1
EXHIBIT 99.B
MERGER AGREEMENT
(Attached hereto)
2
EXHIBIT 99.B
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
LITRONIC INC.
AND
BIZ INTERACTIVE ZONE, INC.
JULY 3, 2001
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TABLE OF CONTENTS
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1. FORMATION OF SUBSIDIARY............................................................1
1.1 Organization of Merger Subsidiary...........................................1
1.2 Actions of Directors and Officers...........................................1
2. PLAN OF REORGANIZATION.............................................................2
2.1 The Merger..................................................................2
2.2 Effective Time; Closing.....................................................2
2.3 Effect of the Merger........................................................2
2.4 Certificate of Incorporation; Bylaws. .....................................2
2.5 Directors and Officers......................................................2
2.6 Effect on Capital Stock.....................................................3
2.7 Dissenting Shares...........................................................3
2.8 Surrender of Certificates...................................................4
2.9 Tax Consequences. ..........................................................7
2.10 Taking of Necessary Action; Further Action..................................7
2.11 Stock Options and Warrants..................................................7
2.12 Proxy Statement.............................................................8
2.13 Reorganization..............................................................9
3. REPRESENTATIONS AND WARRANTIES OF BIZ..............................................9
3.1 Organization; Good Standing; Qualification and Power........................9
3.2 Capital Structure..........................................................10
3.3 Authority..................................................................11
3.4 Financial Statements.......................................................12
3.5 Information Supplied.......................................................12
3.6 Compliance with Applicable Laws............................................12
3.7 Insurance..................................................................12
3.8 Litigation.................................................................13
3.9 ERISA and Other Compliance.................................................13
3.10 Absence of Undisclosed Liabilities.........................................15
3.11 Absence of Certain Changes or Events.......................................15
3.12 Certain Agreements.........................................................17
3.13 Taxes......................................................................17
3.14 Intellectual Property......................................................19
3.15 Fees and Expenses..........................................................20
3.16 Environmental Matters......................................................20
3.17 Interested Party Transactions..............................................20
3.18 Vote Required..............................................................21
3.19 Disclosure.................................................................21
3.20 Restrictions on Business Activities........................................21
3.21 Accounts Receivable........................................................21
3.22 Personal Property..........................................................21
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3.23 Real Property..............................................................21
3.24 Warranties.................................................................22
3.25 Contracts..................................................................22
3.26 Products and Distribution..................................................22
4. REPRESENTATIONS AND WARRANTIES OF LITRONIC........................................23
4.1 Organization; Good Standing; Qualification and Power.......................23
4.2 Capital Structure..........................................................24
4.3 Authority..................................................................24
4.4 SEC Documents..............................................................26
4.5 Information Supplied.......................................................29
4.6 Litigation.................................................................29
4.7 Fees and Expenses..........................................................29
4.8 Interested Party Transactions..............................................29
4.9 Board Approval.............................................................29
4.10 Vote Required..............................................................29
4.11 Disclosure.................................................................29
4.12 Fairness Opinion...........................................................30
4.13 Shares of Litronic Common Stock............................................30
4.14 Compliance with Applicable Laws............................................30
4.15 Intellectual Property......................................................30
4.16 Taxes......................................................................31
4.17 No Investment Company......................................................33
4.18 ERISA and Other Compliance.................................................33
4.19 Environmental Matters......................................................35
4.20 Directors and Officers Liability Insurance.................................35
4.21 Restrictions on Business Activities........................................35
4.22 Warranties.................................................................36
4.23 Products and Distribution..................................................36
4.24 Accounts Receivable. ......................................................36
4.25 Personal Property. ........................................................37
4.26 Real Property. ............................................................37
4.27 Insurance. ................................................................37
5. BIZ COVENANTS.....................................................................38
5.1 Notification of Changes....................................................38
5.2 Maintenance of Business....................................................38
5.3 Conduct of Business........................................................38
5.4 Stockholder Approval.......................................................40
5.5 Proxy Statement............................................................40
5.6 Regulatory Approvals.......................................................40
5.7 Necessary Consents.........................................................41
5.8 Access to Information......................................................41
5.9 Satisfaction of Conditions Precedent.......................................41
5.10 Confidentiality............................................................41
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6. LITRONIC COVENANTS................................................................41
6.1 Stockholder Approval.......................................................41
6.2 Proxy Statement ...........................................................42
6.3 Regulatory Approvals.......................................................42
6.4 Necessary Consents.........................................................42
6.5 Satisfaction of Conditions Precedent.......................................42
6.6 Confidentiality............................................................42
6.7 Access to Information......................................................43
6.8 Notification of Changes....................................................43
6.9 Maintenance of Business....................................................43
6.10 Current Nasdaq Quotation...................................................43
6.11 Other Covenants............................................................43
6.12 Reservation of Shares......................................................45
7. ADDITIONAL AGREEMENTS.............................................................45
7.1 Employee Matters...........................................................45
7.2 Appointment of Officers....................................................46
7.3 Voting Agreement...........................................................46
7.4 Indemnification of Officers, Directors, Etc................................46
7.5 Tax Matters................................................................47
7.6 No Additional Issuances....................................................47
7.7 Reports Under 1934 Act.....................................................47
7.8 Non-Solicitation...........................................................48
8. CLOSING...........................................................................49
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BIZ........................................49
9.1 Accuracy of Representations and Warranties.................................49
9.2 Covenants..................................................................50
9.3 Absence of Material Adverse Change.........................................50
9.4 Compliance with Law........................................................50
9.5 Corporate Opinion..........................................................50
9.6 Consents...................................................................50
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF LITRONIC...................................50
10.1 Accuracy of Representations and Warranties.................................50
10.2 Covenants..................................................................51
10.3 Absence of Material Adverse Change.........................................51
10.4 Compliance with Law........................................................51
10.5 Consents...................................................................51
10.6 Corporate Opinion..........................................................51
10.7 Fairness Opinion...........................................................51
10.8 Termination of Stockholders Agreement......................................51
10.9 Repurchase of Series A Shares..............................................51
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF LITRONIC AND BIZ...........................52
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11.1 Government Consents........................................................52
11.2 Investment Representation Statement........................................52
11.3 Stockholder Approvals......................................................52
11.4 No Legal Action............................................................52
11.5 Dissenting Shares..........................................................52
11.6 Nasdaq Listing and Trading Symbol..........................................52
11.7 Election of Litronic Directors.............................................52
12. TERMINATION OF AGREEMENT..........................................................52
12.1 Termination................................................................52
12.2 Due Diligence Investigations...............................................53
12.3 Notice of Termination......................................................54
12.4 Effect of Termination......................................................54
13. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.............................54
14. MISCELLANEOUS.....................................................................54
14.1 Governing Law..............................................................54
14.2 Assignment: Binding Upon Successors and Assigns............................54
14.3 Severability...............................................................55
14.4 Counterparts...............................................................55
14.5 Other Remedies.............................................................55
14.6 Amendment and Waivers......................................................55
14.7 Expenses...................................................................55
14.8 Attorneys' Fees............................................................55
14.9 Notices....................................................................55
14.10 Construction of Agreement..................................................56
14.11 No Joint Venture...........................................................56
14.12 Further Assurances.........................................................57
14.13 Absence of Third Party Rights..............................................57
14.14 Public Announcement........................................................57
14.15 Entire Agreement...........................................................57
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is entered into
as of this 3rd day of July, 2001, by and among Litronic Inc., a Delaware
corporation ("Litronic") Litronic Merger Corp., a Delaware corporation and
wholly owned subsidiary of Litronic ("Litronic Merger Corp.") and BIZ
Interactive Zone, Inc., a Delaware corporation ("BIZ").
R E C I T A L S
A. BIZ is a provider of broadband security solutions for electronic
business. Litronic desires to acquire all of the outstanding capital stock of
BIZ pursuant to a strategic merger under the applicable provisions of Delaware
law.
B. The Boards of Directors of BIZ, Litronic and Litronic Merger Corp.
believe it is in the best interests of their respective companies and the
stockholders of their respective companies that BIZ and Litronic Merger Corp.
combine into a single company through the statutory merger of Litronic Merger
Corp. with and into BIZ with BIZ to be the surviving corporation ("Merger") and,
in furtherance thereof, have approved the Merger.
C. The Merger is intended to be treated as a tax-free reorganization
pursuant to the provisions of Section 368 of the Internal Revenue Code of 1986,
as amended ("Code").
D. Pursuant to the Merger, among other things, the outstanding shares of
BIZ Stock (as defined in Section 3.2.1) shall be converted into the right to
receive shares of Litronic Common Stock (as defined in Section 4.2) upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. FORMATION OF SUBSIDIARY.
1.1 ORGANIZATION OF MERGER SUBSIDIARY. Litronic has formed Litronic
Merger Corp., a corporation organized under the laws of the State of Delaware.
The authorized capital stock of Litronic Merger Corp. consists of 1,000 shares
of Common Stock, $0.001 par value, which shall be issued to Litronic at a price
of $0.01 per share.
1.2 ACTIONS OF DIRECTORS AND OFFICERS. Prior to the execution of this
Agreement, Litronic shall (i) elect the directors of Litronic Merger Corp. and
(ii) cause the directors of Litronic Merger Corp. to elect officers. As promptly
as practicable following the execution of this Agreement, Litronic shall (i)
cause the Merger Agreement (as defined in Section 2.2) to be executed on behalf
of Litronic Merger Corp., (ii) cause the directors and officers of Litronic
Merger Corp. to take such steps as may be necessary or appropriate to complete
the organization of Litronic Merger Corp. and to approve the Merger Agreement,
and (iii) take all necessary action as the stockholder of Litronic Merger Corp.
to adopt and approve this Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby.
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2. PLAN OF REORGANIZATION.
2.1 THE MERGER. At the Effective Time (as defined in Section 2.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware law, Litronic Merger Corp. shall be merged
with and into BIZ, the separate corporate existence of Litronic Merger Corp.
shall cease and BIZ shall continue as the surviving corporation. BIZ, as the
surviving corporation after the Merger, is sometimes referred to herein as the
"Surviving Corporation," which shall be a wholly owned subsidiary of Litronic.
2.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
an Agreement of Merger substantially in the form of Exhibit 2.2 ("Merger
Agreement") with the Secretary of State of the State of Delaware in accordance
with the relevant provisions of Delaware law (the time of filing (or such later
time as may be agreed in writing by the parties and specified in the Merger
Agreement) being referred to as the "Effective Time") as soon as practicable on
or after the Closing Date (as defined below). The closing of the Merger
("Closing") shall take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at a time and date to be
specified by the parties, which shall be no later than the fifth business day
after the satisfaction or waiver of the conditions set forth in Sections 9, 10
and 11, or at such other time, date and location as the parties hereto agree in
writing ("Closing Date"). The parties acknowledge that it is their express
current intent that, to the extent practicable, the Closing Date shall occur as
promptly as reasonably practicable following approval by the Litronic
stockholders and the BIZ stockholders and on or before August 31, 2001.
2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the 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 BIZ and Litronic Merger Corp. shall vest in the Surviving
Corporation, and all debts, liabilities and duties of BIZ and Litronic Merger
Corp. shall become the debts, liabilities and duties of the Surviving
Corporation. At the Effective Time, the separate existence of Litronic Merger
Corp. will cease and Litronic Merger Corp. will be merged with and into BIZ.
2.4 CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective Time, the
Certificate of Incorporation and Bylaws of Litronic Merger Corp., as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until thereafter amended
as provided by law and by the Certificate of Incorporation of the Surviving
Corporation.
2.5 DIRECTORS AND OFFICERS. The directors of the Surviving Corporation
shall be the directors of Litronic Merger Corp. immediately prior to the
Effective Time, until their successors are duly elected or appointed and
qualified. The initial officers of the Surviving Corporation shall be the
officers of Litronic Merger Corp. immediately prior to the Effective Time, until
their successors are duly appointed.
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2.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Litronic Merger Corp., BIZ or the
holders of any of the following securities:
2.6.1 CONVERSION OF BIZ STOCK. Each share of BIZ Common Stock
issued and outstanding immediately prior to the Effective Time will be
canceled and extinguished and automatically converted (subject to
Section 2.6.4) into 0.4751248 ("Exchange Ratio") shares of Litronic
Common Stock (as defined in Section 4.2.1), and each share of BIZ Series
B Preferred (as defined in Section 3.2.1 issued and outstanding
immediately prior to the Effective Time will be canceled and
extinguished and automatically converted (subject to Section 2.6.4) into
0.8564122 shares of Litronic Common Stock.
2.6.2 CAPITAL STOCK OF LITRONIC MERGER CORP. Each share of Common
Stock, $0.001 par value per share, of Litronic Merger Corp. ("Litronic
Merger Corp. Common Stock") issued and outstanding immediately prior to
the Effective Time shall be converted into one validly issued, fully
paid and nonassessable share of Common Stock, $0.001 par value per
share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Litronic Merger Corp. Common Stock shall evidence
ownership of shares of capital stock of the Surviving Corporation.
2.6.3 ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of
securities convertible into Litronic Common Stock or BIZ Stock, as
defined in Section 3.2.1), reorganization, recapitalization,
reclassification or other like change with respect to Litronic Common
Stock or BIZ Stock occurring or having a record date on or after the
date hereof and prior to the Effective Time.
2.6.4 FRACTIONAL SHARES. No fraction of a share of Litronic
Common Stock will be issued by virtue of the Merger, but in lieu thereof
each holder of shares of BIZ Stock who would otherwise be entitled to a
fraction of a share of Litronic Common Stock (after aggregating all
fractional shares of Litronic Common Stock that otherwise would be
received by the holder) shall receive from Litronic an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) that
fraction, multiplied by (ii) the average closing price of one share of
Litronic Common Stock for the five most recent days that Litronic Common
Stock has traded ending on the trading day immediately prior to the
Effective Time, as reported on the Nasdaq National Market.
2.6.5 CANCELLATION OF LITRONIC WARRANT. At the Effective Time,
the warrant to purchase 400,000 shares of BIZ Common Stock issued to
Litronic on July 31, 2000 shall be canceled and extinguished ("Litronic
Warrant").
2.7 DISSENTING SHARES. Notwithstanding anything to the contrary herein,
any shares of BIZ Stock held by a holder who has demanded and perfected such
holder's right for appraisal of such shares in accordance with applicable law
and who, as of the Effective Time, has not effectively withdrawn or lost such
right to appraisal ("Dissenting Shares"), if any, shall not be converted into
Litronic Common Stock but shall instead be converted into the right to receive
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such consideration as may be determined to be due with respect to such
Dissenting Shares. BIZ shall give Litronic prompt notice of any demand received
by BIZ to require BIZ to purchase shares of Common Stock of BIZ, and Litronic
and BIZ shall mutually direct and participate in all negotiations and
proceedings with respect to such demand. BIZ agrees that, except with the prior
written consent of Litronic, or as required under applicable law, it will not
voluntarily make any payment with respect to, or settle or offer to settle, any
such purchase demand. Each holder of Dissenting Shares ("Dissenting
Stockholder") who becomes entitled to payment of the fair value for shares of
BIZ Stock shall receive payment therefor (but only after the value therefor has
been agreed upon or finally determined pursuant to such provisions). If, after
the Effective Time, any Dissenting Shares shall lose their status as Dissenting
Shares, Litronic shall issue and deliver, upon surrender by such stockholder of
a certificate or certificates representing shares of BIZ Stock, the shares of
Litronic Common Stock to which such stockholder would otherwise be entitled
under Section 2.6.
2.8 SURRENDER OF CERTIFICATES.
2.8.1 EXCHANGE AGENT. American Stock Transfer & Trust Company
shall act as the exchange agent ("Exchange Agent") in the Merger.
2.8.2 LITRONIC TO PROVIDE COMMON STOCK. Promptly after the
Effective Time, Litronic shall make available to the Exchange Agent, for
exchange in accordance with this Section 2, the shares of Litronic
Common Stock issuable pursuant to Section 2.6 in exchange for
outstanding shares of BIZ Stock, and cash in an amount sufficient for
payment in lieu of fractional shares pursuant to Section 2.6.4 and any
dividends or distributions to which holders of shares of BIZ Stock may
be entitled pursuant to Section 2.8.4.
2.8.3 EXCHANGE PROCEDURES. Promptly after the Effective Time,
Litronic shall cause the Exchange Agent to mail to each holder of record
(as of the Effective Time) of a certificate or certificates
("Certificates") which immediately prior to the Effective Time
represented outstanding shares of BIZ Stock whose shares were converted
into shares of Litronic Common Stock pursuant to Section 2.6, cash in
lieu of any fractional shares pursuant to Section 2.6.4 and any
dividends or other distributions pursuant to Section 2.8.4, (i) a letter
of transmittal in customary form (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and
shall contain such other provisions as Litronic may reasonably specify)
and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of
Litronic Common Stock, cash in lieu of any fractional shares pursuant to
Section 2.6.4 and any dividends or other distributions pursuant to
Section 2.8.4. Upon surrender of Certificates for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by
Litronic, together with the letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the
holders of Certificates shall be entitled to receive in exchange
therefor certificates representing the number of whole shares of
Litronic Common Stock into which their shares of BIZ Stock were
converted at the Effective Time, payment in lieu of fractional shares
which the holders have the right to receive pursuant to Section 2.6.4
and any dividends or distributions payable pursuant to Section
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2.8.4, and the Certificates surrendered shall be canceled. Until
surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 2.8.4 as
to the payment of dividends, to evidence the ownership of the number of
full shares of Litronic Common Stock into which shares of BIZ Stock have
been converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 2.6.4 and
any dividends or distributions payable pursuant to Section 2.8.4.
2.8.4 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Litronic Common Stock with a record date after
the Effective Time will be paid to the holders of any unsurrendered
Certificates with respect to the shares of Litronic Common Stock
represented thereby until the holders of record of the Certificates
surrender the Certificates, and no cash payment in lieu of fractional
shares shall be paid to the holders of Certificates until the holders of
record of those Certificates surrender the Certificates. Subject to
applicable law, following surrender of the Certificates, the Exchange
Agent shall deliver to the record holders, without interest,
certificates representing whole shares of Litronic Common Stock issued
in exchange therefor along with payment in lieu of fractional shares
pursuant to Section 2.6.4 and the amount of any dividends or other
distributions with a record date after the Effective Time payable with
respect to whole shares of Litronic Common Stock.
