Item
1.01
Entry
into a Material Definitive Agreement.
On
February 20, 2008, SYS (the “Company”) entered into an Agreement and Plan of
Merger and Reorganization (the “Agreement”) with Kratos Defense & Security
Solutions, Inc. (“Kratos”) and its wholly-owned subsidiary, White Shadow, Inc.
(“Merger Sub”), pursuant to which White Shadow will be merged with and into the
Company (the “Merger”). The Company will be the surviving entity and
a wholly owned subsidiary of Kratos. Effective at the time of Merger,
each outstanding share of the Company’s common stock will be converted into
1.2582 shares of Kratos common stock.
At the
effective time of the Merger, each outstanding option to purchase common stock
of the Company will be cancelled. Warrants to purchase common stock
of the Company will continue to be in effect pursuant to their terms following
the Merger.
Consummation
of the Merger is subject to several closing conditions, including:
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approval
of the Merger by the shareholders of the
Company;
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approval
of the issuance of shares of Kratos common stock in the Merger by the
stockholders of Kratos; and
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the
effectiveness of a Form S-4 registration statement to be filed by
Kratos.
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The
Merger Agreement contains certain termination rights, including a termination
fee of $2,394,000 to be paid by the Company to Kratos upon termination of the
Merger Agreement in certain circumstances
The
foregoing description of the Merger Agreement is qualified in its entirety by
reference to the full text of the Merger Agreement, a copy of which is attached
hereto as Exhibit 10.1 and is incorporated herein by reference.
In
connection with the Merger Agreement, on February 20, 2008, certain executive
officers and directors of the Company entered into Voting Agreements with Kratos
(the “SYS Voting Agreements”) pursuant to which such officers and directors have
undertaken to vote their shares of common stock of the Company in favor of the
Merger and against any other proposal or offer to acquire the Company unless the
Merger Agreement has been terminated. The SYS Voting Agreements apply
to all shares of the Company’s common stock held by the signatories at the
record date for the relevant Company stockholder meeting. The SYS
Voting Agreements restrict the transfer of shares by the signatories, except
under certain limited conditions.
Additionally,
on February 20, 2008 certain executive officers and directors of Kratos entered
into Voting Agreements with the Company (the “Kratos Voting Agreements”),
pursuant to which such officers and directors have undertaken to vote their
shares of common stock of Kratos in favor of the issuance of additional shares
of common stock of Kratos in connection with the Merger, unless the Merger
Agreement has been terminated. The Kratos Voting Agreements apply to
all shares of Kratos common stock held by the signatories at the record date for
the relevant Kratos stockholder meeting. The Kratos Voting Agreements restrict
the transfer of shares by the signatories, except under certain limited
conditions.
A copy of
the form of SYS Voting Agreement and form of Kratos Voting Agreement is attached
hereto as Exhibit 10.2 and 10.3, respectively, and is incorporated herein by
reference. The foregoing description of the SYS Voting Agreements and
Kratos Voting Agreements is qualified in its entirety by reference to the full
text of such agreements.
The
Merger Agreement, form of SYS Voting Agreement and form of Kratos Voting
Agreement have been included to provide security holders with information
regarding their terms. They are not intended to provide any other
factual information about Kratos, Merger Sub or the Company. The
Merger Agreement contains representations and warranties that Kratos and the
Company have made for the benefit of each other. The assertions
embodied in those representations and warranties are qualified by information in
confidential disclosure schedules that the parties have exchanged with each
other in connection with the signing of the Merger
Agreement. Accordingly, investors and security holders should not
rely on the representations and warranties as characterizations of the actual
state of facts, since they were only made as of the date of the Merger Agreement
and are modified in important part by the underlying disclosure
schedule.
You are
encouraged to read the Merger Agreement, the form of SYS Voting Agreement and
the form of Kratos Voting Agreement for a more complete understanding of the
transaction. The foregoing descriptions of the Merger Agreement, the form of SYS
Voting Agreement and the form of Kratos Voting Agreement are qualified in their
entirety by reference to the full text of the Merger Agreement, the form of SYS
Voting Agreement and the form of Kratos Voting Agreement.