Agreement and Plan of Reorganization - Titan Corp. and William C. Lindsey Inc. d/b/a Lincom Corp.
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
THE TITAN CORPORATION,
M T ACQUISITION CORP.,
WILLIAM C. LINDSEY, INC.
(D/B/A LINCOM CORPORATION)
AND
THE PRINCIPAL SHAREHOLDER OF WILLIAM C. LINDSEY, INC.
DATED AS OF JANUARY 28, 2000
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TABLE OF CONTENTS
ARTICLES
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PAGE
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ARTICLE I THE MERGER......................................................................1
SECTION 1.01 The Merger.............................................................1
SECTION 1.02 Effective Time; Closing Date...........................................2
SECTION 1.03 Effect of the Merger...................................................2
SECTION 1.04 Articles of Incorporation; Bylaws......................................2
SECTION 1.05 Directors and Officers.................................................2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.............................3
SECTION 2.01 The Merger.............................................................3
SECTION 2.02 Conversion of Company Common Stock.....................................3
SECTION 2.03 Acquiror to Deliver Cash...............................................5
SECTION 2.04 [Intentionally Omitted]................................................5
SECTION 2.05 Holdback Consideration; Determination of Closing Adjustment............5
SECTION 2.06 Conversion of Acquiror Sub Shares......................................7
SECTION 2.07 Closing................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY.....................................8
SECTION 3.01 Organization and Qualification.........................................8
SECTION 3.02 Subsidiaries...........................................................8
SECTION 3.03 Articles of Incorporation and Bylaws...................................9
SECTION 3.04 Capitalization.........................................................9
SECTION 3.05 Authority; Binding Obligation..........................................9
SECTION 3.06 No Conflict; Required Filings and Consents.............................10
SECTION 3.07 Intellectual Property..................................................11
SECTION 3.08 Financial Statements and Condition.....................................12
SECTION 3.09 Absence of Certain Developments........................................13
SECTION 3.10 Absence of Undisclosed Liabilities.....................................14
SECTION 3.11 Litigation; Disputes...................................................15
SECTION 3.12 Real Property Leases...................................................15
SECTION 3.13 Other Agreements; No Default...........................................16
SECTION 3.14 Labor Relations........................................................16
SECTION 3.15 Pension and Benefit Plans..............................................17
SECTION 3.16 Taxes and Tax Matters..................................................18
SECTION 3.17 Insurance..............................................................20
SECTION 3.18 Arrangements With Related Parties......................................20
SECTION 3.19 Books and Records......................................................20
SECTION 3.20 Assets.................................................................20
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SECTION 3.21 Board Recommendation...................................................21
SECTION 3.22 Directors and Officers.................................................21
SECTION 3.23 State Takeover Statutes; Certain Charter Provisions....................21
SECTION 3.24 Environmental Matters..................................................21
SECTION 3.25 Y2K Compliance.........................................................22
SECTION 3.26 Government Contracts and Other Commitments.............................22
SECTION 3.27 Relations with Governments.............................................24
SECTION 3.28 Broker's Fees..........................................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB....................24
SECTION 4.01 Organization and Qualification.........................................25
SECTION 4.02 Reliance on Financial Information......................................25
SECTION 4.03 Authority; Binding Obligation..........................................25
SECTION 4.04 No Conflict; Required Filings and Consents.............................25
SECTION 4.05 No Prior Activities of Acquiror Sub....................................26
ARTICLE V PRE-CLOSING COVENANTS...........................................................27
SECTION 5.01 Conduct of Business of Company Until Effective Time....................27
SECTION 5.02 Best Efforts to Satisfy Conditions.....................................29
SECTION 5.03 Other Actions..........................................................29
SECTION 5.04 Certain Tax Matters....................................................29
SECTION 5.05 Access and Information.................................................30
SECTION 5.06 Notification Filing Required under HSR Act.............................30
SECTION 5.07 Access to Company and Company Subsidiary Information...................30
SECTION 5.08 Exon-Florio Notice; Mitigation of FOCI.................................30
ARTICLE VI ADDITIONAL AGREEMENTS..........................................................31
SECTION 6.01 Shareholder Approval...................................................31
SECTION 6.02 Appropriate Action; Consents; Filings..................................31
SECTION 6.03 Disclosure.............................................................33
SECTION 6.04 Public Announcements...................................................33
SECTION 6.05 Obligations of Acquiror Sub............................................33
SECTION 6.06 Transaction Expenses...................................................33
SECTION 6.07 Key Employees..........................................................34
ARTICLE VII CONDITIONS PRECEDENT..........................................................34
SECTION 7.01 Conditions to Obligations of Each Party Under This Reorganization
Agreement........................................................34
SECTION 7.02 Additional Conditions to Obligations of Acquiror and Acquiror Sub......35
SECTION 7.03 Additional Conditions to Obligations of Company........................36
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................................37
SECTION 8.01 Termination............................................................37
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SECTION 8.02 Effect of Termination..................................................38
SECTION 8.03 [Intentionally Omitted]................................................38
SECTION 8.04 Amendment..............................................................38
SECTION 8.05 Extension; Waiver......................................................38
ARTICLE IX SURVIVAL OF REPRESENTATIONS; REMEDIES..........................................38
SECTION 9.01 Survival of Representations............................................38
SECTION 9.02 Indemnification by Principal Shareholder; Right to Offset..............39
SECTION 9.03 Third Party Claims.....................................................41
SECTION 9.04 No Recourse Against the Company........................................42
SECTION 9.05 Remedies Cumulative....................................................42
ARTICLE X GENERAL PROVISIONS..............................................................43
SECTION 10.01 Notices...............................................................43
SECTION 10.02 Headings..............................................................44
SECTION 10.03 Severability..........................................................44
SECTION 10.04 Entire Agreement......................................................44
SECTION 10.05 Assignment............................................................44
SECTION 10.06 Parties in Interest...................................................45
SECTION 10.07 Mutual Drafting.......................................................45
SECTION 10.08 Governing Law.........................................................45
SECTION 10.09 Counterparts..........................................................45
SECTION 10.10 Singular and Plural...................................................45
ARTICLE XI DEFINITIONS....................................................................46
EXHIBITS
EXHIBIT A [Intentionally Omitted]
EXHIBIT B Shareholders of Company
EXHIBIT C Form of Indemnification Promissory Note
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION, dated as of January 28, 2000
(this "Reorganization Agreement"), is entered into by and among The Titan
Corporation, a corporation organized under the laws of the State of Delaware
("Acquiror"), M T Acquisition Corp., a corporation organized under the laws of
the State of California ("Acquiror Sub"), William C. Lindsey, Inc. (d/b/a LinCom
Corporation), a corporation organized under the laws of the State of California
("Company"), and William C. Lindsey, an individual (the "Principal Shareholder")
("Acquiror," "Acquiror Sub," "Principal Shareholder" and "Company" individually
hereinafter referred to as "Party" and collectively hereinafter referred to as
the "Parties");
WHEREAS, Acquiror Sub, upon the terms and subject to the conditions of
this Reorganization Agreement and in accordance with the California General
Corporation Law ("California Law"), will merge with and into Company (the
"Merger");
WHEREAS, the Board of Directors of Company has (i) determined that the
Merger is advisable and fair to the holders of Company Common Stock (as defined
in Section 3.04 of this Reorganization Agreement) and is in the best interests
of such Shareholders, (ii) advised, authorized, approved and adopted this
Reorganization Agreement and the Agreement of Merger and the transactions
contemplated hereby and the thereby and (iii) recommended approval and adoption
of this Reorganization Agreement and the Agreement of Merger by the Shareholders
of Company (the "Company Shareholders");
WHEREAS, the Board of Directors of Acquiror has determined that the
Merger is advisable and in the best interests of Acquiror and its stockholders
and the Boards of Directors of Acquiror and Acquiror Sub and the sole
shareholder of Acquiror Sub have advised, authorized, approved and adopted this
Reorganization Agreement and the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Reorganization Agreement, and intending to be legally bound hereby, the Parties
agree as follows.
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER
Upon the terms and subject to the conditions set forth in this Reorganization
Agreement, and in accordance with California Law, at the Effective Time (as
defined in Section 1.02 of this Reorganization Agreement) Acquiror Sub shall be
merged with and into Company, with
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Company being the surviving corporation (hereinafter sometimes called
"Surviving Corporation") in the Merger. Upon consummation of the Merger, the
separate corporate existence of Acquiror Sub shall cease, and Surviving
Corporation shall continue to exist as a California corporation.
SECTION 1.02 EFFECTIVE TIME; CLOSING DATE
Subject to the provisions of Section 2.07 of this Reorganization Agreement, as
promptly as practicable after the satisfaction or, if permissible, waiver of the
conditions set forth in Article VII of this Reorganization Agreement, the
Parties shall cause the Merger to be consummated by filing the Agreement of
Merger consistent with applicable California Law (the "Agreement of Merger"),
and any other appropriate documents with the Secretary of State, in such form as
required by, and executed in accordance with the relevant provisions of,
California Law (the date and time of such filing being the "Effective Time").
The day on which the Effective Time shall occur shall hereinafter be referred to
as the "Closing Date."
SECTION 1.03 EFFECT OF THE MERGER
At the Effective Time, the effect of the Merger shall be as provided in Section
1107 and other applicable provisions of California Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of Company and Acquiror Sub
shall vest in Surviving Corporation, and all debts, liabilities and duties of
Company and Acquiror Sub shall become the debts, liabilities and duties of
Surviving Corporation.
SECTION 1.04 ARTICLES OF INCORPORATION; BYLAWS
(a) Unless otherwise determined by Acquiror prior to the Effective
Time, at the Effective Time, the articles of incorporation of Acquiror Sub shall
continue unchanged and shall be the articles of incorporation of Surviving
Corporation until thereafter amended as provided by Law and such articles of
incorporation, except that Acquiror Sub's articles of incorporation shall be
amended as necessary at the Effective Time to indicate that the name of the
Surviving Corporation is LinCom Corporation.
(b) Unless otherwise determined by Acquiror prior to the Effective
Time, at the Effective Time, the bylaws of Acquiror Sub shall continue unchanged
and shall be the bylaws of Surviving Corporation until thereafter amended as
provided by Law, the articles of incorporation of Surviving Corporation and such
bylaws.
SECTION 1.05 DIRECTORS AND OFFICERS
At the Effective Time, the initial officers and directors of Surviving
Corporation shall be the officers and directors of Acquiror Sub, each to hold
office in accordance with the articles of incorporation and bylaws of Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 THE MERGER
Subject to the terms and conditions of this Reorganization Agreement, in
accordance with California Law, at the Effective Time, Acquiror Sub shall merge
into Company, with Company being the Surviving Corporation in the Merger. Upon
consummation of the Merger, the corporate existence of Acquiror Sub shall cease
and Company shall continue to exist as a California corporation.
SECTION 2.02 CONVERSION OF COMPANY COMMON STOCK
At the Effective Time, by virtue of the Merger and without any action on the
part of the Parties hereto or the holders of the Company Common Stock (as
defined in Section 3.04 of this Reorganization Agreement):
(a) OUTSTANDING COMMON STOCK. Subject to the provisions of this
Reorganization Agreement, each share of Company Common Stock, issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares (as defined in Section 2.02(e) of this Reorganization Agreement) and any
shares described in Section 2.02(d) of this Reorganization Agreement) shall be
converted into the right to receive:
(i) An amount equal to (x) the Adjusted Merger Consideration
($23,000,000 as adjusted by the Cash Adjustment, less the amounts set forth in
Section 2.02(a)(ii) and (iii) and as further described in the definitions in
Article XI), DIVIDED BY (y) the number of shares of Company Common Stock issued
and outstanding immediately prior to the Effective Time (the "Outstanding Common
Stock") (the aggregate cash amount payable with respect to such shares of
Company Common Stock pursuant to this Section 2.02(a)(i), the "Cash
Consideration");
(ii) An amount equal to (x) One Million Dollars ($1,000,000)
(or such lesser amount as may be payable to the former holders of the Company
Common Stock pursuant to Section 2.05), DIVIDED BY (y) the Outstanding Common
Stock, which amount shall secure the payment of the Closing Adjustment (as
defined in Section 2.05(b) of this Reorganization Agreement) (such amount the
"Holdback Consideration"); and
(iii) The right to receive a portion of the proceeds pursuant
to the Indemnification Promissory Note $2,000,000 (as defined in Section 7.02(f)
of this Reorganization Agreement) equal to (x) the total proceeds payable
pursuant to the Indemnification Promissory Note (subject to set off pursuant to
Section 9.02 of this Reorganization Agreement), DIVIDED BY, (y) the Outstanding
Common Stock (the principal amount of the Indemnification Promissory Note
together with the Cash Consideration and the Holdback Consideration, the "Merger
Consideration").
(b) At the Effective Time, all shares of Company Common Stock shall (i)
be converted into the right to receive the cash or a portion of the
Indemnification Promissory Note as determined in accordance with this Article
II, (ii) no longer be outstanding, (iii) automatically be canceled and
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(iv) cease to exist, and each certificate previously representing any such
shares of Company Common Stock (each a "Certificate") shall thereafter represent
the right to receive the Merger Consideration determined in accordance with
Sections 2.02(a) of this Reorganization Agreement.
(c) At the Effective Time, all shares of Company Common Stock that are
owned by Company as treasury stock and all shares of Company Common Stock that
are owned directly or indirectly by Acquiror, any of its Subsidiaries, Company,
or any Company Subsidiary, other than (i) any shares of Company Common Stock
held directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity that are beneficially owned by Persons
other than Acquiror, any of its Subsidiaries, Company, or any Company
Subsidiary, and (ii) any shares of Company Common Stock held by Acquiror, any of
its Subsidiaries, Company, or any Company Subsidiary, in respect of a debt
previously contracted, shall be canceled and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(d) Notwithstanding anything in this Reorganization Agreement to the
contrary and unless otherwise provided by applicable law, shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective
Time and that are owned by Company Shareholders who have properly demanded
payment of the fair market value of their stock (the "Dissenting Shares") within
the meaning of Section 1301 of California Law shall not be converted into the
right to receive the Merger Consideration unless and until such Company
Shareholders shall have failed to perfect or shall have effectively withdrawn
their demand, or lost their right of payment under applicable law. If any such
Company Shareholder shall have failed to perfect or shall have effectively
withdrawn or lost such right of payment, each share of Company Common Stock held
by such Company Shareholder shall thereupon be deemed converted into the right
to receive and exchangeable for, at the Effective Time, the Merger Consideration
pursuant to Sections 2.02 of this Reorganization Agreement. Subject to the terms
and conditions of this Reorganization Agreement, at and after the Effective
Time, any holder of shares of Company Common Stock who complies with Section
1301 of California Law (a "Company Dissenting Shareholder") shall be entitled to
obtain payment from Surviving Corporation of the fair market value of such
Company Dissenting Shareholder's shares of Company Common Stock as determined
pursuant to Article 13 of California Law; PROVIDED, HOWEVER, that, to the extent
permissible under California Law, no such payment shall be made unless and until
such Company Dissenting Shareholder has surrendered to the Exchange Agent the
Certificate representing the shares of Company Common Stock for which payment is
being made.
(e) Company shall give Acquiror (i) prompt notice of any written notice
of intent to demand payment for shares filed pursuant to Section 1301 of
California Law received by Company, withdrawals of such notices, and any other
instruments served in connection with such notices pursuant to the relevant
provisions of California Law and received by Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to such notices under
California Law consistent with the obligations of Company thereunder. Company
shall not, except with the prior written consent of Acquiror (which shall not be
unreasonably withheld), (A) make any payment with respect to any such notice,
(B) offer to settle or settle any such notices or (C) waive any failure to
timely deliver a written notice in accordance with the California Law.
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SECTION 2.03 ACQUIROR TO DELIVER CASH
Immediately after the Effective Time, Acquiror shall deliver to the Company
Shareholders (other than the Dissenting Shareholders) the Cash Consideration by
wire transfer of immediately available funds payable to each Company Shareholder
(other than the Dissenting Shareholders) in the proportion of each Company
Shareholder's ownership of the Company Common Stock identified in EXHIBIT B and
to such accounts that are identified by such Company Shareholders not less than
two (2) business day s prior to the Closing Date in exchange for the
Certificates.
SECTION 2.04 [INTENTIONALLY OMITTED]
SECTION 2.05 HOLDBACK CONSIDERATION; DETERMINATION OF CLOSING ADJUSTMENT
(a) HOLDBACK CONSIDERATION. Within ten (10) business days of the final
determination of the Closing Adjustment pursuant to Section 2.05(b), Acquiror
shall pay to the former holders of Company Common Stock, the Holdback
consideration LESS the Closing Adjustment, if any.