2.8.5 TRANSFERS OF OWNERSHIP. If certificates representing shares
of Litronic Common Stock are to be issued in a name other than that in
which the Certificates surrendered in exchange therefor are registered,
it will be a condition of the issuance thereof that the Certificates so
surrendered be properly endorsed and otherwise in proper form for
transfer and that the persons requesting the exchange have paid to
Litronic or any agent designated by it any transfer or other taxes
required by reason of the issuance of certificates representing shares
of Litronic Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or established to the
satisfaction of Litronic or any agent designated by it that the tax has
been paid or is not payable.
2.8.6 NO LIABILITY. Notwithstanding anything to the contrary in
this Section 2.8, neither the Exchange Agent, Litronic, the Surviving
Corporation nor any party hereto shall be liable to a holder of shares
of Litronic Common Stock or BIZ Stock for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat
or similar law.
2.8.7 TERMINATION OF EXCHANGE AGENT PROVISIONS. On the demand of
Litronic, any Litronic Common Stock issuable or cash payable in
accordance with this Agreement that is made available to the Exchange
Agent, if not distributed to the stockholders of BIZ within one year
after the Effective Time, shall no longer be made available to the
Exchange Agent, and any former stockholders of BIZ who have not complied
with this Section 2.8 shall thereafter look only to Litronic for payment
of their claim for Litronic Common Stock, any cash in lieu of fractional
shares of Litronic Common Stock and any dividends or distributions with
respect to Litronic Common Stock.
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2.8.8 NO FURTHER OWNERSHIP RIGHTS IN BIZ STOCK. All shares of
Litronic Common Stock issued in accordance with the terms hereof
(including any cash paid pursuant to Sections 2.6.4 and 2.8.4) shall be
deemed to have been issued in full satisfaction of all rights pertaining
to shares of BIZ Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of BIZ
Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Section.
2.8.9 LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificates
have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for the lost, stolen or destroyed Certificates, upon the making
of an affidavit of that fact by the holder, certificates representing
the shares of Litronic Common Stock into which the shares of BIZ Stock
represented by those Certificates were converted pursuant to Section
2.6, cash for fractional shares, if any, as may be required pursuant to
Section 2.6.4 and any dividends or distributions payable pursuant to
Section 2.8.4; provided, however, that Litronic may, in its discretion
and as a condition precedent to the issuance of the certificates
representing shares of Litronic Common Stock, require the owner of the
lost, stolen or destroyed Certificates to deliver a bond in such sum as
it may reasonably direct as indemnity against any claim that may be made
against Litronic, the Surviving Corporation or the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or
destroyed.
2.8.10 DISSENTING SHARES. The provisions of this Section 2.8
shall also apply to Dissenting Shares that lose their status as such,
except that the obligations of Litronic under this Section 2.8 shall
commence on the date of loss of such status and the holder of such
shares shall be entitled to receive in exchange for such shares of
Litronic Common Stock to which such holder is entitled pursuant to
Section 2.6.
2.8.11 CERTIFICATE LEGENDS. The shares of Litronic Common Stock
to be issued pursuant to this Section 2 shall not have been registered
and shall be characterized as "restricted securities" under the federal
securities laws, and under such laws such shares may be resold without
registration under the Securities Act of 1933, as amended (the
"Securities Act"), only in certain limited circumstances. Each
certificate evidencing shares of Litronic Common Stock to be issued
pursuant to this Section 2 shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION WITHOUT AN EXEMPTION UNDER
THE SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
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2.9 TAX CONSEQUENCES. The parties intend that the Merger constitute a
reorganization within the meaning of Section 368 of the Code, and adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.
2.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. Litronic and BIZ will
each take all such reasonable and lawful action as may be necessary or desirable
in order to effectuate the Merger in accordance with this Agreement as promptly
as possible. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of BIZ and Litronic Merger
Corp., the officers and directors of BIZ and Litronic Merger Corp. will take all
such lawful and necessary action. Litronic shall cause Litronic Merger Corp. to
perform all of its obligations relating to this Agreement and the transactions
contemplated hereby.
2.11 STOCK OPTIONS AND WARRANTS.
2.11.1 CONVERSION. At the Effective Time, each of the then
outstanding options ("BIZ Options"), to purchase BIZ Common Stock
(whether vested or unvested) will, by virtue of the Merger and without
any further action on the part of any such holder, be converted into an
option (collectively, the "Assumed Options") to purchase that number of
shares of Litronic Common Stock determined by multiplying the number of
shares of BIZ Common Stock subject to the BIZ Option at the Effective
Time by the Common Exchange Ratio (the "Adjusted Option Shares"), at an
exercise price per share of Litronic Common Stock equal to the exercise
price per share of the BIZ Option immediately prior to the Effective
Time divided by the Common Exchange Ratio and rounded up to the nearest
whole cent (the "Adjusted Exercise Price"). If the foregoing calculation
results in an Assumed Option being exercisable for a fraction of a share
of Litronic Common Stock, then the number of shares of Litronic Common
Stock subject to that option will be rounded to the nearest whole number
of shares (rounded down, in the case of BIZ Options that are "incentive
stock options" ("ISOs") under Section 422 of the Code). The term,
exercisability, vesting schedule, status as an ISO, if applicable, shall
be as set forth in the BIZ Disclosure Schedule (as defined in Section
3). Continuous employment with BIZ will be credited to an optionee of
BIZ for purposes of vesting of Assumed Options. Litronic shall issue,
upon any partial or total exercise of Assumed Option in lieu of shares
of BIZ Common Stock, the number of shares of Litronic Common Stock to
which the holder of the Assumed Option is entitled. Each BIZ Option so
assumed by Litronic under this Agreement shall continue to have, and be
subject to, the same terms and conditions set forth in BIZ's 2000 Stock
Option Plan (the "BIZ Plan") and any other document governing such
option immediately prior to the Effective Time, except that (i) such BIZ
Option will be exercisable for the Adjusted Option Shares, (ii) the per
share exercise price for the shares of Litronic Common Stock issuable
upon exercise of such Assumed Option will be equal to the Adjusted
Exercise Price and (iii) any restriction on the exercisability of such
BIZ Option shall continue in full force and effect, and the term,
exercisability, vesting schedule and other provisions of such BIZ Option
shall remain unchanged. Consistent with the terms of the BIZ Plan and
the documents governing the outstanding options under such plan, the
Merger will not terminate any of the outstanding
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options under the BIZ Stock Option Plan or accelerate the exercisability
or vesting of such options or the shares of Litronic Common Stock which
will be subject to those options upon Litronic's assumption of the
options in the Merger. It is the intention of the parties that the
Assumed Options will remain ISOs as defined in Section 422 of the Code
to the extent such options qualified as ISOs prior to the Effective
Time.
2.11.2 REGISTRATION ON FORM S-8. Litronic will cause a Form S-8
registration statement ("Form S-8") to be filed under the Securities Act
of 1933, as amended ("Securities Act") with respect to the Litronic
Common Stock issuable upon exercise of the Assumed Options (with respect
to all BIZ Options granted to persons who are eligible to receive
registered shares under a Form S-8) as soon as practicable after the
Closing, and will use its best efforts to maintain the effectiveness
(and current status) of the Form S-8 for so long as any Assumed Options
remain outstanding. Litronic will reserve a sufficient number of shares
of Litronic Common Stock for issuance upon exercise of Assumed Options.
With respect to those individuals, if any, who subsequent to the Merger
will be subject to the reporting requirements under Section 16(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), where
applicable, Litronic shall administer those individuals' Assumed Options
in a manner that complies with Rule 16b-3 promulgated under the Exchange
Act.
2.11.3 CONVERSION OF WARRANTS. At the Effective Time (except as
set forth under Section 2.6.5), each of the then outstanding Warrants
("BIZ Warrants") to purchase BIZ Common Stock will, by virtue of the
Merger and without any further action on the part of any holder, be
converted into a Warrant (collectively, the "Assumed Warrants") to
purchase that number of shares of Litronic Common Stock determined by
multiplying the number of shares of BIZ Common Stock subject to the BIZ
Warrants at the Effective Time by the Exchange Ratio, at an exercise
price per share of Litronic Common Stock equal to the exercise price per
share of the BIZ Warrant immediately prior to the Effective Time divided
by the Exchange Ratio and rounded up to the nearest whole cent. If the
foregoing calculation results in an Assumed Warrant being exercisable
for a fraction of a share of Litronic Common Stock, then the number of
shares of Litronic Common Stock subject to that warrant will be rounded
to the nearest whole number of shares.
2.12 PROXY STATEMENT. As promptly as practicable after execution of this
Agreement, Litronic, with assistance from BIZ (to the extent reasonably
requested by Litronic), shall prepare and file with the Securities and Exchange
Commission ("SEC") a proxy statement ("Proxy Statement") in connection with the
Merger. Each of Litronic and BIZ shall use its best effort to respond promptly
to any SEC comments. Litronic shall mail the Proxy Statement to its stockholders
at the earliest possible time. BIZ shall promptly furnish to Litronic all
information concerning BIZ and its stockholders as may be reasonably required in
connection with the Proxy Statement or any SEC comments. The Proxy Statement
shall comply in all material respects with all applicable requirements of law.
The Proxy Statement shall contain proposals to vote regarding the Merger, to
elect directors as specified in Section 11.7, to change the name of Litronic to
"SSP Solutions, Inc.," to increase the size of the Litronic Plan to 4,000,000
shares, to adopt an Employee Stock Purchase Plan with 1,000,000 shares
available, and to increase the number of authorized shares of Litronic Common
Stock from 25,00,000 to 100,000,000.
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2.13 REORGANIZATION. The parties intend to adopt this Agreement and the
Merger Agreement as a plan of reorganization under Section 368(a) of the Code.
The Litronic Common Stock issued in the Merger will be issued solely in exchange
for BIZ Stock, and no other transaction other than the Merger represents,
provides for or is intended to be an adjustment to the consideration paid for
the BIZ Stock. Except for cash paid in lieu of fractional shares or as a result
of Dissenting Shares, no consideration that could constitute "other property"
within the meaning of Section 356(b) of the Code is being transferred by
Litronic for BIZ Stock in the Merger. The parties shall not take a position on
any tax return inconsistent with this Section 2.13. In addition, BIZ, Litronic
and Litronic Merger Corp. represent as of the date of this Agreement, and as of
the Closing Date, that neither they nor their affiliates has taken or agreed to
take any action, or has any plan or intention or arrangement to take any action
that would prevent the Merger from qualifying as a tax-free reorganization under
the provisions of Section 368(a) of the Code.
3. REPRESENTATIONS AND WARRANTIES OF BIZ.
Except in each case as set forth in a schedule dated the date of this
Agreement and delivered by BIZ to Litronic concurrently herewith ("BIZ
Disclosure Schedule") specifically identifying the Section of this Agreement
requiring the delivery of such disclosure (except to the extent disclosure in
any numbered and lettered Section of BIZ Disclosure Schedule is specifically
cross referenced in another numbered and lettered section of BIZ Disclosure
Schedule). As the date hereof, BIZ represents and warrants to Litronic as set
forth below. In this Agreement, any reference to any event, change or effect
being "material" with respect to any entity or group of entities means any
material event, change or effect related to the condition (financial or
otherwise), properties, assets, liabilities, businesses, operations, results of
operations or prospects of such entity or group of entities taken as a whole. In
this Agreement, the term "Material Adverse Effect" used in connection with a
party or any of that party's subsidiaries means any event, change or effect that
is, singly or in the aggregate, materially adverse to the condition (financial
or otherwise), properties, assets, liabilities, businesses, operations, results
of operations or prospects of that party and its subsidiaries, taken as a whole;
provided, however, that a Material Adverse Effect shall not include any adverse
effect resulting from general economic conditions or conditions affecting the
engineering software market. In this Agreement, a "subsidiary" means a
corporation, partnership or other entity in which a party owns directly or
indirectly more than 50% of the voting stock, equity interests or beneficial
interests. In this Agreement, "knowledge" means actual knowledge, and with
respect to any party that is an entity, the entity shall not be deemed to have
knowledge of any particular fact or matter unless any member of the Board of
Directors or any executive officer (within the meaning of Rule 405 under the
Securities Act of 1933, as amended) of the entity has actual knowledge thereof.
3.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each of BIZ
and its only subsidiary, Broadband Consumer Products, Inc., a Delaware
corporation ("BCP") is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes qualification
necessary, other than in jurisdictions where the failure to so qualify or be in
good standing would not have a Material Adverse Effect
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on BIZ. BIZ has made available to Litronic or its counsel complete and correct
copies of the certificate of incorporation and bylaws of BIZ and BCP, in each
case as amended to the date of this Agreement, and copies of all minutes of
meetings and actions by written consent of stockholders, directors and board
committees of each such entity.
3.2 CAPITAL STRUCTURE.
3.2.1 STOCK AND OPTIONS. The authorized capital stock of BIZ
consists of 30,000,000 shares of Common Stock, $0.001 par value ("BIZ
Common Stock"), and 7,000,000 shares of Preferred, $0.001 par value
("BIZ Preferred Stock"; the BIZ Common Stock and the BIZ Preferred Stock
are sometimes collectively referred to as the "BIZ Stock"). At the close
of business on July 2, 2001, 16,400,000 shares of BIZ Common Stock were
issued and outstanding, 187,970 shares of BIZ Preferred Stock
convertible into 187,970 shares of BIZ Common Stock were issued and
outstanding and designated as "Series A" ("BIZ Series A Preferred"),
3,600,000 shares of BIZ Preferred Stock convertible into 3,600,000
shares of BIZ Common Stock were issued and outstanding and designated as
"Series ▇" ("▇▇▇ Series B Preferred"), 450,000 shares of BIZ Common
Stock were reserved for issuance upon the exercise of outstanding BIZ
Warrants and 1,756,500 shares of BIZ Common Stock were reserved for
issuance upon the exercise of outstanding BIZ Options and 1,843,500
shares of BIZ Common Stock were reserved for future option grants. All
outstanding shares of BIZ Stock are validly issued, fully paid and
nonassessable and not subject to preemptive rights and were not issued
in violation of any preemptive rights. BIZ has made available to
Litronic a true and correct copy of the BIZ Plan, and the BIZ Disclosure
Schedule contains a correct and complete list of each BIZ Option and BIZ
Warrant outstanding as of the date hereof, including the name of the
holder of each BIZ Option and BIZ Warrant, the security and number of
shares covered by each BIZ Option and BIZ Warrant, the per share
exercise price of each BIZ Option and BIZ Warrant and the vesting
schedule applicable to each BIZ Option and BIZ Warrant. BIZ Disclosure
Schedules list all option agreements that contain accelerated vesting
upon change of control provisions along with the material terms of such
option agreements.
3.2.2 NO OTHER COMMITMENTS. Except for the BIZ Options and BIZ
Warrants disclosed in or pursuant to Section 3.2.1, there are no
options, warrants, calls, rights, commitments, conversion rights,
exchange rights or agreements of any character to which BIZ or BCP is a
party or by which BIZ or BCP is bound obligating BIZ or BCP to issue,
deliver or sell, or cause to be issued, delivered or sold, any shares of
capital stock of BIZ or BCP or securities convertible into or
exchangeable for shares of capital stock of BIZ or BCP, or obligating
BIZ or BCP to grant, extend or enter into any option, warrant, call,
right, commitment, conversion right or agreement. There are no voting
trusts or other agreements or understandings to which BIZ or BCP or, to
the knowledge of BIZ, any of its stockholders is a party with respect to
the voting of the capital stock of BIZ or BCP. There are no put
agreements or registration rights agreements, or any other agreements of
any character or nature to which BIZ is a party or by which BIZ is
bound, obligating BIZ to purchase or register, or cause to be purchased
or registered, any shares of capital stock of BIZ or securities
convertible into or exchangeable for shares of capital stock of BIZ.
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3.3 AUTHORITY.
3.3.1 CORPORATE ACTION. BIZ has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of this
Agreement, the Merger Agreement and the Merger by the stockholders of
BIZ, to perform its obligations hereunder and to consummate the Merger
and the other transactions contemplated by this Agreement. The execution
and delivery of this Agreement by BIZ and, subject to approval of this
Agreement, the Merger Agreement and the Merger by the stockholders of
BIZ, the consummation by BIZ of the Merger and the other transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of BIZ. This Agreement has been duly executed and
delivered by BIZ and is the valid and binding obligation of BIZ,
enforceable in accordance with its terms, except that enforceability may
be subject to (i) bankruptcy, insolvency, reorganization or other laws
affecting or relating to enforcement of creditors' rights generally and
(ii) general equitable principles regardless of whether considered at
law or in equity.
3.3.2 NO CONFLICT. Neither the execution, delivery and
performance of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby or thereby nor
compliance with the provisions hereof or thereof will: (i) conflict
materially with, or result in any material violations of, or cause a
material default (with or without notice or lapse of time, or both)
under, or give rise to a material right of termination, amendment,
cancellation or acceleration of any obligation contained in, or the loss
of any material benefit under, or result in the creation of any material
lien, security interest, charge or encumbrance upon any of the material
properties or assets of BIZ or BCP under, any term, condition or
provision of (x) the certificate of incorporation or bylaws of BIZ or
BCP or (y) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other material agreement, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to BIZ or BCP or
their respective properties or assets, other than any such conflicts,
violations, defaults, losses, liens, security interests, charges, or
encumbrances which, individually or in the aggregate, would not have a
Material Adverse Effect; or (ii) require the affirmative vote of the
holders of greater than a majority of the issued and outstanding shares
of BIZ Common Stock and BIZ Preferred Stock, each voting as a separate
class.
3.3.3 CONSENTS.
(a) No consent, approval, order or authorization of, or
registration, declaration or filing with (collectively, "Governmental
Consents"), any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (each a
"Governmental Entity"), is required to be obtained by BIZ or BCP in
connection with the execution and delivery of this Agreement or the
Merger Agreement or the consummation of the transactions contemplated
hereby or thereby, except for: (i) the filing of Merger Agreement with
the Secretary of State of Delaware and appropriate documents with the
relevant authorities of other states in which BIZ is qualified to do
business; (ii) such filings, authorizations, orders and approvals as may
be required under state "control share acquisition," "anti-takeover" or
other similar statutes and regulations (collectively, "State Takeover
Laws"); and (iii) where the failure to obtain or make such
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Governmental Consents would not prevent or materially delay the
consummation of the Merger and would not reasonably be expected to have
a Material Adverse Effect on BIZ.
(b) No other consent is required to be obtained by BIZ or BCP in
connection with the execution and delivery of this Agreement or the
Merger Agreement or the consummation of the transactions contemplated
hereby or thereby.
