EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
THE TITAN CORPORATION,
a Delaware corporation;
SUNRISE ACQUISITION SUB, INC.
a Delaware corporation;
HORIZONS TECHNOLOGY, INC.,
a Delaware corporation;
and
CERTAIN STOCKHOLDERS OF HORIZONS TECHNOLOGY, INC.
_____________________________
Dated as of February 26, 1998
_____________________________
TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION. . . . . . . . . . . . . . . . . . . . . 2
1.1 Merger of Merger Sub into the Company . . . . . . . . . . . . . . . 2
1.2 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing; Effective Time . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Certificate of Incorporation and Bylaws; Directors and Officers . . 2
1.5 Payment and Conversion of Shares. . . . . . . . . . . . . . . . . . 3
1.6 Employee Stock Options and Company Warrants . . . . . . . . . . . . 4
1.7 Closing of the Company's Transfer Books . . . . . . . . . . . . . . 5
1.8 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . . 5
1.9 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.10 Tax Consequences. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . 7
1.12 Further Action. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . 7
2.1 Due Organization; Subsidiaries; Etc. . . . . . . . . . . . . . . . 7
2.2 Certificate of Incorporation and Bylaws; Records. . . . . . . . . . 8
2.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . 11
2.6 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Bank Accounts; Receivables. . . . . . . . . . . . . . . . . . . . . 11
2.8 Equipment; Leasehold. . . . . . . . . . . . . . . . . . . . . . . . 11
2.9 Proprietary Assets. . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.11 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.12 Compliance with Legal Requirements. . . . . . . . . . . . . . . . . 17
2.13 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . 17
2.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.15 Employee and Labor Matters; Benefit Plans . . . . . . . . . . . . . 19
2.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . 21
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2.17 ESOP Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.19 Related Party Transactions. . . . . . . . . . . . . . . . . . . . . 23
2.20 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . 24
2.21 Authority; Binding Nature of Agreement. . . . . . . . . . . . . . . 24
2.22 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . . . 24
2.23 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.24 Accounting Matters. . . . . . . . . . . . . . . . . . . . . . . . . 26
2.25 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE DESIGNATED
STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . 26
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB . . . . . . 27
4.1 Due Organization; Etc . . . . . . . . . . . . . . . . . . . . . . . 27
4.2 Certificate of Incorporation and By-Laws. . . . . . . . . . . . . . 27
4.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . . . 28
4.4 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . 28
4.5 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . 29
4.6 Compliance with Legal Requirements. . . . . . . . . . . . . . . . . 29
4.7 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . 29
4.8 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . 29
4.9 Authority; Binding Nature of Agreement. . . . . . . . . . . . . . . 30
4.10 Valid Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.11 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . . . 30
4.12 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.13 Government Contracts; Government Bids . . . . . . . . . . . . . . . 32
4.14 Accounting Matters. . . . . . . . . . . . . . . . . . . . . . . . . 32
4.15 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5. CERTAIN COVENANTS OF THE COMPANY AND THE DESIGNATED STOCKHOLDERS. . 32
5.1 Access and Investigation. . . . . . . . . . . . . . . . . . . . . . 32
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5.2 Operation of the Company's Business . . . . . . . . . . . . . . . . 33
5.3 Notification; Updates to Company Disclosure Schedule. . . . . . . . 35
5.4 No Negotiation. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.5 ESOP Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6. CERTAIN COVENANTS OF PARENT . . . . . . . . . . . . . . . . . . . . 37
6.1 Access and Investigation. . . . . . . . . . . . . . . . . . . . . . 37
6.2 Notification; Updates to Parent Disclosure Schedule . . . . . . . . 37
SECTION 7. ADDITIONAL COVENANTS OF THE COMPANY AND PARENT. . . . . . . . . . . 38
7.1 Filings and Consents. . . . . . . . . . . . . . . . . . . . . . . . 38
7.2 Company Stockholders' Meeting . . . . . . . . . . . . . . . . . . . 38
7.3 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . 38
7.4 Pooling of Interests. . . . . . . . . . . . . . . . . . . . . . . . 38
7.5 Affiliate Agreements. . . . . . . . . . . . . . . . . . . . . . . . 38
7.6 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.7 Registration Statement; Proxy Statement . . . . . . . . . . . . . . 39
7.8 Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . 39
7.9 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.10 FIRPTA Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.11 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.12 Treatment of Employee Plans and Benefits. . . . . . . . . . . . . . 40
7.13 "Post-Closing" Insurance. . . . . . . . . . . . . . . . . . . . . . 40
7.14 Directors' and Officers' Indemnification and Insurance. . . . . . . 41
7.15 Earnings Release. . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB. . . . 41
8.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . 41
8.2 Performance of Covenants. . . . . . . . . . . . . . . . . . . . . . 42
8.3 Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . 42
8.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.5 Agreements and Documents. . . . . . . . . . . . . . . . . . . . . . 42
8.6 FIRPTA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 43
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8.7 Compliance With the Securities Act. . . . . . . . . . . . . . . . . 43
8.8 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.9 No Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.10 Effectiveness of Registration Statement . . . . . . . . . . . . . . 43
8.11 No Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 43
8.12 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.13 Average Sales Price . . . . . . . . . . . . . . . . . . . . . . . . 44
8.14 Stock Voting Agreement. . . . . . . . . . . . . . . . . . . . . . . 44
8.15 Tax Representation Letters. . . . . . . . . . . . . . . . . . . . . 44
8.16 Representation and Warranty Insurance . . . . . . . . . . . . . . . 44
SECTION 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. . . . . . . . . 44
9.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . 44
9.2 Performance of Covenants. . . . . . . . . . . . . . . . . . . . . . 44
9.3 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.4 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.5 No Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.6 Effectiveness of Registration Statement . . . . . . . . . . . . . . 45
9.7 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8 Average Sales Price . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 10. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.1 Termination Events. . . . . . . . . . . . . . . . . . . . . . . . . 46
10.2 Termination Procedures. . . . . . . . . . . . . . . . . . . . . . . 46
10.3 Termination Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.4 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 11. SURVIVAL OF REPRESENTATIONS, ETC.; INDEMNIFICATION, ETC. . . . . . 47
11.1 Survival of Representations, Etc. . . . . . . . . . . . . . . . . . 47
11.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.3 Limits on Indemnification and Liability . . . . . . . . . . . . . . 48
11.4 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.5 Defense of Third Party Claims . . . . . . . . . . . . . . . . . . . 49
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11.6 Exercise of Remedies by Indemnitees Other Than Parent . . . . . . . 49
SECTION 12. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 49
12.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 49
12.2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.3 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.6 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . 51
12.7 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.10 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 52
12.11 Remedies Cumulative; Specific Performance . . . . . . . . . . . . . 52
12.12 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.13 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.14 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.15 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . 53
12.16 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.17 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
LIST OF EXHIBITS:
EXHIBIT A - DESIGNATED STOCKHOLDERS
EXHIBIT B - CERTAIN DEFINITIONS
EXHIBIT C - DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
EXHIBIT D-1 - FORM OF AFFILIATE AGREEMENT
EXHIBIT D-2 - PERSONS TO EXECUTE AFFILIATE AGREEMENTS
EXHIBIT E - FORM OF TAX REPRESENTATION LETTER OF XXXXXX GODWARD LLP
EXHIBIT F - FORM OF TAX REPRESENTATION LETTER OF JENKENS & XXXXXXXXX, P.C.
EXHIBIT G - FORM OF RELEASE
EXHIBIT H - FORM OF LEGAL OPINION OF JENKENS & XXXXXXXXX, P.C.
EXHIBIT I - FORM OF LEGAL OPINION OF XXXXXX GODWARD LLP
v.
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of February 26, 1998, by and among: THE TITAN CORPORATION,
a Delaware corporation ("Parent"); SUNRISE ACQUISITION SUB, INC., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"); HORIZONS
TECHNOLOGY, INC., a Delaware corporation (the "Company"); and the parties
identified on Exhibit A (the "Designated Stockholders"). Certain capitalized
terms used in this Agreement are defined in Exhibit B.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub into the Company in accordance with this Agreement and the Delaware
General Corporation Law (the "Merger"). Upon consummation of the Merger,
Merger Sub will cease to exist, and the Company will become a wholly owned
subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger
be treated as a "pooling of interests."
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company.
D. The Designated Stockholders own a total of 5,172,500 shares of the
Common Stock (with par value $.01) of the Company ("Company Common Stock") and
no other shares of capital stock of the Company. Each Designated Stockholder
has executed and delivered to Parent a Stock Voting Agreement dated on or about
the date hereof (the "Stock Voting Agreement").
1.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Parent, 0000 Xxxxxxx Xxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, on March 31,
1998, or at such other time and date as the Parties agree, but in no event
later than the second business day after the date that all of the conditions
set forth in Sections 8 and 9 have been satisfied or waived (the "Closing Date"
and, unless and until the Closing has occurred, the "Scheduled Closing Time").
Contemporaneously with or as promptly as practicable after the Closing, a
properly executed Certificate of Merger conforming to the requirements of the
Delaware General Corporation Law shall be filed with the Secretary of State of
the State of Delaware. The Merger shall become effective at the time such
Certificate of Merger is filed with and accepted by the Secretary of State of
the State of Delaware (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent and the Company prior to the Effective
Time:
(a) the Certificate of Incorporation of Merger Sub in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation as of the Effective Time;
(b) the Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation as of the
Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
Exhibit C.
1.5 PAYMENT AND CONVERSION OF SHARES.
(a) Subject to Sections 1.8(d) and 1.9, at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any stockholder of the Company:
(i) each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be converted into the right to receive the
"Applicable Fraction"
2.
(as defined in Section 1.5(b)(i)) of a share of the common stock (par value
$.01 per share) of Parent ("Parent Common Stock");
(ii) each share of the Company's Series A Preferred Stock (with
par value $.01) (the "Series A Preferred Stock"), if any, outstanding
immediately prior to the Effective Time shall be converted into the right to
receive the fraction of a share of Parent Common Stock (A) having a numerator
equal to $5.00 and (B) having a denominator equal to the Designated Parent
Stock Price (as defined in Section 1.5(b)(iv)); and
(iii) each share of the common stock (with par value $.01)
of Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
(b) For purposes of this Agreement:
(i) The "Applicable Fraction" shall be the fraction: (A) having
a numerator equal to the amount by which (x) $23,850,000, minus the "Balance
Sheet Deduction," plus $65,240 (which the Company represents to be a good faith
estimate of the aggregate exercise prices of all of the Company Options),
exceeds (y) the "Aggregate Preferred Stock Valuation" and (B) having a
denominator equal to the amount determined by multiplying (1) the "Adjusted
Company Share Amount" by (2) the "Designated Parent Stock Price".
(ii) The "Aggregate Preferred Stock Valuation" shall be the
amount determined by multiplying (A) $5.00 by (B) the aggregate number of
shares of Series A Preferred Stock outstanding immediately prior to the
Effective Time.
(iii) The "Adjusted Company Share Amount" shall be the sum
of (A) the aggregate number of shares of Company Common Stock outstanding
immediately prior to the Effective Time (including any such shares that are
subject to a repurchase option or risk of forfeiture under any restricted stock
purchase agreement or other agreement), and (B) the aggregate number of shares
of Company Common Stock purchasable under or otherwise subject to all Company
Options outstanding immediately prior to the Effective Time (including all
shares of Company Common Stock that may ultimately be purchased under Company
Options that are unvested or are otherwise not then exercisable).
(iv) The "Designated Parent Stock Price" shall be (A) the
average of the closing sale prices of a share of Parent Common Stock as
reported on the New York Stock Exchange for each of the twenty consecutive
trading days immediately preceding the Closing Date (the "Average Sales
Price"), if the Average Sales Price is less than or equal to $8.00 per share
and greater than or equal to $6.00 per share; (B) $8.00 if the Average Sales
Price is greater than $8.00 per share; or (C) $6.00 if the Average Sales Price
is less than $6.00 per share.
