
method in accordance with SFAS No. 123R. The fair
value of each of the options and purchase plan subscription
rights granted in 2009, 2008 and 2007 was estimated on the date
of grant using the Black-Scholes option valuation model. For the
years ended January 2, 2010, January 3, 2009 and
December 29, 2007, the Company used the Simplified Method
to estimate the expected term of the expected life of stock
option grants as defined by Securities and Exchange Commission
Staff Accounting Bulletin No. 107 and 110 for each
award granted. Expected volatility for the years ended
January 2, 2010, January 3, 2009 and December 29,
2007, is based on historical volatility levels of the
Companys common stock. The risk-free interest rate for the
years ended January 2, 2010, January 3, 2009 and
December 29, 2007 is based on the implied yield currently
available on U.S. Treasury zero coupon issues with the
remaining term equal to the expected term of the option granted. |
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The following weighted average assumptions were utilized: |
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2009
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2008
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2007
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Expected option life (years)
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6.0
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|
|
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6.0
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|
|
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5.7
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Expected volatility
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|
|
63.71
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%
|
|
|
37.59
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%
|
|
|
32.89
|
%
|
Risk-free interest rate
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|
|
2.53
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%
|
|
|
3.14
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%
|
|
|
4.53
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%
|
Expected dividend yield
|
|
|
0.00
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%
|
|
|
0.00
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%
|
|
|
0.00
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%
|
I-17
|
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|
(3) |
|
The table below summarizes the aggregate number of stock awards
and the aggregate number of option awards for each director
outstanding at January 2, 2010. |
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Name
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Stock Awards
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Option Awards
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Edward H. Cohen
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|
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7,000
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12,500
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Fernando L. Fernandez
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6,000
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|
|
|
12,500
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Joel H. Goldberg
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|
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6,000
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12,500
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Ludwig G. Kuttner
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4,500
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7,500
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Timothy P. McCann
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5,000
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Arthur A. Oliner
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6,000
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12,500
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Harold J. Raveche
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6,000
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12,500
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(4) |
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Represents fees paid to Career Consultants, of which
Dr. Goldberg is Chairman, Chief Executive Officer and
principal owner, to perform employee benefits analysis. |
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(5) |
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Mr. McCanns fees are paid directly to E.I. DuPont de
Nemours and Company and he did not accept restricted stock
awards granted in 2009. |
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(6) |
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Represents fees paid for technology-related consulting services. |
I-18
ANNEX II
Opinion
of Americas Growth Capital, LLC
December 23, 2009
CONFIDENTIAL
Board of Directors
Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, NJ 07006
Members of the Board:
You have asked for our opinion as to the fairness, from a
financial point of view, to the holders of the common stock of
Merrimac Industries, Inc. (the Company), of the Cash
Consideration (as defined below) to be received by such holders,
other than Crane Co (Crane), Crane Merger Co., a
wholly-owned subsidiary of Crane (Merger Sub), and
their respective affiliates, pursuant to the terms and subject
to the conditions set forth in an Agreement and Plan of Merger
to be entered into among Crane, Merger Sub and the Company (the
Agreement). As more fully described in the Agreement
or as otherwise described to us by the Company, (i) Crane
will cause Merger Sub to commence a tender offer to purchase all
of the outstanding shares of the common stock of the Company
(Company Common Stock), together with the associated
common stock purchase rights issued pursuant to the Rights
Agreement, dated as of March 19, 2009 between the Company
and American Stock Transfer & Trust Company, LLC,
at a purchase price of $16.00 in cash per share (the Cash
Consideration and, such tender offer, the Tender
Offer), (ii) subsequent to consummation of the Tender
Offer, Merger Sub will be merged with and into the Company (the
Merger and, together with the Tender Offer, the
Transaction) and each outstanding share of Company
Common Stock not previously tendered will be converted into the
right to receive the Cash Consideration.
In connection with providing our opinion to the Board of
Directors of the Company in connection with the Transaction we
will receive a fee from the Company for such services pursuant
to the terms of our engagement letter with the Company, dated as
of December 15, 2009. We have not provided any other
services to the Company in connection with the Transaction and
will receive no other fees from the Company except for our
services as described above. In the ordinary course of business,
we and our affiliates may actively trade the equity securities
of the Company for our and our affiliates own accounts and
for the accounts of our customers and, accordingly, at any time
may hold a long or a short position in such securities.
