Exhibit 2.1
Agreement and Plan of
Merger Dated January 6, 2002
Exhibit 2.1
TABLE OF CONTENTS
Page
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SECTION 1. THE MERGER....................................................................2
1.1 MERGER OF MERGER SUB INTO THE COMPANY.................................................2
1.2 EFFECT OF THE MERGER..................................................................2
1.3 CLOSING; EFFECTIVE TIME...............................................................2
1.4 ARTICLES OF INCORPORATION AND BYLAWS..................................................2
1.5 CONVERSION OF SHARES IN THE MERGER....................................................3
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS...............................................5
1.7 EXCHANGE OF CERTIFICATES..............................................................5
1.8 APPRAISAL RIGHTS......................................................................7
1.9 FURTHER ACTION........................................................................7
1.10 TAX CONSEQUENCES......................................................................7
1.11 STOCK OPTIONS.........................................................................7
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................8
2.1 DUE ORGANIZATION; SUBSIDIARIES........................................................8
2.2 AUTHORITY; BINDING NATURE OF AGREEMENT................................................9
2.3 CAPITALIZATION........................................................................9
2.4 SEC FILINGS; FINANCIAL STATEMENTS.....................................................10
2.5 ABSENCE OF CHANGES....................................................................11
2.6 PROPRIETARY ASSETS....................................................................13
2.7 CONTRACTS.............................................................................14
2.8 LIABILITIES...........................................................................16
2.9 COMPLIANCE WITH LEGAL REQUIREMENTS....................................................16
2.10 GOVERNMENTAL AUTHORIZATIONS...........................................................16
2.11 TAX MATTERS...........................................................................17
2.12 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.............................................18
2.13 ENVIRONMENTAL MATTERS.................................................................22
2.14 LEGAL PROCEEDINGS; ORDERS.............................................................23
2.15 VOTE REQUIRED.........................................................................23
2.16 NON-CONTRAVENTION; CONSENTS...........................................................23
2.17 FAIRNESS OPINION......................................................................24
2.18 FINANCIAL ADVISOR.....................................................................24
2.19 TAKEOVER STATUTES; NO DISCUSSIONS.....................................................24
2.20 INFORMATION TO BE SUPPLIED............................................................25
2.21 FOREIGN CORRUPT PRACTICES ACT.........................................................25
2.22 CERTAIN OTHER REPRESENTATIONS.........................................................26
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......................26
3.1 DUE ORGANIZATION; SUBSIDIARIES........................................................26
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT................................................26
3.3 CAPITALIZATION, ETC. .................................................................27
3.4 SEC FILINGS; FINANCIAL STATEMENTS.....................................................27
3.5 NON-CONTRAVENTION; CONSENTS...........................................................28
3.6 INTERIM OPERATIONS OF MERGER SUB......................................................28
3.7 INFORMATION TO BE SUPPLIED............................................................29
3.8 PARENT STOCKHOLDER APPROVAL...........................................................29
3.9 FINANCIAL ADVISOR.....................................................................29
3.10 ABSENCE OF CHANGES....................................................................29
3.11 LIABILITIES...........................................................................29
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS....................................................30
3.13 GOVERNMENTAL AUTHORIZATIONS...........................................................30
SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND PARENT...................................30
4.1 ACCESS AND INVESTIGATION..............................................................30
4.2 OPERATION OF THE COMPANY'S BUSINESS; OPERATION OF THE PARENT'S BUSINESS...............31
4.3 NO SOLICITATION BY THE COMPANY........................................................35
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES...........................................36
5.1 REGISTRATION STATEMENT AND PROXY STATEMENT FOR STOCKHOLDER APPROVAL...................37
5.2 COMPANY STOCKHOLDERS' MEETING.........................................................38
5.3 REGULATORY APPROVALS..................................................................38
5.4 INDEMNIFICATION OF OFFICERS AND DIRECTORS.............................................39
5.5 ADDITIONAL AGREEMENTS.................................................................40
5.6 PUBLIC DISCLOSURE.....................................................................40
5.7 TAX MATTERS...........................................................................40
5.8 RESIGNATION OF DIRECTORS..............................................................40
5.9 LISTING...............................................................................41
5.10 TAKEOVER LAWS; ADVICE OF CHANGES......................................................41
5.11 SECTION 16............................................................................41
5.12 AFFILIATES............................................................................42
5.13 PARENT COMMON STOCK...................................................................42
5.14 LITIGATION............................................................................42
5.15 CERTAIN OTHER COVENANTS...............................................................42
5.16 SCHEDULE OF DEBT......................................................................42
SECTION 6. CONDITIONS TO THE MERGER......................................................43
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION.................................................43
6.2 ADDITIONAL CONDITIONS TO PARENT'S AND MERGER SUB'S OBLIGATIONS........................44
6.3 ADDITIONAL CONDITIONS TO THE COMPANY'S OBLIGATIONS....................................45
SECTION 7. TERMINATION...................................................................46
7.1 TERMINATION...........................................................................46
7.2 EFFECT OF TERMINATION.................................................................47
7.3 EXPENSES; TERMINATION FEES............................................................47
SECTION 8. SPECIAL COMMITTEE.............................................................48
SECTION 9. MISCELLANEOUS PROVISIONS......................................................49
9.1 AMENDMENT.............................................................................49
9.2 WAIVER................................................................................49
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................................49
9.4 ENTIRE AGREEMENT; COUNTERPARTS........................................................49
9.5 APPLICABLE LAW; JURISDICTION..........................................................50
9.6 ATTORNEYS' FEES.......................................................................50
9.7 ASSIGNABILITY; THIRD PARTY BENEFICIARIES..............................................50
9.8 NOTICES...............................................................................50
9.9 COOPERATION...........................................................................52
9.10 CONSTRUCTION..........................................................................52
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into on January 6, 2002, by and among The Titan Corporation, a Delaware
corporation ("PARENT"), T T III ACQUISITION CORP., a Nevada corporation and a
wholly owned subsidiary of Parent ("MERGER SUB"), and GlobalNet, Inc., a Nevada
corporation (the "COMPANY"). Certain capitalized terms used in this Agreement
are defined in EXHIBIT A.
RECITALS
WHEREAS, Parent, Merger Sub and the Company intend to effect a
merger (the "MERGER") of Merger Sub with and into the Company in accordance with
this Agreement and the Nevada Revised Statutes (the "NRS"). Upon consummation of
the Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent;
WHEREAS, it is intended that the Merger shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "CODE");
WHEREAS, the Board of Directors of the Company, upon the
unanimous recommendation of the Special Committee, has (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
advisable and in the best interests of the Company, (ii) adopted this Agreement
and the transactions contemplated hereby, and (iii) resolved to recommend the
approval of this Agreement in accordance with the terms hereof by the Company's
stockholders;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent and Merger Sub to enter
into this Agreement, Parent and certain stockholders of the Company
(collectively, the "STOCKHOLDERS") are entering into Voting Agreements in the
form of EXHIBIT B (the "VOTING AGREEMENTS") pursuant to which such stockholders,
upon the terms and subject to the conditions specified therein, have agreed to
vote all of their shares of Company Common Stock in favor of the approval of
this Agreement and to take certain other actions in connection with the
transactions contemplated hereby;
WHEREAS, immediately (but not later than one Business Day)
following the execution and delivery of this Agreement, Parent, in its capacity
as lender, and the Company, in its capacity as borrower, shall enter into a
Non-Negotiable Note Purchase Agreement (the "NOTE PURCHASE AGREEMENT") pursuant
to which Parent shall purchase a note in the principal amount of up to Five
Million Dollars ($5,000,000) from the Company and, at the time set forth in the
Note Purchase Agreement, Parent shall advance to the Company the principal sum
of Three Million Dollars ($3,000,000) in accordance with the use of proceeds
heretofore approved by Parent, all as more fully described therein; and
WHEREAS, the Company, Parent and Merger Sub desire to make
certain representations, warranties, covenants and agreements in respect of the
Merger and to prescribe various conditions thereto, all as hereinafter set
forth.
NOW, THEREFORE, in consideration for the mutual premises and the
representations, warranties, covenants and agreements contained herein, the
parties to this Agreement, intending to be legally bound, hereby agree as
follows:
SECTION 1. THE MERGER
1.1 MERGER OF MERGER SUB INTO THE COMPANY.
Upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the NRS, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub thereupon shall cease. The Company shall
continue as the surviving corporation in the Merger (the "SURVIVING
CORPORATION") and shall become a wholly owned subsidiary of Parent.
1.2 EFFECT OF THE MERGER.
The Merger shall have the effects set forth in this Agreement
and in the applicable provisions of the NRS, including, without limitation, the
effects set forth in Section 92A.250 thereof.
1.3 CLOSING; EFFECTIVE TIME.
The consummation of the Merger (the "CLOSING") shall take place
at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. on a date to be mutually designated by Parent and
the Company (the "CLOSING DATE"), which date shall be no later than the third
business day after the last to be satisfied, or to the extent permitted by
applicable Legal Requirements waived, of the conditions set forth in Section 6
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of such conditions). Subject
to the provisions of this Agreement, articles of merger satisfying the
applicable requirements of the NRS (the "ARTICLES OF MERGER") shall be duly
executed on behalf of the Company and Merger Sub and simultaneously with the
Closing delivered to the Secretary of State of the State of Nevada for filing.
The Merger shall become effective upon the date and time of the filing of the
Articles of Merger with the Secretary of State of the State of Nevada or on such
other date and at such other time as may be mutually agreed upon by Parent and
the Company and set forth in the Articles of Merger (the "EFFECTIVE TIME").
1.4 ARTICLES OF INCORPORATION AND BYLAWS.
Unless otherwise determined by Parent and the Company prior to
the Effective Time:
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(a) At the Effective Time, the articles of incorporation of
Merger Sub in effect immediately prior to the Effective Time shall be the
articles of incorporation of the Surviving Corporation, except that Article I
thereof shall be amended to read as follows: "The name of the Corporation shall
be GlobalNet, Inc.", and, as so amended, such articles of incorporation shall be
the articles of incorporation of the Surviving Corporation after the Effective
Time until thereafter changed or amended as provided therein and in accordance
with the NRS.
(b) At the Effective Time, the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation, until thereafter amended as provided in the articles of
incorporation of the Surviving Corporation and in accordance with the NRS.
(c) The directors of the Surviving Corporation immediately
after the Effective Time shall be the respective individuals who are directors
of Merger Sub immediately prior to the Effective Time.
(d) The officers of the Surviving Corporation immediately
after the Effective Time shall be the individuals listed on EXHIBIT C.
1.5 CONVERSION OF SHARES IN THE MERGER.
(a) At the Effective Time, by virtue of the Merger and
without any further action on the part of Parent, Merger Sub, the Company or any
stockholder of the Company:
(i) subject to Sections 1.5(b) and 1.5(c), each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time, other than Excluded Shares, if any, shall be converted into the
right to receive (A) that number of duly authorized, validly issued, fully paid
and non-assessable shares of Parent Common Stock equal to the Exchange Ratio,
plus (B) any cash in lieu of fractional shares of Parent Common Stock as set
forth in Section 1.5(c) (collectively, the "MERGER CONSIDERATION");
For purposes of this Agreement:
The term "EXCHANGE RATIO" shall be determined as follows:
(1) subject to clause (4) below, if the Average Parent
Trading Price is greater than $27.625, the Exchange Ratio shall be equal to the
quotient (computed to the fifth decimal place) obtained by dividing the Company
Stock Value by $27.625;
(2) if the Average Parent Trading Price is less than or
equal to $27.625 and greater than or equal to $25.625, the Exchange Ratio shall
be equal to the quotient (computed to the fifth decimal place) obtained by
dividing the Company Stock Value by the Average Parent Trading Price; and
(3) subject to clause (5) below, if the Average Parent
Trading Price is less than $25.625, the Exchange Ratio shall be equal to the
quotient (computed to the fifth decimal place) obtained by dividing the Company
Stock Value by $25.625.
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(4) if the Average Parent Trading Price is greater than
$33.150, (A) Parent may terminate this Merger Agreement pursuant to Section
7.1(g), unless the Company makes a "Company Election" prior to the date of the
Company Stockholders Meeting, in which case the Exchange Ratio shall be equal to
the quotient (computed to the fifth decimal place) obtained by dividing (x) the
Company Stock Value by (y) $33.150 or (B) in the event that Parent does not
terminate this Agreement pursuant to Section 7.1(g) and the Company does not
make a Company Election, the Exchange Ratio shall be equal to the quotient
(computed to the fifth decimal place) obtained by dividing the Company Stock
Value by $27.625;
(5) if the Average Parent Trading Price is less than
$20.125, (A) Company may terminate this Merger Agreement pursuant to Section
7.1(h), unless the Parent makes a "Parent Election" prior to the date of the
Company Stockholders Meeting, in which case the Exchange Ratio shall be equal to
the quotient (computed to the fifth decimal place) obtained by dividing (x) the
Company Stock Value by (y) $20.125 or (B) in the event that Company does not
terminate this Agreement pursuant to Section 7.1(h) and Parent does not make the
Parent Election, the Exchange Ratio shall be equal to the quotient (computed to
the fifth decimal place) obtained by dividing the Company Stock Value by
$25.625.
The "AVERAGE PARENT TRADING PRICE" shall mean the average
closing sales price, as reported in the NYSE Composite Transactions Tape (as
reported in The Wall Street Journal or, if not reported therein, any other
nationally recognized authoritative source), of shares of Parent Common Stock
for the twenty (20) consecutive trading day period ending on the fifth trading
day preceding the date of the Company Stockholders Meeting.
(ii) each share of the common stock, no par value, of
Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one (1) duly authorized, validly issued, fully paid and
nonassessable share of common stock, no par value, of the Surviving Corporation;
and
(iii) except as provided in Section 1.8, any and all
Excluded Shares shall be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) If, between the date of this Agreement and the Effective
Time, the outstanding shares of Company Common Stock or Parent Common Stock are
changed into a different number or class or series of shares by reason of any
stock split, stock dividend, reverse stock split, reclassification,
recapitalization exchange, extraordinary distribution, redemption or other
similar transaction, then, if the effect of the same is not already accommodated
in the calculation of the Exchange Ratio, the Exchange Ratio shall be
appropriately and correspondingly adjusted downward or upward (as the case may
be) to the extent the record date for any such event is prior to the Effective
Time.
(c) No fractional shares of Parent Common Stock shall be
issued in the Merger, and no certificates or scrip for any such fractional
shares shall be issued. Any holder of Company Common Stock who otherwise would
be entitled to receive a fraction of a share of Parent Common Stock in the
Merger (after aggregating all fractional shares of Parent Common Stock issuable
to such holder) shall, in lieu of such fraction of a share and
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upon surrender of such holder's Company Stock Certificate(s) (as defined in
Section 1.6), be paid in cash the dollar amount (rounded to the nearest whole
cent), without interest equal to the product obtained by multiplying (A) that
fraction of a share of Parent Common Stock to which such stockholder is entitled
(after aggregating all fractional shares of Parent Common Stock issuable to such
holder) by (B) the closing sale price of one (1) share of Parent Common Stock as
reported in the NYSE Composite Transactions Tape (as reported in The Wall Street
Journal or, if not reported therein, any other nationally recognized
authoritative source) on the trading day immediately preceding the Closing Date.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS.
At the Effective Time: (a) all shares of the Company Common
Stock issued and outstanding immediately prior to the Effective Time, other than
the Excluded Shares, if any ("SHARES"), automatically shall be converted as
provided in Section 1.5(a)(i) and canceled and retired and shall cease to exist,
and all holders of certificates representing Shares that were outstanding
immediately prior to the Effective Time thereupon shall cease to have any rights
as stockholders of the Company; and (b) the stock transfer books of the Company
shall be closed with respect to all Shares outstanding immediately prior to the
Effective Time. No further transfer of any such Shares shall be made on such
stock transfer books after the Effective Time. If, after the Effective Time, a
valid certificate previously representing any Shares (a "COMPANY STOCK
CERTIFICATE") is presented to the Exchange Agent (as defined in Section 1.7) or
to the Surviving Corporation or Parent for receipt of the applicable Merger
Consideration, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) Prior to the Closing Date, Company and Parent shall
select a reputable bank or trust company to act as exchange agent in the Merger
(the "EXCHANGE AGENT"). At the Effective Time, Parent shall deposit with the
Exchange Agent, for the benefit of the holders of Shares, (i) certificates
representing the shares of Parent Common Stock issuable pursuant to this Section
1.7, and (ii) cash sufficient to make payments in lieu of fractional shares in
accordance with Section 1.5(c) (such cash and shares of Parent Common Stock,
together with any dividends or distributions with respect thereto, being
referred to as the "EXCHANGE FUND").
(b) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to the record holders of Company Stock
Certificates (i) a letter of transmittal in customary form and containing such
provisions as Parent and the Company may reasonably specify (including a
provision confirming that delivery of Company Stock Certificates shall be
effected, and risk of loss and title to Company Stock Certificates shall pass,
only upon delivery of such Company Stock Certificates to the Exchange Agent),
and (ii) instructions for use in effecting the surrender of Company Stock
Certificates in exchange for the aggregate Merger Consideration applicable
thereto. Upon surrender of a Company Stock Certificate to the Exchange Agent for
exchange, together with a duly executed letter of transmittal and such other
documents as reasonably may be required by the Exchange Agent or Parent, (A) the
holder of such Company Stock Certificate shall be entitled to receive in
exchange therefor the aggregate Merger Consideration applicable
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thereto, and (B) the Company Stock Certificate so surrendered shall be
immediately canceled. Except as provided in Section 1.8, until surrendered as
contemplated by this Section 1.7, each Company Stock Certificate shall be
deemed, from and after the Effective Time, to represent only the right to
receive the aggregate Merger Consideration applicable thereto and any
distribution or dividend the record date for which is after the Effective Time.
If any Company Stock Certificate shall have been lost, stolen or destroyed,
Parent may, in its discretion and as a condition precedent to the issuance of
any certificate representing Parent Common Stock, require the owner of such
lost, stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent reasonably may direct) as
indemnity against any claim that may be made against the Exchange Agent, Parent
or the Surviving Corporation with respect to such Company Stock Certificate,
and, in such case, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Company Stock Certificates the aggregate Merger
Consideration applicable thereto.
(c) No dividends or other distributions declared or made
with respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock that such holder has the right to
receive in the Merger until such holder surrenders such Company Stock
Certificate in accordance with this Section 1.7 (at which time such holder shall
be entitled, subject to the effect of applicable escheat laws or similar Legal
Requirements, to receive all such dividends and distributions, without
interest).
(d) Any portion of the Exchange Fund that remains
undistributed to holders of Company Stock Certificates as of the date one
hundred eighty (180) days after the Effective Time shall be delivered to Parent
upon demand, and any holders of Company Stock Certificates who theretofore have
not surrendered their Company Stock Certificates in accordance with this Section
1.7 thereafter shall look only to Parent for satisfaction of their claims for
the Merger Consideration to which such holder is entitled pursuant hereto.
(e) Each of the Exchange Agent, Parent and the Surviving
Corporation shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Agreement to any holder or
former holder of Company Common Stock such amounts as may be required to be
deducted or withheld therefrom under the Code or any provision of state, local
or foreign tax law or under any other applicable Legal Requirement. To the
extent such amounts are so deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been paid to the Person to whom
such amounts would otherwise have been paid.
(f) Neither Parent nor the Surviving Corporation shall be
liable to any holder or former holder of Company Common Stock or to any other
Person with respect to any shares of Parent Common Stock (or dividends or
distributions with respect thereto), or for any cash amounts, delivered to any
public official pursuant to any applicable abandoned property law, escheat law
or similar Legal Requirement.
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1.8 APPRAISAL RIGHTS.
To the extent applicable, shares of Company Common Stock
outstanding immediately prior to the Effective Time and held by a holder who is
entitled to demand and who properly demands appraisal for such shares of Company
Common Stock in accordance with the NRS (the "DISSENTING SHARES") shall not be
converted into the right to receive Parent Common Stock, unless such holder
fails to perfect or withdraws or otherwise loses his or her right to appraisal.
If after the Effective Time such holder fails to perfect or withdraws or loses
his or her right to appraisal, each such share of Company Common Stock shall be
treated as if it had been converted as of the Effective Time into the right to
receive the Merger Consideration without any interest thereon. The Company shall
give Parent prompt notice of any demands received by the Company for appraisal
of shares of Company Common Stock, and Parent shall have the right to
participate in all negotiations and proceedings with respect to such demands.
The Company shall not, without the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands. Any
amounts paid to a holder pursuant to a right of appraisal will be paid by the
Company out of its own funds and will not be reimbursed by Parent or any
affiliate of Parent.
1.9 FURTHER ACTION.
If, at any time after the Effective Time, any further action is
determined by Parent to be necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full right, title and
possession of and to all rights and property of Merger Sub and the Company, the
officers and directors of the Surviving Corporation and Parent shall be fully
authorized (in the name of Merger Sub, in the name of the Company and otherwise)
to take such action.
1.10 TAX CONSEQUENCES.
For federal income tax purposes, the Merger is intended to
constitute a reorganization within the meaning of Section 368 of the Code. The
parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 STOCK OPTIONS.
(a) At the Effective Time all rights with respect to Company
Common Stock under each Company Assumed Option then outstanding shall be
converted into and become rights with respect to Parent Common Stock, and Parent
shall assume each such Company Assumed Option in accordance with the terms and
conditions (as in effect as of the date of this Agreement) of the Company Stock
Option Plan under which it was issued and the terms and conditions of the stock
option agreement by which it is evidenced. From and after the Effective Time,
(i) each Company Assumed Option assumed by Parent may be exercised solely for
shares of Parent Common Stock, (ii) the number of shares of Parent Common Stock
subject to each such Company Assumed Option shall be equal to the number of
shares of Company Common Stock subject to such Company Assumed Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounding down
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to the nearest whole share, (iii) the per share exercise price under each such
Company Assumed Option shall be adjusted by dividing the per share exercise
price under such Company Assumed Option by the Exchange Ratio and rounding up to
the nearest cent, and (iv) any restriction on the exercise of any such Company
Assumed Option shall continue in full force and effect and the term,
exercisability, vesting schedule and other provisions of such Company Assumed
Option shall otherwise remain unchanged.
(b) Prior to the Effective Time, the Company shall take all
actions that may be necessary (under the plans pursuant to which Company Assumed
Options are outstanding and otherwise) to effectuate the provisions of this
Section 1.11 and to ensure that, from and after the Effective Time, holders of
Company Assumed Options have no rights with respect thereto other than those
specifically provided in this Section 1.11.