(v) The "Balance Sheet Deduction" shall be (A) $4,500,000 plus
or minus, as described below, (B) the amount by which the Company's Working
Capital (determined prior to the Closing as set forth in Section 1.5(c) below)
is less than (in which case such amount shall be added to the amount determined
in (A) above) or greater than (in which case such amount shall be subtracted
from the amount determined in (A) above) negative
3.
$2,150,000; provided, however, no such adjustment shall be made unless the
Company's Working Capital is at least $200,000 less than or greater than, as
the case may be, negative $2,150,000 (and in such case such adjustment shall
be made with respect to the entire amount less than or greater than, as
appropriate, negative $2,150,000).
(c) As soon as practicable, and prior to March 15, 1998, or at such
other time as the parties may agree, the Company shall provide to Parent a
certificate (the "Estimated Deduction Certificate") executed by the Company's
Chief Executive Officer, which shall set forth the Company's good faith best
estimate of the Balance Sheet Deduction (determined using the Company's
unaudited balance sheet as of January 31, 1998, and as provided in Section
1.5(b)(v) above), and such estimate shall be used for purposes of determining
the Applicable Fraction; provided, however, that if Parent determines that the
Estimated Deduction Certificate underestimates the Balance Sheet Deduction (as
determined by the Parent's audit of the Company's records to be completed
within 15 days following delivery of such Estimated Deduction Certificate),
Parent and the Company shall cooperate to mutually determine the appropriate
Applicable Fraction consistent with the foregoing provisions (and any
disagreement between them shall be resolved via arbitration).
1.6 EMPLOYEE STOCK OPTIONS AND COMPANY WARRANTS. At the Effective Time,
each stock option that is then outstanding under the Company's 1988 Amended
Stock Option Plan, whether vested or unvested (a "Company Option"), and each
warrant to purchase shares of Company Common Stock ("Company Warrants") that
does not by its terms terminate in connection with the Merger, shall be assumed
(or substituted in the case of Company Warrants) by Parent in accordance with
the terms (as in effect as of the date of this Agreement) of the Company's 1988
Amended Stock Option Plan and the stock option agreement by which such Company
Option is evidenced, or the Company Warrant (as applicable). All rights with
respect to Company Common Stock under outstanding Company Options and such
surviving Company Warrants shall thereupon be converted into rights with
respect to Parent Common Stock. Accordingly, from and after the Effective
Time, (a) each Company Option and Company Warrant assumed (as substituted in
the case of Company Warrants) by Parent may be exercised solely for shares of
Parent Common Stock, (b) the number of shares of Parent Common Stock subject to
each such assumed Company Option and Company Warrant shall be equal to the
number of shares of Company Common Stock that were subject to such Company
Option or Company Warrant (as applicable) immediately prior to the Effective
Time multiplied by the Applicable Fraction, rounded down to the nearest whole
number of shares of Parent Common Stock, (c) the per share exercise price for
the Parent Common Stock issuable upon exercise of each such assumed Company
Option and Company Warrant shall be determined by dividing the exercise price
per share of Company Common Stock subject to such Company Option or Company
Warrant (as applicable), as in effect immediately prior to the Effective Time,
by the Applicable Fraction, and rounding the resulting exercise price up to the
nearest whole cent, and (d) all restrictions on the exercise of each such
assumed Company Option and Company Warrant shall continue in full force and
effect, and the term, exercisability, vesting schedule and other provisions of
such Company Option or Company Warrant (as applicable) shall otherwise remain
unchanged; provided, however, that each such assumed Company Option and Company
Warrant shall, in accordance with its terms, be subject to further adjustment
as appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction
4.
effected by Parent after the Effective Time. The Company and Parent shall
take all action that may be necessary (under the Company's 1988 Amended
Stock Option Plan and otherwise) to effectuate the provisions of this Section
1.6. Following the Closing, Parent will send to each holder of an assumed
Company Option a written notice setting forth (i) the number of shares of
Parent Common Stock subject to such assumed Company Option, and (ii) the
exercise price per share of Parent Common Stock issuable upon exercise of
such assumed Company Option.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have
any rights as stockholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of
any such shares of the Company's capital stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company Stock Certificate") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(a) At or as soon as practicable after the Effective Time, Parent,
or a transfer agent designated by Parent (the "Transfer Agent") will send to
the holders of Company Stock Certificates (i) a letter of transmittal in
customary form and containing such provisions as Parent may reasonably specify,
and (ii) instructions for use in effecting the surrender of Company Stock
Certificates in exchange for certificates representing Parent Common Stock.
Upon surrender of a Company Stock Certificate to Parent for exchange, together
with a duly executed letter of transmittal and such other documents as may be
reasonably required by Parent or the Transfer Agent, the holder of such Company
Stock Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock that
such holder has the right to receive pursuant to the provisions of this Section
1, and the Company Stock Certificate so surrendered shall be canceled. Until
surrendered as contemplated by this Section 1.8, each Company Stock Certificate
shall be deemed, from and after the Effective Time, to represent only the right
to receive upon such surrender a certificate representing shares of Parent
Common Stock (and cash in lieu of any fractional share of Parent Common Stock)
as contemplated by this Section 1. If any Company Stock Certificate shall have
been lost, stolen or destroyed, Parent may, in its discretion and as a
condition precedent to the issuance of any certificate representing Parent
Common Stock, require the owner of such lost, stolen or destroyed Company Stock
Certificate to provide an appropriate affidavit and to deliver a bond (in such
sum as Parent may reasonably direct) as indemnity against any claim that may be
made against Parent or the Surviving Corporation with respect to such Company
Stock Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Stock Certificate in accordance with
5.
this Section 1.8 (at which time such holder shall be entitled to receive all
such dividends and distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital
stock of the Company who would otherwise be entitled to receive a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock issuable to such holder) shall, upon surrender of such holder's
Company Stock Certificate(s), be paid in cash the dollar amount (rounded to the
nearest whole cent), without interest, determined by multiplying such fraction
by the Designated Parent Stock Price.
(d) Parent and the Surviving Corporation (or the Transfer Agent on
their behalf) shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable to any holder or former holder of capital
stock of the Company pursuant to this Agreement such amounts as Parent or the
Surviving Corporation may be required to deduct or withhold therefrom under the
Code or under any provision of state, local or foreign tax law (or, in the
alternative, Parent or the Transfer Agent, at Parent's option may request tax
information and other documentation to ensure no withholding is necessary). To
the extent such amounts are so deducted or withheld, such amounts shall be
treated for all purposes under this Agreement as having been paid to the Person
to whom such amounts would otherwise have been paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or
for any cash amounts, delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become "dissenting shares" within the meaning of applicable
law, shall not be converted into or represent the right to receive Parent
Common Stock in accordance with Section 1.5 (or cash in lieu of fractional
shares in accordance with Section 1.8(c)), and the holder or holders of such
shares shall be entitled only to such rights as may be granted to such holder
or holders pursuant to applicable law; provided, however, that if the status of
any such shares as "dissenting shares" shall not be perfected, or if any such
shares shall lose their status as "dissenting shares," then, as of the later of
the Effective Time or the time of the failure to perfect such status or the
loss of such status, such shares shall automatically be converted into and
shall represent only the right to receive (upon the surrender of the
certificate or certificates representing such shares) Parent Common Stock in
accordance with Section 1.5 (and cash in lieu of fractional shares in
accordance with Section 1.8(c)).
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to
applicable law and of any other demand, notice or instrument delivered to the
Company prior to the Effective Time pursuant to applicable law, and
6.
(ii) the opportunity to participate in all negotiations and proceedings with
respect to any such demand, notice or instrument. The Company shall not make
any payment or settlement offer prior to the Effective Time with respect to
any such demand unless Parent shall have consented in writing to such payment
or settlement offer.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
1.11 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.12 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation or
Parent with full right, title and possession of and to all rights and property
of Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except as
set forth in the disclosure schedule prepared by the Company and delivered by
the Company to Parent on the date of this Agreement (the "Company Disclosure
Schedule"):
2.1 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) Each of the Company and its majority-owned subsidiaries
(including any subsidiaries of such subsidiaries) (each of the Company and such
subsidiaries is individually referred to herein as "Acquired Corporation" and
collectively as the "Acquired Corporations") is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary power and authority: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and use
its assets in the manner in which its assets are currently owned and used; and
(iii) to perform its obligations under all Company Contracts. For purposes of
this Agreement, a company's "subsidiaries" shall mean and include all Entities
in which such company owns a majority interest or has the power to vote a
majority of the interests.
(b) Since January 1, 1993, except as set forth in Part 2.1 of the
Company Disclosure Schedule, the Company has not conducted any business under
or otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name or other name, other than the name "Horizons Technology, Inc."
(c) Each of the Acquired Corporations is qualified, authorized,
registered or licensed to do business as a foreign corporation in any
jurisdiction where so required under applicable law, except where the failure
to be so qualified, authorized, registered or licensed has
7.
not had and will not have a Material Adverse Effect on the Acquired
Corporation. Each of the Acquired Corporations is in good standing as a
foreign corporation in each of such jurisdictions.
(d) Part 2.1 of the Company Disclosure Schedule accurately sets
forth (i) the names of each of the Acquired Corporations, (ii) the names of the
members of each of the Acquired Corporations' board of directors, (iii) the
names of the members of each committee of each of the Acquired Corporations'
board of directors, and (iv) the names and titles of each of the Acquired
Corporations' officers.
(e) Except for the equity interests identified in Part 2.1 of the
Company Disclosure Schedule, each of the Acquired Corporations does not own,
beneficially or otherwise, any shares or other securities of, or any direct or
indirect equity interest in, any Entity. Each of the Acquired Corporations has
not agreed and is not obligated to make any future investment in or capital
contribution to any Entity. Each of the Acquired Corporations has not
guaranteed and is not responsible or liable for any obligation of any of the
Entities in which it owns any equity interest.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered or made available to Parent accurate and complete copies of: (1) the
Company's Certificate of Incorporation and bylaws, including all amendments
thereto, and all charter documents and bylaws and amendments thereto relating
to the other Acquired Corporations; (2) the stock records of each of the
Acquired Corporations, and (3) the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent) of the
stockholders of each of the Acquired Corporations, the board of directors of
each of the Acquired Corporations and all committees of the board of directors
of each of the Acquired Corporations. There have been no formal meetings (or
other proceedings required under applicable law to be reflected in the
Company's minute book) of the stockholders of any of the Acquired Corporations,
the board of directors of any of the Acquired Corporations or any committee of
the board of directors of any of the Acquired Corporations that are not
accurately reflected in such minutes or other records. There has not been any
violation of any of the provisions of the Certificate of Incorporation or
bylaws or other charter documents of any of the Acquired Corporations, and each
of the Acquired Corporations has not taken any action that is inconsistent in
any material respect with any resolution adopted by the its stockholders, its
board of directors or any committee of its board of directors. The stock
records and minute books of the Acquired Corporations are accurate, up-to-date
and complete in all material respects.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
12,000,000 shares of Common Stock (with par value $.01), of which 7,496,953
shares have been issued and are outstanding as of the date of this Agreement;
and (ii) 2,500,000 shares of Preferred Stock (with par value $.01), all of
which have been designated "Series A Preferred Stock," of which 500,000 shares
have been issued and are outstanding as of the date of this Agreement. Except
as set forth in Part 2.3 of Company Disclosure Schedule, each outstanding share
of Series A Preferred Stock is convertible into one share of Company Common
Stock. All of the outstanding shares of Company Common Stock and Series A
Preferred Stock have been duly authorized and validly issued, and are fully
paid and non-assessable. The Company has made available to
8.
Parent an accurate and complete description of the terms of each repurchase
option which is held by the Company and to which any of such shares is
subject as well as any obligation by the Company to pay dividends on any of
its stock.
(b) The Company has reserved 1,225,760 shares of Company Common
Stock for issuance under its 1988 Amended Stock Option Plan, of which options
to purchase 27,700 shares are outstanding as of the date of this Agreement.
