Attached files
file | filename |
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EX-2.1 - EX-2.1 - TOLLGRADE COMMUNICATIONS INC \PA\ | l41970aexv2w1.htm |
EX-99.1 - EX-99.1 - TOLLGRADE COMMUNICATIONS INC \PA\ | l41970aexv99w1.htm |
EX-10.2 - EX-10.2 - TOLLGRADE COMMUNICATIONS INC \PA\ | l41970aexv10w2.htm |
EX-10.1 - EX-10.1 - TOLLGRADE COMMUNICATIONS INC \PA\ | l41970aexv10w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 20, 2011
TOLLGRADE COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Charter)
Pennsylvania | 000-27312 | 25-1537134 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
3120 Unionville Road, Suite 400 | ||
Cranberry Township, Pennsylvania | 16066 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code: (724) 720-1400
493 Nixon Road, Cheswick, Pennsylvania, 15024
(Former Name or Former Address, if Changed Since Last Report)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
þ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Table of Contents
Section 1 Registrants Business and Operations
Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On February 21, 2011, Tollgrade Communications, Inc., a Pennsylvania corporation (the
Company), entered into an Agreement and Plan of Merger (the Merger Agreement) with Talon
Holdings, Inc., a Delaware corporation (Parent), and Talon Merger Sub, Inc., a Pennsylvania
corporation and a direct wholly-owned subsidiary of Parent (Merger Sub), providing for the merger
of Merger Sub with and into the Company (the Merger), with the Company surviving the Merger as a
wholly-owned subsidiary of Parent. Parent is owned by investment funds managed by Golden Gate
Capital, a San Francisco based private equity firm (the Sponsor). The Merger Agreement was
unanimously approved by the Companys Board of Directors.
At the effective time of the Merger, each share of Company common stock issued and outstanding
immediately prior to the effective time (other than shares (i) owned by Parent or Merger Sub
immediately prior to the effective time of the Merger, (ii) held in the treasury of the Company, or
(iii) held by a wholly-owned subsidiary of the Company) will be automatically cancelled and
converted into the right to receive $10.10 in cash (the Merger Consideration), without interest.
Any shares of Company common stock held by Parent or Merger Sub or held in the treasury of the
Company immediately prior to the effective time of the Merger will be cancelled and will cease to
exist without conversion and without any payment or distribution being made with respect to such
shares. Any shares of Company common stock owned by a wholly-owned subsidiary of the Company
immediately prior to the effective time of the Merger will be converted into a number of shares of
the common stock of the surviving corporation (without any payment, distribution or consideration
in respect thereof) such that such subsidiary would own the same percentage of capital stock of the
surviving corporation immediately following the effective time of the Merger as it owned in the
Company common stock immediately prior to the effective time of the Merger.
Consummation of the Merger is subject to customary conditions, including without limitation
(i) the approval by the holders of at least a majority of the votes cast by the outstanding shares
of the Companys common stock entitled to vote on the Merger, (ii) the expiration or early
termination of the waiting period applicable to the consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (iii) the absence of any law
restraining, enjoining or prohibiting the Merger. Moreover, each partys obligation to consummate
the Merger is subject to certain other conditions, including without limitation (x) the accuracy of
the other partys representations and warranties and (y) the other partys compliance with its
covenants and agreements contained in the Merger Agreement.
Parent has obtained an equity financing commitment for the transaction contemplated by the
Merger Agreement, the proceeds of which, together with approximately $62,000,000 of the Companys
available cash and cash equivalents, will be used to pay the aggregate Merger Consideration.
Pursuant to its equity commitment, an investment fund (the Guarantor) managed by the Sponsor has
committed to capitalize Parent at or prior to the Closing, with an aggregate equity contribution in
an amount equal to $74,400,000, on the terms and subject to the conditions set forth in an equity
commitment letter dated February 21, 2011.
Beginning on the date of the Merger Agreement, the Company will be subject to customary
no-shop restrictions on its ability to solicit alternative acquisition proposals from third
parties and to provide information to and participate in discussions and engage in negotiations
with third parties regarding alternative acquisition proposals. However, prior to approval of the
Merger by the Companys shareholders, the no-shop provision is subject to a customary
fiduciary-out provision which allows the Company, under certain circumstances, to provide
information to and participate in discussions and engage in negotiations with third parties with
respect to an alternative acquisition proposal that the Board of Directors has determined is
reasonably likely to result in a Superior Proposal (as defined in the Merger Agreement).