(c) For the avoidance of doubt, Parent shall not assume any
Company Option which is not a Company Assumed Option, each of which shall
terminate as of the Effective Time.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the Company Disclosure
Schedule delivered by the Company to Parent and Merger Sub prior to the
execution and delivery of this Agreement (the "COMPANY DISCLOSURE SCHEDULE") and
referenced in the Company Disclosure Schedule to the section(s) of this Section
2 to which such disclosure applies (provided, however, that nothing contained in
the Company Disclosure Schedule shall be deemed to modify, amend or otherwise
effect clause (iii) of Section 2.16(b)), the Company hereby represents and
warrants to Parent and Merger Sub that:
2.1 DUE ORGANIZATION; SUBSIDIARIES.
Each of the Acquired Corporations (as defined below) is a
corporation duly organized, validly existing and in good standing under the
Legal Requirements of the jurisdiction of its incorporation. Each of the
Acquired Corporations has all necessary corporate power and authority: (a) to
conduct its business in the manner in which its business is currently being
conducted; (b) to own and use its assets in the manner in which its assets are
currently owned and used; and (c) to perform its obligations under all Company
Material Contracts. Each of the Acquired Corporations is qualified to do
business as a foreign corporation, and is in good standing, under the Legal
Requirements in all jurisdictions where the transaction therein by it of
business or the ownership by it of property therein requires such qualification,
except where the failure to be so qualified would not have a Material Adverse
Effect on the Acquired Corporations (taken as a whole). The Company has
delivered to Parent accurate and complete copies of the certificate or articles
of incorporation, bylaws and other charter or organizational documents of each
of the Acquired Corporations, including all amendments thereto (collectively,
the "COMPANY ORGANIZATION DOCUMENTS"). The Company has no Subsidiaries, except
for the corporations identified in Schedule 2.1 of the Company Disclosure
Schedule. (The Company and each of its Subsidiaries identified in Schedule 2.1
of the Company Disclosure Schedule are collectively referred to herein as the
"ACQUIRED CORPORATIONS"). None of the Acquired Corporations has any equity
interest or similar interest in, or any interest convertible into
8
or exchangeable or exercisable for any equity or similar interest in, any
Entity, other than (i) the Company's interest in its Subsidiaries identified in
Schedule 2.1 of the Company Disclosure Schedule, or (ii) any interest in any
publicly traded company held solely for investment and comprising less than five
percent of the outstanding capital stock of such company.
2.2 AUTHORITY; BINDING NATURE OF AGREEMENT.
The Company has all requisite corporate power and authority to
enter into this Agreement, and, subject to obtaining the approval of the Company
Stockholders referred to in Section 2.15, to perform its obligations under this
Agreement. Assuming the due authorization, execution and delivery by the other
signatories hereto, this Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to (a) Legal Requirements of general application relating to
bankruptcy, insolvency and the relief of debtors, and (b) rules of law governing
specific performance, injunctive relief and other equitable remedies. The
Company's Board of Directors, upon the unanimous recommendation of the Special
Committee, at a meeting of the Company's Board of Directors duly called and held
on or prior to the date hereof, has by unanimous vote (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
advisable and in the best interests of the Company, (ii) approved and adopted
this Agreement and the transactions contemplated hereby, and (iii) resolved to
recommend approval of this Agreement in accordance with the terms hereof by the
Company's stockholders (the unanimous recommendations referred to in this clause
(iii) are collectively referred to in this Agreement as the "RECOMMENDATIONS").
2.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock. As of December 20, 2001, 32,320,878
shares of Company Common Stock have been issued and are outstanding, of which
2,150,000 were restricted shares of Company Common Stock issued to officers,
directors and employees of the Company, consultants and certain third parties.
All of the outstanding shares of Company Common Stock have been duly authorized
and validly issued, and are fully paid and non-assessable. There are no shares
of Company Common Stock held by any of the Company's Subsidiaries. None of the
outstanding shares of Company Common Stock is entitled or subject to any
preemptive right, right of participation, right of maintenance or any similar
right or subject to any right of first refusal in favor of the Company. There is
no Contract to which the Company is a party and, to the Company's knowledge,
there is no Contract between other Persons, relating to the voting or
registration of, or restricting any Person from purchasing, selling, pledging or
otherwise disposing of (or granting any option or similar right with respect
to), any shares of Company Common Stock. None of the Acquired Corporations is
under any obligation, or is bound by any Contract pursuant to which it may
become obligated, to repurchase, redeem or otherwise acquire any outstanding
shares of Company Common Stock.
(b) As of December 20, 2001, 3,000,000 shares of Company
Common Stock are reserved for issuance pursuant to stock options under the 2000
Stock Plan, of which
9
1,781,000 have been granted and are outstanding, and 6,000,000 shares of Company
Common Stock are reserved for issuance pursuant to stock options under the 2001
Incentive Plan (together with the 2000 Stock Plan, the "COMPANY STOCK OPTION
PLANS"), of which 75,000 have been granted and are outstanding. (Stock options
granted by the Company pursuant to the Company Stock Option Plans, as well as
any stock options granted outside of the Company Stock Option Plans, are
referred to collectively herein as "COMPANY OPTIONS"). Schedule 2.3(b) of the
Company Disclosure Schedule sets forth the following information with respect to
each Company Option outstanding as of December 20, 2001: (i) the particular plan
pursuant to which such Company Option was granted; (ii) the name of the
optionee; (iii) the number of shares of Company Common Stock subject to such
Company Option; (iv) the exercise price of such Company Option; (v) the date on
which such Company Option was granted; (vi) the extent to which such Company
Option is vested and exercisable as of the date of this Agreement; and (vii) the
vesting schedule of such Company Option. The Company has made available to
Parent accurate and complete copies of all stock option plans pursuant to which
the Company has granted Company Options, and the forms of all stock option
agreements evidencing such options. Except as otherwise contemplated by this
Agreement, between December 20, 2001 and the date of this Agreement, the Company
has not (i) issued any subscriptions, options, calls, warrants or rights
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of the Company or (ii) issued any capital stock of the
Company other than pursuant to stock options outstanding as of December 20,
2001.
(c) Except as set forth in Section 2.3(a) or Section 2.3(b)
above, there is no: (i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of any of the Acquired Corporations; (ii) outstanding
security, instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of any of
the Acquired Corporations; (iii) rights agreement, stockholder rights plan (or
similar plan commonly referred to as a "poison pill") or Contract under which
any of the Acquired Corporations are or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities; or (iv)
condition or circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any shares of capital stock or other securities of any of the
Acquired Corporations (items (i) through (iv) above, collectively, "COMPANY
STOCK RIGHTS").
(d) All outstanding shares of Company Common Stock, all
outstanding Company Options and all outstanding shares of capital stock of each
Subsidiary of the Company have been issued and granted in compliance with (i)
all applicable securities laws and other applicable Legal Requirements, and (ii)
all requirements set forth in applicable Contracts. All of the outstanding
shares of capital stock of each of the Company's Subsidiaries have been duly
authorized and are validly issued, are fully paid and nonassessable and are
owned beneficially and of record by the Company, free and clear of any
Encumbrances.
2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has made available to Parent all
registration statements, proxy statements and other statements, reports,
schedules, forms and other
10
documents filed by the Company with the SEC since January 1, 1998 (the "COMPANY
SEC DOCUMENTS"). All statements, reports, schedules, forms and other documents
required to have been filed by the Company with the SEC since January 1, 1998
have been so filed. As of their respective dates (or, if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
amendment or superseding filing): (i) each of the Company SEC Documents complied
in all material respects with the applicable requirements of the Securities Act
or the Exchange Act (as the case may be); and (ii) none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The financial statements (including related notes, if
any) contained in the Company SEC Documents (the "COMPANY FINANCIAL
STATEMENTS"): (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods covered
(except as may be indicated in the notes to such financial statements or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC, and except
that the unaudited financial statements may not have contained footnotes and
were subject to normal and recurring year-end adjustments which were not, or
were not reasonably expected to be, individually or in the aggregate, material
in amount), and (iii) fairly presented (subject in the case of the unaudited
interim financial statements, to normal, recurring, year-end audit adjustments)
in all material respects the consolidated financial position of the Company and
its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows of the Company and its
consolidated subsidiaries for the periods covered thereby. For purposes of this
Agreement, "COMPANY BALANCE SHEET" means that certain consolidated balance sheet
of the Company and its consolidated subsidiaries as of December 31, 2000 set
forth in the Company's Annual Report on Form 10-K/A filed with the SEC and the
"COMPANY BALANCE SHEET DATE" means December 31, 2000.
2.5 ABSENCE OF CHANGES.
Except as otherwise contemplated by this Agreement with respect
to the period between the date of this Agreement and the Effective Time, since
the Company Balance Sheet Date:
(a) each of the Acquired Corporations has operated its
respective business in the ordinary course and consistent with past practices;
(b) there has not been any event that has had a Material
Adverse Effect on the Acquired Corporations (taken as a whole), and to the
Company's knowledge, no fact, event, circumstance or condition exists or has
occurred that could reasonably be expected to have a Material Adverse Effect on
the Acquired Corporations (taken as a whole);
(c) none of the Acquired Corporations has (i) declared,
accrued, set aside or paid any dividend or made any other distribution in
respect of any shares of capital stock; (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or
11
other securities; (iii) sold, issued or granted, or authorized the issuance of,
(A) any capital stock or other security (except for Company Common Stock issued
or reserved for issuance upon the valid exercise of outstanding Company
Options), (B) any option, warrant or right to acquire any capital stock or any
other security (except for Company Options), or (C) any instrument convertible
into or exchangeable for any capital stock or other security; (iv) made any
capital expenditure which, when added to all other capital expenditures made on
behalf of the Acquired Corporations since the Company Balance Sheet Date exceeds
the amounts set forth in the Company's fiscal year ending March 31, 2002 capital
expenditures budget by more than $75,000 in the aggregate; (v) made any material
Tax election; (vi) commenced or settled any Legal Proceeding; or (vii) entered
into or consummated any transactions with any affiliate which is not a
wholly-owned subsidiary;
(d) none of the Acquired Corporations has (i) sold or
otherwise disposed of, or acquired, leased, licensed, waived or relinquished any
material right or other material asset to, from or for the benefit of, any other
Person except for rights or other assets sold, disposed of, acquired, leased,
licensed, waived or relinquished in the ordinary course of business and
consistent with past practice; (ii) 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; (iii) entered into or amended any lease of
real property or material personal property (whether as lessor or lessee); or
(iv) canceled or compromised any debt or claim other than accounts payable in
the ordinary course of business consistent with past practice;
(e) none of the Acquired Corporations has become liable in
respect of any guarantee or has incurred or otherwise become liable in respect
of any indebtedness for borrowed money in excess of $75,000, individually or in
the aggregate;
(f) none of the Acquired Corporations has (i) amended or
waived any of its material rights under, or permitted the acceleration of
vesting under, any provision of any of the Company Employee Plans or any
provision of any agreement or Company Stock Option Plan evidencing any
outstanding Company Option; (ii) established or adopted any Company Employee
Plan; (iii) caused or permitted any Company Employee Plan to be amended in any
material respect; or (iv) paid any bonus or made any profit-sharing or similar
payment to, or materially increased the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers, employees, consultants or agents;
(g) there has been no work slowdown, stoppage or strike
involving the Acquired Corporations or any material change in any of their
respective personnel or the terms and conditions of the employment of such
personnel;
(h) none of the Acquired Corporations has made any change in
(i) their respective methods of accounting or accounting practices, except as
required by GAAP, or (ii) their respective 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 consistent with past practice;
12
(i) none of the Acquired Corporations has terminated or
closed any material facility, business or operation;
(j) none of the Acquired Corporations has made any material
loan, advance or capital contributions to, or any other investment in, any
Person;
(k) none of the Acquired Corporations has written up or
written down any of its respective material assets;
(l) there has been no loss, destruction or damage to any
material item of property of the Acquired Corporations, whether or not insured,
which has had or could reasonably be expected to have a Material Adverse Effect
on the Acquired Corporations (taken as a whole);
(m) none of the Acquired Corporations has terminated or
amended, or failed in any material respect to perform obligations or suffered
the occurrence of any material default under any Company Material Contract; and
(n) none of the Acquired Corporations has entered into any
contractual obligation to do any of the things referred to in this Section 2.5.
2.6 PROPRIETARY ASSETS.
(a) Schedule 2.6(a) of the Company Disclosure Schedule sets
forth a complete and accurate list of all U.S. and foreign patents, patent
applications, invention disclosures, trademarks, service marks, trademark and
service ▇▇▇▇ registrations and applications, copyright registrations, copyright
applications, material unregistered copyrights and domain names owned by any of
the Acquired Corporations. Each Acquired Corporation has good, valid and
marketable title to, or has a valid and enforceable right to use, license or
otherwise exploit, all of the Acquired Corporation Proprietary Assets necessary
for the conduct of that Acquired Corporation's business as presently conducted,
free and clear of all Encumbrances, except for any lien for current Taxes not
yet due and payable. No Acquired Corporation has developed jointly with any
other Person any Acquired Corporation Proprietary Assets with respect to which
such other Person has any rights. There is no Acquired Corporation Contract
(with the exception of end user license Contracts in the form previously
delivered by the Company to Parent) pursuant to which any Person has any right
(whether or not currently exercisable) to use, license or otherwise exploit any
Acquired Corporation Proprietary Assets owned or exclusively licensed by any
Acquired Corporation.
(b) (i) All Acquired Corporation Proprietary Assets are
valid, enforceable and subsisting; (ii) none of the Acquired Corporation
Proprietary Assets and no Proprietary Assets that are currently being developed
by any Acquired Corporation (either by itself or with any other Person)
infringes, misappropriates, violates or conflicts with any Proprietary Asset
owned or used by any other Person; (iii) none of the products or services that
are or have been designed, created, developed, assembled, performed,
manufactured or sold by any Acquired Corporation is infringing,
misappropriating, violating or making any unlawful or unauthorized use of any
Proprietary Asset owned or used by any other Person, and none of such products
or services has at any time infringed, misappropriated, violated
13
or made any unlawful or unauthorized use of, and no Acquired Corporation has
received any written notice or, to its knowledge, other communication of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful or unauthorized use of, any Proprietary Asset owned or used by any
other Person; (iv) the operation of the business of each Acquired Corporation as
it currently is conducted does not and after Closing when conducted in
substantially the same manner will not, infringe, misappropriate, violate or
make any unlawful or unauthorized use of any Proprietary Asset of any Person;
and (v) to the knowledge of each Acquired Corporation, no other Person is
infringing, misappropriating or making any unlawful or unauthorized use of, and
no Proprietary Asset owned or used by any other Person infringes or conflicts
with, any Acquired Corporation Proprietary Assets. The Acquired Corporation
Proprietary Assets constitute all the Proprietary Assets necessary to enable
each Acquired Corporation to conduct its business in the manner in which such
business is being conducted. After the Closing, the Acquired Corporations will
retain good, valid, and enforceable title to the Acquired Corporation
Proprietary Assets, free and clear of all Encumbrances and on the same terms and
conditions as in effect immediately prior to the Closing. None of the Acquired
Corporations has (A) licensed any of the Acquired Corporation Proprietary Assets
to any Person on an exclusive basis, or (B) entered into any covenant not to
compete or Contract limiting its ability to exploit fully any Acquired
Corporation Proprietary Assets or to transact business in any market or
geographical area or with any Person.
(c) Each Acquired Corporation has taken all reasonable steps
that are required to protect its rights in its own confidential information and
trade secrets and in any confidential information or trade secrets provided by
any other Person to such Acquired Corporation. Without limiting the foregoing,
each Acquired Corporation has, and enforces, a policy requiring each employee,
consultant and contractor to execute a proprietary information and
confidentiality agreement, substantially in the form attached to Schedule 2.6(c)
of the Company Disclosure Schedule, and all current and former employees,
consultants and contractors of each Acquired Corporation have executed such an
agreement.
2.7 CONTRACTS.
(a) For purposes of this Agreement, each of the following
shall be deemed to constitute a "COMPANY MATERIAL CONTRACT":
(i) any Acquired Corporation Contract that is
required by the rules and regulations of the SEC to be filed as an exhibit to
the Company SEC Documents;
(ii) any Acquired Corporation Contract relating to
the employment of any employee, and any Contract pursuant to which any of the
Acquired Corporations is or may become obligated to make any severance,
termination, bonus or relocation payment or any other payment (other than
payments in respect of salary) in excess of $100,000, to any current or former
employee or director;
(iii) any Acquired Corporation Contract relating to
the acquisition, transfer, development, sharing or license of any material
Proprietary Asset (except for any Acquired Corporation Contract pursuant to
which (A) any material Proprietary Asset is licensed to the Acquired
Corporations under any third party software license generally
14
available for sale to the public, or (B) any material Proprietary Asset is
licensed by any of the Acquired Corporations to any Person on a non-exclusive
basis);
(iv) any Acquired Corporation Contract which provides
for indemnification of any officer, director or employee;
(v) any Acquired Corporation Contract creating or
relating to any partnership or joint venture or any sharing of revenues,
profits, losses, costs or liabilities;
(vi) any Acquired Corporation Contract that involves
the payment or expenditure of $100,000 or more in any 12-month period or more
than $200,000 in the aggregate that may not be terminated by the applicable
Acquired Corporation (without penalty) within sixty (60) days after the delivery
of a termination notice by the applicable Acquired Corporation;
(vii) any Acquired Corporation Contract contemplating
or involving (A) the payment or delivery of cash or other consideration in an
amount or having a value in excess of $100,000 in the aggregate, or (B) the
performance of services having a value in excess of $100,000 in the aggregate;
(viii) any Acquired Corporation Contract imposing any
restriction on the right or ability of any Acquired Corporation to (A) compete
with any other Person, (B) acquire any material product or other material asset
or any services from any other Person, sell any material product or other
material asset to or perform any services for any other Person or transact
business or deal in any other manner with any other Person, or (C) develop or
distribute any material technology; and
(ix) any other Acquired Corporation Contract, if a
breach of such Acquired Corporation Contract could reasonably be expected to
have a Material Adverse Effect on the Acquired Corporations (taken as a whole).
(b) Each Company Material Contract is valid and in full
force and effect, and is enforceable in accordance with its terms.
(c) None of the Acquired Corporations has violated or
breached, or committed any material default under, any Company Material
Contract. To the Company's knowledge, no other Person has violated or breached,
or committed any material default under, any Company Material Contract.
(d) To the Company's knowledge, no event has occurred, and
no circumstance or condition exists, that (with or without notice or lapse of
time) could reasonably be expected to (i) result in a material violation or
breach of any provision of any Company Material Contract by any of the Acquired
Corporations; (ii) give any Person the right to declare a material default or
exercise any material remedy under any Company Material Contract; (iii) to the
Company's knowledge, give any Person the right to receive or require a material
rebate, chargeback, penalty or change in delivery schedule under any Company
Material Contract; (iv) give any Person the right to accelerate the maturity or
performance of any Company Material Contract; or (v) give any Person the right
to cancel or terminate, or modify in any material respect, any Company Material
Contract.
15
(e) None of the Acquired Corporations is a guarantor or
otherwise liable for any liability or obligation (including indebtedness) of any
other Person other than any of the Acquired Corporations.
(f) Schedule 2.7(f) of the Company Disclosure Schedule
provides a list of all Company Material Contracts (including all amendments
thereto). The Company has provided or made available to Parent a copy of each
Company Material Contract (including all amendments thereto) listed in Schedule
2.7(g) of the Company Disclosure Schedule, other than Company Material Contracts
filed as exhibits to the Company SEC Documents and all copies of all amendments
to the Company Material Contracts filed as exhibits to the Company SEC
Documents, to the extent such amendments have not been filed with the SEC.
(g) Neither Company nor any Acquired Corporation is a party
to any contract with the United States government or to any other material
Government Contract.
2.8 LIABILITIES.
None of the Acquired Corporations has any accrued, contingent or
other liabilities of any nature, either matured or unmatured (whether or not
required to be reflected in financial statements prepared in accordance with
GAAP and whether due or to become due), except for: (a) liabilities that are
reflected in the "liabilities" column of the Company Financial Statements, and
(b) normal and recurring liabilities that have been incurred by the Acquired
Corporations since the Company Balance Sheet Date in the ordinary course of
business and consistent with past practices that, individually or in the
aggregate, are not in excess of $75,000.
2.9 COMPLIANCE WITH LEGAL REQUIREMENTS.
Each of the Acquired Corporations is, and at all times, has
been, in compliance in all material respects with all applicable Legal
Requirements. None of the Acquired Corporations has received any written notice
or, to the Company's knowledge, other communication from any Governmental Body
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement.
2.10 GOVERNMENTAL AUTHORIZATIONS.
Each of the Acquired Corporations holds all Governmental
Authorizations necessary to enable such Acquired Corporation to conduct its
business in the manner in which such business is currently being conducted. All
such Governmental Authorizations are valid and in full force and effect. Each
Acquired Corporation is, and at all times has been, in compliance in all
material respects with the terms and requirements of such Governmental
Authorizations. None of the Acquired Corporations has received any notice or
other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
16
2.11 TAX MATTERS.
(a) The Acquired Corporations have paid or reserved for 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) Each of the Acquired Corporations has filed on a timely
basis all Tax Returns that it was required to file except for Tax Returns for
the year which includes the Closing Date. All such Tax Returns were accurate and
complete in all material respects. None of the Acquired Corporations is the
beneficiary of any extension of time within which to file any Tax Return. No
claim that has not been resolved has ever been made by an authority in a
jurisdiction where the Acquired Corporations do not file Tax Returns that any
one of them is or may be subject to taxation by that jurisdiction. None of the
Acquired Corporations 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 any of the Acquired Corporations that arose in
connection with any failure (or alleged failure) to pay any Tax.
(c) The Acquired Corporations have 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, stockholder or other
third party except for such withholding or payments to be made at or after
Closing.
(d) None of the Acquired Corporations, including any
director, officer or employee responsible for tax matters of the Acquired
Corporations is aware of any facts or circumstances which could give rise to a
reasonable expectation that any Governmental Body may assess any additional
Taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any liability for Taxes of the Acquired Corporations either
(i) claimed or raised by any Governmental Body in writing or (ii) as to which
such Acquired Corporation has knowledge based upon personal contact with any
agent of such authority. Schedule 2.11(d) to the Disclosure Schedule sets forth
a complete and accurate list of, Tax Returns filed by or on behalf of the
Acquired Corporations with any Governmental Body with respect to the taxable
periods of the Acquired Corporations ended on or after December 31, 1997 (the
"COMPANY TAX RETURNS"); 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 the Acquired Corporations (i) did
not, as of the date of the most recent Company Financial Statements, exceed the
reserve for Tax Liability (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
in the Company Balance Sheet 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 the Acquired Corporations in filing their Tax Returns.
