EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE TITAN CORPORATION,
V T ACQUISITION CORP.
AND
AVERSTAR, INC.
DATED AS OF MARCH 24, 2000
TABLE OF CONTENTS
ARTICLES
PAGE
--------
ARTICLE I THE MERGER........................................ 2
SECTION 1.01 The Merger................................... 2
SECTION 1.02 Effective Time; Closing Date................. 2
SECTION 1.03 Effect of the Merger......................... 2
SECTION 1.04 Certificate of Incorporation; Bylaws......... 2
SECTION 1.05 Directors and Officers....................... 2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF
CERTIFICATES.............................................. 3
SECTION 2.01 The Merger................................... 3
SECTION 2.02 Exchange of Certificates..................... 5
SECTION 2.03 Stock Options................................ 7
SECTION 2.04 Certain Adjustments.......................... 8
SECTION 2.05 Closing...................................... 8
SECTION 2.06 Escrow Stock; Determination of Closing
Adjustment.............................................. 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY....... 12
SECTION 3.01 Organization and Qualification............... 12
SECTION 3.02 Subsidiaries................................. 12
SECTION 3.03 Articles of Incorporation and Bylaws......... 12
SECTION 3.04 Capitalization............................... 12
SECTION 3.05 Authority; Binding Obligation................ 13
SECTION 3.06 No Conflict; Required Filings and Consents... 14
SECTION 3.07 Intellectual Property........................ 15
SECTION 3.08 Financial Statements and Condition........... 16
SECTION 3.09 Absence of Certain Developments.............. 16
SECTION 3.10 Absence of Undisclosed Liabilities........... 17
SECTION 3.11 Litigation; Disputes......................... 18
SECTION 3.12 Real Property Leases; Real Property.......... 18
SECTION 3.13 Other Agreements; No Default................. 19
SECTION 3.14 Labor Relations.............................. 19
SECTION 3.15 Pension and Benefit Plans.................... 20
SECTION 3.16 Taxes and Tax Matters........................ 21
SECTION 3.17 Insurance.................................... 22
SECTION 3.18 Arrangements with Related Parties............ 22
SECTION 3.19 Books and Records............................ 22
SECTION 3.20 Assets....................................... 22
SECTION 3.21 Board Recommendation......................... 23
SECTION 3.22 Directors and Officers....................... 23
SECTION 3.23 [Intentionally Omitted]...................... 23
SECTION 3.24 Environmental Matters........................ 23
SECTION 3.25 [Intentionally Omitted]...................... 23
A-i
PAGE
--------
SECTION 3.26 Government Contracts and Other Commitments... 23
SECTION 3.27 Relations with Governments................... 24
SECTION 3.28 Broker's Fees................................ 25
SECTION 3.29 Registration Statement; Proxy
Statement/Prospectus.................................... 25
SECTION 3.30 [Intentionally Omitted]...................... 25
SECTION 3.31 Interest Rate and Foreign Exchange
Contracts............................................... 25
SECTION 3.32 Pooling/Tax Matters.......................... 26
SECTION 3.33 Disclosure................................... 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
ACQUIROR SUB.............................................. 26
SECTION 4.01 Organization and Qualification............... 26
SECTION 4.02 Certificate or Articles of Incorporation and
Bylaws.................................................. 27
SECTION 4.03 Capitalization............................... 27
SECTION 4.04 Authority; Binding Obligation................ 27
SECTION 4.05 No Conflict; Required Filings and Consents... 27
SECTION 4.06 No Prior Activities of Acquiror Sub.......... 28
SECTION 4.07 SEC Filings; Financial Statements............ 28
SECTION 4.08 No Undisclosed Liabilities................... 29
SECTION 4.09 Absence of Certain Changes or Events......... 29
SECTION 4.10 Absence of Litigation........................ 29
SECTION 4.11 Certain Practices............................ 29
SECTION 4.12 Government Contracts......................... 30
SECTION 4.13 Intellectual Property........................ 30
SECTION 4.14 Interest Rate and Foreign Exchange
Contracts............................................... 31
SECTION 4.15 Brokers...................................... 31
SECTION 4.16 Pooling/Tax Matters.......................... 31
SECTION 4.17 Registration Statement; Proxy
Statement/Prospectus.................................... 31
SECTION 4.18 Board Recommendation......................... 32
SECTION 4.19 Disclosure................................... 32
ARTICLE V PRE-CLOSING COVENANTS............................. 32
SECTION 5.01 Conduct of Business of Company Until
Effective Time.......................................... 32
SECTION 5.02 Best Efforts to Satisfy Conditions........... 34
SECTION 5.03 Other Actions................................ 34
SECTION 5.04 Certain Tax Matters.......................... 34
SECTION 5.05 Access and Information....................... 34
SECTION 5.06 Notification Filing Required Under HSR Act... 35
SECTION 5.07 Related Party Matters........................ 35
SECTION 5.08 Proxy Statement/Prospectus and Registration
Statement; Company Stockholders Meeting................. 35
SECTION 5.09 [Intentionally Omitted]...................... 36
SECTION 5.10 No Solicitation.............................. 36
SECTION 5.11 NYSE Listing................................. 37
SECTION 5.12 Affiliates................................... 37
A-ii
PAGE
--------
SECTION 5.13 Tax Treatment................................ 38
SECTION 5.14 Pooling...................................... 38
SECTION 5.15 Negative Covenants of Acquiror............... 38
ARTICLE VI ADDITIONAL AGREEMENTS............................ 39
SECTION 6.01 Stockholder Approval......................... 39
SECTION 6.02 Appropriate Action; Consents; Filings........ 39
SECTION 6.03 Disclosure................................... 40
SECTION 6.04 Public Announcements......................... 40
SECTION 6.05 Obligations of Acquiror Sub.................. 40
SECTION 6.06 Transaction Expenses......................... 41
SECTION 6.07 Board of Directors........................... 41
SECTION 6.08 Company Common Stock......................... 41
ARTICLE VII CONDITIONS PRECEDENT............................ 41
SECTION 7.01 Conditions to Obligations of Each Party Under
This Merger Agreement................................... 41
SECTION 7.02 Additional Conditions to Obligations of
Acquiror and Acquiror Sub............................... 42
SECTION 7.03 Additional Conditions to Obligations of
Company................................................. 44
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.............. 45
SECTION 8.01 Termination.................................. 45
SECTION 8.02 Effect of Termination........................ 46
SECTION 8.03 Transaction Fees, Termination Fees, Expenses
and Other Payments...................................... 46
SECTION 8.04 Amendment.................................... 46
SECTION 8.05 Extension; Waiver............................ 46
ARTICLE IX SURVIVAL OF REPRESENTATIONS; REMEDIES............ 47
SECTION 9.01 Survival of Representations.................. 47
SECTION 9.02 Indemnification by Company Stockholders...... 47
SECTION 9.03 Third Party Claims........................... 48
SECTION 9.04 No Recourse Against the Company.............. 49
SECTION 9.05 Specific Performance......................... 49
SECTION 9.06 Remedies Cumulative.......................... 49
ARTICLE X GENERAL PROVISIONS................................ 49
SECTION 10.01 Notices..................................... 49
SECTION 10.02 Headings.................................... 50
SECTION 10.03 Severability................................ 51
SECTION 10.04 Entire Agreement............................ 51
SECTION 10.05 Assignment.................................. 51
SECTION 10.06 Parties in Interest......................... 51
SECTION 10.07 Mutual Drafting............................. 51
SECTION 10.08 Governing Law............................... 51
SECTION 10.09 Counterparts................................ 52
SECTION 10.10 Singular and Plural......................... 52
ARTICLE XI DEFINITIONS...................................... 52
A-iii
EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Initial Officers and Directors of Surviving Corporation
Exhibit C Form of Exchange Agreement
Exhibit D Form of Escrow Agreement
Exhibit E Form of Company Affiliate Letter
Exhibit F Form of Acquiror Affiliate Letter
Exhibit G Form of Company's Counsel Opinion
Exhibit H Form of Acquiror's Counsel Opinion
A-iv
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of March 24, 2000 (this "Merger
Agreement"), is entered into by and among The Titan Corporation, a corporation
organized under the laws of the State of Delaware ("Acquiror"), V T Acquisition
Corp., a corporation organized under the laws of the State of Delaware
("Acquiror Sub"), and AverStar, Inc., a corporation organized under the laws of
the State of Delaware ("Company") ("Acquiror," "Acquiror Sub" and "Company"
individually hereinafter referred to as "Party" and collectively hereinafter
referred to as the "Parties");
WHEREAS, Acquiror Sub, upon the terms and subject to the conditions of this
Merger Agreement and in accordance with the Delaware General Corporation Law
("Delaware Law"), will merge with and into Company (the "Merger");
WHEREAS, the Board of Directors of Company has (i) determined that the
Merger is advisable and fair to the holders of Company Common Stock (as defined
in Section 3.04 of this Merger Agreement) and is in the best interests of such
stockholders, (ii) advised, authorized, approved and adopted this Merger
Agreement and the transactions contemplated hereby and (iii) recommended
approval and adoption of this Merger Agreement by the stockholders of Company
(the "Company Stockholders");
WHEREAS, the Board of Directors of Acquiror has determined that the Merger
is advisable and in the best interests of Acquiror and its stockholders, the
Board of Directors of Acquiror Sub has determined that the Merger is advisable
and in the best interests of Acquiror Sub and its stockholder, and the Boards of
Directors of Acquiror and Acquiror Sub and the sole stockholder of Acquiror Sub
have advised, authorized, approved and adopted this Merger Agreement and the
transactions contemplated hereby;
WHEREAS, as a condition and inducement to Acquiror's and Acquiror Sub's
entering into this Merger Agreement and incurring the obligations set forth
herein, concurrently with the execution and delivery of this Merger Agreement,
Acquiror and Acquiror Sub are entering into a Stockholders Agreement with
certain stockholders of the Company (the "Company Stockholders Agreement"),
pursuant to which, among other things, such stockholders have agreed to vote
their shares of Company Common Stock in favor of the Merger and have granted
Acquiror an irrevocable proxy to vote such shares of Company Common Stock;
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code (as defined in Article XI) and that this Merger
Agreement qualifies as a "plan of reorganization" as defined in Treasury
Regulation 1.368-2(g); and
WHEREAS, for accounting purposes it is intended that the Merger shall be
accounted for as a "pooling of interests" under GAAP (as defined in
Article XI).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this Merger
Agreement, and intending to be legally bound hereby, the Parties agree as
follows.
A-1
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER
Upon the terms and subject to the conditions set forth in this Merger
Agreement, and in accordance with Delaware Law, at the Effective Time (as
defined in Section 1.02 of this Merger Agreement) Acquiror Sub shall be merged
with and into Company, with Company being the surviving corporation (hereinafter
sometimes called "Surviving Corporation") in the Merger. Upon consummation of
the Merger, the separate corporate existence of Acquiror Sub shall cease, and
Surviving Corporation shall continue to exist as a Delaware corporation.
SECTION 1.02 EFFECTIVE TIME; CLOSING DATE
Subject to the provisions of Section 2.05 of this Merger Agreement, as
promptly as practicable after the satisfaction or, if permissible, waiver of the
conditions set forth in Article VII of this Merger Agreement, the Parties shall
cause the Merger to be consummated by filing the Certificate of Merger, attached
hereto as Exhibit A (the "Certificate of Merger"), and any other appropriate
documents with the Delaware Secretary of State, in such form as required by, and
executed in accordance with the relevant provisions of, Delaware Law (the date
and time of such filing being the "Effective Time"). The day on which the
Effective Time shall occur shall hereinafter be referred to as the "Closing
Date."
SECTION 1.03 EFFECT OF THE MERGER
At the Effective Time, the effect of the Merger shall be as provided in
Section 259 and other applicable provisions of Delaware Law. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of Company and Acquiror
Sub shall vest in Surviving Corporation, and all debts, liabilities and duties
of Company and Acquiror Sub shall become the debts, liabilities and duties of
Surviving Corporation.
SECTION 1.04 CERTIFICATE OF INCORPORATION; BYLAWS
(a) Unless otherwise determined by Acquiror prior to the Effective Time, at
the Effective Time, the certificate of incorporation of Acquiror Sub shall
continue unchanged and shall be the certificate of incorporation of Surviving
Corporation until thereafter amended as provided by Law and such certificate of
incorporation, except that Acquiror Sub's certificate of incorporation shall be
amended at the Effective Time to reflect that the name of the Surviving
Corporation shall be AverStar, Inc.
(b) Unless otherwise determined by Acquiror prior to the Effective Time, at
the Effective Time, the bylaws of Acquiror Sub shall continue unchanged and
shall be the bylaws of Surviving Corporation until thereafter amended as
provided by Law, the certificate of incorporation of Surviving Corporation and
such bylaws.
SECTION 1.05 DIRECTORS AND OFFICERS
At the Effective Time, the initial officers and directors of Surviving
Corporation shall be the persons listed on Exhibit B, each to hold office in
accordance with the certificate of incorporation and bylaws of Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
A-2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 THE MERGER
At the Effective Time, by virtue of the Merger and without any action on the
part of Acquiror, Acquiror Sub, the Company or the holders of any of the
securities referred to in this Section 2.01:
(a) COMMON STOCK. Subject to Section 2.06, (i) each share of Company
Common Stock (excluding any shares described in Section 2.01(c) and (f)) issued
and outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to receive a
portion of a share of common stock, par value $0.01, of Acquiror ("Acquiror
Common Stock") equal to the Exchange Ratio (as defined below). The shares of
Acquiror Common Stock issuable to the holders of Company Common Stock pursuant
hereto is sometimes referred to herein, collectively, as the "Merger
Consideration". All such shares of Company Common Stock shall cease to be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such shares shall
thereafter represent only the right to receive the Merger Consideration. Except
as otherwise provided herein or by applicable law, the holders of certificates
previously evidencing such shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock. Each such certificate previously
evidencing such shares of Company Common Stock shall be exchanged for the number
of shares indicated in the certificate provided by the Company pursuant to
Section 6.08 in accordance with the provisions of Section 2.02 multiplied by the
Exchange Ratio, rounded up to the nearest whole number.
The "Exchange Ratio" shall be determined as follows:
(i) if the Acquiror Stock Price is less than or equal to $56.00 per
share and greater than or equal to $44.00 per share, the Exchange Ratio
shall be equal to the quotient obtained by dividing the Company Stock Value
by the Acquiror Stock Price;
(ii) if the Acquiror Stock Price is less than $44.00 per share and
greater than or equal to $39.60 per share, the Exchange Ratio shall be equal
to the quotient obtained by dividing the Company Stock Value by $44.00;
(iii) if the Acquiror Stock Price is greater than $56.00 per share and
less than or equal to $61.60 per share, the Exchange Ratio shall be equal to
the quotient obtained by dividing the Company Stock Value by $56.00;
(iv) if the Acquiror Stock Price is greater than $61.60 per share,
(A) Acquiror may terminate this Merger Agreement pursuant to
Section 8.01(d)(i), unless the Company makes a "Company Floating Rate
Election" prior to the Scheduled Closing Date, in which case the Exchange
Ratio shall be equal to the quotient obtained by dividing (x) the product of
the Company Stock Value multiplied by 1.10 by (y) the Acquiror Stock Price
or (B) in the event that Acquiror does not terminate this Agreement pursuant
to clause (A) and the Company does not make a Company Floating Rate
Election, the Exchange Ratio shall be equal to the quotient obtained by
dividing the Company Stock Value by $56.00;
(v) if the Acquiror Stock Price is less than $39.60 per share,
(A) Company may terminate this Merger Agreement pursuant to
Section 8.01(d)(ii), unless the Acquiror makes an "Acquiror Floating Rate
Election" prior to the Scheduled Closing Date, in which case the Exchange
Ratio shall be equal to the quotient obtained by dividing (x) the product of
the Company Stock Value multiplied by 0.90 by (y) the Acquiror Stock Price
or (B) in the event that Company does not terminate this Agreement pursuant
to clause (A) and Acquiror does not make the Acquiror
A-3
Floating Rate Election, the Exchange Ratio shall be equal to the quotient
obtained by dividing the Company Stock Value by $44.00.
(b) CERTAIN DEFINITIONS. For purposes of this Merger Agreement, (i) the
term "Acquiror Stock Price" shall mean the average of the closing sale prices of
a share of Acquiror Common Stock as reported on the New York Stock Exchange
("NYSE") for the ten (10) consecutive trading days ending with and including the
second trading day immediately preceding the date of the Scheduled Closing Date;
(ii) the term "Acquiror Floating Rate Election" shall mean an election made by
Acquiror to use the Exchange Ratio calculated pursuant to
Section 2.01(a)(v)(A); and (iii) the term "Company Floating Rate Election" shall
mean an election made by the Company to use the Exchange Ratio calculated
pursuant to Section 2.01(a)(iv)(A).
(c) TREASURY STOCK. All shares of capital stock of the Company held in the
treasury of the Company immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof and no amount shall be
delivered or deliverable in exchange therefor.
(d) ACQUIROR SUB STOCK. Each share of common stock, par value $.01 per
share, of Acquiror Sub issued and outstanding immediately prior to the Effective
Time ("Acquiror Sub Stock") shall be converted into and exchanged for one
(1) duly and validly issued, fully paid and nonassessable share of common stock
of the Surviving Corporation.
(e) [Intentionally Omitted].
(f) DISSENTING SHARES. Notwithstanding anything in this Merger Agreement
to the contrary and unless otherwise provided by applicable law, shares of
Company Common Stock that are issued and outstanding immediately prior to the
Effective Time and that are owned by Company Stockholders who have properly
demanded payment of the fair value of their stock (the "Dissenting Shares")
within the meaning of Section 262 of Delaware Law shall not be converted into
the right to receive the Merger Consideration unless and until such Company
Stockholders shall have failed to perfect or shall have effectively withdrawn
their demand, or lost their right of payment under applicable law. If any such
Company Stockholder shall have failed to perfect or shall have effectively
withdrawn or lost such right of payment, each share of Company Common Stock held
by such Company Stockholder shall thereupon be deemed converted into the right
to receive and exchangeable for, at the Effective Time, the Merger Consideration
pursuant to Section 2.02 of this Merger Agreement. Subject to the terms and
conditions of this Merger Agreement, at and after the Effective Time, any holder
of shares of Company Common Stock who complies with Section 262 of Delaware Law
(a "Company Dissenting Stockholder") shall be entitled to obtain payment from
Surviving Corporation of the fair value of such Company Dissenting Stockholder's
shares of Company Common Stock as determined pursuant to Delaware Law; PROVIDED,
HOWEVER, that, to the extent permissible under Delaware Law, no such payment
shall be made unless and until such Company Dissenting Stockholder has
surrendered to the Exchange Agent the Certificate representing the shares of
Company Common Stock for which payment is being made.
(g) PROCEDURE WITH RESPECT TO DISSENTING SHARES. Company shall give
Acquiror (i) prompt notice of any written notice of intent to demand payment for
shares filed pursuant to Section 262 of Delaware Law received by Company,
withdrawals of such notices, and any other instruments served in connection with
such notices pursuant to the relevant provisions of Delaware Law and received by
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to such notices under Delaware Law consistent with the obligations of
Company thereunder. Company shall not, except with the prior written consent of
Acquiror (which shall not be unreasonably withheld), (A) make any payment with
respect to any such notice, (B) offer to settle or settle any such notices or
(C) waive any failure to timely deliver a written notice in accordance with the
Delaware Law.
A-4
(h) FLOATING RATE ELECTION. The Company and the Acquiror shall deliver the
Company Floating Rate Election or the Acquiror Floating Rate Election, as the
case may be, by notice to the other Party prior to the Scheduled Closing Date.
The Company Floating Rate Election and the Acquiror Floating Rate Election may
be delivered notwithstanding the fact that the other Party has not then elected
to terminate this Merger Agreement pursuant to Section 2.01(a) and
Section 8.01(d), in which event the other Party shall not be entitled to
terminate this Merger Agreement pursuant to Section 2.01(a) or Section 8.01(d).
SECTION 2.02 EXCHANGE OF CERTIFICATES
(a) EXCHANGE AGENT. As soon as reasonably practicable after the Effective
Time, but in no event later than four (4) business days after the Effective Time
(assuming the Company has provided to Acquiror an electronic list of the names,
addresses, and tax identification numbers of the Company Stockholders and the
information provided in the certificate in Section 6.08 at least one
(1) business day prior to the Effective Time), Acquiror shall deposit with an
exchange agent designated by Acquiror and reasonably acceptable to Company (the
"Exchange Agent") pursuant to an exchange agreement in the form attached hereto
as Exhibit C, for the benefit of the former holders of shares of Company Common
Stock (excluding any shares described in Section 2.01(c)), for issuance and
payment in accordance with this Article II the shares of Acquiror Common Stock
(but not including the Escrow Stock) issuable pursuant to Section 2.01(a) (such
shares of Acquiror Common Stock being hereinafter referred to as the "Exchange
Fund"). Acquiror shall cause the Exchange Agent, pursuant to irrevocable
instructions, to deliver Acquiror Common Stock contemplated to be delivered
pursuant to Section 2.01(a) out of the Exchange Fund within three (3) business
days of the Exchange Agent's receipt of all information and documentation
required pursuant to Section 2.02(b). The Exchange Fund shall not be used for
any purpose other than as set forth in this Section 2.02(a).