In connection with our opinion, we:
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reviewed a draft of the Agreement dated December 23, 2009
(the Draft Agreement);
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reviewed certain publicly available information, including SEC
filings, for the Company and certain other relevant financial
and operating data furnished to us by the Companys
management;
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|
reviewed certain internal financial analyses, historical
financials, financial forecasts, reports and other information
concerning the Company, prepared by the management of the
Company and conducted a discounted cash flow analysis of the
Company;
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|
held discussions with certain members of the management of the
Company concerning the historical and current business
operations, financial condition and prospects of the Company and
such other matters we deemed relevant;
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analyzed certain financial, stock market and other publicly
available information relating to the businesses of other
companies whose operations we considered relevant in evaluating
those of the Company and considered, to the extent publicly
available, the financial terms of certain other transactions
which we considered relevant in evaluating the Transaction;
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II-1
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reviewed the financial terms of the Transaction as described in
the Draft Agreement in relation to; among other things, the
historical and projected earnings and other operating data of
the Company; and the capitalization and financial condition of
the Company; and
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|
reviewed and considered such other information, financial
studies, analyses and investigations and such other factors that
we deemed relevant for the purposes of this opinion.
|
In conducting our review and arriving at our opinion, we have,
with your consent, assumed and relied, without independent
investigation or verification, upon the accuracy and
completeness of all financial and other information provided to
us by the Company in any form, written or oral, or which is
otherwise publicly available. We have not undertaken or assumed
any responsibility for the accuracy, completeness or
reasonableness of, or independently verified, such information.
In addition, we have not conducted nor have we assumed any
obligation to conduct any physical inspection of the properties
or facilities of the Company. We have further relied upon the
assurance of management of the Company that they are unaware of
any facts that would make the information provided to us
incomplete or misleading in any material respect. We have, with
your consent, assumed that the financial forecasts which we
examined were reasonably prepared by the management of the
Company on bases reflecting the best currently available
estimates and good faith judgments of such management as to the
future performance of the Company. We have assumed that the
final form of the Agreement will be substantially similar to the
last Draft Agreement, without material alteration or waiver
thereof. We have relied, at your direction, without independent
verification, upon the assessment of the management of the
Company as to the products and product candidates of the Company
and the risks associated with such products and product
candidates.
We have not made or obtained any independent evaluations,
valuations or appraisals of the assets or liabilities of the
Company, nor have we been furnished with such materials. We have
not made any review of or sought or obtained advice of legal
counsel regarding legal matters relating to the Company, and we
understand that the Company has relied and will rely only on the
advice of legal counsel to the Company as to such matters. Our
services to the Company in connection with the Transaction have
been comprised solely of rendering an opinion as to the
fairness, from a financial point of view, to the holders of
Company Common Stock of the Cash Consideration to be paid to
such holders. Our opinion is necessarily based upon economic and
market conditions and other circumstances as they exist and can
be evaluated by us on the date hereof. It should be understood
that although subsequent developments may affect our opinion,
except as agreed to with the Company, we do not have or
undertake any obligation to update, revise or reaffirm our
opinion.
For purposes of rendering our opinion we have assumed, in all
respects material to our analysis, that the representations and
warranties of each party contained in the Draft Agreement are
true and correct, that each party will perform all of the
covenants and agreements required to be performed by it under
the Agreement and that all conditions to the consummation of the
Transaction will be satisfied without waiver thereof. We have
also assumed that all governmental, regulatory and other
consents and approvals contemplated by the Draft Agreement will
be obtained and that in the course of obtaining any of those
consents no restrictions will be imposed or waivers made that
would have an adverse effect on the contemplated benefits of the
Transaction.
We express no view as to and our opinion does not address any
terms or other aspects or implications of the Transaction (other
than the Cash Consideration to the extent expressly specified
herein) or any aspects or implications of any other agreement,
arrangement or understanding to be entered into in connection
with, or otherwise contemplated by, the Transaction. 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 Transaction. We have not been
requested, and we did not, solicit third party indications of
interest in the possible acquisition of all or a part of the
Company, nor were we requested to consider, and our opinion does
not in any manner address and should not be construed to
address, the Companys underlying business decision to
effect the Transaction or the relative merits of the Transaction
or alternative business strategies that may be available to the
Company.
II-2
Our opinion expressed herein is provided to the Board of
Directors of the Company in connection with its evaluation of
the proposed Transaction, and our opinion is not intended to be
and does not constitute a recommendation to any stockholder as
to whether such stockholder should tender shares of Company
Common Stock in the Tender Offer or how such stockholder should
vote or act on any matters relating to the proposed Transaction.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion
that, as of the date hereof, the Cash Consideration to be
received in the Transaction by the holders of Company Common
Stock (other than Crane and Merger Sub and their respective
affiliates) is fair from a financial point of view, to such
holders.
Very truly yours,
/s/ Americas
Growth Capital, LLC
Americas Growth Capital, LLC
II-3