(f) None of the Acquired Corporations is a party to any Tax
allocation or sharing agreement. None of the Acquired Corporations has made any
distribution of any
17
"Controlled Corporation" as that term is defined in Section 355(a)(1) of the
Code. None of the Acquired Corporations (i) 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 an affiliated group the common parent of which is
the Company or (ii) has any Liability for the Taxes of any Person (other than
any of the Acquired Corporations) 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.
2.12 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Schedule 2.12(a) of the Company Disclosure Schedule
lists (i) all employee pension benefit plans (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) all
employee welfare benefit plans (as defined in Section 3(1) of ERISA), (iii) all
other bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance, fringe benefits and other similar benefit
plans (including, without limitation, any fringe benefit under Section 132 of
the Code), programs, Contracts, arrangements or policies (including a specific
identification of those which contain change of control provisions or pending
change of control provisions), and (iv) any employment, executive compensation
or severance agreements (including a specific identification of those which
contain change of control provisions or pending change of control provisions),
whether written or otherwise, as amended, modified or supplemented, of any
Acquired Corporation or any other Entity (whether or not incorporated) which is
a member of a controlled group which includes any of the Acquired Corporations
or which is under common control with any of the Acquired Corporations within
the meaning of Sections 414(b), (c), (m) or (o) of the Code or Section 4001(a)
(14) or (b) of ERISA ("ERISA AFFILIATES") (all such plans, programs, Contracts,
agreements, arrangements or policies as described in this Section 2.12 shall be
collectively referred to as the "COMPANY EMPLOYEE PLANS") for the benefit of, or
relating to, any former or current employee, officer or director (or any of
their beneficiaries) of any Acquired Corporation or any other ERISA Affiliate.
The Company has provided to Parent, in a reasonable time, place and manner, true
and complete copies of (i) each such written Company Employee Plan (or a written
description of any Company Employee Plan which is not written) and all related
trust agreements, insurance and other contracts (including policies), summary
plan descriptions, summaries of material modifications, registration statements
(including all attachments), prospectuses and communications distributed to plan
participants, (ii) the three most recent annual reports on Form 5500 series,
with accompanying schedules and attachments, filed with respect to each Company
Employee Plan required to make such a filing, (iii) the most recent actuarial
valuation for each Company Employee Plan subject to Title IV of ERISA, (iv) the
latest reports which have been filed with the U.S. Department of Labor with
respect to each Company Employee Plan required to make such filing, (v) the most
recent favorable determination letters issued for each Company Employee Plan and
related trust which is intended to be qualified under Section 401(a) of the Code
(and, if an application for such determination is pending, a copy of the
application for such determination), (vi) financial and other information
regarding current and projected liabilities with respect to each Company
Employee Plan for which the filings described in (ii), (iii) or (iv) above are
not required under ERISA and (vii) all correspondence within the last four years
between the Internal Revenue Service and/or the
18
Department of Labor and the Company and/or any of the other Acquired
Corporations with respect to any Company Employee Plan.
(b) None of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person (other than
continuation coverage to the extent required by law, whether pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985 or otherwise), and none
of the Company Employee Plans is a "Multiemployer Plan" (as defined in Section
3(37) of ERISA) or a "Multiple Employer Welfare Arrangement" (as defined in
Section 3(40) of ERISA); (ii) no party in interest or disqualified person (as
defined in Section 3(14) of ERISA and Section 4975 of the Code, respectively)
has at any time engaged in a transaction with respect to any Company Employee
Plan which could subject any of the Acquired Corporations, directly or
indirectly, to any tax, penalty or other liability for prohibited transactions
under ERISA or Section 4975 of the Code; (iii) no fiduciary of any Company
Employee Plan has breached any of the responsibilities or obligations imposed
upon fiduciaries under Title I of ERISA which shall subject any of the Acquired
Corporations, directly or indirectly, to any penalty or Liability for breach of
fiduciary duty; (iv) all Company Employee Plans have been established and
maintained in accordance with their terms and have been operated in compliance
in all respects with all applicable Legal Requirements, and may by their terms
be amended and/or terminated at any time without the consent of any other Person
subject to applicable Legal Requirements and the terms of each Company Employee
Plan, and each of the Acquired Corporations has performed all obligations
required to be performed by them under, and are not in any respect in default
under or in violation of, any Company Employee Plan, and none of the Acquired
Corporations has any knowledge of any default or violation by any other Person
with respect to any of the Company Employee Plans; (v) each Company Employee
Plan which is intended to be qualified under Section 401(a) of the Code is the
subject of a favorable determination letter from the Internal Revenue Service as
to such plan's qualified status under Section 401(a) of the Code (or comparable
letter, such as an opinion or notification letter as to the form of plan adopted
by one or more Acquired Corporations), and nothing has occurred since the
issuance of such letter (or could reasonably be expected to occur) which might
impair such favorable determination or otherwise impair the qualified status of
such plan; and (vi) all contributions required to be made or reserved, as
appropriate, with respect to any Company Employee Plan pursuant to the terms of
the Company Employee Plan or any collective bargaining agreement, have been made
or reserved on or before their due dates (including any extensions thereof).
(c) None of the Acquired Corporations or any other ERISA
Affiliate currently maintains, sponsors or participates in, or has maintained,
sponsored or participated in, any "EMPLOYEE BENEFIT PLAN" (as defined in Section
3(3) of ERISA) that is subject to Section 412 of the Code or Title IV of ERISA.
(d) None of the Company Employee Plans currently covers, or
has ever covered, former or current non-U.S. Employees, independent contractors
or consultants (or any of their beneficiaries). The consummation of the
transactions contemplated by this Agreement will not cause, in itself, or result
in an increase in the amount of compensation or benefits or accelerate the
vesting or timing of payment of any benefits or compensation payable in respect
of any former or current foreign employee, independent contractor or consultant
(or any of their beneficiaries);
19
(e) There are no Legal Proceedings pending or, to the
knowledge of the Company, threatened in respect of or relating to any Company
Employee Plan. There are no facts or circumstances which could reasonably be
expected to give rise to any such Legal Proceeding (other than routine,
uncontested benefit claims) in respect of or relating to any Company Employee
Plan.
(f) (i) None of the Acquired Corporations has ever
maintained an employee stock ownership plan (within the meaning of Section
4975(e)(7) of the Code) or any other Company Employee Plan that invests in
Company capital stock; (ii) since December 31, 1998, none of the Acquired
Corporations has proposed or agreed to any increase in benefits under any
Company Employee Plan (or the creation of new benefits) or change in employee
coverage which would materially increase the expense of maintaining any Company
Employee Plan; (iii) the consummation of the transactions contemplated by this
Agreement will not cause, in itself, or result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment of any
benefits or compensation payable in respect of any former or current employee,
officer or director (or any of their beneficiaries); and (iv) no person will be
entitled to any severance benefits or the acceleration of any options under the
terms of any Company Employee Plan as a result of the consummation of the
transactions contemplated by this Agreement.
(g) To the extent that any Company Employee Plan is required
by any applicable Legal Requirement to be covered by any bond (e.g., fidelity or
otherwise) in any particular amount, each such Company Employee Plan required to
be covered by such bond has at all times been covered by such bond in accordance
and compliance with all applicable Legal Requirements.
(h) (i) There are no controversies pending or, to the
knowledge of the Company, threatened, between any of the Acquired Corporations
and any of their respective foreign or domestic former or current employees,
officers, directors, independent contractors or consultants (or any of their
beneficiaries), which controversies could reasonably be expected to result in a
material Liability to any of the Acquired Corporations; (ii) there is no labor
strike, dispute, slowdown, work stoppage or lockout actually pending or, to the
knowledge of the Company, threatened against or affecting any Acquired
Corporation and, during the past five years, there has not been any such action,
(iii) none of the Acquired Corporations is a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Acquired Corporations, (iv) none of the employees
of the Acquired Corporations are represented by any labor organization and none
of the Acquired Corporations have any knowledge of any current union organizing
activities among the employees of the Acquired Corporations nor does any
question concerning representation exist concerning such employees, (v) the
Acquired Corporations have each at all times been in material compliance with
all applicable Legal Requirements respecting employment and employment practices
(both foreign and domestic), (vi) there is no unfair labor practice charge or
complaint against any of the Acquired Corporations pending or, to the knowledge
of the Company, threatened before the National Labor Relations Board or any
similar state or foreign agency, (vii) there is no grievance or arbitration
proceeding arising out of any collective bargaining agreement or other grievance
procedure relating to the Acquired Corporations pending, or to the knowledge of
the Company, threatened, before the National Labor Relations Board or any
20
similar state or foreign agency, (viii) neither the Occupational Safety and
Health Administration nor any corresponding state agency is threatening to file
any citation, and there are no pending citations, relating to the Acquired
Corporations, and (ix) there are no pending or, to the knowledge of the Company,
threatened material claims by any current or former employee of the Acquired
Corporations or any employment-related claims or investigations by any
Governmental Body, including any charges to the Equal Employment Opportunity
Commission or state employment practice agency, investigations regarding
compliance with federal, state or local wage and hour Legal Requirements, audits
by the Office of Federal Contractor Compliance Programs, complaints of sexual
harassment or any other form of unlawful harassment, discrimination, or
retaliation.
(i) None of the Acquired Corporations has effectuated (i) a
"plant closing" (as defined in the Worker Adjustment and Retraining Notification
Act) ("WARN ACT") affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of the Acquired
Corporations or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility of the Acquired Corporations, nor has the
Acquired Corporations been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law, in each case that could reasonably be expected to
have a Material Adverse Effect on the Acquired Corporations (taken as a whole).
(j) None of the Acquired Corporations has received a notice
of any violation of any immigration and naturalization laws relating to
employment and employees and all of the Acquired Corporations have properly
completed and maintained all applicable forms (including, but not limited to,
I-9 forms) and the Acquired Corporations and each affiliate is in compliance
with all such immigration and naturalization laws and there are no citations,
investigations, administrative proceedings or formal complaints of violations of
the immigration or naturalization laws pending or threatened before the
Immigration and Naturalization Service of any federal, state or administrative
agency or court against or involving the Acquired Corporations.
(k) As of the date of this Agreement, the Company has paid
to its employees allprofit-sharing or other bonuses with respect to performance
during the fiscal year ended March 31, 2001.
(l) No Company Employee Plan is a Voluntary Employees'
Beneficiary Association ("VEBA") within the meaning of Section 501(c)(9) of the
Code.
(m) All Welfare Plans and the related trusts that are
subject to Section 4980B(f) of the Code and Sections 601 through 607 of ERISA
comply with and have been administered in compliance with the health care
continuation-coverage requirements for tax-favored status under Section 4980B(f)
of the Code (formerly Section 162(k) of the Code), Sections 601 through 607 of
ERISA, and all final Treasury regulations under Section 4890B of the Code
explaining those requirements, and all other applicable Legal Requirements
regarding continuation and/or conversion coverage.
(n) No amount required to be paid or payable to or with
respect to any employee of any of the Acquired Corporations in connection with
the transactions contemplated hereby (either solely as a result thereof or as a
result of such transactions in
21
conjunction with any other event) will be an "excess parachute payment" within
the meaning of Section 280G of the Code or will not be deductible under Sections
162(a)(1) or 404 of the Code.
2.13 ENVIRONMENTAL MATTERS.
(a) Each of the Acquired Corporations is in compliance in
all respects with all applicable Environmental Laws, which compliance includes
the possession by each of the Acquired Corporations of all permits and other
Governmental Authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof, except for such failures to
comply that would not reasonably be expected to have a Material Adverse Effect
on the Acquired Corporations (taken as a whole). None of the Acquired
Corporations has received any notice or other communication (in writing or
otherwise), whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that any of the Acquired Corporations is not in
compliance with any Environmental Law, and, there are no circumstances that may
prevent or interfere with the compliance by any of the Acquired Corporations
with any Environmental Law in the future. To the Company's knowledge, no current
or prior owner of any property leased or controlled by any of the Acquired
Corporations has received any notice or other communication (in writing or
otherwise), whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or any of the Acquired
Corporations is not in compliance with any Environmental Law. All property that
is or has been leased to, controlled by or used by the Acquired Corporations,
and all surface water, groundwater and soil associated with or adjacent to such
property is in clean and healthful condition and is free of any material
environmental contamination of any nature and none of the Acquired Corporations
has any liability for any clean-up or remediation under any Environmental Law.
All property that is leased to, controlled by or used by any of the Acquired
Corporations is free of any friable asbestos or asbestos-containing material.
(b) For purposes of this Section 2.13:
(i) "ENVIRONMENTAL LAW" shall mean any foreign, federal,
state or local statute, law, rule, regulation, ordinance, treaty, code, policy
or rule of common law now or from time to time in effect and in each case as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
the environment, natural resources, health, safety or Hazardous Materials,
including the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended; the Resource Conservation and Recovery Act, as amended;
the Hazardous Materials Transportation Act, as amended; the Clean Water Act, as
amended; the Toxic Substances Control Act, as amended; the Clean Air Act, as
amended; the Safe Drinking Water Act, as amended; the Atomic Energy Act, as
amended; the Federal Insecticide, Fungicide and Rodenticide Act, as amended; and
the Occupational Safety and Health Act, as amended; and
(ii) "HAZARDOUS MATERIALS" shall mean (A) petroleum or
petroleum products (including crude oil or any fraction thereof, natural gas,
natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel, or
any mixture thereof), polychlorinated biphenyls (PCBs), asbestos or asbestos
containing materials, urea formaldehyde foam insulation, and radon gas; (B) any
substance defined as or included in
22
the definition of "hazardous substance," "hazardous waste," "hazardous
material," "extremely hazardous waste," "restricted hazardous waste," "waste,"
"special waste," "toxic substance," "toxic pollutant," "contaminant" or
"pollutant," or words of similar import, under any applicable Environmental Law
(as defined above); (C) infectious materials and other regulated medical wastes;
(D) any substance which is toxic, explosive, corrosive, flammable, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by
any governmental agency; and (E) any other substance, material or waste the
presence of which requires investigation or remediation under any Environmental
Law
2.14 LEGAL PROCEEDINGS; ORDERS.
There is no pending Legal Proceeding and, to the Company's
knowledge, no Person has threatened to commence any Legal Proceeding, that
involves any of the Acquired Corporations or any of the assets owned or used by
any of the Acquired Corporations; and there is no Order, writ, injunction,
judgment or decree to which any of the Acquired Corporations, or any of the
material assets owned or used by any of the Acquired Corporations, is subject,
except for any of the foregoing that individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations (taken as a whole).
2.15 VOTE REQUIRED.
The affirmative vote of the holders of a majority of the shares
of Company Common Stock outstanding on the record date for the Company
Stockholders' Meeting is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve this Agreement.
2.16 NON-CONTRAVENTION; CONSENTS.
(a) Neither the execution, delivery or performance by the
Company of this Agreement, the consummation by the Company of the Merger, nor
any of the other transactions contemplated by this Agreement, will directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in a
violation of any of the provisions of the Company Organization Documents or any
resolution adopted by the stockholders, the Board of Directors or any committee
of the Board of Directors of any of the Acquired Corporations;
(ii) contravene, conflict with or result in a
violation of, or give any Governmental Body the right to challenge the Merger or
any of the other transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order, writ,
injunction, judgment or decree to which any of the Acquired Corporations, or any
of the material assets owned or used by any of the Acquired Corporations, is
subject;
(iii) contravene, conflict with or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw,
23
suspend, cancel, terminate or modify, any Governmental Authorization that is
held by any of the Acquired Corporations or that otherwise relates to the
business of any of the Acquired Corporations or to any of the assets owned or
used by any of the Acquired Corporations; or
(iv) contravene, conflict with or result in a
violation or breach of, or result in a default under, any provision of any
Company Material Contract, or give any Person the right to (w) declare a default
or exercise any remedy under any Company Material Contract, (x) a rebate,
chargeback, penalty or change in delivery schedule under any Company Material
Contract, (y) accelerate the maturity or performance of any Company Material
Contract, or (z) cancel, terminate or modify any term of any Company Material
Contract.
(b) Except as may be required by the Exchange Act, the NRS,
the HSR Act, and applicable competition laws of any foreign country, none of the
Acquired Corporations was, is or will be required to make any filing with or
give any notice to, or obtain any Consent from, any Person in connection with
(i) the execution, delivery or performance of this Agreement, (ii) the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, or (iii) effecting the covenants of the Company set forth in EXHIBIT
D, except in the case of clauses (i) and (ii), where the failure to obtain any
Consent would not, individually or in the aggregate, have a Material Adverse
Effect on the Acquired Corporations (taken as a whole).
2.17 FAIRNESS OPINION.
The Special Committee of the Company's Board of Directors has
received the opinion of Ladenburg ▇▇▇▇▇▇▇▇ & Co. Inc. ("LADENBURG ▇▇▇▇▇▇▇▇"),
financial advisor to the Special Committee, as of the date of this Agreement, to
the effect that the consideration to be received by the non-affiliate
stockholders of the Company in the Merger is fair to such stockholders, from a
financial point of view. The Company will furnish an accurate and complete copy
of said opinion to Parent.
2.18 FINANCIAL ADVISOR.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
any of the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of any Acquired Corporation. The Company has
furnished to Parent accurate and complete copies of all agreements under which
any such fees, commissions or other amounts have been paid or may become payable
and all indemnification and other agreements related to any such engagement.
2.19 TAKEOVER STATUTES; NO DISCUSSIONS.
(a) The Company has taken all actions required to be taken
by it so that the restrictions of Sections 78.378 through 78.3793 and 78.411
through 78.444 of the NRS do not apply to the Merger, this Agreement and the
transactions contemplated hereby. No
24
Takeover Laws are applicable to the Merger, this Agreement and the transactions
contemplated hereby.
(b) As of the date of this Agreement, none of the Acquired
Corporations, and to the Company's knowledge, no Representative of any of the
Acquired Corporations, is engaged, directly or indirectly, in any discussions or
negotiations with any other Person relating to any Company Acquisition Proposal,
and the Company has provided to Parent the terms of any Company Acquisition
Proposal received by the Company in the last ninety (90) days.
2.20 INFORMATION TO BE SUPPLIED.
None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in the
Registration Statement will, at the time the Registration Statement is filed
with the SEC or becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. None of
the information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in the Proxy Statement will, at the time
the Proxy Statement is mailed to the stockholders of the Company or at the time
of the Company Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated by the SEC thereunder.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Merger Sub that is
contained in the foregoing documents.
2.21 FOREIGN CORRUPT PRACTICES ACT.
Neither the Company, any other Acquired Corporation, any of the
Acquired Corporation's officers, directors, nor, to the Company's knowledge, any
employees or agents (or stockholders), distributors, representatives or other
Persons acting on the express, implied or apparent authority of any Acquired
Corporation, 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 Governmental Body in the United States or elsewhere in connection with
or in furtherance of the business of any of the Acquired Corporations
(including, without limitation, any unlawful 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 any Acquired
Corporation 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 unlawfully to any
such official or party for such purposes). Neither the business of the Company
nor any other Acquired Corporation is in any manner dependent upon the making or
receipt of such payments, discounts or
25
other inducements. Neither the Company nor any other Acquired Corporation has
otherwise taken any action that could cause the Company or any other Acquired
Corporation to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended, the regulations thereunder, or any applicable Legal Requirements of
similar effect.
2.22 CERTAIN OTHER REPRESENTATIONS.
The representations and warranties set forth in Section 3 of
EXHIBIT D are hereby incorporated herein by this reference.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in the Parent Disclosure Schedule delivered
by Parent and Merger Sub to the Company prior to the execution and delivery of
this Agreement (the "PARENT DISCLOSURE SCHEDULE") and referenced in the Parent
Disclosure Schedule to the section(s) of this Section 3 to which such disclosure
applies, Parent and Merger Sub jointly and severally represent and warrant to
the Company as follows:
3.1 DUE ORGANIZATION; SUBSIDIARIES.
Parent is a corporation duly organized, validly existing and in
good standing under the Legal Requirements of the State of Delaware. Merger Sub
is a corporation duly organized, validly existing and in good standing under the
Legal Requirements of the State of Nevada. Each of Parent and Merger Sub has all
necessary corporate power and authority to conduct its business in the manner in
which its business is currently being conducted and to own and use its assets in
the manner in which its assets are currently owned and used. Each of Parent and
Merger Sub is qualified to do business as a foreign corporation, and is in good
standing, under the Legal Requirements of all jurisdictions where the nature of
its business requires such qualification and where the failure to be so
qualified would have a Material Adverse Effect on Parent. Parent has made
available to the Company accurate and complete copies of the certificate or
articles of incorporation and bylaws of each of Parent and Merger Sub, including
all amendments thereto (collectively, the "PARENT ORGANIZATION DOCUMENTS").
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT.
Each of Parent and Merger Sub has all requisite corporate power
and authority to enter into and to perform its obligations under this Agreement.
Parent and Merger Sub each hereby represents that its respective Board of
Directors, at a meeting duly called and held, or by written consent dated, on or
prior to the date hereof, has by unanimous vote (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
advisable, and (ii) adopted this Agreement and the transactions contemplated
hereby, including the Merger and the transactions contemplated thereby. This
Agreement constitutes the legal, valid and binding obligation of Parent and
Merger Sub, enforceable against Parent and Merger Sub in accordance with its
terms, subject to (a) Legal Requirements of general application relating to
bankruptcy, insolvency
26
and the relief of debtors, and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of Parent consists of: (i)
200,000,000 shares of Parent Common Stock and (ii) 5,000,000 shares of Parent
Preferred Stock. As of November 24, 2001, 65,966,332 shares of Parent Common
Stock have been issued and are outstanding, 689,678 shares of Parent Cumulative
Preferred Stock have been issued or are outstanding and no shares of Parent
Series A Preferred Stock are issued and outstanding. As of November 24, 2001,
360,701 shares of Parent Common Stock are held in Parent's treasury. All of the
outstanding shares of Parent Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. None of the outstanding shares of
Parent Common Stock is entitled or subject to any preemptive right, right of
participation, right of maintenance or any similar right or subject to any right
of first refusal in favor of Parent.