(b) PAYMENT PROCEDURES. As soon as reasonably practicable after the
Effective Time, but in no event later than four (4) business days after the
Effective Time (assuming the Company has provided to Acquiror an electronic list
of the names, addresses, and tax identification numbers of the Company
Stockholders and the information provided in the certificate in Section 6.08 at
least one (1) business day prior to the Effective Time), Acquiror shall cause
the Exchange Agent to mail to each record holder, as of the Effective Time, of
an outstanding certificate or certificates (each a "Certificate" and
collectively, the "Certificates") that immediately prior to the Effective Time
evidenced outstanding shares of Company Common Stock (excluding any shares
described in Sections 2.01(c)): (i) a form letter of transmittal and
(ii) instructions for use in effecting the surrender of the Certificates for
payment therefor. The Exchange Agent shall provide to the Company (for delivery
to the Company Stockholders) all such documentation in advance of the Effective
Time, but in any event not less than one (1) week prior to the Closing Date.
Upon surrender to the Exchange Agent of a Certificate, together with such letter
of transmittal duly executed and any other required documents, the holder of
such Certificate shall be entitled to receive in exchange therefor the
applicable consideration set forth in Section 2.01, and such Certificate shall
forthwith be canceled. In the event of a surrender of a Certificate representing
shares of Company Common Stock which are not registered in the transfer records
of the Company under the name of the Person surrendering such Certificate, a
certificate representing the proper number of shares of Acquiror Common Stock
may be issued to a Person other than the Person in whose name the Certificate so
surrendered is registered if (x) such Certificate shall be properly endorsed or
otherwise be in proper form for transfer to the Person surrendering such
Certificate and requesting such issuance, (y) such Person surrendering such
Certificate and requesting such issuance shall pay any transfer or other Taxes
required by reason of the issuance of shares of Acquiror Common Stock to a
Person other than the registered holder of such Certificate or shall establish
to the satisfaction of Acquiror that such Taxes have been paid or are not
applicable, and (z) such Person surrendering such certificate shall, if required
by Acquiror, have such Person's signature
A-5
guaranteed by a bank, brokerage firm or other financial intermediary that is a
member of a medallion guarantee program. Until surrendered in accordance with
the provisions of this Section 2.02, each Certificate shall represent for all
purposes only the right to receive the applicable consideration set forth in
Section 2.01, without any interest thereon.
(c) ISSUANCES TO AFFILIATES. Notwithstanding anything herein to the
contrary, any Certificate surrendered for exchange by any "affiliate" of the
Company (as that term is used in SEC Accounting Series Release Nos. 130 and 135
and Rule 145 of the rules and regulations of the SEC under the Securities Act)
shall not be exchanged until Acquiror shall have received a signed agreement
from such "affiliate" as provided in Section 5.12 hereof.
(d) NO FURTHER RIGHTS IN STOCK. All shares of Acquiror Common Stock issued
upon the surrender for exchange of Certificates in accordance with the terms of
Sections 2.01 and 2.02 hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, and there shall be no further
registration of transfer on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock represented by such
Certificates which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, any such Certificates are presented to Acquiror, the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by law.
(e) [Intentionally Omitted]
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the holders of Company Common Stock for twelve
(12) months after the Effective Time shall be delivered to Acquiror, upon
demand, and any holder of Company Common Stock that has not theretofore complied
with this Article II shall thereafter look only to the Surviving Corporation and
Acquiror for the Merger Consideration to which such holder is entitled pursuant
hereto.
(g) NO LIABILITY. Neither Acquiror nor the Surviving Corporation shall be
liable to any holder of shares of Company Common Stock for any Acquiror Common
Stock or cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) WITHHOLDING OF TAX. Acquiror or the Exchange Agent shall be entitled
to deduct and withhold from the applicable amount of the Merger Consideration
otherwise issuable to any former holder of Company Common Stock such amounts as
Acquiror (or any Affiliate thereof) or the Exchange Agent are required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by Acquiror (or any Affiliate thereof) or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Merger Agreement as
having been paid to the former holder of Company Common Stock in respect of whom
such deduction and withholding was made by Acquiror (or any Affiliate thereof)
or the Exchange Agent.
(i) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificate
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit setting forth that fact by the Person
claiming such lost, stolen or destroyed Certificate and the granting of a
reasonable indemnity against any claim that may be made against Acquiror or the
Exchange Agent with respect to such Certificate (and if required by Acquiror in
the case of any Certificate or Certificates from any Company Stockholder
representing more than seven thousand five hundred (7,500) shares of Company
Common Stock, the posting by such Person of a bond, in such reasonable amount as
Acquiror may direct), Acquiror shall cause the Exchange Agent to pay to such
Person the applicable amount of the Merger Consideration with respect to such
lost, stolen or destroyed Certificate.
A-6
(j) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF ACQUIROR COMMON
STOCK. No dividends or other distributions declared or made after the Effective
Time with respect to Acquiror Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Acquiror Common Stock evidenced thereby until the
holder of such Certificate shall properly surrender such Certificate in
accordance with the requirements of Section 2.02(b). Subject to the effect of
escheat, tax or other applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificates evidencing
whole shares of Acquiror Common Stock issued in exchange therefor, without
interest, (i) promptly the amount of dividends or other distributions with a
record date after the Effective Time and theretofore paid with respect to such
whole shares of Acquiror Common Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions, with a record date after the
Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole shares of Acquiror Common Stock.
(k) APPOINTMENT OF STOCKHOLDERS' REPRESENTATIVES. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall, by virtue of the Merger, be
appointed attorneys-in-fact and authorized and empowered to act, for and on
behalf of any or all of the Company Stockholders (with full power of
substitution in the premises), in connection with the provisions of Article IX
as they relate to the Company and the Company Stockholders generally, and such
other matters as are reasonably necessary for the consummation of the
transactions contemplated hereby including, without limitation, (i) to
compromise on their behalf with Acquiror any claims asserted thereunder,
(ii) to execute and deliver on behalf of the Company Stockholders any documents
or agreements contemplated by or necessary or desirable in connection with this
Merger Agreement and (iii) to take such further actions including coordinating
and administering post-closing matters related to the rights and obligations of
the Company Stockholders as are authorized in this Merger Agreement (the above
named representatives, as well as any subsequent representative(s) of the
Company Stockholders appointed by the Company Stockholders being referred to
herein as the "Stockholders' Representatives"). The Stockholders'
Representatives shall not be liable to any Company Stockholder, Acquiror, the
Surviving Corporation or their respective Affiliates or any other Person with
respect to any action taken or omitted to be taken by the any of Stockholders'
Representatives in their role as Stockholders' Representatives under or in
connection with this Merger Agreement unless such action or omission results
from or arises out of fraud, gross negligence, willful misconduct or bad faith
on the part of the Stockholders' Representatives. Acquiror, Acquiror Sub and the
Surviving Corporation shall be entitled to rely on such appointment and treat
such Stockholders' Representatives, or any one of them, as the duly appointed
attorney-in-fact of each Company Stockholder. Each Company Stockholder who votes
in favor of the Merger pursuant to the terms hereof, by such vote and without
any further action, and each Company Stockholder who receives Merger
Consideration in connection with the Merger, by acceptance thereof and without
any further action, confirms such appointment and authority. In the event
Acquiror receives conflicting instructions from different Stockholders'
Representatives, Acquiror shall be permitted to take no action with respect
thereto until it receives written instructions signed by all Stockholders'
Representatives or directed by court order.
SECTION 2.03 STOCK OPTIONS
(a) As of the Effective Time, each outstanding Option shall be converted
into an option to acquire Acquiror Common Stock as provided in this
Section 2.03. Following the Effective Time, each Option shall continue to have,
and shall be subject to, the terms and conditions of each agreement pursuant to
which such Option was subject immediately prior to the Effective Time
(including, in the case of each Option granted under the Company's 1998 Long
Term Incentive Plan, the terms and conditions of the Company's 1998 Long Term
Incentive Plan under which such Option was granted), except that: (i) each
Option (as converted pursuant to this Section 2.03) shall be exercisable for
that number of whole shares of Acquiror Common Stock equal to the product of
(A) the aggregate number
A-7
of shares of Company Common Stock for which such Option was exercisable at the
Effective Time, multiplied by (B) the Exchange Ratio, rounded up to the nearest
whole share (provided that all references in such Company Stock Option Plans and
the agreement under which such Option was granted to the Company shall be
references to Acquiror and references to the Company's Common Stock shall be
references to Acquiror Common Stock); and (ii) the exercise price per share of
Acquiror Common Stock issuable pursuant to each Option (as converted pursuant to
this Section 2.03) shall be equal to the exercise price per share of Company
Common Stock under such Option at the Effective Time divided by the Exchange
Ratio, rounded to the nearest whole cent.
(b) The assumption and substitution of Options as provided herein shall not
give the holders of such Options additional benefits or additional (or
accelerated) vesting rights that they did not have immediately prior to the
Effective Time or relieve the holders of such Options from any obligations or
restrictions applicable to their Options or the shares obtainable upon exercise
of the Options. The adjustment provided herein with respect to any Options that
are "incentive stock options" (as defined in Section 422 of the Code) shall be
and is intended to be, effected in a manner that is consistent with continued
treatment of such Options as "incentive stock options" under Section 424(a) of
the Code. The duration and other terms of the converted options provided for in
this Section 2.03 shall be the same as the Options except that all references to
the Company shall be references to Acquiror and references to the Company's
Common Stock shall be references to Acquiror Common Stock. Acquiror shall take
all corporate action necessary to reserve for issuance, at all times any
converted Options provided for in this Section 2.03 are outstanding, a
sufficient number of shares of Acquiror Common Stock for delivery upon the
exercise of such converted Options. The Company will take such action as shall
be reasonably necessary (including but not limited to obtaining waivers from
holders of Options) so that each Option that was unvested or subject to a
repurchase option, risk of forfeiture or other condition under any applicable
Company Stock Option Plans immediately prior to the Effective Time shall
continue to be subject to such vesting, repurchase, forfeiture or other
conditions with respect to the Acquiror Common Stock that may be issuable with
respect thereto after the occurrence of the Effective Time or the consummation
of the transactions contemplated by this Merger Agreement. As of the Effective
Time, the Company shall effect the termination of each other outstanding
unexpired and unexercised option to purchase shares of Company Common Stock.
SECTION 2.04 CERTAIN ADJUSTMENTS
If between the date hereof and the Effective Time, the outstanding shares of
Company Common Stock or of Acquiror Common Stock shall be changed into a
different number of shares by reason of any reclassification, recapitalization,
split-up, combination or exchange of shares, or any dividend payable in stock or
other securities shall be declared thereon with a record date within such
period, the Exchange Ratio (and any other references herein to a price per share
of Acquiror Common Stock) shall be adjusted accordingly to provide the same
economic effect as contemplated by this Merger Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend.
SECTION 2.05 CLOSING
Subject to the terms and conditions of this Merger Agreement, the closing of
the Merger (the "Closing" and the date of such Closing, the "Scheduled Closing
Date") will take place on the second Business Day after the satisfaction of the
latest to occur or, if permissible, waiver of the conditions set forth in
Article VII of this Merger Agreement at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another date
or place is agreed to in writing by the Parties.
A-8
SECTION 2.06 ESCROW STOCK; DETERMINATION OF CLOSING ADJUSTMENT
(a) ESCROW STOCK. When making the issuances of Acquiror Common Stock
pursuant to Section 2.01(a) above, Acquiror shall withhold from the Company
Stockholders a number of shares of Acquiror Common Stock equal to the quotient
of five percent (5%) of the Transaction Value divided by the Acquiror Stock
Price (the "Escrow Stock"). The Escrow Stock will be placed in escrow as
security for the performance of the indemnity obligations of the Company
Stockholders under Section 9.02 of this Merger Agreement and to pay Acquiror any
Closing Adjustment required to be paid to Acquiror pursuant to this
Section 2.06, all pursuant to the terms and conditions of an escrow agreement
among Acquiror, the Surviving Corporation, the Stockholders' Representatives and
First Union National Bank or another escrow agent designated by Acquiror and
reasonably acceptable to the Company (the "Escrow Agent"), in form attached
hereto as Exhibit D (the "Escrow Agreement"). The Escrow Stock shall be
registered in the name of the Escrow Agent as nominee for the Company
Stockholders. The Merger Consideration otherwise distributable as of the
Effective Time to each Company Stockholder in connection with the Merger as
provided in Section 2.01(a) shall be proportionately reduced to reflect the
Escrow Stock required to be deposited in Escrow pursuant to this
Section 2.06(a) and the Escrow Agreement, and such Escrow Stock shall be
released to the Company Stockholders or Acquiror, as the case may be, only in
accordance with the terms of this Merger Agreement and the Escrow Agreement. The
fees of the Escrow Agent shall be paid by Acquiror. On the earlier to occur of
(i) five (5) business days after the final determination of the Closing
Adjustment and the Loss Adjustment pursuant to Section 2.06(b) (including,
without limitation, final resolution of any disputes with respect thereto) or
(ii) ninety (90) days after Closing, the Escrow Agent shall deliver to the
Company Stockholders, pro-rata in accordance with the number of shares of
Company Common Stock held by each such Company Stockholder immediately prior to
the Effective Time, the Escrow Stock, after deducting therefrom an amount of
Escrow Stock having a value equal to the sum (which shall not be less than zero)
of the Closing Adjustment, if any, and the Loss Adjustment, if any, and shall
deliver to Acquiror an amount of Escrow Stock having a value equal to such sum;
PROVIDED, HOWEVER, that in the event of any dispute over the sum of the Closing
Adjustment and the Loss Adjustment pursuant to Section 2.06(b), the Escrow Stock
having a value equal to the amount of any disputed Closing Adjustment and Loss
Adjustment (together with a number of shares of Escrow Stock which are, in
Acquiror's reasonable judgment, necessary to cover any expenses of Acquiror
necessary to resolve such dispute) need not be delivered until such dispute is
finally resolved. For purposes of this Section 2.06, the value of each share of
Escrow Stock shall be equal to the Closing Acquiror Stock Price.
(b) DETERMINATION OF CLOSING ADJUSTMENT AND LOSS ADJUSTMENT. The "Closing
Adjustment" shall equal (i) the amount by which the Net Debt of the Company and
the Company Subsidiaries as of the Closing Date is greater or less than
(ii) the Estimated Net Debt as set forth in the certificate required to be
delivered pursuant to Section 7.02(k) of this Merger Agreement. The "Loss
Adjustment" shall equal the amount of any Losses for which Acquiror Indemnified
Persons are entitled to indemnification pursuant to Section 9.02. The Company
will use its best efforts to close its books and records for the period ending
on the Closing Date within five (5) days after the Closing Date and shall
deliver to the Acquiror or, at the request of the Acquiror, to Acquiror and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, such books and records as shall be requested by Acquiror or
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP to enable ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP to perform an audit of the
consolidated financial statements of the Company as of the Closing Date and to
determine the amount of the Closing Adjustment and the Loss Adjustment. Upon
receipt of such books and records, the Acquiror shall use its best efforts to
cause ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP to complete an audit of the consolidated financial
statements of the Company in order to provide Acquiror the information necessary
to calculate the amount of the Closing Adjustment and the Loss Adjustment within
sixty (60) days following receipt of the books and records of the Company.
Acquiror shall deliver to the Stockholders' Representatives a draft copy of such
audited financial statements and the draft
A-9
determination of the amount of the Closing Adjustment and the Loss Adjustment
promptly upon receipt of such items from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP. The Stockholders'
Representatives shall have the right to review and copy the computations and
review workpapers used in connection with the preparation of the audited
financial statements after providing ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP with written releases
reasonably acceptable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and the computation of the Closing
Adjustment and the Loss Adjustment. If the Stockholders' Representatives
disagree with the determination of the Closing Adjustment or the Loss
Adjustment, the Stockholders' Representatives shall so notify the Acquiror in
writing within ten (10) days after the date of their receipt of the audited
financial statements and the computation of the Closing Adjustment and the Loss
Adjustment, specifying in detail any point of disagreement; PROVIDED, HOWEVER,
that if the Stockholders' Representatives fail to notify the Acquiror in writing
of the Stockholders' Representatives' disagreement within such ten (10) day
period, the determination of the Closing Adjustment and the Loss Adjustment
shall be final, conclusive and binding on the Parties for purposes of
determining the amount of the Escrow Stock to be delivered to Company
Stockholders pursuant to this Section 2.06, PROVIDED, FURTHER, HOWEVER, that the
sum of the Closing Adjustment and the Loss Adjustment shall not exceed five
percent (5%) of the Transaction Value. The Acquiror and the Stockholders'
Representatives shall negotiate in good faith to resolve any such disagreement.
It is the intent of the Parties hereto that upon final determination of the
Closing Adjustment, if any, and the Loss Adjustment, if any, the net amount of
such adjustments, provided such amount is in Acquiror's favor, shall be paid to
Acquiror from the Escrow Stock pursuant to this section. There shall be no
adjustment in the case of a net sum in the Company's favor but the escrow stock
shall be distributed to the Company Stockholders as provided above.
(c) RESOLUTION OF CLOSING ADJUSTMENT. If any such disagreement with
respect to the Closing Adjustment cannot be resolved by the Acquiror and the
Stockholders' Representatives within fifteen (15) days after the Stockholders'
Representatives have received notice from the Acquiror in accordance with
Section 2.06(b) of the existence of such disagreement, the Acquiror and the
Stockholders' Representatives shall jointly select a nationally recognized
independent public accounting firm (which has not performed any service since
January 1, 1996 for either the Company or the Acquiror or any of their
respective Affiliates (the "Accounting Firm")), to act as an arbitrator to
resolve as expeditiously as possible all points of disagreement with respect to
the Closing Adjustment (or, in the event they are unable to agree, either may
request the San Diego, CA office of the American Arbitration Association to make
such selection, which shall be final and binding on the Parties). All
determinations made by the Accounting Firm with respect to the Closing
Adjustment shall be final, conclusive and binding on the Parties hereto. Each
party shall be responsible for its fees and expenses, as well as one-half of the
fees and expenses of the Accounting Firm, incurred in connection with the
resolution of the Closing Adjustment; PROVIDED, HOWEVER, that any such fees and
expenses incurred on behalf of the Company Stockholders may be paid from any
excess Escrow Stock (that is, any Escrow Stock remaining after the final
distribution to Acquiror of Escrow Stock, if any, in respect of the Closing
Adjustment or the Loss Adjustment) pursuant to the Escrow Agreement.
(d) RESOLUTION OF LOSS ADJUSTMENT. If any such disagreement with respect
to the Loss Adjustment cannot be resolved by the Acquiror and the Stockholders'
Representatives within fifteen (15) days after the Stockholders' Representatives
have received notice from the Acquiror in accordance with Section 2.06(b) of the
existence of such disagreement, the Acquiror and the Stockholders'
Representatives shall submit the matter to the San Diego, CA office of the
American Arbitration Association ("AAA") for binding arbitration to be conducted
in accordance with the AAA commercial arbitration rules in effect at the time
such matter is submitted. If any such matter is submitted to the AAA as provided
herein, (A) each of the Acquiror and the Stockholders' Representatives will
furnish to AAA such workpapers and other documents and information as AAA may
request and will be afforded the opportunity to present to AAA any material
relevant to the matter, (B) the determination by AAA, as set forth in a notice
delivered to the Acquiror and the Stockholders' Representatives by
A-10
AAA, will be binding and conclusive on such parties and (C) the non-prevailing
party shall be responsible for the fees and expenses incurred in connection with
the resolution of the Loss Adjustment; provided, however, that any such fees and
expenses that are to be paid by the Company Stockholders may be paid from any
excess Escrow Stock (that is, any Escrow Stock remaining after the final
distribution to Acquiror of Escrow Stock, if any, in respect of the Closing
Adjustment or Loss Adjustment) pursuant to the Escrow Agreement.
A-11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as specifically set forth in the Disclosure Letter delivered by
Company to Acquiror prior to the execution and delivery of this Merger Agreement
(the "Company Disclosure Letter") and referenced in the Company Disclosure
Letter to the Section(s) of this Article III to which such disclosure applies,
Company hereby represents, warrants to and agrees with Acquiror and Acquiror Sub
as follows, in each case as of the date of this Merger Agreement and as of the
Closing Date:
SECTION 3.01 ORGANIZATION AND QUALIFICATION
Company is a corporation duly organized, validly existing and in good
standing under Delaware Law, and has the corporate power and authority to own,
operate and lease its Assets, to carry on its business as currently conducted,
to execute and deliver this Merger Agreement and to carry out the transactions
contemplated hereby. Company is duly qualified to conduct business as a foreign
corporation and is in good standing in the states, countries and territories
listed in the Company Disclosure Letter and in each jurisdiction where the
nature of its business or the ownership, operation or leasing of its Assets
makes such qualification necessary except where failure to so qualify would not
have a Company Material Adverse Effect.
SECTION 3.02 SUBSIDIARIES
Section 3.02 of the Company Disclosure Letter lists each Company Subsidiary.
Neither Company nor any Company Subsidiary has any equity investment or other
interest in, nor has Company or any Company Subsidiary made advances or loans to
any Person (other than intra-company transactions between or among Company and a
Company Subsidiary). Section 3.02 of the Company Disclosure Letter sets forth
(a) the authorized capital stock or other equity interests of each Company
Subsidiary and (b) the percentage of the issued and outstanding capital stock or
other equity interests of each Company Subsidiary owned by Company. All of such
shares of capital stock or other equity interests of each Company Subsidiary
have been duly authorized and validly issued and are outstanding, fully paid and
nonassessable and are owned by Company free and clear of all Encumbrances other
than Encumbrances arising under applicable securities Laws. Each Company
Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of its state or jurisdiction of incorporation (as listed
in Section 3.02 of the Company Disclosure Letter), and has the requisite
corporate power and authority to own, operate and lease its Assets and to carry
on its business as currently conducted. Each Company Subsidiary is duly
qualified to conduct business as a foreign Person and is in good standing in
each jurisdiction where the nature of its business or the ownership, operation
or the leasing of its Assets makes such qualification necessary except where
failure to so qualify would not have a Company Material Adverse Effect.