3.4 FINANCIAL STATEMENTS. BIZ has furnished to Litronic copies of: (a)
the audited consolidated balance sheet of BIZ at December 31, 2000, and the
related statement of income and changes in financial position for the period
then ended, together with the related notes thereto and the auditors' report
thereon of KPMG LLP, independent auditors, and (b) the unaudited consolidated
balance sheet of BIZ at March 31, 2001, and the related statement of income and
changes in financial position for the period then ended, together with the
related notes thereto. All financial statements referred to in this Section 3.4
("BIZ Financial Statements") are complete and correct in all material respects,
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the respective periods, and fairly
present the consolidated financial condition of BIZ and BCP as at the respective
dates thereof and the consolidated results of operation and cash flow of BIZ and
BCP for the respective periods covered by the statements of income and cash flow
contained therein.
3.5 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by BIZ in writing for inclusion or incorporation by reference in the
Proxy Statement will, at the date the Proxy Statement is mailed to the
stockholders of Litronic, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
3.6 COMPLIANCE WITH APPLICABLE LAWS. The businesses of BIZ and BCP are
not being conducted in violation of any law, ordinance, regulation, rule or
order of any Governmental Entity where the violation would have a Material
Adverse Effect on BIZ. BIZ has not been notified by any Governmental Entity that
any investigation or review with respect to BIZ or BCP is pending or, to the
knowledge of BIZ, threatened, nor has any Governmental Entity notified BIZ of
its intention to conduct an investigation or review. BIZ and BCP have all
permits, licenses and franchises from Governmental Entities required to conduct
their businesses as now being conducted, except for those whose absence would
not have a Material Adverse Effect with respect to BIZ.
3.7 INSURANCE. BIZ maintains and at all times since its inception has
maintained fire and casualty and general liability insurance that BIZ believes
or believed at that time to be reasonably prudent for the business of BIZ and
BCP as conducted at that time. The BIZ Disclosure Schedule contains a complete
and correct list and summary description of all insurance policies maintained by
BIZ. BIZ has delivered or made available to Litronic complete and correct
certificates of insurance setting forth the summary terms of the insurance
policies. These policies are in full force and effect in all material respects,
and all premiums due thereon have been paid, except for such failure of payment
that would not have a Material Adverse Effect on BIZ. BIZ has complied in all
material respects with the terms and provisions of the
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policies. The BIZ Disclosure Schedule summarizes all material claims made by BIZ
under any policy of insurance since BIZ's inception.
3.8 LITIGATION. There is no suit, action, arbitration, demand, claim or
proceeding pending or, to the knowledge of BIZ, threatened against BIZ or BCP in
connection with or relating to the transactions contemplated by this Agreement
or of any action taken or to be taken in connection herewith or the consummation
of the transactions contemplated hereby. BIZ has made available to Litronic or
its counsel correct and complete copies of all correspondence prepared by its
counsel for BIZ's auditors in connection with the last two completed audits of
BIZ's financial statements and any such correspondence since the date of the
last audit. There is no suit, action, arbitration, demand, claim or proceeding
pending or, to the best knowledge of BIZ, threatened against BIZ or BCP, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against BIZ or BCP that could reasonably be expected
to have a Material Adverse Effect with respect to BIZ.
3.9 ERISA AND OTHER COMPLIANCE.
(a) BIZ has made available to Litronic a list of all employees of
BIZ and their salaries as of the date of this Agreement. BIZ has made
available to Litronic copies of (i) each "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and (ii) all other written or formal
plans or agreements involving direct or indirect compensation or
benefits (including any employment agreements entered into between BIZ
or BCP and any employee of BIZ or BCP, but excluding workers'
compensation, unemployment compensation and other government-mandated
programs) currently or previously maintained, contributed to or entered
into by BIZ or BCP under which BIZ or BCP or an ERISA Affiliate (as
defined below) thereof has any present or future material obligation or
liability (collectively, "BIZ Employee Plans"). "ERISA Affiliates" means
any entity which is a member of (A) a "controlled group of
corporations," as defined in Section 414(b) of the Code, (B) a group of
entities under "common control," as defined in Section 414(c) of the
Code, or (C) an "affiliated service group," as defined in Section 414(m)
of the Code, or treasury regulations promulgated under Section 414(o) of
the Code, any of which includes BIZ. Copies of all BIZ Employee Plans
(and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof (including summary plan
descriptions) have been made available to Litronic or its counsel,
together with the three most recent annual reports (Form 5500,
including, if applicable, Schedule B thereto) prepared in connection
with any BIZ Employee Plans. Copies of all BIZ Employee Plans which
individually or collectively would constitute an "employee pension
benefit plan," as defined in Section 3(2) of ERISA (collectively, "BIZ
Pension Plans"), have been made available to Litronic. All contributions
due from BIZ or BCP through the date hereof with respect to any of the
BIZ Employee Plans have been made as required under ERISA or have been
accrued on BIZ's financial statements as of December 31, 2000. To BIZ's
knowledge, each of the BIZ Employee Plans has been maintained in
compliance with its terms and with the requirements prescribed by any
and all statutes, orders, rules and regulations, including, without
limitation, ERISA and the Code, which are applicable to the BIZ Employee
Plans except for noncompliance that would not have a Material Adverse
Effect on BIZ.
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(b) None of the BIZ Pension Plans constitutes, or has since the
enactment of ERISA constituted, a "multiemployer plan," as defined in
Section 3(37) of ERISA. No BIZ Pension Plans are subject to Title IV of
ERISA. No "prohibited transaction," as defined in Section 406 of ERISA
or Section 4975 of the Code, has occurred with respect to any of the BIZ
Employee Plans that is covered by Title I of ERISA that would result in
a material liability to BIZ, excluding transactions effected pursuant to
a statutory or administrative exemption. To BIZ's knowledge, nothing
done or omitted to be done and no transaction or holding of any asset
under or in connection with any of the BIZ Employee Plans has or will
make BIZ or any officer or director of BIZ or BCP subject to any
material liability under Title I of ERISA or liable for any material tax
or penalty pursuant to Sections 4972, 4975, 4976 or 4979 of the Code or
Section 502 of ERISA.
(c) Any of the BIZ Pension Plans that is intended to be qualified
under Section 401(a) of the Code (a "BIZ 401(a) Plan") is so qualified
and has been so qualified during the period from its adoption to date,
and the trust forming a part thereof is exempt from tax pursuant to
Section 501(a) of the Code.
(d) BIZ has made available to Litronic a list of each employment,
severance or other similar contract, arrangement or policy and each plan
or arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' benefits, vacation
benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits for employees,
consultants or directors which (i) is not one of the BIZ Employee Plans,
(ii) is entered into, maintained or contributed to, as the case may be,
by BIZ or BCP and (iii) covers any employee or former employee of BIZ.
The contracts, plans and arrangements described in this paragraph 3.9(d)
are referred to collectively as the "BIZ Benefit Arrangements." To BIZ's
knowledge, each of the BIZ Benefit Arrangements has been maintained in
material compliance (i) with its terms and (ii) with the requirements
prescribed by any and all statutes, orders, rules and regulations that
are applicable to BIZ Benefit Arrangements. BIZ has made available to
Litronic or its counsel a complete and correct copy or description of
each of the BIZ Benefit Arrangements.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by BIZ or BCP relating to, or
change in employee participation or coverage under, any of the BIZ
Employee Plans or BIZ Benefit Arrangements that would increase
materially the expense of maintaining the BIZ Employee Plans or BIZ
Benefit Arrangements above the level of the expense incurred in respect
thereof for the fiscal year ended December 31, 2000.
(f) BIZ has provided, or will have provided prior to the Closing,
to individuals entitled thereto all required notices and coverage
pursuant to Section 4980B of the Code and the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), with respect to
any "qualifying event" (as defined in Section 4980B(f)(3) of the Code)
occurring prior to and including the Closing Date, and no
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material tax payable on account of Section 4980B of the Code has been
incurred with respect to any current or former employees (or their
beneficiaries) of BIZ.
(g) No benefit or compensation payable or which may become
payable by BIZ or BCP pursuant to any of the BIZ Employee Plans or any
BIZ Benefit Arrangements or as a result of or arising under this
Agreement shall (i) constitute an "excess parachute payment" (as defined
in Section 280G(b)(1) of the Code) which is subject to the imposition of
an excise tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code or (ii) be
nondeductible by reason of Section 162(m) of the Code.
(h) BIZ and BCP are in compliance in all material respects with
all applicable laws, agreements and contracts relating to employment,
employment practices, wages, hours, and terms and conditions of
employment, including, but not limited to, employee compensation
matters, but not including ERISA.
(i) Neither BIZ nor BCP has any knowledge of any facts indicating
that the consummation of the transactions contemplated hereby will have
a Material Adverse Effect on labor relations, and has no actual
knowledge that any of its key employees intends to leave its or their
employ.
3.10 ABSENCE OF UNDISCLOSED LIABILITIES. The consolidated balance sheet
of BIZ as of December 31, 2000 and delivered to Litronic by BIZ is referred to
herein as the "BIZ Balance Sheet." At the date of the BIZ Balance Sheet ("BIZ
Balance Sheet Date"), BIZ had no liabilities or obligations, secured or
unsecured (whether accrued or absolute) and of a nature required to be reflected
in the liabilities column of a balance sheet prepared in accordance with GAAP,
not reflected on the BIZ Balance Sheet.
3.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the BIZ Balance Sheet
Date (and other than in compliance with Section 5.3) there has not occurred:
(a) a Material Adverse Effect with respect to BIZ and BCP, taken
as a whole;
(b) any amendments or changes in BIZ's certificate of
incorporation or bylaws;
(c) any damage, destruction or loss, whether covered by insurance
or not, that could reasonably constitute a Material Adverse Effect with
respect to BIZ;
(d) any redemption, repurchase or other acquisition of shares of
capital stock of BIZ or BCP (other than pursuant to arrangements with
terminated employees or consultants), or any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any capital stock of BIZ or BCP;
(e) any material increase in or modification of the compensation
or benefits payable or to become payable by BIZ or BCP to any of its
directors or employees, except in the ordinary course of business
consistent with past practice;
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(f) any material increase in or modification of any bonus,
pension, insurance or any of the BIZ Employee Plans or BIZ Benefit
Arrangements (including, but not limited to, the granting of stock
options, restricted stock awards or stock appreciation rights) made to,
for or with any of its employees, other than in the ordinary course of
business consistent with past practice;
(g) any acquisition or sale of a material amount of property or
assets of BIZ or BCP, other than in the ordinary course of business
consistent with past practices;
(h) any alteration in any term of any outstanding security of BIZ
or BCP other than as required under the terms thereof;
(i) any (A) incurrence, assumption or guarantee by BIZ or BCP of
any debt for borrowed money other than pursuant to credit lines or loan
agreements disclosed in the BIZ Balance Sheet or the notes thereto; (B)
issuance or sale of any securities convertible into or exchangeable for
debt securities of BIZ; or (C) issuance or sale of options or other
rights to acquire from BIZ or BCP, directly or indirectly, debt
securities of BIZ or BCP or any securities convertible into or
exchangeable for any such debt securities;
(j) any creation or assumption by BIZ or BCP of any mortgage,
pledge, security interest or lien or other encumbrance on any material
asset (other than liens for taxes not yet delinquent and liens and
encumbrances which are not material in character, amount or extent and
which do not materially interfere with the use of the asset subject
thereto or affected thereby);
(k) any making of any loan, advance or capital contribution to or
investment in any person other than (i) travel loans or advances made in
the ordinary course of business, (ii) other loans and advances in an
aggregate amount which does not exceed $25,000 outstanding at any time
and (iii) purchases on the open market of liquid, publicly traded
securities;
(l) any entering into, amendment of, relinquishment, termination
or non-renewal by BIZ or BCP of any material contract, lease commitment
or other material right or obligation other than in the ordinary course
of business;
(m) any transfer or grant of a right under the BIZ IP Rights (as
defined in Section 3.14), other than in the ordinary course of business;
(n) any material labor dispute or written charge of unfair labor
practice (other than routine individual grievances), or, to the
knowledge of BIZ, any material activity or proceeding by a labor union
or representative thereof to organize any employees of BIZ or BCP; or
(o) any agreement or arrangement made by BIZ or BCP to take any
action, which, if taken prior to the date hereof, would have made any
representation or warranty, set forth in this Agreement untrue or
incorrect unless otherwise disclosed.
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3.12 CERTAIN AGREEMENTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of BIZ or BCP, under any of the BIZ Employee Plans, BIZ Benefit
Arrangements or otherwise, (ii) materially increase any benefits otherwise
payable under any of the BIZ Employee Plans, the BIZ Benefit Arrangements or
otherwise or (iii) result in the acceleration of the time of payment or vesting
of any benefits.
3.13 TAXES. For purposes of this Agreement, "Tax" or collectively
"Taxes" means any and all federal, state, local, and foreign taxes, assessments,
and other governmental charges, duties, impositions, and liabilities, including
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, estimated, excise and property taxes, together
with all interest, penalties, and additions imposed with respect to those
amounts and any obligations under any agreements or arrangements with any other
person with respect to those amounts and including any liability for taxes of a
predecessor entity. For purposes of this Agreement, "Income Tax" or collectively
"Income Taxes" means any Tax on income, including any interest, penalty or
addition thereto.
(a) As of the Closing, BIZ and each consolidated, combined or
unitary group of which BIZ is a member ("BIZ Group") will have prepared
and filed all required material federal, state, local, and foreign
returns, information statements, and reports relating to any and all
Taxes ("Returns") of BIZ or any BIZ Group that it was required to file,
and each such Return was true, correct, and complete in all material
respects;
(b) As of the Closing, BIZ and any BIZ Group: (A) will have paid
or accrued in accordance with generally accepted accounting principles
all material Taxes concerning or attributable to BIZ and any BIZ Group
relating to periods ending on or before the month-end prior to the
Closing regardless of whether reflected on BIZ's or any BIZ Group's
Returns and (B) will have withheld with respect to their employees all
federal and state income taxes, FICA, FUTA and other Taxes which, to
BIZ's knowledge, were required to be withheld;
(c) Neither BIZ nor any member of any BIZ Group has any material
Tax deficiency outstanding, proposed in writing or as to which any
director of officer has actual knowledge or assessed, nor has BIZ or any
member of any BIZ Group executed any waiver of the statute of
limitations on or extending the period for the assessment or collection
of any Taxes;
(d) No audit or other examination of any Return of BIZ or any
member of any BIZ Group is presently in progress, nor, to BIZ's
knowledge, has BIZ or any member of any BIZ Group been notified of any
request for an audit or examination;
(e) As of December 31, 2000, neither BIZ nor any member of any
BIZ Group has any material liabilities for unpaid federal, state, local
and foreign Taxes which have not been accrued or reserved in accordance
with generally accepted accounting principles on the BIZ Balance Sheet;
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(f) BIZ has made available to Litronic copies of all federal and
state income and all state sales and use Tax returns for all periods
since BIZ's inception;
(g) There are (and as of the Closing there will be) no liens,
pledges, security interests or other encumbrances of any sort ("Liens")
on the assets of BIZ for Taxes other than Liens for Taxes not yet due
and payable;
(h) To BIZ's knowledge, BIZ has not taken or omitted to take any
action relating or attributable to Taxes that would result in any Lien
on the assets of BIZ or any member of any BIZ Group other than Liens for
Taxes not yet due and payable.
(i) None of the assets of BIZ or any member of any BIZ Group is
treated as "tax-exempt use property" within the meaning of Code Section
168(h);
(j) Neither BIZ nor any member of any BIZ Group has filed any
consent agreement under Code Section 341(f) or agreed to have Code
Section 341(f) apply to any disposition of a "subsection (f) asset" (as
defined in Code Section 341(f)(4)) owned by BIZ or any member of any BIZ
Group;
(k) Neither BIZ nor any member of any BIZ Group is a party to any
material Tax sharing, allocation, indemnification or similar Tax
agreement or arrangement, nor does BIZ or any member of any BIZ Group
owe any amount under any such agreement or arrangement;
(l) No Return of BIZ or any member of any BIZ Group contains a
disclosure statement under Code Section 6662 (or predecessor provision)
or any similar provision of state, local or foreign law;
(m) Neither BIZ nor any member of any BIZ Group is or has been at
any time a "United States real property holding corporation" within the
meaning of Code Section 897(c)(2) during the applicable period specified
in Code Section 897(c)(1)(A)(ii);
(n) No material indebtedness of BIZ or any member of any BIZ
Group consists of "corporate acquisition indebtedness" within the
meaning of Code Section 279;
(o) Neither BIZ nor any member of any BIZ Group has taken any
action not in accordance with past practice that would have the effect
of deferring any material Tax liability of BIZ or any member of any BIZ
Group from any period ending on before the Closing Date to any taxable
period ending after the Closing Date;
(p) Neither BIZ nor any member of any BIZ Group was acquired in a
"qualified stock purchase" under Code Section 338(d)(3), and no
elections under Code Section 338(g), protective carryover basis
elections or offset prohibition elections are applicable to BIZ or any
predecessor corporations; and
(q) The tax bases of the assets of BIZ and of the members of any
BIZ Group for purposes of determining future amortization, depreciation
and other federal income tax deductions are, in all material respects,
accurately reflected on the tax books and
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records of BIZ and of the members of any BIZ Group (which means, for
purposes of this clause (xvii), that any inaccurate reflection of such
tax bases would not result in the loss of a material Tax deduction which
is not able to be offset by a refund resulting from amendment of a prior
year's Return).
3.14 INTELLECTUAL PROPERTY.
(a) BIZ and BCP own or have acquired (by license or otherwise)
all material Intellectual Property Rights (as defined below), including
rights to make, use and sell goods and services, as necessary or
required for the conduct of their respective businesses as presently
conducted (such Intellectual Property Rights being referred to as the
"BIZ IP Rights"), and these rights are reasonably sufficient for the
conduct of its business;
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not
constitute a material breach of any instrument or agreement governing
any BIZ IP Rights ("BIZ IP Rights Agreements"), will not cause the
forfeiture or termination or give rise to a right of forfeiture or
termination of any BIZ IP Right or materially impair the right of BIZ or
Litronic to use, sell or license any BIZ IP Right or portion thereof
(except where the breach, forfeiture or termination would not have a
Material Adverse Effect on BIZ);
(c) Neither the manufacture, marketing, license, sale or intended
use of any product currently licensed or sold by BIZ or BCP or currently
under development by BIZ or BCP violates any license or agreement
between BIZ or BCP and any third party or, to the knowledge of BIZ,
infringes any Intellectual Property Right of any other party; and there
is no pending or, to the knowledge of BIZ, threatened claim or
litigation contesting the validity, ownership or right to use, sell,
license or dispose of any BIZ IP Right nor, to the knowledge of BIZ, is
there any basis for any claim, nor has BIZ received any written notice
asserting that any BIZ IP Right or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any
other party, nor, to the actual knowledge of BIZ, is there any basis for
any assertion; and
(d) BIZ and BCP have taken reasonable and practicable steps
designed to safeguard and maintain their proprietary rights in all
material BIZ IP Rights. All officers, employees and consultants of BIZ
and BCP have executed and delivered to BIZ an agreement regarding the
protection of proprietary information and the assignment to BIZ of all
Intellectual Property Rights arising from the services performed for BIZ
or BCP by those persons. To the knowledge of BIZ, no current or prior
officer, employee or consultant of BIZ or BCP claims an ownership
interest in any BIZ IP Rights as a result of having been involved in the
development of that property while employed by or consulting to BIZ or
BCP, or otherwise.
