ACQUISITION OF ARA AGREEMENT FORMALISED AND SIGNED

Transcription

1 Alaris Holdings Limited (formerly Poynting Holdings Limited) Incorporated in the Republic of South Africa (Registration number 1997/011142/06) code: ALH ISIN: ZAE ( Alaris or the Company ) ACQUISITION OF ARA AGREEMENT FORMALISED AND SIGNED 1. INTRODUCTION 1.1. holders are referred to the announcements on SENS by Alaris on 19 February 2015 and 1 April 2015 ( Previous Announcements ) in which it was advised that Alaris had entered into binding heads of agreement with the existing shareholders of Antenna Research Associates Inc ( ARA ) ( Vendors ) setting out the principal terms and conditions of the proposed acquisition of 100% of the issued share capital of ARA ( Acquisition ) holders are advised that Alaris and ARA have subsequently entered into a formal agreement and plan of merger in respect of the implementation of the Acquisition on 27 June 2015 ( Merger Agreement ) Alaris and ARA have agreed to structure the Acquisition as a series of mergers to qualify as a reorganisation under the provisions of section 368(a) of the United States of America ( USA or US ) Internal Revenue Code (referred to herein as the Merger ). The transaction is structured in this manner for the purpose of obtaining optimal tax efficiency in terms of US tax legislation Accordingly, for purposes of the Merger, Alaris has incorporated two companies in the USA which are wholly-owned subsidiaries of Alaris, namely Merger Sub and Merger Sub II (which will be the surviving entity, known as Alaris ARA ). In terms of the Merger, Merger Sub will be merged with and into ARA in a US statutory reverse triangular merger (the First Merger ), with ARA surviving the First Merger as the surviving entity, whereafter as part of a single overall transaction with the First Merger pursuant to an integrated plan, ARA will be merged with and into Merger Sub II in a US statutory forward triangular merger (the Merger ), with Merger Sub II surviving the Merger. The Merger will be implemented as soon as possible after the implementation of the First Merger, to allow for sufficient time for Merger Sub II to obtain a facility clearance certificate ( FCL ) issued by the US Defense Security Service ( DSS ) The result of the successful implementation of the Merger will be that Alaris will have a wholly-owned subsidiary incorporated in the USA, namely Alaris ARA The effective date of the Merger is anticipated to be 31 August The principal terms and conditions of the Merger contained in the Merger Agreement are as set out below. 2. THE MERGER 2.1. Nature of ARA and rationale for the Merger holders are referred to the Previous Announcements, which set out the nature of the Alaris Defence & Specialised Division as well as the nature of the business of ARA and the rationale for the Merger in detail, as this remains unchanged.

2 2.2. Purchase The total consideration payable by Alaris to the Vendors in respect of the Merger ( Merger ) is comprised of: USD in cash less any adjustment in terms of the Merger Agreement ( Initial Cash ), payable upon the date on which the First Merger is implemented, which date shall be within three business days of the fulfilment or waiver of the conditions precedent to the Merger ( Merger Closing Date ) to all Vendors pro-rata to their shareholding in ARA, with the exception of ARA s chief executive officer, Logen Thiran, who shall not share in the Initial Cash and instead will only receive ordinary shares in Alaris ( Alaris s ); Alaris s to be issued on the Merger Closing Date to the Vendors in the proportions set out in the Merger Agreement ( Initial which, together with the Initial Cash, constitutes the Initial ); an additional Alaris s ( ) and an additional cash consideration of USD ( Cash ) (which together are referred to as the ) payable should the audited IFRS Recurring Headline Profit before taxation (as defined in the Merger Agreement) for the 12 month period ending 30 June 2016 ( First Measurement Period ) be USD ( First Profit Target ); and a further additional Alaris s ( Additional ) and a further additional cash consideration of USD ( Additional Cash ) (which together are referred to as the Additional ) payable should the audited IFRS Recurring Headline Profit before taxation (as defined in the Merger Agreement) for the 12 month period ending 30 June 2017 ( Measurement Period ) be USD ( Profit Target ), (the and the Additional are collectively referred to as the Additional ) On the Merger Closing Date, the Initial shall be adjusted based on the foreign currency rate and Alaris price at the time to ensure that the total possible cash component of the Merger does not exceed 59% of the total Merger. Alaris could be required to issue up to s in aggregate on the Merger Closing Date with the Initial Cash decreasing accordingly If the adjustment to the Initial contemplated above would result in the issuance of more than Alaris s, then Alaris may elect, in its sole discretion, to issue such Alaris s as contemplated above. If Alaris does not so elect, and the Merger Agreement is not terminated pursuant to its terms, then Alaris shall issue Alaris s, and reallocate the value of any excess Alaris s that would have been issued to the Initial Cash The shall be adjusted based on the actual audited IFRS Recurring Headline Profit before taxation (as defined in the Merger Agreement) reported in the First Measurement Period, in the following manner: if 100% or more of the First Profit Target is achieved in the First Measurement Period, 100% of the shall be payable; if less than 80% of the First Profit Target is achieved in the First Measurement Period,