SECTION 3.03 ARTICLES OF INCORPORATION AND BYLAWS
Company has furnished to Acquiror a true and complete copy of the
certificate or articles of incorporation of Company and each Company Subsidiary,
as currently in effect on the date of this Merger Agreement, and a true and
correct copy of Company's bylaws and the bylaws of each Company Subsidiary, as
currently in effect on the date of this Merger Agreement. Neither the Company
nor any Company Subsidiary is in violation of any of the provisions of its
respective articles of incorporation or bylaws.
SECTION 3.04 CAPITALIZATION
The authorized capital stock of the Company consists of Seventeen Million
(17,000,000) shares of Company Common Stock, of which (i) 2,280,471 shares are
designated as Voting Class A Common
A-12
Stock and 105,190 shares are designated as Non-Voting Class A Common Stock,
(ii) 1,867,808 shares are designated as Voting Class B Common Stock and 290,873
shares are designated as Non-Voting Class B Common Stock, (iii) 182,939 shares
are designated as Voting Class C Common Stock, (iv) 3,681,251 are designated as
Voting Class D Common Stock and 756,608 are designated as Non-Voting Class D
Common Stock, (v) 91,470 shares are designated as Voting Class E Common Stock,
(vi) 6,000,000 shares are designated as Voting Class F Common Stock,
(vii) 756,608 shares are designated as Non-Voting Class G Common Stock, and
(viii) 986,782 shares of additional classes of stock which may be issued in one
or more series, from time to time, with such designations, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereon (including, without limitation, voting
rights) as may be provided in a resolution or resolutions adopted by the Board
of Directors of the Company. Section 3.04 of the Company Disclosure Letter sets
forth the names and addresses of all holders of record of Company Common Stock
and the number and class of shares held by each such stockholder. No other
shares of Company Common Stock have been reserved for any purpose. There are no
outstanding securities convertible into or exchangeable for Company Common
Stock, any other securities of Company, or any capital stock or other securities
of any Company Subsidiary and no outstanding options, rights (preemptive or
otherwise), or warrants to purchase or to subscribe for any shares of such stock
or other securities of Company or any Company Subsidiary. There are no
outstanding Agreements affecting or relating to the voting, issuance, purchase,
redemption, registration, repurchase or transfer of Company Common Stock, any
other securities of Company, or any capital stock or other securities of any
Company Subsidiary, except as contemplated hereunder. Each of the outstanding
shares of Company Common Stock and of capital stock of, or other equity
interests in, each Company Subsidiary was issued in compliance with all
applicable federal and state Laws concerning the issuance of securities. There
are no obligations, contingent or otherwise, of Company or any Company
Subsidiary to provide funds to, make any investment (in the form of a loan,
capital contribution or otherwise) in, or provide any guarantee with respect to,
any Person other than Company or any Company Subsidiary. There are no Agreements
pursuant to which any Person (other than Company or any Company Subsidiary) is
or may be entitled to receive any of the revenues or earnings, or any payment
based thereon or calculated in accordance therewith, of Company or any Company
Subsidiary. As of the Effective Time, Company shall have only one class of
capital stock.
SECTION 3.05 AUTHORITY; BINDING OBLIGATION
The execution and delivery by Company of this Merger Agreement, the
execution and delivery by Company of all other Agreements, documents,
certificates or other instruments contemplated hereby, and the consummation by
Company of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Company are necessary to authorize this Merger Agreement and the
other Agreements, documents, certificates or other instruments contemplated
hereby, or to consummate the transactions contemplated hereby and thereby, other
than approval by the Company Stockholders and the approval and adoption of this
Merger Agreement by Company in accordance with Delaware Law and Company's
certificate of incorporation and bylaws. This Merger Agreement has been duly
executed and delivered by Company and constitutes a legal, valid and binding
obligation of Company (assuming the Merger Agreement has been duly executed and
delivered by Acquiror and Acquiror Sub and constitutes a legal, valid and
binding obligation of Acquiror and Acquiror Sub), enforceable in accordance with
its terms, except as such enforceability may be subject to the effects of any
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar Laws affecting creditors' rights generally and subject to
the effects of general equitable principles (whether considered in a proceeding
in equity or at law).
A-13
SECTION 3.06 NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) The execution, delivery and performance by Company of this Merger
Agreement and all other Agreements, documents, certificates or other instruments
contemplated hereby, the fulfillment of and compliance with the respective terms
and provisions hereof and thereof, and the consummation by Company of the
transactions contemplated hereby and thereby, do not and will not: (i) conflict
with, or violate any provision of, the certificate of incorporation or bylaws of
Company; (ii) subject to (A) obtaining the requisite approval and adoption of
this Merger Agreement by Company Stockholders in accordance with Delaware Law
and Company's certificate of incorporation and bylaws and (B) obtaining the
consents, approvals, authorizations and permits of, and making filings with or
notifications to, the applicable Governmental Entity pursuant to the applicable
requirements, if any, of the HSR Act, and the filing and recordation of the
Certificate of Merger as required by Delaware Law, conflict with or violate any
Law applicable to Company or any Company Subsidiary, or any of their Assets;
(iii) conflict with, result in any breach of, or constitute a default (or an
event that with notice or lapse of time or both would become a default) or
result in the termination or acceleration, or create in another Person, a put
right, purchase obligation or similar right under any Agreement to which Company
or any Company Subsidiary is a party or by which Company or any Company
Subsidiary, or any of their Assets, may be bound; or (iv) result in or require
the creation or imposition of, or result in the acceleration of, any
indebtedness or any Encumbrance of any nature upon, or with respect to, Company
or any Company Subsidiary or any of the Assets now owned or hereafter acquired
by Company; except for any such conflict or violation described in clause (ii)
above, any such conflict, breach or default described in clause (iii) above, or
any such creation, imposition or acceleration described in clause (iv) above
that would not have a Company Material Adverse Effect and that would not prevent
Company from consummating the Merger on a timely basis.
(b) The execution, delivery and performance by Company and each Company
Subsidiary of this Merger Agreement and all other Agreements, documents,
certificates or other instruments contemplated hereby, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by Company and each Company Subsidiary of the transactions
contemplated hereby and thereby, do not and will not: (i) require any consent,
approval, authorization or permit of, or filing with or notification to, any
Person not party to this Merger Agreement, except (A) pursuant to the applicable
requirements, if any, of the HSR Act and Laws of other Governmental Entities,
(B) the filing and recordation of the Certificate of Merger as required by
Delaware Law and (C) where the failure to obtain any consent, approval,
authorization or permit or to make any filing or notification otherwise required
to be disclosed hereunder would not have a Company Material Adverse Effect; or
(ii) result in or give rise to any penalty, forfeiture, Agreement termination,
right of termination, amendment or cancellation, or restriction on business
operations of Company or any Company Subsidiary that would have a Company
Material Adverse Effect.
(c) All returns (other than Tax Returns), reports (other than reports
required to be filed pursuant to the terms of any Government Contract),
statements and other documents required to be filed by the Company or any
Company Subsidiary with any Governmental Entity have been filed in a timely
manner and complied with and are true, correct and complete in all material
respects, except for returns, reports, statements and other documents where the
failure to so file would not be reasonably expected to have a Company Material
Adverse Effect. All material records of every type and nature relating to the
business, operations or Assets of the Company and each Company Subsidiary have
been maintained in all material respects in accordance with good business
practices and are maintained at the Company or Company Subsidiary.
(d) No Governmental Entity or any other Person has notified Company or any
Company Subsidiary in writing that such Governmental Entity or other Person
intends to object to the transactions contemplated hereunder which shall include
for this purpose any objection to the operations of the business of Company or
any Company Subsidiary as part of Acquiror. The Company
A-14
is not aware of any fact or circumstance related to it or to any Company
Subsidiary that would reasonably be expected to (i) cause the filing of any
objection to any application for any Governmental consent required hereunder,
(ii) lead to any delay in processing such application or (iii) require any
waiver of any Governmental rule, policy or other applicable law, in each case
which would reasonably be expected to materially delay the consummation of the
transaction contemplated hereunder.
SECTION 3.07 INTELLECTUAL PROPERTY
(a) Section 3.07 of the Company Disclosure Letter sets forth an accurate,
correct and complete list, as of the date hereof, of (i) all Intellectual
Property (other than non-registered copyrights) of Company or any Company
Subsidiaries, (ii) all Software of Company or any Company Subsidiary that has
been expensed, if the cost of such Software was greater than $100,000, and all
Software of Company or any Company Subsidiary capitalized on Company's books and
records at any time within the last three (3) fiscal years, (iii) all Software
of Company or any Company's Subsidiary sold or licensed to Persons by Company or
any Company Subsidiary at any time within the last three (3) fiscal years and
(iv) all pending Software development projects approved by senior management of
Company which, if completed as currently anticipated by Company, would be
required to be listed on Section 3.07 of the Company Disclosure Letter pursuant
to clauses (ii) and (iii) above, together with an identification of the division
undertaking such projects. Prior to the Closing, Company will provide to
Acquiror an accurate, correct and complete list and make available to Acquiror
at Company's offices, accurate, correct and complete copies of all written
Agreements with respect to Intangible and Other Property and written summaries
of each oral Agreement with respect to Intangible and Other Property entered
into by Company or any Company Subsidiary from the date hereof through the
Closing Date of a type that is described in this Section 3.07(a).
(b) Company and Company Subsidiaries own, have licensed or otherwise have
the right to use all Intangible and Other Property used in the business of
Company and Company Subsidiaries, as presently conducted or as proposed to be
conducted, except for such Intangible and Other Property the loss of the use of
which is not reasonably likely, individually or in the aggregate (together with
the items set forth in Section 3.07 of the Company Disclosure Letter), to have a
Company Material Adverse Effect. To the knowledge of Company, except as
specifically noted in Section 3.07 of the Company Disclosure Letter, none of the
Software owned, licensed or used by Company or any Company Subsidiary is owned
by or licensed from any employees of Company or any Company Subsidiary.
(c) (i) The use of the Intangible and Other Property by Company or any
Company Subsidiary does not infringe upon or otherwise violate the rights of any
third party in or to such Intangible and Other Property (except as any
Commercial Software licensed or sold to Company or any Company Subsidiary by
unrelated Persons may involve such infringement or violation) and (ii) no claim
has been asserted, and Company is not aware of any claim which can be asserted,
by any Person against Company or Company Subsidiaries with respect to the use of
any item of Intangible and Other Property challenging or questioning the
validity or effectiveness of such use of any such item, except for such
infringements, violations or claims which are not reasonably likely,
individually or in the aggregate (together with the items set forth in
Section 3.07 of the Company Disclosure Letter), to have a Company Material
Adverse Effect. Unless specifically noted in Section 3.07 of the Company
Disclosure Letter, no employee of Company or any Company Subsidiary has a right
to receive a royalty or similar payment, or has any other monetary rights, in
respect of any item of Intangible and Other Property of Company or any Company
Subsidiary. Unless specifically noted in Section 3.07 of the Company Disclosure
Letter, no Person (other than employees of Company or any Company Subsidiary)
has a right to receive a royalty or similar payment, or has any other monetary
rights, in respect of any item of Intangible and Other Property, except for such
rights which are not reasonably likely, individually or in the aggregate
(together with the items set forth in Section 3.07 of the Company Disclosure
Letter),
A-15
to have a Company Material Adverse Effect. The Merger will not violate any
provision of any Agreements relating to any of the Intangible or Other Property.
Each of Company and Company Subsidiaries has taken reasonable measures to
protect the proprietary nature of each item of Intellectual Property and
Software, and to maintain the confidentiality of all confidential information,
that it owns or uses and are not aware of any unauthorized disclosure of
confidential information.
SECTION 3.08 FINANCIAL STATEMENTS AND CONDITION
(a) Company has prepared the audited consolidated balance sheets of Company
and the Company Subsidiaries as of the end of the fiscal periods ending
February 28, 1997, December 31, 1997, December 31, 1998 and December 31, 1999
(collectively, the "Company Audited Balance Sheet") and the audited consolidated
statements of income, Company's and the Company Subsidiaries' equity and changes
in financial position for each of such fiscal years in each case audited by
Ernst & Young LLP, the Company's independent public accountants, in accordance
with generally accepted auditing standards (other than the report and notes
thereto in the case of the fiscal period ending December 31, 1999) and
accompanied by the related report of Ernst & Young LLP (such balance sheets and
such consolidated statements of income, Company's equity and changes in
financial position are hereinafter referred to collectively as the "Company
Financial Statement"). A true and complete copy of the Company Financial
Statement has been delivered to Acquiror and is attached as an exhibit to, and
constitutes an integral part of, the Company Disclosure Letter.
(b) The Company Financial Statement, including, without limitation, the
notes thereto (other than the notes to the December 31, 1999 financial statement
which will be provided to Acquiror prior to the Effective Time), (i) has been
prepared in accordance with the books and records of Company and its
Subsidiaries and (ii) presents fairly in all material respects the consolidated
financial position of Company and its Subsidiaries at the respective dates
thereof and their consolidated results of operations and cash flows for the
periods indicated, in accordance with GAAP applied throughout the periods
involved (except as noted therein).
SECTION 3.09 ABSENCE OF CERTAIN DEVELOPMENTS
Since December 31, 1999:
(a) the business of Company and each Company Subsidiary has been conducted
in all material respects only in the Ordinary Course of Business;
(b) neither Company nor any Company Subsidiary has become liable in respect
of any guarantee or has incurred or otherwise become liable in respect of any
debt, except for borrowings, letters of credit and bankers' acceptances in the
Ordinary Course of Business under credit facilities in existence on
December 31, 1999;
(c) neither Company nor any Company Subsidiary has mortgaged, pledged or
subjected to any lien any of their respective property, business or assets,
except for Permitted Encumbrances or 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 $100,000 in the
aggregate;
(d) neither Company nor any Company Subsidiary has made any declaration,
setting aside or payment of any dividend or other distribution with respect to,
or repurchase of, any of their respective capital stock or other equity
interests;
(e) neither Company nor any Company Subsidiary has (i) acquired or leased
from any other Person any material assets, or sold or leased to any other Person
or otherwise disposed of any material assets (in each case except for assets
acquired or sold in the Ordinary Course of Business in connection with goods and
services provided to customers); (ii) entered into any contractual obligation
relating to (A) the purchase or sale of any capital stock, partnership interest
or other equity interest in any
A-16
Person, (B) the purchase of assets constituting a business or (C) any merger,
consolidation or other business combination; (iii) entered into or amended any
lease of real property or material personal property (whether as lessor or
lessee); (iv) canceled or compromised any debt or claim other than accounts
receivable in the Ordinary Course of Business; (v) sold, transferred, licensed
or otherwise disposed of any material intangible assets other than in the
Ordinary Course of Business; (vi) waived or released any right of substantial
value; (vii) instituted, settled or agreed to settle any material action; or
(viii) entered into or consummated any transaction with any Affiliate;
(f) there has been no loss, destruction or damage to any material item of
property of Company or any Company Subsidiary, whether or not insured, which has
had or could reasonably be expected to have a Company Material Adverse Effect;
(g) other than in the Ordinary Course of Business and consistent with past
practices, neither Company nor any Company Subsidiary has made any changes in
the rate of compensation payable or paid, or agreed or orally promised to pay,
conditionally or otherwise, any extra compensation, or severance or vacation
pay, to any director, officer, employee, consultant or agent of Company or any
Company Subsidiary;
(h) neither Company nor any Company Subsidiary has made any change in
(x) its methods of accounting or accounting practices, except as required by
GAAP, or (y) its pricing policies or payment or credit practices or failed to
pay any creditor any amount owed to such creditor when due or granted any
extensions or credit other than in the Ordinary Course of Business;
(i) neither Company nor any Company Subsidiary has terminated or closed any
facility, business or operation which is material to the Company and the Company
Subsidiaries, taken as a whole;
(j) neither Company nor any Company Subsidiary has made any loan, advance or
capital contributions to, or any other investment in, any Person other than
loans in the Ordinary Course of Business;
(k) neither Company nor any Company Subsidiary has adopted or increased any
benefits under any Plan in any material manner;
(l) neither Company nor any Company Subsidiary has written up or written
down any of its respective material assets; and
(m) neither Company nor any Company Subsidiary has entered into any
contractual obligation to do any of the things referred to elsewhere in this
Section 3.09.
SECTION 3.10 ABSENCE OF UNDISCLOSED LIABILITIES
To the knowledge of Company, there are no liabilities or obligations
(whether absolute or contingent, matured or unmatured, known or unknown) of
Company or any Company Subsidiary, including but not limited to liabilities for
Taxes and that are not reflected, or reserved against, in the Company Financial
Statement, except for those that may have been incurred after December 31, 1999
in the Ordinary Course of Business or that would not be reasonably be expected
to have a Company Material Adverse Effect. Since December 31, 1999, neither
Company nor any Company Subsidiary has incurred any liabilities or obligations
(whether absolute or contingent, matured or unmatured, known or unknown) other
than in the Ordinary Course of Business or those which would not reasonably be
expected to have a Company Material Adverse Effect.
A-17
SECTION 3.11 LITIGATION; DISPUTES
(a) Company has not received notice of, and there is no pending, or, to the
knowledge of Company, threatened, action, suit, claim, arbitration, proceeding
or investigation against, affecting or involving Company or any Company
Subsidiary or their respective businesses or Assets, or the transactions
contemplated by this Merger Agreement, at law or in equity, or before or by any
domestic or foreign court, arbitrator or Governmental Entity that, alone or in
the aggregate, would have a Company Material Adverse Effect. Neither Company nor
any Company Subsidiary is (i) operating under or subject to any order, award,
writ, injunction, decree or judgment of any court, arbitrator or Governmental
Entity which would reasonably be expected to have a Company Material Adverse
Effect or that would prevent or enjoin, or delay in any material respect,
consummation of the Merger or the transactions contemplated hereby or (ii) in
default with respect to any order, award, writ, injunction, decree or judgment
of any court, arbitrator or Governmental Entity which default would reasonably
be expected to have a Company Material Adverse Effect.
(b) Company and each Company Subsidiary have complied and are in compliance
in all material respects with all laws, ordinances, regulations, awards, orders,
judgments, decrees and injunctions applicable to Company and each Company
Subsidiary and their respective businesses or Assets, including all federal,
state and local laws, ordinances, regulations and orders pertaining to
employment or labor, safety, health, zoning and other matters, the failure to
comply with which, in each case, or in the aggregate would reasonably be
expected to have a Company Material Adverse Effect. Company and each Company
Subsidiary have obtained and hold all permits, licenses and approvals (none of
which has been materially modified or rescinded and all of which are in full
force and effect) from all government authorities necessary in order to own, use
and maintain their respective Assets and to conduct their respective businesses
as presently conducted, which the failure to obtain and hold would reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.12 REAL PROPERTY LEASES; REAL PROPERTY
(a) Section 3.12 of the Company Disclosure Letter lists each real property
lease under which Company or any Company Subsidiary is the lessee or lessor.
Company and each Company Subsidiary are the owners and holders of the leasehold
estates purported to be granted to them by the leases listed in Section 3.12 of
the Company Disclosure Letter. Each such lease is in full force and effect and,
to the knowledge of Company, constitutes a legal, valid and binding obligation
of, and is legally enforceable in all material respects against, the respective
parties thereto. Company and each Company Subsidiary have in all material
respects performed all material obligations thereunder required to be performed
by any of them to date. To the knowledge of Company, no party is in default in
any material respect under any of the foregoing, and there has not occurred any
event which (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute such a material default.
Section 3.12 of the Company Disclosure Letter lists and describes any Real
Property in which Company or any Company Subsidiary holds an interest.
(b) Section 3.12 of the Company Disclosure Letter lists and sets forth a
description for all the Real Property, specifying the owner of each parcel
thereof, and all such Real Property is suitable and adequate for the uses for
which it is currently devoted.
(c) Company and the Company Subsidiaries are the sole owners of good, valid,
fee simple, marketable and insurable (at standard rates) title to the Real
Property respectively owned by them, including, without limitation, all
buildings, structures, fixtures and improvements thereon and all equipment,
machinery and personal property therein, in each case free and clear of all
Encumbrances, except as would not materially detract from the use of the Real
Property.
(d) All buildings, structures, fixtures and other improvements on the Real
Property are in good repair, free of defects (latent or patent), and fit for the
uses to which they are currently devoted. All
A-18
such buildings, structures, fixtures and improvements on the Real Property
conform to all Laws. The buildings, structures, fixtures and improvements on
each parcel of the Real Property lie entirely within the boundaries of such
parcel of the Real Property, and no structures of any kind encroach on the Real
Property, except as would not materially detract from the use of the Real
Property.
(e) None of the Real Property is subject to any Agreement or other
restriction of any nature whatsoever (recorded or unrecorded) preventing or
limiting Company's or any Company Subsidiary's right to convey or to use it for
its intended use.
(f) The Real Property has direct and unobstructed access to electric, gas,
water, sewer and telephone lines, all of which are adequate for the uses to
which the Real Property is currently devoted and intended to be devoted.