The term "Intellectual Property Rights" means all worldwide industrial
and intellectual property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark registrations, trademark
registration applications, trade names, service marks, service ▇▇▇▇
registrations, service ▇▇▇▇ registration applications, copyrights, copyright
registrations, copyright registration applications, franchises, licenses,
inventories, know-how,
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trade secrets, customer lists, proprietary processes and formulae, all source
and object codes, algorithms, architecture, structure, display screens, layouts,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records.
3.15 FEES AND EXPENSES. Neither BIZ nor BCP has paid or become obligated
to pay any fee or commission to any broker, finder or similar intermediary in
connection with the transactions contemplated by this Agreement.
3.16 ENVIRONMENTAL MATTERS.
(a) To BIZ's knowledge, none of the properties or facilities
owned or leased by BIZ or BCP as of the date hereof ("BIZ Facilities")
is in violation of any federal, state or local law, ordinance,
regulation, permit or order relating to industrial health and safety or
to the environmental conditions on, under or about the properties or
facilities, (including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.),
the Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. 2601 et seq.), the Occupational Safety and Health Act (29
U.S.C. 651 et seq.) and the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. 11001 et seq.)) (collectively, the
"Environmental Laws") except where the violations would not constitute a
Material Adverse Effect. During the time that BIZ or BCP has owned or
leased the BIZ Facilities, neither BIZ nor BCP nor, to BIZ's knowledge,
any third party, has engaged in any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, dumping or disposing ("Release") on,
under or about the BIZ Facilities of any chemicals, materials,
substances, or items in any form, whether solid, liquid, gaseous,
semisolid, or any combination thereof, which because of their physical,
chemical, or other characteristics may pose a risk of endangering human
health or safety or of degrading the environment and are regulated under
any Environmental Law ("Hazardous Materials").
(b) During the time that BIZ or BCP has owned or leased the BIZ
Facilities, there has been no litigation brought or, to the knowledge of
BIZ, threatened against BIZ by, or any settlement reached by BIZ or BCP
with, any party or parties alleging the Release or threatened Release of
any Hazardous Materials on, from or under any of the BIZ Facilities.
3.17 INTERESTED PARTY TRANSACTIONS. No officer or director of BIZ or any
"affiliate" or "associate" (as those terms are defined in Rule 405 promulgated
under the Securities Act) of any such person has had, either directly or
indirectly, a material interest in: (i) any person or entity which purchases
from or sells, licenses or furnishes to BIZ or BCP any material amount of goods,
property, technology or intellectual or other property rights or services; or
(ii) any material contract or agreement to which BIZ or BCP is a party or by
which it may be bound or affected.
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3.18 VOTE REQUIRED. The affirmative vote of a majority of the votes that
holders of the outstanding shares of (i) BIZ Common Stock and (ii) BIZ Preferred
Stock, each voting as a separate class, are entitled to cast are the only votes
of the holders of any class or series of BIZ's capital stock necessary to
approve this Agreement and the Merger.
3.19 DISCLOSURE. No representation or warranty made by BIZ in this
Agreement, nor any schedule, certificate or exhibit prepared and furnished or to
be prepared and furnished by BIZ or its representatives pursuant hereto, when
taken together, contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading in light of the circumstances under which they were
made.
3.20 RESTRICTIONS ON BUSINESS ACTIVITIES. Other than this Agreement,
there is no material agreement, judgment, injunction, order or decree binding
upon BIZ or BCP that has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of BIZ or BCP, any
acquisition of property by BIZ or BCP or the conduct of business by BIZ or BCP
as currently conducted.
3.21 ACCOUNTS RECEIVABLE. The accounts receivable shown on the BIZ
Balance Sheet as of the BIZ Balance Sheet Date, or thereafter acquired prior to
the date hereof, have been or are (as the case may be) collectible within 120
days from the Closing Date (or, if later, when due) in amounts not materially
less than the aggregate amounts thereof carried on the books of BIZ reduced by
the reserves for discounts and bad debts taken on the BIZ Balance Sheet.
3.22 PERSONAL PROPERTY. Other than the BIZ Intellectual Property Rights
(which are the subject of Section 3.14), BIZ and BCP have good title, free and
clear of all title defects, objections and liens, including without limitation,
leases, chattel mortgages, conditional sales contracts, collateral security
arrangements and other title or interest-retaining arrangements (other than
liens for taxes not yet delinquent and liens, objections, encumbrances and title
defects which are not material in character, amount or extent and which do not
materially interfere with the use of the asset subject thereto or affected
thereby), to all of its machinery, equipment, furniture, inventory and other
personal property. All tangible personal property used in and material to the
business of BIZ and BCP is in good operating condition (ordinary wear and tear
excepted). All of the leases to personal property utilized in the business of
BIZ and BCP are valid and enforceable against BIZ or BCP (except as
enforceability may be subject to bankruptcy, insolvency, reorganization or other
laws affecting or relating to enforcement of creditors' rights generally and by
general equitable principles, regardless of whether considered at law or in
equity) and neither BIZ nor BCP is in material default thereunder and, to the
knowledge of BIZ, none of the other parties thereto is in material default
thereof, except in each case where the unenforceability or default would not
have a Material Adverse Effect with respect to BIZ.
3.23 REAL PROPERTY. Neither BIZ nor BCP owns any real property. The BIZ
Disclosure Schedule contains a list of all leases for real property to which BIZ
or BCP is a party, the square footage leased with respect to each lease and the
expiration date of each lease. These leases are valid and enforceable
obligations of BIZ or BCP (except as enforceability may be subject to
bankruptcy, insolvency, reorganization or other laws affecting or relating to
enforcement of
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creditors' rights generally and by general equitable principles, regardless of
whether considered at law or in equity) and neither BIZ or BCP is in material
default of any material provision thereof. To the knowledge of BIZ, the real
property leased or occupied by BIZ or BCP, the improvements located thereon, and
the furniture, fixtures and equipment relating thereto (including plumbing,
heating, air conditioning and electrical systems), conform to any and all
applicable health, fire, safety, zoning, land use and building laws, ordinances
and regulations except where the failure to so conform would not reasonably be
expected to have a Material Adverse Effect on BIZ. There are no outstanding
contracts made by BIZ or BCP for any improvements made to the real property
leased or occupied by BIZ or BCP that have material amounts remaining unpaid
thereunder.
3.24 WARRANTIES. Neither BIZ nor BCP has made any warranties or
guarantees relating to its products other than in the ordinary course of
business or as implied or required by law. The BIZ Disclosure Schedule contains
a list of all warranty and indemnification obligations of BIZ or BCP, other than
as implied or required by law, relating to patents and other proprietary rights.
3.25 CONTRACTS. The BIZ Disclosure Schedule lists all oral or written
agreements, notes, instruments, or contracts to which BIZ or BCP is a party or
by which its assets or properties may be bound, in each case as of the date
hereof, which involve the future payment or receipt of more than $100,000 (on an
annual basis), or which have a term of more than one year, or which involve any
material BIZ IP Rights, or which are employment or consulting agreements ("BIZ
Contracts"). Neither BIZ nor BCP is in default in performance of its obligations
under any material provisions of the BIZ Contracts, except for defaults that
would not have a Material Adverse Effect on BIZ. BIZ has no knowledge of any
material violation of any BIZ Contract by any other party thereto.
3.26 PRODUCTS AND DISTRIBUTION.
(a) The BIZ Disclosure Schedule sets forth, for each BIZ Product
(as defined below), the following: (i) a list of all material contracts
and agreements (including without limitation all material development,
trademark license, technology license, distribution or other agreements)
relating to the BIZ Product (provided, however, that with respect to
distribution agreements, clause (iv) shall apply); (ii) whether the BIZ
Product has been developed internally (i.e., substantially entirely by
employees of BIZ or BCP) or externally (i.e., including substantive
contributions by one or more independent contractors to BIZ or BCP) and,
if externally, the BIZ Disclosure Schedule sets forth the identity of
the significant independent contractors and a list of the material
agreements with those independent contractors; (iii) the material
advances paid or payable, and the material royalties payable, to any
third parties with respect to that BIZ Product; and (iv) a copy of BIZ's
standard distribution agreement used with respect to that BIZ Product
together with a description of the territories in which BIZ or BCP have
granted distribution rights with respect to that BIZ Product.
(b) The BIZ Disclosure Schedule sets forth, for each BIZ Product
Under Development, the following (as of the date of this Agreement): (i)
the currently scheduled public availability date without regard to the
Merger (which dates BIZ believes to be reasonable); (ii) a schedule of
development milestone events and any material related
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payments, including both milestones already achieved in the past six
months and those scheduled for the future; and (iii) whether any
significant development milestone for the BIZ Product has been missed in
the past six months by more than 30 days.
(c) For purposes of this Section 3.26, "BIZ Developed Products"
means products developed, sold, published and/or distributed by BIZ or
BCP. "BIZ Products Under Development" means products under development
or consideration by BIZ or BCP with a scheduled ship date on or prior to
December 31, 2001. "BIZ Products" includes both BIZ Developed Products
and BIZ Products Under Development.
4. REPRESENTATIONS AND WARRANTIES OF LITRONIC.
Except as set forth in a schedule dated the date of this Agreement and
delivered by Litronic to BIZ concurrently herewith ("Litronic Disclosure
Schedule") specifically identifying the Section of this Agreement requiring the
delivery of the disclosure, Litronic hereby represents and warrants to BIZ as
set forth below. In this Agreement, any reference to any event, change or effect
being "material" with respect to any entity or group of entities means any
material event, change or effect related to the condition (financial or
otherwise), properties, assets, liabilities, businesses, operations, results of
operations or prospects of such entity or group of entities taken as a whole. In
this Agreement, the term "Material Adverse Effect" used in connection with a
party or any of that party's subsidiaries means any event, change or effect that
is, singly or in the aggregate, materially adverse to the condition (financial
or otherwise), properties, assets, liabilities, businesses, operations, results
of operations or prospects of that party and its subsidiaries, taken as a whole;
provided, however, that a Material Adverse Effect shall not include any adverse
effect resulting from general economic conditions or conditions affecting the
engineering software market. In this Agreement, a "subsidiary" means a
corporation, partnership or other entity in which a party owns directly or
indirectly more than 50% of the voting stock, equity interests or beneficial
interests. In this Agreement, "knowledge" means actual knowledge, and with
respect to any party that is an entity, the entity shall not be deemed to have
knowledge of any particular fact or matter unless any member of the Board of
Directors or any executive officer (within the meaning of Rule 405 under the
Securities Act of 1933, as amended) of the entity has actual knowledge thereof.
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Litronic and
each of its subsidiaries ("Litronic Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes qualification necessary, other than
in jurisdictions where the failure to so qualify or be in good standing would
not have a Material Adverse Effect. The Litronic Disclosure Schedule sets forth
a correct and complete list of the Litronic Subsidiaries. Litronic has made
available to BIZ or its counsel complete and correct copies of the certificates
or articles of incorporation and bylaws (or similar charter documents) of
Litronic and each of the Litronic Subsidiaries, in each case as amended to the
date of this Agreement, and copies of all minutes of meetings and actions by
written consent of stockholders, directors and board committees of each such
entity.
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4.2 CAPITAL STRUCTURE.
4.2.1 STOCK, OPTIONS AND WARRANTS. The authorized capital stock
of Litronic consists of 25,000,000 shares of Common Stock, $0.01 par
value ("Litronic Common Stock"), and 5,000,000 shares of Preferred
Stock, $0.01 par value ("Litronic Preferred Stock"). At the close of
business on July 2, 2001, 9,747,526 shares of Litronic Common Stock were
issued and outstanding, and 548,142 shares of Litronic Common Stock were
reserved for issuance upon the exercise of outstanding options
("Litronic Options") and outstanding warrants ("Litronic Warrants") to
purchase Litronic Common Stock and 954,858 shares of Litronic Common
Stock were reserved for future option grants. No shares of Litronic
Preferred Stock are issued or outstanding. All outstanding shares of
Litronic Common Stock are validly issued, fully paid and nonassessable
and not subject to preemptive rights and were not issued in violation of
any preemptive rights. Litronic has made available to BIZ true and
correct copies of its 1998 and 1999 Stock Option Plans (each a "Litronic
Plan" and collectively, the "Litronic Plans"), and the Litronic
Disclosure Schedule contains a correct and complete list of each
Litronic Option and Litronic Warrant outstanding as of the date hereof,
including the name of the holder of each Litronic Option or Litronic
Warrant, the Litronic Plan (if any) pursuant to which the Litronic
Option or Litronic Warrant was issued, the security and number of shares
covered by each Litronic Option or Litronic Warrant, the per share
exercise price of the Litronic Option or Litronic Warrant and the
vesting schedule applicable to each Litronic Option or Litronic Warrant.
Litronic Disclosure Schedules list all option agreements that contain
accelerated vesting upon change of control provisions along with the
material terms of such option agreements.
4.2.2 NO OTHER COMMITMENTS. Except for the Litronic Options and
Litronic Warrants disclosed in or pursuant to Section 4.2.1, there are
no options, warrants, calls, rights, commitments, conversion rights,
exchange rights or agreements of any character to which Litronic or any
of the Litronic Subsidiaries is a party or by which Litronic or any of
the Litronic Subsidiaries is bound obligating Litronic or any of the
Litronic Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock of Litronic or any of the
Litronic Subsidiaries or securities convertible into or exchangeable for
shares of capital stock of Litronic or any of the Litronic Subsidiaries,
or obligating Litronic or any of the Litronic Subsidiaries to grant,
extend or enter into any such option, warrant, call, right, commitment,
conversion right or agreement. There are no voting trusts or other
agreements or understandings to which Litronic or any of the Litronic
Subsidiaries is a party with respect to the voting of the capital stock
of Litronic or any of the Litronic Subsidiaries. There are no put
agreements or registration rights agreements, or any other agreements of
any character or nature to which Litronic is a party or by which
Litronic is bound, obligating Litronic to purchase or register, or cause
to be purchased or registered, any shares of capital stock of Litronic
or securities convertible into or exchangeable for shares of capital
stock of Litronic.
4.3 AUTHORITY.
4.3.1 CORPORATE ACTION. Litronic has all requisite corporate
power and authority to enter into this Agreement and, subject to
approval of this Agreement, the
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Merger Agreement and the Merger by the stockholders of Litronic, to
perform its obligations hereunder and to consummate the Merger and the
other transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Litronic and, subject to approval of this
Agreement, the Merger Agreement and the Merger by the stockholders of
Litronic, the consummation by Litronic and Litronic Merger Corp. of the
Merger and the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Litronic and
Litronic Merger Corp., including any necessary approval by Litronic as
the stockholder of Litronic Merger Corp. This Agreement has been duly
executed and delivered by Litronic and is the valid and binding
obligation of Litronic, enforceable in accordance with its terms, except
that enforceability may be subject to (i) bankruptcy, insolvency,
reorganization or other laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles
regardless of whether considered at law or in equity.
4.3.2 NO CONFLICT. Neither the execution, delivery and
performance of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby or thereby nor
compliance with the provisions hereof or thereof will: (i) conflict
with, or result in any violations of, or cause a default (with or
without notice or lapse of time, or both) under, or give rise to a right
of termination, amendment, cancellation or acceleration of any
obligation contained in, or the loss of any material benefit under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the material properties or assets of Litronic or
any of the Litronic Subsidiaries under, any term, condition or provision
of (x) the certificate or articles of incorporation or bylaws (or
similar charter documents) of Litronic or any of the Litronic
Subsidiaries or (y) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other material agreement, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Litronic or
any of the Litronic Subsidiaries or their respective properties or
assets, other than any such conflicts, violations, defaults, losses,
liens, security interests, charges or encumbrances which, individually
or in the aggregate, would not have a Material Adverse Effect; or (ii)
require the affirmative vote of the holders of greater than a majority
of the issued and outstanding shares of Litronic Common Stock.
4.3.3 CONSENTS.
(a) No Governmental Consent is required to be obtained by
Litronic or any of the Litronic Subsidiaries in connection with the
execution and delivery of this Agreement or the Merger Agreement or the
consummation of the transactions contemplated hereby or thereby, except
for: (i) the filing with the SEC of the Proxy Statement relating to the
meeting of the stockholders of Litronic ("Litronic Stockholders
Meeting") to be held with respect to the approval by Litronic's
stockholders of this Agreement, the Merger and the issuance of shares of
Litronic Common Stock pursuant to the Merger, and such reports and
information under the Exchange Act and the rules and regulations
promulgated by the SEC thereunder, as may be required in connection with
this Agreement and the transactions contemplated hereby; (ii) the filing
of the Merger Agreement with the Secretary of State of Delaware and
appropriate documents with the relevant authorities of
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other states in which Litronic is qualified to do business; (iii) such
filings, authorizations, orders and approvals as may be required under
State Takeover Laws; (iv) such filings, authorizations, orders and
approvals as may be required under foreign laws, state securities laws
and the Bylaws of the National Association of Securities Dealers, Inc.
("NASD"); and (v) where the failure to obtain or make such Governmental
Consents would not prevent or materially delay the consummation of the
Merger or otherwise prevent Litronic from performing its obligations
under this Agreement and would not reasonably be expected to have a
Material Adverse Effect on Litronic and the Litronic Subsidiaries taken
as a whole.
(b) No other consent is required to be obtained by Litronic or
any of the Litronic Subsidiaries in connection with the execution and
delivery of this Agreement or the Merger Agreement or the consummation
of the transactions contemplated hereby or thereby.