The Company has reserved 158,364 shares of Company Common Stock for issuance
under outstanding warrants to purchase Company Common Stock. Part 2.3 of the
Company Disclosure Schedule accurately sets forth, with respect to each Company
Option and Company Warrant that is outstanding as of the date of this
Agreement: (i) the name of the holder of such Company Option or Company
Warrant; (ii) the total number of shares of Company Common Stock that are
subject to such Company Option or Company Warrant and the number of shares of
Company Common Stock with respect to which such Company Option or Company
Warrant is immediately exercisable; (iii) the date on which such Company Option
or Company Warrant was granted and the term of such Company Option or Company
Warrant; (iv) the exercise schedule or period, as applicable, for such Company
Option or Company Warrant; (v) the exercise price per share of Company Common
Stock purchasable under such Company Option or Company Warrant; and (vi)
whether such Company Option has been designated an "incentive stock option" as
defined in Section 422 of the Code. Except as set forth above and in Part 2.3
of the Company Disclosure Schedule, there is no: (i) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) to
acquire any shares of the capital stock or other securities of the Company;
(ii) outstanding security, instrument or obligation that is or may become
convertible into or exchangeable for any shares of the capital stock or other
securities of the Company; (iii) Contract under which the Company is or may
become obligated to sell or otherwise issue any shares of its capital stock or
any other securities; or (iv) to the best of the knowledge (as defined in
Exhibit B hereto) of the Company, condition or circumstance that may give rise
to or provide a basis for the assertion of a claim by any Person to the effect
that such Person is entitled to acquire or receive any shares of capital stock
or other securities of the Company. All of the Company Warrants except the
Company Warrants issued to Imperial Bank shall terminate and be of no further
force and effect as of the Closing.
(c) All outstanding shares of Company Common Stock and Series A
Preferred Stock, and all outstanding Company Options and Company Warrants, have
been issued and granted in compliance with (i) all applicable securities laws
and other applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts.
(d) Except as set forth in Part 2.3 of the Company Disclosure
Schedule, since January 31, 1993, the Company has never repurchased, redeemed
or otherwise reacquired any shares of capital stock or other securities of the
Company. All securities so reacquired by the Company were reacquired in
compliance with (i) the applicable provisions of the Delaware General
Corporation Law and all other applicable Legal Requirements, and (ii) all
requirements set forth in applicable restricted stock purchase agreements and
other applicable Contracts.
(i) 321,322 shares of the Company Common Stock, and no other
securities of the Company, have been issued to and are held by the Company's
Employee Stock Ownership Plan and Trust (the "Company ESOP") and 300,000 Shares
of the Company's Series
9.
A Preferred Stock, and no other securities of the Company, have been issued
and are held by the Company's Retirement Plan.
(ii) All of the outstanding shares of capital stock of each of
the subsidiaries of the Company are validly issued (in compliance with all
applicable securities laws and other Legal Requirements and applicable Company
Contracts), fully paid and nonassessable and are owned beneficially and of
record by the Company, free and clear of any Encumbrance.
2.4 FINANCIAL STATEMENTS
(a) The Company has delivered or made available to Parent the
following financial statements and notes (collectively, the "Company Financial
Statements"):
(i) the audited balance sheets of the Company as of January 31,
1997 and 1996, and the related audited income statements, statements of
stockholders' equity and statements of cash flows of the Company for the years
then ended, together with the notes thereto and the unqualified report and
opinion of Ernst & Young LLP relating thereto; and
(ii) the unaudited balance sheet of the Company as of January 2,
1998 (the "Unaudited Interim Balance Sheet"), and the related unaudited income
statement of the Company for the eleven months then ended.
(b) The Company Financial Statements are accurate and complete in
all material respects except as adjusted per agreement with Parent and present
fairly the financial position of the Company and the other Acquired
Corporations as of the respective dates thereof and the results of operations
and (in the case of the financial statements referred to in Section 2.4(a)(i))
cash flows of the Company and the other Acquired Corporations for the periods
covered thereby. The Company Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered (except that the financial
statements referred to in Section 2.4(a)(ii) do not contain footnotes).
2.5 ABSENCE OF CHANGES. Since December 31, 1997 there has not been
(a) any change, or any development or combination of developments that has had
or would reasonably be expected to have a Material Adverse Effect on the
Company, or (b) any material damage, destruction or loss, whether or not
covered by insurance, that has had or would reasonably be expected to have a
Material Adverse Effect on the Company.
2.6 TITLE TO ASSETS
(a) Each of the Acquired Corporations owns, and has good, valid and
marketable title to, all assets purported to be owned by it, including: (i)
all assets reflected on the Unaudited Interim Balance Sheet; (ii) all assets
referred to in Parts 2.1, 2.7(b) and 2.9 of the Company Disclosure Schedule and
all of its rights under the Contracts identified in Part 2.10 of the Company
Disclosure Schedule; and (iii) all other assets reflected in its books and
records as being owned by such Acquired Corporation. Except as set forth in
Part 2.6 of the Company
10.
Disclosure Schedule, all of said assets are owned by the Acquired
Corporations free and clear of any liens or other Encumbrances, except for
any lien for current taxes not yet due and payable.
(b) Part 2.6 of the Company Disclosure Schedule identifies all
material assets that are material to the business of the Acquired Corporations
and that are being leased or licensed to any of the Acquired Corporations.
2.7 BANK ACCOUNTS; RECEIVABLES
(a) The Company has provided to Parent accurate records for each
account (including account numbers) maintained by or for the benefit of any of
the Acquired Corporations at any bank or other financial institution.
(b) The Company has provided to Parent accurate records reflecting a
breakdown and aging of all accounts receivable, notes receivable and other
receivables of the Acquired Corporations as of December 31, 1997. Except as
set forth in Part 2.7(b) of the Company Disclosure Schedule, all existing
accounts receivable of the Acquired Corporations (including those accounts
receivable reflected on the Unaudited Interim Balance Sheet that have not yet
been collected and those accounts receivable that have arisen since December
31, 1997 and have not yet been collected) (i) represent valid obligations of
customers of the Acquired Corporations arising from bona fide transactions
entered into in the ordinary course of business, and (ii) are current and to
the best knowledge of the Company will be collected in full when due, without
any counterclaim or set off (net of a reasonable allowance for doubtful
accounts).
2.8 EQUIPMENT; LEASEHOLD
(a) All material items of equipment and other tangible assets owned
by or leased to the Acquired Corporations are adequate for the uses to which
they are being put, are in good condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of the Acquired Corporations'
businesses, in the manner in which such businesses are currently being
conducted.
(b) None of the Acquired Corporations own any real property or any
interest in real property, except for the leasehold created under the real
property leases identified in Part 2.10 of the Company Disclosure Schedule.
2.9 PROPRIETARY ASSETS
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Company Proprietary Asset registered with any Governmental
Body or for which an application has been filed with any Governmental Body, (i)
a brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application.
Part 2.9(a)(ii) of the Company Disclosure Schedule identifies and provides a
brief description of all other material Company Proprietary Assets owned by the
Company or any other Acquired Corporation. Part 2.9(a)(iii) of the Company
Disclosure Schedule identifies and provides a brief description of each
material Proprietary Asset licensed to the Company or any other Acquired
Corporation by any Person (except for any Proprietary Asset that is licensed to
11.
the Company or any other Acquired Corporation under any third party software
license generally available to the public at a cost of less than $10,000), and
identifies the license agreement under which such Proprietary Asset is being
licensed to the Company or any other Acquired Corporation. Except as set forth
in Part 2.9(a)(iv) of the Company Disclosure Schedule the Company (or any other
Acquired Corporation, as appropriate) has good, valid and marketable title to
all of the Company Proprietary Assets identified in Parts 2.9(a)(i) and
2.9(a)(ii) of the Company Disclosure Schedule, free and clear of all liens and
other Encumbrances, and has a valid right (contractual or otherwise) to use all
Proprietary Assets identified in Part 2.9(a)(iii) of the Company Disclosure
Schedule. Except as set forth in Part 2.9(a)(v) of the Company Disclosure
Schedule, no Acquired Corporation is obligated to make any payment to any
Person for the use of any Company Proprietary Asset. Except as set forth in
Part 2.9(a)(vi) of the Company Disclosure Schedule, no Acquired Corporation has
developed jointly with any other Person any Company Proprietary Asset with
respect to which such other Person has any rights.
(b) The Acquired Corporations have taken all measures and
precautions reasonably necessary to protect and maintain the confidentiality
and secrecy of all Company Proprietary Assets (except Company Proprietary
Assets whose value would be unimpaired by public disclosure) and otherwise to
maintain and protect the value of all Company Proprietary Assets.
(c) None of the Company Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person. None of the
Acquired Corporations is infringing, misappropriating or making any unlawful
use of, and the Acquired Corporations have not at any time infringed,
misappropriated or made any unlawful use of, or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the best of the knowledge of the
Company, no other Person is infringing, misappropriating or making any unlawful
use of, and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Company Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material respects
with any specification, documentation and performance standard provided with
respect thereto by or on behalf of any Acquired Corporation; and (ii) there has
not been any material claim by any customer or other Person alleging that any
Company Proprietary Asset does not conform in all material respects with any
specification, documentation, performance standard, representation or statement
made or provided by or on behalf of any Acquired Corporation, and, to the best
of the knowledge of the Company, there is no basis for any such claim. The
Company has established adequate reserves on the Unaudited Interim Balance
Sheet to cover all costs associated with any obligations that the Acquired
Corporations may have with respect to the correction or repair of programming
errors or other defects in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets reasonably necessary to enable the Acquired Corporations to conduct
their businesses in the manner in which such businesses have been and are being
conducted. Except as set forth in Part 2.9(e) of the Company Disclosure
Schedule, (i) the Acquired Corporations have not licensed any of the Company
Proprietary Assets to any Person on an exclusive basis, and (ii) the Acquired
12.
Corporations have not entered into any covenant not to compete or Contract
limiting the ability to exploit fully any Proprietary Assets or to transact
business in any market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Company Disclosure
Schedule, (i) all current and former employees of the Acquired Corporations
have executed and delivered to the Acquired Corporations an agreement that is
substantially identical to the standard form of Confidential Information and
Invention Assignment Agreement or similar agreement used by the Company and
previously delivered to Parent, and (ii) all current and former consultants and
independent contractors to the Acquired Corporations have executed and
delivered to the Acquired Corporations an agreement that is substantially
identical to the standard form of Consultant Confidential Information and
Invention Assignment Agreement or similar agreement used by the Company and
previously delivered to Parent.
2.10 CONTRACTS
(a) Part 2.10 of the Company Disclosure Schedule identifies each
Contract of the Company or any of the other Acquired Corporations material to
the Acquired Corporations, considered as a whole (each a "Material Company
Contract"), including the following (to the extent material):
(i) each Company Contract relating to the employment of, or
the performance of services by, any employee, consultant or independent
contractor;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any Proprietary Asset;
(iii) each Company Contract imposing any material
restriction on any Acquired Corporation's right or ability (A) to compete with
any other Person, (B) to acquire any product or other asset or any services
from any other Person, to sell any product or other asset to or perform any
services for any other Person or to transact business with any other Person, or
(C) develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of any of the Acquired Corporations;
(vi) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(vii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(viii) each Company Contract relating to the purchase or sale
of any product or other asset by or to, or the performance of any services by
or for, any Related Party (as defined in Section 2.19);
13.
(ix) any other Company Contract that was entered into by any
Acquired Corporation outside the ordinary course of business or was
inconsistent with any such Acquired Corporation's past practices;
(b) The Acquired Corporations have delivered or made available to
Parent accurate and complete copies of all written Contracts identified in Part
2.10 of the Company Disclosure Schedule, including all amendments thereto.
Each Contract identified in Part 2.10 of the Company Disclosure Schedule is
valid and in full force and effect, and, to the best of the knowledge of the
Company, is enforceable by the Acquired Corporations in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Company Disclosure
Schedule:
(i) none of the Acquired Corporations has materially violated
or breached, or committed any material default under, any Company Contract,
and, to the best of the knowledge of the Company, no other Person has
materially violated or breached, or committed any material default under, any
Company Contract;
(ii) to the best of the knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) will, or would reasonably be expected to, (A) result in a
material violation or breach of any of the provisions of any Material Company
Contract, (B) give any Person the right to declare a default or exercise any
remedy under any Material Company Contract, (C) give any Person the right to
accelerate the maturity or performance of any Material Company Contract, or
(D) give any Person the right to cancel, terminate or modify any Material
Company Contract;
(iii) since January 31, 1997, none of the Acquired
Corporations has received any notice or other communication regarding any
material violation or breach of, or default under, any Company Contract; and
(iv) none of the Acquired Corporations has waived any of its
material rights under any Material Company Contract.