SECTION 3.13 OTHER AGREEMENTS; NO DEFAULT
Sections 3.12 and 3.13 of the Company Disclosure Letter list each Agreement
(other than (w) Agreements solely between Company and any Company Subsidiary,
(x) Government Contracts, (y) Agreements which are purchase or task orders under
a Company Contract and (z) real property leases identified in Section 3.12, to
which Company or any Company Subsidiary is a party or by which Company or any
Company Subsidiary, or any of their respective Assets, is bound, and which
(i) involves expenditures or receipts by Company or any Company Subsidiary
(other than contracts, commitments or Agreements which do not require payments
or yield receipts of more than $250,000 in any twelve (12) month period or more
than $1,000,000 in the aggregate); or (ii) contain covenants that limit the
freedom of Company or any Company Subsidiary to engage in a line of business or
to compete with any third party (Agreements listed pursuant to clauses (i) and
(ii) above, collectively the "Company Contracts"). Each Company Contract is in
full force and effect, constitutes a valid and binding obligation of and is
legally enforceable in accordance with its terms against Company and, to the
knowledge of Company, the Company Contracts are valid, binding and enforceable
obligations of the other parties thereto, except as such enforceability may be
subject to the effects of any applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar Laws affecting creditors'
rights generally or subject to the effects of general equitable principles
(whether considered in a proceeding in equity or at law). Company has complied
with all of the provisions of such Company Contracts and is not in default
thereunder, and there has not occurred any event which (whether with or without
notice, lapse of time, or the happening or occurrence of any other event) would
constitute such a default, and the execution of this Merger Agreement by Company
and its performance hereunder will not cause, or result in, a breach or default
under any Company Contract in each case which would reasonably be expected to
have a Company Material Adverse Effect. There has not been (A) any failure by
Company or, to the knowledge of Company, any other party to any such Company
Contract to comply with all material provisions thereof which default or failure
to perform would reasonably be expected to have a Company Material Adverse
Effect, (B) any default by Company or, to the knowledge of Company, any other
party thereunder, which default or failure to perform would reasonably be
expected to have a Company Material Adverse Effect or (C) to the knowledge of
Company (X) any cancellation thereof in writing which has not been cured or
(Y) any outstanding dispute thereunder which has not been cured. Neither Company
nor any Company Subsidiary is a guarantor or otherwise liable for any liability
or obligation (including indebtedness) of any other Person other than any
Company Subsidiary.
SECTION 3.14 LABOR RELATIONS
There are no collective bargaining or other labor union Agreements to which
Company or any Company Subsidiary is a party. There are, and for the past two
(2) years have been, no strikes, work stoppages, union organization efforts or
lawsuits (other than grievance proceedings) pending or, to the knowledge of
Company, threatened between Company or any Company Subsidiary and (a) any
current
A-19
or former employees of Company or any Company Subsidiary except where such
activity or lawsuits would not reasonably be expected to have a Company Material
Adverse Effect or (b) any union or other collective bargaining unit representing
such employees. Company and each Company Subsidiary have complied and are in
compliance with all Laws relating to employment or the workplace, including,
without limitation, Laws relating to wages, hours, collective bargaining, safety
and health, work authorization, equal employment opportunity, immigration,
withholding, unemployment compensation, worker's compensation, employee privacy
and right to know, except where the failure so to comply would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.15 PENSION AND BENEFIT PLANS
(a) Company has delivered to Acquiror prior to the execution of this Merger
Agreement true and complete copies (or written descriptions, where no written
plan exists) (and, where applicable, the most recent actuarial, valuation or
annual (Form 5500 with attachments) reports with respect thereto) of all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus or other incentive
plans, employment agreements of executive officers or change in control
agreements, medical, vision, dental or other health plans, life insurance plans
and other employee benefit plans or fringe benefit plans, programs, arrangements
or Agreements, including, without limitation, all Company Benefit Plans. No
Company Benefit Plan is or has been a Multiemployer Plan or could subject
Company or any Company Subsidiary to liability under Sections 4063 or 4064 of
ERISA. Company has set forth in the Company Disclosure Letter (i) a list of all
of the Company Benefit Plans, (ii) a list of the Company Benefit Plans that are
Company Pension Plans, (iii) a list of the Company Benefit Plans that are
Company Stock Plans, and (iv) a list of the number of shares covered by,
exercise prices for, and holders of, all stock options granted and available for
grant under the Company Stock Plans.
(b) From their inception, all Company Benefit Plans have been and are in
material compliance (in form and in operation) with the applicable terms of
ERISA and the Code and any other applicable Laws, including the terms of such
plans.
(c) All liabilities (contingent or otherwise) under any Company Benefit Plan
are fully accrued or reserved against in the Company Financial Statement in
accordance with GAAP. Each Company Pension Plan that is subject to Title IV of
ERISA or Section 412 of the Code satisfies the minimum funding standards
(without regard to any waiver) provided for in Section 412 of the Code.
(d) Neither Company nor any Company Subsidiary has any obligations for
retiree health or other welfare benefits for retirees under any Company Benefit
Plan or otherwise except as required by Section 4908(b) of the Code and Sections
601-608 of ERISA, and there are no restrictions on the rights of Company or any
Company Subsidiary to unilaterally amend or terminate any such Company Benefit
Plan at any time without incurring any material liability thereunder.
(e) Neither the execution and delivery of this Merger Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, golden parachute or
otherwise) becoming due to any person under any Company Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Company
Benefit Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits.
(f) Each Company Benefit Plan which is intended to be qualified under
Section 401(a) or 401(k) of the Code or qualified as a voluntary employees'
beneficiary association under Sections 501(a) and 501(c)(9) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and so exempt, and no fact or event has occurred that could adversely affect
such qualified or exempt status.
A-20
(g) Company and each Company Subsidiary have not incurred any material
liability under, and have complied in all material respects with, the Worker
Adjustment Retraining Notification Act and the regulations promulgated
thereunder and do not reasonably expect to incur any such material liability as
a result of actions taken or not taken prior to the consummation of the Merger.
SECTION 3.16 TAXES AND TAX MATTERS
(a) The Company and each Company Subsidiary have paid, or reserved in
accordance with GAAP, all Taxes due and payable by any of them for or with
respect to all periods up to and including the date hereof (without regard to
whether or not such Taxes are or were disputed), whether or not shown on any Tax
Return.
(b) The Company and each Company Subsidiary have filed on a timely basis all
material Company Tax Returns that it was required to file. All such Company Tax
Returns were accurate and complete in all material respects. None of Company or
any Company Subsidiary is the beneficiary of any extension of time within which
to file any Tax Return which has not yet been filed. No written claim has ever
been made (which has not been satisfactorily resolved) by an authority in a
jurisdiction where Company or any Company Subsidiary does not file Company Tax
Returns that any one of them is or may be subject to taxation by that
jurisdiction. None of Company or any Company Subsidiary has given any currently
effective waiver of any statute of limitations in respect of Taxes or agreed to
any currently effective extension of time with respect to a Tax assessment or
deficiency. There are no security interests on any of the assets of Company or
any Company Subsidiary that arose in connection with any failure (or alleged
failure) to pay any Tax except for Permitted Encumbrances.
(c) Company and each Company Subsidiary has withheld and paid all material
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.
(d) None of Company or any Company Subsidiary has knowledge of any facts or
circumstances which could give rise to a reasonable expectation that any
authority may assess any additional Taxes for any period for which Company Tax
Returns have been filed. There is no dispute or claim concerning any liability
for Taxes of Company or any Company Subsidiary either (i) claimed or raised by
any authority in writing or (ii) as to which Company has knowledge based upon
personal contact with any agent of such authority. Company and each Company
Subsidiary has delivered to the Acquiror copies of, and Section 3.16 of the
Company Disclosure Letter sets forth a complete and accurate list of, Company
Tax Returns filed with respect to the taxable periods of Company and any Company
Subsidiary ended on or after December 31, 1996; indicates those Company Tax
Returns that have been audited; and indicates those Company Tax Returns that
currently are the subject of an audit.
(e) The unpaid Taxes of Company and any Company Subsidiary (i) did not, as
of the date of any financial statements of Company and the Company Subsidiaries
furnished to Acquiror pursuant to Section 3.08 of this Merger Agreement, exceed
the reserve for any Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the such financial statements (rather than in any notes thereto)
and (ii) do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of Company or
any Company Subsidiary in filing their Company Tax Returns.
(f) None of Company or any Company Subsidiary has filed a consent under
Section 341(f) of the Code, concerning collapsible corporations. None of Company
or any Company Subsidiary has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. The Company
and each Company Subsidiary has disclosed on its federal income Company Tax
Returns all positions taken therein that could reasonably be expected to give
rise to a substantial understatement of federal income
A-21
Tax within the meaning of Section 6662 of the Code. None of Company or any
Company Subsidiary is a party to any Tax allocation or sharing agreement. None
of Company or any Company Subsidiary (A) has been a member of an "affiliated
group," as defined in Section 1504(a) of the Code, filing a consolidated federal
income Tax Return (other than a group the common parent of which was Company) or
(B) has any Liability for the Taxes of any Person (other than any of Company)
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract or otherwise.
SECTION 3.17 INSURANCE
Section 3.17 of the Company Disclosure Letter lists all policies of title,
asset, fire, hazard, casualty, liability, life, worker's compensation and other
forms of insurance of any kind owned or held by Company or any Company
Subsidiary. All such policies: (a) are with insurance companies reasonably
believed by Company to be financially sound and reputable; (b) to the knowledge
of Company are in full force and effect; (c) are sufficient for compliance in
all material respects by Company and by each Company Subsidiary with all
requirements of Law and of all Agreements to which Company or any Company
Subsidiary is a party; (d) to the knowledge of the Company are valid and
outstanding policies enforceable against the insurer; (e) insure against risks
of the kind customarily insured against and in amounts customarily carried by
companies similarly situated and by companies engaged in similar businesses and
owning similar Assets; and (f) have the policy expiration dates set forth in
Section 3.17 of the Company Disclosure Letter.
SECTION 3.18 ARRANGEMENTS WITH RELATED PARTIES
No present or former officer, director, stockholder or Person known by the
Company to be an Affiliate of the Company or the any Company Subsidiary, nor any
Person known by the Company to be an Affiliate of such Person, is currently a
party to any transaction or agreement with the Company or any Company
Subsidiary, including any agreement providing for any loans, advances, the
employment of, furnishing of services by, rental of its Assets from or to, or
otherwise requiring payments to, any such officer, director, stockholder or
affiliate.
SECTION 3.19 BOOKS AND RECORDS
The books of account, stock records, minute books and other corporate and
financial records of Company and each Company Subsidiary are complete and
correct in all material respects and have been maintained in accordance with
reasonable business practices for companies similar to Company and each Company
Subsidiary (except where the failure to do so would not reasonably be expected
to have a Company Material Adverse Effect), and Company and each Company
Subsidiary will have prior to Closing prepared and made available to Acquiror
the minutes for all meetings of the Board of Directors and/or stockholders of
the Company and each Company Subsidiary held as of the date hereof (or written
consents in lieu of such meetings).
SECTION 3.20 ASSETS
Company and each Company Subsidiary have good, valid and marketable title to
all Assets respectively owned by them, including, without limitation, all
material Assets reflected in the Company Financial Statement and all Assets
acquired by Company or by any Company Subsidiary since December 31, 1999 (except
for Assets reflected in the Company Financial Statement or acquired since such
date which have been sold or otherwise disposed of in the Ordinary Course of
Business), free and clear of all Encumbrances other than Permitted Encumbrances.
All material personal property of Company and each Company Subsidiary is in good
operating condition and repair, ordinary wear and tear excepted, and is suitable
and adequate for the uses for which it is intended or is being used. All
material Inventory of Company and each Company Subsidiary (i) consists of items
which are good and
A-22
merchantable and of a quality and quantity presently usable and salable in the
Ordinary Course of Business and (ii) have been reflected in the Company
Financial Statement in accordance with GAAP.
SECTION 3.21 BOARD RECOMMENDATION
The Board of Directors of Company has unanimously adopted, in compliance
with Delaware Law, a resolution advising, authorizing, approving and adopting
this Merger Agreement and the transactions contemplated hereby, and recommending
approval and adoption of this Merger Agreement and the transactions contemplated
hereby by the Company Stockholders.
SECTION 3.22 DIRECTORS AND OFFICERS
Section 3.22 of the Company Disclosure Letter lists all current directors
and officers of Company and each Company Subsidiary, showing each such person's
name, positions, annual remuneration, bonuses and fringe benefits paid by
Company or any Company Subsidiary for the current fiscal year and the most
recently completed fiscal year.
SECTION 3.23 [INTENTIONALLY OMITTED]
SECTION 3.24 ENVIRONMENTAL MATTERS
Each of the Company and each Company Subsidiary is in material compliance
with all Environmental Laws except where the failure to comply would not
reasonably be expected to have a Company Material Adverse Effect. Neither the
Company nor any Company Subsidiary has any material liability under any
Environmental Law, nor is any of the Company or any Company Subsidiary
responsible for any liability of any other person under any Environmental Law
except for any material liability which would not reasonably be expected to have
a Company Material Adverse Effect. There are no pending or, to the knowledge of
the Company, threatened actions, suits, claims, legal proceedings or other
proceedings based on, and neither the Company nor any Company Subsidiary
directly or indirectly received any notice of any complaint, order, directive,
citation, notice of responsibility, notice of potential responsibility, or
information request from any Governmental Entity or any other person arising out
of or attributable to: (i) the current or past presence at any part of the real
property owned or leased by the Company or any Company Subsidiary (the "Real
Property") of Hazardous Materials (as defined below) or any substances that pose
a hazard to human health or an impediment to working conditions; (ii) the
current or past release or threatened release into the environment from the Real
Property (including, without limitation, into any storm drain, sewer, septic
system or publicly owned treatment works) of any Hazardous Materials or any
substances that pose a hazard to human health or an impediment to working
conditions; (iii) the off-site disposal of Hazardous Materials originating on or
from the Real Property; or (iv) any violation of Environmental Laws at any part
of the Real Property or otherwise arising from the Company's or any Company
Subsidiary's activities involving Hazardous Materials, which in each case, or in
the aggregate, would reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.25 [INTENTIONALLY OMITTED]
SECTION 3.26 GOVERNMENT CONTRACTS AND OTHER COMMITMENTS
(a) Except as disclosed in Section 3.26 of the Company Disclosure Letter, to
the knowledge of the Company, with respect to Government Contracts held by the
Company or any of its Subsidiaries, there is, as of the date hereof, no
(i) civil fraud or criminal investigation by any government investigative
agency, (ii) suspension or debarment proceeding (or equivalent proceeding)
against the Company or
A-23
any Company Subsidiaries, (iii) request by the government for a contract price
adjustment based on a claimed disallowance by any governmental agency or at the
direction of a governmental entity or written notice of defective pricing other
than as reserved for on the Company Financial Statement in accordance with GAAP,
(iv) claim or equitable adjustment by the Company or any Company Subsidiaries
against the U.S. Government or any third party in excess of $500,000,
(v) written notice challenging, questioning or disallowing any cost(s) in excess
of $500,000, or (vi) notice of contract termination, cure notice or show cause
notice.
(b) Each Government Contract is in full force and effect, constitutes a
valid and binding obligation of and is legally enforceable in accordance with
its terms against Company and, to the knowledge of Company, the Government
Contracts are valid, binding and enforceable obligations of the other parties
thereto, except as such enforceability may be subject to the effects of any
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar Laws affecting creditors' rights generally or subject to
the effects of general equitable principles (whether considered in a proceeding
in equity or at law). Company has complied with all of the provisions of such
Government Contracts and is not in default thereunder, and there has not
occurred any event which (whether with or without notice, lapse of time, or the
happening or occurrence of any other event) would constitute such a default, and
the execution of this Merger Agreement by Company and its performance hereunder
will not cause, or result in, a breach or default under any Government Contract
in each case. There has not been (A) any failure by Company or, to the knowledge
of Company, any other party to any such Government Contract to comply with all
material provisions thereof which default or failure to perform would have a
Company Material Adverse Effect, (B) any default by Company or, to the knowledge
of Company, any other party thereunder, which default or failure to perform
would not have a Company Material Adverse Effect or (C) to the knowledge of
Company (X) any written cancellation thereof which has been cured or (Y) any
outstanding dispute thereunder which has not been cured. Neither Company nor any
Company Subsidiary is a guarantor or otherwise liable for any liability or
obligation (including indebtedness) of any other Person other than any Company
Subsidiary.
(c) For the purposes of this Merger Agreement, with respect to any party,
"Government Contract" means any prime contract, subcontract, teaming agreement
or arrangement, joint venture, basic ordering agreement, pricing agreement,
letter contract, purchase order, delivery order, change order, Bid or other
arrangement of any kind between such party or any of its Subsidiaries and
(i) the U.S. Government (acting on its own behalf or on behalf of another
country or international organization), (ii) any prime contractor of the U.S.
Government or (iii) any subcontractor with respect to any contract of a type
described in clauses (i) or (ii) above. For the purposes of this Merger
Agreement, with respect to any party, "Bid" means any quotation, bid or proposal
made by such party or any of its Subsidiaries that if accepted or awarded would
lead to a contract with the U.S. Government or any other person for the design,
manufacture and sale of products or the provision of services.
SECTION 3.27 RELATIONS WITH GOVERNMENTS
Neither the Company, any Company Subsidiary nor, to the knowledge of the
Company, any of the Company's or any Company Subsidiary's officers, directors,
employees or agents (or stockholders, distributors, representatives or other
persons acting on the express, implied or apparent authority of the Company or
any Company Subsidiary) have paid, given or received or have offered or promised
to pay, give or receive, any bribe or other unlawful payment of money or other
thing of value, any unlawful discount, or any other unlawful inducement, to or
from any person or Governmental Entity in the United States or elsewhere in
connection with or in furtherance of the business of the Company or any Company
Subsidiary (including, without limitation, any offer, payment or promise to pay
money or other thing of value (a) to any foreign official, political party (or
official thereof) or candidate for
A-24
political office for the purposes of influencing any act, decision or omission
in order to assist the Company or any Company Subsidiary in obtaining business
for or with, or directing business to, any person, or (b) to any person, while
knowing that all or a portion of such money or other thing of value will be
offered, given or promised to any such official or party for such purposes);
except for minimal payments, discounts or inducements which would not reasonably
be expected to have a Company Material Adverse Effect. Neither the business of
the Company nor any Company Subsidiary is in any manner dependent upon the
making or receipt of such payments, discounts or other inducements except for
minimal payments, discounts or inducements which would not reasonably be
expected to have a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary has otherwise taken any action that would cause the Company
or any Company Subsidiary to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any applicable Laws of similar effect.
SECTION 3.28 BROKER'S FEES
Neither the Company nor any Company Subsidiary has any liability or
obligation to pay any fees or commissions to any broker, finder, or similar
agent with respect to the transactions contemplated by this Merger Agreement.
SECTION 3.29 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS
The information supplied by the Company or required to be supplied by the
Company (except to the extent revised or superseded by amendments or
supplements) for inclusion in the registration statement on Form S-4, or any
amendment or supplement thereto, pursuant to which the shares of Acquiror Common
Stock to be issued in the Merger will be registered under the Securities Act
(including any amendments or supplements, the "Registration Statement") shall
not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, 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 light of
the circumstances under which they were made, not misleading. The information
supplied by the Company or required to be supplied by the Company (except to the
extent revised or superseded by amendments or supplements) for inclusion in the
proxy statement relating to the Company Stockholders Meeting (such proxy
statement, together with the prospectus relating to the shares of Acquiror
Common Stock to be issued in the Merger, in each case as amended or supplemented
from time to time, the "Proxy Statement/ Prospectus") shall not, on the date the
Proxy Statement/Prospectus is first mailed to the Company's stockholders, at the
time of the Company Stockholders Meeting and at the Effective Time, contain any
statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies by or on behalf of the Company for the Company
Stockholders Meeting which has become false or misleading. Notwithstanding the
foregoing, the Company makes no representation, warranty or covenant with
respect to any information supplied or required to be supplied by Acquiror which
is contained in or omitted from any of the foregoing documents.
SECTION 3.30 [INTENTIONALLY OMITTED]
SECTION 3.31 INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS
All material interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements and foreign exchange contracts
to hedge the Company's investments in foreign subsidiaries, whether entered into
for the account of the Company or any Company Subsidiary,
A-25
were entered into in the Ordinary Course of Business and, to the Company's
knowledge, in accordance with prudent business practice and applicable rules,
regulations and policies of any Governmental Entity and with counterparties
believed to be financially responsible at the time and at the date hereof, and
in all material respects are valid and binding obligations of the Company or a
Company Subsidiary enforceable in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies), and are in full force and effect in all material respects. The
Company and each Company Subsidiary has duly performed in all material respects
its material obligations thereunder to the extent that such obligations to
perform have accrued, and, to the Company's knowledge, there are no material
breaches, violations or defaults or allegations or assertions of such by any
other party thereunder.
SECTION 3.32 POOLING /TAX MATTERS
(a) Neither Company nor any of its "affiliates" (as defined in
Section 5.12) has taken or has agreed to take any action or failed to take any
action that would prevent the Merger from (i) being treated for financial
accounting purposes as a "pooling of interests" in accordance with GAAP and the
regulations and interpretations of the SEC, or (ii) from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(b) At or prior to the date hereof, Company has received a draft of the
letter described in Section 7.02(h)(i).