(b) DETERMINATION OF CLOSING ADJUSTMENT. The "Closing Adjustment" shall
equal (i) the amount by which (A) the cash, PLUS (B) the fair market value of
the marketable securities, PLUS (C) the account receivable payable by NASA (or
by the University of Houston based upon its contract with NASA) to the Company
in an amount equal to approximately $870,000 (provided such account receivable
has not been paid prior to Closing), and MINUS (D) the Transaction Expenses
(provided such Transaction Expenses have not been paid) of the Company and the
Company Subsidiary on the Closing Date is greater than or less than Four Million
Dollars ($4,000,000) (after taking into consideration the adjustments made in
computing the Adjusted Merger Consideration based on the estimate of the Closing
Adjustment required to be delivered to Acquiror pursuant to Section 7.02(g) of
this Reorganization Agreement), PLUS (ii) an amount equal to the amount by which
the "accounts receivable" on the Company's balance sheet dated January 22, 2000
is less than the amount determined to be the "accounts receivable" of the
Company as a result of the audit of the consolidated financial statements of the
Company as of the Closing Date by Arthur Andersen LLP, the Acquiror's
independent public accountants, (determined using the same accounting method as
used by the Company prior to December 31, 1999), PLUS (iii) an amount by which
the "current liabilities" on the Company's balance sheet dated as of January 22,
2000 is less than the "current liabilities" of the Company as determined by
Arthur Andersen LLP, if any (determined in accordance with GAAP) as hereinafter
provided; PROVIDED, HOWEVER, no adjustment shall be made to the Closing
Adjustment as a result of the operation of clauses (ii) and (iii) if the
difference between the Company's determination of the amounts identified by the
Company in clauses (ii) and (iii) and Arthur Anderson LLP's audit of such
amounts does not exceed $100,000. The Company will use its best efforts to close
its books and records for the period ending on the Closing Date within twenty
(20) days after the Closing Date and shall deliver to the Acquiror or, at the
request of the Acquiror, to Acquiror and Arthur Andersen LLP, such books and
records as shall be requested by Acquiror or Arthur Andersen LLP to enable
Arthur Andersen LLP to perform an audit of the items identified in clause (i) of
the preceding sentence as of the Closing Date and of the items identified in
clauses (ii) and (iii)
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of the preceding sentences as of January 22, 2000 and to determine the amount
of the Closing Adjustment based thereon. Upon receipt of such books and
records, the Acquiror shall use its best efforts to cause Arthur Andersen LLP to
complete an audit of such items and to calculate the amount of the Closing
Adjustment within thirty (30) days following receipt of the books and records of
the Company. Acquiror shall deliver to the Shareholders' Representative a copy
of such audits and the amount of the Closing Adjustment promptly upon receipt of
such items from Arthur Andersen LLP. The Shareholders' Representative shall have
the right to review and copy the computations and workpapers used in connection
with the preparation of the such audits and the computation of the Closing
Adjustment. If the Shareholders' Representative disagrees with the Closing
Adjustment, the Shareholders' Representative shall so notify the Acquiror in
writing within ten (10) days after the date of receipt of the such audits and
the computation of the Closing Adjustment, specifying in detail any point of
disagreement; PROVIDED, HOWEVER, if the Shareholders' Representative fails to
notify the Acquiror in writing of the Shareholders' Representative's
disagreement within such ten (10) day period, the determination of the Closing
Adjustment shall be final, conclusive and binding on the Parties for purposes of
determining the amount of the Holdback Consideration to be released to the
former holders of Company Common Stock pursuant to Section 2.05(a), but shall
not limit Acquiror's other rights pursuant to this Reorganization Agreement or
any other document delivered in connection with this Reorganization Agreement.
The Acquiror and the Shareholders' Representative shall negotiate in good faith
to resolve any such disagreement. If any such disagreement cannot be resolved by
the Acquiror and the Shareholders' Representative within fifteen (15) days after
the Shareholders' Representative has received notice from the Acquiror in
accordance with the preceding sentence of the existence of such disagreement,
the Acquiror and the Shareholders' Representative shall jointly select a
nationally recognized independent public accounting firm (which has not
performed any service since January 1, 1996 for either the Company or the
Acquiror or any of their respective Affiliates (the "Accounting Firm")), to act
as an arbitrator to resolve as expeditiously as possible all points of
disagreement with respect to the Closing Adjustment (or, in the event they are
unable to agree, either may request the Los Angeles, CA office of the American
Arbitration Association to make such selection, which shall be final and binding
on the Parties). All determinations made by the Accounting Firm with respect to
the Closing Adjustment shall be final, conclusive and binding on the Parties
hereto for purposes of determining the amount of the Holdback Consideration to
be paid to the former holders of Company Common Stock, but shall not limit
Acquiror's other rights pursuant to this Reorganization Agreement or any other
document delivered in connection with this Reorganization Agreement. The fees
and expenses of the Accounting Firm shall be borne by the non-prevailing Party.
(c) APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE. The Principal
Shareholder shall, by virtue of the Merger, be appointed attorney-in-fact and
authorized and empowered to act, for and on behalf of any or all of the Company
Shareholders (with full power of substitution in the premises), in connection
with the provisions of this Section 2.05 as they relate to the Company and the
Company Shareholders generally, and such other matters as are reasonably
necessary for the consummation of the transactions contemplated hereby
including, without limitation, (i) to review all determinations of the Closing
Adjustment and, to the extent deemed appropriate, dispute, question the accuracy
of, compromise, settle or otherwise resolve any and all such determinations,
(ii) to compromise on their behalf with Acquiror any claims asserted thereunder,
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(iii) to authorize payments to be made with respect to the Closing Adjustment,
(iv) to execute and deliver on behalf of the Company Shareholders any documents
or agreement contemplated by or necessary or desirable in connection with this
Reorganization Agreement and (v) to take such further actions including
coordinating and administering post-closing matters related to the rights and
obligations of the Company Shareholders as are authorized in this Reorganization
Agreement (the above named representative, as well as any subsequent
representative of the Company Shareholders appointed by the Company Shareholders
being referred to herein as the "Shareholders' Representative"). The
Shareholders' Representative shall not be liable to any Company Shareholder,
Acquiror, the Surviving Corporation or their respective Affiliates or any other
Person with respect to any action taken or omitted to be taken by the
Shareholders' Representative in his role as Shareholders' Representative under
or in connection with this Reorganization Agreement unless such action or
omission results from or arises out of fraud, gross negligence, willful
misconduct or bad faith on the part of the Shareholders' Representative.
Acquiror, Acquiror Sub and the Surviving Corporation shall be entitled to rely
on such appointment and treat such Shareholders' Representative as the duly
appointed attorney-in-fact of each Company Shareholder. Each Company Shareholder
who votes in favor of the Merger pursuant to the terms hereof, by such vote and
without any further action, and each Company Shareholder who receives Merger
Consideration in connection with the Merger, by acceptance thereof and without
any further action, confirms such appointment and authority.
(d) RECORD RETENTION. Acquiror, the Company and the Shareholder
Representative agree that following the Closing through the date of the final
determination of the Closing Adjustment that they will not destroy any records
pertaining to the final determination of the Closing Adjustment.
SECTION 2.06 CONVERSION OF ACQUIROR SUB SHARES
Each share of capital stock of Acquiror Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one fully
paid and nonassessable share of common stock of Surviving Corporation.
SECTION 2.07 CLOSING
Subject to the terms and conditions of this Reorganization Agreement, the
closing of the Merger (the "Closing") will take place after the satisfaction of
the latest to occur or, if permissible, waiver of the conditions set forth in
Article VII of this Reorganization Agreement. The scheduled closing date will
take place as soon as practicable (but, in any event, no later than the first
business day following the tenth (10th) day) after the satisfaction of the
latest to occur or, if permissible, waiver, of the conditions set forth in
Article VII of this Reorganization Agreement; PROVIDED, HOWEVER, the Closing
shall not occur prior to March 3, 2000; PROVIDED, FURTHER, HOWEVER, if the
conditions set forth in Article VII of this Reorganization Agreement are
satisfied or waived in the month of March, 2000, the Closing shall occur on the
first Friday in the first three full weeks of March 2000 following the payment
of the accounts receivable payable by 3COM Corp. to the Company in an amount of
approximately $375,000 (the "Scheduled Closing Date"), at the offices of Hogan &
Hartson L.L.P., Biltmore Tower, 500 South Grand Avenue,
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Suite 1900, Los Angeles, California 90071, unless another date or place is
agreed to in writing by the Parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as specifically set forth in the Disclosure Letter delivered by Company
to Acquiror prior to the execution and delivery of this Reorganization Agreement
(the "Company Disclosure Letter") and referenced in the Company Disclosure
Letter to the Section(s) of this Article III to which such disclosure applies,
Company hereby represents, warrants to and agrees with Acquiror and Acquiror Sub
as follows, in each case as of the date of this Reorganization Agreement and as
of the Closing Date:
SECTION 3.01 ORGANIZATION AND QUALIFICATION
Company is a corporation duly organized, validly existing and in good standing
under California Law, and has the full and unrestricted corporate power and
authority to own, operate and lease its Assets, to carry on its business as
currently conducted, to execute and deliver this Reorganization Agreement and to
carry out the transactions contemplated hereby. Company is duly qualified to
conduct business as a foreign corporation and is in good standing in the states,
countries and territories listed in the Company Disclosure Letter and in each
jurisdiction where the nature of its business or the ownership, operation or
leasing of its Assets makes such qualification necessary.
SECTION 3.02 SUBSIDIARIES
Section 3.02 of the Company Disclosure Letter lists each Company Subsidiary.
Neither Company nor any Company Subsidiary has any equity investment or other
interest in, nor has Company or any Company Subsidiary made advances or loans to
any Person (other than intra-company transactions between or among Company and a
Company Subsidiary). Section 3.02 of the Company Disclosure Letter sets forth
(a) the authorized capital stock or other equity interests of each Company
Subsidiary and (b) the percentage of the issued and outstanding capital stock or
other equity interests of each Company Subsidiary owned by Company. All of such
shares of capital stock or other equity interests of each Company Subsidiary
have been duly authorized and validly issued and are outstanding, fully paid and
nonassessable and are owned by Company free and clear of all Encumbrances other
than Encumbrances arising under applicable securities Laws. Each Company
Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of its state or jurisdiction of organization (as listed
in Section 3.02 of the Company Disclosure Letter), and has the requisite
corporate or limited liability company power and authority to own, operate and
lease its Assets and to carry on its business as currently conducted. Each
Company Subsidiary is duly qualified to conduct business as a foreign Person and
is in good standing in each jurisdiction where the nature of its business or the
ownership, operation or the leasing of its Assets makes such qualification
necessary.
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SECTION 3.03 ARTICLES OF INCORPORATION AND BYLAWS
Company has furnished to Acquiror a true and complete copy of the articles of
incorporation of Company and each Company Subsidiary, as currently in effect on
the date of this Reorganization Agreement, and a true and correct copy of
Company's bylaws and the bylaws of each Company Subsidiary, as currently in
effect on the date of this Reorganization Agreement, and in each case certified
by the corporate secretary of the Company and each such Company Subsidiary, as
appropriate. Neither the Company nor any Company Subsidiary is in violation of
any of the provisions of its respective articles of organization or bylaws.
SECTION 3.04 CAPITALIZATION
The authorized capital stock of Company consists of 5,000,000 shares of common
stock, no par value per share, of which 910,000 shares of common stock (the
"Company Common Stock") are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable. Section 3.04 of the
Company Disclosure Letter sets forth the names and addresses of all holders of
record of Company Common Stock and the number and class of shares held by each
such Shareholder. No other shares of Company Common Stock have been reserved for
any purpose. There are no outstanding securities convertible into or
exchangeable for Company Common Stock, any other securities of any Company, or
any capital stock or other securities of any Company Subsidiary and no
outstanding options, rights (preemptive or otherwise), or warrants to purchase
or to subscribe for any shares of such stock or other securities of Company or
any Company Subsidiary. There are no outstanding Agreements affecting or
relating to the voting, issuance, purchase, redemption, registration, repurchase
or transfer of Company Common Stock, any other securities of Company, or any
capital stock or other securities of any Company Subsidiary, except as
contemplated hereunder. Each of the outstanding shares of Company Common Stock
and of capital stock of, or other equity interests in, each Company Subsidiary
was issued in compliance with all applicable federal and state Laws concerning
the issuance of securities. There are no obligations, contingent or otherwise,
of Company or any Company Subsidiary to provide funds to, make any investment
(in the form of a loan, capital contribution or otherwise) in, or provide any
guarantee with respect to, any Person other than Company or any Company
Subsidiary. There are no Agreements pursuant to which any Person (other than
Company or any Company Subsidiary) is or may be entitled to receive any of the
revenues or earnings, or any payment based thereon or calculated in accordance
therewith, of Company or any Company Subsidiary.
SECTION 3.05 AUTHORITY; BINDING OBLIGATION
The execution and delivery by Company of this Reorganization Agreement, the
execution and delivery by Company of all other Agreements, documents,
certificates or other instruments contemplated hereby, and the consummation by
Company of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Company are necessary to authorize this Reorganization Agreement
and the other Agreements, documents, certificates or other instruments
contemplated hereby, or to consummate the transactions contemplated hereby and
thereby, other than the approval and adoption of this Reorganization Agreement
by Company in accordance with
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California Law and Company's articles of incorporation and bylaws. This
Reorganization Agreement has been duly executed and delivered by Company and
constitutes a legal, valid and binding obligation of Company, enforceable in
accordance with its terms, except as such enforceability may be subject to the
effects of any applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar Laws affecting creditors' rights generally
and subject to the effects of general equitable principles (whether considered
in a proceeding in equity or at law).
SECTION 3.06 NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) The execution, delivery and performance by Company of this
Reorganization Agreement and all other Agreements, documents, certificates or
other instruments contemplated hereby, the fulfillment of and compliance with
the respective terms and provisions hereof and thereof, and the consummation by
Company of the transactions contemplated hereby and thereby, do not and will
not: (i) conflict with, or violate any provision of, the articles of
incorporation or bylaws of Company; (ii) subject to (A) obtaining the requisite
approval and adoption of this Reorganization Agreement by the Company
Shareholders in accordance with California Law and Company's articles of
incorporation and bylaws and (B) obtaining the consents, approvals,
authorizations and permits of, and making filings with or notifications to, the
applicable Governmental Entity pursuant to the applicable requirements, if any,
of the HSR Act, and the filing and recordation of the Agreement of Merger and
the articles of merger as required by California Law, conflict with or violate
any Law applicable to Company or any Company Subsidiary, or any of their Assets;
(iii) conflict with, result in any breach of, or constitute a default (or an
event that with notice or lapse of time or both would become a default) or
result in the termination or acceleration, or create in another Person, a put
right, purchase obligation or similar right under any Agreement to which Company
or any Company Subsidiary is a party or by which Company or any Company
Subsidiary, or any of their Assets, may be bound; or (iv) result in or require
the creation or imposition of, or result in the acceleration of, any
indebtedness or any Encumbrance of any nature upon, or with respect to, Company
or any Company Subsidiary or any of the Assets now owned or hereafter acquired
by Company; except for any such conflict or violation described in clause (ii)
above, any such conflict, breach or default described in clause (iii) above, or
any such creation, imposition or acceleration described in clause (iv) above
that would not have a Company Material Adverse Effect and that would not prevent
Company from consummating the Merger on a timely basis.
(b) The execution, delivery and performance by Company and each Company
Subsidiary of this Reorganization Agreement and all other Agreements, documents,
certificates or other instruments contemplated hereby, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by Company and each Company Subsidiary of the transactions
contemplated hereby and thereby, do not and will not: (i) require any consent,
approval, authorization or permit of, or filing with or notification to, any
Person not party to this Reorganization Agreement, except (A) pursuant to the
applicable requirements, if any, of the HSR Act and Laws of other Governmental
Entities, (B) the filing and recordation of the Agreement of Merger and the
articles of merger as required by California Law and (C) where the failure to
obtain any consent, approval, authorization or permit or to make any filing or
notification otherwise required to be disclosed hereunder would not have a
Company Material
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Adverse Effect; or (ii) result in or give rise to any penalty, forfeiture,
Agreement termination, right of termination, amendment or cancellation, or
restriction on business operations of Company or any Company Subsidiary that
would have a Company Material Adverse Effect.
(c) Except as set forth in Section 3.06 of the Company Disclosure
Letter, all returns, reports, statements and other documents required to be
filed by the Company or any Company Subsidiary with any Governmental Entity have
been filed in a timely manner and complied with and are true, correct and
complete in all material respects (and any related fees required to be paid have
been paid in full). All material records of every type and nature relating to
the business, operations or Assets of the Company and each Company Subsidiary
have been maintained in all material respects in accordance with good business
practices and the rules of any Governmental Entity and are maintained at the
Company or Company Subsidiary.
(d) No Governmental Entity or any other Person has notified Company or
any Company Subsidiary that such Governmental Entity or other Person intends to
object to the transactions contemplated hereunder which shall include for this
purpose any objection to the operations of the business of Company or any
Company Subsidiary as part of Acquiror. The Company is not aware of any fact or
circumstance related to it or to any Company Subsidiary that would reasonably be
expected to (i) cause the filing of any objection to any application for any
Governmental consent required hereunder, (ii) lead to any delay in processing
such application or (iii) require any waiver of any Governmental rule, policy or
other applicable law.