(d) No Person is renegotiating any amount paid or payable to the
Company under any Material Company Contract or any other material term or
provision of any Material Company Contract.
(e) The Contracts identified in Part 2.10 of the Company Disclosure
Schedule collectively constitute all of the Contracts reasonably necessary to
enable the Acquired Corporations to conduct their businesses in the manner in
which they are currently being conducted.
(f) The Company has made available to Parent all material
documentation regarding any bid, offer, award, written proposal or term sheet
which has been submitted or received by the Acquired Corporations since January
31, 1997.
14.
(g) The Company has made available to Parent all material
documentation regarding the Acquired Corporations' current backlog under
Company Contracts.
(h) Since January 1, 1992, except as set forth in Part 2.10(h) of
the Company Disclosure Schedule:
(i) none of the Acquired Corporations has had any
determination of noncompliance or entered into any consent order;
(ii) each of the Acquired Corporations has complied in all
material respects with all Legal Requirements with respect to all Government
Contracts and Government Bids;
(iii) none of the Acquired Corporations has, in obtaining
or performing any Government Contract, violated (A) the Truth in Negotiations
Act of 1962, as amended, (B) the Service Contract Act of 1963, as amended,
(C) the Contract Disputes Act of 1978, as amended, (D) the Office of Federal
Procurement Policy Act, as amended, (E) the Federal Acquisition Regulations
(the "FAR") or any applicable agency supplement thereto, (F) the Cost
Accounting Standards, (G) the Defense Industrial Security Manual (DOD
5220.22-M), (H) the Defense Industrial Security Regulation (DOD 5220.22-R) or
any related security regulations, or (I) any other applicable procurement law
or regulation or other Legal Requirement;
(iv) all facts set forth in or acknowledged by any of the
Acquired Corporations in any certification, representation or disclosure
statement submitted by it with respect to any Government Contract or
Government Bid were current, accurate and complete as of the date of
submission;
(v) neither the Acquired Corporations nor any of their
current employees (while, or to the best of the Company's knowledge, prior to
becoming an employee) has been debarred or suspended from doing business with
any Governmental Body, and, to the best of the knowledge of the Company, no
circumstances exist that would sustain a debarment or suspension of any of
the Acquired Corporations or any employee of any of the Acquired Corporations;
(vi) no negative determinations of responsibility have been
issued against any of the Acquired Corporations in connection with any
Government Contract or Government Bid;
(vii) no material direct or indirect costs incurred by any
Acquired Corporation have been questioned (by written document or formal
proceeding) or disallowed as a result of a finding or determination of any
kind by any Governmental Body;
(viii) Since January 1, 1997, no Governmental Body, and no
prime contractor or higher-tier subcontractor of any Governmental Body, has
withheld or set off, or threatened to withhold or set off, any amount due to
any Acquired Corporation under any Government Contract;
15.
(ix) none of the Acquired Corporations is undergoing or has
undergone any audit, and the Company has no knowledge of any basis for any
impending audit, arising under or relating to any Government Contract (other
than normal routine audits conducted in the ordinary course of business);
(x) except as set forth in Part 2.10 of the Company
Disclosure Schedule none of the Acquired Corporations has entered into any
financing arrangement with respect to the performance of any Government
Contract;
(xi) no payment has been made by any Acquired Corporation, or
to the best knowledge of the Company, to any Person (other than to any bona
fide employee or agent (as defined in subpart 3.4 of the FAR) of the Company)
which is or was contingent upon the award of any Government Contract or which
would otherwise be in violation of any applicable procurement law or
regulation or any other Legal Requirement;
(xii) each of the Acquired Corporations' cost accounting
system has not been determined by any Governmental Body not to be in
compliance with any Legal Requirement;
(xiii) each of the Acquired Corporations has complied with
all applicable regulations and other Legal Requirements and with all
applicable contractual requirements relating to the placement of legends or
restrictive markings on technical data, computer software and other
Proprietary Assets, except where any failure to do so has not and would not
reasonably be expected to have a Material Adverse Effect on the Company;
(xiv) in each case in which any Acquired Corporation has
delivered or otherwise provided any technical data, computer software or
Company Proprietary Asset to any Governmental Body in connection with any
Government Contract, such Acquired Corporation has taken reasonable measures
to xxxx such technical data, computer software or Company Proprietary Asset
with all markings and legends (including any "restricted rights" legend and
any "government purpose license rights" legend) necessary (under the FAR or
other applicable Legal Requirements) to ensure that no Governmental Body or
other Person is able to acquire any unlimited rights with respect to such
technical data, computer software or Company Proprietary Asset;
(xv) each of the Acquired Corporations has reached agreement
with the cognizant government representatives approving and "closing" all
indirect costs charged to Government Contracts for 1991, 1992, and 1993, and
those years are closed;
(xvi) none of the Acquired Corporations is nor will they
be required to make any filing with or give any notice to, or to obtain any
Consent from, any Governmental Body under or in connection with any
Government Contract or Government Bid as a result of or by virtue of (A) the
execution, delivery of performance of this Agreement or any of the other
agreements referred to in this Agreement, or (B) the consummation of the
Merger or any of the other transactions contemplated by this Agreement.
16.
2.11 LIABILITIES. Each of the Acquired Corporations has no material
accrued, contingent or other liabilities of any nature, either matured or
unmatured (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles, and whether due or
to become due), not otherwise reflected in the Company Financial Statements
or provided in the Company Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Acquired
Corporations is, and has at all times since December 31, 1993 been, in
compliance with all applicable Legal Requirements, except where the failure
to comply with such Legal Requirements has not had and will not have a
Material Adverse Effect on the Company. Except as set forth in Part 2.12 of
the Company Disclosure Schedule, since December 31, 1993, each of the
Acquired Corporations has not received any notice or other communication from
any Governmental Body regarding any actual or possible violation of, or
failure to comply with, any Legal Requirements, except where the failure to
comply with such Legal Requirements has not had and will not have a Material
Adverse Effect on the Company.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Company Disclosure
Schedule identifies each material Governmental Authorization held by each of
the Acquired Corporations. The Governmental Authorizations identified in
Part 2.13 of the Company Disclosure Schedule are valid and in full force and
effect, and collectively constitute all Governmental Authorizations necessary
to enable each of the Acquired Corporations to conduct its business in the
manner in which its business is currently being conducted except where any
failure to have such Governmental Authorizations has not had and will not
have a Material Adverse Effect on the Company. Each of the Acquired
Corporations is, and at all times since December 31, 1993 has been, in
substantial compliance with the terms and requirements of the respective
Governmental Authorizations identified in Part 2.13 of the Company Disclosure
Schedule. Since December 31, 1993, the Company has not received any notice or
other communication from any Governmental Body regarding (a) any actual or
possible violation of or failure to comply with any term or requirement of
any Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
2.14 TAX MATTERS
(a) All Tax Returns required to be filed by or on behalf of any
Acquired Corporation with any Governmental Body with respect to any taxable
period ending on or before the Closing Date (the "Company Returns") (i) have
been or will be filed on or before the applicable due date (including any
extensions of such due date), and (ii) have been, or will be when filed,
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or
before the Closing Date have been or will be paid on or before the Closing
Date. The Company has delivered or made available to Parent accurate and
complete copies of all Company Returns filed since December 31, 1990 which
have been requested by Parent.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with generally accepted accounting principles.
17.
(c) Except as set forth in Part 2.14 of the Company Disclosure
Schedule, there have been no examinations or audits of any Company Return
since December 31, 1990. The Company has delivered to Parent accurate and
complete copies of all audit reports and similar documents (to which it has
access) relating to the Company Returns. Except as set forth in Part 2.14 of
the Company Disclosure Schedule, no extension or waiver of the limitation
period applicable to any of the Company Returns has been granted and no such
extension or waiver has been requested from any Acquired Corporation.
(d) Except as set forth in Part 2.14 of the Company Disclosure
Schedule, since January 31, 1993 no material claim or Proceeding is pending
or has been threatened against or with respect to any Acquired Corporation in
respect of any Tax. There are no unsatisfied liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon
and related expenses) with respect to any notice of deficiency or similar
document received by any Acquired Corporation with respect to any Tax (other
than liabilities for Taxes asserted under any such notice of deficiency or
similar document which are being contested in good faith by any such Acquired
Corporation and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of any
Acquired Corporation except liens for current Taxes not yet due and payable.
Each of the Acquired Corporations has not entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. Each of the
Acquired Corporations has not been, and will not be, required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant
to Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions or events occurring, or
accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any Acquired Corporation that, considered
individually or considered collectively with any other such Contracts, will,
or could reasonably be expected to, give rise directly or indirectly to the
payment of any amount that would not be deductible pursuant to Section 280G
or Section 162 of the Code. Each of the Acquired Corporations is not, and
has never been, a party to or bound by any tax indemnity agreement, tax
sharing agreement, tax allocation agreement or similar Contract.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS
(a) Part 2.15(a) of the Company Disclosure Schedule identifies
each salary, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, or termination pay plan (collectively,
the "Compensation Plans"), and each hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, including the Company
ESOP, the "Plans") sponsored, maintained, contributed to or required to be
contributed to by any Acquired Corporation for the benefit of any employee of
any Acquired Corporation ("Employee"), except for Plans which would not
require the Acquired Corporations to make payments or provide benefits having
a value in excess of $25,000 in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Company Disclosure
Schedule, the Acquired Corporations do not maintain, sponsor or contribute to,
and, to the best of the
18.
knowledge of Company, have not at any time in the past maintained, sponsored
or contributed to, any employee pension benefit plan (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not excluded from coverage under specific Titles or
Merger Subtitles of ERISA) for the benefit of Employees or former Employees
(a "Pension Plan").
(c) Each of the Acquired Corporations maintains, sponsors or
contributes only to those employee welfare benefit plans (as defined in
Section 3(1) of ERISA, whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of Employees or former
Employees which are described in Part 2.15(c) of the Company Disclosure
Schedule (the "Welfare Plans"), none of which is a multiemployer plan (within
the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent
summary plan description, together with each Summary of Material
Modifications, if required under ERISA, with respect to such Plan, and all
material employee communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and record keeping
agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect
to such Plan (if such Plan is intended to be qualified under Section 401(a)
of the Code).
(e) No Acquired Corporation is required to be, and, to the best of
the knowledge of the Company, has ever been required to be, treated as a
single employer with any other Person under Section 4001(b)(1) of ERISA or
Section 414(b), (c), (m) or (o) of the Code. No Acquired Corporation has
ever been a member of an "affiliated service group" within the meaning of
Section 414(m) of the Code. To the best of the knowledge of the Company, the
Acquired Corporations have never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA,
resulting in "withdrawal liability," as
19.
such term is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208 of
ERISA).
(f) The Acquired Corporations do not have any plan or commitment
to create any additional Welfare Plan or any Pension Plan, or to modify or
change any existing Welfare Plan or Pension Plan (other than to comply with
applicable law) in a manner that would affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Company Disclosure
Schedule, no Welfare Plan provides death, medical or health benefits (whether
or not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated
by applicable law, including coverage provided pursuant to Section 4980B of
the Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which
are borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in
all material respects.
(i) Each of the Compensation Plans and the Plans has been operated
and administered in all material respects in accordance with applicable Legal
Requirements, including but not limited to ERISA and the Code.
(j) Each of the Compensation Plans and the Plans intended to be
qualified under Section 401(a) of the Code has received a favorable
determination from the Internal Revenue Service, the Company is not aware of
any reason why any such determination letter should be revoked.