SECTION 3.33 DISCLOSURE
No representation or warranty of the Company in this Merger Agreement when
read together with the information in the Section of the Company Disclosure
Letter applicable thereto is misleading with respect to any material fact or
omits to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
Except as specifically set forth in the Disclosure Letter delivered by
Acquiror and Acquiror Sub to Company prior to the execution and delivery of this
Merger Agreement (the "Acquiror Disclosure Letter") and referenced in the
Acquiror Disclosure Letter to the Section(s) of this Article IV to which such
disclosure applies, Acquiror and Acquiror Sub hereby jointly and severally
represent, warrant to and agree with Company as follows, in each case as of the
date of this Merger Agreement and as of the Closing Date:
SECTION 4.01 ORGANIZATION AND QUALIFICATION
Acquiror and each Subsidiary of Acquiror (each a "Titan Subsidiary" and
collectively the "Titan Subsidiaries") is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and has the corporate power and authority to own, operate and
lease its Assets, and to carry on its business as currently conducted. Acquiror
and each Titan Subsidiary is duly qualified to conduct business as a foreign
corporation and is in good standing in the states, countries and territories
listed in the Acquiror Disclosure Letter and in each jurisdiction where the
nature of its business or the ownership, operation or leasing of its Assets
makes such qualification necessary except where failure to so qualify would not
reasonably be expected to have an Acquiror Material Adverse Effect.
A-26
SECTION 4.02 CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS
Acquiror has furnished to Company a true and complete copy of the
certificate of incorporation of Acquiror and the certificate of incorporation of
Acquiror Sub, as currently in effect on the date of this Merger Agreement,
certified as of a recent date by the Secretary of State of Delaware and a true
and complete copy of the bylaws of Acquiror and Acquiror Sub. Neither Acquiror
nor Acquiror Sub is in violation of any of the provisions of its respective
certificate of incorporation or bylaws.
SECTION 4.03 CAPITALIZATION
The authorized capital stock of Acquiror consists of one hundred million
(100,000,000) shares of Acquiror Common Stock and two million five hundred
thousand (2,500,000) shares of preferred stock, par value $.01 per share
("Acquiror Preferred Stock"). As of March 15, 2000: (i) 50,618,107 shares of
Acquiror Common Stock were issued and outstanding; (ii) 693,300 shares of
Acquiror Preferred Stock were issued and outstanding; (iii) 1,000,000 shares of
Acquiror Common Stock were reserved for issuance upon the exercise of
outstanding employee stock options or other rights to purchase or receive
Acquiror Common Stock granted under Acquiror's Stock Option Plan of 1997 or
under any other Acquiror Employee Stock Option Plan (collectively, the "Acquiror
Stock Option Plan"); (iv) 500,000 shares of Acquiror Common Stock were reserved
for issuance pursuant to Acquiror's Employee Stock Purchase Plan (the "Acquiror
Stock Purchase Plan"); and (v) 1,119,465 shares of Acquiror Common Stock were
held by Acquiror in Acquiror's treasury. No other shares of Acquiror Common
Stock have been reserved for any purpose. Except as described above, there are
no outstanding securities convertible into or exchangeable for Acquiror Common
Stock, any other securities of any Acquiror, or any capital stock or other
securities of any Acquiror Subsidiary and no outstanding options, rights
(preemptive or otherwise), or warrants to purchase or to subscribe for any
shares of such stock or other securities of Acquiror or any Acquiror Subsidiary.
SECTION 4.04 AUTHORITY; BINDING OBLIGATION
The execution and delivery by Acquiror and Acquiror Sub of this Merger
Agreement and all other Agreements, documents, certificates or other instruments
contemplated hereby, and the consummation by Acquiror and Acquiror Sub of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
Acquiror or Acquiror Sub are necessary to authorize this Merger Agreement and
the other Agreements, documents, certificates or other instruments contemplated
hereby, or to consummate the transactions contemplated hereby and thereby. This
Merger Agreement has been duly executed and delivered by Acquiror and Acquiror
Sub and constitutes a legal, valid and binding obligation of each of Acquiror
and Acquiror Sub (assuming the Merger Agreement has been duly executed and
delivered by Company and constitutes a legal, valid and binding obligation of
Company), enforceable in accordance with its terms, except as such
enforceability may be subject to the effect of any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws
affecting creditors' rights generally and subject to the effect of general
equitable principles (whether considered in a proceeding in equity or at law).
SECTION 4.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) The execution, delivery and performance by Acquiror and Acquiror Sub of
this Merger Agreement and all other Agreements, documents, certificates or other
instruments contemplated hereby, the fulfillment of and compliance with the
respective terms and provisions hereof and thereof, and the consummation by
Acquiror and Acquiror Sub of the transactions contemplated hereby and thereby,
do not and will not: (i) conflict with, or violate any provision of, the
certificate of incorporation or the bylaws of Acquiror, or the certificate of
incorporation or the bylaws of Acquiror
A-27
Sub; (ii) subject to obtaining the consents, approvals, authorizations and
permits of, and making filings with or notifications to, the applicable
Governmental Entity pursuant to the applicable requirements, if any, of the HSR
Act and the filing and recordation of the Certificate of Merger as required by
Delaware Law, conflict with or violate any Law applicable to Acquiror or
Acquiror Sub or any of their respective Assets; (iii) conflict with, result in
any breach of, constitute a default (or an event that with notice or lapse of
time or both would become a default) under any Agreement to which Acquiror or
Acquiror Sub is a party or by which Acquiror or Acquiror Sub or any of their
respective Assets may be bound; or (iv) result in or require the creation or
imposition of, or result in the acceleration of, any indebtedness or any
Encumbrance of any nature upon, or with respect to, Acquiror or Acquiror Sub;
except for any such conflict or violation described in clause (ii) above, any
such conflict, breach or default described in clause (iii) above, or any such
creation, imposition or acceleration described in clause (iv) above that would
not have an Acquiror Material Adverse Effect and that would not prevent Acquiror
or Acquiror Sub from consummating the Merger on a timely basis.
(b) The execution, delivery and performance by Acquiror and Acquiror Sub of
this Merger Agreement and all other Agreements, documents, certificates or other
instruments contemplated hereby, the fulfillment of and compliance with the
respective terms and provisions hereof and thereof, and the consummation by
Acquiror and Acquiror Sub of the transactions contemplated hereby and thereby,
do not and will not: (i) require any consent, approval, authorization or permit
of, or filing with or notification to, any Person not party to this Merger
Agreement, except (A) pursuant to the applicable requirements, if any, of the
HSR Act, (B) the filing and recordation of the Certificate of Merger as required
by Delaware Law and (C) where the failure to obtain any consent, approval,
authorization or permit or to make any filing or notification otherwise required
to be disclosed hereunder would not have an Acquiror Material Adverse Effect; or
(ii) result in or give rise to any penalty, forfeiture, Agreement termination,
right of termination, amendment or cancellation, or restriction on business
operations of Acquiror or Surviving Corporation that would have an Acquiror
Material Adverse Effect.
SECTION 4.06 NO PRIOR ACTIVITIES OF ACQUIROR SUB
Acquiror Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Merger Agreement and has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
SECTION 4.07 SEC FILINGS; FINANCIAL STATEMENTS
(a) Acquiror has filed all forms, reports, statements and other documents
required to be filed with the SEC since January 1, 1997, and has heretofore
delivered to the Company, in the form filed with the SEC since such date,
together with any amendments thereto, all of its (i) Annual Reports on
Form 10-K, (ii) Quarterly Reports on Form 10-Q, (iii) proxy statements relating
to meetings of stockholders (whether annual or special), (iv) reports on
Form 8-K and (v) other reports or registration statements filed by Acquiror and
such Acquiror Subsidiaries (collectively, the "Acquiror SEC Reports"). As of
their respective filing dates, the Acquiror SEC Reports (i) complied as to form
in all material respects with the requirements of the Exchange Act and the
Securities Act, as applicable, and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
A-28
(b) The audited consolidated financial statements and unaudited interim
financial statements of Acquiror included in the Acquiror SEC Reports, including
all related notes and schedules, complied in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The financial statements, including all related
notes and schedules, contained in the Acquiror SEC Reports (or incorporated by
reference therein) present fairly in all material respects the consolidated
financial position of Acquiror and the Acquiror Subsidiaries as at the
respective dates thereof and the consolidated results of operations and cash
flows of Acquiror and the Acquiror Subsidiaries for the periods indicated, in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be noted therein) and subject in the case of interim
financial statements to normal year-end adjustments.
SECTION 4.08 NO UNDISCLOSED LIABILITIES
To the knowledge of Acquiror, neither Acquiror nor any of the Titan
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, except: (a) liabilities or obligations
reflected in the Acquiror SEC Reports; (b) liabilities or obligations incurred
since September 30, 1999, in the Ordinary Course of Business that have not had,
and are not reasonably likely to have (without taking into account the effects
of the consummation of the Merger), an Acquiror Material Adverse Effect; and
(c) liabilities or obligations that have not had, and are not reasonably likely
to have (without taking into account the effects of the consummation of the
Merger), an Acquiror Material Adverse Effect.
SECTION 4.09 ABSENCE OF CERTAIN CHANGES OR EVENTS
Since September 30, 1999, except as contemplated by this Merger Agreement or
as disclosed in any Acquiror SEC Report filed since September 30, 1999, Acquiror
and the Titan Subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice and, since such date, there
has not been (a) any change in the business, operations, properties, condition
(financial or otherwise), assets or liabilities (including, without limitation,
contingent liabilities) of Acquiror or any Titan Subsidiary having, individually
or in the aggregate, an Acquiror Material Adverse Effect, (b) any declaration,
setting aside or payment of any dividend or distribution in respect of the
shares of its capital stock or any redemption, purchase or other acquisition of
any of its securities, or (c) any agreement by Acquiror or any Titan Subsidiary
to take any of the actions described in this Section 4.09 except as expressly
contemplated by this Merger Agreement.
SECTION 4.10 ABSENCE OF LITIGATION
Except as set forth in the Acquiror SEC Reports, there are: (a) no claims,
actions, suits, investigations, or proceedings pending or, to Acquiror's
knowledge, threatened against Acquiror or any of the Titan Subsidiaries before
any court, administrative, governmental, arbitral, mediation or regulatory
authority or body, domestic or foreign, that would be reasonably likely to have
an Acquiror Material Adverse Effect or that would prevent or enjoin, or delay in
any material respect, consummation of the Merger or the transactions
contemplated hereby; and (b) no orders of any Governmental Entity or arbitrator
outstanding against Acquiror or any Titan Subsidiary that would reasonably be
likely to have an Acquiror Material Adverse Effect or that would prevent or
enjoin, or delay in any material respect, consummation of the Merger or the
transactions contemplated hereby.
SECTION 4.11 CERTAIN PRACTICES
Except as would not, individually or in the aggregate, reasonably be
expected to have an Acquiror Material Adverse Effect, none of Acquiror or any
Titan Subsidiary or any director, officer, agent, consultant or employee of
Acquiror or any Titan Subsidiary has: (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) directly or
A-29
indirectly, paid or delivered any fee, commission or other sum of money or item
or property, however characterized, to any finder, agent, government official or
other party, in the United States or any other country, which is in any manner
related to the business or operations of Acquiror or any Titan Subsidiary, that
was illegal under any federal, state or local Laws of the United States or any
other country having jurisdiction; (c) made any payment to any customer or
supplier of Acquiror or any Titan Subsidiary or any officer, director, partner,
employee, consultant or agent of any such customer or supplier, for the unlawful
sharing of fees or to any such customer or supplier or any such officer,
director, partner, employee, consultant or agent for the unlawful rebating of
charges, or engaged in any other unlawful reciprocal practice, or made any other
unlawful payment or given any other unlawful consideration to any such customer
or supplier or any such officer, director, partner, employee, consultant or
agent, in respect of the business of Acquiror or any Titan Subsidiary; (d) made
any other unlawful payment; or (e) established or maintained any fund or asset
that has not been appropriately recorded in the books and records of Acquiror
that would be in violation of law.
SECTION 4.12 GOVERNMENT CONTRACTS
To the knowledge of Acquiror, with respect to Government Contracts held by
Acquiror or any of the Titan Subsidiaries, there is, as of the date hereof, no
(i) civil fraud or criminal investigation by any government investigative agency
that is reasonably likely to have an Acquiror Material Adverse Effect,
(ii) suspension or debarment proceeding (or equivalent proceeding) against the
Acquiror or any Titan Subsidiaries that is reasonably likely to have an Acquiror
Material Adverse Effect, (iii) request by the government for a contract price
adjustment based on a claimed disallowance by Defense Contract Audit Agency or
claim of defective pricing, (iv) claim or equitable adjustment by the Acquiror
or any Titan Subsidiaries against the U.S. Government or any third party in
excess of $500,000, (v) written notice challenging, questioning or disallowing
any cost(s) in excess of $500,000, or (vi) notice of contract termination, cure
notice or show cause notice.
SECTION 4.13 INTELLECTUAL PROPERTY
(a) Acquiror and Titan Subsidiaries own, have licensed or otherwise have the
right to use all Intangible and Other Property used in the business of Acquiror
and Titan Subsidiaries, as presently conducted or as proposed to be conducted,
except for such Intangible and Other Property the loss of the use of which is
not reasonably likely, individually or in the aggregate, to have a Acquiror
Material Adverse Effect. To the knowledge of Acquiror, except as specifically
noted in Section 4.13 of the Acquiror Disclosure Letter, none of the Software
owned, licensed or used by Acquiror or any Titan Subsidiary is owned by or
licensed from any employees of Acquiror or any Titan Subsidiary.
(b) (i) The use of the Intangible and Other Property by Acquiror or any
Titan Subsidiary does not infringe upon or otherwise violate the rights of any
third party in or to such Intangible and Other Property (except as any
Commercial Software licensed or sold to Acquiror or any Titan Subsidiary by
unrelated Persons may involve such infringement or violation) and (ii) except as
set forth in Section 4.13 of the Acquiror Disclosure Letter, no claim has been
asserted, and Acquiror is not aware of any claim which can be asserted, by any
Person against Acquiror or Titan Subsidiaries with respect to the use of any
item of Intangible and Other Property challenging or questioning the validity or
effectiveness of such use of any such item, except for such infringements,
violations or claims which are not reasonably likely, individually or in the
aggregate, to have an Acquiror Material Adverse Effect. No employee of Acquiror
or any Acquiror Subsidiary has a right to receive a royalty or similar payment,
or has any other monetary rights, in respect of any item of Intangible and Other
Property of Acquiror or any Titan Subsidiary. No Person (other than employees of
Acquiror or any Titan Subsidiary) has a right to receive a royalty or similar
payment, or has any other monetary rights, in respect of any item of Intangible
and Other Property, except for such rights which are not reasonably likely,
individually or in the aggregate, to have an Acquiror Material Adverse Effect.
Each of Acquiror and Titan Subsidiaries
A-30
has taken reasonable measures to protect the proprietary nature of each item of
Intellectual Property and Software, and to maintain the confidentiality of all
confidential information, that it owns or uses and is not aware of any
unauthorized disclosure of confidential information.
SECTION 4.14 INTEREST RATE AND FOREIGN EXCHANGE CONTRACTS
All material interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements and foreign exchange contracts
to hedge Acquiror's investments in foreign subsidiaries, whether entered into
for the account of the Acquiror or any Titan Subsidiary, were entered into in
the Ordinary Course of Business and, to the Acquiror's knowledge, in accordance
with prudent business practice and applicable rules, regulations and policies of
any Governmental Entity and with counterparties believed to be financially
responsible at the time and at the date hereof, and in all material respects are
valid and binding obligations of the Acquiror or the applicable Titan Subsidiary
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
rights of creditors generally and the availability of equitable remedies), and
are in full force and effect in all material respects. Acquiror and each Titan
Subsidiary has duly performed in all material respects its material obligations
thereunder to the extent that such obligations to perform have accrued, and, to
the Acquiror's knowledge, there are no material breaches, violations or defaults
or allegations or assertions of such by any other party thereunder.
SECTION 4.15 BROKERS
Except for Credit Suisse First Boston, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Merger Agreement based
upon arrangements made by or on behalf of Acquiror.
SECTION 4.16 POOLING/TAX MATTERS
(a) Neither Acquiror nor any of its "affiliates" (as defined in
Section 5.12) has taken or agreed to take any action or failed to take any
action that would prevent the Merger from (i) being treated for financial
accounting purposes as a "pooling of interests" in accordance with GAAP and the
regulations and interpretations of the SEC, or (ii) from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(b) At or prior to the date hereof, Acquiror has received a draft of the
letter described in Section 7.02(h)(ii).
SECTION 4.17 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.
The information supplied by Acquiror or required to be supplied by Acquiror
(except to the extent revised or superseded by amendments or supplements) for
inclusion in the Registration Statement, or any amendment or supplement thereto,
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, 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 light of
the circumstances under which they were made, not misleading. The information
supplied by Acquiror or required to be supplied by Acquiror (except to the
extent revised or superseded by amendments or supplements) for inclusion in the
Proxy Statement/Prospectus shall not, on the date the Proxy Statement/Prospectus
is first mailed to the Company's stockholders and at the Effective Time, contain
any statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies by or on behalf of Company for the Company Stockholders
Meeting which
A-31
has become false or misleading. The Registration Statement will comply as to
form in all material respects with the provisions of the Securities Act.
Notwithstanding the foregoing, Acquiror makes no representation, warranty or
covenant with respect to any information supplied or required to be supplied by
the Company which is contained in or omitted from any of the foregoing
documents.
SECTION 4.18 BOARD RECOMMENDATION
The Board of Directors of Acquiror and Acquiror Sub have each unanimously
adopted, in compliance with Delaware law, a resolution advising, authorizing,
approving and adopting this Merger Agreement and the transactions contemplated
hereby, and the resolutions adopted by the Board of Directors of Merger Sub
recommend approval and adoption of this Merger Agreement and the transactions
contemplated hereby by the sole shareholder of Acquiror Sub.
SECTION 4.19 DISCLOSURE
No representation or warranty of the Acquiror in this Merger Agreement when
read together with the information in the Section of the Acquiror Disclosure
Letter applicable thereto is misleading with respect to any material fact or
omits to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
ARTICLE V
PRE-CLOSING COVENANTS
SECTION 5.01 CONDUCT OF BUSINESS OF COMPANY UNTIL EFFECTIVE TIME
The Company hereby covenants and agrees that, from the date of this Merger
Agreement until the Effective Time, Company, unless otherwise expressly
contemplated by this Merger Agreement or consented to in writing by Acquiror,
will, and will cause each Company Subsidiary to, carry on their respective
businesses only in the Ordinary Course of Business, use their respective best
efforts to preserve intact their business organizations and Assets, maintain
their rights and franchises, retain the services of their officers and employees
and maintain their relationships with customers, suppliers, licensors, licensees
and others having business dealings with them, and use their respective best
efforts to keep in full force and effect liability insurance and bonds
comparable in amount and scope of coverage to that currently maintained. Except
as set forth on Section 5.01 of the Company Disclosure Letter, without limiting
the generality of the foregoing, neither Company nor any Company Subsidiary
will:
(a) (i) increase in any manner the compensation or fringe benefits of, or
pay any bonus to, any employee (who is not an officer or director) other than in
the Ordinary Course of Business, or to any officer or director; (ii) grant any
severance or termination pay (other than pursuant to the normal severance
practices or existing agreements of the Company in effect on the date of this
Merger Agreement) to, or enter into any severance agreement with, any director,
officer or employee, or enter into any employment agreement with any employee
(who is not an officer or director) (other than in the Ordinary Course of
Business) or with any officer or director or otherwise without the prior written
consent of Acquiror; (iii) establish, adopt, enter into or amend any Company
Benefit Plan or other arrangement, except as may be required to comply with
applicable Law; (iv) pay any benefit not provided for under any Company Benefit
Plan or other arrangement; (v) grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Company Benefit Plan or
other arrangement (including the grant of stock options, stock appreciation
rights, stock-based or stock-related awards, performance units or restricted
stock, or the removal of existing restrictions in any Company Benefit Plan or
other arrangement or agreement or awards made thereunder), (vi) take any action
to fund or in any other way secure the payment of compensation or benefits under
any
A-32
agreement or (vii) promote or fire any director or officer, or other than in the
Ordinary Course of Business, any employee (who is not an officer or director);
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of capital stock of
the Company or any Company Subsidiary or any securities or obligations
convertible into or exchangeable for any shares of capital stock of the Company
or any Company Subsidiary, or any options, warrants or conversion or other
rights to acquire any shares of capital stock of the Company or any Company
Subsidiary or any such securities or obligations, or any other securities
thereof, other than pursuant to the Stockholders Agreement, dated February 27,
1998, by and among the Company and the Company Stockholders who are signatories
thereto; (ii) effect any reorganization, recapitalization, merger or share
exchange; or (iii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock;
(d) issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any limitations in voting
rights or other Encumbrances) of, any shares of any class of its capital stock
(including shares held in treasury but excluding shares issuable upon the
exercise of options outstanding on the date hereof in accordance with their
terms as of the date hereof), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to acquire,
any such shares, or amend or otherwise modify the terms of any such rights,
warrants or options the effect of which shall be to make such terms more
favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the Assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any Assets of any other person (other than the purchase of assets from
suppliers or vendors in the Ordinary Course of Business);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise subject
to any Encumbrance or dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise subject to any Encumbrance or dispose of, any of
its Assets, except for sales, dispositions, pledges, encumbrances or transfers
in the Ordinary Course of Business;
(g) propose or adopt any amendments to its certificate of incorporation,
bylaws or other comparable charter or organizational documents;
(h) make or rescind any express or deemed election relating to Taxes, settle
or compromise any claim, action, lawsuit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes (except where the amount
of such settlements or controversies, individually or in the aggregate, does not
exceed $100,000), or change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ended December 31, 1998, except,
as may be required by applicable Law or GAAP;
(i) make or agree to make any new capital expenditures which are not
included in the Company's 2000 capital budget, a copy of which was furnished to
Acquiror, to the extent that such new capital expenditures exceed in the
aggregate $100,000;
(j) (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or any Company
Subsidiary, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any agreement having the economic effect of any of
the foregoing, except for borrowings
A-33
incurred in the Ordinary Course of Business, or (ii) make any loans, advances or
capital contributions to, or investments in, any other person other than travel,
entertainment, loans for tuition expenses and payroll advances made to employees
in the Ordinary Course of Business;
(k) pay, discharge, settle or satisfy any claims, liabilities or obligations
(whether absolute or contingent, matured or unmatured, known or unknown), other
than the payments, discharges or satisfactions, in the Ordinary Course of
Business which are materially in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the Company Financial
Statement or waive any material benefits of, or agree to modify in any material
respect, any confidentiality, standstill or similar agreements to which the
Company or any Company Subsidiary is a party;
(l) waive, release or assign any rights or claims, or modify, amend or
terminate any agreement to which the Company or any Company Subsidiary is a
party, which would reasonably be expected to have a Company Material Adverse
Effect;
(m) make any change in any method of accounting or accounting practice or
policy other than those required by generally accepted accounting principles or
a Governmental Entity;
(n) take any action or fail to take any action that would reasonably be
expected to result in a Company Material Adverse Effect prior to or after the
Effective Time or that would adversely affect the ability of the Company or any
Company Subsidiary prior to the Effective Time to obtain consents of third
parties or approvals of Government Entities required to consummate the
transactions contemplated in this Merger Agreement; or
(o) authorize, or commit or agree to do any of the foregoing.