SECTION 3.07 INTELLECTUAL PROPERTY
(a) Section 3.07 of the Company Disclosure Letter identifies each
registered item of Intellectual Property (i) owned by Company or any Company
Subsidiary, (ii) owned by any third party and used by Company or any Company
Subsidiary pursuant to license, sublicense or other Agreement or (iii) otherwise
used by Company or any Company Subsidiary and not otherwise generally used by
Persons similarly situated (including, in each case, specification of whether
each such item is owned, licensed or used by Company or any Company Subsidiary).
In addition, neither Company nor any Company Subsidiary has licensed (as
licensor), sublicensed (as sublicensor) or entered into any other agreement with
respect to the use of any Intellectual Property except: (A) in the course of
distributing software products of Company and any Company Subsidiary; or (B) to
the U.S. Government pursuant to a government contract or to a subcontract under
a government contract.
(b) The Company and each Company Subsidiary either owns or has adequate
rights to use all of the Intellectual Property that is necessary to, and
currently used for, its business as now conducted or currently proposed to be
conducted, and such Intellectual Property is free and clear of Encumbrances. The
Company has previously furnished to Acquiror evidence of either ownership by the
Company or a Company Subsidiary of or license rights to use its Intellectual
Property.
(c) There are no pending or, to Company's knowledge, threatened claims
against Company or any Company Subsidiary alleging that the conduct of its
business infringes any Intellectual Property rights of others that would have a
Company Material Adverse Effect. Neither the Intellectual Property of Company
nor any Company Subsidiary is subject to any
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mortgage, lien, pledge, encumbrance, security interest, deed of trust, option,
order, decree or judgment. The business of Company and each Company Subsidiary
as now conducted or proposed to be conducted does not infringe any third-party
Intellectual Property rights.
(d) To the Company's knowledge, no third party is infringing upon any
of the Company's or any Company Subsidiary's Intellectual Property, and neither
the Company nor any Company Subsidiary has notified any third party that it
believes such third party is interfering with, infringing, or misappropriating
any of the Company's or any Company Subsidiary's Intellectual Property or
engaging in any act of unfair competition. The Company and each Company
Subsidiary have the right to bring an action for the infringement of all of its
Intellectual Property that is owned by the Company or any Company Subsidiary.
(e) Company and each Company Subsidiary has taken all steps that are
required to protect Company and each Company Subsidiary's rights in confidential
information and trade secrets of Company and each Company Subsidiary or provided
by any other Person to Company or any Company Subsidiary. Without limiting the
foregoing, Company and each Company Subsidiary has and enforces a policy
requiring each employee, director, consultant and contractor to execute a
confidentiality and non-disclosure agreement substantially in the form
previously provided to Acquiror, and each present and former employee, director,
consultant and contractor has executed such an agreement.
(f) The operation of the business of the Company and each Company
Subsidiary as it currently is conducted or currently proposed to be conducted as
of and limited to the period prior to the Closing Date by the Company and each
Company Subsidiary does not and will not and will not when conducted by the
Acquiror or the Surviving Corporation in substantially the same manner following
the Closing, infringe or misappropriate any Intellectual Property right of any
person, violate any right of any person (including any right to privacy or
publicity), or constitute unfair competition or trade practices under the laws
of any jurisdiction.
(g) Neither this Reorganization Agreement nor the transactions
contemplated by this Reorganization Agreement, will result in (i) either
Acquiror or the Surviving Corporation granting to any third party any right to
or with respect to any Intellectual Property right owned by, or licensed to,
either of them, (ii) either Acquiror's or the Surviving Corporation's being
bound by, or subject to, any non-compete or other restriction on the operation
or scope of their respective businesses, or (iii) either Acquiror's or the
Surviving Corporation's being obligated to pay any royalties or other amounts to
any third party in excess of those payable by Acquiror's or the Surviving
Corporation's, respectively, prior to the Closing.
SECTION 3.08 FINANCIAL STATEMENTS AND CONDITION
(a) Company has prepared the consolidated balance sheets of Company and
the Company Subsidiaries as of the end of the fiscal year ending in each of
1997, 1998, and 1999 (collectively, the "Company Balance Sheet") and the
consolidated statements of income, Seller's equity and changes in financial
position for each of such fiscal years (The Company Balance Sheet and such
consolidated statements of income, Company's equity and changes in financial
position are hereinafter referred to collectively as the "Company Financial
Statement"). A true
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and complete copy of the Company Financial Statement has been delivered to
Acquiror and is attached as an exhibit to, and constitutes an integral part of,
the Company Disclosure Letter.
(b) The Company Financial Statement, including, without limitation, the
notes thereto, (i) has been prepared in accordance with the books and records of
Company and its Subsidiaries and (ii) presents fairly the consolidated financial
position of Company and its Subsidiaries and their consolidated results of
operations and cash flows applied on a basis consistent with prior accounting
periods.
(c) Company does not expect any year-end audit adjustments for the
current fiscal year ending June 30, 2000. To the knowledge of Company, there are
no anticipated material charges or write-offs of a non-recurring nature for the
fiscal year ending June 30, 2000.
SECTION 3.09 ABSENCE OF CERTAIN DEVELOPMENTS
Since June 30, 1999:
(a) the business of Company and each Company Subsidiary has been
conducted in all material respects only in the Ordinary Course of Business;
(b) neither Company nor any Company Subsidiary has become liable in
respect of any guarantee or has incurred or otherwise become liable in respect
of any debt, except for borrowings, letters of credit and bankers' acceptances
in the Ordinary Course of Business under credit facilities in existence on June
30, 1999;
(c) neither Company nor any Company Subsidiary has mortgaged, pledged
or subjected to any lien any of their respective property, business or assets,
except for purchase money or similar security interests granted in connection
with the purchase of equipment or supplies in the Ordinary Course of Business in
an amount not exceeding $10,000 in the aggregate;
(d) neither Company nor any Company Subsidiary has made any
declaration, setting aside or payment of any dividend or other distribution with
respect to, or repurchase of, any of their respective capital stock or other
equity interests, other than a cash dividend of $0.065 per share or an aggregate
amount of $59,150 paid on December 21, 1999;
(e) neither Company nor any Company Subsidiary has (i) acquired or
leased from any other Person any material assets, or sold or leased to any other
Person or otherwise disposed of any material assets (in each case except for
assets acquired or sold in the Ordinary Course of Business in connection with
goods and services provided to customers), other than the sale to certain
officer's of the Company of the vehicles at their current Blue Book Value as
further identified on Section 3.09 to the Company Disclosure Letter; (ii)
entered into any contractual obligation relating to (A) the purchase or sale of
any capital stock, partnership interest or other equity interest in any Person,
(B) the purchase of assets constituting a business or (C) any merger,
consolidation or other business combination; (iii) entered into or amended any
lease of real property or material personal property (whether as lessor or
lessee); (iv) canceled or compromised any debt or claim other than accounts
receivable in the Ordinary Course of
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Business; (v) sold, transferred, licensed or otherwise disposed of any
material intangible assets other than in the Ordinary Course of Business; (vi)
waived or released any right of substantial value; (vii) instituted, settled or
agreed to settle any material action; or (viii) entered into or consummated any
transaction with any Affiliate;
(f) there has been no loss, destruction or damage to any material item
of property of Company or any Company Subsidiary, whether or not insured, which
has had or could reasonably be expected to have a Company Material Adverse
Effect;
(g) other than in the Ordinary Course of Business and consistent with
past practices, neither Company nor any Company Subsidiary has made any changes
in the rate of compensation payable or paid, or agreed or orally promised to
pay, conditionally or otherwise, any extra compensation, or severance or
vacation pay, to any director, officer, employee, consultant or agent of Company
or any Company Subsidiary;
(h) there has been no material labor trouble (including any work
slowdown, stoppage or strike) involving Company or any Company Subsidiary or any
material change in any of their respective personnel or the terms and conditions
of the employment of such personnel;
(i) neither Company nor any Company Subsidiary has made any change in
(x) its methods of accounting or accounting practices, or (y) its pricing
policies or payment or credit practices or failed to pay any creditor any amount
owed to such creditor when due or granted any extensions or credit other than in
the Ordinary Course of Business;
(j) neither Company nor any Company Subsidiary has terminated or closed
any material facility, business or operation;
(k) neither Company nor any Company Subsidiary has made any material
loan, advance or capital contributions to, or any other investment in, any
Person other than travel advances previously disclosed to Acquiror;
(l) neither Company nor any Company Subsidiary has adopted or increased
any benefits under any Plan in any material manner;
(m) neither Company nor any Company Subsidiary has written up or
written down any of its respective material assets;
(n) neither Company nor any Company Subsidiary has terminated or
amended, or failed in any material respect to perform obligations or suffered
the occurrence of any default under any material contractual obligation; and
(o) neither Company nor any Company Subsidiary has entered into any
contractual obligation to do any of the things referred to elsewhere in this
Section 3.09.
SECTION 3.10 ABSENCE OF UNDISCLOSED LIABILITIES
To the knowledge of Company, there are no material liabilities or obligations
(whether absolute or contingent, matured or unmatured, known or unknown) of
Company or any Company
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Subsidiary, including but not limited to liabilities for Taxes and that are
not reflected, or reserved against, in the Company Financial Statement, except
for those that may have been incurred after June 30, 1999 in the Ordinary Course
of Business or that are not material in amount either individually or
collectively. Since June 30, 1999, neither Company nor any Company Subsidiary
has incurred any material liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown) other than in the Ordinary
Course of Business. Additionally, all bonuses and incentive compensation
(including, without limitation, all compensation-related expenses) have been
accrued on the Company Financial Statement based on GAAP and consistent with
past practices.
SECTION 3.11 LITIGATION; DISPUTES
(a) Company has not received notice of, and there is no pending, or, to
the knowledge of Company, threatened, any action, suit, claim, arbitration,
proceeding or investigation against, affecting or involving Company or any
Company Subsidiary or their respective businesses or Assets, or the transactions
contemplated by this Reorganization Agreement, at law or in equity, or before or
by any domestic or foreign court, arbitrator or Governmental Entity that, alone
or in the aggregate, would have a Company Material Adverse Effect. Neither
Company nor any Company Subsidiary is (i) operating under or subject to any
order, award, writ, injunction, decree or judgment of any court, arbitrator or
Governmental Entity or (ii) in default with respect to any order, award, writ,
injunction, decree or judgment of any court, arbitrator or Governmental Entity.
(b) Company and each Company Subsidiary have complied and are in
compliance in all material respects with all laws, ordinances, regulations,
awards, orders, judgments, decrees and injunctions applicable to Company and
each Company Subsidiary and their respective businesses or Assets, including all
federal, state and local laws, ordinances, regulations and orders pertaining to
employment or labor, safety, health, zoning and other matters. Company and each
Company Subsidiary have obtained and hold all permits, licenses and approvals
(none of which has been materially modified or rescinded and all of which are in
full force and effect) from all government authorities necessary in order to
own, use and maintain their respective Assets and to conduct their respective
businesses as presently conducted.
SECTION 3.12 REAL PROPERTY LEASES
Section 3.12 of the Company Disclosure Letter lists each real property lease
under which Company or any Company Subsidiary is the lessee or lessor. Company
and each Company Subsidiary are the owners and holders of the leasehold estates
purported to be granted to them by the leases listed in Section 3.12 of the
Company Disclosure Letter. Each such lease is in full force and effect and, to
the knowledge of Company, constitutes a legal, valid and binding obligation of,
and is legally enforceable in all material respects against, the respective
parties thereto. Company and each Company Subsidiary have in all material
respects performed all material obligations thereunder required to be performed
by any of them to date. To the knowledge of Company, no party is in default in
any material respect under any of the foregoing, and there has not occurred any
event which (whether with or without notice, lapse of time or the
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happening or occurrence of any other event) would constitute such a material
default. Neither Company nor any Company Subsidiary owns or holds interests in
any Real Property.
SECTION 3.13 OTHER AGREEMENTS; NO DEFAULT
Sections 3.12 and 3.13 of the Company Disclosure Letter list each Agreement
(other than Agreements solely between Company and any Company Subsidiary) to
which Company or any Company Subsidiary is a party or by which Company or any
Company Subsidiary, or any of their respective Assets, is bound, and which (i)
involves expenditures or receipts by Company or any Company Subsidiary (other
than contracts, commitments or Agreements which do not require payments or yield
receipts of more than $25,000) in any twelve (12) month period or more than
$50,000 in the aggregate); or (ii) contain covenants that limit the freedom of
Company or any Company Subsidiary to engage in a line of business or to compete
with any third party (Agreements listed pursuant to clauses (i) and (ii) above,
collectively the "Company Contracts"). Each Company Contract is in full force
and effect, constitutes a valid and binding obligation of and is legally
enforceable in accordance with its terms against Company and, to the knowledge
of Company, the Company Contracts are valid, binding and enforceable obligations
of the other parties thereto, except as such enforceability may be subject to
the effects of any applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar Laws affecting creditors' rights generally
or subject to the effects of general equitable principles (whether considered in
a proceeding in equity or at law). Company has complied with all of the
provisions of such Company Contracts and is not in default thereunder, and there
has not occurred any event which (whether with or without notice, lapse of time,
or the happening or occurrence of any other event) would constitute such a
default, and the execution of this Reorganization Agreement by Company and its
performance hereunder will not cause, or result in, a breach or default under
any Company Contract. There has not been (A) any failure by Company or, to the
knowledge of Company, any other party to any such Company Contract to comply
with all material provisions thereof, (B) any default by Company or, to the
knowledge of Company, any other party thereunder, or (C) to the knowledge of
Company (X) any threatened cancellation thereof or (Y) any outstanding dispute
thereunder. Neither Company nor any Company Subsidiary is a guarantor or
otherwise liable for any liability or obligation (including indebtedness) of any
other Person other than any Company Subsidiary.
SECTION 3.14 LABOR RELATIONS
There are no collective bargaining or other labor union Agreements to which
Company or any Company Subsidiary is a party. There are, and for the past two
(2) years have been, no strikes, work stoppages, union organization efforts or
lawsuits (other than grievance proceedings) pending or, to the knowledge of
Company, threatened or reasonably anticipated between Company or any Company
Subsidiary and (a) any current or former employees of Company or any Company
Subsidiary or (b) any union or other collective bargaining unit representing
such employees. Company and any Company Subsidiary have complied and are in
compliance with all Laws relating to employment or the workplace, including,
without limitation, Laws relating to wages, hours, collective bargaining, safety
and health, work authorization, equal employment opportunity, immigration,
withholding, unemployment compensation, worker's compensation,
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employee privacy and right to know, except where the failure so to comply
would not have a Company Material Adverse Effect.
SECTION 3.15 PENSION AND BENEFIT PLANS
(a) Company has delivered to Acquiror prior to the execution of this
Reorganization Agreement true and complete copies (or written descriptions,
where no written plan exists) (and, where applicable, the most recent actuarial,
valuation or annual (Form 5500 with attachments) reports with respect thereto)
of all pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus or other incentive
plans, employment or change in control agreements, medical, vision, dental or
other health plans, life insurance plans and other employee benefit plans or
fringe benefit plans, programs, arrangements or Agreements, including, without
limitation, all Company Benefit Plans. No Company Benefit Plan is or has been a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA or could
subject Company or any Company Subsidiary to liability under Sections 4063 or
4064 of ERISA. Company has set forth in the Company Disclosure Letter (i) a list
of all of the Company Benefit Plans, (ii) a list of the Company Benefit Plans
that are Company Pension Plans, (iii) a list of the Company Benefit Plans that
are Company Stock Plans, and (iv) a list of the number of shares covered by,
exercise prices for, and holders of, all stock options granted and available for
grant under the Company Stock Plans.
(b) From their inception, all Company Benefit Plans have been and are
in compliance (in form and in operation) with the applicable terms of ERISA and
the Code and any other applicable Laws, including the terms of such plans.
(c) All liabilities (contingent or otherwise) under any Company Benefit
Plan are fully accrued or reserved against in the Company Financial Statement in
accordance with GAAP. Each Company Pension Plan that is subject to Title IV of
ERISA or Section 412 of the Code satisfies the minimum funding standards
(without regard to any waiver) provided for in Section 412 of the Code.
(d) Neither Company nor any Company Subsidiary has any obligations for
retiree health or other welfare benefits under any Company Benefit Plan or
otherwise, and there are no restrictions on the rights of Company or any Company
Subsidiary to unilaterally amend or terminate any such Company Benefit Plan at
any time without incurring any material liability thereunder.
(e) Neither the execution and delivery of this Reorganization Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any payment (including, without limitation, severance, golden parachute or
otherwise) becoming due to any person under any Company Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Company
Benefit Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits.