(k) Except as set forth in Part 2.15(k) of the Company Disclosure
Schedule, neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment (including any
bonus, golden parachute or severance payment) to any current or former
Employee or director of any Acquired Corporation (whether or not under any
Plan), or materially increase the benefits payable under any Compensation
Plan or Plan, or result in any acceleration of the time of payment or vesting
of any such benefits.
(l) The Company has provided to Parent documentation showing all
salaried employees of the Acquired Corporations, and correctly reflecting, in
all material respects, their salaries, any other compensation payable to them
(including compensation payable pursuant to bonus, deferred compensation or
commission arrangements), their dates of employment and their positions. The
Acquired Corporations are not a party to any collective bargaining contract
or other Contract with a labor union involving any of its Employees. All of
the Company's employees are "at will" employees.
20.
(m) Part 2.15(m) of the Company Disclosure Schedule identifies
each Employee who is not fully available to perform work because of
disability or other leave and sets forth the basis of such leave and the
anticipated date of return to full service.
(n) Each of the Acquired Corporations is in compliance in all
material respects with all applicable Legal Requirements and Contracts
relating to employment, employment practices, wages, bonuses and terms and
conditions of employment, including employee compensation matters.
(o) Except as set forth in Part 2.15(o) of the Company Disclosure
Schedule, each of the Acquired Corporations has good labor relations, and the
Company has no reason to believe that (i) the consummation of the Merger or
any of the other transactions contemplated by this Agreement will have a
material adverse effect on any Acquired Corporation's labor relations, or
(ii) any Acquired Corporation's employee(s) intend(s) to terminate his or her
employment with the Acquired Corporation
2.16 ENVIRONMENTAL MATTERS. Each of the Acquired Corporations is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each of the Acquired Corporations
of all permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. Each of the Acquired Corporations has not received any notice or
other communication (in writing or otherwise), whether from a Governmental
Body or citizens group, that alleges that any of the Acquired Corporations is
not in compliance with any Environmental Law, and, to the best of the
knowledge of the Company, there are no circumstances that may prevent or
interfere with the Acquired Corporations' compliance with any Environmental
Law in the future. To the best of the knowledge of the Company, no current
or prior owner of any property leased or controlled by any of the Acquired
Corporations has received any notice or other communication (in writing or
otherwise), whether from a Government Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or any of the
Acquired Corporations is not in compliance with any Environmental Law. All
Governmental Authorizations currently held by each of the Acquired
Corporations pursuant to Environmental Laws are identified in Part 2.16 of
the Company Disclosure Schedule. (For purposes of this Section 2.16: (i)
"Environmental Law" means any federal, state, local or foreign Legal
Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface
or subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "Materials of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or hereafter regulated
by any Environmental Law or that is otherwise a danger to health,
reproduction or the environment.)
2.17 ESOP MATTERS
(a) The Company ESOP is duly organized and existing under applicable
law, is a stock bonus plan qualified under Section 401(a) of the Code and is an
"employee stock
21.
ownership plan" as defined in Section 4975(e)(7) of the Code. The Company
ESOP was formed and is, and at all times has been, maintained primarily for
the benefit of the Company ESOP participants and beneficiaries, within the
meaning of Section 4975(d)(3)(A) of the Code, Treasury Regulations Section
54.4975-7 and Section 408(b)(3) of ERISA. The shares of each Acquired
Corporation's stock held by the Company ESOP (the "ESOP Shares") constitute
"employer securities" within the meaning of Section 409(l) of the Code. The
Company has heretofore delivered to Parent accurate and complete copies of
all documents (and all amendments, modifications and supplements thereto)
material to the creation of the Company ESOP and ESOP Trust and the ESOP
Transactions, including, but not limited to, (a) the Company ESOP plan
document and trust agreement, (b) each request heretofore filed with the IRS
requesting the issuance of a favorable determination letter with respect to
the qualified status or continuing qualified status of the Company ESOP,
including all supporting documentation filed herewith, (c) any request filed
with the IRS under the Voluntary Compliance Resolution Program ("VCR") or the
Closing Agreement Program ("CAP"), (d) documentation of any correction of
Company ESOP defects under the IRS' Administrative Program Regarding Self
Correction ("APRSC").
(b) Except as set forth in Part 2.17(b) of the Company Disclosure
Schedule, (a) as of the Closing Date, no ESOP Transaction has occurred and no
ESOP Loan exists with respect to the Company ESOP and (b) as of the Closing
Date no ESOP Loan or ESOP Transaction is under negotiation and neither the
Company nor any Acquired Corporation have any plan or commitment to enter
into an ESOP Transaction or an ESOP Loan. No ESOP Transaction was, or has
resulted in, or will result in a prohibited transaction under Section 4975(c)
of the Code, Sections 406 or 407 of ERISA, or the regulations thereunder.
Any ESOP Loans and any related guarantees constitutes an "exempt loan" under
Treasury Regulation Section 54.4975-7(b)(1)(iii). The use of the proceeds of
any ESOP Loans by the Acquired Corporations and the Company ESOP,
respectively, and the pledge of the ESOP Shares as security for the ESOP
Loans, did not and does not constitute or result in a violation of the
provisions of the Code or ERISA or any regulations thereunder.
(c) All ESOP Loans have been fully paid, and no further amounts
are due thereunder. Neither any of the Acquired Corporations nor the Company
ESOP is or has been in breach or violation of any ESOP Transaction Document,
there are no remaining unperformed obligations of the Acquired Corporations
or the Company ESOP under any ESOP Transaction Document, and there are no
amounts as to which any Acquired Corporation or the Company ESOP are or may
be liable under any ESOP Transaction Documents.
(d) At the Closing Date, there have been no transactions under
Internal Revenue Code Section 1042 with respect to the Company ESOP.
(e) All Legal Requirements applicable to any Acquired Corporation
and/or to the ESOP Trustee requiring prudence of fiduciaries, including,
without limitation, as to valuation matters and other similar matters
relating to discretionary judgments not involving legal judgments, have been
complied with, and the Acquired Corporations are not and shall not be subject
to any liability as a fiduciary or co-fiduciary under ERISA with respect to
matters arising prior to and through the Closing Date in connection with the
Company ESOP. Neither the execution and delivery of this Agreement nor the
consummation of the transactions described
22.
herein or any other agreement between or among the parties to this Agreement,
or the performance of the terms hereof or thereof, will conflict with,
violate, or result in a breach of the Company ESOP plan document, any ESOP
Transaction Documents or any agreement or other instrument by which the
Acquired Corporations, the Company ESOP, the ESOP Trustee or the ESOP Trust
may be bound, and will not constitute a breach by any Person acting as a
fiduciary, within the meaning of ERISA, with respect to the Company ESOP of
any fiduciary responsibility or similar duty or obligation owed by such
Person to the participants of the Company ESOP under ERISA or otherwise.
2.18 INSURANCE. Part 2.18 of the Company Disclosure Schedule identifies
all insurance policies maintained by, at the expense of or for the benefit of
the Acquired Corporations and identifies any material claims made thereunder,
and the Company has delivered or made available to Parent accurate and
complete copies of the insurance policies identified on Part 2.18 of the
Company Disclosure Schedule. Each of the insurance policies identified in
Part 2.18 of the Company Disclosure Schedule is in full force and effect.
Since January 31, 1993, each of the Acquired Corporations has not received
any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy, or (c)
material adjustment in the amount of the premiums payable with respect to any
insurance policy.
2.19 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.19 of
the Company Disclosure Schedule: (a) no Related Party has, and no Related
Party has at any time since January 31, 1995 had, any direct or indirect
interest in any material asset used in or otherwise relating to the
businesses of the Acquired Corporations; (b) no Related Party is, or has at
any time since January 31, 1995 been, indebted to any of the Acquired
Corporations; (c) since January 31, 1995, no Related Party has entered into,
or has had any direct or indirect financial interest in, any Material Company
Contract, transaction or business dealing involving any of the Acquired
Corporations; (d) no Related Party is competing, or has at any time since
January 31, 1995 competed, directly or indirectly, with any of the Acquired
Corporations; and (e) no Related Party has any claim or right against any of
the Acquired Corporations (other than rights under Company Options or Company
Warrants and rights to receive compensation for services performed as an
employee of any of the Acquired Corporations). (For purposes of this Section
2.19 each of the following shall be deemed to be a "Related Party": (i)
each of the Designated Stockholders; (ii) each individual who is, or who has
at any time since January 31, 1995 been, an officer any of the Acquired
Corporations; (iii) each member of the immediate family of each of the
individuals referred to in clauses "(i)" and "(ii)" above; and (iv) any trust
or other Entity (other than the Acquired Corporations) in which any one of
the individuals referred to in clauses "(i)", "(ii)" and "(iii)" above holds
(or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or equity interest.
No Related Party shall have any liability or obligation to Parent with
respect to this Section 2.19.)
2.20 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 2.20 of the Company Disclosure
Schedule, there is no pending Legal Proceeding, and (to the best of the
knowledge of the Company) no Person has threatened to commence any Legal
Proceeding: (i) that involves any of the Acquired Corporations or any of the
assets owned or used by any of the Acquired Corporations or (to the
23.
best knowledge of the Company) any Person whose liability any of the Acquired
Corporations has or may have retained or assumed, either contractually or by
operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the
Merger or any of the other transactions contemplated by this Agreement. To
the best of the knowledge of the Company, except as set forth in Part 2.20 of
the Company Disclosure Schedule, no event has occurred, and no claim, dispute
or other condition or circumstance exists, that will, or that could
reasonably be expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding.
(b) Except as set forth in Part 2.20 of the Company Disclosure
Schedule, no material Legal Proceeding has been commenced by or has been
pending against any of the Acquired Corporations since January 1, 1997.
(c) There is no order, writ, injunction, judgment or decree to
which any of the Acquired Corporations, or any of the assets owned or used by
any of the Acquired Corporations, is subject. To the best of the knowledge of
the Company, no officer or other employee of any of the Acquired Corporations
is subject to any order, writ, injunction, judgment or decree that prohibits
such officer or other employee from engaging in or continuing any conduct,
activity or practice relating to any such Acquired Corporation's business.
2.21 AUTHORITY; BINDING NATURE OF AGREEMENT. Subject to the approval of
the stockholders of the Company, the Company has the absolute and
unrestricted right and authority to enter into and to perform its obligations
under this Agreement; and the execution, delivery and performance by the
Company of this Agreement have been duly authorized by all necessary action
on the part of the Company and its board of directors. This Agreement
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief
of debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
2.22 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.22 of
the Company Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly
(with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of the Company's Certificate of Incorporation or bylaws, or
(ii) any resolution adopted by the Company's stockholders, the Company's
board of directors or any committee of each of the Company's board of
directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any material Legal Requirement or any order, writ,
injunction, judgment or decree to which the Company, or any of the assets
owned or used by any of the Acquired Corporations, is subject;
24.
(c) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any material
Governmental Authorization that is held by any of the Acquired Corporations
or that otherwise relates to any of the Acquired Corporations' business or to
any of the assets owned or used by any of the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Company Contract that
is or would constitute a Material Company Contract, or give any Person the
right to (i) declare a default or exercise any remedy under any such Company
Contract, (ii) accelerate the maturity or performance of any such Company
Contract, or (iii) cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by any of the
Acquired Corporations (except for minor liens that will not, in any case or
in the aggregate, materially detract from the value of the assets subject
thereto or materially impair the operations of any such Acquired Corporation).
Except as set forth in Part 2.22 of the Company Disclosure Schedule, the
Acquired Corporations are not and will not be required to make any filing
with or give any notice to, or to obtain any Consent from, any Person in
connection with (x) the execution, delivery or performance of this Agreement
or any of the other agreements referred to in this Agreement, or (y) the
consummation of the Merger or any of the other transactions contemplated by
this Agreement.
2.23 FULL DISCLOSURE
(a) This Agreement (including the Company Disclosure Schedule)
does not (i) contain any representation, warranty or information that is
false or misleading with respect to any material fact, or (ii) omit to state
any material fact or necessary in order to make the representations,
warranties and information contained and to be contained herein and therein
(in the light of the circumstances under which such representations,
warranties and information were or will be made or provided) not false or
misleading.