(b) All outstanding shares of Parent Common Stock and all
outstanding shares of capital stock of each Significant Subsidiary of Parent
have been issued and granted in compliance with (i) all applicable securities
laws and other applicable Legal Requirements, and (ii) all requirements set
forth in applicable Parent Contracts. All of the outstanding shares of capital
stock of each of the Significant Subsidiaries of Parent have been duly
authorized and are validly issued, are fully paid and nonassessable and are
owned beneficially and of record by Parent, free and clear of any Encumbrances.
The Parent Common Stock to be issued in the Merger will, when issued in
accordance with the provisions of this Agreement, be validly issued, fully paid
and nonassessable and in compliance with all applicable securities laws and
other applicable Legal Requirements. The shares of Parent Common Stock to be
issued upon exercise of Company Assumed Options assumed by Parent in connection
with the Merger will, when issued, be issued and granted in compliance with (i)
all applicable securities laws and other applicable Legal Requirements, and (ii)
all requirements set forth in applicable Parent Contracts.
3.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has made available to the Company all
registration statements, proxy statements and other statements, reports,
schedules, forms and other documents filed by Parent with the SEC since December
31, 2000 (the "PARENT SEC DOCUMENTS"). All statements, reports, schedules, forms
and other documents required to have been filed by Parent with the SEC since
December 31, 2000 have been so filed. As of their respective dates (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such amendment or superseding filing): (i) each of the Parent SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
27
(b) The financial statements (including any related notes)
contained in the Parent SEC Documents (the "PARENT FINANCIAL STATEMENTS"): (i)
complied as to form in all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered (except as may
be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC, and except that the
unaudited financial statements may not have contained footnotes and were subject
to normal and recurring year-end adjustments which were not, or are not
reasonably expected to be, individually or in the aggregate, material in
amount), and (iii) fairly presented in all material respects the consolidated
financial position of Parent and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows of Parent and its consolidated subsidiaries for the periods covered
thereby.
3.5 NON-CONTRAVENTION; CONSENTS.
Neither the execution, delivery or performance of this Agreement
nor the consummation of the Merger or any of the other transactions contemplated
by this Agreement, will directly or indirectly (with or without notice or lapse
of time):
(a) contravene, conflict with or result in a violation of
any of the provisions of the Parent Organization Documents or any resolution
adopted by the stockholders, the Board of Directors or any committee of the
Board of Directors of Parent or any Significant Subsidiary of Parent; or
(b) contravene, conflict with or result in a violation of,
or give any Governmental Body the right to challenge the Merger or any of the
other transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any Legal Requirement or any order, writ, injunction,
judgment or decree to which Parent, or any of the assets owned or used by
Parent, is subject;.
Except as may be required by the Securities Act, the Exchange
Act, the NRS, the Delaware General Corporation Law, the HSR Act, applicable
anti-trust laws of any foreign country, and the NYSE Listed Company Manual (as
it relates to the Registration Statement and the Proxy Statement) none of Parent
or any Subsidiary of Parent was, is or will be required to make any filing with
or give any notice to, or obtain any Consent from, any Person in connection with
(x) the execution, delivery or performance of this Agreement, or (y) the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, except in each case, where the failure to make any filing, give any
notice or obtain any Consent would not have a Material Adverse Effect on Parent.
3.6 INTERIM OPERATIONS OF MERGER SUB.
Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement.
28
3.7 INFORMATION TO BE SUPPLIED.
None of the information supplied or to be supplied by or on
behalf of Parent for inclusion or incorporation by reference in the Registration
Statement will, at the time the Registration Statement is filed with the SEC or
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the information
supplied or to be supplied by or on behalf of Parent for inclusion or
incorporation by reference in the Proxy Statement will, at the time the Proxy
Statement is mailed to the stockholders of the Company or at the time of the
Company Stockholders' Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. Notwithstanding the foregoing, Parent makes
no representation or warranty with respect to any information supplied by the
Company that is contained in the foregoing documents.
3.8 PARENT STOCKHOLDER APPROVAL.
This Agreement and the transactions contemplated hereby,
including the issuance of shares of Parent Common Stock pursuant to the Merger,
do not require the approval of the holders of any (a) shares of capital stock of
Parent or (b) voting securities of Parent.
3.9 FINANCIAL ADVISOR.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
any of the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Sub.
3.10 ABSENCE OF CHANGES.
Since July 31, 2001 and except as set forth in any documents
publicly filed by Parent or any Significant Subsidiary with the SEC since July
31, 2001:
(a) each of Parent and its Significant Subsidiaries has
operated its business in the ordinary course and consistent with past practices;
and
(b) there has not been any event that has had a Material
Adverse Effect on Parent, and to Parent's knowledge no fact, event, circumstance
or condition exists or has occurred that could reasonably be expected to have a
Material Adverse Effect on Parent or any Significant Subsidiary.
3.11 LIABILITIES.
Parent has no accrued, contingent or other liabilities of any
nature, either matured or unmatured (whether or not required to be reflected in
financial statements
29
prepared in accordance with GAAP, and whether due or to become due), except for:
(a) liabilities that are reflected in the "liabilities" column of the Parent
Financial Statements, including the notes thereto; (b) normal and recurring
liabilities that have been incurred by Parent since December 31, 2000 in the
ordinary course of business and consistent with past practices that,
individually or in the aggregate, have not had or could not reasonably be
expected to have, a Material Adverse Effect on Parent; and (c) liabilities
incurred under this Agreement.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS.
Parent is, and at all times has been, in compliance in all
material respects with all applicable Legal Requirements. Parent has not
received any written notice or, to Parent's knowledge, other communication from
any Governmental Body regarding any actual or possible violation of, or failure
to comply with, any Legal Requirement (except where such violation or failure to
comply would not have a Material Adverse Effect on Parent).
3.13 GOVERNMENTAL AUTHORIZATIONS.
Parent holds all Governmental Authorizations necessary to enable
Parent to conduct its business in the manner in which such business is currently
being conducted. All such Governmental Authorizations are valid and in full
force and effect. Parent is, and at all times has been, in compliance in all
material respects with the terms and requirements of such Governmental
Authorizations. Parent has not received any notice or other communication from
any Governmental Body regarding (a) any actual or possible violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization
(except where any such violation, failure, revocation, withdrawal, suspension,
cancellation, termination or modification would not have a Material Adverse
Effect on Parent).
SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND PARENT
4.1 ACCESS AND INVESTIGATION.
During the period from the date of this Agreement through the
Effective Time unless this Agreement shall be terminated in accordance with
Section 7 (the "PRE-CLOSING PERIOD"), subject to applicable antitrust laws and
regulations relating to the exchange of information each of Parent and Merger
Sub on the one hand and, the Company on the other hand shall, and shall cause
each of their respective Representatives (including, without limitation, in the
case of the Company, each of the Acquired Corporations' Representatives) to: (a)
provide the other and the others' Representatives with reasonable access during
normal business hours to its Representatives and the Acquired Corporations'
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the other
and the Acquired Corporations; and (b) provide the other and the others'
Representatives with such copies of the existing books, records, Tax Returns,
work papers and other documents and
30
information relating to it and the Acquired Corporations, and with such
additional financial, operating and other data and information regarding it and
the Acquired Corporations, in each case, as the other may reasonably request.
Each Party will use and hold any such information which is not public in
confidence in accordance with the Mutual Nondisclosure Agreement.
4.2 OPERATION OF THE COMPANY'S BUSINESS; OPERATION OF THE PARENT'S
BUSINESS.
(a) During the Pre-Closing Period the Company shall: (i)
ensure that each of the Acquired Corporations conducts its business and
operations (A) in the ordinary course in accordance with past practices, and (B)
in material compliance with all applicable Legal Requirements and the
requirements of all Company Material Contracts; (ii) use commercially reasonable
efforts to ensure that each of the Acquired Corporations preserves intact its
current business organization, keeps available the services of its current
officers and employees and maintains its relations and goodwill with all
suppliers, customers, distributors, landlords, creditors, licensors, licensees
and other Persons having business relationships with the respective Acquired
Corporations; (iii) provide all notices, assurances and support required by any
Contract relating to any Proprietary Asset in order to ensure that no condition
under such Contract occurs which could result in, or could increase the
likelihood of any transfer or disclosure by any Acquired Corporation of any
source code materials or other Proprietary Asset; and (iv) keep in full force
and effect (with the same scope and limits of coverage) all insurance policies
in effect as of the date of this Agreement covering all material assets of the
Acquired Corporations.
(b) During the Pre-Closing Period, except as set forth in
Schedule 4.2(b) of the Company Disclosure Schedule and except for the Merger and
the other matters and transactions contemplated by this Agreement, the Company
shall not (without the prior written consent of Parent), and shall not permit
any of the other Acquired Corporations to:
(i) declare, accrue, set aside or pay any dividend
or make any other distribution in respect of any shares of capital stock or
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities (other than ordinary quarterly dividends);
(ii) sell, issue, grant or authorize the issuance or
grant of (A) any capital stock, other security (including the sale, transfer or
grant of any treasury shares) or any obligation convertible or exchangeable for
capital stock, (B) any Company Stock Right (except that, prior to the Effective
Time, the Company may issue and reserve for issuance Company Common Stock upon
the valid exercise of Company Options or Company Warrants outstanding as of the
date of this Agreement) or (C) any option to acquire any shares of capital stock
or other securities of any of the Acquired Corporations pursuant to the Company
Stock Option Plans;
(iii) other than with respect to the Merger or the
transactions contemplated by this Agreement, amend or waive any of its rights
under, or accelerate the vesting under, any provision of any of the Company
Stock Option Plans, any provision of any agreement evidencing any outstanding
Company Stock Option or any restricted stock
31
purchase agreement, or otherwise modify any of the terms of any outstanding
Company Stock Option, warrant, or other security or any related Contract;
(iv) amend or permit the adoption of any amendment to
the Company Organization Documents, or effect or become a party to any Company
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(v) form any Subsidiary that is not wholly owned by
an Acquired Corporation or acquire any equity interest or other interest in any
other Entity;
(vi) make any capital expenditure, to the extent such
new capital expenditures exceed $200,000 in the aggregate; and which is not
included in the Company's fiscal year ending March 31, 2002 Capital Expenditures
Budget, a copy of which was furnished to Parent;
(vii) enter into or become bound by, or permit any of
the assets owned or used by it to become bound by, any Contract with obligations
in excess of $200,000, or waive, release, or assign any rights or claims, or
modify or terminate any Company Material Contract with obligations in excess of
$200,000;
(viii) 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);
(ix) 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;
(x) (A) 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, 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 (B) 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;
(xi) 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
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by, the Company Financial Statements or waive any material benefits
of, or agree to modify in any material respect, any confidentiality, standstill
or similar agreements to which any Acquired Company is a party;
32
(xii) (A) increase in any manner the compensation or
fringe benefits of, or pay any bonus to, any director, officer or employee,
except for increases in the compensation or fringe benefits, or bonus payments,
to employees below the level of vice president in the ordinary course of
business consistent with past practice; (B) 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 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 Parent, except for severance or
termination pay to employees below the level of vice president in the ordinary
course of business consistent with past practice; (C) establish, adopt, enter
into or amend any Company Benefit Plan or other arrangement, except as may be
required to comply with applicable Legal Requirements and except with respect to
such actions taken with respect to employees below the level of vice president
in the ordinary course of business consistent with past practice; (D) pay any
benefit not provided for under any Company Benefit Plan or other arrangement,
except for benefits paid to employees below the level of vice president in the
ordinary course of business consistent with past practice; (E) 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), except for awards of bonuses or other payments under bonus,
incentive, performance or other compensation plans or arrangements to employees
below the level of vice president in the ordinary course of business consistent
with past practice (but not 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); (F) take any
action to fund or in any other way secure the payment of compensation or
benefits under any agreement; or (G) hire or promote any key officer or key
employee;
(xiii) change any of its methods of accounting or
accounting practices in any respect, except as required by GAAP;
(xiv) 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 have a 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 its federal income tax returns;
(xv) commence or settle any Legal Proceeding;
(xvi) enter into any material transaction or take any
other material action outside the ordinary course of business that is
inconsistent with past practices;
(xvii) take, or permit the taking of any action, which
could reasonably be expected to cause the vesting of any Company Options to be
accelerated in accordance with the terms of any of the Company Stock Option
Plans;
33
(xviii) take, agree to take, or omit to take any action
which would (A) make any of the representations and warranties of the Company
contained in this Agreement untrue or incorrect, (B) prevent the Company from
performing or cause the Company not to perform its covenants hereunder, or (C)
cause any of the conditions set forth in Section 6 not to be able to be
satisfied prior to the Termination Date; or
(xix) agree or commit to take any of the actions
described in clauses "(i)" through "(xviii)" of this Section 4.2(b).
(c) During the Pre-Closing Period, the Company shall
promptly notify Parent in writing of: (i) the discovery by the Company of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes a material inaccuracy
in any representation or warranty made by the Company in this Agreement; (ii)
any event, condition, fact or circumstance that occurs, arises or exists after
the date of this Agreement and that would cause or constitute a material
inaccuracy in any representation or warranty made by the Company in this
Agreement if (A) such representation or warranty had been made as of the time of
the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any material
breach of any covenant or obligation of the Company; and (iv) any event,
condition, fact or circumstance that would make the timely satisfaction of any
condition set forth in Section 6 impossible or unlikely or that has had or could
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations (taken as a whole). The Company shall have the ability to
supplement and update the Company Disclosure Schedule as of the Closing Date
with any event, condition, fact or circumstance disclosed in writing to the
Parent pursuant to clause (ii) above; provided however, that such supplemental
and updated disclosure shall not constitute a waiver by Parent of, or release
the Company from any liability with respect to, any breaches of any
representations or warranties contained in this Agreement. Neither such updated
Company Disclosure Schedules nor any notification given to Parent pursuant to
this Section 4.2(c) shall modify, limit or otherwise affect any of the
representations, warranties, covenants or obligations of the Company contained
in this Agreement.
(d) During the Pre-Closing Period, Parent shall promptly
notify the Company in writing of: (i) the discovery by Parent of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by Parent in this Agreement; (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute a material inaccuracy in any
representation or warranty made by Parent in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any material breach of any
covenant or obligation of Parent; and (iv) any event, condition, fact or
circumstance that would make the timely satisfaction of any condition set forth
in Section 6 impossible or unlikely or that has had or could reasonably be
expected to have a Material Adverse Effect on the Parent. Parent shall have the
ability to supplement and update the Parent Disclosure Schedule as of the
Closing Date with any event, condition, fact or circumstance disclosed in
writing to the Company pursuant to clause (i) above;
34
provided however, that such supplemental and updated disclosure shall not
constitute a waiver by the Company of, or release Parent from any liability with
respect to, any breaches of any representations or warranties contained in this
Agreement. Neither such updated Parent Disclosure Schedules nor any notification
given to the Company pursuant to this Section 4.2(d) shall modify, limit or
otherwise affect any of the representations, warranties, covenants or
obligations of Parent contained in this Agreement.
4.3 NO SOLICITATION BY THE COMPANY.
(a) During the Pre-Closing Period, the Company shall not
directly or indirectly, and shall not authorize or permit any of the other
Acquired Corporations or any Representative of any of the Acquired Corporations
directly or indirectly to, (i) solicit, initiate, encourage, induce or
facilitate the making, submission or announcement of any Company Acquisition
Proposal or take any action that could reasonably be expected to lead to a
Company Acquisition Proposal, (ii) furnish any information regarding any of the
Acquired Corporations to any Person in connection with or in response to a
Company Acquisition Proposal, (iii) engage in discussions or negotiations with
any Person with respect to any Company Acquisition Proposal, (iv) approve,
endorse or recommend any Company Acquisition Proposal or (v) enter into any
letter of intent or similar document or any Contract contemplating or otherwise
relating to any Company Acquisition Transaction; provided, however, that nothing
in this Section 4.3(a) shall prohibit (A) the Company, or the Board of Directors
of the Company, from furnishing information regarding the Acquired Corporations
to, or entering into discussions with, any Person in response to a Company
Acquisition Proposal that is submitted to the Company by such Person (and not
withdrawn) if (1) neither the Company nor any Representative of any of the
Acquired Corporations shall have violated any of the restrictions set forth in
this Section 4.3, (2) a majority of the Board of Directors of the Company
concludes in good faith, after consultation with its outside legal counsel, that
the failure to take such action, furnish such information or enter into such
discussions would be inconsistent with its fiduciary obligations under
applicable Legal Requirements, (3) a majority of the Board of Directors
determines in good faith, after consultation with its outside legal counsel,
that taking such action would be reasonably likely to lead to the delivery of a
Company Superior Offer, (4) at least three (3) business days prior to furnishing
any such information to, or entering into discussions with, such Person, the
Company gives Parent written notice of the identity of such Person and of the
Company's intention to furnish information to, or enter into discussions with,
such Person, and the Company receives from such Person an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all written and oral nonpublic information furnished to such
Person or any of such Person's Representatives by or on behalf of the Company,
and (5) not later than the time such information is furnished to such Person,
the Company furnishes such nonpublic information to Parent (to the extent such
information has not been previously furnished by the Company to Parent); or (B)
the Company from complying with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act or making any public announcement, disclosure or filing which,
after consultation with outside legal counsel, the Company's Board of Directors
concludes in good faith is required pursuant to applicable Legal Requirements
(including the rules of any national securities exchange or U.S. inter-dealer
quotation system of a registered national securities association) with regard to
a Company Acquisition Proposal. Without limiting the generality of any of the
foregoing, the Company acknowledges and agrees that any violation
35
of any of the restrictions set forth in the preceding sentence by any
Representative of any of the Acquired Corporations, whether or not such
Representative is purporting to act on behalf of any of the Acquired
Corporations, shall be deemed to constitute a breach of this Section 4.3 by the
Company.
(b) The Company shall promptly (and in no event later than
24 hours) after receipt of any Company Acquisition Proposal or any request for
nonpublic information related to the Acquired Corporations, advise Parent orally
(and subsequently confirm the same by delivery to Parent in writing) of any
Company Acquisition Proposal or any request for nonpublic information related to
any of the Acquired Corporations (including the identity of the Person making or
submitting such Company Acquisition Proposal, and the terms thereof to the
extent then known) that is made or submitted by any Person during the
Pre-Closing Period. The Company shall keep Parent fully informed on a prompt
basis with respect to the status of any such Company Acquisition Proposal, and
any modification or proposed modification thereto. The Company agrees that the
Company shall simultaneously provide to Parent any non-public information
concerning the Company provided to any Person in connection with any Company
Acquisition Proposal which was not previously provided to Parent.
(c) The Company shall immediately cease and cause to be
terminated any existing discussions with any Person (other than Parent) that
relate to any Company Acquisition Proposal, except as may be provided for in
Section 4.3(a).
(d) The Company agrees not to release any Person (other than
Parent) from or waive any provision of any confidentiality, "standstill" or
similar agreement to which the Company is a party (including the provisions
thereof relating to the return or physical delivery of information furnished by
the Company to any Person) and will use its best efforts to enforce each such
agreement at the request of Parent.
(e) Notwithstanding anything contained in this Agreement to
the contrary (including Section 5.2(b)), the Recommendations may be withheld,
withdrawn or modified in a manner adverse to Parent if: (i) the Company's Board
of Directors determines in good faith, after consultation with the Company's
outside legal counsel, that the failure to withdraw or modify the
Recommendations would be inconsistent with its fiduciary obligations under
applicable Legal Requirements; (ii) the Company shall have released Parent from
the provisions of any standstill or similar agreement restricting Parent from
acquiring securities of the Company; and (iii) neither the Company nor any of
its Representatives shall have violated any of the restrictions set forth in
Section 4.3(a).
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT AND PROXY STATEMENT FOR STOCKHOLDER
APPROVAL.
As soon as practicable following the execution of this
Agreement, the Company shall prepare and file with the SEC a preliminary proxy
statement of the Company in connection with the Merger complying with applicable
Legal Requirements and including the fairness opinion of Ladenburg ▇▇▇▇▇▇▇▇
referred to in Section 2.17 above
36
(the "PROXY STATEMENT"), and Parent shall prepare, and Parent shall file with
the SEC, a registration statement on Form S-4 (such registration statement,
together with the amendments thereto, being the "REGISTRATION STATEMENT") for
the offer and sale of Parent Common Stock pursuant to the Merger and in which
the Proxy Statement will be included as a prospectus. Each of the Company and
Parent shall use commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing. The Company will use commercially reasonable efforts to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act and the Proxy Statement is "cleared" by the SEC (in definitive
form). Parent shall also take any action (other than qualifying to do business
in any jurisdiction in which it is not now so qualified or filing a general
consent to service of process) required to be taken under any applicable state
securities laws in connection with the issuance of Parent Common Stock in the
Merger, and each of the Company and Parent shall furnish all information
concerning it and the holders of its capital stock as may be reasonably
requested by the other in connection with any such action and the preparation,
filing and distribution of the Proxy Statement. No filing of, or amendment or
supplement to, or correspondence with the SEC or its staff with respect to, the
Registration Statement shall be made by Parent, or with respect to the Proxy
Statement shall be made by the Company, without first providing the other with a
reasonable opportunity to review and comment thereon. Parent shall advise the
Company, promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the Parent Common Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, or any request by the SEC for amendment of the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information. The Company will advise Parent, promptly
after it receives notice thereof, of any request by the SEC for the amendment of
the Proxy Statement or comments thereon and responses thereto or requests by the
SEC for additional information. If at any time prior to the Effective Time any
information relating to the Company or Parent, or any of their respective
affiliates, officers or directors, is discovered by the Company or Parent which
should be set forth in an amendment or supplement to either the Registration
Statement or the Proxy Statement, so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers such information
shall promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by applicable Legal Requirements, disseminated to the
stockholders of the Company.
5.2 COMPANY STOCKHOLDERS' MEETING.
(a) The Company shall take all action necessary under all
applicable Legal Requirements to call, give notice of and hold a meeting of the
holders of Company Common Stock to vote on a proposal to approve this Agreement
(the "COMPANY STOCKHOLDERS' MEETING"). The Company Stockholders' Meeting shall
be held as soon as reasonably practicable after the Registration Statement is
declared effective under the Securities Act and the Proxy Statement is "cleared"
by the SEC for mailing in definitive
37
form to the holders of Company Common Stock. The Company shall use commercially
reasonable efforts to take all actions necessary or advisable to solicit proxies
in favor of the Merger and shall ensure that all proxies solicited in connection
with the Company Stockholders' Meeting are solicited in compliance with all
applicable Legal Requirements. Once the Company Stockholders' Meeting has been
called and noticed, the Company shall not postpone or adjourn the Company
Stockholders' Meeting (other than for the absence of a quorum) without the
consent of Parent; provided, however, notwithstanding the foregoing, the Board
of Directors of the Company shall be permitted to postpone or adjourn the
Company Stockholders' Meeting if at any time prior to such meeting a Company
Acquisition Proposal has been made, submitted or announced (which is not in
violation of Section 4.3) and the Board of Directors of the Company, after
consultation with its outside legal counsel, concludes in good faith that the
failure so to postpone or adjourn the Company Stockholder's Meeting would likely
constitute a violation of the fiduciary duties of the Company's Board of
Directors under applicable Legal Requirements.