(f) Each Company Benefit Plan which is intended to be qualified under
Section 401(a) or 401(k) of the Code or qualified as a voluntary employees'
beneficiary association under Sections 501(a) and 501(c)(9) of the Code has
received a favorable determination letter from the
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IRS that it is so qualified and so exempt, and no fact or event has occurred
that could adversely affect such qualified or exempt status.
(g) Company and each Company Subsidiary have not incurred any liability
under, and have complied in all respects with, the Worker Adjustment Retraining
Notification Act and the regulations promulgated thereunder and do not
reasonably expect to incur any such liability as a result of actions taken or
not taken prior to the consummation of the Merger.
(h) With respect to each Company Benefit Plan that is a Multiemployer
Plan, (i) neither Company nor any Company Subsidiary has incurred any Withdrawal
Liability that has not been satisfied in full; (ii) if Company or any Company
Subsidiary were to experience a withdrawal or partial withdrawal from such plan,
no material Withdrawal Liability would be incurred; (iii) neither Company nor
any Company Subsidiary has received any notification, nor has any reason to
believe, that any such plan is in reorganization, has been terminated, or may
reasonably be expected to be in reorganization or to be terminated, and (iv)
neither Company nor any Company Subsidiary is liable or has been advised that it
is liable for any funding Taxes under sections 413(b)(6) or 4971 of the Code on
account of any accumulated funding deficiency of any Multiemployer Plan to which
Company or any Company Subsidiary has contributed or is required to contribute.
(i) Neither Company nor any Company Subsidiary is now or has ever been
a "substantial employer" as defined in Section 4001(a)(2) of ERISA.
SECTION 3.16 TAXES AND TAX MATTERS
(a) The Company and each Company Subsidiary have paid all Taxes due and
payable by any of them for or with respect to all periods up to and including
the date hereof (without regard to whether or not such Taxes are or were
disputed), whether or not shown on any Tax Return.
(b) The Company and each Company Subsidiary has filed on a timely basis
all Company Tax Returns that it was required to file. All such Company Tax
Returns were accurate and complete in all material respects. Except as described
in Section 3.16 of the Company Disclosure Letter, none of Company or any Company
Subsidiary is the beneficiary of any extension of time within which to file any
Tax Return. No claim has ever been made by an authority in a jurisdiction where
Company or any Company Subsidiary does not file Company Tax Returns that any one
of them is or may be subject to taxation by that jurisdiction. None of Company
or any Company Subsidiary has given any currently effective waiver of any
statute of limitations in respect of Taxes or agreed to any currently effective
extension of time with respect to a Tax assessment or deficiency. There are no
security interests on any of the assets of Company or any Company Subsidiary
that arose in connection with any failure (or alleged failure) to pay any Tax.
(c) Company and each Company Subsidiary has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other third
party.
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(d) None of Company nor any Company Subsidiary has knowledge of any
facts or circumstances which could give rise to a reasonable expectation that
any authority may assess any additional Taxes for any period for which Company
Tax Returns have been filed. There is no dispute or claim concerning any
liability for taxes of Company or any Company Subsidiary either (i) claimed or
raised by any authority in writing or (ii) as to which Company has knowledge
based upon personal contact with any agent of such authority. Company and each
Company Subsidiary has delivered to the Acquiror copies of, and Section 3.16 of
the Company Disclosure Letter sets forth a complete and accurate list of,
Company Tax Returns filed with respect to the taxable periods of Company and any
Company Subsidiary ended on or after December 31, 1995; indicates those Company
Tax Returns that have been audited; and indicates those Company Tax Returns that
currently are the subject of an audit.
(e) The unpaid Taxes of Company and any Company Subsidiary (i) did not,
as of the date of any financial statements of Company and the Company
Subsidiaries furnished to Acquiror pursuant to Section 3.08 of this
Reorganization Agreement, exceed the reserve for any Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the such financial statements
(rather than in any notes thereto) and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of Company or any Company Subsidiary in filing their
Company Tax Returns.
(f) None of Company or any Company Subsidiary has filed a consent under
Section 341(f) of the Code, concerning collapsible corporations. None of Company
or any Company Subsidiary has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. The Company
and each Company Subsidiary has disclosed on its federal income Company Tax
Returns all positions taken therein that could reasonably be expected to give
rise to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code. None of Company or any Company Subsidiary is a party
to any Tax allocation or sharing agreement. None of Company or any Company
Subsidiary (A) has been a member of an "affiliated group," as defined in Section
1504(a) of the Code, filing a consolidated federal income Tax Return (other than
a group the common parent of which was Company) and (B) has any Liability for
the Taxes of any Person (other than any of Company) under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract or otherwise.
(g) Section 3.16 of the Company Disclosure Letter sets forth the
following information with respect to each of Company and each Company
Subsidiary (or, in the case of clause (ii) below, with respect to each of the
Company Subsidiary) as of the date hereof: (i) the tax basis of Company and each
Company Subsidiary in its assets; (ii) the basis of the shareholders of each
Company Subsidiary in such Company Subsidiary's stock (or the amount of any
excess loss account); and (iii) the amount of any net operating loss, net
capital loss, unused investment, foreign tax or other credit, or excess
charitable contribution allocable to Company or a Company Subsidiary; and (iv)
the amount of any deferred gain or loss allocable to Company or a Company
Subsidiary arising out of any "deferred intercompany transaction" as defined in
Treas. Reg. Section 1.1502-13(a)(2).
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SECTION 3.17 INSURANCE
Section 3.17 of the Company Disclosure Letter lists all policies of title,
asset, fire, hazard, casualty, liability, life, worker's compensation and other
forms of insurance of any kind owned or held by Company or any Company
Subsidiary. All such policies: (a) are with insurance companies reasonably
believed by Company to be financially sound and reputable; (b) are in full force
and effect; (c) are sufficient for compliance by Company and by each Company
Subsidiary with all requirements of Law and of all Agreements to which Company
or any Company Subsidiary is a party; (d) are valid and outstanding policies
enforceable against the insurer; (e) insure against risks of the kind
customarily insured against and in amounts customarily carried by companies
similarly situated and by companies engaged in similar businesses and owning
similar Assets; and (f) have the policy expiration dates set forth in Section
3.17 of the Company Disclosure Letter.
SECTION 3.18 ARRANGEMENTS WITH RELATED PARTIES
No present or former officer, director, Shareholder or Person known by the
Company to be an Affiliate of the Company or the any Company Subsidiary, nor any
Person known by the Company to be an Affiliate of such Person, is currently a
party to any transaction or agreement with the Company or the any Company
Subsidiary, including any agreement providing for any loans, advances, the
employment of, furnishing of services by, rental of its Assets from or to, or
otherwise requiring payments to, any such officer, director, Shareholder or
affiliate.
SECTION 3.19 BOOKS AND RECORDS
The books of account, stock records, minute books and other corporate and
financial records of Company and each Company Subsidiary are complete and
correct and have been maintained in accordance with reasonable business
practices for companies similar to Company and each Company Subsidiary, and
Company and each Company Subsidiary will have prior to Closing prepared and made
available to Acquiror the minutes for all meetings of the Board of Directors
and/or Shareholders of the Company and each Company Subsidiary held as of the
date hereof (or written consents in lieu of such meetings).
SECTION 3.20 ASSETS
Company and each Company Subsidiary have good, valid and marketable title to all
Assets respectively owned by them, including, without limitation, all material
Assets reflected in the Company Financial Statement and all Assets acquired by
Company or by any Company Subsidiary since June 30, 1999 (except for Assets
reflected in the Company Financial Statement or acquired since such date which
have been sold or otherwise disposed of in the Ordinary Course of Business),
free and clear of all Encumbrances other than Permitted Encumbrances. All
personal property of Company and each Company Subsidiary is in good operating
condition and repair and is suitable and adequate for the uses for which it is
intended or is being used. All Inventory of Company and each Company Subsidiary
(i) consists of items which are good and merchantable and of a quality and
quantity presently usable and salable in the Ordinary Course of
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Business and (ii) have been reflected in the Company Financial Statement in
accordance with the Company's historic accounting past practices.
SECTION 3.21 BOARD RECOMMENDATION
The Board of Directors of Company has unanimously adopted, in compliance with
California Law, a resolution advising, authorizing, approving and adopting this
Reorganization Agreement and the transactions contemplated hereby, and
recommending approval and adoption of this Reorganization Agreement and the
transactions contemplated hereby by the Company Shareholders. Company
Shareholders representing 96.7% of the Company Common Stock have adopted in
compliance with California Law a resolution authorizing, approving, and adopting
the Reorganization Agreement and the transactions contemplated hereby.
SECTION 3.22 DIRECTORS AND OFFICERS
Section 3.22 of the Company Disclosure Letter lists all current directors and
officers of Company and each Company Subsidiary, showing each such person's
name, positions, and annual remuneration, bonuses and fringe benefits paid by
Company or any Company Subsidiary for the current fiscal year and the most
recently completed fiscal year.
SECTION 3.23 STATE TAKEOVER STATUTES; CERTAIN CHARTER PROVISIONS
The Board of Directors of Company has, to the extent such statutes are
applicable, taken all action (including appropriate approvals of the Board of
Directors of Company) necessary to exempt Company, each Company Subsidiary and
Affiliates, the Merger, this Reorganization Agreement and the transactions
contemplated hereby and thereby from the takeover provisions of California Law,
if any. To the knowledge of Company, no other state takeover statutes or Company
charter or bylaw provisions are applicable to the Merger or this Reorganization
Agreement and the transactions contemplated hereby or thereby.
SECTION 3.24 ENVIRONMENTAL MATTERS
Each of the Company and each Company Subsidiary is in material compliance with
all Environmental Laws. Neither the Company nor any Company Subsidiary has any
material liability under any Environmental Law, nor is any of the Company or any
Company Subsidiary responsible for any liability of any other person under any
Environmental Law. There are no pending or, to the knowledge of the Company,
threatened actions, suits, claims, legal proceedings or other proceedings based
on, and neither the Company nor any Company Subsidiary directly or indirectly
received any notice of any complaint, order, directive, citation, notice of
responsibility, notice of potential responsibility, or information request from
any Government Entity or any other person arising out of or attributable to: (i)
the current or past presence at any part of the real property owned or leased by
the Company or any Company Subsidiary (the "Real Property") of Hazardous
Materials (as defined below) or any substances that pose a hazard to human
health or an impediment to working conditions; (ii) the current or past release
or threatened release into the environment from the Real Property (including,
without limitation, into any storm drain, sewer, septic system or publicly owned
treatment works) of any Hazardous Materials or any
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substances that pose a hazard to human health or an impediment to working
conditions; (iii) the off-site disposal of Hazardous Materials originating on or
from the Real Property; or (iv) any violation of Environmental Laws at any part
of the Real Property or otherwise arising from the Company's or any Company
Subsidiary's activities involving Hazardous Materials.
SECTION 3.25 Y2K COMPLIANCE
(a) Each of the Company's and each Company Subsidiary's products
(including products currently under development): (i) will record, store,
process, calculate and present calendar dates falling on and after (and if
applicable, spans of time including) January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information dependent on or relating to such dates
(collectively, "Year 2000 Compliant"); (ii) will lose no functionality with
respect to the introduction of records containing dates falling on or after
January 1, 2000; and (iii) will be interoperable with other products used and
distributed by Company or each Company Subsidiary, as applicable, that may
reasonably deliver records to, receive records from, or interact with the
Company's or Company Subsidiary's products, including but not limited to back-up
and archived data.
(b) All of the Company's and each Company's Subsidiary's Information
Technology (as defined below) is Year 2000 Compliant, and will not cause an
interruption in the ongoing operations of the Company's or any Company
Subsidiary's business on or after January 1, 2000. For purposes of the
foregoing, the term "Information Technology" shall mean and include all
software, hardware, firmware, telecommunications systems, network systems,
embedded systems and other systems, components and/or services (other than
general utility services including gas, electric, telephone and postal) that are
owned or used by the Company or any Company Subsidiary in the conduct of its
business, or purchased by the Company or any Company Subsidiary from third party
suppliers.
SECTION 3.26 GOVERNMENT CONTRACTS AND OTHER COMMITMENTS
(a) With respect to any contracts with Governmental Entities and
subcontracts (at any tier) under prime contracts with Governmental Entities to
which Company or any Company Subsidiary is a party (collectively, "Government
Contracts"): (A) such Government Contracts constitute valid and binding
obligations of Company or a Company Subsidiary, and the other party or parties
thereto, enforceable in accordance with their terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or similar laws or
equitable principles relating to creditors' rights generally; (B) Company and
each Company Subsidiary is in compliance in all material respects with the terms
of all Government Contracts to which it is a party and all laws, regulations and
contract provisions applicable to the obtaining, formation, pricing,
performance, billing, administration and other aspects of its Government
Contracts, including without limitation the False Claims Act, False Statements
Act, and Truth in Negotiations Act, except for such non-compliance that does not
have a Company Material Adverse Effect; (C) none of Company, any Company
Subsidiary, or to the knowledge of Company, any other party has terminated,
canceled or waived any material term or condition of
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any such Government Contract; (D) the cost accounting, pricing, estimating,
property and procurement systems relating to Company's and any Company
Subsidiary's Government Contracts are in compliance in all material respects
with applicable laws regulations and contract provisions, including without
limitation procurement integrity laws and regulations, cost principles and cost
accounting standards; and (E) Company and each Company Subsidiary is in
compliance in all material respects with all national security obligations,
including, without limitation, those specified in the National Industrial
Security Program.
(b) With respect to the Government Contracts to which Company or any
Company Subsidiary is a party, except as is reserved for on the Company
Financial Statement: (A) each billed account receivable represents a bona fide
claim against the government for sales, services performed or other charges
arising on or prior to the date hereof, and all the products delivered and
services performed which gave rise to such accounts were delivered or performed
in accordance with the applicable Government Contracts; (B) to the best of
Company's knowledge, each such billed account receivable is subject to no
defense, counterclaim or right to setoff and is fully collectable in the
Ordinary Course of Business consistent with past practices without cost in
collection efforts therefor; and (C) all unbilled or unreserved amounts included
in accounts receivable will, in the Ordinary Course of Business as currently
conducted consistent with past practices, mature into and become billed accounts
receivable in the same or greater amount and such receivables, when billed, will
be fully collectable in the Ordinary Course of Business consistent with past
practices.
(c) With respect to the Government Contracts to which Company or any
Company Subsidiary is a party, none of such Government Contracts has incurred or
currently projects cost overruns in an amount exceeding $50,000.
(d) With respect to the Government Contracts to which Company or any
Company Subsidiary is a party, neither Company nor any Company Subsidiary has
assigned or otherwise conveyed or transferred, or agreed to assign, to any
Person, any Government Contracts to which it is a party, or any account
receivable relating thereto, whether as a security interest or otherwise.
(e) With respect to any Government Property provided to or acquired by
the Company or any Company Subsidiary pursuant to the Government Contracts: (A)
the approximate value of such Government Property as of the date hereof is
$934,272; and (B) there exists no material deviation between the Government
Property as provided to or acquired by the Company or any Company Subsidiary and
the Government Property as currently possessed by the Company and any Company
Subsidiary
(f) Neither Company nor any Company Subsidiary has received any formal
notice or other written communication from the federal government within the
last three (3) years regarding its actual or threatened disqualification,
suspension or debarment from contracting with the federal government and, to the
knowledge of Company, no action for which Company or any Company Subsidiary has
received such notice prior to the last three (3) years is pending.
(g) To the knowledge of Company, there is no: (A) pending or threatened
investigation for fraud or other misconduct relating to Government Contracts to
which Company or any Company Subsidiary is a party; (B) existing or threatened
claim, cost disallowance,
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pricing adjustment, or adverse audit finding relating to any Government
Contract to which Company or any Company Subsidiary is a party; or (C)
termination for default or cure notice or show cause notice currently in effect,
relating to any Government Contract to which Company or any Company Subsidiary
is a party.
SECTION 3.27 RELATIONS WITH GOVERNMENTS
Neither the Company, any Company Subsidiary nor, to the knowledge of the
Company, any of the Company's or any Company Subsidiary's officers, directors,
employees or agents (or Shareholders, distributors, representatives or other
persons acting on the express, implied or apparent authority of the Company or
any Company Subsidiary) have paid, given or received or have offered or promised
to pay, give or receive, any bribe or other unlawful payment of money or other
thing of value, any unlawful discount, or any other unlawful inducement, to or
from any person or Government Entity in the United States or elsewhere in
connection with or in furtherance of the business of the Company or any Company
Subsidiary (including, without limitation, any offer, payment or promise to pay
money or other thing of value (a) to any foreign official, political party (or
official thereof) or candidate for political office for the purposes of
influencing any act, decision or omission in order to assist the Company or any
Company Subsidiary in obtaining business for or with, or directing business to,
any person, or (b) to any person, while knowing that all or a portion of such
money or other thing of value will be offered, given or promised to any such
official or party for such purposes). Neither the business of the Company nor
any Company Subsidiary is in any manner dependent upon the making or receipt of
such payments, discounts or other inducements. Neither the Company nor any
Company Subsidiary has otherwise taken any action that would cause the Company
or any Company Subsidiary to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any applicable Laws of similar effect.