4.4 SEC DOCUMENTS.
4.4.1 SEC REPORTS. Litronic has made available to BIZ or its
counsel correct and complete copies of each report, schedule,
registration statement and definitive proxy statement filed by Litronic
with the SEC on or after June 11, 1999 ("Litronic SEC Documents"), which
are all the documents (other than preliminary material) that Litronic
was required to file with the SEC on or after that date. In addition,
Litronic has made available to BIZ all exhibits to the Litronic SEC
Documents filed prior to the date hereof which are (i) requested by BIZ
and (ii) are not available in complete form through ▇▇▇▇▇ ("Requested
Confidential Exhibits") and will promptly make available to BIZ all
Requested Confidential Exhibits to any additional Litronic SEC Documents
filed prior to the Effective Time. As of their respective dates or, in
the case of registration statements, their effective dates (or if
amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing), none of the Litronic SEC Documents
(including all exhibits and schedules thereto and documents incorporated
by reference therein) contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the
Litronic SEC Documents complied when filed in all material respects with
the then applicable requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations promulgated by
the SEC thereunder. Litronic has filed all documents and agreements that
were required to be filed as exhibits to the Litronic SEC Documents and
all material contracts so filed (and those to be filed with any Litronic
SEC Documents) as exhibits are in full force and effect except those
which have expired in accordance with their terms, and neither Litronic
nor any of the Litronic Subsidiaries is in default thereunder. The
Litronic Disclosure Schedule lists such material contracts required to
be filed with the SEC that have not yet been filed with any Litronic SEC
Documents.
4.4.2 FINANCIAL STATEMENTS. The financial statements of Litronic
included in the Litronic SEC Documents (including, in each case, any
related notes) complied as to form in all material respects with the
then applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in
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accordance with GAAP applied on a consistent basis during the periods
involved (except as may have been indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Form 10-Q) and
fairly present the consolidated financial position of Litronic and the
Litronic Subsidiaries as at the respective dates thereof and the results
of the operations and cash flows of Litronic and the Litronic
Subsidiaries for the respective periods then ended.
4.4.3 CERTAIN LIABILITIES. The consolidated balance sheet of
Litronic as of December 31, 2000 is referred to herein as the "Litronic
Balance Sheet." At the date of the Litronic Balance Sheet ("Litronic
Balance Sheet Date"), Litronic had no liabilities or obligations,
secured or unsecured (whether accrued or absolute) and of a nature
required to be reflected in the liabilities column of a balance sheet
prepared in accordance with GAAP, not reflected on the Litronic Balance
Sheet or the accompanying notes thereto.
4.4.4 ABSENCE OF CERTAIN CHANGES. Since the Litronic Balance
Sheet Date, there has not occurred:
(a) a Material Adverse Effect with respect to Litronic and the
Litronic Subsidiaries, taken as a whole;
(b) any amendments or changes in Litronic's certificate of
incorporation or bylaws;
(c) any damage to, destruction of or loss of any assets of
Litronic (whether or not covered by insurance) that resulted or would
reasonably be expected to result in a Material Adverse Effect on
Litronic;
(d) any agreement or arrangement made by Litronic to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement untrue or
incorrect unless otherwise disclosed;
(e) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to
any of the capital stock of Litronic or any of the Litronic
Subsidiaries;
(f) any acquisition or sale of a material amount of property or
assets other than in the ordinary course of business consistent with
past practices;
(g) any (A) incurrence, assumption or guarantee by Litronic of
any debt for borrowed money other than pursuant to credit lines or loan
agreements disclosed in the Litronic Disclosure Schedule, Litronic's
Form 10-K filed on April 19, 2001, Form 10-K/A No. 1 filed on April 30,
2001 or Form 10-Q filed on May 15, 2001; (B) issuance or sale of any
securities convertible into or exchangeable for debt securities of
Litronic; or (C) issuance or sale of options or other rights to acquire
from Litronic, directly or indirectly, debt securities of Litronic or
any securities convertible into or exchangeable for any such debt
securities;
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(h) any creation or assumption by Litronic of any mortgage,
pledge, security interest or line or other encumbrance on any material
asset (other than liens for taxes not yet delinquent and liens and
encumbrances which are not material in character, amount or extent and
which do not materially interfere with the use of the asset subject
thereto or affected thereby);
(i) any entering into, amendment of, relinquishment, termination
or non-renewal by Litronic or any of the Litronic Subsidiaries of any
material contract, lease commitment or other material right or
obligation other than in the ordinary course of business;
(j) any material change in accounting methods, principles or
practices by Litronic.
(k) any redemption, repurchase or other acquisition of shares of
capital stock of Litronic or any of the Litronic Subsidiaries (other
than pursuant to arrangements with terminated employees or consultants),
or any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any
capital stock of Litronic or any of the Litronic Subsidiaries;
(l) any material increase in or modification of the compensation
or benefits payable or to become payable by Litronic or any of the
Litronic Subsidiaries to any of its directors or employees, except in
the ordinary course of business consistent with past practice;
(m) any material increase in or modification of any bonus,
pension, insurance or any of the Litronic Employee Plans or Litronic
Benefit Arrangements (including, but not limited to, the granting of
stock options, restricted stock awards or stock appreciation rights)
made to, for or with any of its employees, other than in the ordinary
course of business consistent with past practice;
(n) any alteration in any term of any outstanding security of
Litronic or any of the Litronic Subsidiaries other than as required
under the terms thereof;
(o) any making of any loan, advance or capital contribution to or
investment in any person other than (i) travel loans or advances made in
the ordinary course of business, (ii) other loans and advances in an
aggregate amount which does not exceed $25,000 outstanding at any time
and (iii) purchases on the open market of liquid, publicly traded
securities;
(p) any transfer or grant of a right under Litronic's
Intellectual Property Rights (as defined in Section 3.14), other than in
the ordinary course of business; or
(q) any material labor dispute or written charge of unfair labor
practice (other than routine individual grievances), or, to the
knowledge of Litronic, any material activity or proceeding by a labor
union or representative thereof to organize any employees of Litronic or
any of the Litronic Subsidiaries.
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4.5 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Litronic in writing for inclusion or incorporation by reference in
the Proxy Statement will, at the date the Proxy Statement is mailed to the
stockholders of Litronic, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder.
4.6 LITIGATION. There is no suit, action, arbitration, demand, claim or
proceeding pending or, to the knowledge of Litronic, threatened against Litronic
or any of the Litronic Subsidiaries in connection with or relating to the
transactions contemplated by this Agreement or of any action taken or to be
taken in connection herewith or the consummation of the transactions
contemplated hereby. There is no suit, action, arbitration, demand, claim or
proceeding pending or, to the best knowledge of Litronic, threatened against
Litronic or any of the Litronic Subsidiaries, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Litronic or any of the Litronic Subsidiaries that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect
with respect to Litronic.
4.7 FEES AND EXPENSES. Neither Litronic nor any Litronic Subsidiary has
paid or become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
4.8 INTERESTED PARTY TRANSACTIONS. Except as disclosed under Item 12 of
Litronic's most recent Form 10-K or under the "Certain Transactions" section of
the Proxy Statement, no officer or director of Litronic or any "affiliate" or
"associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of any such person has had, either directly or indirectly, a
material interest in: (i) any person or entity which purchases from or sells,
licenses or furnishes to Litronic or any of the Litronic Subsidiaries any
material amount of goods, property, technology or intellectual or other property
rights or services; or (ii) any material contract or agreement to which Litronic
or any of the Litronic Subsidiaries is a party or by which it may be bound or
affected.
4.9 BOARD APPROVAL. The Board of Directors of Litronic has, on or prior
to the date hereof, unanimously (i) approved this Agreement, the Merger
Agreement and the Merger, (ii) determined that the Merger is in the best
interests of the stockholders of Litronic and are on terms that are fair to the
stockholders and (iii) recommended that the stockholders of Litronic approve
this Agreement and the Merger.
4.10 VOTE REQUIRED. The affirmative vote of a majority of the votes that
holders of the outstanding shares of Litronic Common Stock are entitled to cast
is the only vote of the holders of any class or series of Litronic capital stock
necessary to approve this Agreement and the Merger.
4.11 DISCLOSURE. No representation or warranty made by Litronic in this
Agreement, nor any schedule, certificate or exhibits prepared and furnished or
to be prepared and furnished
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by Litronic or its representatives pursuant hereto or in connection with the
transactions contemplated hereby, when taken together, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in light
of the circumstances under which they were furnished.
4.12 FAIRNESS OPINION. Litronic's Board of Directors has received a
written opinion from L.H. Friend, Weinress, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC that as of
July 2, 2001, the consideration to be paid by Litronic in the Merger is fair to
Litronic and its stockholders from a financial point of view.
4.13 SHARES OF LITRONIC COMMON STOCK. The shares of Litronic Common
Stock to be issued pursuant to the Merger will, when issued and delivered
pursuant to the Merger, and the shares of Litronic Common Stock to be issued
pursuant to the Assumed Options will, when issued and delivered to the holders
thereof on payment of the consideration provided for therein, be validly issued,
fully paid and non-assessable.
4.14 COMPLIANCE WITH APPLICABLE LAWS. The businesses of Litronic and the
Litronic Subsidiaries are not being conducted in violation of any law,
ordinance, regulation, rule, permit or order of any Governmental Entity where
the violation would have a Material Adverse Effect on Litronic. Litronic has not
been notified by any Governmental Entity that any investigation or review with
respect to Litronic or any of the Litronic Subsidiaries is pending or
threatened, nor has any Governmental Entity notified Litronic of its intention
to conduct an investigation or review. Litronic and the Litronic Subsidiaries
have all permits, licenses and franchises from Governmental Entities required to
conduct their businesses as now being conducted, except for those whose absence
would not have a Material Adverse Effect with respect to Litronic.
4.15 INTELLECTUAL PROPERTY.
(a) Litronic and the Litronic Subsidiaries own or have acquired
(by license or otherwise) all material Intellectual Property Rights (as
defined in Section 3.14), including rights to make, use and sell goods
and services, as necessary or required for the conduct of their
respective businesses as presently conducted (such Intellectual Property
Rights being referred to as the "Litronic IP Rights"), and these rights
are reasonably sufficient for the conduct of their respective
businesses.
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not
constitute a material breach of any instrument or agreement governing
any Litronic IP Rights, will not cause the forfeiture or termination or
give rise to a right of forfeiture or termination of any Litronic IP
Right or materially impair the right of Litronic to use, sell or license
any Litronic IP Right or portion thereof (except where the breach,
forfeiture or termination would not have a Material Adverse Effect on
Litronic).
(c) Neither the manufacture, marketing, license, sale or intended
use of any product currently licensed or sold by Litronic or any of the
Litronic Subsidiaries or currently under development by Litronic or any
of the Litronic Subsidiaries violates any license or agreement between
Litronic or any of the Litronic Subsidiaries and any third
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party or, to the knowledge of Litronic, infringes any Intellectual
Property Right of any other party; and there is no pending or, to the
knowledge of Litronic, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any
Litronic IP Right nor, to the knowledge of Litronic, is there any basis
for any claim, nor has Litronic received any written notice asserting
that any Litronic IP Right or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any
other party, nor, to the actual knowledge of Litronic, is there any
basis for any assertion.
(d) Litronic and any of the Litronic Subsidiaries have taken
reasonable and practicable steps designed to safeguard and maintain
their proprietary rights in all material Litronic IP Rights. All
officers, employees and consultants of Litronic and any of the Litronic
Subsidiaries have executed and delivered to Litronic an agreement
regarding the protection of proprietary information and the assignment
to Litronic of all Intellectual Property Rights arising from the
services performed for Litronic or any of the Litronic Subsidiaries by
those persons. To the knowledge of Litronic, no current or prior
officer, employee or consultant of Litronic or any of the Litronic
Subsidiaries claims an ownership interest in any Litronic IP Rights as a
result of having been involved in the development of that property while
employed by or consulting to Litronic or any of the Litronic
Subsidiaries, or otherwise.
4.16 TAXES.
(a) As of the Closing, Litronic and each consolidated, combined
or unitary group of which Litronic is a member ("Litronic Group") will
have prepared and filed all required of Litronic or any Litronic Group
that it was required to file, and each such Litronic or Litronic Group's
Return was true, correct, and complete in all material respects;
(b) As of the Closing, Litronic and any Litronic Group: (A) will
have paid or accrued in accordance with generally accepted accounting
principles all material Taxes concerning or attributable to Litronic and
any Litronic Group relating to periods ending on or before the month-end
prior to the Closing regardless of whether reflected on Litronic or
Litronic Group's Returns and (B) will have withheld with respect to
their employees all federal and state income taxes, FICA, FUTA and other
Taxes which, to Litronic's knowledge, were required to be withheld;
(c) Neither Litronic nor any member of any Litronic Group has any
material Tax deficiency outstanding, proposed in writing or as to which
any director of officer has actual knowledge or assessed, nor has
Litronic or any member of any Litronic Group executed any waiver of the
statute of limitations on or extending the period for the assessment or
collection of any Taxes;
(d) No audit or other examination of any Return of Litronic or
any member of any Litronic Group is presently in progress, nor, to
Litronic's knowledge, has Litronic or any member of any Litronic Group
been notified of any request for an audit or examination;
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(e) As of December 31, 2000, neither Litronic nor any member of
any Litronic Group has any material liabilities for unpaid federal,
state, local and foreign Taxes which have not been accrued or reserved
in accordance with generally accepted accounting principles on the
Litronic Balance Sheet;
(f) Litronic has made available to BIZ copies of all federal and
state income and all state sales and use Tax returns for all periods
since January 1, 1997;
(g) There are (and as of the Closing there will be) no Liens on
the assets of Litronic or any member of any Litronic Group for Taxes
other than Liens for Taxes not yet due and payable;
(h) To Litronic's knowledge, Litronic has not taken or omitted to
take any action relating or attributable to Taxes which would result in
any Lien on the assets of Litronic or any member of any Litronic Group
other than Liens for Taxes not yet due and payable.
(i) None of the assets of Litronic or any member of any Litronic
Group is treated as "tax-exempt use property" within the meaning of Code
Section 168(h);
(j) Neither Litronic nor any member of any Litronic Group has
filed any consent agreement under Code Section 341(f) or agreed to have
Code Section 341(f) apply to any disposition of a "subsection (f) asset"
(as defined in Code Section 341(f)(4)) owned by Litronic or any member
of any Litronic Group;
(k) Neither Litronic nor any member of any Litronic Group is a
party to any material tax sharing, allocation, indemnification or
similar agreement or arrangement, nor does Litronic or any member of any
Litronic Group owe any amount under any such agreement or arrangement;
(l) No Return of Litronic or any member of any Litronic Group
contains a disclosure statement under Code Section 6662 (or predecessor
provision) or any similar provision of state, local or foreign law;
(m) Neither Litronic nor any member of any Litronic Group is or
has been at any time a "United States real property holding corporation"
within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii);
(n) No material indebtedness of Litronic or any member of any
Litronic Group consists of "corporate acquisition indebtedness" within
the meaning of Code Section 279;
(o) Neither Litronic nor any member of any Litronic Group has
taken any action not in accordance with past practice that would have
the effect of deferring any material Tax liability of Litronic or any
member of any Litronic Group from any period ending on before the
Closing Date to any taxable period ending after the Closing Date;
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(p) Neither Litronic nor any member of any Litronic Group was
acquired in a "qualified stock purchase" under Code Section 338(d)(3),
and no elections under Code Section 338(g), protective carryover basis
elections or offset prohibition elections are applicable to Litronic or
any member of any Litronic Group or any predecessor corporations of any
of them; and
(q) The tax bases of the assets of Litronic and of the members of
any Litronic Group for purposes of determining future amortization,
depreciation and other federal income tax deductions are, in all
material respects, accurately reflected on the tax books and records of
Litronic and of the members of any Litronic Group (which shall mean, for
purposes of this clause (xvii), that any inaccurate reflection of such
tax bases would not result in the loss of a material Tax deduction which
is not able to be offset by a refund resulting from amendment of a prior
year's Return).
4.17 NO INVESTMENT COMPANY. Neither Litronic nor Litronic Merger Corp.
is an "investment company" as defined in Section 368(a)(2)(F)(iii) and (iv) of
the Code.
4.18 ERISA AND OTHER COMPLIANCE.
(a) Litronic has made available to BIZ copies of (i) each
"employee benefit plan," as defined in Section 3(3) of ERISA, and (ii)
all other written or formal plans or agreements involving direct or
indirect compensation or benefits (including any employment agreements
entered into between Litronic or any of the Litronic Subsidiaries and
any employee of Litronic or any of the Litronic Subsidiaries, but
excluding workers' compensation, unemployment compensation and other
government-mandated programs) currently or previously maintained,
contributed to or entered into by Litronic or any of the Litronic
Subsidiaries under which Litronic or any of the Litronic Subsidiaries or
an ERISA Affiliate thereof has any present or future obligation or
liability (collectively, "Litronic Employee Plans"). Copies of all
Litronic Employee Plans (and, if applicable, related trust agreements)
and all amendments thereto and written interpretations thereof
(including summary plan descriptions) have been made available to BIZ or
its counsel, together with the three most recent annual reports (Form
5500, including, if applicable, Schedule B thereto) prepared in
connection with any Litronic Employee Plan. Copies of all Litronic
Employee Plans which individually or collectively would constitute an
"employee pension benefit plan," as defined in Section 3(2) of ERISA
(collectively, "Litronic Pension Plans"), have been made available to
BIZ. All contributions due from Litronic or any of the Litronic
Subsidiaries through the date hereof with respect to any of the Litronic
Employee Plans have been made as required under ERISA or have been
accrued on Litronic's financial statements as of December 31, 2000. Each
of the Litronic Employee Plans has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including, without limitation, ERISA and
the Code, which are applicable to the Litronic Employee Plans except for
noncompliance which would not have a Material Adverse Effect on
Litronic.
(b) None of the Litronic Pension Plans constitutes, or has since
the enactment of ERISA constituted, a "multiemployer plan," as defined
in Section 3(37) of ▇▇▇▇▇. ▇▇
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▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Plans are subject to Title IV of ERISA. No "prohibited
transaction," as defined in Section 406 of ERISA or Section 4975 of the
Code, has occurred with respect to any of the Litronic Employee Plans
that is covered by Title I of ERISA which would result in a material
liability to Litronic, excluding transactions effected pursuant to a
statutory or administrative exemption. Nothing done or omitted to be
done and no transaction or holding of any asset under or in connection
with any of the Litronic Employee Plans has or will make Litronic or any
officer or director of Litronic or any of the Litronic Subsidiaries
subject to any material liability under Title I of ERISA or liable for
any material tax or penalty pursuant to Sections 4972, 4975, 4976 or
4979 of the Code or Section 502 of ERISA.