SECTION 5.02 BEST EFFORTS TO SATISFY CONDITIONS
Acquiror and Company shall use their respective best efforts to cause all
conditions to the obligations of Acquiror and Company set forth in Article VII
of this Merger Agreement to be satisfied on or before the Closing Date.
SECTION 5.03 OTHER ACTIONS
Acquiror and Company shall not, and shall not permit any of their respective
Affiliates to, take any action that would, or that could reasonably be expected
to, result in (a) any of the representations and warranties of such Party set
forth in this Merger Agreement becoming untrue, or (b) any of the conditions to
the Merger set forth in Article VII of this Merger Agreement not being
satisfied.
SECTION 5.04 CERTAIN TAX MATTERS
From the date hereof until the Effective Time, Company and each Company
Subsidiary (a) will prepare and timely file with the relevant Taxing authority
all Company Tax Returns required to be filed during such period ("Post-Signing
Returns"), which Post-Signing Returns shall be accurate in all material
respects, or permitted extensions with respect thereto, (b) will timely pay all
Taxes due and payable with respect to such Post-Signing Returns, (c) will pay or
otherwise make adequate provision for all Taxes payable by Company and Company
Subsidiary for which no Post-Signing Return is due prior to the Effective Time,
and (d) will promptly notify Acquiror of any action, suit, proceeding, claim or
audit pending against or with respect to Company or any Company Subsidiary in
respect of any Taxes.
SECTION 5.05 ACCESS AND INFORMATION
For so long as this Merger Agreement is in effect, and subject to applicable
Laws, each Party shall, and shall cause each of their respective Subsidiaries
to, (a) afford to the other Party and its officers,
A-34
employees, accountants, consultants, legal counsel and other representatives
reasonable access during normal business hours, subject to reasonable advance
notice, to all of their respective properties, Agreements, books, records and
personnel and (b) furnish promptly to the other Party (i) a copy of each
Agreement, document, certificate or other instrument filed with, or received
from any Governmental Entity and (ii) all other information concerning their
respective businesses, operations, prospects, conditions (financial or
otherwise), Assets, liabilities and personnel as such other Party may reasonably
request.
SECTION 5.06 NOTIFICATION FILING REQUIRED UNDER HSR ACT
If required, the parties shall make good faith efforts to complete and file
without delay, and in any event within thirty (30) days after the date of this
Merger Agreement, any notification filing required under the HSR Act with
respect to the transactions contemplated by this Merger Agreement. Acquiror and
Company shall in good faith take (or fully cooperate in the taking of) all
actions, and provide any additional information that may be, required or
reasonably requested in order to comply with the requirements of the HSR Act. If
a notification filing is required under the HSR Act, Acquiror shall pay all
filing fees in connection therewith.
SECTION 5.07 RELATED PARTY MATTERS
Company shall use commercially reasonable efforts to have each person
identified on Exhibit I to Section 3.18 of the Company Disclosure Letter execute
an agreement reasonably acceptable to Acquiror to pay-off as soon as practicable
after the Effective Time all indebtedness (including principal and interest)
owed by such person to the Company which is secured by Company Common Stock and
which was issued to such persons to purchase the capital stock of the Company or
any of its predecessors.
SECTION 5.08 PROXY STATEMENT/PROSPECTUS AND REGISTRATION STATEMENT; COMPANY
STOCKHOLDERS MEETING
(a) As soon as practicable following the date of this Merger Agreement, the
Company and Acquiror shall prepare and file with the SEC the Proxy
Statement/Prospectus, and Acquiror shall prepare and file with the SEC the
Registration Statement in which the Proxy Statement/Prospectus will be included
as a prospectus. Each of the Company and Acquiror shall use its best efforts to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. The Company shall use its best
efforts to cause the Proxy Statement/Prospectus to be mailed to the Company
Stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act. Acquiror also shall 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 Acquiror Common Stock in the Merger, and the Company shall furnish all
information concerning the Company and the holders of Company Common Stock as
may be reasonably requested in connection with any such action. No filing of, or
amendment or supplement to, the Registration Statement or the Proxy
Statement/Prospectus will be made by either Acquiror or the Company without the
other party's prior consent (which shall not be unreasonably withheld, delayed
or conditioned) and without providing the other party the opportunity to review
and comment thereon. Acquiror 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 Acquiror 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 Proxy Statement/Prospectus or the
Registration 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
A-35
information relating to the Company or Acquiror, or any of their respective
"affiliates" (as defined in Section 5.12), officers or directors, should be
discovered by the Company or Acquiror which should be set forth in an amendment
or supplement to any of the Registration Statement or the Proxy Statement/
Prospectus, 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 law, disseminated to the Company Stockholders.
(b) The Company shall, as promptly as practicable after the Registration
Statement is declared effective under the Securities Act, duly call, give notice
of, convene and hold a meeting of its stockholders (the "Company Stockholders
Meeting") in accordance with Delaware Law and its certificate of incorporation
and bylaws for the purpose of obtaining the requisite approval of the Company
Stockholders and shall, through the unanimous action of its Board of Directors,
declare that this Merger Agreement is advisable and recommend to its
stockholders the approval and adoption of this Merger Agreement, the Merger and
the other transactions contemplated hereby.
SECTION 5.09 [INTENTIONALLY OMITTED]
SECTION 5.10 NO SOLICITATION.
(a) From the date of this Merger Agreement until the Effective Time or the
termination of this Merger Agreement pursuant to the terms of this Merger
Agreement, the Company shall not and shall not permit any of its Subsidiaries,
Affiliates, directors, officers, employees, agents or representatives,
including, without limitation, any investment banker, attorney or accountant of
the Company or any of its Subsidiaries (collectively, "Representatives")
directly or indirectly, to (i) initiate, solicit, encourage or knowingly
facilitate (including by way of furnishing information), the making of any
proposal or offer that constitutes, an Acquisition Proposal (as defined below),
(ii) enter into or maintain or continue discussions or negotiate with any Person
in furtherance of such inquiries or to obtain an Acquisition Proposal,
(iii) agree to, approve, recommend, or endorse any Acquisition Proposal,
(iv) disclose any non-public information relating to the Company or any Company
Subsidiary or afford access to the properties, books or records of the Company
or any Company Subsidiary to any person that has made or may reasonably be
expected to make a proposal regarding a Acquisition Proposal or that has advised
the Company that it is or may be interested in making a proposal regarding a
Acquisition Proposal, or (v) authorize or permit any of its or their
Subsidiaries or Representatives to take any such action and, the Company shall
promptly notify Acquiror of any such inquiries and proposals received by the
Company or any of its Subsidiaries or Representatives, relating to any of such
matters
(b) Notwithstanding the foregoing, nothing contained in clause (a) above
shall prohibit the Board of Directors of the Company from furnishing information
to or entering into discussions or negotiations with any Person that makes a
BONA FIDE proposal or offer with respect to the Company that constitutes an
Acquisition Proposal for the Company, if: (A) the Board of Directors of the
Company determines in good faith, taking into account the advice of outside
counsel, that such action is reasonably likely to be required for the Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law; (B) prior to furnishing such information to, or entering into discussions
or negotiations with, such Person, the Company provides written notice to
Acquiror of the identity of the Person making the Acquisition Proposal for the
Company and that it intends to furnish information to, or intends to enter into
discussions or negotiations with, such Person; (C) the Company enters into a
customary confidentiality agreement; (D) the Company keeps Acquiror informed on
a timely basis of the status of such negotiations and all material terms and
conditions thereof and promptly provides Acquiror with
A-36
copies of any and all written inquiries or proposals relating thereto; and
(E) such Acquisition Proposal for the Company was not solicited in violation of
this Merger Agreement.
(c) For purposes of this Merger Agreement, "Acquisition Proposal" means an
inquiry, offer or proposal regarding any of the following (other than the
transactions contemplated by this Merger Agreement) involving the Company or its
Subsidiaries: (a) any merger, consolidation, share exchange, business
combination, or other similar transaction (other than the Merger); (b) any sale,
lease, license, exchange, mortgage, pledge, transfer or other disposition of 15%
or more of the fair market value of the business or assets of the Company and
the Company Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (c) any tender offer or exchange offer for outstanding shares of
capital stock of the Company or the filing of a registration statement under the
Securities Act in connection therewith; (d) any solicitation of proxies in
opposition to approval by the Company's stockholders of the Merger; (e) the
acquisition by any person, after the date hereof, of beneficial ownership or the
right to acquire beneficial ownership of, or the formation of any "group" (as
such term is defined under Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder) that beneficially owns or has the right to
acquire beneficial ownership of, 5% or more of the then outstanding shares of
capital stock of the Company, or the acquisition by any person or "group" that,
as of the date hereof, beneficially owns 5% or more of the outstanding shares of
capital stock of the Company or beneficial ownership or the right to acquire
beneficial ownership of any additional shares of capital stock of the Company;
(f) the adoption by the Company of a plan of liquidation, the declaration or
payment by the Company of an extraordinary dividend on any of its shares of
capital stock or the effectuation by the Company of a recapitalization or other
type of transaction that would involve either a change in the Company's
outstanding capital stock or a distribution of assets of any kind to the holders
of such capital stock; (g) the repurchase by the Company or any Company
Subsidiary of any shares of Company Common Stock other than pursuant to the
Stockholders Agreement, dated February 27, 1998, by and among the Company and
the Company Stockholders who are signatories thereto; or (h) any resolution or
agreement to, or public announcement by the Company or any other person or
entity of a proposal, plan or intention to, do any of the foregoing.
SECTION 5.11 NYSE LISTING
Acquiror shall use reasonable efforts to cause the Acquiror Common Stock to
be issued pursuant to Section 2.01(a) of this Merger Agreement to be approved
for listing on the NYSE, subject to official notice of issuance, prior to the
Effective Time.
SECTION 5.12 AFFILIATES
(a) Each of the Company and Acquiror: (i) has disclosed to the other in
Section 5.12 of the Company Disclosure Letter or the Acquiror Disclosure Letter,
as the case may be, all Persons who are, or may be, as of the date hereof its
"affiliates" as that term is used in SEC Accounting Series Release Nos. 130 and
135 and Rule 145 of the rules and regulations of the SEC under the Securities
Act; and (ii) shall use all reasonable efforts to cause each Person who is
identified as an "affiliate" of it in Section 5.12 of the Company Disclosure
Letter or the Acquiror Disclosure Letter, as the case may be, to deliver to the
other as promptly as practicable but in no event later than thirty-one
(31) days prior to the Closing Date, a signed agreement substantially in the
form attached hereto as Exhibit E, in the case of the Company, and Exhibit F, in
the case of Acquiror. The Company and Acquiror shall notify each other from time
to time of all other Persons who then are, or may be, such an "affiliate" and
use all reasonable efforts to cause each additional Person who is identified as
an "affiliate" to execute a signed agreement as set forth in this
Section 5.12(a).
A-37
(b) Shares of Company Common Stock and shares of Acquiror Common Stock held
by the "affiliates" of the Company or Acquiror set forth in Section 5.12 of the
Company Disclosure Letter or the Acquiror Disclosure Letter, as the case may be,
shall not be transferable during the thirty (30) day period prior to the
Effective Time, and shares of Acquiror Common Stock issued to, or as of the
Effective Time held by, such "affiliates" of the Company and Acquiror shall not
be transferable until such time as financial results covering at least thirty
(30) days of combined operations of the Company and Acquiror have been published
within the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies, regardless of whether each such "affiliate" has provided the
signed agreement referred to in Section 5.12(a), except to the extent permitted
by, and in accordance with, SEC Accounting Series Release 135 and SEC Staff
Accounting Bulletins 65 and 76. Any Company Common Stock and any Acquiror Common
Stock held by any such "affiliate" shall not be transferable, regardless of
whether such "affiliate" has provided the applicable signed agreement referred
to in Section 5.12(a), if such transfer, either alone or in the aggregate with
other transfers by "affiliates", would preclude the ability of the parties to
account for the transactions contemplated by this Merger Agreement as a "pooling
of interests" in accordance with GAAP, Accounting Principles Board Opinion
No. 16 and all rules, regulations and policies of the SEC. Acquiror shall not
register the transfer of any shares of Acquiror Common Stock unless such
transfer is made in compliance with the foregoing.
SECTION 5.13 TAX TREATMENT
Each of Acquiror and the Company shall use reasonable efforts to cause the
Merger to qualify as a reorganization under the provisions of Section 368 of the
Code. The parties will characterize the Merger as such a reorganization for
purposes of all Tax Returns and other filings.
SECTION 5.14 POOLING
Each of the Company and Acquiror shall use reasonable efforts to cause the
transactions contemplated by this Merger Agreement, including the Merger, to be
accounted for as a "pooling of interests" in accordance with GAAP Accounting
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC, and each of the Company and Acquiror agrees that it shall
take no action that would cause such accounting treatment not to be obtained.
SECTION 5.15 NEGATIVE COVENANTS OF ACQUIROR
Except as expressly contemplated by this Merger Agreement, from the date
hereof until the Effective Time, without the written consent of the Company
(which consent shall not be unreasonably withheld, delayed or conditioned)
Acquiror shall not, and shall not permit any Acquiror Subsidiary to, do any of
the following:
(a) (i) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of Acquiror Common Stock; (ii) repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other securities
of, or other ownership interests in, Acquiror or any Acquiror Subsidiary (except
for those repurchases related to shares owned by employees or former employees
of Acquiror or any Acquiror Subsidiary); or (iii) except to the extent not
accounted for in Section 2.06 hereof, split, combine or reclassify any shares of
Acquiror Common Stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares of Acquiror
Common Stock or other securities;
(b) take any action that is intended or would reasonably be expected to
result in any of Acquiror's representations and warranties set forth in this
Merger Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set forth
in Article VII not being satisfied or in a violation of any provision of this
Merger Agreement;
A-38
(c) take any action that would, or would be reasonably likely to, prevent
the Merger from being accounted for as a "pooling of interests" in accordance
with GAAP and the rules and regulations of the SEC;
(d) take any action that would, or would be reasonably likely to, prevent
the Merger from qualifying as a reorganization under the provisions of
Section 368(a) of the Code; or
(e) agree in writing or otherwise to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 STOCKHOLDER APPROVAL
Promptly after the date of this Merger Agreement, Company shall take all
additional action, if any, necessary in accordance with Delaware Law and its
certificate of incorporation and bylaws to secure the vote or consent of Company
Stockholders required by Delaware Law to approve this Merger Agreement and the
transactions contemplated hereby. In all events, this Merger Agreement shall be
submitted to the Company Stockholders whether or not the board of directors of
the Company determines that this Merger Agreement is no longer advisable and
recommends that the Company Stockholders reject it.
SECTION 6.02 APPROPRIATE ACTION; CONSENTS; FILINGS
(a) Upon the terms and subject to the conditions set forth in this Merger
Agreement, the Parties shall use their reasonable best efforts to take, or cause
to be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Merger Agreement as
promptly as practicable, including, without limitation, (i) executing and
delivering any additional instruments necessary, proper or advisable to
consummate the transactions contemplated by, and to carry out fully the purposes
of, this Merger Agreement, (ii) obtaining from any Governmental Entities any
material Licenses required to be obtained or made by Acquiror, or any of its
Subsidiaries, or Company, or any Company Subsidiary, in connection with the
authorization, execution and delivery of this Merger Agreement and the
consummation of the transactions contemplated herein, including, without
limitation, the Merger, and (iii) making all necessary filings, and thereafter
making any other required submissions, with respect to this Merger Agreement and
the Merger required under (A) the HSR Act and (B) any other applicable Law;
PROVIDED that Acquiror and Company shall cooperate with each other in connection
with the making of all such filings, including providing copies of all such
documents to the non-filing Party and its advisors prior to filing and
discussing all reasonable additions, deletions or changes suggested in
connection therewith. Company and Acquiror shall furnish to each other all
information required for any application or other filing to be made pursuant to
the rules and regulations of any applicable Law in connection with the
transactions contemplated by this Merger Agreement.
(b) (i) Except as the Parties may otherwise agree, Company, each Company
Stockholder and Acquiror shall give (and, in the case of Company, shall cause
each Company Subsidiary to give, and, in the case of Acquiror, shall cause its
Subsidiaries to give) any notices to third parties, and use (and, in the case of
Company, shall cause each Company Subsidiary to use, and, in the case of
Acquiror, shall cause its Subsidiaries to use) their reasonable best efforts to
obtain any third-party consents, approvals or waivers (A) necessary, proper or
advisable to consummate the transactions contemplated in this Merger Agreement,
(B) disclosed or required to be disclosed in the Company Disclosure Letter or
the Acquiror Disclosure Letter, as the case may be, or (C) required to prevent a
Company Material Adverse Effect or an Acquiror Material Adverse Effect.
A-39
(ii) In the event that any of Company, any Company Stockholder or
Acquiror shall fail to obtain any third-party consent, approval or waiver
described in Section 6.02(b)(i) of this Merger Agreement, such Party shall
use its reasonable best efforts, and shall take any such actions reasonably
requested by the other Parties, to minimize any adverse effect upon Company
or any Company Subsidiary and Acquiror or its Subsidiaries and their
respective businesses resulting, or which could reasonably be expected to
result after the Effective Time, from the failure to obtain such consent,
approval or waiver.
(c) From the date of this Merger Agreement until the Effective Time, Company
and Acquiror shall promptly notify each other in writing of any pending or, to
the knowledge of Company or any Company Subsidiary or Acquiror or any one of its
Subsidiaries, threatened action, proceeding or investigation by any Governmental
Entity or any other Person (i) challenging or seeking damages in connection with
the Merger or the conversion of Company Common Stock into the Merger
Consideration pursuant to the Merger or the transactions contemplated hereunder
or (ii) seeking to restrain or prohibit the consummation of the Merger or the
transactions contemplated hereunder or otherwise limit the right of Acquiror or
its Subsidiaries to own or operate all or any portion of the businesses or
Assets of Company or any Company Subsidiary. Company and Acquiror shall
cooperate with each other in defending any such action, proceeding or
investigation, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed.
SECTION 6.03 DISCLOSURE
Prior to the Effective Time, each Party shall notify the other Parties by
written update to its respective Disclosure Letter of (i) any representation or
warranty made by it in connection with this Merger Agreement becoming untrue or
inaccurate, (ii) the occurrence or non-occurrence of any event, the occurrence
or non-occurrence of which would be likely to cause any condition to the
obligations of any Party to effect the Merger and the other transactions
contemplated by this Merger Agreement not to be satisfied or (iii) the failure
of Company, any Company Subsidiary, Acquiror or Acquiror Sub, as the case may
be, to comply with or satisfy any covenant, condition or Agreement to be
complied with or satisfied by it pursuant to this Merger Agreement which would
be likely to result in any condition to the obligations of any Party to effect
the Merger and the other transactions contemplated by this Merger Agreement not
to be satisfied; PROVIDED, HOWEVER, the delivery of any notice pursuant to this
Section 6.03 shall not cure any breach of any representation or warranty
requiring disclosure of such matter as of the date of this Merger Agreement or
otherwise limit or affect the rights and remedies available hereunder to the
Party receiving such notice.
SECTION 6.04 PUBLIC ANNOUNCEMENTS
Acquiror, Acquiror Sub and Company shall consult with each other before
issuing or making, and shall give each other the opportunity to review and
comment upon, any press release or other public statement with respect to the
Merger and the other transactions contemplated in this Merger Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by Law or any applicable listing
agreements.
SECTION 6.05 OBLIGATIONS OF ACQUIROR SUB
Acquiror shall take all action necessary to cause Acquiror Sub to perform
its obligations under this Merger Agreement and to consummate the Merger on the
terms and conditions set forth in this Merger Agreement.
A-40
SECTION 6.06 TRANSACTION EXPENSES
Each Party to this Merger Agreement shall bear their own expenses in
connection herewith, including, without limitation, the fees of each Party's
respective legal counsel, financial advisors, accountants, brokers, finders or
investment bankers.
SECTION 6.07 BOARD OF DIRECTORS
At the first meeting of the Board of Directors of Acquiror after later of
(a) the Effective Time or (b) Acquiror's May 2000 Stockholders Meeting, Acquiror
shall cause ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ to be appointed to the Board of Directors of
Acquiror for a term of approximately one (1) year; PROVIDED, HOWEVER, such term
shall not be less than eleven (11) months.