SECTION 3.28 BROKER'S FEES
Except as set forth in the Company Disclosure Letter, neither the Company nor
any Company Subsidiary has any liability or obligation to pay any fees or
commissions to any broker, finder, or similar agent with respect to the
transactions contemplated by this Reorganization Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
Except as specifically set forth in the Disclosure Letter delivered by Acquiror
and Acquiror Sub to Company prior to the execution and delivery of this
Reorganization Agreement (the "Acquiror Disclosure Letter") and referenced in
the Acquiror Disclosure Letter to the Section(s) of this Article IV to which
such disclosure applies, Acquiror and Acquiror Sub hereby jointly and severally
represent, warrant to and agrees with Company as follows, in each case as of the
date of this Reorganization Agreement and as of the Closing Date:
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SECTION 4.01 ORGANIZATION AND QUALIFICATION
Acquiror is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware, and has the full and unrestricted
corporate power and authority to own, operate and lease its Assets, to carry on
its business as currently conducted, to execute and deliver this Reorganization
Agreement and to carry out the transactions contemplated hereby. Acquiror Sub is
a corporation duly organized, validly existing and in good standing under
California Law, and has full and unrestricted corporate power and authority to
own, operate and lease its Assets, to carry on its business as currently
conducted, to execute and deliver this Reorganization Agreement and to carry out
the transactions contemplated hereby. Each of Acquiror and Acquiror Sub is duly
qualified to conduct business as a foreign corporation and is in good standing
in the states, countries and territories in which the nature of the business
conducted by it or the character of the Assets owned, leased or otherwise held
by it makes such qualification necessary, except where the failure to be so
qualified would not have an Acquiror Material Adverse Effect.
SECTION 4.02 RELIANCE ON FINANCIAL INFORMATION
Acquiror has relied on the financial statements of the Company for periods prior
to the Closing Date. Acquiror has made its own evaluation of the backlog of
revenues due under any contract of the Company. No reliance has been placed on
any financial projections or forward looking statements made by Company or
Company Shareholders.
SECTION 4.03 AUTHORITY; BINDING OBLIGATION
Each of Acquiror and Acquiror Sub has the full and unrestricted corporate power
and authority to execute and deliver this Reorganization Agreement and to carry
out the transactions contemplated hereby. The execution and delivery by Acquiror
and Acquiror Sub of this Reorganization Agreement and all other Agreements,
documents, certificates or other instruments contemplated hereby, and the
consummation by Acquiror and Acquiror Sub of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action,
and no other corporate proceedings on the part of Acquiror or Acquiror Sub are
necessary to authorize this Reorganization Agreement and the other Agreements,
documents, certificates or other instruments contemplated hereby, or to
consummate the transactions contemplated hereby and thereby. This Reorganization
Agreement has been duly executed and delivered by Acquiror and Acquiror Sub and
constitutes a legal, valid and binding obligation of Acquiror and Acquiror Sub,
enforceable in accordance with its terms, except as such enforceability may be
subject to the effect of any applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar Laws affecting creditors'
rights generally and subject to the effect of general equitable principles
(whether considered in a proceeding in equity or at law).
SECTION 4.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) The execution, delivery and performance by Acquiror and Acquiror
Sub of this Reorganization Agreement and all other Agreements, documents,
certificates or other
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instruments contemplated hereby, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by Acquiror and Acquiror Sub of the transactions contemplated
hereby and thereby, do not and will not: (i) conflict with, or violate any
provision of, the certificate of incorporation or the bylaws of Acquiror, or the
articles of incorporation or the bylaws of Acquiror Sub; (ii) subject to
obtaining the consents, approvals, authorizations and permits of, and making
filings with or notifications to, the applicable Governmental Entity pursuant to
the applicable requirements, if any, of the HSR Act and the filing and
recordation of the Agreement of Merger and the articles of merger as required by
California Law, conflict with or violate any Law applicable to Acquiror or
Acquiror Sub or any of their respective Assets; (iii) conflict with, result in
any breach of, constitute a default (or an event that with notice or lapse of
time or both would become a default) under any Agreement to which Acquiror or
Acquiror Sub is a party or by which Acquiror or Acquiror Sub or any of their
respective Assets may be bound; or (iv) result in or require the creation or
imposition of, or result in the acceleration of, any indebtedness or any
Encumbrance of any nature upon, or with respect to, Acquiror or Acquiror Sub;
except for any such conflict or violation described in clause (ii) above, any
such conflict, breach or default described in clause (iii) above, or any such
creation, imposition or acceleration described in clause (iv) above that would
not have an Acquiror Material Adverse Effect and that would not prevent Acquiror
or Acquiror Sub from consummating the Merger on a timely basis.
(b) The execution, delivery and performance by Acquiror and Acquiror
Sub of this Reorganization Agreement and all other Agreements, documents,
certificates or other instruments contemplated hereby, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by Acquiror and Acquiror Sub of the transactions contemplated
hereby and thereby, do not and will not: (i) require any consent, approval,
authorization or permit of, or filing with or notification to, any Person not
party to this Reorganization Agreement, except (A) pursuant to the applicable
requirements, if any, of the HSR Act, (B) the filing and recordation of the
Agreement of Merger and the articles of merger as required by California Law and
(C) where the failure to obtain any consent, approval, authorization or permit
or to make any filing or notification otherwise required to be disclosed
hereunder would not have an Acquiror Material Adverse Effect; or (ii) result in
or give rise to any penalty, forfeiture, Agreement termination, right of
termination, amendment or cancellation, or restriction on business operations of
Acquiror or Surviving Corporation that would have an Acquiror Material Adverse
Effect.
SECTION 4.05 NO PRIOR ACTIVITIES OF ACQUIROR SUB
Acquiror Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Reorganization Agreement and has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
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ARTICLE V
PRE-CLOSING COVENANTS
SECTION 5.01 CONDUCT OF BUSINESS OF COMPANY UNTIL EFFECTIVE TIME
The Company hereby covenants and agrees that, from the date of this
Reorganization Agreement until the Effective Time, Company, unless otherwise
expressly contemplated by this Reorganization Agreement or consented to in
writing by Acquiror, will, and will cause each Company Subsidiary to, carry on
their respective businesses only in the Ordinary Course of Business, use their
respective best efforts to preserve intact their business organizations and
Assets, maintain their rights and franchises, retain the services of their
officers and employees and maintain their relationships with customers,
suppliers, licensors, licensees and others having business dealings with them,
and use their respective best efforts to keep in full force and effect liability
insurance and bonds comparable in amount and scope of coverage to that currently
maintained. Without limiting the generality of the foregoing, neither Company
nor any Company Subsidiary will:
(a) (i) increase in any manner the compensation or fringe benefits of,
or pay any bonus to, any director, officer or employee; (ii) grant any severance
or termination pay (other than pursuant to the normal severance practices or
existing agreements of the Company in effect on the date of this Reorganization
Agreement) to, or enter into any severance agreement with, any director, officer
or employee, or enter into any employment agreement with any director, officer
or employee or otherwise without the prior written consent of Acquiror; (iii)
establish, adopt, enter into or amend any Company Benefit Plan or other
arrangement, except as may be required to comply with applicable Law; (iv) pay
any benefit not provided for under any Company Benefit Plan or other
arrangement; (v) grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or Company Benefit Plan or other
arrangement (including the grant of stock options, stock appreciation rights,
stock-based or stock-related awards, performance units or restricted stock, or
the removal of existing restrictions in any Company Benefit Plan or other
arrangement or agreement or awards made thereunder), (vi) take any action to
fund or in any other way secure the payment of compensation or benefits under
any agreement or (vii) promote or fire any director, officer or employee;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of capital
stock of the Company or any Company Subsidiary or any securities or obligations
convertible into or exchangeable for any shares of capital stock of the Company
or any Company Subsidiary, or any options, warrants or conversion or other
rights to acquire any shares of capital stock of the Company or any Company
Subsidiary or any such securities or obligations, or any other securities
thereof; (ii) effect any reorganization, recapitalization, merger or share
exchange; or (iii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock;
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(d) issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any limitations in voting
rights or other Encumbrances) of, any shares of any class of its capital stock
(including shares held in treasury but excluding shares issuable upon the
exercise of options outstanding on the date hereof in accordance with their
terms as of the date hereof), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to acquire,
any such shares, or amend or otherwise modify the terms of any such rights,
warrants or options the effect of which shall be to make such terms more
favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the Assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any Assets of any other person (other than the purchase of assets from
suppliers or vendors in the Ordinary Course of Business);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
subject to any Encumbrance or dispose of, or agree to sell, lease, exchange,
mortgage, pledge, transfer or otherwise subject to any Encumbrance or dispose
of, any of its Assets, except for sales, dispositions or transfers in the
Ordinary Course of Business;
(g) propose or adopt any amendments to its articles of incorporation,
bylaws or other comparable charter or organizational documents;
(h) make or rescind any express or deemed election relating to Taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes which would
reasonably be expected to result in a Company Material Adverse Effect, or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns;
(i) make or agree to make any new capital expenditures which are not
included in the Company's 2000 capital budget, a copy of which was furnished to
Acquiror, to the extent that such new capital expenditures exceed in the
aggregate $100,000;
(j) (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or any Company
Subsidiary, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any agreement having the economic effect of any of
the foregoing, except for borrowings incurred in the Ordinary Course of
Business, or (ii) make any loans, advances or capital contributions to, or
investments in, any other person other than travel and payroll advances made to
employees in the Ordinary Course of Business;
(k) pay, discharge, settle or satisfy any claims, liabilities or
obligations (whether absolute or contingent, matured or unmatured, known or
unknown), other than the payments, discharges or satisfactions, in the Ordinary
Course of Business which are materially in
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accordance with their terms, of liabilities reflected or reserved against in,
or contemplated by, the Company Financial Statement or waive any material
benefits of, or agree to modify in any material respect, any confidentiality,
standstill or similar agreements to which the Company or any Company Subsidiary
is a party;
(l) waive, release or assign any rights or claims, or modify, amend or
terminate any agreement to which the Company or any Company Subsidiary is a
party;
(m) make any change in any method of accounting or accounting practice
or policy other than those required by generally accepted accounting principles
or a Government Entity;
(n) take any action or fail to take any action that would have a
Company Material Adverse Effect prior to or after the Effective Time or a
material adverse effect after the Effective Time, or that would adversely affect
the ability of the Company or any Company Subsidiary prior to the Effective
Time, or Acquiror or any of its Subsidiaries after the Effective Time, to obtain
consents of third parties or approvals of Government Entities required to
consummate the transactions contemplated in this Agreement; or
(o) authorize, or commit or agree to do any of the foregoing.
SECTION 5.02 BEST EFFORTS TO SATISFY CONDITIONS
Acquiror and Company shall use their respective best efforts to cause all
conditions to the obligations of Acquiror and Company set forth in Article VII
of this Reorganization Agreement to be satisfied on or before the Closing Date.
SECTION 5.03 OTHER ACTIONS
Acquiror and Company shall not, and shall not permit any of their respective
Affiliates to, take any action that would, or that could reasonably be expected
to, result in (a) any of the representations and warranties of such Party set
forth in this Reorganization Agreement becoming untrue, or (b) any of the
conditions to the Merger set forth in Article VII of this Reorganization
Agreement not being satisfied.
SECTION 5.04 CERTAIN TAX MATTERS
From the date hereof until the Effective Time, Company and Company Subsidiary
(a) will prepare and timely file with the relevant Taxing authority all Company
Tax Returns required to be filed during such period ("Post-Signing Returns"),
which Post-Signing Returns shall be accurate in all material respects, or
permitted extensions with respect thereto, (b) will timely pay all Taxes due and
payable with respect to such Post-Signing Returns, (c) will pay or otherwise
make adequate provision for all Taxes payable by Company and Company Subsidiary
for which no Post-Signing Return is due prior to the Effective Time, and (d)
will promptly notify Acquiror of any action, suit, proceeding, claim or audit
pending against or with respect to Company or any Company Subsidiary in respect
of any Taxes.
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SECTION 5.05 ACCESS AND INFORMATION
For so long as this Reorganization Agreement is in effect, and subject to
applicable Laws, Company shall, and shall cause each Company Subsidiary to, (a)
afford to Acquiror and its officers, employees, accountants, consultants, legal
counsel and other representatives reasonable access during normal business
hours, subject to reasonable advance notice, to all of their respective
properties, Agreements, books, records and personnel and (b) furnish promptly to
Acquiror (i) a copy of each Agreement, document, certificate or other instrument
filed with, or received from any Governmental Entity and (ii) all other
information concerning their respective businesses, operations, prospects,
conditions (financial or otherwise), Assets, liabilities and personnel as
Acquiror may reasonably request.
SECTION 5.06 NOTIFICATION FILING REQUIRED UNDER HSR ACT
If required, the Parties shall make good faith efforts to complete and file
without delay, and in any event within thirty (30) days after the date of this
Reorganization Agreement, any notification filing required under the HSR Act
with respect to the transactions contemplated by this Reorganization Agreement.
The Parties shall in good faith take (or fully cooperate in the taking of) all
actions, and provide any additional information that may be, required or
reasonably requested in order to comply with the requirements of the HSR Act. If
a notification filing is required under the HSR Act, Acquiror and the Company
shall each pay half of all filings fees in connection therewith.
SECTION 5.07 ACCESS TO COMPANY AND COMPANY SUBSIDIARY INFORMATION
From the date hereof and through the Closing Date, Company shall, and shall
cause each Company Subsidiary and its accountants, counsel, investment bankers,
financial advisors, consultants and other representatives, to provide Acquiror
and Acquiror's accountants, counsel, investment bankers, financial advisors,
consultants and other representatives, upon reasonable notice, access to, and
make available, all books, contracts, records, reports, properties and
commitments of Company and each Company Subsidiary, including, without
limitation, Company's and each Company Subsidiary's tax returns and financial
statements, for Acquiror's use in connection with Acquiror's financing.
SECTION 5.08 EXON-FLORIO NOTICE; MITIGATION OF FOCI
(a) Acquiror promptly shall use reasonable, best efforts to obtain
confirmation from the staff of the Committee on Foreign Investment in the United
States ("CFIUS") that the Merger does not fall within the scope of transactions
for review under the "Exon-Florio" Amendment to the Defense Production Act, and,
if such confirmation is not obtained in a timely manner, Acquiror shall use its
reasonable, best efforts to prepare and file with CFIUS a notice under such
Amendment with respect to the Merger (the "Exon-Florio Notice") by February 15,
2000.
(b) If requested by any Governmental Entity in connection with its
consideration of the transactions contemplated by this Reorganization Agreement,
Acquiror shall agree to, and
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shall cause to be executed and delivered, reasonable Agreements or restrictions
designed to mitigate FOCI on Acquiror.
(c) Acquiror and Company shall use their respective reasonable, best
efforts, to obtain as soon as possible, and in any event prior to February 15,
2000, confirmation from the "Cognizant Agencies" (as such term is defined
herein) that they will not recommend that the Company's security clearances be
revoked, suspended or downgraded as a result of the Merger.
(d) For purposes of this Reorganization Agreement, the "Cognizant
Agencies" are: (i) the Defense Security Service of the Department of Defense;
(ii) the Chief, Counter Intelligence Acquisition Board of the Central
Intelligence Agency; (iii) the Chief, Security Policy Branch of the National
Reconnaissance Office; (iv) the Industrial Management Branch of the Federal
Bureau of Investigation; (v) the office in the National Security Agency
responsible for supervision of NISPOM compliance by contractors and
subcontractors of that Agency; and (vi) the office in the Drug Enforcement
Administration responsible for supervision of NISPOM compliance by contractors
and subcontractors of that Administration.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 SHAREHOLDER APPROVAL
Promptly after the date of this Reorganization Agreement, Company shall take all
additional action, if any, necessary in accordance with California Law and its
articles of incorporation and bylaws to secure the vote or consent of Company
Shareholders required by California Law to approve this Reorganization Agreement
and the transactions contemplated hereby. In all events, this Reorganization
Agreement shall be submitted to the Company Shareholders whether or not the
board of directors of the Company determines that this Reorganization Agreement
is no longer advisable and recommends that the Company Shareholders reject it.