3 no shall be payable; if between 80% and 100% of the First Profit Target is achieved in the First Measurement Period, payment of the will be linearly scaled (between 50% and 100% of the ) For illustrative purposes only, the following table sets out the relevant that would be payable based on achievement of the IFRS Recurring Headline Profit before taxation (as defined in the Merger Agreement) set out in the first row of the table below: Actual IFRS Recurring Headline Profit before taxation (USD) First Profit Target Percentage Achieved 70% 80% 90% 100% 110% Percentage of paid 0% 50% 75% 100% 100% Cash (USD) (in cash) * (USD) (in s) * To the extent that Alaris elects to pay the in cash, this will represent the maximum cash amount The Additional shall be adjusted based on the actual audited IFRS Recurring Headline Profit before taxation (as defined in the Merger Agreement) reported in the Measurement Period, in the following manner: if 100% or more of the Profit Target is achieved in the Measurement Period, 100% of the Additional shall be payable; if less than 80% of the Profit Target is achieved in the Measurement Period, no Additional shall be payable; if between 80% and 100% of the Profit Target is achieved in the Measurement Period, payment of the Additional will be linearly scaled (between 50% and 100% of the Additional ) For illustrative purposes only, the following table sets out the relevant Additional that would be payable based on achievement of the IFRS Recurring Headline Profit before taxation (as defined in the Merger Agreement) set out in the first row of the table below:

4 Actual IFRS Recurring Headline Profit before taxation (USD) Profit Target Percentage 70% 80% 90% 100% 110% Percentage of Additional paid 0% 50% 75% 100% 100% Additional Cash (USD) Additional (in cash) (USD) * Additional (in s) * To the extent that Alaris elects to pay the Additional in cash, this will represent the maximum cash amount The First Profit Target and the Profit Target are not cumulative and will be calculated separately each year Alaris may elect, in its sole discretion, to pay all or part of the (i) and/or the Additional in cash at a fixed price of USD per Alaris (irrespective of currency or Alaris price fluctuations). To preserve continuity of interest as required by the US Treasury Regulation section (e), however, in no event shall the amount of cash payable as Cash, Additional Cash or in lieu of the or the Additional exceed an amount that would cause the overall cash component of the Merger to exceed 59% of the aggregate Merger. To the extent that the amount of cash payable exceeds an amount that would cause the overall cash component of the Merger to exceed 59% of the aggregate Merger, then Alaris shall waive all or part of its right to pay all or part of the First Additional and/or the Additional in cash and shall be obligated to issue Alaris s at an issue price of USD per Alaris in order to ensure that the aggregate cash component of the Merger is a maximum of 59%. Under no circumstance shall Alaris be required to issue, in aggregate, more than Alaris s as part of the Merger Conditions precedent to the Merger and effective date The obligations of Alaris, Merger Sub and Merger Sub II to consummate the transactions

5 contemplated in the Merger Agreement are subject to the satisfaction, on or prior to the Merger Closing Date, of each of the following conditions (any or all of which may be waived in writing by Alaris in whole or in part to the extent permitted by applicable law): the representations and warranties of ARA and the Vendors contained in the Merger Agreement shall be true and correct in all respects; the Fundamental Representations (as defined in the Merger Agreement) shall be true and correct in all respects; ARA and the Vendors shall have performed and complied with, in all material respects, all covenants and agreements contained in the Merger Agreement; ARA shall have delivered to Alaris a certificate executed by the chief executive officer of ARA, dated on the Merger Closing Date, to the effect that each of the conditions specified have been satisfied in all respects; ARA shall have caused to be delivered to Alaris, certificates representing all of the issued and outstanding shares of ARA; there shall not have been any Material Adverse Effect (as defined in the Merger Agreement) since the date of the Merger Agreement; there shall not be in effect any order by a governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated in the Merger Agreement, and there shall not be pending or threatened any legal proceeding seeking to restrain or prohibit or with the probable or reasonably likely effect of restraining or prohibiting the consummation of the Merger or seeking material damages on account thereof; Alaris shall have obtained or received all approvals necessary from the shareholders with respect to the consummation of the transactions contemplated in the Merger Agreement; Alaris, Merger Sub, Merger Sub II and ARA shall have executed a commitment letter, in a form and substance acceptable to Alaris (in its reasonable discretion) and the DSS, regarding a plan to operate ARA pursuant to a foreign ownership, control or influence ( FOCI ) mitigation agreement, and shall have provided the DSS with (i) a draft of such mitigation agreement in a form and substance acceptable to Alaris (in its reasonable discretion) and the DSS, and (ii) written Interim Security Measures (as defined in the Merger Agreement), in a form and substance acceptable to Alaris (in its reasonable discretion) and the DSS, to be established and implemented on the Merger Closing Date through the date that the DSS executes the planned FOCI mitigation agreement (the FOCI Condition ); the Committee for Foreign Investment in the United States ( CFIUS ) shall have notified Alaris and ARA in writing that (a) the transactions contemplated by the Merger Agreement do not constitute a covered transaction pursuant to section of Title 31 of the Code of Federal Regulations of the United States ( CFR ), (b) review or investigation of the transactions contemplated by the Merger Agreement has been concluded under the Exon-Florio Provision of the Defense Production Act of 1950, 50 U.S.C. app. 2170, as amended ( Exon-Florio ) and that a determination has been made that there are no unresolved national security concerns, or (c) following an investigation conducted by CFIUS pursuant to section of Title 31 of the CFR and a subsequent report of the transaction to the President of the United States by CFIUS, a decision by the President of the United States not to suspend or prohibit such transaction pursuant to his authorities under Exon-Florio (the CFIUS Condition );

