Item 1.01. Entry into a Material Definitive Agreement.
On November 12, 2020, Mikros Systems Corporation, a Delaware corporation (the
"Company"), entered into an Agreement and Plan of Merger (the "Merger
Agreement"), with McKean Defense Group, Inc., a Delaware corporation ("McKean
Defense"), and Gyro Merger Sub Inc., a Delaware corporation and wholly owned
subsidiary of McKean Defense ("Merger Sub"), pursuant to which, among other
things, Merger Sub will merge with and into the Company, with the Company
surviving as a wholly owned subsidiary of McKean Defense (the "Merger").
At the effective time of the Merger, each share of the Company's common stock
issued and outstanding immediately prior to the effective time (other than
(i) shares owned directly by McKean Defense, Merger Sub or any direct or
indirect wholly owned subsidiary of McKean Defense; and (ii) shares held by
stockholders who have not voted in favor of approval of the Merger and have
demanded and perfected, and not withdrawn or lost, their right to dissent from
the Merger and be paid the fair value of their shares of Company common stock
under Delaware law) will be automatically cancelled and converted into the right
to receive payment in cash of $0.13 per share (the per-share merger
consideration), less any applicable taxes required to be withheld. At the
effective time of the Merger, each then-outstanding restricted stock award,
shall have any restrictions lapse, whether or not vested, will be cancelled and
converted into the right to receive an amount in cash equal to the product of
(i) the total number of shares of Company common stock subject to the restricted
stock award and (ii) the per-share merger consideration (less any applicable
withholding taxes).
Consummation of the Merger is subject to customary conditions, including (i) the
approval by the holders of a majority of the issued and outstanding shares of
common stock of the Company (the "Requisite Stockholder Approval"); (ii) any
mandatory required consent or approval shall have been obtained; (iii) the
Company having Excess Cash (as defined in the Merger Agreement) at the time of
closing of at least $1.5 million; and (iv) the absence of any law or order
restraining, enjoining, rendering illegal or otherwise prohibiting the Merger.
The Merger Agreement contains a customary "no shop" provision that, in general,
restricts the Company's ability to solicit alternative acquisition proposals
from third parties and to provide non-public information to and engage in
discussions or negotiations with third parties regarding alternative acquisition
proposals. The "no shop" provision is subject to a customary "fiduciary out"
provision that allows the Company, under certain circumstances and in compliance
with certain obligations, to provide non-public information and engage in
discussions and negotiations with respect to an unsolicited alternative
acquisition proposal that constitutes or that would reasonably be expected to
lead to a Superior Company Proposal (as defined in the Merger Agreement).
The Merger Agreement contains certain customary termination rights for the
Company and McKean Defense. The Merger Agreement may be terminated by either
party if (i) the Merger is not consummated within six months, subject to a
three-month extension if required to remove an applicable injunction or
restraint ; (ii) the Merger becomes subject to a final, non-appealable law or
order restraining, enjoining, rendering illegal or otherwise prohibiting the
Merger; or (iii) the Requisite Shareholder Approval is not obtained following a
vote of stockholders taken thereon. Upon termination of the Merger Agreement
under specified circumstances, including with respect to the Company's entry
into an agreement with respect to a Superior Company Proposal, the Company will
be required to pay McKean Defense a termination fee of $175,000.
The representations, warranties, and covenants of the Company contained in the
Merger Agreement have been made solely for the benefit of McKean Defense and
Merger Sub. In addition, such representations, warranties and covenants (i) have
been made only for purposes of the Merger Agreement; (ii) have been qualified by
(a) matters specifically disclosed in the Company's filings with the Securities
and Exchange Commission (the "SEC") prior to the date of the Merger Agreement
and (b) disclosures made to McKean Defense and Merger Sub in the disclosure
letter delivered in connection with the Merger Agreement; (iii) are subject to
materiality qualifications contained in the Merger Agreement, which may differ
from what may be viewed as material by investors; (iv) were made only as of the
date of the Merger Agreement or, in the event the closing occurs, as of the date
of the closing, or such other date as is specified in the Merger Agreement; and
(v) have been included in the Merger Agreement for the purpose of allocating
risk between the contracting parties rather than establishing matters as fact.
Accordingly, the Merger Agreement is included with this filing only to provide
investors with information regarding the terms of the Merger Agreement, and not
to provide investors with any other factual information regarding the Company or
its business.
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Investors should not rely on the representations, warranties and covenants or
any descriptions thereof as characterizations of the actual state of facts or
condition of the Company. Moreover, information concerning the subject matter of
the representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in the
Company's public disclosures. The Merger Agreement should not be read alone, but
should instead be read in conjunction with the other information regarding the
Company that is or will be contained in, or incorporated by reference into, the
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and other documents that the Company files with the SEC.
In connection with the Merger Agreement, on November 12, 2020 Thomas J. Meaney,
the Chief Executive Officer and a director of the Company, entered into a
non-competition and non-solicitation agreement with McKean Defense, which, for a
period of (12) months from the consummation of the Merger, prohibits Mr. Meaney
from engaging in competitive business activity with McKean Defense and
soliciting or attempting to do business with any person who is, or was, during
the most recent twelve (12) month period, a customer, employee, officer, or
agent of McKean Defense or any of it subsidiaries.
In connection with the Merger Agreement, on November 12, 2020, the Company and
Mark J. Malone, the Chief Financial Officer and a director of the Company,
entered into a Settlement and Release Agreement (the "Malone Agreement")
acknowledging that payment to Mr. Malone required by that certain letter
agreement between the Company and Mr. Malone dated July 29, 2020 in the event of
a change of control of the Company or the termination of Mr. Malone's employment
other than for cause shall be in complete satisfaction of amounts due and owing
under such letter agreement.