(b) Except as provided in Section 4.3(e), the Proxy
Statement shall include the Recommendations, and, subject to Section 4.3(e), the
Recommendations shall not be withdrawn or modified in a manner adverse to
Parent, and no resolution by the Board of Directors of the Company or any
committee thereof to withdraw or modify the Recommendations in a manner adverse
to Parent shall be adopted or proposed.
(c) The Company and Parent shall cooperate with one another
(i) in connection with the preparation of the Proxy Statement and the
Registration Statement, (ii) in determining whether any action by or in respect
of, or filing with, any Governmental Body is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement and (iii) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith or with the Proxy Statement and the Registration Statement
and seeking timely to obtain any such actions, consents, approvals or waivers.
5.3 REGULATORY APPROVALS.
Each of the Company and Parent shall use its commercially
reasonable efforts to file, as soon as practicable after the date of this
Agreement, all notices, reports and other documents required to be filed with
any Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, if Parent or the Company reasonably determines that
it is so required, the Company and Parent shall, promptly after the date of this
Agreement, prepare and file the notifications required under the HSR Act and any
applicable foreign antitrust laws or regulations in connection with the Merger.
The Company and Parent shall respond as promptly as practicable to (a) any
inquiries or requests received from the Federal Trade Commission or the
Department of Justice for additional information or documentation and (b) any
inquiries or requests received from any state attorney general, foreign
antitrust authority or other Governmental Body in connection with antitrust or
related matters. Each of the Company and Parent shall (i) give the other party
prompt notice of the commencement or threat of commencement of any Legal
Proceeding by or before any Governmental Body with respect to the Merger or any
of
38
the other transactions contemplated by this Agreement, (ii) keep the other party
informed as to the status of any such Legal Proceeding or threat, and (iii)
promptly inform the other party of any material communication to or from the
Federal Trade Commission, the Department of Justice or any other Governmental
Body regarding the Merger. Except as may be prohibited by any Governmental Body
or by any Legal Requirement, the Company and Parent shall consult and cooperate
with one another, and shall consider in good faith the views of one another, in
connection with any analysis, appearance, presentation, memorandum, brief,
argument, opinion or proposal made or submitted in connection with any Legal
Proceeding under or relating to the HSR Act or any other foreign, federal or
state antitrust or fair trade law. In addition, except as may be prohibited by
any Governmental Body or by any Legal Requirement, in connection with any Legal
Proceeding under or relating to the HSR Act or any other foreign, federal or
state antitrust or fair trade law or any other similar Legal Proceeding, each of
the Company and Parent will permit authorized Representatives of the other party
to be present at each meeting or conference with government representatives
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document, opinion or proposal made or submitted to any
Governmental Body in connection with any such Legal Proceeding. Notwithstanding
anything to the contrary in this Section 5.3, neither Parent nor the Company nor
any of their respective Subsidiaries shall be required to take any action that
could reasonably be expected to substantially impair the overall benefits
expected, as of the date hereof, to be realized from the consummation of the
Merger.
5.4 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) Parent and the Surviving Corporation agree that, except
as may be limited by applicable law, from and after the Effective Time, the
indemnification obligations that relate to matters that occur prior to the
Effective Time and that are set forth in the Company Organizational Documents or
any agreement to which the Parent or the Surviving Corporation is bound, shall
survive the Merger. Parent and Surviving Corporation further agree that such
obligations shall remain in existence and shall not be amended, repealed or
otherwise modified at or at any time after the Effective Time in any manner that
would adversely affect the rights of an Indemnified Person thereunder. For
purposes of this Agreement, "INDEMNIFIED PERSON" shall mean each Person,
including without limitation, each officer and director of the Company, who, on
or at any time prior to the Effective Time, was entitled to indemnification
benefits described in this Section 5.4.
(b) From the Effective Time until the fourth anniversary of
the Effective Time, the Surviving Corporation shall provide for the benefit of
the insured parties named in such policy and the Indemnified Persons, only with
respect to acts or omissions occurring prior to the Effective Time, directors'
and officers' liability insurance on terms with respect to coverage and amount
at least as favorable as those of the insurance policy maintained by the Company
as of the date of this Agreement in the form attached to the Company Disclosure
Schedule as Schedule 5.4 (provided that the Surviving Corporation will not be
required to maintain such policy except to the extent that the aggregate annual
cost of maintaining such policy is not in excess of one hundred forty percent
(140%) of the current annual cost, in which case the Surviving Corporation shall
maintain such policies up to an annual cost of one hundred forty percent
(140%)).
39
5.5 ADDITIONAL AGREEMENTS.
Each of Parent and the Company shall use its commercially
reasonable efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make effective the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing each party to
this Agreement (a) shall make all filings (if any) and give all notices (if any)
required to be made and given by such party in connection with the Merger and
the other transactions contemplated by this Agreement; (b) shall use its
commercially reasonable efforts to obtain each Consent (if any) required to be
obtained (pursuant to any applicable Legal Requirement or Contract, or
otherwise) by such party in connection with the Merger or any of the other
transactions contemplated by this Agreement; and (c) shall use its commercially
reasonable efforts to lift any restraint, injunction or other legal bar to the
Merger. The Company shall promptly deliver to Parent a copy of each such filing
made, each such notice given and each such Consent obtained by it during the
Pre-Closing Period.
5.6 PUBLIC DISCLOSURE.
Parent, Merger Sub and the Company shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated hereunder and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by Legal Requirements or any listing agreement with,
or the rules of a national securities exchange or any U.S. inter-dealer
quotation system of a registered national securities association.
5.7 TAX MATTERS.
At or prior to the filing of the Registration Statement, the
Company and Parent shall execute and deliver to ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. and to
▇▇▇▇▇▇▇▇▇ Traurig, LLP, tax representation letters in customary form. Parent,
Merger Sub and the Company shall each confirm to ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. and to
▇▇▇▇▇▇▇▇▇ Traurig, LLP on such dates as shall be reasonably requested by ▇▇▇▇▇ &
▇▇▇▇▇▇▇ L.L.P. and ▇▇▇▇▇▇▇▇▇ Traurig, LLP, the accuracy and completeness of the
tax representation letters delivered pursuant to the immediately preceding
sentence. Each of Parent, Merger Sub and the Company shall use its best efforts
prior to the Effective Time to cause the Merger to qualify as a reorganization
under Section 368(a) of the Code. Following delivery of the tax representations
letters pursuant to the first sentence of this Section 5.7, each of Parent and
the Company shall use its commercially reasonable efforts to cause ▇▇▇▇▇ &
▇▇▇▇▇▇▇ L.L.P. and ▇▇▇▇▇▇▇▇▇ Traurig, LLP, respectively, to deliver to it a tax
opinion satisfying the requirements of Item 601 of Regulation S-K promulgated
under the Securities Act. In rendering such opinions, each of such counsel shall
be entitled to rely on the tax representation letters referred to in this
Section 5.7.
5.8 RESIGNATION OF DIRECTORS.
The Company shall use its reasonable best efforts to obtain and
deliver to Parent prior to the Closing the resignation of each director of each
of the Acquired Corporations, effective as of the Effective Time.
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5.9 LISTING.
Parent shall use its commercially reasonable efforts to cause
the shares of Parent Common Stock being issued in the Merger to be approved for
listing (subject to official notice of issuance) on the NYSE.
5.10 TAKEOVER LAWS; ADVICE OF CHANGES.
(a) If any Takeover Law may become, or may purport to be,
applicable to the transactions contemplated in this Agreement, each of Parent
and the Company and the members of their respective Boards of Directors and the
Special Committee will grant such approvals and take such actions as are
necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable, and in any event prior to the
Termination Date, on the terms and conditions contemplated hereby and thereby
and otherwise act to eliminate the effect of any Takeover Law on any of the
transactions contemplated by this Agreement.
(b) Each of the Company and Parent will give prompt notice
to the other (and will subsequently keep the other informed on a current basis
of any developments related to such notice) upon its becoming aware of the
occurrence or existence of any fact, event or circumstance that (i) is
reasonably likely to result in a Material Adverse Effect with respect to the
Acquired Corporations or a material adverse effect with respect to Parent,
respectively, (ii) would cause or constitute a breach of any representations,
warranties or covenants contained herein or (iii) is reasonably likely to result
in any of the conditions set forth in Section 6 not being able to be satisfied
prior to the Termination Date.
5.11 SECTION 16.
(a) Parent shall, prior to the Effective Time, cause
Parent's Board of Directors to approve the issuance of shares of Parent Common
Stock in connection with the Merger, with respect to any employees of the
Company who upon the Effective Time will become subject to the reporting
requirements of Section 16 of the Exchange Act to the extent necessary for such
issuance to be an exempt acquisition pursuant to SEC Rule 16b-3, provided,
however, that Parent shall not be deemed to have violated this covenant if the
Company does not provide to the Board of Directors of Parent at least five (5)
business days prior to the Effective Time, all information reasonably requested
by Parent for the purpose of effecting such exemption. Prior to the Effective
Time, the Board of Directors of the Company shall approve the disposition of
Company Common Stock in connection with the Merger by those directors and
officers of the Company subject to the reporting requirements of Section 16 of
the Exchange Act to the extent necessary for such disposition to be an exempt
disposition pursuant to SEC Rule 16b-3.
(b) Parent agrees to file one or more registration
statements on Form S-8 for the shares of Parent Common Stock issuable with
respect to Company Assumed Options within ten (10) business days after the
Effective Time and keep any such registration statements effective until all
shares registered thereunder have been issued.
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5.12 AFFILIATES.
Within twenty (20) days after the date of this Agreement, the
Company shall deliver to Parent a letter identifying all Persons who are, to the
Company's knowledge, affiliates of the Company for purposes of Rule 145 under
the Securities Act. Prior to the Effective Time, the Company shall obtain and
deliver to Parent Affiliate Agreements from each Person identified in such
letter and any Person who may be deemed to have become an affiliate of the
Company for purposes of Rule 145 under the Securities Act after the date of this
Agreement and at or prior to the Effective Time. The Company shall cause each
such affiliate to certificate such affiliate's Company Common Stock and Parent
shall place the appropriate Rule 145 legend on the stock certificates
representing Parent Common Stock issued in the Merger to such affiliates. Parent
shall use its commercially reasonable efforts to remove such legends promptly
when such legends are no longer required by applicable Legal Requirements.
5.13 PARENT COMMON STOCK.
Parent shall take all corporate action necessary to reserve for
issuance and shall reserve for issuance a sufficient number of shares of Parent
Common Stock, registered pursuant to the Securities Act and listed on the NYSE,
for delivery upon exercise of the Company Assumed Options and the New Warrants.
5.14 LITIGATION.
The Company shall give Parent the opportunity to participate in
the defense of any litigation against the Company and/or its directors relating
to the transactions contemplated by this Agreement and the Voting Agreements.
5.15 CERTAIN OTHER COVENANTS.
The covenants set forth in Section 3 of EXHIBIT D are hereby
incorporated herein by this reference.
5.16 SCHEDULE OF DEBT.
On or prior to the fifth trading day preceding the date of the
Company Stockholders Meeting, the Company shall deliver to Parent a good faith
estimate in writing of all Debt of the Company (including, but without
duplication, any sums outstanding under the Note Purchase Agreement and the note
issued thereunder) as of immediately prior to the then expected Effective Time
and which shall be accompanied by reasonable supporting detail therefor. On the
Closing Date, the Company shall deliver to Parent a schedule of all Debt of the
Company (including, but without duplication, any sums outstanding under the Note
Purchase Agreement and the note issued thereunder) as of immediately prior to
the Effective Time certified as true and correct by the chief financial officer
of the Company and which shall be accompanied by reasonable supporting detail
therefor.
42
SECTION 6. CONDITIONS TO THE MERGER
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION.
The respective obligations of the Company, Parent and Merger Sub
to consummate the Merger are subject to the satisfaction or, to the extent
permitted by applicable Legal Requirements, the waiver by each party on or prior
to the Effective Time of each of the following conditions:
(a) Stockholder Approval. To the extent required by the
NRS, this Agreement shall have been approved by the stockholders of the Company.
(b) No Order. No provision of any applicable Legal
Requirements and no judgment, injunction, Order or decree shall prohibit the
consummation of the Merger or the other transactions contemplated by this
Agreement.
(c) Effectiveness of Registration Statement; Proxy
Statement. The Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and any material "blue sky" and other state securities
laws applicable to the registration and qualification of the Parent Common Stock
shall have been complied with. The Proxy Statement shall have been "cleared" by
the SEC for mailing by the Company in definitive form to the holders of Company
Common Stock.
(d) Listing. The shares of Parent Common Stock to be issued
in the Merger shall have been included for listing on the NYSE (subject to
official notice of issuance).
(e) HSR Act. The applicable waiting period under the HSR Act
shall have expired or been terminated and any applicable waiting periods,
consents or clearances under foreign antitrust laws shall have expired, been
terminated or been obtained.
(f) Parent Tax Opinion. Parent shall have received an
opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., in form and substance reasonably satisfactory
to Parent and to the Company, on the basis of customary facts, representations
and assumptions set forth in such opinion, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, provided, however, that if ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
does not render such opinion or withdraws or modifies such opinion, this
condition shall nonetheless be deemed satisfied if ▇▇▇▇▇▇▇▇▇ Traurig LLP renders
such opinion to Parent.
(g) Company Tax Opinion. The Company shall have received an
opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP in form and substance reasonably satisfactory
to Parent and to the Company, on the basis of customary facts, representations
and assumptions set forth in such opinion, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code; provided, however, that if ▇▇▇▇▇▇▇▇▇ Traurig LLP
does not render such opinion or withdraws or modifies such opinion, this
condition shall nonetheless be deemed satisfied if ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
renders such opinion to the Company.
43
(h) Parent Consents. Parent shall have procured all
consents of third-parties and Governmental Bodies set forth on Schedule 3.5 to
the Parent Disclosure Schedule.
6.2 ADDITIONAL CONDITIONS TO PARENT'S AND MERGER SUB'S OBLIGATIONS.
The respective obligations of the Parent and Merger Sub to
consummate the Merger are subject to the satisfaction or, to the extent
permitted by applicable Legal Requirements, the waiver by Parent and Merger Sub,
on or prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. (i) the representations
and warranties of the Company contained in this Agreement (including EXHIBIT D,
except those set forth in Section 2.3, Section 2.4 or clause (iii) of Section
2.16(b)) not qualified by a "materiality" or "Material Adverse Effect" qualifier
shall be accurate in all material respects except as otherwise contemplated by
this Agreement, and (ii) the representations and warranties of the Company
contained in this Agreement (including EXHIBIT D, except those set forth in
Section 2.3, Section 2.4 or clause (iii) of Section 2.16(b)) qualified by a
"materiality" or "Material Adverse Effect" qualifier shall be accurate in all
respects, in the case of each of (i) and (ii) above, as of the date of this
Agreement and as of the Effective Time; except to the extent such
representations and warranties speak as of an earlier date, in which case such
representations and warranties shall be accurate as of such date in all material
respects, in the case of (i) above, and accurate in all respects, in the case of
(ii) above. The representations and warranties of the Company contained in
Section 2.3, Section 2.4 or clause (iii) of Section 2.16(b) of this Agreement
shall be true and correct in all respects as of the date of this Agreement and
as of the Effective Time. Parent shall have received a certificate of the chief
executive officer or chief financial officer of the Company to that effect.
(b) Covenants and Agreements. The Company shall have
performed in all material respects its covenants, obligations and agreements
under the Agreement (other than those set forth in EXHIBIT D). The Company shall
have performed in all respects its covenants, obligations and agreements set
forth in EXHIBIT D. Parent shall have received a certificate of the chief
executive officer or chief financial officer of the Company to that effect.
(c) Company Material Adverse Effect. Since the date hereof,
there shall not have occurred, and there shall not exist any event or
circumstance, including any Legal Proceeding, that could reasonably be expected
to have a Material Adverse Effect on the Acquired Corporations (taken as a
whole).
(d) No Litigation. There shall be no pending or threatened
Legal Proceeding: (i) challenging or seeking to prohibit or materially delay the
consummation of the Merger or any of the other transactions contemplated by this
Agreement; (ii) seeking to prohibit or materially delay or limit in any material
respect Parent's ability to vote, receive dividends with respect to or otherwise
exercise beneficial ownership rights with respect to the capital stock of the
Surviving Corporation; (iii) which would materially and adversely affect the
right of Parent, the Surviving Corporation or any subsidiary of Parent to own
the
44
assets or operate the business of the Acquired Corporations as presently owned
and operated by the Company; or (iv) seeking to compel Parent or the Company, or
any subsidiary of Parent or the Company, to dispose of or hold separate any
material assets, as a result of the Merger or any of the other transactions
contemplated by this Agreement; (v) seeking to have the Company, Parent or any
of their respective subsidiaries pay material damages or otherwise become
subject to material adverse consequences in connection with any of the
transactions contemplated by this Agreement; or (vi) otherwise have or
reasonably be expected to have, a Material Adverse Effect on the Acquired
Corporations (taken as a whole) or, as a result of the transactions contemplated
by this Agreement, a Material Adverse Effect on Parent and the Significant
Subsidiaries (taken as a whole).
(e) Consents. The Acquired Corporations shall have procured
all consents of third-parties and Governmental Bodies set forth on Schedule 2.16
to the Company Disclosure Schedule.
(f) Dissenting Shares. The Dissenting Shares shall not
constitute more than five percent (5%) of the issued and outstanding Company
Common Stock.
(g) Amendment to Executive Employment Agreements. Each of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Colum ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and Pere ▇▇▇▇▇▇ shall
have entered into an amendment to his employment agreement with Parent and
Company substantially in the form of EXHIBIT E.
(h) Certain Other Conditions. The conditions set forth in
Section 1 of EXHIBIT D shall have been satisfied or, to the extent permitted by
applicable Legal Requirements, waived by Parent and Merger Sub, on or prior to
the Effective Time.
6.3 ADDITIONAL CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The obligations of the Company to consummate the Merger are
subject to the satisfaction or, to the extent permitted by applicable Legal
Requirements, the waiver by the Company, on or prior to the Effective Time of
each of the following conditions:
(a) Representations and Warranties. (i) the representations
and warranties of Parent and Merger Sub contained in this Agreement not
qualified by a "materiality" or "Material Adverse Effect" qualifier shall be
accurate in all material respects, and (ii) the representations and warranties
of Parent and Merger Sub contained in this Agreement qualified by a
"materiality" or "Material Adverse Effect" qualifier shall be accurate in all
respects, in the case of each of (i) and (ii) above, as of the date of this
Agreement and as of the date of the Effective Time; except to the extent such
representations and warranties speak as of an earlier date, in which case such
representations and warranties shall be accurate as of such date in all material
respects, in the case of (i) above, or in all respects, in the case of (ii)
above. The Company shall have received a certificate of the chief executive
officer or chief financial officer of Parent to that effect.
(b) Covenants and Agreements. Parent or Merger Sub shall
have performed in all material respects their respective covenants, obligations
or agreements
45
under this Agreement. The Company shall have received a certificate of the chief
executive officer or chief financial officer of Parent to that effect.
(c) Parent Material Adverse Effect. Since the date hereof,
there shall not have occurred, and there shall not exist any event or
circumstance, including any Legal Proceeding, that would have a Material Adverse
Effect on Parent and its Significant Subsidiaries (taken as a whole).
(d) No Litigation. There shall be no pending or threatened
Legal Proceeding: (i) challenging or seeking to prohibit or materially delay the
consummation of the Merger or any of the other transactions contemplated by this
Agreement; or (ii) seeking to obtain from the Company in a Legal Proceeding
relating to the Merger any monetary damages that would be material to the
Company.
SECTION 7. TERMINATION
7.1 TERMINATION.
This Agreement may be terminated prior to the Effective Time,
whether before or after approval of this Agreement by the Company's
stockholders:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if (i) the Merger shall
not have been consummated by the date which is 180 days after the date of this
Agreement (the "TERMINATION DATE") (unless the failure to consummate the Merger
is attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Termination Date); or (ii) this Agreement has not been
approved by the requisite vote of the holders of Company Common Stock at the
Company Stockholders' Meeting;
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable Order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(d) by Parent, at any time prior to the Effective Time, if a
Company Triggering Event shall have occurred;
(e) by Parent, at any time prior to the Effective Time, if
(i) any of the Company's representations or warranties contained in this
Agreement shall be inaccurate as of the date of this Agreement, or shall have
become inaccurate as of a date subsequent to the date of this Agreement (as if
made on such subsequent date), such that the condition set forth in Section
6.2(a) would not be satisfied, or (ii) any of the Company's covenants contained
in this Agreement shall not have been performed such that the condition set
forth in Section 6.2(b) would not be satisfied;
46
(f) by the Company, at any time prior to the Effective Time, if
(i) any of the Parent's or Merger Sub's representations or warranties contained
in this Agreement shall be inaccurate as of the date of this Agreement, or shall
have become inaccurate as of a date subsequent to the date of this Agreement (as
if made on such subsequent date), such that the condition set forth in Section
6.3(a) would not be satisfied, or (ii) any of the Parent's or Merger Subs
covenants contained in this Agreement shall not have been performed such that
the condition set forth in Section 6.3(b) would not be satisfied;
(g) by Parent, if the Average Parent Trading Price is
greater than $33.150 unless the Company makes a Company Election, in which case
the Parent shall have no right of termination pursuant to this Section 7.1(g);
(h) by the Company, if the Average Parent Trading Price is
less than $20.125 unless Parent makes a Parent Election, in which case the
Company shall have no right to a termination pursuant to this Section 7.1(h);
and
(i) by the Company, if (i) the Board of Directors of the
Company shall have withdrawn its Recommendations in accordance with Section
4.3(e), or (ii) the Company shall have entered into an agreement providing for a
Company Acquisition Transaction (and neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in Section
4.3).
7.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect; provided,
however, that (a) this Section 7.2 and Section 7.3 shall survive the termination
of this Agreement and shall remain in full force and effect, and (b) the
termination of this Agreement shall not relieve any party from any liability or
damages for any willful breach of any provision contained in this Agreement.