(b) The information supplied by the Company for inclusion in the
S-4 Registration Statement (as defined in Section 7.7) will not, as of the
date the S-4 Registration Statement becomes effective or as of the date of
the Company Stockholders' Meeting (as defined in Section 7.2), (i) contain
any statement that is inaccurate or misleading with respect to any material
fact, or (ii) omit to state any material fact necessary in order to make such
information (in the light of the circumstances under which it is provided)
not false or misleading.
2.24 ACCOUNTING MATTERS To the knowledge of the Company, neither the
Company nor any of its affiliates has taken or agreed to, or plans to, take
any action that would prevent Parent from accounting for the business
combination to be effected by the Merger as a "pooling of interests."
2.25 BROKERS. No broker, finder or financial adviser retained by the
Company is entitled to any brokerage, finder's or other fee or commission
from the Company in connection with the transactions contemplated by this
Agreement; except the Company has retained the
25.
Xxxxxxx Xxxxxxxxx Group to give fairness opinions and valuations in
connection with the Merger for a fee not to exceed $50,000.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE DESIGNATED STOCKHOLDERS.
3.1 REPRESENTATIONS AND WARRANTIES. The Designated Stockholders
represent and warrant to and for the benefit of the Parent that to the best
of their actual knowledge, and based upon review of relevant information and
records of the Company as deemed appropriate by the Designated Stockholders,
the representations and warranties of the Company contained herein (as
qualified by the Company Disclosure Schedule) are true and correct in all
material respects, and do not set forth facts that are false or misleading in
any material respect, nor do they omit to set forth facts the absence of
which would make such representations and warranties materially false or
misleading. Notwithstanding the generality of the foregoing, the Designated
Stockholders represent and warrant to the best of their actual knowledge, and
based upon review of relevant information and records of the Company as
deemed appropriate by the Designated Stockholders, as follows:
(a) The Company has made available to Parent the Company Financial
Statements and the Company Financial Statements are accurate and complete in
all material respects and present fairly the financial position of the
Company and the other Acquired Corporations as of the respective dates
thereof and the results of operations and (in the case of the financial
statements referred to in Section 2.4(a)(i)) cash flows of the Company and
the other Acquired Corporations for the periods covered thereby. The Company
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered (except that the financial statements referred to in Section
2.4(a)(ii) do not contain footnotes and are subject to normal and recurring
year-end audit adjustments, which will not, individually or in the aggregate,
be material in magnitude).
(b) Except as set forth in Part 2.12 of the Company Disclosure
Schedule, to the best knowledge of the Designated Stockholders, each of the
Acquired Corporations is, and has at all times since January 31, 1993 been in
compliance with all applicable Legal Requirements, except where the failure
to comply with such Legal Requirements has not had and will not have a
Material Adverse Effect on the Company.
(c) Except as would not have a Material Adverse Effect on the
Company, each of the Acquired Corporations owns, and has good, valid and
marketable title to, all assets purported to be owned by it, including: (i)
all assets reflected on the Unaudited Interim Balance Sheet; (ii) all
assets referred to in Parts 2.1, 2.7(b) and 2.9 of the Company Disclosure
Schedule and all of its rights under the Contracts identified in Part 2.10 of
the Company Disclosure Schedule; and (iii) all other assets reflected in its
books and records as being owned by such Acquired Corporation. Except as set
forth in Part 2.6 of the Company Disclosure Schedule, all of said assets are
owned by the Acquired Corporations free and clear of any liens or other
Encumbrances, except for any lien for current taxes not yet due and payable.
(d) None of the Acquired Corporations has materially violated or
breached or committed any material default under, any Material Company
Contract.
26.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub (each of the Parent and Merger Sub is individually
referred to herein as "Acquiring Corporation" and collectively as the
"Acquiring Corporations") jointly and severally represent and warrant to the
Company that, except as set forth in the disclosure schedule prepared by the
Parent and delivered by the Parent to the Company on the date of this
Agreement (the "Parent Disclosure Schedule"):
4.1 DUE ORGANIZATION; ETC
(a) Each of the Acquiring Corporations is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all necessary power and authority: (i) to conduct its
business in the manner in which its business is currently being conducted;
(ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Material Company Contracts by which it is bound.
(b) Each of the Acquiring Corporations is qualified, authorized,
registered or licensed to do business as a foreign corporation in any
jurisdiction where so required under applicable law, except where the failure
to be so qualified, authorized, registered or licensed has not had and will
not have a Material Adverse Effect on the Acquiring Corporation. Each of the
Acquiring Corporations is in good standing as a foreign corporation in each
of such jurisdictions.
4.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. True, correct and
complete copies of the Certificates of Incorporation and By-laws, each as
amended to date, of Parent and Merger Sub have been made available to the
Company. The Certificates of Incorporation and By-laws of Parent and each of
the other Acquiring Corporations are in full force and effect. Neither
Parent nor any of the other Acquiring Corporations is in violation of any
provision of its Certificate of Incorporation or By-laws.
4.3 CAPITALIZATION, ETC. The authorized capital stock of Parent
consists of: (i) 45,000,000 shares of Common Stock, $.01 par value per
share, 16,725,179 shares were issued and are outstanding as of January 30,
1998, and (ii) 2,500,000 shares of Preferred Stock, (A) 250,000 shares of
which have been designated as Series A Junior Participating Preferred Stock,
none of which has been issued, (B) 1,068,102 shares of which have been
designated as $1.00 Cumulative Convertible Preferred Stock, $1.00 par value
per share, 694,872 of which were issued and are outstanding as of January 30,
1998, and (C) 500,000 shares of which have been designated as Series B
Cumulative Convertible Redeemable Preferred Stock, all of which were issued
as of January 30, 1998. Each outstanding share of $1.00 Cumulative
Convertible Preferred Stock is convertible at any time into two-thirds (2/3)
of a share of Parent's common stock. The Series B Preferred Stock is
convertible at the holder's option into shares of Parent's common stock at a
conversion price of $9.00 per share. In November 1996, Parent issued
$34,500,000 of convertible subordinated debentures. The debentures are
convertible into common stock at a conversion price of $3.50 per share. All
of the outstanding shares of Parent capital stock have been duly authorized
and validly issued, and are fully paid and nonassessable, and none of such
shares is subject to any repurchase option or restriction on transfer other
than restrictions imposed by federal or state securities laws. All
outstanding shares of Parent capital
27.
stock have been issued in compliance with all applicable securities laws and
other applicable Legal Requirements, and all requirements set forth in
applicable Contracts. All of the outstanding shares of capital stock of
Merger Sub are owned beneficially and of record by Parent, free and clear of
any Encumbrances and were issued in compliance with all applicable securities
laws and other applicable Legal Requirements. Parent has outstanding options
to purchase 1,860,598 shares of common stock as of the date hereof, with
exercise prices ranging between $2.625 to $9.50. In addition, Parent has
issued 100,000 warrants to acquire common stock at an exercise price of $3.50
per share. The shares of Parent Common Stock to be issued to the Company's
shareholders in the Merger, when issued by Parent in accordance with the
terms of this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable, will be issued in compliance with applicable federal and
state securities laws and, except for the restrictions imposed by applicable
federal and state securities laws, will be free and clear of any Encumbrances
created or imposed, directly or indirectly, by Parent (subject to the terms
of Affiliate Agreements entered into as contemplated by this Agreement).
4.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered or made available to the Company accurate
and complete copies (excluding copies of exhibits) of each report,
registration statement (on a form other than Form S-8) and definitive proxy
statement filed by Parent with the SEC between January 1, 1997 and the date
of this Agreement (the "Parent SEC Documents"). As of the time it was filed
with the SEC (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing): (i) each of the Parent SEC
Documents complied in all material respects with the applicable requirements
of the Securities Act or the Exchange Act (as the case may be); and (ii) none
of the Parent SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the Parent
SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered, except as may be
indicated in the notes to such financial statements and (in the case of
unaudited statements) as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
year-end audit adjustments; and (iii) fairly present the consolidated
financial position of Parent and its subsidiaries as of the respective dates
thereof and the consolidated results of operations of Parent and its
subsidiaries for the periods covered thereby.
4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997,
there has not been (a) any change, or any development or combination of
developments, that has had or would reasonably be expected to have a Material
Adverse Effect on Parent, or (b) any damage, destruction or loss, whether or
not covered by insurance, that has had or would reasonably be expected to
have a Material Adverse Effect on Parent.
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4.6 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Acquiring
Corporations is, and has at all times since December 31, 1993 been, in
compliance with all applicable Legal Requirements, except where the failure
to comply with such Legal Requirements has not had and will not have a
Material Adverse Effect on Parent. Except as set forth in Part 4.6 of the
Parent Disclosure Schedule, since December 31, 1993, each of the Acquiring
Corporations has not received any notice or other communication from any
Governmental Body regarding any actual or possible violation of, or failure
to comply with, any Legal Requirements, except where the failure to comply
with such Legal Requirements has not had and will not have a Material Adverse
Effect on Parent.
4.7 GOVERNMENTAL AUTHORIZATIONS. The Governmental Authorizations held
by the Acquiring Corporations are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable
each of the Acquiring Corporations to conduct its business in the manner in
which its business is currently being conducted except where any failure to
have such Governmental Authorizations has not had and will not have a
Material Adverse Effect on Parent. Each of the Acquiring Corporations is in
substantial compliance with the terms and requirements of such Governmental
Authorizations.
4.8 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 4.8 of the Parent Disclosure
Schedule, there is no pending Legal Proceeding, and (to the best of the
knowledge of the Acquiring Corporations) no Person has threatened to commence
any Legal Proceeding that has had or would reasonably be expected to have a
Material Adverse Effect on Parent: (i) that involves any of the Acquiring
Corporations or any of the assets owned or used by any of the Acquiring
Corporations or (to the best knowledge of the Company) any Person whose
liability any of the Acquiring Corporations has or may have retained or
assumed, either contractually or by operation of law; or (ii) that
challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. To the best of the knowledge of
the Company, except as set forth in Part 4.8 of the Parent Disclosure
Schedule, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.
(b) Except as set forth in Part 4.8 of the Parent Disclosure
Schedule, no material Legal Proceeding has ever been commenced by or has ever
been pending against any of the Acquiring Corporations since January 1, 1997.
(c) There is no order, writ, injunction, judgment or decree to
which any of the Acquiring Corporations, or any of the assets owned or used
by any of the Acquiring Corporations, is subject. To the best of the
knowledge of the Company, no officer or other employee of any of the
Acquiring Corporations is subject to any order, writ, injunction, judgment or
decree that prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to any such Acquiring
Corporation's business.
4.9 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right and authority to perform their obligations
under this Agreement;
29.
and the execution, delivery and performance by Parent and Merger Sub of this
Agreement (including the contemplated issuance of Parent Common Stock in the
Merger in accordance with this Agreement) have been duly authorized by all
necessary action on the part of Parent and Merger Sub and their respective
boards of directors. No vote of Parent's stockholders is needed to approve
the Merger. This Agreement constitutes the legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable
remedies.
4.10 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable, as described herein.
4.11 NON-CONTRAVENTION; CONSENTS. Except as set forth in 4.11 of the
Parent Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly
(with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of the Acquiring Corporations' Certificates of
Incorporation or bylaws, or (ii) any resolution adopted by either Acquiring
Corporations' stockholders, board of directors or any committee of either of
the Acquiring Corporation's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any material Legal Requirement or any order, writ,
injunction, judgment or decree to which the Company, or any of the assets
owned or used by any of the Acquiring Corporations, is subject;
(c) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any material
Governmental Authorization that is held by any of the Acquiring Corporations
or that otherwise relates to any of the Acquiring Corporations' business or
to any of the assets owned or used by any of the Acquiring Corporations;
(d) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Contract material to
the Acquiring Corporations, or give any Person the right to (i) declare a
default or exercise any remedy under any such Contract, (ii) accelerate the
maturity or performance of any such Contract, or (iii) cancel, terminate or
modify any such Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by any of the
Acquiring Corporations (except for minor liens that will not, in any case or
in the aggregate, materially detract from the value of the assets subject
thereto or materially impair the operations of any such Acquiring
Corporation).