SECTION 6.02 APPROPRIATE ACTION; CONSENTS; FILINGS
(a) Upon the terms and subject to the conditions set forth in this
Reorganization Agreement, the Parties shall use their reasonable best efforts to
take, or cause to be taken, all appropriate action, and do, or cause to be done,
all things necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the transactions contemplated by this
Reorganization Agreement as promptly as practicable, including without
limitation (i) executing and delivering any additional instruments necessary,
proper or advisable to consummate the transactions contemplated by, and to carry
out fully the purposes of, this Reorganization Agreement, (ii) obtaining from
any Governmental Entities any material Licenses required to be obtained or made
by Acquiror, or any of its Subsidiaries, or Company, or any Company Subsidiary,
in connection with the authorization, execution and delivery of this
Reorganization Agreement and the consummation of the transactions contemplated
herein, including, without limitation, the Merger, and (iii) making all
necessary filings, and thereafter making any other required submissions, with
respect to this Reorganization Agreement and the
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Merger required under (A) the HSR Act, (B) the Exon-Florio Amendment to the
Defense Production Act (if this transaction is determined by Acquiror to be
subject thereto) and the FOCI regulations of the Defense Security Service and
(C) any other applicable Law; PROVIDED that Acquiror and Company shall cooperate
with each other in connection with the making of all such filings, including
providing copies of all such documents to the non-filing Party and its advisors
prior to filing and discussing all reasonable additions, deletions or changes
suggested in connection therewith. Company and Acquiror shall furnish to each
other all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable Law in connection with
the transactions contemplated by this Reorganization Agreement.
(b) (i) Except as the Parties may otherwise agree, Company, each
Company Shareholder and Acquiror shall give (and, in the case of Company, shall
cause each Company Subsidiary to give, and, in the case of Acquiror, shall cause
its Subsidiaries to give) any notices to third parties, and use (and, in the
case of Company, shall cause each Company Subsidiary to use, and, in the case of
Acquiror, shall cause its Subsidiaries to use) their reasonable best efforts to
obtain any third-party consents, approvals or waivers (A) necessary, proper or
advisable to consummate the transactions contemplated in this Reorganization
Agreement, (B) disclosed or required to be disclosed in the Company Disclosure
Letter or the Acquiror Disclosure Letter, as the case may be, or (C) required to
prevent a Company Material Adverse Effect or an Acquiror Material Adverse
Effect.
(ii) In the event that either Company, any Company Shareholder
or Acquiror shall fail to obtain any third-party consent, approval or waiver
described in Section 6.02(b)(i) of this Reorganization Agreement, such Party
shall use its reasonable best efforts, and shall take any such actions
reasonably requested by the other Parties, to minimize any adverse effect upon
Company or any Company Subsidiary and Acquiror or its Subsidiaries and their
respective businesses resulting, or which could reasonably be expected to result
after the Effective Time, from the failure to obtain such consent, approval or
waiver.
(c) From the date of this Reorganization Agreement until the Effective
Time, Company, each Company Shareholder and Acquiror shall promptly notify each
other in writing of any pending or, to the knowledge of Company or any Company
Subsidiary or Acquiror or any one of its Subsidiaries, threatened action,
proceeding or investigation by any Governmental Entity or any other Person (i)
challenging or seeking damages in connection with the Merger or the conversion
of Company Common Stock into the Merger Consideration pursuant to the Merger or
the transactions contemplated hereunder or (ii) seeking to restrain or prohibit
the consummation of the Merger or the transaction contemplated hereunder or
otherwise limit the right of Acquiror or its Subsidiaries to own or operate all
or any portion of the businesses or Assets of Company or any Company Subsidiary.
Company and Acquiror shall cooperate with each other in defending any such
action, proceeding or investigation, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed.
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SECTION 6.03 DISCLOSURE
Prior to the Effective Time, each Party shall notify the other Parties
by written update to its respective Disclosure Letter of (i) any representation
or warranty made by it in connection with this Reorganization Agreement becoming
untrue or inaccurate, (ii) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which would be likely to cause any condition to
the obligations of any Party to effect the Merger and the other transactions
contemplated by this Reorganization Agreement not to be satisfied or (iii) the
failure of Company, any Company Subsidiary, Acquiror or Acquiror Sub, as the
case may be, to comply with or satisfy any covenant, condition or Agreement to
be complied with or satisfied by it pursuant to this Reorganization Agreement
which would be likely to result in any condition to the obligations of any Party
to effect the Merger and the other transactions contemplated by this
Reorganization Agreement not to be satisfied; PROVIDED, HOWEVER, the delivery of
any notice pursuant to this Section 6.03(a) shall not cure any breach of any
representation or warranty requiring disclosure of such matter as of the date of
this Reorganization Agreement or otherwise limit or affect the rights and
remedies available hereunder to the Party receiving such notice.
SECTION 6.04 PUBLIC ANNOUNCEMENTS
Acquiror, Acquiror Sub and Company shall consult with each other before issuing
or making, and shall give each other the opportunity to review and comment upon,
any press release or other public statement with respect to the Merger and the
other transactions contemplated in this Reorganization Agreement, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by Law or any applicable listing
agreements.
SECTION 6.05 OBLIGATIONS OF ACQUIROR SUB
Acquiror shall take all action necessary to cause Acquiror Sub to perform its
obligations under this Reorganization Agreement and to consummate the Merger on
the terms and conditions set forth in this Reorganization Agreement.
SECTION 6.06 TRANSACTION EXPENSES
Except as set forth in Section 5.06 of this Reorganization Agreement (relating
to the payment of filing fees in connection with any notification filings under
the HSR Act), each Party to this Reorganization Agreement shall bear their own
expenses in connection herewith, including, without limitation, the fees of each
Party's respective legal counsel, financial advisors, accountants, brokers,
finders or investment bankers, but in no event shall such fees and expenses
(including, without limitation, the fees and expenses described in Section 3.28
of the Company Disclosure Letter) incurred by or on behalf of the Company exceed
$190,000 (the "Transaction Expenses"). In the event Acquiror or Acquiror Sub
shall pay any such expenses of Company or any Company Subsidiary following the
Closing, Acquiror or Acquiror Sub shall be entitled to offset any such expenses
an offset against the outstanding amount of principal and accrued but unpaid
interest under the Indemnification Promissory Note in the same manner as set
forth in
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Article IX of this Reorganization Agreement. In the event that the Transaction
Expenses are not paid prior to Closing, Acquiror agrees to promptly pay such
Transaction Expenses after Closing.
SECTION 6.07 KEY EMPLOYEES
Key Employees of the Company and any Company Subsidiary who continue to be
employed with the Surviving Corporation following the Merger, shall, during the
term of their employment, (i) be eligible to participate in Acquiror's incentive
compensation program, and will have the opportunity to participate in the
Acquiror's stock option plan, on terms consistent with similarly situated
employees of the Acquiror and its Affiliates and (ii) be entitled to receive a
portion of a $1,000,000 retention bonus pool which shall be payable upon terms
and conditions agreed upon by Acquiror and the Principal Stockholder, prior to
Closing.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
REORGANIZATION AGREEMENT
The respective obligations of each Party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived by agreement of Acquiror and Company, in whole or in part, to the
extent permitted by applicable Law:
(a) SHAREHOLDER APPROVAL. This Reorganization Agreement and the Merger
shall have been approved and adopted by the requisite vote or consent of Company
Shareholders.
(b) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in any
case which is in effect and which prevents or prohibits consummation of the
Merger; PROVIDED, HOWEVER, that the Parties shall use their reasonable best
efforts to cause any such decree, judgment, injunction or other order to be
vacated or lifted; PROVIDED, FURTHER, that the failure to obtain a required
consent or approval of a Governmental Entity (other than that specified in
Section 7.01(c)) of this Reorganization Agreement shall not form the basis for
an assertion that this condition is not satisfied.
(c) HSR ACT. The applicable waiting period with respect to the Merger
and the other transactions contemplated hereby, together with any extensions
thereof, under the HSR Act shall have expired or been terminated.
(d) COMPANY SECURITIES. Except as set forth in the Company Disclosure
Letter, there shall be no other securities of Company outstanding that are
securities convertible into or exchangeable for Company Common Stock or any
other equity securities of Company and no
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outstanding options, rights (preemptive or otherwise), or warrants to purchase
or to subscribe for any shares of such stock or other equity securities of
Company.
(e) EXON-FLORIO; COGNIZANT AGENCY CONFIRMATION. (i) If an Exon-Florio
Notice shall have been filed as provided in Section 5.10(a), the thirty (30) day
notice period shall have expired or been earlier terminated without a
recommendation by CFIUS that a formal investigation of the Merger be commenced;
or (ii) if an Exon-Florio Notice shall not have been filed as provided in
Section 5.10(a), confirmation shall have been obtained from the Cognizant
Agencies that they will not recommend that the Company's security clearances be
revoked, suspended or downgraded as a result of the Merger, PROVIDED that if all
such confirmations are not obtained by February 15, 2000, Acquiror shall
consider, in good faith, whether to waive this condition with respect to
agencies with which the Company has contracts or subcontracts that Acquiror does
not consider to be material to the business of the Company.
SECTION 7.02 Additional Conditions to Obligations of Acquiror and Acquiror Sub
The obligations of Acquiror and Acquiror Sub to effect the Merger and the other
transactions contemplated in this Reorganization Agreement are also subject to
the satisfaction at or prior to the Effective Time of the following conditions,
any or all of which may be waived by Acquiror, in whole or in part, to the
extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Company contained in this Reorganization Agreement shall be true
and correct as of the date of this Reorganization Agreement and shall be true
and correct (except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall be true and
correct in all respects giving effect to such standard) as of the Effective Time
as though made as of the Effective Time, except for (i) representations and
warranties which address matters only as of a particular date, which
representations and warranties shall be true and correct in all material
respects (except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall be true and
correct in all respects giving effect to such standard) as of such date and (ii)
changes permitted by or consistent with this Reorganization Agreement. Acquiror
shall have received a certificate of the chief executive officer or chief
financial officer of Company to the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Company shall have performed or complied
in all respects with all Agreements and covenants required by this
Reorganization Agreement to be performed or complied with by Company on or prior
to the Effective Time. Acquiror shall have received a certificate of the chief
executive officer or chief financial officer of Company (as to Company) to that
effect.
(c) OPINION OF COUNSEL. Acquiror shall have received from Rosenberg,
Herfel, Stethem & Bender, LLP, counsel to Company, an opinion dated the Closing
Date, which is reasonable and customary for transactions of the type
contemplated by this Reorganization Agreement.
(d) NO CHALLENGE. There shall not be pending any enforcement action or
similar proceeding by any state or federal Governmental Entity that is likely to
have a Company Material
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Adverse Effect or, if such action arises in connection with the transactions
contemplated hereby, an Acquiror Material Adverse Effect. Acquiror shall have
received a certificate of the chief executive officer or chief financial officer
of Company to the foregoing effect.
(e) COMPANY MATERIAL ADVERSE EFFECT. Since June 30, 1999, there shall
not have occurred a Company Material Adverse Effect (or any development that,
insofar as reasonably can be foreseen, is reasonably likely to result in any
Company Material Adverse Effect) not disclosed in the Company Disclosure Letter
as of the date hereof. Acquiror shall have received a certificate of the chief
executive officer or chief financial officer of Company to the foregoing effect.
(f) CONSENTS: Company and Company Subsidiary shall have procured all
consents of third-parties and Governmental Entities specified in Section 3.06 of
the Company Disclosure Letter. Acquiror shall have received a certificate of the
chief executive officer or chief financial officer of Company to the foregoing
effect.
(g) ESTIMATE OF CASH ADJUSTMENT AS OF CLOSING DATE. Acquiror shall have
received from Company five (5) days prior to the Closing Date an estimate of the
Cash Adjustment of the Company estimated as of the Closing Date and prepared on
a good faith basis. The Parties acknowledge and agree that the amounts set forth
on such estimate shall be used in computing the Adjusted Merger Amount.
(h) INDEMNIFICATION PROMISSORY NOTE. Acquiror shall have delivered to
the Company Shareholders a promissory note in substantially the form attached
hereto as EXHIBIT C (the "Indemnification Promissory Note").
SECTION 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY
The obligations of Company to effect the Merger and the other transactions
contemplated by this Reorganization Agreement are also subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived by Company, in whole or in part, to the extent
permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Acquiror and Acquiror Sub contained in this Reorganization
Agreement shall be true and correct as of the date of this Reorganization
Agreement and shall be true and correct (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving effect to such
standard) as of the Effective Time as though made as of the Effective Time,
except for (i) representations and warranties which address matters only as of a
particular date, which representations and warranties shall be true and correct
in all material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects giving effect to such standard) as of such date
and (ii) changes permitted by or consistent with this Reorganization Agreement.
Company shall have received a certificate of the chief executive officer or
chief financial officer of Acquiror to the foregoing effect.
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(b) AGREEMENTS AND COVENANTS. Acquiror and Acquiror Sub shall have
performed or complied in all respects with all Agreements and covenants required
by this Reorganization Agreement to be performed or complied with by them on or
prior to the Effective Time except for such noncompliance that does not have an
Acquiror Material Adverse Effect. Company shall have received a certificate of
the chief executive officer or chief financial officer of Acquiror and Acquiror
Sub to that effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 TERMINATION
This Reorganization Agreement may be terminated at any time (except where
otherwise indicated) prior to the Effective Time, whether before or after
approval of this Reorganization Agreement and the Merger by Company
Shareholders:
(a) by mutual written consent of Acquiror and Company;
(b) (i) by Acquiror, if any of the conditions provided in Section 7.02
have not been met and such failure has not been cured within twenty (20)
business days following receipt by Company of written notice of such failure
describing the extent and nature thereof in reasonable detail, or to the extent
permitted by applicable law, such conditions have not been waived in writing by
Acquiror;
(ii) by Company and the Company Shareholder, if any of the
conditions provided in Section 7.03 have not been met and such failure has
not been cured within twenty (20) business days following receipt by Acquiror
of written notice of such failure describing the extent and nature thereof in
reasonable detail, or, to the extent permitted by applicable law, such
conditions have not been waived in writing by Company and the Company
Shareholder.
(c) by either Acquiror or Company and the Company Shareholder if any
decree, permanent injunction, judgment, order or other action by any court of
competent jurisdiction or any other federal or state (but not county or
municipal) Governmental Entity preventing or prohibiting consummation of the
Merger shall have been filed or in effect;
(d) by either Acquiror or Company if the Merger shall not have been
consummated by the earlier to occur of the Scheduled Closing Date or April 15,
2000; PROVIDED HOWEVER, that the right to terminate this Reorganization
Agreement under this Section 8.01(d) shall not be available to (i) Acquiror,
where Acquiror's failure to fulfill any obligation under this Reorganization
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date, or (ii) Company, where Company's or any
Company Shareholder's failure to fulfill any obligation under this
Reorganization Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date;
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(e) by either Acquiror, or Company and the Company Shareholders, if any
of the conditions provided in Section 7.01 have not been met, or to the extent
permitted by applicable law, have not been waived by both Parties.
SECTION 8.02 EFFECT OF TERMINATION
In the event of termination of this Reorganization Agreement by either Acquiror
or Company as provided in Section 8.01 of this Reorganization Agreement, this
Reorganization Agreement shall forthwith become void and there shall be no
liability or obligation on the part of the Company Shareholder, Acquiror,
Acquiror Sub or Company or any of their respective directors or officers except
(i) nothing herein shall relieve any Party from liability for any breach hereof,
(ii) each Party shall be entitled to any remedies at law or in equity for such
breach and (iii) Sections 6.08 and 8.02 and Article IX of this Reorganization
Agreement shall remain in full force and effect and survive any termination of
this Reorganization Agreement.
SECTION 8.03 [INTENTIONALLY OMITTED]
SECTION 8.04 AMENDMENT
Subject to applicable Law, this Reorganization Agreement may be amended by the
Parties at any time prior to the Effective Time. This Reorganization Agreement
may not be amended except by an instrument in writing signed by the Parties.
SECTION 8.05 EXTENSION; WAIVER
At any time prior to the Effective Time, the Parties may (a) extend the time for
the performance of any of the obligations or other acts of the other Parties,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any Agreements, documents, certificates or other instruments
delivered pursuant hereto and (c) waive compliance with any of the Agreements or
conditions contained in this Reorganization Agreement. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
Party or Parties to be bound thereby. The failure of any Party to assert any of
its rights under this Reorganization Agreement or otherwise shall not constitute
a waiver of such rights.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; REMEDIES
SECTION 9.01 SURVIVAL OF REPRESENTATIONS
All representations, warranties, covenants, indemnities and other agreements
made by any party to this Reorganization Agreement herein, shall be deemed made
on and as of the Effective Time as though such representations, warranties,
covenants, indemnities and other agreements were
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made on and as of such date, and all such representations, warranties,
covenants, indemnities and other agreements shall survive for a period of
twelve (12) months after the Effective Time; PROVIDED, HOWEVER, that the
representations set forth in Section 3.05 (Authority; Binding Obligation),
Section 3.15 (Pension and Benefit Plans), Section 3.16 (Taxes and Tax Matters)
and Section 3.24 (Environmental Matters) shall survive until the expiration of
the applicable statute of limitations. Notwithstanding anything herein to the
contrary, any representation, warranty, covenant, agreement or indemnity which
is the subject of a claim which is asserted in writing prior to the expiration
of the applicable period set forth above shall survive solely with respect to
such claim until the final resolution thereof.