(c) Any of the Litronic Pension Plans that is intended to be
qualified under Section 401(a) of the Code (a "Litronic 401(a) Plan") is
so qualified and has been so qualified during the period from its
adoption to date, and the trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code.
(d) Litronic has made available to BIZ a list of each employment,
severance or other similar contract, arrangement or policy and each plan
or arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' benefits, vacation
benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits for employees,
consultants or directors which (i) is not one of the Litronic Employee
Plans, (ii) is entered into, maintained or contributed to, as the case
may be, by Litronic or any of the Litronic Subsidiaries and (iii) covers
any employee or former employee of Litronic or any of the Litronic
Subsidiaries. The contracts, plans and arrangements described in this
paragraph 4.18(d) are referred to collectively as the "Litronic Benefit
Arrangements." Each of the Litronic Benefit Arrangements has been
maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to Litronic Benefit Arrangements.
Litronic has made available to Litronic or its counsel a complete and
correct copy or description of each of the Litronic Benefit
Arrangements.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Litronic or any of the Litronic
Subsidiaries relating to, or change in employee participation or
coverage under, any of the Litronic Employee Plans or Litronic Benefit
Arrangements that would increase materially the expense of maintaining
the Litronic Employee Plans or Litronic Benefit Arrangements above the
level of the expense incurred in respect thereof for the fiscal year
ended December 31, 2000.
(f) Litronic has provided, or will have provided prior to the
Closing, to individuals entitled thereto all required notices and
coverage pursuant to Section 4980B of the Code and the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), with
respect to any "qualifying event" (as defined in Section 4980B(f)(3) of
the Code) occurring prior to and including the Closing Date, and no
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material tax payable on account of Section 4980B of the Code has been
incurred with respect to any current or former employees (or their
beneficiaries) of Litronic or any of the Litronic Subsidiaries.
(g) No benefit or compensation payable or which may become
payable by Litronic or any of the Litronic Subsidiaries pursuant to any
of the Litronic Employee Plans or any Litronic Benefit Arrangements or
as a result of or arising under this Agreement shall (i) constitute an
"excess parachute payment" (as defined in Section 280G(b)(1) of the
Code) which is subject to the imposition of an excise tax under Section
4999 of the Code or which would not be deductible by reason of Section
280G of the Code or (ii) be nondeductible by reason of Section 162(m) of
the Code.
(h) Litronic and each Litronic Subsidiary is in compliance in all
material respects with all applicable laws, agreements and contracts
relating to employment, employment practices, wages, hours, and terms
and conditions of employment, including, but not limited to, employee
compensation matters, but not including ERISA.
(i) Neither Litronic nor any Litronic Subsidiary has any
knowledge of any facts indicating that the consummation of the
transactions contemplated hereby will have a Material Adverse Effect on
labor relations, and, except for reductions in force specifically
contemplated by Litronic in connection with the Merger, has no knowledge
that any of its key employees intends to leave its or their employ.
4.19 ENVIRONMENTAL MATTERS.
(a) To Litronic's knowledge, none of the properties or facilities
owned or leased by Litronic or the Litronic Subsidiaries as of the date
hereof ("Litronic Facilities") is in violation of any Environmental Laws
except where the violations would not constitute a Material Adverse
Effect. During the time that Litronic or the Litronic Subsidiaries have
owned or leased the Litronic Facilities, neither Litronic nor any of the
Litronic Subsidiaries nor, to Litronic's knowledge, any third party, has
engaged in any Release on, under or about the Litronic Facilities of any
Hazardous Materials.
(b) During the time that Litronic or the Litronic Subsidiaries
have owned or leased the Litronic Facilities, there has been no
litigation brought or, to the knowledge of Litronic, threatened against
Litronic or any of the Litronic Subsidiaries by, or any settlement
reached by Litronic or any of the Litronic Subsidiaries with, any party
or parties alleging the Release or threatened Release of any Hazardous
Materials on, from or under any of the Litronic Facilities.
4.20 DIRECTORS AND OFFICERS LIABILITY INSURANCE. Litronic currently
maintains the directors and officers liability insurance that Litronic believes
to be sufficient on the date hereof. Such director and officers liability
insurance is described on the Litronic Disclosure Schedule.
4.21 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material
agreement, judgment, injunction, order or decree binding upon Litronic or any of
the Litronic Subsidiaries that has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Litronic
or any of the Litronic Subsidiaries, any acquisition of property by
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Litronic or any of the Litronic Subsidiaries or the conduct of business by
Litronic or any of the Litronic Subsidiaries as currently conducted.
4.22 WARRANTIES. Neither Litronic nor any of the Litronic Subsidiaries
have made any warranties or guarantees relating to its products other than in
the ordinary course of business or as implied or required by law. The Litronic
Disclosure Schedule contains a list of all warranty and indemnification
obligations of Litronic or any of the Litronic Subsidiaries, other than as
implied or required by law, relating to patents and other proprietary rights.
4.23 PRODUCTS AND DISTRIBUTION.
(a) The Litronic Disclosure Schedule sets forth, for each
Litronic Product (as defined below), the following: (i) a list of all
material contracts and agreements (including without limitation all
material development, trademark license, technology license,
distribution or other agreements) relating to the Litronic Product
(provided, however, that with respect to distribution agreements, clause
(iv) shall apply); (ii) whether the Litronic Product has been developed
internally (i.e., substantially entirely by employees of Litronic or any
of the Litronic Subsidiaries) or externally (i.e., including substantive
contributions by one or more independent contractors to Litronic or any
of the Litronic Subsidiaries) and, if externally, the Litronic
Disclosure Schedule sets forth the identity of the significant
independent contractors and a list of the material agreements with those
independent contractors; (iii) the material advances paid or payable,
and the material royalties payable, to any third parties with respect to
that Litronic Product; and (iv) a copy of Litronic's standard
distribution agreement used with respect to that Litronic Product
together with a description of the territories in which Litronic or any
of the Litronic Subsidiaries have granted distribution rights with
respect to that Litronic Product.
(b) The Litronic Disclosure Schedule sets forth, for each
Litronic Product Under Development, the following (as of the date of
this Agreement): (i) the currently scheduled public availability date
without regard to the Merger (which dates Litronic believes to be
reasonable); (ii) a schedule of development milestone events and any
material related payments, including both milestones already achieved in
the past six months and those scheduled for the future; and (iii)
whether any significant development milestone for the Litronic Product
has been missed in the past six months by more than 30 days.
(c) For purposes of this Section 4.23, "Litronic Developed
Products" means products developed, sold, published and/or distributed
by Litronic or any Litronic Subsidiaries. "Litronic Products Under
Development" means products under development or consideration by
Litronic or any Litronic Subsidiaries with a scheduled ship date on or
prior to December 31, 2001. "Litronic Products" includes both Litronic
Developed Products and Litronic Products Under Development.
4.24 ACCOUNTS RECEIVABLE. The accounts receivable shown on the Litronic
Balance Sheet as of the Litronic Balance Sheet Date, or thereafter acquired
prior to the date hereof, have been or are (as the case may be) collectible
within 120 days from the Closing Date (or, if later,
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when due) in amounts not materially less than the aggregate amounts thereof
carried on the books of Litronic reduced by the reserves for discounts and bad
debts taken on the Litronic Balance Sheet.
4.25 PERSONAL PROPERTY. Other than the Litronic IP Rights (which are the
subject of Section 4.15), Litronic and each of the Litronic Subsidiaries has
good title, free and clear of all title defects, objections and liens, including
without limitation, leases, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest-retaining
arrangements (other than liens for taxes not yet delinquent and liens,
objections, encumbrances and title defects which are not material in character,
amount or extent and which do not materially interfere with the use of the asset
subject thereto or affected thereby), to all of its machinery, equipment,
furniture, inventory and other personal property. All tangible personal property
used in and material to the business of Litronic and any of the Litronic
Subsidiaries is in good operating condition (ordinary wear and tear excepted).
All of the leases to personal property utilized in the business of Litronic and
each of the Litronic Subsidiaries are valid and enforceable against Litronic or
the particular Litronic Subsidiary (except as enforceability may be subject to
bankruptcy, insolvency, reorganization or other laws affecting or relating to
enforcement of creditors' rights generally and by general equitable principles,
regardless of whether considered at law or in equity) and neither Litronic nor
any of the Litronic Subsidiaries is in material default thereunder, except in
each case where the unenforceability or default would not have a Material
Adverse Effect with respect to Litronic and, to the knowledge of Litronic, none
of the other parties thereto is in material default thereof.
4.26 REAL PROPERTY. Neither Litronic nor any of the Litronic
Subsidiaries owns any real property. The Litronic Disclosure Schedule contains a
list of all leases for real property to which Litronic or any of the Litronic
Subsidiaries is a party, the square footage leased with respect to each lease
and the expiration date of each lease. These leases are valid and enforceable
obligations of Litronic or the particular Litronic Subsidiary (except as
enforceability may be subject to bankruptcy, insolvency, reorganization or other
laws affecting or relating to enforcement of creditors' rights generally and by
general equitable principles, regardless of whether considered at law or in
equity) and neither Litronic or any of the Litronic Subsidiaries is in material
default of any material provision thereof. To the knowledge of Litronic, the
real property leased or occupied by Litronic or any of the Litronic
Subsidiaries, the improvements located thereon, and the furniture, fixtures and
equipment relating thereto (including plumbing, heating, air conditioning and
electrical systems), conform to any and all applicable health, fire, safety,
zoning, land use and building laws, ordinances and regulations except where the
failure to so conform would not reasonably be expected to have a Material
Adverse Effect on Litronic. There are no outstanding contracts made by Litronic
or any of the Litronic Subsidiaries for any improvements made to the real
property leased or occupied by Litronic or any of the Litronic Subsidiaries that
have material amounts remaining unpaid thereunder.
4.27 INSURANCE. Litronic maintains and at all times since its inception
has maintained fire and casualty and general liability insurance that Litronic
believes or believed at that time to be reasonably prudent for the business of
Litronic and the Litronic Subsidiaries as conducted at that time. The Litronic
Disclosure Schedule contains a complete and correct list and summary description
of all insurance policies maintained by Litronic. Litronic has delivered or made
available to BIZ complete and correct certificates of insurance setting forth
the summary terms
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of the insurance policies. These policies are in full force and effect in all
material respects, and all premiums due thereon have been paid, except for such
failure of payment that would not have a Material Adverse Effect on Litronic.
Litronic has complied in all material respects with the terms and provisions of
the policies. The Litronic Disclosure Schedule summarizes all material claims
made by Litronic under any policy of insurance since Litronic's inception.
5. BIZ COVENANTS.
BIZ further covenants and agrees as follows:
5.1 NOTIFICATION OF CHANGES. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, BIZ will promptly notify Litronic in
writing (a) of any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of BIZ contained in this Agreement,
if made on or as of the date of the event or the Closing Date, untrue or
inaccurate in any material respect, (b) of any Material Adverse Effect with
respect to BIZ or BCP and (c) of any breach by BIZ of any covenant or agreement
contained in this Agreement, and in each case listed in clauses (a), (b) and (c)
of this Section 5.1, such inaccuracy, breach or Material Adverse Effect would
result in either the condition set forth in Section 10.1 or the condition set
forth in Section 10.2 not being satisfied at the Closing. BIZ shall deliver to
Litronic as soon as practicable after the end of each monthly accounting period
ending after the date of this Agreement and before the earlier of the Closing
Date or the termination of this Agreement in accordance with its terms, an
unaudited consolidated balance sheet, statement of operations and statement of
cash flows for BIZ, which financial statements shall be prepared in the ordinary
course of business, in accordance with BIZ's books and records and GAAP and
shall fairly present the consolidated financial position of BIZ as of their
respective dates and the results of BIZ's operations for the periods then ended.
5.2 MAINTENANCE OF BUSINESS. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, BIZ will use commercially reasonable
efforts to carry on and preserve its business and its relationships with
customers, suppliers, employees and others in substantially the same manner as
it has prior to the date hereof. If BIZ becomes aware of any material
deterioration in its relationship with any material customer, material supplier
or key employee, it will promptly bring that information to the attention of
Litronic.
5.3 CONDUCT OF BUSINESS. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, BIZ will continue to conduct its
business and maintain its business relationships in the ordinary and usual
course and will not, and will not permit BCP to, without the prior written
consent of Litronic, except with respect to a repurchase of Series A Preferred
Stock from the holder thereof:
(a) borrow any money except for amounts that would not, in the
aggregate, have a Material Adverse Effect on the financial condition of
BIZ;
(b) enter into any material transaction not in the ordinary
course of its business;
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(c) encumber or permit to be encumbered any of its assets except
in the ordinary course of its business;
(d) dispose of any of its assets except in the ordinary course of
business consistent with past practice;
(e) enter into any material lease or contract for the purchase or
sale or license of any property, real or personal, except in the
ordinary course of business;
(f) fail to maintain its equipment and other assets in good
working condition and repair in all material respects to the standards
it has maintained to the date of this Agreement, subject only to
ordinary wear and tear;
(g) pay (or make any oral or written commitments or
representations to pay) any bonus, increased salary or special
remuneration to any officer, employee or consultant (except for normal
salary increases consistent with past practice not to exceed 10% per
year) or enter into or vary the terms of any employment, consulting or
severance agreement with any person, pay any severance or termination
pay (other than payments made in accordance with plans or agreements
existing on the date hereof), grant any stock option or issue any
restricted stock, or enter into or modify any agreement or plan of the
type described in Section 3.9, provided that BIZ shall be entitled to
pay annual bonuses or to make changes to compensation (i) in the
ordinary course of business consistent with past practice or (ii) with
prior written notice to Litronic if the changes are required, in the
good faith judgment of BIZ and after consultation with Litronic, to
retain its key employees following the Closing;
(h) change accounting methods (except as disclosed in the
financial statements listed in Section 3.4);
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire
any of its capital stock (other than pursuant to arrangements with
terminated employees or consultants in the ordinary course of business
consistent with BIZ's past practice);
(j) amend or terminate any material contract, agreement or
license to which it is a party and except those amended or terminated in
the ordinary course of its business, or which are not material in amount
or effect;
(k) lend any amount to any person or entity, other than (i)
advances for travel and expenses which are incurred in the ordinary
course of business consistent with past practice, not material in amount
and documented by receipts for the claimed amounts, or (ii) any loans
pursuant to any BIZ 401(a) Plan;
(l) guarantee or act as a surety for any obligation, except for
obligations in amounts that are not material;
(m) waive or release any material right or material claim except
for the waiver or release of non-material claims in the ordinary course
of business, consistent with past
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practice or the waiver or release of rights or claims set forth in the
BIZ Disclosure Schedule;
(n) issue or sell any shares of its capital stock of any class
(except upon the exercise of options or convertible securities currently
outstanding or permitted to be granted or sold in accordance with this
Section), or any other of its securities, or issue or create any
warrants, obligations, subscriptions, options, convertible securities or
other commitments to issue shares of capital stock, or accelerate the
vesting of any outstanding option or other security (except as required
pursuant to the terms thereof);
(o) split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement affecting
the number or rights of outstanding shares of its capital stock of any
class or affecting any other of its securities;
(p) merge, consolidate or reorganize with, or acquire any entity;
(q) amend its certificate of incorporation or bylaws;
(r) license any BIZ IP Rights except in the ordinary course of
business consistent with past practice;
(s) agree to any audit assessment by any tax authority;
(t) change materially any insurance coverage; or
(u) agree to do, or enter into negotiations with respect to, any
of the things described in the preceding clauses in this Section 5.3.
5.4 STOCKHOLDER APPROVAL. BIZ shall obtain BIZ Stockholders' approval of
this Agreement, the Merger Agreement, the Merger and related matters by written
consent of the BIZ Stockholders in accordance with applicable law. Approval will
be recommended by BIZ's Board of Directors and management, and such
recommendation will not be withdrawn or modified adversely. BIZ shall take all
lawful action to solicit such approval of its stockholders and shall use its
best efforts to obtain the approval of its stockholders.
5.5 PROXY STATEMENT. BIZ will promptly provide all information relating
to its business or operations necessary for inclusion in the Proxy Statement to
satisfy all requirements of applicable laws. BIZ shall be solely responsible for
any statement, information or omission in the Proxy Statement relating to it or
its affiliates based upon written information furnished by it. BIZ will not
provide or publish to its stockholders any material concerning it or its
affiliates that constitutes a prospectus within the meaning of the Securities
Act.
5.6 REGULATORY APPROVALS. BIZ will promptly execute and file, or join in
the execution and filing of, any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be required, or
which Litronic may reasonably request, in connection with the consummation of
the transactions contemplated by this Agreement. BIZ will use its best efforts
to obtain promptly all such authorizations, approvals and consents.
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5.7 NECESSARY CONSENTS. During the term of this Agreement, BIZ will use
its best efforts to obtain such written consents and take such other actions as
may be necessary or appropriate in addition to those set forth in Section 5.6 to
allow the consummation of the transactions contemplated hereby.
5.8 ACCESS TO INFORMATION. BIZ will allow Litronic and its agents
reasonable access to the files, books, records and offices of BIZ and BCP,
including, without limitation, any and all information relating to BIZ's taxes,
commitments, contracts, leases, licenses and real, personal and intangible
property and financial condition. BIZ will cause its accountants to cooperate
with Litronic and its agents in making available to Litronic all financial
information reasonably requested, including, without limitation, the right to
examine all working papers pertaining to all tax returns and financial
statements prepared or audited by the accountants.
5.9 SATISFACTION OF CONDITIONS PRECEDENT. During the term of this
Agreement, BIZ will use its best efforts to satisfy or cause to be satisfied all
the conditions precedent that are set forth in Sections 10 and 11, and BIZ will
use its best efforts to cause the Merger and the other transactions contemplated
by this Agreement to be consummated.
5.10 CONFIDENTIALITY. All information concerning Litronic or the
Litronic Subsidiaries received by BIZ (other than that information which is a
matter of public knowledge or which has been published for public distribution
or filed as public information with any governmental authority) shall not at any
time, except in connection with this Agreement and the transactions contemplated
hereby, be used for BIZ's advantage or disclosed by BIZ to any third person
without the prior written consent of Litronic. BIZ may disclose that information
on a confidential basis to its affiliates, employees, officers, agents,
auditors, investment bankers, consultants, counsel, directors, present and
prospective lenders, and state and federal regulatory agencies and, to the
extent provided elsewhere in this Agreement, may disclose such information in
press releases and like disclosures, filings with the SEC or other governmental
or self-regulatory agencies or as otherwise required by law. This covenant shall
expire at the Effective Time; provided, however, that if the Closing does not
occur, it shall expire three years after the date of this Agreement.