SECTION 6.08 COMPANY COMMON STOCK
On or prior to the Effective Time, the Company shall deliver to the Acquiror
and the Exchange Agent a calculation, certified as being true, correct and
complete by the Company's chief financial officer, of (a) the number of shares
of Company Common Stock that will be outstanding as of the Effective Time and
(b) the number of shares of Company Common Stock that would be issuable with
respect to Options outstanding as of the Effective Time if such Options were
fully vested and immediately exercisable, when, as of the Effective Time, all
shares of Company Common Stock are converted into a single class of Company
Common Stock.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS MERGER AGREEMENT
The respective obligations of each Party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived by agreement of Acquiror and Company, in whole or in part, to the
extent permitted by applicable Law:
(a) STOCKHOLDER APPROVAL. This Merger Agreement and the Merger shall have
been approved and adopted by the requisite vote or consent of Company
Stockholders.
(b) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC under the Securities Act prior to
the mailing of the Proxy Statement/Prospectus by the Company to its stockholders
and no stop order suspending the effectiveness of such Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall have
been initiated or, to the knowledge of Acquiror or the Company, threatened by
the SEC.
(c) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in any
case which is in effect and which prevents or prohibits consummation of the
Merger; PROVIDED, HOWEVER, that the Parties shall use their reasonable best
efforts to cause any such decree, judgment, injunction or other order to be
vacated or lifted.
(d) HSR ACT. The applicable waiting period with respect to the Merger and
the other transactions contemplated hereby, together with any extensions
thereof, under the HSR Act shall have expired or been terminated.
A-41
SECTION 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND ACQUIROR SUB
The obligations of Acquiror and Acquiror Sub to effect the Merger and the
other transactions contemplated in this Merger Agreement are also subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived by Acquiror, in whole or in part, to the extent
permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Company contained in this Merger Agreement shall be true and
correct as of the date of this Merger Agreement and shall be true and correct
(except that where any statement in a representation or warranty expressly
includes a standard of materiality, such statement shall be true and correct in
all respects giving effect to such standard) as of the Effective Time as though
made as of the Effective Time, except for (i) representations and warranties
which address matters only as of a particular date, which representations and
warranties shall be true and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects giving
effect to such standard) as of such date and (ii) changes permitted by or
consistent with this Merger Agreement. Acquiror shall have received a
certificate of the chief executive officer or chief financial officer of Company
to the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Company shall have performed or complied in
all respects with all Agreements and covenants required by this Merger Agreement
to be performed or complied with by Company on or prior to the Effective Time.
Acquiror shall have received a certificate of the chief executive officer or
chief financial officer of Company (as to Company) to that effect.
(c) OPINION OF COUNSEL. Acquiror shall have received from ▇▇▇▇▇▇▇ Berlin
Shereff ▇▇▇▇▇▇▇▇, LLP, counsel to Company, an opinion dated the Closing Date, in
the form attached hereto as Exhibit G.
(d) NO CHALLENGE. There shall not be pending any enforcement action or
similar proceeding by any state or federal Governmental Entity that is likely to
have a Company Material Adverse Effect or, if such action arises in connection
with the transactions contemplated hereby, an Acquiror Material Adverse Effect.
(e) COMPANY MATERIAL ADVERSE EFFECT. Since December 31, 1999, there shall
not have occurred a Company Material Adverse Effect (or any development that,
insofar as reasonably can be foreseen, is reasonably likely to result in any
Company Material Adverse Effect) not disclosed in the Company Disclosure Letter
as of the date hereof.
(f) NO LITIGATION. There shall be no pending or threatened suit, action,
proceeding or investigation: (i) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Merger Agreement, (ii) relating to the Merger and seeking to obtain from
Acquiror or any Acquiror Subsidiary any damages that may be material to
Acquiror, (iii) seeking to prohibit or limit in any respect Acquiror's ability
to vote, receive dividends with respect to or otherwise exercise ownership
rights with respect to the stock of the Surviving Corporation; (iv) which would
materially and adversely affect the right of the Surviving Corporation to own
the assets or operate the business of the Company; or (v) which, if adversely
determined, could have a Company Material Adverse Effect or Acquiror Adverse
Effect.
(g) CONSENTS. Company and Company Subsidiary shall have procured all
consents of third-parties and Governmental Entities specified in Section 3.06 of
the Company Disclosure Letter.
(h) ACCOUNTANT LETTER. Acquiror shall have received:
(i) a letter from the Company's independent accountants, dated as of the
Closing Date and addressed to Acquiror, the Company and Acquiror's
independent accountants, reasonably satisfactory in form and substance to
Acquiror and Acquiror's independent accountants, to the
A-42
effect that, after reasonable investigation, the Company's independent
accountants are not aware of any fact concerning the Company or any of the
Company's stockholders or Affiliates that could preclude Acquiror from
accounting for the Merger as a "pooling of interests" in accordance with
GAAP, Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC; and
(ii) a letter from Acquiror's independent accountants, dated as of the
Closing Date and addressed to Acquiror, reasonably satisfactory in form and
substance to Acquiror, to the effect that Acquiror's independent accountants
concur in Acquiror's management's conclusion that Acquiror may account for
the Merger as a "pooling of interests" in accordance with generally accepted
accounting principles, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC.
(i) DISSENTING COMPANY STOCKHOLDERS. The Company Dissenting Stockholders
shall not hold more than five percent (5%) of the Company Common Stock.
(j) TAX OPINION. Acquiror shall have received a legal opinion addressed to
Acquiror from ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, dated as of the Closing Date to the effect
that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code.
(k) ESTIMATED NET DEBT AS OF CLOSING DATE. Acquiror shall have received
from Company two (2) days prior to the Closing Date a certificate of the chief
financial officer of the Company of the Net Debt of the Company estimated as of
the Closing Date (the "Estimated Net Debt") and prepared on a good faith basis
consistent with the Company Financial Statement. The Parties acknowledge and
agree that the amounts set forth on the Estimated Balance Sheet shall be used in
computing an estimate of the Transaction Value as of the Closing Date.
(l) CONSULTING AGREEMENTS. All of the consulting agreements with and of
Westgate Capital Co., ▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇/▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, L.L.C. shall have been terminated, and each party to each such
agreement shall have released the Company (in a form satisfactory to Acquiror)
from any liability as a result of such termination.
(m) NO ACQUIROR STOCKHOLDER VOTE. No approval or adoption or consent of
the stockholders of Acquiror with respect to the transactions contemplated by
this Merger Agreement shall be required pursuant to the rules of the NYSE.
(n) 1999 FINANCIALS. Company shall have prepared and delivered to Acquiror
and Acquiror Sub, and shall provide a certificate signed by its chief financial
officer in which Company represents and warrants to Acquiror and Acquiror Sub
that Company has prepared and delivered to Acquiror and Acquiror Sub a true and
complete copy of, the audited consolidated balance sheet of Company and the
Company Subsidiaries as of the end of the fiscal period ending December 31, 1999
and the audited consolidated statement of income and the statement of cash flows
and equity and changes in financial position for the Company and the Company's
Subsidiaries for such fiscal year audited by Ernst & Young LLP, the Company's
independent public accountants, in accordance with generally accepted auditing
standards and accompanied by the related report of Ernst & Young LLP (such
balance sheet and such consolidated statement of income, Company's equity and
changes in financial position are hereinafter referred to collectively as the
"1999 Company Financial Statement"). In the certificate to be delivered to
Acquiror and Acquiror Sub pursuant to the immediately preceding sentence,
Company shall also represent and warrant to Acquiror and Acquiror Sub that the
1999 Company Financial Statement, including, without limitation, the notes
thereto, (i) has been prepared in accordance with the books and records of
Company and its Subsidiaries and (ii) presents fairly in all material respects
the consolidated financial position of Company and its Subsidiaries at the date
thereof and their consolidated results of operations and cash flows for the
period indicated, in accordance with GAAP applied throughout the periods
involved (except as noted therein). The representations and warranties
A-43
contained in such certificate shall survive for the same period of time as the
representations and warranties contained in Section 3.08 survive.
SECTION 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY
The obligations of Company to effect the Merger and the other transactions
contemplated by this Merger Agreement are also subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived by Company, in whole or in part, to the extent permitted by applicable
Law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Acquiror and Acquiror Sub contained in this Merger Agreement shall
be true and correct as of the date of this Merger Agreement and shall be true
and correct (except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall be true and
correct in all respects giving effect to such standard) as of the Effective Time
as though made as of the Effective Time, except for (i) representations and
warranties which address matters only as of a particular date, which
representations and warranties shall be true and correct in all material
respects (except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall be true and
correct in all respects giving effect to such standard) as of such date and
(ii) changes permitted by or consistent with this Merger Agreement. Company
shall have received a certificate of the chief executive officer or chief
financial officer of Acquiror to the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Acquiror and Acquiror Sub shall have
performed or complied in all respects with all Agreements and covenants required
by this Merger Agreement to be performed or complied with by them on or prior to
the Effective Time except for such noncompliance that does not have an Acquiror
Material Adverse Effect. Company shall have received a certificate of the chief
executive officer or chief financial officer of Acquiror and Acquiror Sub to
that effect.
(c) OPINION OF COUNSEL. The Company shall have received from ▇▇▇▇▇ &
▇▇▇▇▇▇▇ L.L.P., counsel to Acquiror, an opinion dated the Closing Date, in the
form attached hereto as Exhibit H.
(d) LISTING. The approval for listing described in Section 5.11 shall have
been received.
(e) LEGAL OPINION. The Company and the Company Stockholders shall have
received a legal opinion addressed to the Company and the Company Stockholders
from ▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇ LLP ("Company's Legal Counsel"), dated as
of the Closing Date to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code.
(f) NO CHALLENGE. There shall not be pending any enforcement action or
similar proceeding by any state or federal Governmental Entity that is likely to
have an Acquiror Material Adverse Effect.
(g) NO LITIGATION. There shall be no pending or threatened suit, action,
proceeding or investigation: (i) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Merger Agreement or (ii) which, if adversely determined, could have an
Acquiror Adverse Effect.
(h) CONSENTS. Acquiror and Acquiror Sub shall have procured all consents
of third-parties and Governmental Entities specified in Section 4.05 of the
Acquiror Disclosure Letter.
A-44
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 TERMINATION
This Merger Agreement may be terminated at any time (except where otherwise
indicated) prior to the Effective Time, whether before or after approval of this
Merger Agreement and the Merger by Company Stockholders:
(a) by mutual written consent of Acquiror and Company;
(b) (i) by Acquiror, if any of the conditions provided in Section 7.01
(other than Section 7.01(a)) or Section 7.02 (other than Section 7.02(i)) have
not been met as of the Scheduled Closing Date and such failure has not been
cured within twenty (20) business days following receipt by Company of written
notice of such failure describing the extent and nature thereof in reasonable
detail, or to the extent permitted by applicable law, such conditions have not
been waived in writing by Acquiror;
(ii) by Company, if any of the conditions provided in Section 7.01
(other than Section 7.01(a)) or Section 7.03 have not been met as of the
Scheduled Closing Date and such failure has not been cured within twenty
(20) business days following receipt by Acquiror of written notice of such
failure describing the extent and nature thereof in reasonable detail, or,
to the extent permitted by applicable law, such conditions have not been
waived in writing by Company.
(c) by either Acquiror or Company if any decree, permanent injunction,
judgment, order or other action by any court of competent jurisdiction or any
other federal or state (but not county or municipal) Governmental Entity
preventing or prohibiting consummation of the Merger shall have been filed or in
effect;
(d) subject to the provisions of Section 2.01(h), (i) by Acquiror, if the
Acquiror Stock Price is greater than $61.60 per share unless the Company makes a
Company Floating Rate Election, in which case the Acquiror shall have no right
of termination pursuant to this Section 8.01(d)(i); or
(ii) by Company, if the Acquiror Stock Price is less than $39.60 per
share unless Acquiror makes an Acquiror Floating Rate Election, in which
case the Company shall have no right to a termination pursuant to this
Section 8.01(d)(ii);
PROVIDED, that any such termination pursuant to this Section 8.01(d) shall be
without any liability to the parties hereto solely by virtue of the fact that
Acquiror Stock Price is greater than $61.60 or less than $39.60 per share, as
the case may be.
(e) by either Acquiror or Company if the Merger shall not have been
consummated by the date which is 180 days following the date of this Merger
Agreement; PROVIDED HOWEVER, that the right to terminate this Merger Agreement
under this Section 8.01(d) shall not be available to (i) Acquiror, where
Acquiror's failure to fulfill any obligation under this Merger Agreement has
been the cause of, or resulted in, the failure of the Effective Time to occur on
or before such date, or (ii) Company, where Company's failure to fulfill any
obligation under this Merger Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date;
(f) by Acquiror, if (i) the board of directors of Company (A) fails to make
or withdraws or modifies its recommendation referred to in Section 3.21 of this
Merger Agreement or (B) recommends to the Company Stockholders approval or
acceptance of an Acquisition Proposal, or (ii) the condition set forth in
Section 7.02(i) has not been satisfied; or
(g) by either Acquiror or the Company if the stockholder approval
contemplated by Section 7.01(a) shall not have been received at the Company
Stockholders Meeting.
A-45
SECTION 8.02 EFFECT OF TERMINATION
In the event of termination of this Merger Agreement by either Acquiror or
Company as provided in Section 8.01 of this Merger Agreement, this Merger
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Acquiror, Acquiror Sub or Company or any of their
respective directors or officers except (i) nothing herein shall relieve any
Party from liability for any breach hereof, (ii) each Party shall be entitled to
any remedies at law or in equity for such breach and (iii) Sections 6.06, 8.02
and 8.03 and Article IX of this Merger Agreement shall remain in full force and
effect and survive any termination of this Merger Agreement.
SECTION 8.03 TRANSACTION FEES, TERMINATION FEES, EXPENSES AND OTHER PAYMENTS
(a) Except as otherwise set forth in this Section 8.03, all costs and
expenses incurred by the parties hereto shall be borne solely and entirely by
the party that has incurred such costs and expenses, whether or not the Merger
is consummated; PROVIDED, HOWEVER, that in the event that the Merger and the
other transactions contemplated hereby are not consummated, Acquiror and the
Company shall share equally all costs and expenses (other than attorneys' and
accountants' fees and expenses) incurred in relation to printing and filing and,
as applicable, mailing the Registration Statement and the Proxy Statement and
any amendments or supplements thereto and all SEC and other regulatory filing
fees incurred in connection with the Registration Statement and the Proxy
Statement and the fees required under the applicable foreign laws, if any,
incurred in connection with the transactions contemplated under this Merger
Agreement up to one hundred thousand dollars ($100,000) and Acquiror shall bear
all such costs and expenses in excess of one hundred thousand dollars
($100,000).
(b) If this Merger Agreement is terminated pursuant to Section 8.01(f), or
if this Merger Agreement is terminated pursuant to Section 8.01(g) and at the
time of the Company Stockholder Meeting an Acquisition Proposal from a Person
other than Acquiror shall have been made and disclosed to the Company
Stockholders, the Company shall pay to Acquiror an amount equal to two million
dollars ($2,000,000) within one (1) Business Day after such termination.
(c) If this Merger Agreement is terminated pursuant to Section 8.01(f), or
if this Merger Agreement is terminated pursuant to Section 8.01(g) and at the
time of the Company Stockholder Meeting an Acquisition Proposal from a Person
other than Acquiror shall have been made and disclosed to the Company
Stockholders, and the Company (i) enters into a definitive agreement in
connection with an Acquisition Proposal within nine (9) months after the date of
such termination (regardless of when such definitive agreement is consummated)
or (ii) consummates an Acquisition Proposal within nine (9) months after the
date of such termination, the Company shall pay to Acquiror, in addition to the
amounts set forth in Section 8.03(b) above, an amount equal to two million
dollars ($2,000,000) within five (5) Business Days after the consummation of
such definitive agreement or such Acquisition Proposal, as the case may be.
SECTION 8.04 AMENDMENT
Subject to applicable Law, this Merger Agreement may be amended by the
Parties at any time prior to the Effective Time. This Merger Agreement may not
be amended except by an instrument in writing signed by the Parties.
SECTION 8.05 EXTENSION; WAIVER
At any time prior to the Effective Time, the Parties may (a) extend the time
for the performance of any of the obligations or other acts of the other
Parties, (b) waive any inaccuracies in the representations and warranties
contained herein or in any Agreements, documents, certificates or other
instruments delivered pursuant hereto and (c) waive compliance with any of the
Agreements or conditions contained in this Merger Agreement. Any such extension
or waiver shall be valid if set forth
A-46
in an instrument in writing signed by the Party or Parties to be bound thereby.
The failure of any Party to assert any of its rights under this Merger Agreement
or otherwise shall not constitute a waiver of such rights.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; REMEDIES
SECTION 9.01 SURVIVAL OF REPRESENTATIONS
All representations, warranties, covenants, indemnities and other agreements
made by any party to this Merger Agreement herein shall be deemed made on and as
of the Effective Time as though such representations, warranties, covenants,
indemnities and other agreements were made on and as of such date, and all such
representations, warranties, covenants, indemnities and other agreements shall
survive until the ninetieth (90(th)) day following the Effective Time; PROVIDED,
HOWEVER, that if Acquiror shall have given Stockholders' Representatives notice
of a claim on or prior to such 90(th) day, the representations, warranties,
covenants, indemnities, and other agreements applicable to such claim shall
survive with respect to such claim until such claim is finally resolved, and
provided further that (a) representations and warranties set forth in Sections
3.01 (Organization) and 3.04 (Capitalization) shall survive with the expiration
of the applicable statute of limitations and (b) in the event of fraud all such
representations, warranties, covenants, indemnities and other agreements shall
survive indefinitely.
SECTION 9.02 INDEMNIFICATION BY COMPANY STOCKHOLDERS
(a) The Company Stockholders hereby agree to indemnify, defend and hold
Acquiror, the Surviving Corporation and their respective officers and directors,
and each person, if any, who controls or may control Acquiror or the Surviving
Corporation within the meaning of the Securities Act (all such persons
hereinafter are referred to individually as an "Acquiror Indemnified Person" and
collectively as "Acquiror Indemnified Persons," but in no event shall any
stockholder of the Company prior to the Effective Time be such an Acquiror
Indemnified Person) harmless (pro-rata in accordance with the their respective
beneficial holdings of Escrow Stock) against all Losses resulting from, imposed
upon or incurred by any Acquiror Indemnified Person, directly or indirectly, as
a result of any of the following, anything in this Merger Agreement to the
contrary notwithstanding:
(i) any inaccuracy or breach of a representation or warranty of the
Company given or made by the Company in this Merger Agreement, in the
Certificate of Merger or in the Company Disclosure Letter or in any
certificate, document or agreement delivered by or on behalf of the Company
pursuant hereto; and
(ii) any failure by the Company to perform or comply with any covenant
or agreement contained in this Merger Agreement, in the Certificate of
Merger or in the Company Disclosure Letter or in any certificate, document
or agreement delivered by or on behalf of the Company pursuant hereto.
(b) Notwithstanding anything in this Merger Agreement to the contrary, the
Company Stockholders shall not be responsible for any Loss pursuant to this
Section 9.02 (i) in excess of the Escrow Stock, and (ii) unless and until the
aggregate amount of all of such Losses shall exceed $250,000, in which case the
Company Stockholders severally shall be liable for the aggregate amount of all
such Losses in excess of $100,000.
(c) The indemnity obligations of the Company Stockholders under this
Article IX shall be satisfied through the delivery to the Acquiror Indemnified
Persons of such number of shares of Escrow Stock having a value equal to the
amount of the Loss or Losses for which indemnification or payment is being made.
A-47
(d) Neither the exercise of nor the failure to exercise any remedy under
this Merger Agreement will constitute an election of remedies or limit Acquiror
in any manner in the enforcement of any other remedies available to Acquiror.
SECTION 9.03 THIRD PARTY CLAIMS.
The obligations and liabilities of the Company Stockholders with respect to
their respective indemnities pursuant to this Article IX, resulting from any
Third Party Claim shall be subject to the following terms and conditions:
(a) The party seeking indemnification (the "Indemnified Party") must give
the party obligated to indemnify (the "Indemnifying Party"), notice of any Third
Party Claim which is asserted against, resulting to, imposed upon or incurred by
the Indemnified Party and which may give rise to liability of the Indemnifying
Party pursuant to this Article IX, stating (to the extent known or reasonably
anticipated) the nature and basis of such Third Party Claim and the amount
thereof; provided that the failure to give such notice shall not affect the
rights of the Indemnified Party hereunder except to the extent (i) that the
Indemnifying Party shall have suffered actual damage by reason of such failure,
or (ii) such failure or delay materially adversely affects the ability of the
Indemnifying Party to defend, settle or compromise such Third Party Claim.
(b) Subject to Section 9.03(c) below, if the Indemnifying Party assumes
responsibility for Losses arising out of such Third Party Claim, then the
Indemnifying Party shall have the right to undertake, by counsel or other
representatives of its own choosing, the defense of such Third Party Claim at
the Indemnifying Party's risk and expense.