6 any applicable prior notice period under the International Traffic in Arms Regulations (ITAR) relating to the transactions contemplated in the Merger Agreement shall have expired or otherwise been waived by the US Department of State s Directorate of Defense Trade Controls ( DDTC ); ARA shall have obtained all consents, waivers and approvals referred to in the Merger Agreement; ARA shall have terminated all agreements between ARA and related parties; each of the Key Employees (as defined in the Merger Agreement) shall have entered into employment agreements with terms acceptable to Alaris and such Key Employee; Merger Sub II and Pradeep Wahi (being a Vendors) shall have entered into a loan agreement pursuant to which, at Alaris election, Pradeep Wahi or his designee shall make available a working capital loan to Merger Sub II in the amount of up to $1.2 million at a simple interest rate of 10% per annum; ARA shall have delivered, or caused to be delivered, to Alaris a certificate of good standing as of a recent date with respect to ARA by the Secretary of State of the State of Texas and the Maryland State Department of Assessments and Taxation; ARA shall have delivered, or caused to be delivered, to Alaris a certificate from the company secretary of ARA certifying (i) the organisational documents of ARA, and (ii) resolutions of the board of directors of ARA and the Vendors authorising the execution, delivery and performance of the Merger Agreement and the other agreements, instruments and certificates to be delivered by ARA pursuant to the Merger Agreement; Alaris shall have received satisfactory evidence that all personal guarantees have been released (other than any personal guarantee of Pradeep Wahi, which, in Alaris discretion, may stay in effect for one year following the Merger Closing Date); Alaris shall have received a non-foreign affidavit from each Vendor dated as of the Merger Closing Date, sworn under penalty of perjury and in form and substance required under the Treasury Regulations issued pursuant to section 1445 of the USA Internal Revenue Code stating that such Vendor is not a Foreign Person as defined in section 1445 of the USA Internal Revenue Code; the irrevocable written consents to the implementation of the Merger given by the Vendors shall be in full force and effect and shall be valid and effective; and the representations and warranties contained in each of the Vendors accredited investor declaration certificates delivered pursuant to the Merger Agreement shall be true and correct The obligations of ARA to consummate the transactions contemplated by the Merger Agreement are subject to the fulfilment, prior to or on the Merger Closing Date, of each of the following conditions (any or all of which may be waived in writing by ARA in whole or in part to the extent permitted by applicable law): the representations and warranties of Alaris contained in the Merger Agreement shall be true and correct in all material respects as of the Merger Closing Date as though made at and as of the Merger Closing Date; Alaris shall have performed and complied in all material respects with all covenants and agreements contained in the Merger Agreement that are required to be performed or complied with by it on or before the Merger Closing Date;

7 Alaris shall not have had any Material Adverse Effect since the date on which the Merger Agreement was signed; the FOCI Condition has been fulfilled; the CFIUS Condition has been fulfilled; the DSS has communicated, orally or in writing, that it expects to issue the facility security clearance to Merger Sub II on or prior to 31 December 2015; any applicable prior notice period under ITAR relating to the Merger shall have expired or otherwise been waived by the DDTC; ARA shall have received satisfactory evidence that all personal guarantees given by the Vendors have been released (other than any personal guarantee of Pradeep Wahi and Anuradha Wahi (being two of the Vendors)); Pradeep Wahi shall have been appointed as a member of the Board; and Alaris shall have delivered to ARA a certificate executed by an officer of Alaris, dated as of the Merger Closing Date, as to the matters set out in paragraphs , and above Principal terms The parties to the Merger Agreement have provided representations, warranties and indemnities to each other that are customary for a transaction similar to the Merger. 3. UNDERLYING FINANCIAL INFORMATION OF ARA As at 30 April 2014 (last audited financial statements) the value of total assets of ARA was USD 9.6 million and the value of net assets was USD 1.9 million. ARA reported a loss before tax of $ for the year ended 30 April CLASSIFICATION OF THE MERGER AND CIRCULAR TO SHAREHOLDERS As set out in the Previous Announcements, the Merger is classified as a Category 1 transaction in terms of the JSE Listings Requirements and requires shareholder approval. Accordingly, a circular containing full details of the Merger and a notice to shareholders in terms of section 60 of the Companies Act (Act 71 of 2008), as amended, submitting the resolutions necessary to approve and implement, inter alia, the Merger for shareholders to consider and if deemed fit, to pass with or without modification, in writing, shall be distributed in due course. Johannesburg 30 June 2015 Transaction adviser PSG Capital Proprietary Limited Designated Adviser Merchantec Capital