6. LITRONIC COVENANTS.
Litronic further covenants and agrees as follows:
6.1 STOCKHOLDER APPROVAL. Litronic will call the Litronic Stockholders
Meeting to be held within 45 days after either (a) having been informed by the
SEC that all comments on the Proxy Statement have been satisfactorily resolved
or (b) the time for SEC comments on the Proxy Statement has expired, to submit
this Agreement, the Merger and related matters for the consideration and
approval of the stockholders of Litronic. Litronic's Board of Directors and
management will recommend such approval, such recommendation will be included in
the Proxy Statement and will not be withdrawn or modified adversely, Litronic
shall take all lawful action to solicit such approval, and Litronic shall use
its best efforts to obtain such approval of its stockholders. The meeting will
be called, held and conducted, and any proxies will be solicited, in compliance
with applicable law.
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6.2 PROXY STATEMENT. Litronic will prepare and file with the SEC, will
use its best efforts to have cleared by the SEC, and will thereafter mail to its
stockholders as promptly as practicable, for the purpose of considering and
voting upon the Merger at the Litronic Stockholders Meeting, the Proxy
Statement. Litronic will promptly provide all information relating to its
business or operations necessary for inclusion in the Proxy Statement to satisfy
all requirements of applicable laws. Litronic shall be solely responsible for
any statement, information or omission in the Proxy Statement relating to it or
its affiliates other than information furnished by BIZ and BIZ's affiliates.
Litronic will not provide or publish to its stockholders any material concerning
it or its affiliates that violate the Exchange Act with respect to the
transactions contemplated hereby. Litronic shall provide BIZ a copy of the Proxy
Statement for review prior to filing the Proxy Statement with the SEC and shall
notify BIZ of its intention to mail the Proxy Statement at least five (5) days
prior to the mailing of the Proxy Statement.
6.3 REGULATORY APPROVALS. Litronic will promptly execute and file or
cause to be filed, or join in the execution and filing of, any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any governmental body, (federal, state, local or foreign)
which may be required, or which BIZ may reasonably request, in connection with
the consummation of the transactions contemplated by this Agreement. Litronic
will use its best efforts to obtain promptly all such authorizations, approvals
and consents. Without limiting the generality of the foregoing, Litronic shall
take such steps as may be necessary to comply with the securities and "Blue Sky"
laws of all jurisdictions which are applicable to the issuance of shares of
Litronic Common Stock in the Merger and pursuant to Assumed Options and Assumed
Warrants as provided herein.
6.4 NECESSARY CONSENTS. During the term of this Agreement, Litronic will
use its best efforts to obtain such written consents and take such other actions
as may be necessary or appropriate in addition to those set forth in Section 6.3
to allow the consummation of the transactions contemplated hereby.
6.5 SATISFACTION OF CONDITIONS PRECEDENT. During the term of this
Agreement, Litronic will use its best efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Sections 9 and 11,
and Litronic will use its best efforts to cause the Merger and the other
transactions contemplated by this Agreement to be consummated.
6.6 CONFIDENTIALITY. All information concerning BIZ or BCP received by
Litronic (other than that information which is a matter of public knowledge or
which has been published for public distribution or filed as public information
with any governmental authority) shall not at any time, except in connection
with this Agreement and the transactions contemplated hereby, be used for
Litronic's advantage or disclosed by Litronic to any third person without the
prior written consent of BIZ. Litronic may disclose that information on a
confidential basis to its affiliates, employees, officers, agents, auditors,
investment bankers, consultants, counsel, directors, present and prospective
lenders, and state and federal regulatory agencies and, to the extent provided
elsewhere in this Agreement, may disclose such information in press releases and
like disclosures, filings with the SEC or other governmental or self-regulatory
agencies or as otherwise required by law. This covenant shall expire at the
Effective Time; provided, however, that if the Closing does not occur, it shall
expire three years after the date of this Agreement.
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6.7 ACCESS TO INFORMATION. Litronic will allow BIZ and its agents
reasonable access to the files, books, records and offices of Litronic and each
Litronic Subsidiary, including, without limitation, any and all information
relating to Litronic's taxes, commitments, contracts, leases, licenses and real,
personal and intangible property and financial condition. Litronic will cause
its accountants to cooperate with BIZ and its agents in making available to BIZ
all financial information reasonably requested, including, without limitation,
the right to examine all working papers pertaining to all tax returns and
financial statements prepared or audited by the accountants.
6.8 NOTIFICATION OF CHANGES. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, Litronic will promptly notify BIZ in
writing (a) of any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of Litronic contained in this
Agreement, if made on or as of the date of the event or the Closing Date, untrue
or inaccurate in any material respect, (b) of any Material Adverse Effect with
respect to Litronic or the Litronic Subsidiaries and (c) of any breach by
Litronic of any covenant or agreement contained in this Agreement, and in each
case listed in clauses (a), (b) and (c) of this Section 6.8, such inaccuracy,
breach or Material Adverse Effect would result in either the condition set forth
in Section 9.1 or the condition set forth in Section 9.2 not being satisfied at
the Closing. Litronic shall deliver to BIZ as soon as practicable after the end
of each monthly accounting period ending after the date of this Agreement and
before the earlier of the Closing Date or the termination of this Agreement in
accordance with its terms, an unaudited consolidated balance sheet, statement of
operations and statement of cash flows for Litronic, which financial statements
shall be prepared in the ordinary course of business, in accordance with
Litronic's books and records and GAAP and shall fairly present the consolidated
financial position of Litronic as of their respective dates and the results of
Litronic's operations for the periods then ended.
6.9 MAINTENANCE OF BUSINESS. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, Litronic will use its commercially
reasonable efforts to carry on and preserve its business and relationships with
customers, supplies, employees and others in substantially the same manner as it
has prior to the date hereof. If Litronic becomes aware of any material
deterioration in its relationship with any material customer, material supplier
or key employee, it will promptly bring that information to the attention of
BIZ.
6.10 CURRENT NASDAQ QUOTATION. Litronic shall use its best efforts to
continue the quotation of Litronic Common Stock on the Nasdaq National Market
through and including the Effective Time and to take all actions necessary to
provide for the listing on the Nasdaq National Market, at or prior to the
Closing, of the shares of Litronic Common Stock issuable pursuant to the Merger
and upon exercise of all Assumed Options and Assumed Warrants.
6.11 OTHER COVENANTS. During the period from the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Litronic will continue to conduct its business and
maintain its business relationships in the ordinary and usual course, and will
not, and will not permit any of the Litronic Subsidiaries to,
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without the prior written consent of BIZ, except with the respect to a
disposition of its Pulsar Data Systems, Inc. subsidiary:
(a) borrow any money except for amounts that would not, in the
aggregate, have a Material Adverse Effect on the financial condition of
Litronic;
(b) enter into any material transactions not in the ordinary
course of business;
(c) dispose of any of its assets (including without limitation by
way of spin-off or other distribution) except in the ordinary course of
business consistent with past practice;
(d) encumber or permit to be encumbered any of its assets except
in the ordinary course of its business;
(e) enter into any material lease or contract for the purchase or
sale or license of any property, real or personal, except in the
ordinary course of business;
(f) fail to maintain its equipment and other assets in good
working condition and repair in all material respects to the standards
it has maintained to the date of this Agreement, subject only to
ordinary wear and tear;
(g) pay (or make any oral or written commitments or
representations to pay) any bonus, increased salary or special
remuneration to any officer, employee or consultant (except for normal
salary increases consistent with past practice not to exceed 10% per
year) or enter into or vary the terms of any employment, consulting or
severance agreement with any person, pay any severance or termination
pay (other than payments made in accordance with plans or agreements
existing on the date hereof, grant any stock option or issue any
restricted stock, or enter into or modify any agreement or plan of the
type described in Section 4.18, provided that Litronic shall be entitled
to pay annual bonuses or to make changes to compensation (i) in the
ordinary course of business consistent with past practice or (ii) with
prior written notice to BIZ if the changes are required, in the good
faith judgment of Litronic and after consultation with BIZ, to retain
its key employees following the Closing;
(h) change accounting methods (except as disclosed in the
financial statements listed in Section 4.4);
(i) amend or terminate any material contract, agreement or
license to which it is a party and except those amended or terminated in
the ordinary course of its business, or which are not material in amount
or effect;
(j) lend any amount to any person or entity, other than (i)
advances for travel and expenses which are incurred in the ordinary
course of business consistent with past practices, not material in
amount and documented by receipt for the claimed amounts, or (ii) any
loan pursuant to any Litronic 401(a) Plan;
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(k) guarantee or act as surety for any obligation, except for
obligations in amounts that are not material;
(l) waive or release any material right or material claim except
for the waiver or release of non-material claims in the ordinary course
of business consistent with past practice or the waiver or release of
rights or claims set forth in the Litronic Disclosure Schedule;
(m) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire
any of its capital stock (other than pursuant to arrangements with
terminated employees or consultants in the ordinary course of business
consistent with Litronic's past practice);
(n) issue or sell any shares of its capital stock of any class
(except upon the exercise of options currently outstanding), or any
other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities or other commitments to
issue shares of capital stock, or accelerate the vesting of any
outstanding option, warrant or other security;
(o) split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement affecting
the number or rights of outstanding shares of its capital stock, of any
class or affecting any other of its securities;
(p) merge, consolidate or reorganize with, or acquire any entity;
(q) amend its certificate of incorporation (or, in the case of
subsidiaries, articles of incorporation or similar charter documents) or
bylaws;
(r) license any Litronic IP Rights except in the ordinary course
of business consistent with past practice;
(s) agree to any audit assessment by any tax authority;
(t) change materially any insurance coverage; or
(u) agree to do, or enter into negotiations with respect to, any
of the things described in the preceding clauses in this Section 6.11.
6.12 RESERVATION OF SHARES. Litronic shall reserve for issuance the
maximum number of shares of Litronic Common Stock issuable upon exercise of all
Assumed Options and Assumed Warrants.
7. ADDITIONAL AGREEMENTS.
7.1 EMPLOYEE MATTERS. Promptly following the Merger, employees of BIZ,
at the option of Litronic, will either (i) become eligible to Litronic's
standard employee benefit plans on an equivalent basis with other similarly
situated employees of Litronic and will receive full credit pursuant to those
plans for years of service at BIZ; or (ii) participate in such employee
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benefit plans to be established or maintained by BIZ and/or Litronic for the
benefit of BIZ employees, with full credit pursuant to such plan for years of
service at BIZ, or (iii) any combination of options (i) and (ii). Litronic
agrees to recognize all vacation time accrued through the Effective Time under
BIZ's vacation policy as of the Effective Time.
7.2 APPOINTMENT OF OFFICERS. Litronic's Board of Directors shall appoint
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as Co-Chairman and Chief Executive Officer, ▇▇▇ ▇▇▇▇▇▇ as
President of the Global Marketing division, ▇▇▇▇▇▇ ▇▇▇▇▇▇ as Executive Vice
President and Chief Financial Officer and ▇▇▇▇ ▇▇▇▇ as Co-Chairman and President
of the Software and Embedded Systems division of Litronic, effective as of the
Effective Time. It is anticipated that within ten days after the Effective Time,
these individuals (other than ▇▇▇▇ ▇▇▇▇) will file with the SEC and Nasdaq
Initial Statements of Beneficial Ownership on Form 3.
7.3 VOTING AGREEMENT. Simultaneously with the execution of this
Agreement, ▇▇▇▇ ▇▇▇▇ and certain of his affiliates and family members, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and certain of his affiliates, and Wave Systems Corp. shall execute a
Voting Agreement in the form of Exhibit 7.3.
7.4 INDEMNIFICATION OF OFFICERS, DIRECTORS, ETC.
(a) From and after the Effective Time, Litronic shall, to the
fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director and officer of BIZ
("Indemnified Executives") against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to the
transactions contemplated by this Agreement or any other matter arising
out of or attributable to the Indemnified Executive's status as a
director, officer, employee or agent of BIZ or BCP, whether or not the
matter was existing prior to the Effective Time. In the event of any
claim, action, suit, proceeding or investigation as to which this
paragraph 7.4(a) applies (whether arising before or after the Effective
Time), (i) any counsel retained by the Indemnified Executives to defend
them with respect to any such claim, action, suit, proceeding or
investigation for any period after the Effective Time shall be
reasonably satisfactory to Litronic, (ii) after the Effective Time,
Litronic shall pay the reasonable fees and expenses of that counsel,
promptly after statements therefor are received and (iii) Litronic will
cooperate in the defense of any such matter; provided, however, that
Litronic shall not be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld). The
Indemnified Executives as a group may retain only one law firm to
represent them with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict or potential
conflict between the positions of any two or more Indemnified
Executives.
(b) For a period of three (3) years after the Effective Time,
Litronic shall maintain in effect directors and officers liability
insurance covering the executive officers and directors of BIZ on the
date hereof on terms at least as favorable as those currently applicable
to the current directors and officers of Litronic.
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(c) Without limiting any other obligation herein, after the
Effective Time, Litronic will fulfill and honor (and will cause
Surviving Corporation to fulfill and honor) in all respects the
obligations of BIZ pursuant to indemnification agreements with, and
indemnification provisions (including provisions relating to advancement
of expenses) of the certificate of incorporation and bylaws of BIZ with
respect to, BIZ's officers, directors and key employees as those
agreements and provisions are in existence at the Effective Time.
(d) If Litronic or any of its successors or assigns (i)
consolidates with or merges into any other corporation or entity and is
not the continuing or surviving corporation or entity of the
consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any individual, corporation or other
entity, then and in each such case, proper provisions shall be made so
that the successors and assigns of Litronic shall assume all of the
obligations set forth in this Section 7.4. Litronic shall bear and pay,
and shall reimburse the Indemnified Executives for, all costs and
expenses, including attorneys' fees, that may be incurred by the
Indemnified Executives in seeking to enforce their rights against
Litronic and the Surviving Corporation under this Section 7.4. The
provisions of this Section 7.4 are intended to be for the benefit or,
and shall be enforceable by, each of the Indemnified Executives, their
heirs and their representatives, and shall survive the Effective Time.
7.5 TAX MATTERS. Litronic and BIZ will deliver tax representation
letters substantially in the form of Exhibit 7.5 dated as of the Closing Date,
to each other. Neither Litronic, BIZ, BCP nor any direct or indirect Litronic
Subsidiary shall take any action or agree to take any action that would
jeopardize the treatment of the Merger as a reorganization within the meaning of
Section 368(a) of the Code. Litronic shall cause BIZ to, and BIZ shall, continue
the significant historic business line of BIZ, or use at least a significant
portion of the historic business assets of BIZ in a business, in each case
within the meaning of Treasury Regulations Section 1.368-1(d).
7.6 NO ADDITIONAL ISSUANCES. Between the date hereof and the Closing,
neither Litronic nor BIZ shall issue any common stock (except in connection with
the exercise of options or warrants outstanding on the date hereof), preferred
stock, options, warrants, convertible debt or other securities without the prior
written consent of the other.
7.7 REPORTS UNDER 1934 ACT. With a view to making available to the
stockholders of BIZ who acquire shares of Litronic Common Stock in the Merger
("Holders") the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of Litronic to the public without registration, Litronic agrees
to use its best efforts to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144:
(b) File with the SEC in a timely manner all reports and other
documents required of Litronic under the Securities Act and the 1934
Act; and
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(c) Furnish to any Holder so long as such Holder owns any of the
shares of Litronic Common Stock it received in the Merger upon request
(i) a written statement by Litronic that it has complied with the
reporting requirements of Rule 144 and of the Securities Act and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of
Litronic, and (iii) such other reports and documents so filed by
Litronic as may be reasonably requested in availing any Holder or any
rule or regulation of the SEC permitting the selling of any such
securities without registration.
7.8 NON-SOLICITATION.
(a) Neither BIZ nor Litronic will, nor will it authorize or
permit any officer, director, employee, consultant or contractor of or
any investment banker, attorney, accountant or other advisor or
representative of, either party to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Acquisition Proposal (as
hereinafter defined) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information in
respect of, or take any other action to facilitate, any Acquisition
Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal. Notwithstanding the foregoing, in the event that either BIZ or
Litronic, as the case may be, receives an unsolicited Acquisition
Proposal, it shall be entitled to negotiate with the third party making
such proposal and to provide information to such third party if the
Board of Directors' of either BIZ or Litronic, as the case may be,
fiduciary duty to its respective stockholders requires that either BIZ
or Litronic, as the case may be, conduct such negotiations and provide
such material in order to make its recommendation to its respective
stockholders regarding the approval or disapproval of the Merger. Each
BIZ or Litronic, as the case may be, shall notify the other party of any
Acquisition Proposal (including the material terms and conditions
thereof and the identity of the person making it) as promptly as
practicable after its receipt thereof, and shall provide the other party
with a copy of any written Acquisition Proposal or amendments or
supplements thereto, and shall thereafter inform the other party on a
prompt basis of the status of any discussions or negotiations with such
a third party, and any material changes to the terms and conditions of
such Acquisition Proposal, and shall promptly give the other party a
copy of any information delivered to such person which has not
previously been reviewed by the other party. Immediately after the
execution and delivery of this Agreement, each of BIZ and Litronic will,
and will use its reasonable best efforts to cause its affiliates, and
their respective officers, directors, employees, consultants,
contractors, investment bankers, attorneys, accountants and other agents
and representatives to, cease and terminate any existing activities,
discussions or negotiations with any parties conducted heretofore in
respect of any possible Acquisition Proposal. Each of BIZ and Litronic
shall take all necessary steps to promptly inform the individuals or
entities referred to in the first sentence of this Section 7.8 of the
obligations undertaken in this Section 7.8. "Acquisition Proposal" means
an inquiry, offer or proposal regarding any of the following (other than
the transactions contemplated by this Agreement) involving either BIZ or
Litronic, as the case may be: (v) any merger, consolidation, share
exchange, recapitalization, business combination or other similar
transaction; (w) any sale of shares of capital stock of either BIZ or
Litronic, as the case may be, (x) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of all or substantially all the
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assets of either BIZ or Litronic, as the case may be, in a single
transaction or series of related transactions; (y) any tender offer or
exchange offer for 20% or more of the outstanding capital stock of or
the filing of a registration statement under the Securities Act in
connection therewith; or (z) any public announcement of a proposal, plan
or intention to do any of the foregoing or any agreement to engage in
any of the foregoing.