(c) In the event that (i) the Indemnifying Party shall elect not to
undertake such defense, (ii) within a reasonable time after notice from the
Indemnified Party of any such Third Party Claim, the Indemnifying Party shall
fail to undertake to defend such Third Party Claim, or (iii) there is a
reasonable probability that such Third Party Claim may materially and adversely
affect the Indemnified Party other than as a result of money damages or other
money payments, then the Indemnified Party (upon further written notice to the
Indemnifying Party) shall have the right to undertake the defense, compromise or
settlement of such Third Party Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the Indemnifying
Party. In the event that the Indemnified Party undertakes the defense of a Third
Party Claim under this Section 9.03, the Indemnifying Party shall pay to the
Indemnified Party, in addition to the other sums required to be paid hereunder,
the reasonable costs and expenses incurred by the Indemnified Party in
connection with such defense, compromise or settlement as and when such costs
and expenses are so incurred.
(d) Anything in this Section 9.03 to the contrary notwithstanding,
(i) neither the Indemnified Party nor the Indemnifying Party shall, without the
other party's written consent (which consent shall not be unreasonably withheld
or delayed), settle or compromise such Third Party Claim or consent to entry of
any judgment which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such Third Party Claim in form and substance
satisfactory to the Indemnified Party; (ii) in the event that a party hereto
undertakes defense of such Third Party Claim in accordance with this
Section 9.03, the other parties, by counsel or other representative of their own
choosing and at their sole cost and expense, shall have the right to participate
in the defense, compromise or settlement thereof and each party and its counsel
and other representatives shall cooperate with the other party and its counsel
and representatives in connection therewith; and (iii) the party that undertakes
the defense of such Third Party Claim in accordance with this Section 9.03 shall
have an obligation to keep the other parties informed of the status of the
defense of such Third Party Claim and furnish the other parties with all
documents, instruments and information that the other parties shall reasonably
request in connection therewith.
A-48
SECTION 9.04 NO RECOURSE AGAINST THE COMPANY
The Company Stockholders hereby irrevocably waive any and all right to
recourse against the Company and the Surviving Corporation with respect to any
misrepresentation or breach of any representation, warranty or indemnity, or
noncompliance with any conditions or covenants, given or made by the Company in
this Merger Agreement or any other agreements and documents executed or to be
executed by the Parties hereto in order to consummate the transactions
contemplated by this Merger Agreement. No Company Stockholder shall be entitled
to contribution from, subrogation to or recovery against the Company or the
Surviving Corporation with respect to any liability of any Company Stockholder
that may arise under or pursuant to this Merger Agreement or any of the other
agreements and documents executed or to be executed by the Parties hereto in
order to consummate the transactions contemplated by this Merger Agreement or
any other agreements and documents contemplated hereby.
SECTION 9.05 SPECIFIC PERFORMANCE
In addition to any other remedies which the Parties may have at law or in
equity, the Parties hereby acknowledge that the transactions contemplated under
this Merger Agreement are unique, and that the harm to the Parties resulting
from breaches by the other Party of its obligation cannot be adequately
compensated by damages. Accordingly, the Parties agree that each Party shall
have the right prior to the Effective Time to have all obligations,
undertakings, agreements, covenants and other provisions of this Merger
Agreement specifically performed by the other Parties and that the Parties shall
have the right to obtain an order or decree of such specific performance in any
of the courts of the United States of America or any state or other political
subdivision thereof.
SECTION 9.06 REMEDIES CUMULATIVE
Subject to the limitations and qualifications set forth in this Article IX,
the remedies provided herein shall be cumulative and shall not preclude the
assertion by the parties hereto of any other rights or the seeking of any other
remedies against the other parties, or their respective successors or assigns.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 NOTICES
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) or sent by
overnight courier (providing proof of delivery) to the Parties at the following
addresses or sent by electronic transmission to the following facsimile numbers
(or at such other address or facsimile number for a Party as shall be specified
by like notice):
(a) If to Acquiror or Acquiror Sub:
The Titan Corporation ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.,
General Counsel
A-49
With a copy (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇, Esq.
(b) If to Company:
AverStar, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
(c) If to Stockholders' Representatives:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
AverStar, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
CM Equity Partners
▇▇▇ ▇▇▇▇ ▇▇(▇▇) ▇▇▇▇▇▇, ▇▇(▇▇) ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇)▇▇▇-▇▇▇▇
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
SECTION 10.02 HEADINGS
The headings contained in this Merger Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Merger Agreement.
A-50
SECTION 10.03 SEVERABILITY
If any term or other provision of this Merger Agreement is invalid, illegal
or incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Merger Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Merger Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.04 ENTIRE AGREEMENT
This Merger Agreement (together with the Exhibits, Schedules, the Company
Disclosure Letter and the Acquiror Disclosure Letter and the other documents
delivered pursuant hereto) constitute the entire agreement of the Parties and
supersede all prior agreements and undertakings, both written and oral, among
the Parties, or any of them, with respect to the subject matter hereof and,
except as otherwise expressly provided herein, are not intended to confer upon
any other Person any rights or remedies hereunder.
SECTION 10.05 ASSIGNMENT
Neither this Merger Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the Parties hereto (whether by
operation of Law or otherwise) without the prior written consent of the other
Parties; PROVIDED, HOWEVER, that Acquiror and Acquiror Sub shall have the right
to assign this Merger Agreement without the prior written consent of the Company
to a direct or indirect Subsidiary of the Acquiror, but no such assignment shall
relieve Acquiror or Acquiror Sub, as the case may be, of its obligations
hereunder. Subject to the preceding sentence, this Merger Agreement shall be
binding upon, inure to the benefit of and be enforceable by the Parties and
their respective successors and assigns.
SECTION 10.06 PARTIES IN INTEREST
This Merger Agreement shall be binding upon and inure solely to the benefit
of each Party, and nothing in this Merger Agreement, express or implied, other
than the right to receive the Merger Consideration pursuant to Article II of
this Merger Agreement and the rights of the Acquiror Indemnified Persons
pursuant to Article IX, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Merger Agreement.
SECTION 10.07 MUTUAL DRAFTING
Each Party has participated in the drafting of this Merger Agreement, which
each Party acknowledges is the result of extensive negotiations between the
Parties. Consequently, this Merger Agreement shall be interpreted without
reference to any rule or precept of law that states that any ambiguity in a
document be construed against the drafter.
SECTION 10.08 GOVERNING LAW
This Merger Agreement shall be governed by, and construed in accordance
with, the Laws of the State of Delaware, regardless of the Laws that might
otherwise govern under applicable principles of conflicts of law.
A-51
SECTION 10.09 COUNTERPARTS
This Merger Agreement may be executed and delivered in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed and delivered shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
SECTION 10.10 SINGULAR AND PLURAL
Any reference in this Merger Agreement to the singular includes a reference
to the plural and VICE VERSA.
ARTICLE XI
DEFINITIONS
For purposes of this Merger Agreement, the following terms, and the singular
and plural thereof, shall have the meanings set forth below:
"Acquiror" is defined in the Preamble to this Merger Agreement.
"Acquiror Common Stock" is defined in Section 2.01(a) of this Merger
Agreement.
"Acquiror Disclosure Letter" is defined in Article IV of this Merger
Agreement.
"Acquiror Material Adverse Effect" means, with respect to Acquiror or
Acquiror Sub, any event, change or effect that, individually or when taken
together with any related events, is or is reasonably likely to be materially
adverse to the business, operations, condition (financial or otherwise), Assets
or liabilities of the Acquiror and its Subsidiaries, taken as a whole, except to
the extent that any such event, change, circumstance, condition, development,
effect or occurrence is directly caused by: (a) the announcement, pendency or
process of effectuating the Merger or the transactions contemplated hereby that
directly results in a delay of, reduction in or cancellation or change in the
terms of customer engagements, projects or relationships; or (b) a change in the
market price or trading volume of the securities of Acquiror.
"Acquiror SEC Reports" is defined in Section 4.07 of this Merger Agreement.
"Acquiror Stock Price" is defined in Section 2.01(b) of the Merger
Agreement.
"Acquiror Floating Rate Election" is defined in Section 2.01(a) of the
Merger Agreement.
"Acquiror Sub" is defined in the Preamble to this Merger Agreement.
"Acquiror Sub Stock" is defined in Section 2.01(d) of this Merger Agreement.
"Acquisition Proposal" is defined in Section 5.10(c) of this Merger
Agreement.
"Affiliate" means: (a) with respect to an individual, any member of such
individual's family residing in the same household; (b) with respect to an
entity, any officer, director, stockholder, partner or investor of or in such
entity or of or in any Affiliate of such entity; and (c) with respect to a
Person, any Person which directly or indirectly, through one or more
intermediaries, Controls, is Controlled by, or is under common Control with such
Person or entity.
"Agreement" means any agreement between or among two or more Persons with
respect to their relative rights and/or obligations or with respect to a thing
done or to be done, including, without limitation, agreements denominated as
contracts, leases, promissory notes, covenants, easements, rights of way,
commitments, arrangements and understandings.
A-52
"Assets" means assets of every kind and everything that is or may be
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"business day" means a day other than a Saturday, a Sunday or any other day
on which commercial banks in the City of New York are authorized or obligated to
be closed.
"Certificate" is defined in Section 2.02(b) of this Merger Agreement.
"Certificate of Merger" is defined in Section 1.02 of this Merger Agreement.
"Closing" is defined in Section 2.05 of this Merger Agreement.
"Closing Date" is defined in Section 1.02 of this Merger Agreement.
"Closing Stock Price" means, the average of the closing sale prices of a
share of Acquiror Common Stock as reported on the NYSE for the ten
(10) consecutive trading days ending with and including the Closing Date.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Commercial Software" means Software (other than Software of any Person or
any of its Subsidiaries sold as products) generally commercially available for
license or sale to the public and to such Person, its Subsidiaries and their
competitors and other Persons in the Software industry.
"Company" is defined in the Preamble to this Merger Agreement.
"Company Audited Balance Sheet" is defined in Section 3.08(a) of this Merger
Agreement.
"Company Benefit Plans" means all "employee benefit plans" as that term is
defined in Section 3(3) of ERISA, whether or not terminated.
"Company Common Stock" is defined in Section 3.04 of this Merger Agreement.
"Company Contracts" is defined in Section 3.13 of this Merger Agreement.
"Company Disclosure Letter" is defined in Article III of this Merger
Agreement.
"Company Dissenting Stockholder" is defined in Section 2.02(f) of this
Merger Agreement.
"Company Financial Statement" is defined in Section 3.08(a) of this Merger
Agreement.
"Company Floating Rate Election" is defined in Section 2.01(b) of this
Merger Agreement.
"Company Material Adverse Effect" means any event, change or effect that,
individually or when taken together with any related events, is or is reasonably
likely to be materially adverse to the business, operations, condition
(financial or otherwise), Assets or liabilities of the Company and any Company
Subsidiaries, taken as a whole.
"Company Pension Plan" means any Company Benefit Plan that is an "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA.
"Company Stockholders" is defined in the Preamble to this Merger Agreement.
"Company Stockholders Meeting" is defined in Section 5.08(d) of this Merger
Agreement.
"Company Stock Plan" means any Company Benefit Plan pursuant to which
Company is or may become obligated to, or obligated to cause Company Subsidiary
or any other Person to, issue, deliver or sell shares of capital stock of
Company or Company Subsidiary, or grant, extend or enter into any option,
warrant, call, right, commitment or agreement to issue, deliver or sell shares,
or any other interest in respect of capital stock of Company or Company
Subsidiary.
A-53
"Company Stock Value" means the result of dividing the Transaction Value by
the sum of (a) the number of shares of Company Common Stock outstanding as of
the Effective Time (assuming for such purposes, that as of the Effective Time,
all shares of Company capital stock were converted into a single class of
Company Common Stock) and (b) the number of shares of Company Common Stock which
would be issuable with respect to all vested Options outstanding as of the
Effective Time if all of the conditions to exercisability of such Options had
been satisfied at that time and (c) one-half of the number of shares of Company
Common Stock which would be issuable with respect to all unvested Options
outstanding as of the Effective Time if all of the conditions to exercisability
of such Options (including, without limitation, vesting) had been satisfied at
that time.
"Company Subsidiary" means any Subsidiary of Company.
"Company Tax Returns" means all Tax Returns required to be filed by Company
or any Company Subsidiary (without regard to extensions of time permitted by law
or otherwise).
"Control" (including the terms "Controlled by" and "under common Control
with") means, as used with respect to any Person, possession of power (directly
or indirectly or as a trustee or executor) to direct or cause the direction of
management or policies of such Person (whether through ownership of voting
securities, as trustee or executor, by Agreement or otherwise).
"Delaware Law" is defined in the Preamble to this Merger Agreement.
"Effective Time" is defined in Section 1.02 of this Merger Agreement.
"Encumbrance" means any mortgage, lien, pledge, encumbrance, security
interest, deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Agreement, claim or equity of any
kind.
"Environmental Laws" means any federal, state or local Law relating to
public health or safety, worker health or safety, or pollution, damage to or
protection of the environment including, without limitation, Laws relating to
emissions, discharges, releases or threatened release of Hazardous Materials
into the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, generation,
disposal, transport or handling of any Hazardous Material.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated pursuant thereto or in connection
therewith.
"Escrow Agent" is defined in Section 2.06(a) of this Agreement.
"Escrow Agreement" is defined in Section 2.06(a) of this Merger Agreement.
"Escrow Stock" is defined in Section 2.06(a)(ii) of this Merger Agreement.
"Estimated Net Debt" is defined in Section 7.02(k) of this Merger Agreement.
"Exchange Agent" is defined in Section 2.02 of this Merger Agreement.
"Exchange Fund" is defined in Section 2.02 of this Merger Agreement.
"Exchange Ratio" is defined in Section 2.01(a) of this Merger Agreement.
"GAAP" means United States generally accepted accounting principles
consistently applied in accordance with past practices.
"Governmental Entities" (including the term "Governmental") means any
governmental, quasi-governmental or regulatory authority, whether domestic or
foreign.
"Hazardous Material" means (i) any "hazardous substance" as now defined
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section9601(14); (ii) any
A-54
"pollutant or contaminant" as defined in 42 U.S.C. Section9601(33); (iii) any
material now defined as "hazardous waste" pursuant to 40 C.F.R. Part 261;
(iv) any petroleum, including crude oil and any fraction thereof; (v) natural
synthetic gas usable for fuel; (vi) any "hazardous chemical" as defined pursuant
to 29 C.F.R. Part 1910; and (vii) any asbestos, polychlorinated biphenyl
("PCB"), radium, or isomer of dioxin, or any material or thing containing or
composed of such substance or substances.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"Intangible and Other Property" means all Agreements, certificates of
deposit, bank accounts, securities, partnership or other ownership interests,
rights to receive money or property by assignment, future interests, claims and
rights against third parties, accounts receivable, notes receivable,
Intellectual Property, Software, prepaid expenses, acquisition costs and other
intangible property of any nature owned, leased, licensed, used or held for use,
directly or indirectly, by, on behalf of or for the account of a Person.
"Intellectual Property" means all patents, intellectual property capable of
being protected by a patent, trademarks, trademark rights, service marks,
service ▇▇▇▇ rights, trade secrets, trade names, product designations, service
marks, copyrights, and applications for any of the foregoing, used, licensed,
leased or owned, directly or indirectly, by, on behalf of or for the account of
a Person.
"Inventory" means all new materials, work in progress, finished goods and
inventoriable supplies.
"knowledge" will be deemed to be present with respect to a Party and each
Subsidiary of that Party when the matter in question is known, or upon
reasonable investigation, should have been known, to the officer, director or
employee primarily responsible for the matter in question.
"Laws" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, tariffs, determinations,
writs, injunctions, awards (including, without limitation, awards of any
arbitrator), judgments and decrees applicable to the specified Person and to the
businesses and Assets thereof (including, without limitation, Laws relating to
the protection of classified information; the sale, leasing, ownership or
management of real property; employment practices, terms and conditions, and
wages and hours; building standards, land use and zoning; safety, health and
fire prevention; and environmental protection, including Environmental Laws).
"License" means any franchise, grant, authorization, license, tariff,
permit, easement, variance, exemption, consent, certificate, approval or order
of any Governmental Entity.
"Losses" means all demands, losses, claims, actions or causes of action,
assessments, damages, liabilities, costs and expenses, including, without
limitation, interest, penalties and reasonable attorneys' fees and
disbursements.
"Merger" is defined in the Preamble to this Merger Agreement.
"Merger Consideration" is defined in Section 2.01(a) of this Merger
Agreement.
"Multiemployer Plan" means any "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA to which Company or Company Subsidiary contribute,
have an obligation to contribute, or have at any time since September 2, 1974,
contributed or been obligated to contribute.
"Net Debt" means the average for the ten (10) consecutive business days
ending with and including the second business day immediately preceding the
Closing Date of all outstanding debt obligations to banks and financial
institutions on each such business day plus any additional consideration payable
to ▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to the acquisition of CBSI by the Company as identified
in Section 3.10 of the Company Disclosure Letter less the sum of (i) cash
invested in overnight instruments as of 12:01 a.m. the morning of each such
business day, (ii) all receipts received as of such business day which were not
included in the overnight investments, (iii) collateralized notes
A-55
receivable that have not been written off or reserved on the Company's books,
and (iv) ▇▇▇▇▇ cash balances on the day prior to each such date.
"NYSE" is defined in Section 2.01(b) of this Merger Agreement.
"Option Exercise Consideration" means the sum of (a) the total consideration
payable to the Company upon the exercise of all vested Options issued and
outstanding immediately prior to the Effective Time and (b) one-half of the
total consideration payable to the Company upon the exercise of all unvested
Options issued and outstanding immediately prior to the Effective Time.
"Option" means an option to acquire Company Common Stock granted under the
Company's 1998 Long Term Incentive Plan.
"Ordinary Course of Business" means ordinary course of business consistent
with past practices.
"Party" and "Parties" are defined in the Preamble to this Merger Agreement.
"Permitted Encumbrance" means (i) easements, rights of way, minor
irregularities of title, and liens for taxes not yet due and payable,
(ii) landlord, warehouse and materialmen's liens and (ii) other Encumbrances
similar to clauses (i) and (ii); provided, however, that any or all of the
foregoing do not materially affect the utility or value of the Assets or other
matters to which they relate.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization or other entity, or a
Governmental Entity.
"Plan" means any plan, program or arrangement, whether or not written, that
is or was an "employee benefit plan" as such term is defined in Section 3(3) of
ERISA and (a) which was or is established or maintained by Company or Company
Subsidiary; (b) to which Company or Company Subsidiary contributed or was
obligated to contribute or to fund or provide benefits; or (c) which provides or
promises benefits to any person who performs or who has performed services for
Company or Company Subsidiary and because of those services is or has been
(i) a participant therein or (ii) entitled to benefits thereunder.
"Post-Signing Returns" is defined in Section 5.04 of this Merger Agreement.
"Proxy Statement/Prospectus" is defined in Section 3.29 of this Merger
Agreement.
"Registration Statement" is defined in Section 3.29 of this Merger
Agreement.
"Representatives" is defined in Section 5.10 of this Merger Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Scheduled Closing Date" is defined in Section 2.05 of this Merger
Agreement.
"Software" means all electronic data processing systems, information
systems, computer software programs, program specifications, designs, charts,
procedures, input data, routines, data bases, report layouts, formats, record
file layouts, written manifestations (in both source code and object code form),
diagrams, functional specifications, narrative descriptions and flow charts,
user manuals and similar documents, and other related material, used, licensed,
leased or owned, directly or indirectly, by, on behalf of or for the account of
a Person.
"Stockholders' Representatives" is defined in Section 2.02(k) of this Merger
Agreement.
"Subsidiary" means a corporation, partnership, joint venture or other entity
of which any Person owns, directly or indirectly, at least fifty percent (50%)
of the outstanding securities or other interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body or otherwise exercise control of such entity.
"Surviving Corporation" is defined in Section 1.01 of this Merger Agreement.
A-56
"Taxes" (including the terms "Tax" and "Taxing") means all federal, state,
local and foreign taxes (including, without limitation, income, profit,
franchise, sales, use, real property, personal property, AD VALOREM, excise,
employment, social security and wage withholding taxes) and installments of
estimated taxes, assessments, deficiencies, levies, imports, duties, license
fees, registration fees, withholdings, or other similar charges of every kind,
character or description imposed by any Governmental Entity, and any interest,
penalties or additions to tax imposed thereon or in connection therewith.
"Tax Liabilities" means any action, suit, proceeding, audit, investigation
or claim pending or threatened in respect of any Taxes for which Company or any
Company Subsidiary is or may become liable, or any deficiency or claim for any
such Taxes that has been to Company's knowledge proposed, asserted or
threatened.
"Tax Returns" means all federal, state, local, foreign and other applicable
returns, declarations, reports and information statements with respect to Taxes
required to be filed with the United States Internal Revenue Service, and its
successors, or any other Governmental Entity or Tax authority or agency,
including, without limitation, consolidated, combined and unitary tax returns.
"Third Party Claim" means any claim or other assertion of liability by any
third party.
"Transaction Value" means Two Hundred Five Million Dollars ($205,000,000)
plus the Option Exercise Consideration less Estimated Net Debt less all payments
made to Company Common Stockholders after the date hereof and prior to the
Effective Time to redeem Company Common Stock.
[Remainder of Page Intentionally Left Blank; Signature Page Follows.]
A-57
IN WITNESS WHEREOF, The Titan Corporation, VT Acquisition Corp. and
AverStar, Inc. have executed and delivered, or have caused this Merger Agreement
to be duly executed and delivered, as of the date first set forth hereinabove.
THE TITAN CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇
Title:
Chairman and Chief Executive Officer
V T ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇
Title:
Chairman and Chief Executive Officer
AVERSTAR, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
The undersigned hereby acknowledge their appointment as the Stockholders'
Representatives hereunder and their willingness to fulfill the duties of the
Stockholders' Representatives as contemplated by this Merger Agreement.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
A-58