7.3 EXPENSES; TERMINATION FEES.
(a) Expenses. Except as set forth in this Section 7.3, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, whether or not the Merger is consummated; provided, however,
that: (i) Parent and the Company shall share equally all fees and expenses,
other than attorneys' fees, incurred in connection with (A) the filing, printing
and mailing of the Registration Statement and Proxy Statement and any amendments
or supplements thereto and (B) the filing of any premerger notification and
report forms relating to the Merger under the HSR Act and the filing of any
notice or other document under any applicable foreign antitrust law or
regulation; and (ii) if this Agreement is terminated and a termination fee is
payable under Section 7.3(b)(i), then, at the time specified in the next
sentence, the Company shall make a nonrefundable cash payment to Parent (in
addition to any other amount that may be payable pursuant to Section 7.3(b)), in
an amount equal to the aggregate amount, not to exceed Two Hundred Fifty
Thousand Dollars ($250,000), of all reasonably documented fees and expenses
(including all attorneys' fees, accountants' fees, financial advisory fees and
filing fees) that
47
have been paid or that have become due and payable or incurred obligations by or
on behalf of Parent in connection with the preparation and negotiation of this
Agreement and otherwise in connection with the Merger. The nonrefundable payment
referred to in clause (ii) of the proviso to the first sentence of this Section
7.3(a) shall be made by the Company at the time the termination fee is payable
under Section 7.3(b)(i).
(b) Termination Fee.
(i) If neither Parent nor Merger Sub is in material
breach of their respective obligations under this Agreement and if (x) (A) this
Agreement is terminated by Parent or the Company pursuant to Section 7.1(b)
(and, in the event such termination is pursuant to clause (i) of Section 7.1(b),
the conditions set forth in Sections 6.1(b), (c) and (e) and Sections 6.3(a),
(b), (c), (d) and (e) were satisfied or waived on or prior to the date of such
termination), (B) at or prior to the time of such termination a Company
Acquisition Proposal shall have been disclosed, announced, commenced, submitted
or made and the same shall have been publicly announced, and (C) within 12
months after such termination the Company enters into a definitive agreement
providing for, or consummates, a Company Acquisition Transaction with any
Person, (y) this Agreement is terminated by Parent pursuant to Section 7.1(d),
or (z) this Agreement is terminated by the Company pursuant to Section 7.1(i),
then, in the case of each of (x), (y) and (z), the Company shall pay to Parent,
in cash at the applicable time specified in the next two sentences, a
nonrefundable fee in the amount of One Million Four Hundred Thousand Dollars
($1,400,000) (in addition to any payment required to be made pursuant to Section
7.3(a), if any). In the case of termination of this Agreement pursuant to
Section 7.1(b), the fee referred to in the previous sentence shall be paid by
the Company upon the execution of such definitive agreement. In the case of
termination of this Agreement by Parent pursuant to Section 7.1(d), or by the
Company pursuant to Section 7.1(i), the fee referred to in the first sentence of
this Section 7.3(b)(i) shall be paid by the Company within two (2) business days
after such termination.
(ii) The Company acknowledges that the agreements
contained in this Section 7.3(b) are an integral part of the transaction
contemplated by this Agreement, and that, without these agreements, Parent would
not enter into this Agreement; accordingly, if the Company fails to pay in a
timely manner the amounts due pursuant to this Section 7.3(b) and, in order to
obtain such payment, Parent makes a claim that results in a judgment against the
Company for the amounts set forth in this Section 7.3(b), the Company shall pay
to Parent its costs and expenses (including attorneys' fee and expenses) in
connection with such suit, together with interest per annum on the amounts set
forth in this Section 7.3(b) at the prime rate of Citibank, N.A. in effect from
time to time from the date such payment was required to be paid to the date it
is paid. Payment of the fees and expenses described in this Section 7.3 shall
not be in lieu of damages incurred in the event of willful breach of this
Agreement.
SECTION 8. SPECIAL COMMITTEE
Until the Effective Time, all actions to be taken by the Company
to enforce, waive compliance with, amend, apply or modify any of the terms of
this Agreement shall require the affirmative approval of the Special Committee,
and Parent shall be entitled to
48
rely on a certificate of the Company's chief executive officer or chief
financial officer attesting to the Company's compliance with this Section 8.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT.
This Agreement may be amended with the approval of the
respective boards of directors of the Company and Parent at any time (whether
before or after approval of this Agreement by the stockholders of the Company);
provided, however, that after any such approval of this Agreement by the
Company's stockholders, no amendment shall be made which by law requires further
approval of the stockholders of the Company without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.2 WAIVER.
(a) No failure on the part of any party to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any party in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
(b) No party shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations, warranties or agreements contained
in this Agreement or in any certificate delivered pursuant to this Agreement
shall survive the Effective Time, except for agreements which by their terms
survive the Effective Time. This Section 9.3 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
9.4 ENTIRE AGREEMENT; COUNTERPARTS.
This Agreement and that certain letter agreement regarding
confidential information, dated November 8, 2001 between Parent and the Company
(the "MUTUAL NONDISCLOSURE AGREEMENT") constitute the entire agreement among the
parties hereto and all other prior agreements and understandings, both written
and oral, among or between any of the parties with respect to the subject matter
hereof and thereof are no force and effect. This Agreement may be executed in
several counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same instrument.
49
9.5 APPLICABLE LAW; JURISDICTION.
This Agreement shall be governed by, and construed in accordance
with, the (internal procedural and substantive) laws of the State of Delaware,
applicable to agreements and instruments executed and delivered wholly within
such state and without regard to such state's principles of conflicts of laws;
provided, however, the provisions of this Agreement relating to the Merger shall
be governed by the NRS. In any action between any of the parties arising out of
or relating to this Agreement or any of the transactions contemplated by this
Agreement: (a) each of the parties irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of any state court of competent
jurisdiction located in the State of Delaware or any United States District
Court located in the State of Delaware, and the applicable courts of appeals
therefrom (or, in the event no Delaware court will accept jurisdiction, state
and federal courts of the same type located in the State of Nevada); (b) if any
such action is commenced in a state court, then, subject to applicable law, no
party shall object to the removal of such action to any federal court located in
the State of Delaware (or the State of Nevada, if applicable); (c) each of the
parties irrevocably waives the right to trial by jury; and (d) each of the
parties irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice in accordance with Section 9.8.
9.6 ATTORNEYS' FEES.
In any action at law or suit in equity to enforce this Agreement
or the rights of any of the parties hereunder, the prevailing party in such
action or suit shall be entitled to receive a reasonable sum for its attorneys'
fees and all other reasonable costs and expenses incurred in such action or
suit.
9.7 ASSIGNABILITY; THIRD PARTY BENEFICIARIES.
This Agreement shall be binding upon, and shall be enforceable
by and inure solely to the benefit of, the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor any
of the Company's rights hereunder may be assigned by the Company without the
prior written consent of Parent, and any attempted assignment of this Agreement
or any of such rights by the Company without such consent shall be void and of
no effect. Except as provided in Section 5.4, nothing in this Agreement, express
or implied, is intended to or shall confer upon any Person (other than the
parties hereto) any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
9.8 NOTICES.
Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when actually delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other parties
50
hereto); provided, however, that a written notice delivered via facsimile shall
be deemed delivered only if at the time of, or shortly after, such facsimile
transmission the party giving the notice confirms by telephone the actual
receipt by the other party of such facsimile transmission:
(a) If to Parent or Merger Sub:
The Titan Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
with a copy to (which shall not constitute notice hereunder), to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
(b) If to the Special Committee of the Company's Board of Directors,
to each of:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (which shall not constitute notice hereunder), to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
The MetLife Building
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
51
(c) If to the Company, to:
GlobalNet, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇-▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to (which shall not constitute notice hereunder), to:
▇▇▇▇▇▇▇▇▇ Traurig, LLP
The MetLife Building
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
All notices to the Company pursuant to this Agreement simultaneously shall be
delivered to the Special Committee in the manner provided above.
9.9 COOPERATION.
The parties agree to cooperate fully with each other and to
execute and deliver such further documents, certificates, agreements and
instruments and to take such other actions as may be reasonably requested by the
other party to evidence or reflect the transactions contemplated by this
Agreement and to carry out the intent and purposes of this Agreement.
9.10 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties hereto agree that any rule of construction
to the effect that ambiguities are to be resolved against the drafting party
shall not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
52
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
(e) Any statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such statute as from
time to time amended, modified or supplemented, including by comparable
successor statutes.
(f) The table of contents, index of defined terms and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the intended meaning or interpretation of this Agreement.
53
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
THE TITAN CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Exec. VP & COO
T T III ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇
Title: Exec. VP & COO
GLOBALNET, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Exec. VP & COO
LIST OF EXHIBITS
EXHIBIT A - CERTAIN DEFINITIONS
EXHIBIT B - FORM OF VOTING AGREEMENT
EXHIBIT C - LIST OF OFFICERS
EXHIBIT D - TREATMENT OF WARRANTS; CONVERTIBLE NOTE; OTHER RIGHTS
(FORM OF WARRANT ATTACHED)
EXHIBIT E - FORM OF EMPLOYMENT AGREEMENT
EXHIBIT F - FORM OF AFFILIATE AGREEMENT
EXHIBIT G - DESCRIPTION OF AMOUNTS OWED TO MCI/WORLDCOM
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this EXHIBIT A):
"ACQUIRED CORPORATION CONTRACT" shall mean any Contract: (a) to
which any of the Acquired Corporations is a party; (b) by which any of the
Acquired Corporations or any asset of any of the Acquired Corporations is or may
become bound or under which any of the Acquired Corporations has, or may become
subject to, any obligation; or (c) under which any of the Acquired Corporations
has or may acquire any right or interest.
"ACQUIRED CORPORATION PROPRIETARY ASSET" shall mean any
Proprietary Asset owned by or licensed to any of the Acquired Corporations or
otherwise used by any of the Acquired Corporations.
"ACQUIRED CORPORATIONS" is defined in Section 2.1 to this
Agreement.
"AFFILIATE AGREEMENTS" means the Affiliate Agreements in the
form attached hereto as EXHIBIT F.
"AGREEMENT" is defined in the Preamble to this Agreement.
"ARTICLES OF MERGER" is defined in Section 1.3 to this
Agreement.
"AVERAGE PARENT TRADING PRICE" is defined in Section 1.5 to this
Agreement.
"CAPITAL LEASE OBLIGATIONS" means all monetary obligations of a
Person under any leasing or similar arrangement which, in accordance with GAAP,
is classified as a capital lease.
"CLOSING" is defined in Section 1.3 to this Agreement.
"CLOSING DATE" is defined in Section 1.3 to this Agreement.
"CODE" is defined in the Recitals to this Agreement.
"COMPANY" is defined in the Preamble to this Agreement.
"COMPANY ACQUISITION PROPOSAL" shall mean any offer, proposal,
letter of intent, inquiry or expression or indication of interest (other than an
offer, proposal, letter of intent, inquiry or expression or indication of
interest by Parent) contemplating or otherwise relating to any Company
Acquisition Transaction.
"COMPANY ACQUISITION TRANSACTION" shall mean any transaction or
series of related transactions involving:
(a) any merger, consolidation, share exchange, business
combination, issuance of securities, direct or indirect acquisition of
securities, tender offer, exchange offer
or other similar transaction in which (i) any of the Acquired Corporations is a
constituent corporation, (ii) a Person or "Group" (as defined in the Exchange
Act and the rules promulgated thereunder) of Persons directly or indirectly
acquires beneficial or record ownership of securities representing more than 10%
of the outstanding securities of any class of voting securities of any of the
Acquired Corporations, or (iii) any of the Acquired Corporations issues
securities representing more than 10% of the outstanding securities of any class
of voting securities of any of the Acquired Corporations;
(b) any direct or indirect sale, lease, exchange, transfer,
license, acquisition or disposition of any business or businesses or of assets
or rights that constitute or account for 10% or more of the consolidated net
revenues, net income or assets of the Acquired Corporations; or
(c) any liquidation or dissolution of any of the Acquired
Corporations.
"COMPANY ASSUMED OPTIONS" shall mean Company Options the
exercise price of which is less than the Company Stock Value.
"COMPANY BALANCE SHEET" is defined in Section 2.4(b) to this
Agreement.
"COMPANY BALANCE SHEET DATE" is defined in Section 2.4(b) to
this Agreement.
"COMPANY COMMON STOCK" shall mean the Common Stock, par value
$0.01 per share, of the Company.
"COMPANY DISCLOSURE SCHEDULE" is defined in Section 2 to this
Agreement.
"COMPANY ELECTION" shall mean an election delivered by the
Company to Parent in accordance with Section 9.8 in which the Company elects to
use the Exchange Ratio calculated pursuant to Section 1.5(a)(i)(4)(A).
"COMPANY EMPLOYEE PLANS" is defined in Section 2.12(a) to this
Agreement.
"COMPANY EXCHANGED WARRANTS" shall mean the warrants to purchase
Company Common Stock identified on Section 2.3(c)(i) of the Company Disclosure
Schedule and that are outstanding as of the Effective Time as to which each
holder thereof has agreed to exchange such warrant for a warrant to purchase
shares of Parent Common Stock in accordance with Section 3(f) of EXHIBIT D.
"COMPANY FINANCIAL STATEMENTS" is defined in Section 2.4(b) to
this Agreement.
"COMPANY MATERIAL CONTRACT" is defined in Section 2.7(a) to this
Agreement.
"COMPANY OPTIONS" is defined in Section 2.3(b) to this
Agreement.
Exhibit A-2
"COMPANY ORGANIZATION DOCUMENTS" is defined in Section 2.1 to
this Agreement.
"COMPANY SEC DOCUMENTS" is defined in Section 2.4(a) to this
Agreement.
"COMPANY STOCK CERTIFICATE" is defined in Section 1.6 to this
Agreement.
"COMPANY STOCK OPTION PLANS" shall mean the 2000 Stock Plan and
the 2001 Incentive Plan, and all stock option agreements evidencing option
grants under each of the foregoing stock option plans.
"COMPANY STOCK RIGHTS" is defined in Section 2.3(c) to this
Agreement.
"COMPANY STOCK VALUE" shall mean the result of dividing the
Transaction Value by the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time.
"COMPANY STOCKHOLDERS' MEETING" is defined in Section 5.2(a) to
this Agreement.
"COMPANY SUPERIOR OFFER" shall mean an unsolicited, bona fide
written offer made by a third party for a merger, consolidation, business
combination, sale of substantial assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transaction
with respect to any Acquired Corporation on terms that the Board of Directors of
the Company determines, in good faith, after consultation with outside legal
counsel and Ladenburg ▇▇▇▇▇▇▇▇ or another nationally recognized independent
financial advisor, if accepted, is reasonably likely to be consummated, taking
into account all legal, financial and regulatory aspects of the offer and the
Person making the offer, and would, if consummated, be more favorable to the
Company's stockholders, from a financial point of view, than the Merger;
provided, however, that any such offer shall not be deemed to be a "Company
Superior Offer" if any financing required to consummate the transaction
contemplated by such offer is not committed or is not, in the good faith
judgment of the Company, reasonably capable of being obtained by such third
party on a timely basis.
"COMPANY TAX RETURNS" is defined in Section 2.11(d) to this
Agreement.
A "COMPANY TRIGGERING EVENT" shall be deemed to have occurred if
there shall have been submitted to the Company a Company Acquisition Proposal
and: (i) the Board of Directors of the Company shall have failed to make and
include in the Registration Statement or the Proxy Statement, or shall have
withdrawn, or modified in a manner adverse to Parent, the Recommendations; it
being hereby acknowledged and understood that any position taken pursuant to
Rule 14e-2(a)(2) under the Exchange Act shall be deemed to constitute the
withdrawal or modification in a manner adverse to the Parent, of the
Recommendations by the Company's Board of Directors; (ii) the Board of Directors
of the Company shall have publicly recommended any Company Acquisition Proposal
or shall have publicly announced an intention or that it has resolved to do so,
or the Company shall have entered into an agreement providing for a Company
Acquisition
Exhibit A-3
Transaction; or (iii) the Company shall have materially breached its obligations
under Section 4.3 of this Agreement.
"COMPANY WARRANTS" shall mean all warrants to purchase Company
Common Stock identified on Section 2.3(c)(i) of the Company Disclosure Schedule.
"CONSENT" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
"CONTRACT" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
"CONVERTIBLE NOTE" shall mean the Convertible Note of the
Company dated April 9, 2001, due April 9, 2004, in the original principal amount
of Two Million Dollars ($2,000,000) made payable to Crescent International Ltd.,
and such other convertible note or notes that may be exchanged therefor.
"DEBT" shall mean without duplication (a) all outstanding
indebtedness for borrowed money of the Acquired Corporations to any Person, (b)
all obligations of the Acquired Corporations arising from or incurred in
connection with the acquisition or purchase of capital assets (including the
deferred purchase price for such capital assets and all Capital Lease
Obligations), (c) all amounts payable by the Acquired Corporations to
MCI/Worldcom of whatever type as described in EXHIBIT G attached hereto and (d)
all other accounts payable by the Acquired Corporations other than those
incurred by the Acquired Corporations in the ordinary course of business. Any
indebtedness for borrowed money of any of the Acquired Corporations to or from
any other of the Acquired Corporations shall be excluded from the definition of
Debt.
"EFFECTIVE TIME" is defined in Section 1.3 to this Agreement.
"EMPLOYEE BENEFIT PLAN" is defined in Section 2.12(c) to this
Agreement.
"ENCUMBRANCE" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
"ENTITY" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
"ENVIRONMENTAL LAW" is defined in Section 2.13(b)(i) to this
Agreement.
Exhibit A-4
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the regulations promulgated thereunder.
"EXCHANGE AGENT" is defined in Section 1.7(a) to this Agreement.
"EXCHANGE FUND" is defined in Section 1.7(a) to this Agreement.
"EXCHANGE RATIO" is defined in Section 1.5(a) to this Agreement.
"EXCLUDED SHARES" shall mean all Dissenting Shares and any
shares of Company Common Stock held as of the Effective Time (a) by Parent,
Merger Sub or any Subsidiary of Parent or Merger Sub, (b) by the Company or any
Subsidiary of the Company or (c) by the Company as treasury shares.
"ERISA" is defined in Section 2.12(a) to this Agreement.
"ERISA AFFILIATES" is defined in Section 2.12(a) to this
Agreement.
"GAAP" is defined in Section 2.4(b) to this Agreement.
"GOVERNMENT CONTRACT" shall mean any prime contract,
subcontract, letter agreement, purchase or delivery order, task order, or other
agreement of any kind executed or submitted to or on behalf of any Governmental
Body or any prime contractor or higher-tier subcontractor, or under which any
Governmental Body or any such prime contractor otherwise has or may acquire any
right or interest.
"GOVERNMENTAL AUTHORIZATION" shall mean any: (a) permit,
license, certificate, franchise, permission, variance, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or (b) right under any Contract with any Governmental Body.
"GOVERNMENTAL BODY" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
"HAZARDOUS MATERIALS" is defined in Section 2.13(b)(ii) to this
Agreement.
"HSR ACT" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the regulations promulgated
thereunder.
"INDEMNIFIED PERSONS" is defined in Section 5.4(a) to this
Agreement.
Exhibit A-5
"LEGAL PROCEEDING" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Body or any arbitrator or arbitration
panel.
"LEGAL REQUIREMENT" shall mean any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body (or under the
authority of the NYSE), including any Environmental Law or export control law.
"LIABILITY" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LOSSES" shall mean 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.
"MATERIAL ADVERSE EFFECT", means with respect to any Person, any
event, occurrence, state of facts, or development having a material adverse
effect on (i) the business, assets, operations, liabilities, condition or
earnings of the referent Person and its subsidiaries considered as an entirety
or (ii) the ability of the referent Person to consummate the Merger or any of
the other transactions contemplated by this Agreement; other than an event,
occurrence, state of facts, development circumstance that relates (w) to the
economy or financial markets in general, (x) in general to the industries in
which the referent Person operates and not specifically relating to (or having
the effect of specifically relating to or having a materially disproportionate
effect on (relative to most other industry participants)) such referent Person,
(y) the announcement of this Agreement, the Merger and the other transactions
contemplated thereby and the performance by the parties of their respective
obligations hereunder, or (z) any action or failure to act (including the
failure to enter into a promissory note as described in Section 2.5(d)(ii) of
the Company Disclosure Schedule) in connection with the indebtedness to MCI
WorldCom described in Section 2.5(d)(ii) of the Company Disclosure Schedule if
such action or inaction is at the request of Parent or Merger Sub. With respect
to the Acquired Corporations, (i)(a) the voluntary commencement of any case or
proceeding by Global Crossing Ltd. under Chapter 7 of Title 11 of the United
States Code or any successor or similar federal or state statute, regulation or
rule, or (b) the involuntary commencement of any such case against Global
Crossing Ltd. which involuntary case is not dismissed within 90 days after such
commencement, shall, in all events, be deemed to have a Material Adverse Effect
on the Acquired Corporations (taken as a whole) and (ii)(a) the voluntary
commencement of any case or proceeding by Global Crossing Ltd. under Chapter 11
of Title 11 of the United States Code or any successor or similar federal or
state statute, regulation or rule, or (b) the involuntary commencement of any
such case against Global Crossing Ltd. which involuntary case is not dismissed
within 90 days after commencement, shall, in all events, be deemed to have a
Material Adverse Effect on the Acquired Corporations (taken as a
Exhibit A-6
whole) if the same has a Material Adverse Effect on the Acquired Corporations
(taken as a whole) under the standards set forth in the immediately preceding
sentence.
"MERGER" is defined in the Recitals to this Agreement.
"MERGER CONSIDERATION" is defined in Section 1.5(a)(i) to this
Agreement.
"MERGER SUB" is defined in the Preamble to this Agreement.
"MUTUAL NONDISCLOSURE AGREEMENT" is defined in Section 9.4 to
this Agreement.
"NEW WARRANTS" is defined in EXHIBIT D to this Agreement.
"NOTE PURCHASE AGREEMENT" is defined in the Recitals to this
Agreement.
"NRS" is defined in the Recitals to this Agreement.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OPTION/WARRANT VALUE" shall mean the fair value of (i) the
Company Assumed Options assumed by the Parent pursuant to Section 1.11 and (ii)
the New Warrants, determined using the Black-Scholes option pricing model in a
manner consistent with the manner in which the same is used by the Parent to
value its own options and warrants for financial reporting purposes.