. . .
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
In connection with the Merger Agreement, on November 12, 2020, the Company and
Walter T. Bristow, the Chief Operating Officer and President of the Company,
entered into an Employment Agreement (the "Bristow Employment Agreement") to
serve as President of the Company effective upon closing of the Merger. The
Bristow Employment Agreement is for a term of one (1) year and automatically
extends for additional successive one-year periods unless the Company or Mr.
Bristow provides at least sixty (60) days written notice of non-renewal prior to
the expiration of any term. The Bristow Employment provides for an annual base
salary of $225,000, an annual discretionary bonus, and a one time bonus of
$12,000 if Mr. Bristow remains continuously employed by the Company for six (6)
months.
The foregoing summary of the Bristow Employment Agreement and the transactions
contemplated thereby does not purport to be complete and is subject to, and
qualified in its entirety by reference to the full text of the Bristow
Employment Agreement which will be filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the three-month period ended September 30,
2020.
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Item 8.01. Other Events.
On November 12, 2020, the Company and McKean Defense issued a joint press
release announcing that they entered into the Merger Agreement. A copy of the
joint press release is filed as Exhibit 99.2 hereto and incorporated by
reference.
Important Additional Information
In connection with the proposed merger, the Company intends to file relevant
materials with the SEC, including a preliminary proxy statement on Schedule 14A.
Following the filing of the definitive proxy statement with the SEC, the Company
will mail or otherwise make available the definitive proxy statement and a proxy
card to each stockholder entitled to vote at the special meeting relating to the
proposed Merger. STOCKHOLDERS ARE URGED TO CAREFULLY READ THESE MATERIALS IN
THEIR ENTIRETY (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER
RELEVANT DOCUMENTS THAT THE COMPANY FILES WITH THE SEC WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
MERGER AND THE PARTIES TO THE PROPOSED MERGER. The proxy statement and other
relevant materials (when available), and any and all documents filed by the
Company with the SEC, may also be obtained for free at the SEC's website at
www.sec.gov. Security holders may also obtain free copies of the documents filed
by the Company with the SEC by contacting our Vice President of Finance,
Secretary and Treasurer at Mikros Systems Corporation, 707 Alexander Road, Suite
208, Princeton, New Jersey.
Participants in the Solicitation
This document does not constitute a solicitation of proxy, an offer to purchase
or a solicitation of an offer to sell any securities. The Company, its
directors, executive officers and certain employees may be deemed to be
participants in the solicitation of proxies from the stockholders of the Company
in connection with the proposed Merger. Information about the persons who may,
under the rules of the SEC, be considered to be participants in the solicitation
of the Company's stockholders in connection with the proposed Merger, and any
interest they have in the proposed Merger, which may, in some cases, differ from
those of the Company's stockholders generally, will be set forth in the
definitive proxy statement when it is filed with the SEC. Additional information
regarding these individuals is set forth in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2019, which was filed with the SEC
on March 30, 2020. To the extent the holdings of the Company's securities by the
directors and executive officers of the Company have changed since the amounts
set forth in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, such changes have been or will be reflected on Statements of
Change in Ownership on Form 4 filed with the SEC. These documents (when
available) may be obtained for free at the SEC's website at www.sec.gov, and via
the Company's Investor Relations section of its website at
https://www.mikrossystems.com/.
Cautionary Note Regarding Forward-Looking Statements
This document may include "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including, without limitation,
statements relating to the completion of the merger. Forward-looking statements
can usually be identified by the use of terminology such as "anticipate,"
"believe," "continue," "could," "estimate," "evolve," "expect," "forecast,"
"intend," "looking ahead," "may," "opinion," "plan," "possible," "potential,"
"project," "should," "will" and similar words or expression. These statements
are based on current expectations and assumptions that are subject to risks and
uncertainties. Actual results could differ materially from those anticipated as
a result of various factors, including: (1) risks related to the Company's
ability to complete the Merger on the proposed terms or on the proposed timeline
or at all, including risks related to the timely receipt of the Requisite
Stockholder Approval, (2) the possibility that other conditions to the
completion of the Merger may not be satisfied, (3) the possibility that
competing offers will be made, and (4) other risks associated with executing
business combination transactions, disruption from the proposed acquisition
making it more difficult to conduct business as usual or to maintain
relationships with customers, employees, manufacturers, or suppliers, as well as
other risks related to the Company's respective businesses. The foregoing
factors should be read in conjunction with the risks and cautionary statements
discussed or identified in the public filings with the SEC made by the Company,
including those listed under "Risk Factors" and "Disclosure Regarding
Forward-Looking Statements" in the Company's annual report on Form 10-K for the
year ended December 31, 2019, and its other filings with the SEC. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date on which such statements were made. Except as required
by applicable law, the Company undertakes no obligation to update
forward-looking statements to reflect events or circumstances arising after such
date.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
2.1* Agreement and Plan of Merger, dated as of November 12, 2020 by
and among Mikros Systems Corporation, Gyro Merger Sub Inc. and
McKean Defense Group, Inc.
99.1 Form of Affiliate Agreement by and between McKean Defense
Group, Inc. and the directors and officers of Mikros Systems
Corporation, dated November 12, 2020
99.2 Joint Press Release, dated November 12, 2020
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to the Merger
Agreement (identified therein) have been omitted from this Report and will be
furnished supplementally to the SEC upon request.
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