30.
Except as set forth in Part 4.11 of the Parent Disclosure Schedule, and
except as may be required by the Securities Act, the Exchange Act, state
securities or "blue sky" laws, the HSR Act and the New York Stock Exchange
Rules and Regulations, the Acquiring Corporations are not and will not be
required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in
this Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
4.12 FULL DISCLOSURE.
(a) This Agreement (including the Parent Disclosure Schedule) does
not (i) contain any representation, warranty or information that is false or
misleading with respect to any material fact, or (ii) omit to state any
material fact or necessary in order to make the representations, warranties
and information contained and to be contained herein and therein (in the
light of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
(b) The information supplied by the Acquiring Corporations for
inclusion in the S-4 Registration Statement (as defined in Section 7.7) will
not, as of the date the S-4 Registration Statement becomes effective, (i)
contain any statement that is inaccurate or misleading with respect to any
material fact, or (ii) omit to state any material fact necessary in order to
make such information (in the light of the circumstances under which it is
provided) not false or misleading.
4.13 GOVERNMENT CONTRACTS; GOVERNMENT BIDS. Except as set forth in Part
4.13 of the Parent Disclosure Schedule:
(a) None of the Acquiring Corporations have had any determination
of noncompliance or entered into any consent order;
(b) the Acquiring Corporations have complied in all material
respects with all Legal Requirements with respect to all Government Contracts
and Government Bids;
(c) the Acquiring Corporations have not, in obtaining or
performing any Government Contract, violated (A) the Truth in Negotiations
Act of 1962, as amended, (B) the Service Contract Act of 1963, as amended,
(C) the Contract Disputes Act of 1978, as amended, (D) the Office of Federal
Procurement Policy Act, as amended, (E) the FAR or any applicable agency
supplement thereto, (F) the Cost Accounting Standards, (G) the Defense
Industrial Security Manual (DOD 5220.22-M), (H) the Defense Industrial
Security Regulation (DOD 5220.22-R) or any related security regulations, or
(I) any other applicable procurement law or regulation or other Legal
Requirement;
(d) neither the Acquiring Corporations nor any of their current
respective employees (while, or to the best of Parent's knowledge prior to
becoming an employee) have been debarred or suspended from doing business
with any Governmental Body, and, to the best of the knowledge of Parent, no
circumstances exist that would sustain a debarment or suspension of any
Acquiring Corporation or any employee of any Acquiring Corporation; and
31.
4.14 ACCOUNTING MATTERS. To the knowledge of Parent, Parent has not
taken and has not agreed, and does not plan, and will not take any action
that would prevent Parent from accounting for the business combination to be
effected by the Merger as a "pooling of interest."
4.15 BROKERS. No broker, finder or financial adviser retained by Parent
and Merger Sub is entitled to any brokerage, finder's or other fee or
commission from Parent and Merger Sub in connection with the transactions
contemplated by this Agreement.
SECTION 5. CERTAIN COVENANTS OF THE COMPANY AND THE DESIGNATED STOCKHOLDERS
5.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and
Parent's Representatives with reasonable access to the Company's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company; and (b) provide Parent and Parent's Representatives with copies of
such existing books, records, Tax Returns, work papers and other documents
and information relating to the Company, and with such additional financial,
operating and other data and information regarding the Company, as Parent may
reasonably request.
5.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing
Period, except pursuant to prior written consent of Parent, the Company
shall, and shall cause each of the other Acquired Corporations to:
(a) conduct its business and operations in the ordinary course and
in substantially the same manner as such business and operations have been
conducted prior to the date of this Agreement;
(b) in each case, in all material respects use reasonable efforts
to preserve intact its current business organization, keep available the
services of its current officers and employees and maintain its relations and
good will with all suppliers, customers, landlords, creditors, employees and
other Persons having business relationships with it;
(c) use reasonable efforts to keep in full force all insurance
policies identified in Part 2.18 of the Company Disclosure Schedule;
(d) not declare, accrue, set aside or pay any dividend or make any
other distribution in respect of any shares of capital stock, and shall not
repurchase, redeem or otherwise reacquire any shares of capital stock or
other securities (except that the Company may repurchase Company Common Stock
from former employees pursuant to the terms of existing restricted stock
purchase agreements);
(e) not sell, issue or authorize the issuance of (i) any capital
stock or other security, (ii) any option or right to acquire any capital
stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that the Company
shall be permitted (x) to grant stock options to employees in accordance with
its
32.
past practices, (y) to issue Company Common Stock to employees upon the
exercise of outstanding Company Options or Company Warrants, and (z) to issue
shares of Company Common Stock upon the conversion of shares of Series A
Preferred Stock);
(f) not amend or waive any of its rights under, or permit the
acceleration of vesting under, (i) any provision of the Company's 1988
Amended Stock Plan, (ii) any provision of any agreement evidencing any
outstanding Company Option or Company Warrants, or (iii) any provision of any
restricted stock purchase agreement;
(g) except as otherwise provided herein, not amend or permit the
adoption of any amendment to the Company's Certificate of Incorporation or
bylaws, or effect or permit the Company to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction; to which each of the Designated
Stockholders also covenants;
(h) not form any subsidiary or acquire any equity interest or
other interest in any other Entity;
(i) not make any capital expenditure, except for capital
expenditures that, when added to all other capital expenditures made on
behalf of the Acquired Corporations during the Pre-Closing Period, do not
exceed $150,000 in the aggregate;
(j) not (i) enter into, or permit any of the assets owned or used
by it to become bound by, any Contract that is or would constitute a Material
Company Contract, or (ii) amend or prematurely terminate, or waive any
material right or remedy under, any such Material Company Contract;
(k) except in compliance with the limits of subsection (i) above,
not (i) acquire, lease or license any right or other asset from any other
Person, (ii) sell or otherwise dispose of, or lease or license, any right or
other asset to any other Person, or (iii) waive or relinquish any right,
except for assets acquired, leased, licensed or disposed of by the Acquired
Corporations pursuant to Contracts that are not Material Company Contracts;
(l) not (i) lend money to any Person or (ii) incur or guarantee
any indebtedness for borrowed money (except that the Company may make routine
borrowings in the ordinary course of business under its line of credit with
Imperial Bank);
(m) except as set forth in the Company Disclosure Schedule, not
(i) establish, adopt or amend any Employee Benefit Plan, (ii) pay any bonus
or make any profit-sharing payment, cash incentive payment or similar payment
to, or increase the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors,
officers or employees, except for items accrued and approved by Parent or
pursuant to agreements in effect on the date hereof, or in accordance with
the Company's past practices, or (iii) hire any new indirect employee whose
aggregate annual compensation from the Company is expected to exceed $40,000;
33.
(n) not change any of its methods of accounting or accounting
practices in any material respect; and, with respect to determinations of
Working Capital, not change any of its methods of accounting or accounting
practices whatsoever, except the Company shall change its methods of
accounting or accounting practices with respect to determinations of Working
Capital to the extent reasonably requested by Parent to ensure compliance
with Generally Accepted Accounting Principles, consistently applied ("GAAP");
(o) not make any Tax election;
(p) not commence or settle any material Legal Proceeding; and
(q) not agree or commit to take any of the actions described in
clauses "(d)" through "(p)" above.
5.3 NOTIFICATION; UPDATES TO COMPANY DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly
notify Parent in writing of:
(i) the discovery by the Company of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by the Company or any of the Designated
Stockholders in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made
by the Company or any of the Designated Stockholders in this Agreement if (A)
such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of the
Company (and each Designated Stockholder shall promptly notify Parent in
writing of any breach of any covenant or obligation of such Designated
Stockholder set forth herein); and
(iv) any event, condition, fact or circumstance that would
make the timely satisfaction of any of the conditions set forth in Section 8
or Section 9 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 5.3(a) requires any change in the Company
Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming the Company Disclosure Schedule were
dated as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then the Company shall promptly deliver to
Parent an update to the Company Disclosure Schedule specifying such change.
No such update shall be deemed to supplement or amend the Company Disclosure
Schedule for the
34.
purpose of (i) determining the accuracy of any of the representations and
warranties made by the Company or any of the Designated Stockholders in this
Agreement, or (ii) determining whether any of the conditions set forth in
Section 8 has been satisfied; provided, however, that if Closing occurs, the
Company Disclosure Schedule shall be deemed to be modified at such time by
such update.
5.4 NO NEGOTIATION. During the Pre-Closing Period, neither the Company
nor any of the Designated Stockholders shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal
or offer from any Person (other than Parent) relating to a possible
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into
any agreement with, or provide any non-public information or afford access to
the properties, books or records of Company to any Person (other than Parent)
relating to or in connection with a possible Acquisition Transaction; or
(c) consider, entertain or accept (subject to Section 10.1(e)) any
proposal or offer from any Person (other than Parent) relating to a possible
Acquisition Transaction.
The parties acknowledge that any breach of the foregoing provisions by any
officer, director or agent (including any employee of the Company acting as
agent) of any of the Acquired Corporations shall be deemed a breach by the
Company.
This Section 5.4 does not prohibit the Company from furnishing information
regarding the Company or entering into discussions with any Person in
response to an unsolicited bona fide written proposal or offer relating to a
possible Acquisition Transaction submitted by such Person if the Board of
Directors of the Company concludes in good faith, after consultation with
outside legal counsel, that such action is required in order for the Board of
Directors of the Company to comply with its fiduciary obligations to the
Company's stockholders under applicable law.
The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company or any of the Designated Stockholders during the
Pre-Closing Period.
5.5 ESOP COVENANTS
(a) The Company shall take such action as is necessary to ensure
that the requirements of Section 409(e) of the Code and the fiduciary
provisions of ERISA are satisfied in connection with the voting of the ESOP
Shares upon the Merger at the Company Stockholders' Meeting.
(b) The Company agrees to take, during the Pre-Closing Period and
thereafter, such actions, if any, as Parent deems reasonably necessary in
Parent's discretion to obtain assurances satisfactory to Parent as to (i) the
qualification of the Company ESOP under Section 401(a) and 4975(e)(7) of the
Code and (ii) the compliance by the Company, the Company ESOP and the ESOP
Trust with applicable Legal Requirements, including ERISA and
35.
the Code, in connection with the establishment, operation and maintenance of
the Company ESOP and the availability of the intended benefits and
consequences associated with the Company ESOP and the ESOP Transactions. No
such actions taken by Parent or the Company shall in any way limit or
diminish the rights of any Indemnitees under this Agreement to recover or be
indemnified for Indemnitee Damages, as defined herein.
SECTION 6. CERTAIN COVENANTS OF PARENT
6.1 ACCESS AND INVESTIGATION. During the pre-closing period, Parent
shall, and shall cause its Representatives to: (a) provide the Company and
the Company's Representatives with reasonable access to Parent's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to Parent;
and (b) provide the Company and the Company's Representatives with copies of
such existing books, records, Tax Returns, work papers and other documents
and information relating to Parent, and with such additional financial,
operating and other data and information regarding Parent, as the Company may
reasonably request.
6.2 NOTIFICATION; UPDATES TO PARENT DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, Parent shall promptly notify
the Company in writing of:
(i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made
by Parent in this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of Parent;
and
(iv) any event, condition, fact or circumstance that would
make the timely satisfaction of any of the conditions set forth in Section 8
or Section 9 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 6.2(a) requires any change in the Parent
Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming the Parent Disclosure Schedule were
dated as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then Parent shall promptly deliver to the
Company an update to the Parent Disclosure Schedule specifying such change.
No such update shall be deemed to supplement or amend the Parent Disclosure
Schedule for the purpose of (i)
36.
determining the accuracy of any of the representations and warranties made by
Parent in this Agreement, or (ii) determining whether any of the conditions
set forth in Section 9 has been satisfied.
SECTION 7. ADDITIONAL COVENANTS OF THE COMPANY AND PARENT
7.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given
by such party in connection with the Merger and the other transactions
contemplated by this Agreement, and (b) shall use all commercially reasonable
efforts to obtain all Consents (if any) required to be obtained (pursuant to
any applicable Legal Requirement or Contract, or otherwise) by such party in
connection with the Merger and the other transactions contemplated by this
Agreement. The Company shall (upon request) promptly deliver to Parent a
copy of each such filing made, each such notice given and each such Consent
obtained by the Company during the Pre-Closing Period.