"ORDER" shall mean any: (a) order, judgment, injunction, edict,
decree, ruling, pronouncement, determination, decision, opinion, verdict,
sentence, subpoena, writ or award issued, made, entered, rendered or otherwise
put into effect by or under the authority of any court, administrative agency or
other Governmental Body or any arbitrator or arbitration panel; or (b) Contract
with any Governmental Body entered into in connection with any Legal Proceeding.
"PARENT" is defined in the Preamble to this Agreement.
"PARENT COMMON STOCK" shall mean the Common Stock, $0.01 par
value per share, of Parent, including the associated rights to purchase capital
stock of Parent pursuant to and in accordance with the Rights Agreement, dated
as of August 21, 1995, between The Titan Corporation and American Stock Transfer
and Trust Company.
"PARENT CONTRACT" shall mean any Contract: (a) to which Parent
or any Subsidiary of Parent is a party; (b) by which Parent or any Subsidiary of
Parent or any asset of Parent or any Subsidiary of Parent is or may become bound
or under which Parent or any Subsidiary of Parent has, or may become subject to,
any obligation; or (c) under which Parent or any Subsidiary of Parent has or may
acquire any right or interest.
"PARENT CUMULATIVE PREFERRED STOCK" shall mean the Cumulative
Convertible Preferred Stock, $1.00 par value, of Parent.
Exhibit A-7
"PARENT DISCLOSURE SCHEDULE" is defined in Section 3 to this
Agreement.
"PARENT ELECTION" shall mean an election delivered by Parent to
the Company in accordance with Section 9.8 in which Parent elects to use the
Exchange Ratio calculated pursuant to Section 1.5(a)(i)(5)(A).
"PARENT FINANCIAL STATEMENTS" is defined in Section 3.4(b) to
this Agreement.
"PARENT ORGANIZATION DOCUMENTS" is defined in Section 3.1 to
this Agreement.
"PARENT PREFERRED STOCK" shall mean the Parent Cumulative
Preferred Stock and Parent Series A Preferred Stock.
"PARENT SEC DOCUMENTS" is defined in Section 3.4(a) to this
Agreement.
"PARENT SERIES A PREFERRED STOCK" shall mean the Series A Junior
Participating Preferred Stock, $1.00 par value, of Parent.
"PERSON" shall mean any individual, Entity or Governmental Body.
"PLEDGE AGREEMENT" shall mean that certain Pledge Agreement of
even date herewith among the Parent and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Colum ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇ Ventures LP.
"PRE-CLOSING PERIOD" is defined in Section 4.1 to this
Agreement.
"PROPRIETARY ASSET" 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
Exhibit A-8
whatever form or medium) existing in any part of the world (including all
computer software and related data and documentation).
"PROXY STATEMENT" is defined in Section 5.1 to this Agreement.
"RECOMMENDATIONS" is defined in Section 2.2 to this Agreement.
"REGISTRATION STATEMENT" is defined in Section 5.1 to this
Agreement.
"REPRESENTATIVES" shall mean officers, directors, employees,
agents, attorneys, accountants, advisors, consultants and representatives.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended and the regulations promulgated thereunder.
"SHARES" is defined in Section 1.6 to this Agreement.
"SIGNIFICANT SUBSIDIARIES" of Parent shall mean Cayenta, Inc.,
SureBeam Corporation, Titan Systems Corporation and Titan Wireless, Inc.
"SPECIAL COMMITTEE" shall mean the Special Committee of the
Board of Directors of the Company, comprised of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
"STOCKHOLDERS" is defined in the Recitals to this Agreement.
An entity shall be deemed to be a "SUBSIDIARY" of another Person
if such Person directly or indirectly owns, beneficially or of record, (a) an
amount of voting securities or other interests in such Entity that is sufficient
to enable such Person to elect at least a majority of the members of such
Entity's Board of Directors or other governing body, or (b) at least 50% of the
outstanding equity or financial interests of such Entity.
"SURVIVING CORPORATION" is defined in Section 1.1 to this
Agreement.
"TAKEOVER LAWS" means any "moratorium," "control share
acquisition," "fair price," "supermajority," "affiliate transactions," or
"business combination statute or regulation" or other similar state antitakeover
laws and regulations.
"TAX" shall mean any tax (including any income tax, franchise
tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise tax,
ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, withholding tax or payroll tax), levy, assessment, tariff, duty
(including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed, assessed or collected
by or under the authority of any Governmental Body.
Exhibit A-9
"TAX RETURN" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"TERMINATION DATE" is defined in Section 7.1(b) to this
Agreement.
"THIRD PARTY CLAIM" means any claim or other assertion of
liability by any third party.
"TRANSACTION VALUE" means, subject to adjustment pursuant to
Section 2 of EXHIBIT D, Sixty Million Dollars ($60,000,000) less (i) all Debt of
the Company (including, but without duplication, any sums outstanding under the
Note Purchase Agreement and the note issued thereunder) immediately prior to the
Effective Time, (ii) the Option/Warrant Value immediately prior to the Effective
Time and (iii) any payments made by the Company to redeem the Convertible Note.
"VEBA" is defined in Section 2.12(l) to this Agreement.
"VOTING AGREEMENTS" is defined in the Recitals to this
Agreement.
"WARN ACT" is defined in Section 2.12(i) to this Agreement.
EXHIBIT B
FORM OF VOTING AGREEMENT
See Exhibit 9.1 to the Current Report on Form 8-K to which this
Agreement and Plan of Merger is annexed as Exhibit 2.1.
EXHIBIT C
LIST OF OFFICERS
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NAME TITLE
---- -----
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▇▇▇▇ ▇. ▇▇▇ CHAIRMAN
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▇. ▇. ▇▇▇▇▇ PRESIDENT
--------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ CHIEF OPERATING OFFICER AND EXECUTIVE VICE PRESIDENT
--------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ CHIEF FINANCIAL OFFICER AND TREASURER
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ VICE PRESIDENT
--------------------------------------------------------------------------------------------
COLUM ▇. ▇▇▇▇▇▇▇ VICE PRESIDENT
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ VICE PRESIDENT
--------------------------------------------------------------------------------------------
PERE ▇▇▇▇▇▇ VICE PRESIDENT
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EXHIBIT D
TREATMENT OF WARRANTS; CONVERTIBLE NOTE;
OTHER RIGHTS
1. ADDITIONAL CONDITIONS TO CLOSING.
In addition to the conditions set forth in Sections 6.1 and
6.2 of the Agreement, the obligations of Parent and Merger Sub to consummate the
Merger is subject to the satisfaction, or waiver by Parent and Merger Sub, on or
prior to the Effective Time of the following conditions:
(a) (i) each of the outstanding Company Warrants shall have
been converted into Company Common Stock in accordance with its terms, (ii) the
holders thereof shall have unconditionally committed in writing to the Company
to exchange such warrants for warrants to purchase shares of Parent Common Stock
in accordance with Section 3(f) of this EXHIBIT D, (iii) such warrants shall
have been terminated in full, or (iv) any combination of (i) through (iii) with
respect to each of the outstanding Company Warrants; and
(b) Crescent International Ltd. ("CRESCENT"), shall have
agreed that the Company's obligations under Sections VII and VIII of the
Securities Purchase Agreement, dated April 9, 2001, between the Company and
Crescent (the "PURCHASE AGREEMENT") shall not survive the termination of the
Purchase Agreement.
(c) all rights referred to in Schedule 2.3(a) of the Company
Disclosure Schedule shall have been terminated and the same shall be null, void
and no further force or effect.
2. PURCHASE PRICE ADJUSTMENT.
In the event that the Company has paid, pays or commits to pay
any additional consideration (i.e., consideration other than Company Common
Stock issuable in accordance with the terms of the various instruments) in
connection with the Company satisfying the conditions set forth in Section 1 to
this EXHIBIT D (the aggregate value of all such consideration paid and committed
to be paid being referred to as the "PAYMENT AMOUNT"), then the Transaction
Value shall be reduced by an amount equal to the Payment Amount. In the event
that the Company has paid, pays or commits to pay any consideration (other than
Company Common Stock) in connection with the Company satisfying its obligations
set forth in Section 3(h) to this EXHIBIT D (the aggregate value of all such
consideration paid and committed to be paid being referred to as the "SETTLEMENT
AMOUNT"), then the Transaction Value shall be reduced by an amount equal to the
Settlement Amount.
3. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) The Company represents and warrants that, as of the date
of this Agreement and during the Pre-Closing Period, (i) the Convertible Note is
and will be freely redeemable at the option of the Company without condition,
restriction, limitation or restraint, except for the requirement of the Company
to provide notice to the holder thereof, and pay the applicable redemption price
therefor in cash, in accordance with its terms, and (ii) if such notice is given
and such redemption price is paid in cash, the holder of the Convertible Note
has no right to block, delay, condition or otherwise limit the redemption of the
Convertible Note by the Company.
(b) During the Pre-Closing Period, the Company agrees to
take all actions required to be taken by it pursuant to the terms of the
Convertible Note in order for the Convertible Note to remain freely redeemable
in accordance with Section 3(a) to this EXHIBIT D and to refrain from taking any
actions that could cause the representations and warranties contained in Section
3(a) of this EXHIBIT D to be inaccurate.
(c) Prior to the Effective Time, the Company shall terminate
the Purchase Agreement.
(d) Prior to the Effective Time, the Company shall cause the
Convertible Note to be converted into shares of Company Common Stock in
accordance with its terms or redeemed with the effect that, in either case, the
Convertible Note shall not be outstanding as of the Effective Time.
(e) Prior to the Effective Time, the Company shall use its
commercially reasonable efforts to cause the conditions contained in Section 1
to this EXHIBIT D to be satisfied.
(f) At the Effective Time each Company Exchanged Warrant
then outstanding shall be exchanged for a warrant to purchase Parent Common
Stock in substantially the form attached to this EXHIBIT D (each a "NEW
WARRANT"), and Parent shall issue and deliver each such New Warrant to the
holder of the Company Exchanged Warrant upon the surrender of the Company
Exchanged Warrant to Parent. From and after the Effective Time, (i) each New
Warrant will be exercisable for shares of Parent Common Stock, (ii) the number
of shares of Parent Common Stock subject to each such New Warrant shall be equal
to the number of shares of Company Common Stock subject to the corresponding
Company Exchanged Warrant immediately prior to the Effective Time multiplied by
the Exchange Ratio, rounding down to the nearest whole share, (iii) the per
share exercise price under each such New Warrant shall be adjusted by dividing
the per share exercise price under the corresponding Company Exchanged Warrant
by the Exchange Ratio and rounding up to the nearest whole cent, and (iv) the
expiration date under such New Warrant will be the same as the expiration date
under the corresponding Company Exchanged Warrant.
(g) The Parent shall use its commercially reasonable efforts
at its expense to cause the shares of Parent Common Stock underlying the New
Warrants to be registered on the Registration Statement along with the shares of
Parent Common Stock being registered thereon, in accordance with the terms and
subject to all the conditions set forth in Section 5.1 of the Agreement.
Exhibit D-2
(h) Prior to the Effective Time, the Company shall settle
the litigation commenced by ▇▇▇▇▇▇▇ Trust Reg., Esquire Trading & Financial
Inc., and Amro International described in Schedule 2.14 of the Company
Disclosure Schedule on terms substantially the same as the agreement in
principle described in Schedule 2.14 of the Company Disclosure Schedule.
Exhibit D-3
ATTACHMENT TO EXHIBIT D
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. THIS
WARRANT MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH STATE SECURITIES LAWS.
THE TITAN CORPORATION
WARRANT TO PURCHASE SHARES OF COMMON STOCK
This warrant (this "WARRANT") certifies that, for good and valuable
consideration, The Titan Corporation, a Delaware corporation (the "COMPANY"),
grants to _______________, a _______________ or its permitted assigns (the
"WARRANTHOLDER"), the right to subscribe for and purchase from the Company, at
any time during the Exercise Period (as defined herein), ___________ shares of
Common Stock (the "WARRANT SHARES"), at the exercise price per share of
$__________ (the "EXERCISE PRICE"), all subject to the terms, conditions and
adjustments herein set forth. The number of Warrant Shares is subject to
adjustment as provided in Article III.
I. DEFINITIONS
1.1 DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"AFFILIATE" with respect to any Person, shall mean any other
Person that directly or indirectly, controls, is controlled by, or is under
common control with, such Person.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
a day on which national banks are authorized by law to close in the State of
California.
"COMMON STOCK" means the common stock, par value $0.01 per
share, of the Company.
"EXCHANGE ACT" mean the Securities Exchange Act of 1934, as
amended from time to time.
"FAIR MARKET VALUE" means with respect to a share of Common
Stock on any date, the average closing sales price, as reported in the NYSE
Composite Transactions Tape (as reported in the Wall Street Journal or, if not
reported therein, any other nationally recognized authoritative source), of
shares of Common Stock for the five (5) consecutive trading day period ending on
the date that is one (1) trading day prior to the date as of which the Fair
Market Value is being determined.
"GOVERNMENTAL AUTHORITY" means any foreign, federal, state,
local or other governmental authority or regulatory body having jurisdiction
over the Company, its Affiliates or the Warrantholder.
"NYSE" means the New York Stock Exchange, Inc.
"PERSON" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
II. EXERCISE OF WARRANT
2.1 EXERCISE PERIOD. On the terms and subject to the conditions
contained herein, the Warrantholder may exercise this Warrant on any Business
Day starting on ___________ and ending at 5:00 p.m., Eastern Standard Time, on
_____________ (the "EXERCISE PERIOD"), for all or any part of the Warrant
Shares.
2.2 EXERCISE PROCEDURE. To exercise this Warrant, the
Warrantholder shall deliver to the Company at its principal executive offices:
(a) payment of the aggregate Exercise Price in the manner provided in Section
2.3 (as computed by multiplying (A) the Exercise Price by (B) the number of
shares of Common Stock for which the Warrantholder is exercising this Warrant at
such time); (b) a completed and properly executed Notice of Exercise in
substantially the form attached hereto as Annex I; and (c) this Warrant. Upon
receipt of the aggregate Exercise Price and the required deliverables pursuant
to the preceding sentence, the Company shall, within three (3) Business Days
thereafter, subject to receipt of any required regulatory approvals (including
expiration of any required waiting period), deliver to the Warrantholder duly
executed certificate(s) representing the aggregate number of shares of Common
Stock issuable upon such exercise, together with cash in lieu of any fraction of
a Warrant Share as provided in Section 2.6. Such stock certificate(s) shall be
in such denominations and registered in the name(s) set forth in the Notice of
Exercise. If this Warrant shall have been exercised in part, the Company shall
deliver to the Warrantholder a new warrant evidencing the rights of the
Warrantholder to purchase the remaining Warrant Shares issuable (which shall in
all other respects be identical to this Warrant). Upon issuance hereof, all
shares of Common Stock issuable upon exercise of this Warrant shall be included
in an effective registration statement under the Securities Act. The Company
shall use all commercially reasonable efforts (including filing an amendment to
such registration statement on Form S-3 (or other appropriate form) promptly
after the date hereof) to maintain such registration statement current and
effective under Section 10 of the Securities Act until the earlier to occur of
(i) such time as all shares issuable hereunder have been issued pursuant such
registration statement, (ii) such time as all shares issuable upon exercise of
this Warrant are eligible to be sold or transferred under Rule 144 (or similar
provisions then in effect) promulgated by the SEC under the Securities Act
without holding period or volume limitations, and (iii) the end of the Exercise
Period.
2.3 PAYMENT OF EXERCISE PRICE. The Exercise Price may be payable
hereunder by the delivery by certified check or by wire transfer of immediately
available funds to the account of the Company of an amount equal to the Exercise
Price. The Warrantholder may elect to exercise the Warrant in a cashless
exercise in lieu of payment of an amount equal to the Exercise Price, pursuant
to which the Warrantholder will receive, subject to Section 2.6 hereof, that
number of shares of Common Stock equal to the quotient obtained by dividing
(A-B)(C) by A where:
(A) = the Fair Market Value of one share of Common Stock on the date
that the Warrantholder delivers the Notice of Exercise;
2
(B) = the Exercise Price for one share of Common Stock under this
Warrant (as adjusted to the date of such calculation); and
(C) = the number of Warrant Shares issuable upon exercise of this
Warrant or, if only a portion of the Warrant is being exercised, the
number of Warrant Shares to be acquired as set forth in the Notice
of Exercise (at the date of such calculation).
If the above calculation results in a negative number, then no Warrant Shares
shall be issued or issuable upon exercise of this Warrant.
2.4 RESTRICTIONS. The Company shall not be required to issue any
shares of Common Stock under this Warrant if the issuance of such shares would
constitute a violation by the Company of any provision of any law, rule or
regulation of (i) any governmental authority, including without limitation,
compliance with the registration or qualification requirement of applicable
federal and state securities laws or (ii) any applicable self governing
organization or stock exchange, including without limitation, the rules,
regulations or listing requirements of any such organization or stock exchange.
If at any time the Company shall determine, based upon the advice of securities
counsel, that the registration, qualification or listing of any shares subject
to this Warrant under any applicable state or federal law or other applicable
rules or regulations (including those of any applicable stock exchange) is
necessary as a condition of, or in connection with, the issuance of shares, the
Company shall not be required to issue any shares of Common Stock under this
Warrant unless and until the Company has received evidence reasonably
satisfactory to it that such laws, rules or regulations have been complied with.
2.5 PAYMENT OF TAXES. The Company shall pay all stamp taxes and
other similar charges with respect to the issue or delivery of Common Stock
hereunder. The Company shall not be required to pay any transfer tax or other
similar charge imposed in connection with the issue of any stock certificate in
any name other than that of the Warrantholder, and in such case the Company
shall not be required to issue or deliver any stock certificate until such tax
or other charge has been paid or it has been established to the reasonable
satisfaction of the Company that no such tax or other charge is due.
2.6 FRACTIONAL SHARES. The Company shall not be required to issue
any fractional shares of Common Stock upon exercise of this Warrant. In lieu of
any fractional share to which the Warrantholder would otherwise be entitled upon
exercise of this Warrant, the Company shall make a cash payment in an amount
equal to the product of (a) the Fair Market Value per share of Common Stock on
the date of exercise multiplied by (b) the fraction of a share.
III. ADJUSTMENTS
3.1 SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the number of shares issuable upon exercise of this Warrant will be
proportionately increased, and if the Company at any time combines (by reverse
stock split, recapitalization or otherwise) its outstanding shares of Common
Stock into a smaller number of shares, the number of shares issuable upon
exercise of this Warrant will be proportionately decreased.
3.2 CONSOLIDATION, MERGER, ETC. In case of any consolidation or
merger of the Company with or into any other corporation, entity or person, or
any other corporate reorganization, in which the Company shall not be the
continuing or surviving entity of such consolidation, merger or reorganization,
or any transaction in which in excess of 50% of the Company's voting power is
transferred to persons or entities not stockholders immediately prior to the
consummation of such
3
transaction, or any sale of all or substantially all of the assets of the
Company (any such transaction being hereinafter referred to as a
"REORGANIZATION"), then, in each case, the Warrantholder, on exercise hereof at
any time after the consummation or effective date of such Reorganization, shall
receive, in lieu of the Warrant Shares issuable on such exercise prior to the
date of such Reorganization, the stock and other securities to which such holder
would have been entitled upon the date of such Reorganization if such holder had
exercised this Warrant immediately prior thereto.
3.3 NOTICE OF ADJUSTMENT. Whenever an event necessitating an
adjustment to this Warrant pursuant to this Article III occurs, the Company
shall promptly deliver written notice thereof, by first class mail, postage
prepaid, addressed to the Warrantholder in accordance with Section 7.5, which
notice shall state the increase or decrease in the number or other denominations
of securities purchasable upon the exercise of this Warrant setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
IV. RESTRICTIONS ON TRANSFER
4.1 RESTRICTIONS ON TRANSFER. The Warrantholder, by its acceptance
of this Warrant, agrees to be bound by the provisions of this Article IV and
acknowledges and confirms that this Warrant has not been registered under the
Securities Act or any applicable state securities laws, and may not be sold or
transferred except in compliance with and subject to the Securities Act and such
state securities laws. Unless and until this Warrant has been registered under
the Securities Act and such state securities laws, the Company may require, as a
condition to effecting any sale or transfer of this Warrant on the books of the
Company, an opinion of counsel reasonably satisfactory to the Company to the
effect that an exemption from registration under the Securities Act and such
state securities laws is available for the proposed transfer or assignment or a
certification reasonably satisfactory to the counsel of the Company in its
professional determination from the transferee that it is an accredited investor
as defined under the Securities Act and regulations promulgated thereunder. Any
purported sale or transfer of this Warrant shall be null and void unless made in
compliance with the conditions set forth in this Article IV. Except as provided
in Section 4.2, this Warrant and any warrant of the Company issued in exchange
or replacement for this Warrant shall be stamped or otherwise imprinted with a
legend in substantially the form set forth on the cover of this Warrant.
4.2 TERMINATION OF RESTRICTIONS. The restrictions imposed by
Section 4.1 upon the transferability of this Warrant shall terminate: (a) when
and so long as this Warrant shall have been effectively registered under the
Securities Act and transferred in compliance therewith; or (b) when the Company
shall have received an opinion of counsel reasonably satisfactory to it that
this Warrant may be transferred without registration thereof under the
Securities Act; provided, however, that if the Warrant has been held (both
legally and beneficially) by the Warrantholder for at least one (1) year and is
proposed to be sold in compliance with Rule 144 under the Securities Act, no
such opinion of counsel shall be required. Whenever the legend requirements
imposed by Section 4.1 shall terminate as to this Warrant, the holder of this
Warrant shall be entitled to receive from the Company, at the Company's expense,
a new warrant not bearing the restrictive legend described in Section 4.1.
4.3 COMPLIANCE WITH SECURITIES LAWS. The Warrantholder, by
acceptance hereof, represents to the Company that this Warrant is being acquired
solely for the Warrantholder's own account and not as a nominee for any other
party, and for investment, and that the Warrantholder will not offer, sell or
otherwise dispose of this Warrant except under circumstances that will not
result in a violation of the Securities Act or any applicable state securities
laws.
4.4 TRANSFER PROCEDURE. Subject to compliance with the other
provisions of this Article IV, transfer of this Warrant, in whole or in part,
shall occur upon surrender of this Warrant at the
4
principal executive offices of the Company, together with a duly executed
written assignment of this Warrant and funds sufficient to pay any transfer
taxes payable upon the making of such transfer and, if required, an opinion of
counsel reasonably acceptable to counsel of the Company in its professional
determination concerning the compliance of such transfer with the Securities Act
and applicable state securities laws. Upon receipt of such items, the Company
shall execute and deliver a new warrant or warrants in the name of the assignee
or assignees and in the denomination(s) specified in such instrument of
assignment, and shall issue to the assignor a new warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
4.5 MAINTENANCE OF TRANSFER BOOKS. The Company agrees to maintain,
at the principal office of the Company at the address set forth in Section 7.5,
books or records for the registration and the registration of transfer of this
Warrant or any warrant of the Company issued in exchange for this Warrant.