(b) Each of BIZ's and Litronic's Board of Directors will not
withdraw or modify, or propose to withdraw or modify, in a manner
adverse to the other party, its approval or recommendation of this
Agreement or the Merger unless either BIZ's or Litronic's Board of
Directors, as applicable, after consultation with independent legal
counsel, determines in good faith that such action is necessary to avoid
a breach by either BIZ's or Litronic's Board of Directors, as the case
may be, of its fiduciary duties to its respective stockholders under
applicable law. Nothing contained in this Section 7.8(b) shall prohibit
either BIZ or Litronic, as the case may be, from making any disclosure
to its stockholders which, in the good faith reasonable judgment of
either BIZ's and Litronic's Board of Directors, as the case may be;
after consultation with independent legal counsel, is required under
applicable law; provided that except as otherwise permitted in this
Section 7.8(b), each of BIZ and Litronic may not withdraw or modify, or
propose to withdraw or modify, its position with respect to the Merger
or approve or recommend, or propose to approve or recommend, an
Acquisition Proposal. Notwithstanding anything contained in this
Agreement to the contrary, any action by each of BIZ's and Litronic's
Board of Directors permitted by, and taken into accordance with, this
Section 7.8(b) shall not constitute a breach of this Agreement by either
BIZ or Litronic, as the case may be. Nothing in this Section 7.8(b)
shall (i) permit either BIZ or Litronic, as the case may be, to
terminate this Agreement (except as provided in Section 12) or (ii)
affect any other obligations of either BIZ or Litronic, as the case may
be, under this Agreement.
8. CLOSING.
Subject to the termination of this Agreement as provided in Section 12,
the Closing of the transactions contemplated by this Agreement will take place
at the offices of R&T, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
on the Closing Date, unless another place, time and date is selected by BIZ and
Litronic. Concurrently with the Closing, the Merger Agreement will be filed in
the Office of the Secretary of State of the State of Delaware.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BIZ.
The obligations of BIZ hereunder are subject to the fulfillment or
satisfaction on or before the Closing of each of the following conditions (any
one or more of which may be waived by BIZ, but only in a writing signed by BIZ):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Litronic set forth in Section 4 (as qualified by the Litronic
Disclosure Schedule, as updated) shall be true and accurate in all material
respects on and as of the Closing Date (except for changes contemplated by this
Agreement and except for representations which address matters only as of a
specific date (which shall be true as of that specific date)) with the same
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force and effect as if they had been made at the Closing except to the extent
the failure of the representations and warranties to be true and accurate in
such respects has not had and could not reasonably be expected to have a
Material Adverse Effect on Litronic, and BIZ shall have received a certificate
to that effect executed by Litronic's Chief Executive Officer and Chief
Financial Officer.
9.2 COVENANTS. Litronic shall have performed and complied in all
material respects with all of its covenants required to be performed by it under
this Agreement and the Merger Agreement on or before the Closing, and BIZ shall
have received a certificate to that effect signed by Litronic's Chief Executive
Officer and Chief Financial Officer.
9.3 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in the condition (financial or otherwise), properties,
assets, liabilities, businesses, operations, results of operations or prospects
of Litronic and the Litronic Subsidiaries, taken as a whole, other than any
change that shall result from general economic conditions, or conditions
generally affecting the engineering software market, and BIZ shall have received
a certificate to that effect executed by Litronic's Chief Executive Officer and
Chief Financial Officer.
9.4 COMPLIANCE WITH LAW. There shall be no order, decree or ruling of
any governmental agency or written threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which would prohibit or render illegal the transactions contemplated by
this Agreement.
9.5 CORPORATE OPINION. BIZ shall have received the opinion of R&T, based
upon reasonably requested certifications as to factual matters and dated the
Closing Date, regarding the status, authority and capitalization of Litronic,
the authorization of this Agreement and the transactions contemplated hereby by
Litronic, and the binding effect of this Agreement on Litronic. The opinion
shall be substantially similar to the opinion rendered by GCW&F with respect to
BIZ as to the foregoing. Such opinion shall also confirm the validity of the
shares issuable in the Merger and upon exercise of the Assumed Options and
Assumed Warrants and shall be reasonably satisfactory to GCW&F.
9.6 CONSENTS. BIZ shall have been furnished with evidence satisfactory
to it that Litronic has obtained the Governmental Consents and other third party
consents set forth in the Litronic Disclosure Schedule pursuant to Section
4.3.3.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF LITRONIC.
The obligations of Litronic hereunder are subject to the fulfillment or
satisfaction on or before the Closing, of each of the following conditions (any
one or more of which may be waived by Litronic, but only in a writing signed by
Litronic).
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of BIZ set forth in Section 3 (as qualified by the BIZ Disclosure
Schedule, as updated) shall be true and accurate in all material respects on and
as of the Closing Date (except for changes contemplated by this Agreement and
except for representations which address matters only as of a specific date
(which shall be true as of that specific date)) with the same force and effect
as if they had been made at the Closing except to the extent the failure of the
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representations and warranties to be true and accurate in such respects has not
had and could not reasonably be expected to have a Material Adverse Effect on
BIZ, and Litronic shall receive a certificate to that effect executed by BIZ's
Chief Executive Officer and Chief Financial Officer.
10.2 COVENANTS. BIZ shall have performed and complied in all material
respects with all of its covenants required to be performed by it under this
Agreement and the Merger Agreement on or before the Closing, and Litronic shall
receive a certificate to that effect signed by BIZ's Chief Executive Officer and
Chief Financial Officer.
10.3 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in the condition (financial or otherwise), properties,
assets, liabilities, businesses, operations, results of operations or prospects
of BIZ, other than any change that shall result from general economic
conditions, or conditions generally affecting the engineering software market,
and Litronic shall receive a certificate to that effect executed by BIZ's Chief
Executive Officer and Chief Financial Officer.
10.4 COMPLIANCE WITH LAW. There shall be no order, decree or ruling by
any governmental agency or written threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which would prohibit or render illegal the transactions contemplated by
this Agreement.
10.5 CONSENTS. Litronic shall have been furnished with evidence
satisfactory to it that BIZ has obtained the Governmental Consents and other
third party consents set forth in the BIZ Disclosure Schedule pursuant to
Section 3.3.3.
10.6 CORPORATE OPINION. Litronic shall have received the opinion of
GCW&F based upon reasonably requested certifications as to factual matters and
dated the Closing Date regarding the status and authority of BIZ, the
authorization of this Agreement and the transactions contemplated hereby by BIZ,
and the binding effect of this Agreement on BIZ. The opinion shall be reasonably
satisfactory to R&T, and shall be substantially similar to the opinion rendered
by R&T with respect to Litronic.
10.7 FAIRNESS OPINION. Litronic shall have received a "bring down" of
the fairness opinion addressed to its Board of Directors referred to in Section
4.12, making that opinion effective as of the Closing Date.
10.8 TERMINATION OF STOCKHOLDERS AGREEMENT. The Amended and Restated
Stockholders Agreement dated as of December 6, 2000 among BIZ and certain of its
stockholders shall have terminated and ceased to be of any further force and
effect.
10.9 REPURCHASE OF SERIES A SHARES. BIZ shall have completed the
repurchase of all outstanding shares of BIZ Series A Preferred (it being
understood that BIZ's promissory note in the principal amount of $500,000,
representing a portion of the repurchase price, may still be outstanding on the
Closing Date).
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11. CONDITIONS PRECEDENT TO OBLIGATIONS OF LITRONIC AND BIZ.
The respective obligations of Litronic and BIZ hereunder are subject to
the fulfillment or satisfaction on or before the Closing, of each of the
following conditions (any one or more of which may be waived by Litronic or BIZ,
but only in a writing signed by Litronic or BIZ).
11.1 GOVERNMENT CONSENTS. There shall have been obtained on or before
the Closing such consents, material permits or authorizations, and there shall
have been taken such other action, as may be required to consummate the Merger
by any regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to requirements, if any,
under applicable federal and state securities laws and any third party.
11.2 INVESTMENT REPRESENTATION STATEMENT. Litronic shall have received
from each holder of BIZ Stock an Investment Representation Statement in the form
of Exhibit 11.2.
11.3 STOCKHOLDER APPROVALS. The principal terms of this Agreement and of
the Merger shall have been approved by the stockholders of Litronic and of BIZ,
respectively, in accordance with applicable law and their respective
certificates of incorporation and bylaws.
11.4 NO LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any Federal or state court and remain in
effect, nor shall any proceeding initiated by the U.S. Government seeking any of
the foregoing be pending.
11.5 DISSENTING SHARES. Holders of shares representing more than 5% of
the issued and outstanding shares of capital stock of BIZ shall not have
exercised, nor shall they have any continued right to exercise, dissenters',
appraisal or similar rights under applicable law with respect to their shares of
BIZ Stock by virtue of the Merger.
11.6 NASDAQ LISTING AND TRADING SYMBOL. The shares of Litronic Common
Stock issuable to stockholders of BIZ pursuant to this Agreement and such other
shares required hereunder to be reserved for issuance in connection with the
Merger (including without limitation the maximum number of shares of Litronic
Common Stock issuable pursuant to all Assumed Options and Assumed Warrants)
shall have been authorized for listing on the Nasdaq National Market upon
official notice of issuance, and Litronic's Nasdaq trading symbol shall have
been changed to "SSPX."
11.7 ELECTION OF LITRONIC DIRECTORS. There shall have been elected at
the Litronic Stockholders Meeting, in accordance with the Voting Agreement,
three directors nominated by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, three directors nominated by ▇▇▇▇
▇▇▇▇, and one director nominated jointly by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇, and
the Litronic Board of Directors shall consist of seven directors.
12. TERMINATION OF AGREEMENT.
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Merger by the
stockholders of Litronic and of BIZ, respectively:
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(a) by written agreement of BIZ and Litronic;
(b) by BIZ, if there has been a breach by Litronic of any of its
representations, warranties, covenants or agreements set forth in this
Agreement and as a result of such breach the conditions set forth in
Section 9.1 or 9.2 would not be satisfied as of the time of such breach;
provided that if such breach is curable by Litronic through the exercise
of reasonable efforts within 45 days after the time of such breach or
the time such representation shall have become inaccurate, then BIZ may
not terminate this Agreement under this paragraph during such 45-day
period so long as Litronic continues to exercise such reasonable efforts
(except that no cure period shall be provided for a breach by Litronic
which by its nature cannot be cured);
(c) by Litronic, if there has been a breach by BIZ of any of its
representations, warranties, covenants or agreements set forth in this
Agreement and as a result of such breach the conditions set forth in
Section 10.1 or 10.2 would not be satisfied as of the time of such
breach; provided that if such breach is curable by BIZ through the
exercise of reasonable efforts within 45 days after the time of such
breach or the time such representation shall have become inaccurate,
then Litronic may not terminate this Agreement under this paragraph
during such 45-day period so long as BIZ continues to exercise such
reasonable efforts (except that no cure period shall be provided for a
breach by BIZ which by its nature cannot be cured); or
(d) by BIZ or Litronic, if:
(i) the required vote of the stockholders of BIZ or of
Litronic in favor of the Merger has not been obtained;
(ii) if the Merger has not occurred on or before August 31,
2001 (or such later date as all parties hereto may agree in
writing) other than as a result of a breach of this Agreement by
the party seeking to terminate this Agreement under this
paragraph; or
(iii) if a permanent injunction or other order by any federal
or state court which would make illegal or otherwise restrain or
prohibit the consummation of the Merger has been issued and has
become final and nonappealable.
12.2 DUE DILIGENCE INVESTIGATIONS.
(a) In recognition of the fact that BIZ as of the date hereof has
not completed its due diligence review of Litronic and the Litronic
Subsidiaries, in addition to the other termination rights set forth in
this Section 12, BIZ shall have the right, at any time after the date of
this Agreement through and including the date which is the day before
the mailing of the Proxy Statement, to terminate this Agreement if BIZ
identifies any circumstance which, in the reasonable business judgment
of the Board of Directors (including any committee thereof) of BIZ,
acting in good faith and with due regard for principles of fair dealing,
could materially and adversely impact the reasonably expected financial
or business benefits to BIZ of the transactions contemplated by this
Agreement
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or otherwise constitute a breach of their fiduciary duty if BIZ were to
consummate the Merger under the terms set forth in this Agreement.
(b) In recognition of the fact that Litronic as of the date
hereof has not completed its due diligence review of BIZ and BCP, in
addition to the other termination rights set forth in this Section 12,
Litronic shall have the right, at any time after the date of this
Agreement through and including the date which is the day before the
mailing of the Proxy Statement, to terminate this Agreement if Litronic
identifies any circumstance which, in the reasonable business judgment
of the Board of Directors (including any committee thereof) of Litronic,
acting in good faith and with due regard for principles of fair dealing,
could materially and adversely impact the reasonably expected financial
or business benefits to Litronic of the transactions contemplated by
this Agreement or otherwise constitute a breach of their fiduciary duty
if Litronic were to consummate the Merger under the terms set forth in
this Agreement.
12.3 NOTICE OF TERMINATION. Any termination of this Agreement under
Section 12.1 or 12.2 will be effective by the delivery of written notice of the
terminating party to the other parties hereto.
12.4 EFFECT OF TERMINATION. In the case of any termination of this
Agreement as provided in this Section 12, this Agreement shall be of no further
force and effect and nothing herein shall relieve any party from liability for
any breach of this Agreement. In case of any termination as a result of a breach
by a party or the failure of a party to satisfy Closing conditions to be
satisfied by it and which are within its control, that party shall bear all of
the expenses (including, without limitation, reasonable legal, accounting and
other advisory fees as identified in the BIZ and Litronic Disclosure Schedules)
of both BIZ and Litronic incurred in connection with the failed transaction. In
all other cases of termination, each party shall be responsible for its own
expenses.
13. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties and covenants of the parties contained
in this Agreement will remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the parties to this Agreement,
until the earlier of the termination of this Agreement or the Closing Date,
whereupon the representations, warranties and covenants of the parties will
expire (except for covenants, such as those contained in Sections 5.11, 6.6,
6.12, 6.13, 7.1, and 7.4, that by their terms survive for a longer period).
14. MISCELLANEOUS.
14.1 GOVERNING LAW. The internal laws of the State of California
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms and the interpretation and enforcement
of the rights and duties of the parties hereto, except to the extent that the
Delaware General Corporation Law governs the legality and effectiveness of the
Merger.
14.2 ASSIGNMENT: BINDING UPON SUCCESSORS AND ASSIGNS. No party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other
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parties hereto. This Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
14.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the interest of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the greatest extent possible, the economic,
business and other purpose of the void unenforceable provision.
14.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original as regards any party
whose signature appears thereon and all of which together will constitute one
and the same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all the parties reflected hereon as signatories.
14.5 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the exercise of any other.
14.6 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto at any
time before or after approval of the stockholders of BIZ or of Litronic, but,
after approval, no amendment will be made which by applicable law requires the
further approval of the stockholders of BIZ or of Litronic without obtaining
such further approval.
14.7 EXPENSES. Except as provided in Section 12.4, each party will bear
its respective expenses and legal fees incurred with respect to this Agreement,
and the transactions contemplated hereby. It is understood that Litronic shall
pay the SEC and Nasdaq fees and all other fees and expenses incurred in relation
to the printing, filing and mailing of the Proxy Statement, other than fees and
disbursements of BIZ's attorneys, accountants and financial advisors.
14.8 ATTORNEYS' FEES. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including, without limitation, costs, expenses and fees
on any successful appeal).
14.9 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier
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or mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following address (at such other address for a
party as shall be specified by like notice):
If to BIZ to: BIZ Interactive Zone, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Litronic to: Litronic Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇, Chairman
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
All notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of delivery, (b) in
the case of a telecopy, when the party receiving the copy shall have confirmed
receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch,
and (d) in the case of mailing, on the third business day following such
mailing.
14.10 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof will
not be construed for or against either party. A reference to a Section or an
Exhibit will mean a Section of, or Exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
14.11 NO JOINT VENTURE. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other. The status of
the parties hereto is, and at all times will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any
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other. No party will hold itself out as having any authority or relationship in
contravention of this Section.
14.12 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
14.13 ABSENCE OF THIRD PARTY RIGHTS. No provisions of this Agreement are
intended, nor will be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, stockholder or partner of any party hereto or any other person or
entity unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement. Anything contained herein to the contrary notwithstanding, (a)
the holders of BIZ Options and BIZ Warrants are intended beneficiaries of
Section 2.11, (b) the employees of BIZ are intended beneficiaries of Section
7.1; (c) the officers and directors of BIZ are intended beneficiaries of Section
7.4; and (d) the stockholders of BIZ are intended beneficiaries of Section 7.7.
14.14 PUBLIC ANNOUNCEMENT. Upon execution of this Agreement, Litronic
and BIZ promptly will issue a joint press release approved by both parties
announcing the execution of this Agreement. Thereafter, Litronic or BIZ may
issue such press releases, and make such other disclosure regarding the proposed
Merger, as it determines (after consultation with legal counsel and after having
given the other a reasonable opportunity to review and comment on the disclosure
unless, under the circumstances, there is no time to do so) are required under
applicable state and federal securities laws or NASD rules.
14.15 ENTIRE AGREEMENT. This Agreement and the schedules and exhibits
hereto constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions, express
or implied, written or oral, between the parties with respect hereto. The
express terms hereof control and supersede any course of performance or usage of
trade inconsistent with any of the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed by their duly authorized respective officers as of the
date first above written.
LITRONIC INC., a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇
-------------------------------------------------
▇▇▇▇ ▇▇▇▇, Chairman and Chief Executive Officer
By: /s/ ▇▇▇ ▇▇▇▇
-------------------------------------------------
▇▇▇ ▇▇▇▇, Chief Financial Officer
BIZ INTERACTIVE ZONE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President and Chief Executive
Officer
By: /s/ ▇▇▇ ▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
LITRONIC MERGER CORP., a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇
-------------------------------------------------
▇▇▇▇ ▇▇▇▇, Chairman and Chief Executive Officer
By: /s/ ▇▇▇ ▇▇▇▇
-------------------------------------------------
▇▇▇ ▇▇▇▇, Chief Financial Officer
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EXHIBIT 2.2
FORM OF MERGER AGREEMENT
66
EXHIBIT 7.3
FORM OF VOTING AGREEMENT
67
EXHIBIT 7.5
FORM OF TAX REPRESENTATION LETTER
68
EXHIBIT 11.2
FORM OF INVESTMENT REPRESENTATION STATEMENT
69
BIZ DISCLOSURE SCHEDULE
70
LITRONIC DISCLOSURE SCHEDULE