The Merger Agreement contains certain termination rights for the Company and Parent. Upon
termination of the Merger Agreement under specified circumstances, the Company will be required to
pay Parent a termination fee in the amount of $3 million plus Expenses (as defined in the Merger
Agreement) not to exceed $1 million. The Merger Agreement also provides that Parent will be
required to pay the Company a termination fee of $4 million under certain circumstances specified
in the Merger Agreement. The Guarantor has provided the Company with a guarantee in favor of the
Company guaranteeing the payment of such $4 million
termination fee and certain other monetary obligations that may be owed by Parent and/ or
Merger Sub pursuant to the Merger Agreement.
Table of Contents
The representations, warranties and covenants of the Company contained in the Merger Agreement
have been made solely for the benefit of Parent and Merger Sub. In addition, such representations
and warranties (a) have been made only for purposes of the Merger Agreement, (b) have been
qualified by (i) matters specifically disclosed in any reports filed by the Company with the
Securities and Exchange Commission (SEC) from December 31, 2009 to the date of the Merger
Agreement and (ii) confidential disclosures made to Parent and Merger Sub in the disclosure
schedule delivered in connection with the Merger Agreement, (c) are subject to knowledge and
materiality qualifications contained in the Merger Agreement which may differ from what may be
viewed as material by investors, (d) were made only as of the date of the Merger Agreement or such
other date as is specified in the Merger Agreement and (e) 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.
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 or any of its
subsidiaries or affiliates. 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 Companys 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 Forms 10-K, Forms 10-Q and other documents that the Company files with the SEC.
The foregoing description of the Merger Agreement and the transactions contemplated thereby
does not purport to be complete and is subject to, and qualified in its entirety by, the full text
of the Merger Agreement attached hereto as Exhibit 2.1, which is incorporated herein by reference.
Cautionary Statement Regarding Forward-Looking Statements
This filing contains forward-looking statements. Statements that are not historical facts,
including statements about beliefs or expectations, are forward-looking statements. These
statements are based on plans, estimates and projections at the time the Company makes the
statements and readers should not place undue reliance on them. In some cases, readers can identify
forward-looking statements by the use of forward-looking terms such as may, will, should,
expect, intend, plan, anticipate, believe, estimate, predict, potential, or
continue or the negative of these terms or other comparable terms. Forward-looking statements
involve inherent risks and uncertainties and the Company cautions readers that a number of
important factors could cause actual results to differ materially from those contained in any such
forward-looking statement. Factors that could cause actual results to differ materially from those
described in this filing include, among others: uncertainties as to the timing of the acquisition;
the possibility that competing offers will be made; the possibility that various closing conditions
for the acquisition may not be satisfied or waived, including that a governmental entity may
prohibit or refuse to grant approval for the consummation of the acquisition; general economic and
business conditions; and other factors. Readers are cautioned not to place undue reliance on the
forward-looking statements included in this filing, which speak only as of the date hereof. The
Company does not undertake to update any of these statements in light of new information or future
events.
Additional Information and Where to Find It
In connection with the proposed merger, the Company will prepare a proxy statement to be filed
with the SEC. When completed, a definitive proxy statement and a form of proxy will be mailed to
the shareholders of the Company. THE COMPANYS SECURITY HOLDERS ARE URGED TO READ THE PROXY
STATEMENT REGARDING THE PROPOSED MERGER BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. The
Companys shareholders will be able to obtain, without charge, a copy of the proxy statement (when
available) and other relevant documents filed with the SEC from the SECs website at
http://www.sec.gov. The Companys shareholders will also be able to obtain, without charge, a copy
of the proxy statement and other relevant documents (when available) by directing a request by mail
or telephone to Tollgrade Communications, Inc. Attn: Corporate Secretary, 3120 Unionville Road,
Suite 400, Cranberry Township, PA 16066, telephone: (724) 720-1400, or from the Companys website,
http://www.tollgrade.com.
The Company and its directors and officers may be deemed to be participants in the
solicitation of proxies from the Companys shareholders with respect to the proposed Merger.