V. NECESSARY ACTIONS
The Company will: (a) use its commercially reasonable efforts to
obtain all such authorizations, approvals, exemptions or consents from any
Governmental Authority having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant (including, without
limitation, making all necessary filings with such Governmental Authorities);
(b) take all necessary steps (including, without limitation, making appropriate
amendments to its certificate of incorporation) to ensure that the Company has
authorized a sufficient number of authorized but unissued shares of its common
stock to provide for the issuance of the Warrant Shares; (c) reserve from such
authorized but unissued shares of common stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the exercise of this
Warrant; and (d) take all actions as may be necessary or appropriate to ensure
that the Company may validly and legally issue fully paid and non-assessable
shares of Common Stock upon the exercise of this Warrant that are not subject to
any preemptive rights and are free from all taxes, liens, security interests,
charges, and other encumbrances with respect to the issuance thereof, other than
taxes in respect of any transfer occurring contemporaneously with such issuance.
VI. LOSS OR MUTILATION
On receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant and (a) in the case of
loss, theft or destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company; or (b) in the case of
mutilation, on surrender and cancellation of this Warrant, the Company shall
execute and deliver, in lieu of this Warrant, a new warrant of like tenor and
amount.
VII. MISCELLANEOUS
7.1 ENTIRE AGREEMENT. This Warrant constitutes the entire
agreement between the Company and the Warrantholder with respect to the Warrant.
7.2 NONWAIVER. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Warrantholder shall operate as a
waiver of such right or otherwise prejudice the Warrantholder's rights, powers
or remedies.
7.3 BINDING EFFECT; NO THIRD-PARTY BENEFICIARIES. This Warrant
shall inure to the benefit of and shall be binding upon the Company and the
Warrantholder and their respective successors and permitted assigns. Nothing in
this Warrant, expressed or implied, is intended to or shall confer on
5
any person other than the Company and the Warrantholder, or their respective
successors or permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Warrant.
7.4 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
7.5 NOTICES. Except as otherwise expressly provided herein, all
notices and deliveries referred to in this Warrant shall be in writing, shall be
delivered personally, sent by registered or certified mail, return receipt
requested and postage prepaid or sent via nationally recognized overnight
courier and shall be deemed to have been given when so delivered (or when
received, if delivered by any other method) if sent (i) to the Company, at its
principal executive offices and (ii) to the holder of this Warrant, at such
holder's address as it appears in the records of the Company (unless otherwise
indicated by such holder).
7.6 SEVERABILITY. Whenever possible, each provision of this
Warrant will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant is held by a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision of this
Warrant or the validity, legality or enforceability of this Warrant in any other
jurisdiction. In such event, this Warrant will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
7.7 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS WARRANT AND THE ISSUANCE OF SECURITIES
HEREUNDER WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT
OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF DELAWARE.
7.8 RIGHTS OR LIABILITIES AS STOCKHOLDER. The Warrantholder shall
be deemed to have become a holder of record of the shares of Common Stock
issuable under Section 2.2 as of the date on which all required deliverables
pursuant to Section 2.2 have been received by the Company. Until such time the
Warrantholder shall not have any voting rights or other rights or liabilities of
a stockholder of the Company with respect to the Common Stock issuable
hereunder.
7.9 AMENDMENT. No amendment or waiver of any provision of this
Warrant shall be effective without the prior written consent of the Company and
the Warrantholder.
[SIGNATURE PAGE FOLLOWS]
6
ATTACHMENT TO EXHIBIT D
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
THE TITAN CORPORATION
By: _________________________
Name: _________________________
Title:_________________________
Dated: January 6, 2002
ATTACHMENT TO EXHIBIT D
Annex I
NOTICE OF EXERCISE
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right
represented by this Warrant to purchase _________ shares of Common Stock, and
herewith tenders to the Company as payment for such shares either (a) the amount
of $__________ or (b) ________ shares of Common Stock, in accordance with the
terms of this Warrant. The undersigned requests that a certificate for such
shares be registered in the name of the undersigned and that such certificates
be delivered to the undersigned's address below.
The undersigned represents that it is an accredited investor (as
defined in applicable rules and regulations under the Securities Act of 1933, as
amended), and that it is acquiring such shares of Common Stock for its own
account for investment and not with a view to or for sale in connection with any
distribution thereof.
Dated:__________________________
Signature ___________________________
___________________________
(Print Name)
___________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
___________________________
(City) (State) (Zip Code)
EXHIBIT E
FORM OF AMENDMENT TO EMPLOYMENT AGREEMENT
(ATTACHED)
FORM OF AMENDMENT TO
EMPLOYMENT AGREEMENT
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this "Amendment") is
entered into as of January 6, 2002, by and between The Titan Corporation a
Delaware corporation ("Parent"), GlobalNet International, Inc., a Delaware
corporation (the "Company"), and ______________ (the "Executive").
WHEREAS, the Company and the Executive have entered into an Employment
Agreement, dated [May 15, 2000][December 28, 2000 for ▇. ▇▇▇▇▇▇] (the
"Employment Agreement"), for the purpose of setting forth the terms and
conditions for the employment relationship of the Executive with the Company;
WHEREAS, the Company is a wholly-owned subsidiary of GlobalNet, Inc.
("GlobalNet");
WHEREAS, Parent, GlobalNet and T T III Acquisition Corp. ("Merger
Sub"), have entered into that certain Agreement and Plan of Merger dated January
6, 2002 (the "Merger Agreement") pursuant to which Merger Sub, a wholly-owned
subsidiary of Parent, is merging with and into GlobalNet (the "Merger") and
Company will be an indirect wholly-owned subsidiary of Parent as a result of the
Merger; and
WHEREAS, in connection with the consummation of the Merger pursuant to
the Merger Agreement, the parties hereto desire to enter into this Amendment to
add the bonus pool provisions set forth herein to the Employment Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto each hereby agrees as follows:
1. AMENDMENT. The following text is hereby added as a new Section 2(d)
to the Employment Agreement:
(d) Special Bonus Pool.
(i) The Executive shall participate in the Special Bonus Pool (as
hereinafter defined). Within ninety (90) days after the end of the 2002 calendar
year, Parent shall designate up to ten (10) executives and/or employees
recommended by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ who were employed by the Company prior to the
consummation of the Merger (as defined in the Merger Agreement) to receive
payments from the Special Bonus Pool; provided that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and the
Executive shall be one of the executives and/or employees so designated;
provided further that in order to be eligible to participate in the Special
Bonus Pool, each executive and employee so designated shall be required to enter
into an amendment to their employment agreement with the Company in
substantially the form of this Amendment or otherwise agree in writing to be
subject to the offset and reimbursement provisions of the Special Bonus Pool
contained in Section 2(d)(ii) hereof. The number of executives and/or employees
so designated, and the amount of money each is to receive, shall be determined
by the Board of Directors of GlobalNet upon the
recommendation of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. Subject to the Parent's right of offset and
reimbursement set forth in Section 2(d)(ii) hereof and, if the conditions for
the determination of the Special Bonus Pool shall have been met by the Company
pursuant to Section 2(d)(iii) hereof, the entire amount of the Special Bonus
Pool shall be awarded and no portion thereof withheld. Payments from the Special
Bonus Pool shall be subject to all applicable employment withholding taxes.
(ii) In the event that the Holdback Stock (as defined in the
Holdback Letter Agreement dated January 6, 2002 among Parent, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and Colum ▇. ▇▇▇▇▇▇▇ (the "Holdback Agreement")) shall be insufficient to cover
any Losses (as defined in the Holdback Agreement) owed to any Parent Indemnified
Person (as defined in the Holdback Agreement) pursuant to the Holdback
Agreement, Parent (A) may offset the amount of such Losses not covered against
the Special Bonus Pool that the Executive and any other designated executive or
employee may otherwise be eligible for pursuant to this Agreement and (B) shall
be entitled to be reimbursed by the Executive and any other executive or
employee who participates in the Special Bonus Pool for amounts previously paid
to the Executive or such executive or employee, as the case may be, from the
Special Bonus Pool, net of any federal and state income taxes paid by the
Executive or such other executive or employee, as the case may be, properly
attributable to any such amounts, up to the amount of the Losses not covered.
For purposes of this Agreement, the Special Bonus Pool shall be deemed to be
reduced automatically by an amount equal to such offset amount. Parent shall
provide written notice to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ of its election to offset or to seek
reimbursement, specifying in reasonable detail the basis therefor. Neither the
exercise of nor the failure to exercise such right of offset or reimbursement
will constitute an election of remedies or limit any Parent Indemnified Persons
in any manner in the enforcement of any other remedies that may be available to
it; provided that the Executive and any other executive or employee who
participates in the Special Bonus Pool shall have no further liability beyond
such offset and reimbursement for any Losses not covered except, if the
Executive is also a signatory to the Holdback Agreement, to the extent set forth
in the Holdback Agreement.
(iii) The "Special Bonus Pool" shall be determined as follows:
(A) If Revenue equals or exceeds One Hundred Fifty Million
Dollars ($150,000,000) and (w) EBITDA equals or exceeds Fifteen Million Dollars
($15,000,000), then the Special Bonus Pool shall be Five Million Five Hundred
Thousand Dollars ($5,500,000), (x) EBITDA is less than Fifteen Million Dollars
($15,000,000) but equals or exceeds Fourteen Million Dollars ($14,000,000), then
the Special Bonus Pool shall be Five Million Two Hundred Twenty-Five Thousand
Dollars ($5,225,000); (y) EBITDA is less than Fourteen Million Dollars
($14,000,000) but equals or exceeds Thirteen Million Dollars ($13,000,000), then
the Special Bonus Pool shall be Four Million Nine Hundred Fifty Thousand Dollars
($4,950,000); or (z) EBITDA is less than Thirteen Million Dollars ($13,000,000)
but equals or exceeds Twelve Million Dollars ($12,000,000), then the Special
Bonus Pool shall be Four Million Six Hundred Seventy-Five Thousand Dollars
($4,675,000).
(B) If Revenue is less than One Hundred Fifty Million Dollars
($150,000,000) but equals or exceeds One Hundred Forty Million Dollars
($140,000,000) and (w) EBITDA equals or exceeds Fifteen Million Dollars
($15,000,000) then the Special Bonus Pool shall be Five Million Two Hundred
Twenty-Five Thousand
2
Dollars ($5,225,000); (x) EBITDA is less than Fifteen Million Dollars
($15,000,000) but equals or exceeds Fourteen Million Dollars ($14,000,000), then
the Special Bonus Pool shall be Four Million Nine Hundred Fifty Thousand Dollars
($4,950,000); (y) EBITDA is less than Fourteen Million Dollars ($14,000,000) but
equals or exceeds Thirteen Million Dollars ($13,000,000), then the Special Bonus
Pool shall be Four Million Six Hundred Seventy-Five Thousand Dollars
($4,675,000); or (z) EBITDA is less than Thirteen Million Dollars ($13,000,000)
but equals or exceeds Twelve Million Dollars ($12,000,000), then the Special
Bonus Pool shall be Four Million Four Hundred Thousand Dollars ($4,400,000).
(C) If Revenue is less than One Hundred Forty Million Dollars
($140,000,000) but equals or exceeds One Hundred Thirty Million Dollars
($130,000,000) and (w) EBITDA equals or exceeds Fifteen Million Dollars
($15,000,000) then the Special Bonus Pool shall be Four Million Nine Hundred
Fifty Thousand Dollars ($4,950,000); (x) EBITDA is less than Fifteen Million
Dollars ($15,000,000) but equals or exceeds Fourteen Million Dollars
($14,000,000), then the Special Bonus Pool shall be Four Million Six Hundred
Seventy-Five Thousand Dollars ($4,675,000); (y) EBITDA is less than Fourteen
Million Dollars ($14,000,000) but equals or exceeds Thirteen Million Dollars
($13,000,000), then the Special Bonus Pool shall be Four Million Four Hundred
Thousand Dollars ($4,400,000); or (z) EBITDA is less than Thirteen Million
Dollars ($13,000,000) but equals or exceeds Twelve Million Dollars
($12,000,000), then the Special Bonus Pool shall be Four Million One Hundred
Twenty-Five Thousand Dollars ($4,125,000).
(D) If Revenue is less than One Hundred Thirty Million
Dollars ($130,000,000) but equals or exceeds One Hundred Twenty Million Dollars
($120,000,000) and (w) EBITDA equals or exceeds Fifteen Million Dollars
($15,000,000) then the Special Bonus Pool shall be Four Million Six Hundred
Seventy-Five Thousand Dollars ($4,675,000); (x) EBITDA is less than Fifteen
Million Dollars ($15,000,000) but equals or exceeds Fourteen Million Dollars
($14,000,000), then the Special Bonus Pool shall be Four Million Four Hundred
Thousand Dollars ($4,400,000); (y) EBITDA is less than Fourteen Million Dollars
($14,000,000) but equals or exceeds Thirteen Million Dollars ($13,000,000), then
the Special Bonus Pool shall be Four Million One Hundred Twenty-Five Thousand
Dollars ($4,125,000); or (z) EBITDA is less than Thirteen Million Dollars
($13,000,000) but equals or exceeds Twelve Million Dollars ($12,000,000), then
the Special Bonus Pool shall be Three Million Eight Hundred Fifty Thousand
Dollars ($3,850,000).
(E) If Revenue is less than One Hundred Twenty Million
Dollars ($120,000,000) or EBITDA is less than Twelve Million Dollars
($12,000,000), then there shall be no Special Bonus Pool.
(F) In the event the Executive is terminated by the Company
without cause pursuant to Section 5(k) of the Employment Agreement or in the
event that the Executive resigns for any of the reasons listed in clauses (i)
through (iii) of Section 4(l) of this Agreement (whether or not a Change of
Control has occurred), the Executive shall nevertheless be entitled to
participate in the Special Bonus Pool if the conditions for the determination of
the Special Bonus Pool shall have been met by the Company pursuant to Section
2(d)(iii) hereof; provided, that the Executive shall only be eligible to receive
the pro rata portion of his share of the Special Bonus Pool based on the number
of whole months in which the Executive was employed by the Company in calendar
year 2002 divided by 12.
3
(iv) All determinations of Revenue and EBITDA shall be made in
accordance with GAAP in good faith, applied in a manner consistent with the
Company Financial Statements (as defined in the Merger Agreement).
(v) For purposes of this Section 2(d), the following terms shall
be defined as follows:
"Revenue" means the revenue of GlobalNet for the fiscal year
ended December 31, 2002.
"EBITDA" means earnings before interest, taxes, depreciation
and amortization of GlobalNet for the fiscal year ended December 31, 2002.
"GAAP" means generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
2. NO OTHER 2002 BONUS. The parties expressly acknowledge and agree
that, other than any payment to the Executive from the Special Bonus Pool as
described above, the Executive shall not be entitled to any bonus attributable
to his employment with the Company during the calendar year 2002, but shall be
eligible to participate in the Company's stock option programs to the same
extent as comparably situated employees.
3. MISCELLANEOUS. Capitalized terms not defined herein shall have the
meaning set forth in the Employment Agreement. The Employment Agreement, as
amended by this Amendment, shall remain and continue in full force and effect,
shall be binding on the Company and the Executive and is in all respects agreed
to, ratified and confirmed hereby. Any reference to the Employment Agreement
after the date first set forth above shall be deemed to be a reference to the
Employment Agreement, as amended by this Amendment. This Agreement shall be
governed by and construed in accordance with the laws of the State of Illinois
without regard to conflict of law principles. This Amendment may be executed in
any number of counterparts, each of which shall be deemed to be an original, but
all of which taken together shall constitute one and the same instrument.
4. EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall become
effective upon the Effective Time as defined in the Merger Agreement.
[SIGNATURES ON NEXT PAGE]
4
FORM OF AMENDMENT TO
EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Amendment, or have caused this Amendment to be duly executed and delivered on
their behalf, as of the day and year first above written.
---------------------------------------------
EXECUTIVE
GLOBALNET INTERNATIONAL, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
THE TITAN CORPORATION
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
EXHIBIT F
FORM OF AFFILIATE AGREEMENT
(ATTACHED)
FORM OF AFFILIATE AGREEMENT
____________ ___, 200_
The Titan Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
RE: AFFILIATE AGREEMENT
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter the
undersigned may be deemed to be an "affiliate" of GlobalNet, Inc. a Nevada
corporation (the "Company"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). Pursuant to the terms of the Agreement and Plan
of Merger, dated as of January 6, 2002 (the "Merger Agreement"), by and
among The Titan Corporation, a Delaware corporation ("Parent"), T T III
Acquisition Corp., a Nevada corporation ("Merger Sub"), and the Company, Merger
Sub will be merged with and into the Company (the "Merger") and the Company
shall continue as the surviving corporation of the Merger.
As a result of the Merger, the issued and outstanding shares of common
stock of the Company, par value $.01 per share ("Company Common Stock"), will be
converted into the right to receive common stock of Parent, par value $0.01 per
share ("Parent Common Stock") and cash in lieu of fractional shares, as set
forth in the Merger Agreement.
The undersigned represents, warrants and covenants to Parent that in
the event that the undersigned receives any Parent Common Stock as a result of
the Merger:
1. The undersigned has full power to execute and deliver this
letter and to make the representations and warranties herein and to
perform the obligations hereunder.
2. The undersigned has carefully read this letter and the
Merger Agreement and has discussed the requirements of such documents
and other applicable limitations upon the undersigned's ability to
sell, transfer or otherwise dispose of the Parent Common Stock, to the
extent the undersigned
considered necessary, with counsel to the undersigned or with counsel
for the Company.
3. The undersigned will not make any sale, transfer or other
disposition of the Parent Common Stock in violation of the Act.
4. The undersigned has been advised that the issuance of
Parent Common Stock to the undersigned pursuant to the Merger has been
or will be registered with the Commission under the Act on a
Registration Statement on Form S-4. However, the undersigned has also
been advised that, because the undersigned may be deemed to have been
an "affiliate" of the Company at the time the Merger was submitted for
a vote of the stockholders of the Company and the sale, transfer or
other disposition by the undersigned of the Parent Common Stock has not
been registered under the Act, the undersigned may not sell, transfer
or otherwise dispose of the Parent Common Stock issued to the
undersigned in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer
or other disposition is made in conformity with the volume and other
limitations of Rule 145 or, to the extent applicable, Rule 144
promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Parent, registration is not required
for such sale, transfer or other disposition under the Act.
5. The undersigned understands that Parent is under no
obligation to register the sale, transfer or other disposition of the
Parent Common Stock by, or on behalf of, the undersigned under the Act
or to take any other action necessary in order to make compliance with
an exemption from such registration available.
6. The undersigned also understands that stop transfer
instructions may be given to Parent's transfer agents with respect to
the Parent Common Stock and that there may be placed on the
certificates for the Parent Common Stock issued to the undersigned, or
any substitutions therefor, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN
A TRANSACTION TO WHICH RULE ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
APPLIES. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR
OTHERWISE HYPOTHECATED OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
ACT AND APPLICABLE UNITED STATES STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION OR SAFE HARBOR FROM
REGISTRATION UNDER
THE ACT AND SUCH STATE SECURITIES LAWS UPON RECEIPT BY THE
TITAN CORPORATION (THE "COMPANY") OF A WRITTEN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
7. The undersigned understands and agrees that the legend set
forth in paragraph 6 above shall be removed by delivery of substitute
certificates without such legend if the undersigned has delivered to
Parent a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to
Parent, to the effect that such legend is not required for purposes of
the Act.
Execution of this letter shall not be considered an admission that the
undersigned is an "affiliate" of the Company as described in the first paragraph
of this letter, or as a waiver of any rights the undersigned may have to object
to any claim that the undersigned is such an affiliate on or after the date of
this letter.
Any notices or any other communications in connection herewith shall be
in writing and shall be given to Parent at Parent's address on the first page of
this letter and to the undersigned at the address set forth below the
undersigned's name; or to such other address or person as Parent shall furnish
to the undersigned in writing or that the undersigned shall furnish to Parent in
writing in accordance with the provisions of this paragraph; and shall be deemed
to have been duly received if so given (i) if delivered in person or by courier,
upon actual receipt by the intended party, (ii) if sent by telecopy or facsimile
transmission, when the answerback is received, or (iii) if sent by mail, upon
five days after such notice or other communication is deposited in the mail.
This agreement shall be governed by the laws of the State of Delaware
regardless of applicable principles of conflicts of laws. This agreement shall
be binding upon the undersigned and Parent and their respective successors and
assigns. This agreement is the complete agreement between the undersigned and
Parent concerning the subject matter hereof. Nothing set forth herein, however,
shall be construed to limit in any way any of the undersigned's other rights
incident to ownership of Parent Common Stock to be received by the undersigned
pursuant to the terms of the Merger Agreement. In the event that any signature
hereto is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the executing party with the same force and
effect as if such facsimile signature page were an original thereof.
The undersigned has carefully read this letter and understands the
limitations imposed upon the sale, assignment or transfer of Parent Common Stock
contained herein and imposed by Rule 145 under the Act.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return such
counterpart to the undersigned at the address indicated above, at which time
this letter shall become a binding agreement between you and the undersigned.
Very truly yours,
-----------------------------------------
Signature
Name:
------------------------------------
Date:
------------------------------------
Address:
---------------------------------
AGREED TO AND ACCEPTED as of
__________ __, 200_
THE TITAN CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
EXHIBIT G
DESCRIPTION OF AMOUNTS OWED TO MCI/WORLDCOM
The Company currently owes MCI WorldCom Network Services, Inc.
$5,833,414.46 for Telecommunications Services that MCI provided to GlobalNet,
including Co-Location fees. This amount, secured by a first lien on all of the
accounts receivable of the Company, was incurred in the 3rd and 4th quarters of
2000, and has been and currently remains in arrears in payment. The Company was
contemplating entering into a one year Promissory Note with MCI WorldCom Network
Services, Inc. MCI had indicated its willingness to accept this note. Parent has
requested that the Company not enter into such note at this time. It is
possible, as a result of the Company's compliance with Parent's wishes, that MCI
could demand payment of all outstanding obligations due. Such call would have a
Company Material Adverse Effect.