SECTION 9.02 INDEMNIFICATION BY PRINCIPAL SHAREHOLDER; RIGHT TO OFFSET
(a) The Principal Shareholder (and the other Company Shareholders only
to the extent of their interest in the Indemnification Promissory Note) hereby
agrees indemnify, defend and hold Acquiror, the Surviving Corporation and their
respective officers and directors, and each person, if any, who controls or may
control Acquiror or the Surviving Corporation within the meaning of the
Securities Act (all such persons hereinafter are referred to individually as an
"Acquiror Indemnified Person" and collectively as "Acquiror Indemnified
Persons," but in no event shall any Shareholder of the Company prior to the
Effective Time be such an Acquiror Indemnified Person) harmless against all
Losses resulting from, imposed upon or incurred by any Acquiror Indemnified
Person, directly or indirectly, as a result of any of the following, anything in
this Reorganization Agreement to the contrary notwithstanding:
(i) any inaccuracy or breach of a representation or warranty
of the Company given or made by the Company in this Reorganization Agreement, in
the Agreement of Merger or in the Company Disclosure Letter or in any
certificate, document or agreement delivered by or on behalf of the Company
pursuant hereto; and
(ii) any failure by the Company to perform or comply with any
covenant or agreement contained in this Reorganization Agreement, in the
Agreement of Merger or in the Company Disclosure Letter or in any certificate,
document or agreement delivered by or on behalf of the Company pursuant hereto.
(b) Notwithstanding anything in this Reorganization Agreement to the
contrary, the Principal Shareholder shall not be responsible for any Loss
pursuant to this Section 9.02 unless and until the aggregate amount of all of
such Losses shall exceed $100,000, in which case the Principal Shareholder shall
be liable for the entire Loss including the $100,000. In the event, from time to
time, any Acquiror Indemnified Person determines that it has suffered a Loss for
which indemnification is available pursuant to this Article IX, the following
procedure shall be followed:
(i) Acquiror Indemnified Person shall give written notice of
any such claim (a "Loss Notice") to the Shareholder Representative specifying in
reasonable detail the amount of the claimed Loss (the "Loss Amount") and the
basis for such Loss and that the Acquiror intends to offset against the
aggregate outstanding amount of principal and accrued but unpaid interest under
the Indemnification Promissory Note the amount of any such Loss.
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(ii) Within twenty (20) days after delivery of a Loss Notice,
the Shareholder Representative shall provide to Acquiror and the Acquiror
Indemnified Person (if not the same Person), a written response (a "Response
Notice") in which the Shareholder Representative will (i) agree that an offset
in the full Loss Amount may be made against the Indemnification Promissory Note,
(ii) agree that an offset in an amount equal to part, but not all, of the Loss
Amount (the "Agreed Amount") may be made against the Indemnification Promissory
Note or (iii) contest making any offset against the Indemnification Promissory
Note. The Shareholder Representative may contest an offset against the
Indemnification Promissory Note upon a good faith belief that all or such
portion of such offset does not constitute a Loss for which the Acquiror
Indemnified Person is entitled to indemnification under this Article IX. If no
Response Notice is delivered by the Shareholder Representative within such
twenty (20) day period, the Principal Shareholder shall be deemed to have agreed
that an offset in the full Loss Amount may be made against the Indemnification
Promissory Note.
(iii) If the Shareholder Representative in the Response Notice
agrees (or is deemed to have agreed) that an offset may be made against the
Indemnification Promissory Note in an amount equal to the Loss Amount, the
Acquiror may, promptly following the earlier of the required delivery date of
the Response Notice or the delivery of the Response Notice, cause an offset in
the amount of the Loss Amount to be made to the Indemnification Promissory Note.
(iv) If the Shareholder Representative in the Response Notice
agrees that an offset in an amount equal to part, but not all, of the Loss
Amount (the "Agreed Amount") may be made against the Indemnification Promissory
Note, the Acquiror may, promptly following the earlier of the required delivery
date of the Response Notice or the delivery of the Response Notice, cause an
offset in the amount of the Agreed Amount to be made to the Indemnification
Promissory Note.
(v) If the Shareholder Representative in the Response Notice
contests an offset against the Indemnification Promissory Note equal to all or
any part of the Loss Amount (the "Contested Amount"), the Acquiror Indemnified
Person and the Shareholder Representative shall negotiate in good faith to
resolve any such dispute. If any such dispute cannot be resolved within fifteen
(15) days after the receipt by the Acquiror of the Response Notice, the Acquiror
Indemnified Person and the Shareholder Representative shall submit the matter to
the Los Angeles, CA office of the American Arbitration Association ("AAA") for
binding arbitration to be conducted in accordance with the AAA commercial
arbitration rules in effect at the time such matter is submitted. If any such
matter is submitted to the AAA as provided herein, (A) each of the Acquiror
Indemnified Person and the Shareholder Representative will furnish to AAA such
workpapers and other documents and information as AAA may request and will be
afforded the opportunity to present to AAA any material relevant to the matter,
(B) the determination by AAA, as set forth in a notice delivered to the Acquiror
Indemnified Person and the Shareholder Representative by AAA, will be binding
and conclusive on such parties and (iii) the Acquiror Indemnified Person and the
Principal Shareholder will each bear fifty percent (50%) of the fees of the AAA
for such determination.
(c) The indemnity obligations of the Principal Shareholder (and the
other Company Shareholders) under this Article IX shall first be satisfied
through the exercise by the Acquiror of the right of offset against the
aggregate outstanding amount of principal and accrued but unpaid
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interest under the Indemnification Promissory Note. The principal amount and
accrued but unpaid interest under the Indemnification Promissory Note shall
in no way be deemed to be a limitation on the recourse available to any Acquiror
Indemnified Person for the indemnification obligations of the Principal
Shareholder hereunder. Following its exhaustion of its offset rights as set
forth above, Acquiror shall have the right to enforce the indemnity obligations
of the Principal Shareholder under this Article IX through an action in a court
of competent jurisdiction.
(d) The exercise of such right of offset by Acquiror in good faith,
whether or not ultimately determined to be justified, will not constitute a
breach of this Reorganization Agreement. Neither the exercise of nor the failure
to exercise such right of offset will constitute an election of remedies or
limit Acquiror in any manner in the enforcement of any other remedies available
to Acquiror.
(e) No Acquiror Indemnified Person shall be entitled to recover any
special, consequential or exemplary damages under this Section 9.02 or any
damages based on an adverse effect on Acquirer's stock price. The amount of any
Loss shall be reduced to the extent that the Acquiror Indemnified Person
receives any insurance proceeds with respect to a Loss.
SECTION 9.03 THIRD PARTY CLAIMS.
The obligations and liabilities of the Principal Shareholders with respect to
their respective indemnities pursuant to this Article IX, resulting from any
Third Party Claim shall be subject to the following terms and conditions:
(a) The party seeking indemnification (the "Indemnified Party") must
give the party obligated to indemnify (the "Indemnifying Party"), notice of any
Third Party Claim which is asserted against, resulting to, imposed upon or
incurred by the Indemnified Party and which may give rise to liability of the
Indemnifying Party pursuant to this Article IX, stating (to the extent known or
reasonably anticipated) the nature and basis of such Third Party Claim and the
amount thereof; PROVIDED that the failure to give such notice shall not affect
the rights of the Indemnified Party hereunder except to the extent (i) that the
Indemnifying Party shall have suffered actual damage by reason of such failure,
or (ii) such failure or delay materially adversely affects the ability of the
Indemnifying Party to defend, settle or compromise such Third Party Claim.
(b) Subject to Section 9.03(c) below, if the Indemnifying Party assumes
responsibility for Losses arising out of such Third Party Claim, then the
Indemnifying Party shall have the right to undertake, by counsel or other
representatives of its own choosing, the defense of such Third Party Claim at
the Indemnifying Party's risk and expense.
(c) In the event that (i) the Indemnifying Party shall elect not to
undertake such defense, (ii) within a reasonable time after notice from the
Indemnified Party of any such Third Party Claim, the Indemnifying Party shall
fail to undertake to defend such Third Party Claim, or (iii) there is a
reasonable probability that such Third Party Claim may materially and adversely
affect the Indemnified Party other than as a result of money damages or other
money payments, then the Indemnified Party (upon further written notice to the
Indemnifying Party) shall have the right to undertake the defense, compromise or
settlement of such Third Party Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the
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Indemnifying Party. In the event that the Indemnified Party undertakes the
defense of a Third Party Claim under this Section 9.03, the Indemnifying Party
shall pay to the Indemnified Party, in addition to the other sums required to be
paid hereunder, the reasonable costs and expenses incurred by the Indemnified
Party in connection with such defense, compromise or settlement as and when such
costs and expenses are so incurred.
(d) Anything in this Section 9.03 to the contrary notwithstanding, (i)
neither the Indemnified Party nor the Indemnifying Party shall, without the
other party's written consent (which consent shall not be unreasonably withheld
or delayed), settle or compromise such Third Party Claim or consent to entry of
any judgment which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such Third Party Claim in form and substance
satisfactory to the Indemnified Party; (ii) in the event that a party hereto
undertakes defense of such Third Party Claim in accordance with this Section
9.03, the other parties, by counsel or other representative of their own
choosing and at their sole cost and expense, shall have the right to participate
in the defense, compromise or settlement thereof and each party and its counsel
and other representatives shall cooperate with the other party and its counsel
and representatives in connection therewith; and (iii) the party that undertakes
the defense of such Third Party Claim in accordance with this Section 9.03 shall
have an obligation to keep the other parties informed of the status of the
defense of such Third Party Claim and furnish the other parties with all
documents, instruments and information that the other parties shall reasonably
request in connection therewith.
SECTION 9.04 NO RECOURSE AGAINST THE COMPANY
The Company Shareholders including, without limitation, the Principal
Shareholders, each hereby irrevocably waives any and all right to recourse
against the Company and the Surviving Corporation with respect to any
misrepresentation or breach of any representation, warranty or indemnity, or
noncompliance with any conditions or covenants, given or made by the Company in
this Reorganization Agreement or any other agreements and documents executed or
to be executed by the Parties hereto in order to consummate the transactions
contemplated by this Reorganization Agreement. No Company Shareholder,
including, without limitation, the Principal Shareholder, shall be entitled to
contribution from, subrogation to or recovery against the Company or the
Surviving Corporation with respect to any liability of any Company Shareholder,
including, without limitation, the Principal Shareholder, that may arise under
or pursuant to this Reorganization Agreement or any of the other agreements and
documents executed or to be executed by the Parties hereto in order to
consummate the transactions contemplated by this Reorganization Agreement or
such other agreements and documents contemplated hereby.
SECTION 9.05 REMEDIES CUMULATIVE
Subject to the limitations and qualifications set forth in this Article IX, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by the parties hereto of any other rights or the seeking of any other
remedies against the other parties, or their respective successors or assigns.
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 NOTICES
All notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) or sent by
overnight courier (providing proof of delivery) to the Parties at the following
addresses or sent by electronic transmission to the following facsimile numbers
(or at such other address or facsimile number for a Party as shall be specified
by like notice):
(a) If to Acquiror or Acquiror Sub:
The Titan Corporation
3033 Science Park Road
San Diego, California 92121
Facsimile: (619) 552-9759
Attention: Nicholas J. Costanza, Esq.,
With a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
8300 Greensboro Drive, Suite 1100
McLean, Virginia 22102
Facsimile: (703) 610-6200
Attention: Richard K.A. Becker, Esq.
(b) If to Company or the Principal Shareholder:
William C. Lindsey, Inc.
5110 Goldleaf Circle, Ste. 250
Los Angeles, California 90056
Facsimile: (323) 293-3063
Attention: Dr. William C. Lindsey
With a copy (which shall not constitute notice) to:
Rosenberg, Herfel, Stethem & Bender, LLP
600 Vine Street, Suite 1800
Cinncinatti, Ohio 45202
Facsimile: (513) 763-7694
Attention: James H. Stethem, Esq.
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With a copy (which shall not constitute notice) to:
Law Office of Morton C. Devor
12400 Wilshire Blvd., Ste 1455
Los Angeles, CA 90025
Facsimile: (310) 207-8339
Attention: Morton C. Devor, Esq.
(c) If to Shareholders' Representative:
Dr. William C. Lindsey
1430 Mariana Drive
Pasadena, CA 91105
SECTION 10.02 HEADINGS
The headings contained in this Reorganization Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Reorganization Agreement.
SECTION 10.03 SEVERABILITY
If any term or other provision of this Reorganization Agreement is invalid,
illegal or incapable of being enforced by any rule of Law or public policy, all
other conditions and provisions of this Reorganization Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Reorganization Agreement so as to effect
the original intent of the Parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 10.04 ENTIRE AGREEMENT
This Reorganization Agreement (together with the Exhibits, Schedules, the
Company Disclosure Letter and the Acquiror Disclosure Letter and the other
documents delivered pursuant hereto) constitute the entire agreement of the
Parties and supersede all prior agreements and undertakings, both written and
oral, among the Parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly provided herein, are not intended to
confer upon any other Person any rights or remedies hereunder.
SECTION 10.05 ASSIGNMENT
Neither this Reorganization Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the Parties hereto (whether by
operation of Law or otherwise) without the prior written consent of the other
Parties; PROVIDED, HOWEVER, that Acquiror and Acquiror Sub shall have the right
to assign this Reorganization Agreement without the prior written consent of
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the Company to a direct or indirect Subsidiary of the Acquiror, but no such
assignment shall relieve Acquiror or Acquiror Sub, as the case may be, of its
obligations hereunder. Subject to the preceding sentence, this Reorganization
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and assigns.
SECTION 10.06 PARTIES IN INTEREST
This Reorganization Agreement shall be binding upon and inure solely to the
benefit of each Party, and nothing in this Reorganization Agreement, express or
implied, other than the right to receive the Merger Consideration pursuant to
Article II of this Reorganization Agreement and the rights of the Acquiror
Indemnified Person pursuant to Article IX, is intended to or shall confer upon
any other Person any right, benefit or remedy of any nature whatsoever under or
by reason of this Reorganization Agreement.
SECTION 10.07 MUTUAL DRAFTING
Each Party has participated in the drafting of this Reorganization Agreement,
which each Party acknowledges is the result of extensive negotiations between
the Parties. Consequently, this Reorganization Agreement shall be interpreted
without reference to any rule or precept of law that states that any ambiguity
in a document be construed against the drafter.
SECTION 10.08 GOVERNING LAW
This Reorganization Agreement shall be governed by, and construed in accordance
with, the Laws of the State of Delaware, regardless of the Laws that might
otherwise govern under applicable principles of conflicts of law; PROVIDED,
HOWEVER, the provisions of this Reorganization Agreement relating to the Merger
shall be governed by California Law.
SECTION 10.09 COUNTERPARTS
This Reorganization Agreement may be executed and delivered in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed and delivered shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
SECTION 10.10 SINGULAR AND PLURAL
Any reference in this Reorganization Agreement to the singular includes a
reference to the plural and VICE VERSA.
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ARTICLE XI
DEFINITIONS
For purposes of this Reorganization Agreement, the following terms, and
the singular and plural thereof, shall have the meanings set forth below:
"Acquiror" is defined in the Preamble to this Reorganization Agreement.
"Acquiror Audited Balance Sheet" is defined in Section 4.07(a) of this
Reorganization Agreement.
"Acquiror Financial Statement" is defined in Section 4.07(a) of this
Reorganization Agreement.
"Acquiror Disclosure Letter" is defined in Article IV of this
Reorganization Agreement.
"Acquiror Material Adverse Effect" means any event, change or effect
that, individually or when taken together with any related events, is or is
reasonably likely to be materially adverse to the business, operations,
condition (financial or otherwise), Assets or liabilities of Acquiror and its
Subsidiaries, taken as a whole.
"Acquiror Sub" is defined in the Preamble to this Reorganization
Agreement.
"Adjusted Merger Consideration" means an amount equal to (a) the
Adjusted Merger Amount, MINUS (b) the Holdback Consideration, MINUS (c) the
principal amount of the Indemnification Promissory Note.
"Adjusted Merger Amount" means an amount equal to (a) Twenty Three
Million Dollars ($23,000,000), MINUS (or, PLUS) (b) the Cash Adjustment. For
purposes of computing the Adjusted Merger Amount, the Cash Adjustment, shall be
determined by reference to the estimate to be delivered to the Acquiror pursuant
to Section 7.02(g) of this Reorganization Agreement.
"Affiliate" means: (a) with respect to an individual, any member of
such individual's family; (b) with respect to an entity, any officer, director,
Shareholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a Person, any Person which directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with such Person or entity.
"Agreement" means any agreement between or among two or more Persons
with respect to their relative rights and/or obligations or with respect to a
thing done or to be done, including, without limitation, agreements denominated
as contracts, leases, promissory notes, covenants, easements, rights of way,
commitments, arrangements and understandings.