Information about the Companys directors and executive officers and their ownership of the
Companys common stock is set forth in the proxy statement for the Companys 2010 Annual Meeting of
Shareholders, which was filed with the SEC on April 9, 2010, and in the proxy statement relating to
the proposed Merger when it
becomes available. Shareholders may obtain additional information regarding the interests of
the Company and its directors and executive officers in the proposed merger, which may be different
than those of the Companys shareholders generally, by reading the proxy statement and other
relevant documents regarding the proposed merger, when filed with the SEC.
Table of Contents
Section 5 Corporate Governance and Management
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers.
Amendment of Certain Pre-Existing Change in Control Obligations
On February 20, 2011, the Company entered into an amendment to its agreement with Michael D.
Bornak, the chief financial officer of the Company. The amendment eliminated the provision of the
agreement requiring payments due under the agreement to be reduced to the maximum amount that could
be paid to Mr. Bornak without incurring an excise tax on excess parachute payments, and added in
its place a tax gross-up provision. Under the added provision, if payments made under the
agreement or otherwise, including any payments, benefits, distributions and deemed amounts received
under any other agreement or resulting from the acceleration of the vesting of any stock options or
other equity-based incentive awards, were subject to the excise tax on excess parachute payments,
an additional payment would be made to restore the after-tax payments to the same amount that Mr.
Bornak would have retained if the excise tax had not been imposed. It is estimated that the tax
gross-up amount payable to Mr. Bornak, assuming a termination of employment giving rise to payments
under the agreement and otherwise immediately following the Merger, would be approximately
$292,000.
On the same date, the Company also entered into an amendment to its agreement with Edward H.
Kennedy, the chief executive officer of the Company, which agreement already included a tax
gross-up provision, for the purpose of clarifying the existing application of the tax gross-up
provision in the agreement with respect to equity based awards. It is estimated that the tax
gross-up amount payable to Mr. Kennedy, assuming a termination of employment giving rise to
payments under the agreement and otherwise immediately following the Merger, would be approximately
$1,110,000.
The foregoing description of the amendments to the agreements is qualified in its entirety by
reference to the actual amendments filed herewith as Exhibits 10.1 and 10.2, which are incorporated
herein by reference.
Section 8 Other Events
Item 8.01 Other Events.
On February 22, 2011, the Company issued a press release, which is attached hereto as Exhibit
99.1 and incorporated herein by reference.
Table of Contents
Section 9 Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The
following exhibits are filed herewith:
Table of Contents
Exhibit | Description | |
2.1
|
Agreement and Plan of Merger, dated as of February 21, 2011, by and among Talon Merger Sub, Inc., a Pennsylvania corporation, Talon Holdings, Inc., a Delaware corporation, and Tollgrade Communications, Inc., a Pennsylvania corporation. | |
10.1
|
Second Amendment to Agreement, dated as of February 20, 2011, by and between Tollgrade Communications, Inc., a Pennsylvania corporation, and Michael D. Bornak. | |
10.2
|
First Amendment to Agreement, dated as of February 20, 2011, by and between Tollgrade Communications, Inc., a Pennsylvania corporation, and Edward H. Kennedy. | |
99.1
|
Press Release, dated February 22, 2011. |
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Tollgrade Communications, Inc. | ||||
Date: February 25, 2011
|
By: | /s/ Jennifer M. Reinke | ||
Name: | Jennifer M. Reinke | |||
Title: | General Counsel and Secretary |
Table of Contents
INDEX OF EXHIBITS
Exhibit | Description | |
2.1
|
Agreement and Plan of Merger, dated as of February 21, 2011, by and among Talon Merger Sub, Inc., a Pennsylvania corporation, Talon Holdings, Inc., a Delaware corporation, and Tollgrade Communications, Inc., a Pennsylvania corporation. | |
10.1
|
Second Amendment to Agreement, dated as of February 20, 2011, by and between Tollgrade Communications, Inc., a Pennsylvania corporation, and Michael D. Bornak. | |
10.2
|
First Amendment to Agreement, dated as of February 20, 2011, by and between Tollgrade Communications, Inc., a Pennsylvania corporation, and Edward H. Kennedy. | |
99.1
|
Press Release, dated February 22, 2011. |