"Agreement of Merger" is defined in Section 1.02 of this Reorganization
Agreement.
"Assets" means assets of every kind and everything that is or may be
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
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"business day" means a day other than a Saturday, a Sunday or any other
day on which commercial banks in the Commonwealth of Virginia are authorized or
obligated to be closed.
"California Law" is defined in the Preamble to this Reorganization
Agreement.
"Cash Consideration" is defined in Section 2.02(a)(i) of this
Reorganization Agreement.
"Certificate" is defined in Section 2.02(b) of this Reorganization
Agreement.
"Closing Adjustment" is defined in Section 2.05(b) of this
Reorganization Agreement.
"Closing Date" is defined in Section 1.02 of this Reorganization
Agreement.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Cognizant Agencies" is defined in Section 5.10(d) of this
Reorganization Agreement.
"Company" is defined in the Preamble to this Reorganization Agreement.
"Company Balance Sheet" is defined in Section 3.08(a) of this
Reorganization Agreement.
"Company Benefit Plans" means all "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, whether or not terminated, and trust
agreements and insurance contracts under or with respect to which Company or
Company Subsidiary has or could have any liability, contingent, secondary or
otherwise.
"Company Common Stock" is defined in Section 3.04 of this
Reorganization Agreement.
"Company Contracts" is defined in Section 3.12 of this Reorganization
Agreement.
"Company Disclosure Letter" is defined in Article III of this
Reorganization Agreement.
"Company Dissenting Shareholder" is defined in Section 2.02(d) of this
Reorganization Agreement.
"Company Financial Statement" is defined in Section 3.08(a) of this
Reorganization Agreement.
"Company Material Adverse Effect" means any event, change or effect
that, individually or when taken together with any related events, is or is
reasonably likely to be materially adverse to the business, operations,
condition (financial or otherwise), Assets or liabilities of the Company and any
Company Subsidiaries, taken as a whole.
"Company Pension Plan" means any Company Benefit Plans that is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA.
"Company Shareholders" is defined in the Preamble to this
Reorganization Agreement.
"Company Stock Plan" means any Company Benefit Plan pursuant to which
Company is or may become obligated to, or obligated to cause Company Subsidiary
or any other Person to, issue, deliver or sell shares of capital stock of
Company or Company Subsidiary, or grant, extend
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or enter into any option, warrant, call, right, commitment or agreement to
issue, deliver or sell shares, or any other interest in respect of capital
stock of Company or Company Subsidiary.
"Company Subsidiary" means any Subsidiary of Company.
"Company Tax Returns" means all Tax Returns required to be filed by
Company or any of Company Subsidiary (without regard to extensions of time
permitted by law or otherwise).
"Competing Transactions" is defined in Section 6.07(d) of this
Reorganization Agreement.
"Control" (including the terms "Controlled by" and "under common
Control with") means, as used with respect to any Person, possession of power
(directly or indirectly or as a trustee or executor) to direct or cause the
direction of management or policies of such Person (whether through ownership of
voting securities, as trustee or executor, by Agreement or otherwise).
"Effective Time" is defined in Section 1.02 of this Reorganization
Agreement.
"Encumbrance" means any mortgage, lien, pledge, encumbrance, security
interest, deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Agreement, claim or equity of any
kind.
"Environmental Laws" means any federal, state or local Law relating to
public health or safety, worker health or safety, or pollution, damage to or
protection of the environment including, without limitation, Laws relating to
emissions, discharges, releases or threatened release of Hazardous Materials
into the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, generation,
disposal, transport or handling of any Hazardous Material.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"Exon-Florio Notice" is defined in Section 5.10(a) of this
Reorganization Agreement.
"GAAP" means United States generally accepted accounting principles.
"Government Property" means property or equipment in the possession of
or directly acquired by a Governmental Entity and subsequently made available to
the Company or any Company Subsidiary or any other property or equipment
otherwise acquired by the Company or any Company Subsidiary to which a
Governmental Entity has title.
"Governmental Entities" (including the term "Governmental") means any
governmental, quasi-governmental or regulatory authority, whether domestic or
foreign.
"Hazardous Material" means (i) any "hazardous substance" as now
defined pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601(14); (ii) any "pollutant or
contaminant" as defined in 42 U.S.C. Section 9601(33); (iii) any material now
defined as "hazardous waste" pursuant to 40 C.F.R. Part 261; (iv) any
petroleum,
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including crude oil and any fraction thereof; (v) natural synthetic gas usable
for fuel; (vi) any "hazardous chemical" as defined pursuant to 29 C.F.R. Part
1910; and (vii) any asbestos, polychlorinated biphenyl ("PCB"), radium, or
isomer of dioxin, or any material or thing containing or composed of such
substance or substances.
"Holdback Consideration" is defined in Section 2.02(a)(ii) of this
Reorganization Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and all Laws promulgated pursuant thereto or in connection
therewith.
"Indemnification Promissory Note" is defined in Section 7.01(f) of this
Reorganization Agreement.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
all patent disclosures, industrial designs, utility models and all patents and
patent applications, together with all reissuances, continuations,
continuations-in-part, divisions, revisions, extensions, renewals and
reexaminations thereof, (b) all trademarks, service marks, trade dress, domain
names, web site addresses, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all registered and
unregistered copyrights, all rights to database information, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including research
and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, software, databases, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all rights,
including rights of privacy and publicity, to use the names, likenesses and
other personal characteristics of any individual, and (g) other proprietary
rights and (h) all copies and tangible embodiments thereof (in whatever form or
medium) existing in any part of the world (including all computer software and
related data and documentation).
"Inventory" means all new materials, work in progress, finished goods
and inventorable supplies.
"Key Employees" means the employees identified by the Company and
agreed in writing by Acquiror prior to Closing..
"knowledge" will be deemed to be present with respect to Company and
each Company Subsidiary when the matter in question is known, or upon reasonable
investigation, should have been known, to the Company or any Company Subsidiary.
"Laws" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, tariffs, determinations,
writs, injunctions, awards (including, without limitation, awards of any
arbitrator), judgments and decrees applicable to the specified Person and to the
businesses and Assets thereof (including, without limitation, Laws relating to
the protection of classified information; the sale, leasing, ownership or
management of real property;
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employment practices, terms and conditions, and wages and hours; building
standards, land use and zoning; safety, health and fire prevention; and
environmental protection, including Environmental Laws).
"License" means any franchise, grant, authorization, license, tariff,
permit, easement, variance, exemption, consent, certificate, approval or order
of any Governmental Entity.
"Losses" means all demands, losses, claims, actions or causes of
action, assessments, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties and reasonable attorneys' fees and
disbursements.
"Merger" is defined in the Preamble to this Reorganization Agreement.
"Merger Consideration" is defined in Section 2.02(b)(ii) of this
Reorganization Agreement.
"Multiemployer Plan" means any "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA to which Company or Company Subsidiary
contribute, have an obligation to contribute, or have at any time since
September 2, 1974, contributed or been obligated to contribute.
"Ordinary Course of Business" means ordinary course of business
consistent with past practices and reasonable business operations.
"Party" and "Parties" are defined in the Preamble to this
Reorganization Agreement.
"Permitted Encumbrance" means (i) easements, rights of way, minor
irregularities of title, and liens for taxes not yet due and payable, (ii)
landlord, warehouse and materialmen's liens and (ii) other Encumbrances similar
to clauses (i) and (ii); provided, however, that any or all of the foregoing do
not materially affect the utility or value of the Assets or other matters to
which they relate.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or other
entity, or a Governmental Entity.
"Plan" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by Company or
Company Subsidiary; (b) to which Company or Company Subsidiary contributed or
was obligated to contribute or to fund or provide benefits; or (c) which
provides or promises benefits to any person who performs or who has performed
services for Company or Company Subsidiary and because of those services is or
has been (i) a participant therein or (ii) entitled to benefits thereunder.
"Post-Signing Returns" is defined in Section 5.04 of this
Reorganization Agreement.
"Principal Shareholder" as defined in the Preamble to this
Reorganization Agreement.
"Scheduled Closing Date" is defined in Section 2.07 of this
Reorganization Agreement.
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"Shareholders' Representative" is defined in Section 2.05(c) of this
Reorganization Agreement.
"Subsidiary" means a corporation, partnership, joint venture or other
entity of which any Person owns, directly or indirectly, at least fifty percent
(50%) of the outstanding securities or other interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body or otherwise exercise control of such entity.
"Surviving Corporation" is defined in Section 1.01 of this
Reorganization Agreement.
"Taxes" (including the terms "Tax" and "Taxing") means all federal,
state, local and foreign taxes (including, without limitation, income, profit,
franchise, sales, use, real property, personal property, AD VALOREM, excise,
employment, social security and wage withholding taxes) and installments of
estimated taxes, assessments, deficiencies, levies, imports, duties, license
fees, registration fees, withholdings, or other similar charges of every kind,
character or description imposed by any Governmental Entity, and any interest,
penalties or additions to tax imposed thereon or in connection therewith.
"Tax Liabilities" means any action, suit, proceeding, audit,
investigation or claim pending or threatened in respect of any Taxes for which
Company or any Company Subsidiary is or may become liable, or any deficiency or
claim for any such Taxes that has been to Company's knowledge proposed, asserted
or threatened.
"Tax Returns" means all federal, state, local, foreign and other
applicable returns, declarations, reports and information statements with
respect to Taxes required to be filed with the United States Internal Revenue
Service, and its successors, or any other Governmental Entity or Tax authority
or agency, including, without limitation, consolidated, combined and unitary tax
returns.
"Third Party Claim" means any claim or other assertion of liability by
any third party.
"Transaction Expenses" is defined in Section 6.08 of this
Reorganization Agreement.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
those terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Year 2000 Compliant" means that the Information Technology will
accurately receive, provide and process date/time data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
20th and 21st centuries, including the years 1999 and 2000, and leap-year
calculations.
[Remainder of Page Intentionally Left Blank; Signature Page Follows.]
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IN WITNESS WHEREOF, the Parties have executed and delivered, or have caused this
Reorganization Agreement to be duly executed and delivered, as of the date first
set forth hereinabove.
THE TITAN CORPORATION
By:
--------------------------------
Mellon C. Baird
Senior Vice President
M T ACQUISITION CORP.
By:
--------------------------------
Mellon C. Baird
Senior Vice President
WILLIAM C. LINDSEY, INC.
By:
--------------------------------
Dr. William C. Lindsey
Chairman of the Board and
Chief Executive Officer
PRINCIPAL SHAREHOLDER:
------------------------------------
Dr. William C. Lindsey
The undersigned hereby acknowledges his appointment as the Shareholders'
Representative hereunder and his willingness to fulfill the duties of the
Shareholders' Representative as contemplated by this Reorganization Agreement.
------------------------------------
Dr. William C. Lindsey
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EXHIBIT A
[OMITTED]
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EXHIBIT B
SHAREHOLDERS OF COMPANY
(SEE ATTACHED)
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EXHIBIT C
FORM OF
INDEMNIFICATION PROMISSORY NOTE
THIS PROMISSORY NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
UNDER ANY STATE SECURITIES LAWS (THE "STATE ACTS") AND CANNOT BE
OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
UNDER THE ACT, THE STATE ACTS AND REGULATIONS PROMULGATED THEREUNDER
$______________ ___________, 2000
FOR VALUE RECEIVED, THE TITAN CORPORATION, a Delaware corporation (the
"Maker"), agrees and promises to pay to __________ (individually and
collectively, the "Holder"), at _________________, or at such other place as the
Holder of this Note may from time to time designate, the amount of TWO MILLION
DOLLARS ($2,000,000), together with interest at a rate per annum equal to seven
percent (7%), with the entire unpaid principal amount (together with accrued
interest thereon) to be due and payable in a single payment on ____________,
2001 [12 months following execution]; PROVIDED, HOWEVER, that no Contested
Amount as defined in that certain Agreement of Reorganization by and among the
Maker, M T Acquisition Corp., a California corporation, William C. Lindsey,
Inc., a California corporation, and William C. Lindsey, an individual, dated as
of January 28, 2000 (the "Reorganization Agreement") shall be due and payable
until the amount thereof is resolved pursuant to Article IX of the
Reorganization Agreement. All payments hereunder shall be made in lawful money
of the United States of America, and shall be subject to the offset provisions
described herein.
Maker shall have the right to offset, from time to time, the amounts
payable under this Note against all Losses (as defined in the Reorganization
Agreement) suffered by the Acquiror indemnified Persons (as defined in the
Reorganization Agreement) to the extent provided in Article IX of the
Reorganization Agreement.
This Note has been executed under and pursuant to the Reorganization
Agreement to which reference is hereby made for the terms and conditions upon
which this Note has been delivered.
The occurrence of any one or more of the following shall constitute a
default ("default") hereunder:
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(1) Failure to pay, when due, the principal, any interest, or any other
sum payable hereunder;
(2) The making by Maker of any general assignment for the benefit of
creditors;
(3) The commencement by the Maker of any case, proceeding, or other
action seeking reorganization, arrangement, adjustment, liquidation,
dissolution, or composition of it or its debts under any law relating to
bankruptcy, insolvency, or reorganization, or relief of debtors, or seeking
appointment of a receiver, trustee, custodian, or other similar official for it
or for all or any substantial part of its property;
(4) The commencement of any case, proceeding, or other action against
the Maker seeking to have any order for relief entered against the Maker as
debtor, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution, or composition of the Maker or its debts under any law relating to
bankruptcy, insolvency, reorganization, or relief of debtors, or seeking
appointment of a receiver, trustee, custodian, or other similar official for the
Maker or for all or any substantial part of the property of the Maker, and (i)
the Maker shall, by any act or omission, indicate its consent to, approval of,
or acquiescence in such case, proceeding, or action, or (ii) such case,
proceeding, or action results in the entry of an order for relief which is not
fully stayed within sixty (60) days after the entry thereof, or (iii) such case,
proceeding, or action remains undismissed for a period of sixty (60) days or
more.
Upon the occurrence of a default hereunder and Maker's failure to cure
the same within five (5) days after receipt of written notice thereof, the
entire principal amount hereof, and all accrued and unpaid interest thereon,
shall be accelerated, and shall be immediately due and payable, at the option of
the Holder, without demand or notice. Failure to exercise said option or to
pursue such other remedies shall not constitute a waiver of such option or such
other remedies or of the right to exercise any of the same in the event of any
subsequent default hereunder which remains uncured beyond any applicable grace
or cure periods.
Maker hereby waives presentment, protest, demand, notice of dishonor,
and all other notices, and all defenses and pleas on the grounds of any
extension or extensions of the time of payments or the due dates of this Note,
in whole or in part, before or after maturity, with or without notice. No
renewal or extension of this Note, no release or surrender of any collateral
given as security for this Note, no release of Maker, and no delay in
enforcement of this Note or in exercising any right or power hereunder, shall
affect the liability of Maker.
No single or partial exercise by the Holder of any right hereunder, or
under any other agreement pertaining hereto, shall preclude any other or further
exercise thereof or the exercise of any other rights. No delay or omission on
the part of the Holder in exercising any right hereunder shall operate as a
waiver of such right or of any other right under this Note.
This Note is hereby expressly limited so that in no contingency or
event whatsoever, whether by reason of acceleration or otherwise, shall the
amount paid or agreed to be paid to the Holder for the use, forbearance or
detention of money hereunder exceed the maximum amount permissible under
applicable law. If from any circumstance whatsoever fulfillment of any
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provision hereof, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then IPSO FACTO,
the obligation to be fulfilled shall be reduced to the limit of such validity,
and if from any such circumstance the Holder shall ever receive interest, or
anything which might be deemed interest under applicable law, which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal amount owing on account of
this Note and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal of this Note, such excess shall be
refunded to the Maker. The terms and provisions of this paragraph shall control
and supersede every other provision of this Note and all other agreements
between the Maker and the Holder.
Any payment on this Note coming due on a Saturday, a Sunday, or a day
which is a legal holiday in the place at which a payment is to be made hereunder
shall be made on the next succeeding day which is a business day in such place.
The unpaid principal amount of this Note may be prepaid in whole or in
part at any time and from time to time without prepayment penalty.
Whenever used herein, the words "Maker" and "Holder" shall be deemed to
include their respective successors and assigns.
This Note shall be governed by and construed under and in accordance
with the laws of the State of Delaware (but not including the choice of law
rules thereof.)
If this Note is placed in the hands of an attorney for collection after
default, or if all or any party of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief or other court proceedings, Maker agrees to pay
reasonable attorneys' fees and collection costs to the Holder in addition to the
principal, interest or other amounts payable hereunder.
This Note shall not be transferable (whether by operation of law or
otherwise) by the Holder hereof without the prior consent of the Maker, which
may be granted or withheld in the Maker's sole discretion.
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IN WITNESS WHEREOF, the undersigned has duly executed this Note, or has
caused this Note to be duly executed on its behalf, as of the day and year first
written hereinabove set forth.
[SEAL] THE TITAN CORPORATION
ATTEST:
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Secretary