7.2 COMPANY STOCKHOLDERS' MEETING. The Company shall, in accordance
with its Certificate of Incorporation and By-laws, the applicable
requirements of the Delaware General Corporation Law and SEC requirements
with respect to preparation and mailing of the Prospectus/Proxy Statement,
call and hold a special meeting of its stockholders (or if agreed upon by the
Company and Parent, solicit the vote of its stockholders by way of written
consent) as promptly as practicable for the purpose of permitting them to
consider and to vote upon and approve the Merger and this Agreement (for
purposes of this Agreement, such meeting, or the time at which the Company
shall have received such written consent from the stockholders of the Company
shall be referred to as the "Company Stockholders' Meeting"). As soon as
permissible under the rules of the Delaware General Corporation Law, the
Company shall solicit the vote of its stockholders with respect to the Merger
and the transactions contemplated hereby.
7.3 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) neither
the Company nor any of the Designated Stockholders shall (and the Company
shall not permit any of its Representatives to) issue any press release or
make any public statement regarding this Agreement or the Merger, or
regarding any of the other transactions contemplated by this Agreement,
without Parent's prior written consent, which shall not be unreasonably
withheld, and (b) Parent will use reasonable efforts to consult with the
Company prior to issuing any press release or making any public statement
regarding the Merger.
7.4 POOLING OF INTERESTS. During the Pre-Closing Period, no party to
this Agreement shall take any action that could reasonably be expected to
have an adverse effect on the ability of Parent to account for the Merger as
a "pooling of interests."
7.5 AFFILIATE AGREEMENTS. Each Designated Stockholder shall execute
and deliver to Parent, and the Company shall use all commercially reasonable
efforts to cause each other Person identified on Exhibit D-2 (and any other
Person that could reasonably be deemed to be an "affiliate" of the Company
for purposes of the Securities Act), to execute and deliver to Parent, as
promptly as practicable after the execution of this Agreement, an Affiliate
Agreement in the form of Exhibit D-1.
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7.6 BEST EFFORTS. During the Pre-Closing Period, (a) the Company and
the Designated Stockholders shall use their best efforts to cause the
conditions set forth in Section 8 to be satisfied on a timely basis, and (b)
Parent and Merger Sub shall use their best efforts to cause the conditions
set forth in Section 9 to be satisfied on a timely basis.
7.7 REGISTRATION STATEMENT; PROXY STATEMENT.
(a) As promptly as practicable after the date of this Agreement,
Parent and the Company shall prepare and cause to be filed with the SEC a
registration statement on Form S-4 covering the Parent Common Stock to be
issued to the Company stockholders in the Merger (the "S-4 Registration
Statement"), in which a Prospectus/Proxy Statement will be included as a
prospectus (the "Prospectus/Proxy Statement"), and any other documents
required by the Securities Act or the Exchange Act in connection with the
Merger. Each of Parent and the Company shall use all reasonable efforts to
cause the S-4 Registration Statement (including the Prospectus/Proxy
Statement) to comply with the rules and regulations promulgated by the SEC,
to respond promptly to any comments of the SEC or its staff and to have the
S-4 Registration Statement declared effective under the Securities Act as
promptly as practicable after it is filed with the SEC. The Company will use
all reasonable efforts to cause the Prospectus/Proxy Statement to be mailed
to the Company's stockholders, as promptly as practicable after the S-4
Registration Statement is declared effective under the Securities Act. The
Company shall promptly furnish to Parent all information concerning the
Acquired Corporations and the Company's stockholders that may be required or
reasonably requested in connection with any action contemplated by this
Section 7.7. If any event relating to any of the Acquired Corporations
occurs, or if the Company becomes aware of any information, that should be
set forth in an amendment or supplement to the S-4 Registration Statement or
the Prospectus/Proxy Statement, then the Company shall promptly inform Parent
thereof and shall cooperate with Parent in filing such amendment or
supplement with the SEC and, if appropriate, in mailing such amendment or
supplement to the stockholders of the Company.
(b) Prior to the Effective Time, Parent shall use reasonable
efforts to obtain all regulatory approvals needed to ensure that the Parent
Common Stock to be issued in the Merger will be registered or qualified under
the securities law of every jurisdiction of the United States in which any
registered holder of Company Common Stock has an address of record on the
record date for determining the stockholders entitled to notice of and to
vote upon this Agreement and the Merger as provided herein; PROVIDED,
HOWEVER, that Parent shall not be required (i) to qualify to do business as a
foreign corporation in any jurisdiction in which it is not now qualified or
(ii) to file a general consent to service of process in any jurisdiction.
7.8 REGULATORY APPROVALS. In addition to the obligations of the
parties set forth in the preceding section, the Company and Parent shall use
all reasonable efforts to file, as soon as practicable after the date of this
Agreement, all notices, reports and other documents required to be filed with
any Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, the Company and Parent shall, promptly after the
date of this Agreement, prepare and file the notifications, if any, required
under the HSR Act in connection with the Merger. The Company and Parent
shall respond as promptly as practicable to (i) any inquiries or requests
received from the Federal
38.
Trade Commission or the Department of Justice for additional information or
documentation and (ii) any inquiries or requests received from any state
attorney general or other Governmental Body in connection with antitrust or
related matters. Each of the Company and Parent shall (1) give the other
party prompt notice of the commencement of any Legal Proceeding by or before
any Governmental Body with respect to the Merger or any of the other
transactions contemplated by this Agreement, (2) keep the other party
informed as to the status of any Legal Proceeding, and (3) promptly inform
the other party of any communication to or from the Federal Trade Commission,
the Department of Justice or any other Governmental Body regarding the
Merger. The Company and Parent will consult and cooperate with one another,
and will consider in good faith the views of one another, in connection with
any analysis, appearance, presentation, memorandum, brief, argument, opinion
or proposal made or submitted in connection with any Legal Proceeding under
or relating to the HSR Act or any other federal or state antitrust or fair
trade law. In addition, except as may be prohibited by any Governmental Body
or by any Legal Requirement, in connection with any Legal Proceeding under or
relating to the HSR Act or any other federal or state antitrust or fair trade
law or any other similar Legal Proceeding, each of the Company and Parent
agrees to permit authorized Representatives of the other party to be present
at each meeting or conference relating to any such Legal Proceeding and to
have access to and be consulted in connection with any document, opinion or
proposal made or submitted to any Governmental Body in connection with any
such Legal Proceeding.
7.9 TAX MATTERS. Prior to Closing and prior to the filing of the S-4
Registration Statement, and as soon as practicable after the execution of
this Agreement, Parent and the Company shall execute and deliver, to Xxxxxx
Godward LLP and to Jenkens & Xxxxxxxxx, P.C., tax representation letters in
substantially the form of Exhibit E and Exhibit F, respectively (which will
be relied upon in connection with the legal opinions contemplated by Sections
8.5(e) and 9.3(b)).
7.10 FIRPTA MATTERS. At the Closing (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897-2(h)(l)(i) of the
United States Treasury Regulations, and (b) the Company may deliver to the
Internal Revenue Service the notification required under Section
1.897-2(h)(2) of the United States Treasury Regulations.
7.11 RELEASE. At the Closing, each of the Designated Stockholders shall
execute and deliver to the Company a Release in the form of Exhibit G.
7.12 TREATMENT OF EMPLOYEE PLANS AND BENEFITS. Except as otherwise
agreed to by Parent and the Company, Parent shall ensure that upon the
Closing, the benefit plans and benefit arrangements of employees of the
Company will remain unchanged. By year end, benefits will be reviewed in
consonance with Parent benefit plans and arrangements, applicable law and
marketplace factors.
7.13 "POST-CLOSING" INSURANCE. The parties hereto will cooperate and
otherwise use best efforts to ensure that, prior to the Closing, either
Company, Parent or Merger Sub shall obtain a one (1) year (subject to the
timing requirements of Section 10 and 11 hereof) insurance policy (with an
aggregate coverage limit in excess of $5 million) effective no later than the
Effective Time, covering, pursuant to terms reasonably acceptable to Parent
and the Designated
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Stockholders, the representations and warranties of the Designated
Stockholders set forth in Section 4 hereof (the "Representation and Warranty
Insurance"). The parties hereto agree to comply with the provisions of the
Representation and Warranty Insurance and to not take action that would limit
its availability or effectiveness.
7.14 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) Parent and the Company agree to provide indemnification in
favor of any director or officer of the Company and its Subsidiaries (the
"Indemnified Parties"), as currently provided in their respective
certificates of incorporation or by-laws, or in an agreement between an
Indemnified Party and the Company or one of its Subsidiaries set forth in
Part 7.15 of the Company Disclosure Schedule, and rights to indemnification
shall survive the Merger and shall continue in full force and effect for a
period of six years after the Effective Time; provided that in the event any
claim or claims are asserted or made within such six-year period, all rights
to indemnification in respect to any such claim shall continue until final
disposition of such claim.
(b) Parent agrees that from and after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect for one year
after the Effective Time a policy of directors' and officers' liability
insurance covering the directors and officers of the Company (as of
immediately prior to the Effective Time) in their capacity as such; and
Parent shall secure such policy prior to the Closing.
7.15 EARNINGS RELEASE. Parent shall use best efforts to, as soon as
practicable following the Closing, issue a press release disclosing, or
otherwise publish as contemplated by applicable rules and regulations
relating to "pooling of interests" accounting, thirty days' operations of the
Surviving Corporation; which disclosure shall be no later than the time of
filing of Parent's report on Form 10-Q for the quarter next ended following
the date that is 30 days following the Closing.
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
8.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company and the Designated Stockholders in this
Agreement and in each of the other agreements and instruments delivered to
Parent in connection with the transactions contemplated by this Agreement
shall have been accurate in all material respects as of the date of this
Agreement (without giving double effect to any "Material Adverse Effect" or
other materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties),
and shall be accurate in all material respects as of the Scheduled Closing
Time as if made at the Scheduled Closing Time (without giving double effect
to any update to the Company Disclosure Schedule not consented to in writing
by Parent, and without giving effect to any "Material Adverse Effect" or
other materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties).
40.
8.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that the Company and the Designated Stockholders are required to comply with
or to perform at or prior to the Closing shall have been complied with and
performed in all respects at or prior to Closing.
8.3 STOCKHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved at the Company Stockholders' Meeting as necessary for
approval under the Delaware General Corporation Law (at least a majority of
the Company Common Stock, voting as a class, and two-thirds (2/3) of the
Series A Preferred Stock, voting as a class); and the holders of not more
than 10% of the outstanding shares of the Company shall have exercised
dissenters rights as described in Section 1.9.
8.4 CONSENTS. All material Consents required to be obtained in
connection with the Merger and the other transactions contemplated by this
Agreement (including the Consents identified in Part 2.22 of the Company
Disclosure Schedule) shall have been obtained and shall be in full force and
effect.
8.5 AGREEMENTS AND DOCUMENTS. Parent and the Company, as provided
herein, shall have received the following agreements and documents, each of
which shall be in full force and effect:
(a) Affiliate's Agreements in the form of Exhibit D-1 executed by
any Person who could reasonably be deemed to be an "affiliate" of the Company
for purposes of the Securities Act;
(b) a Release in the form of Exhibit G, executed by the Designated
Stockholders;
(c) to the extent reasonably requested by Parent, confidential
invention and assignment agreements, reasonably satisfactory in form and
content to Parent, executed by all employees of the Company and by all
consultants and independent contractors to the Company who have not already
signed such agreements (including the individuals identified in Part 2.9(f)
of the Company Disclosure Schedule);
(d) a legal opinion of Jenkens & Xxxxxxxxx, P.C., dated as of the
Closing Date, in the form of Exhibit H;
(e) a legal opinion of Xxxxxx Godward LLP dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within
the meaning of Section 368 of the Code (it being understood that, in
rendering such opinion, such counsel may rely upon the tax representation
letters referred to in Section 7.9);
(f) a letter from Xxxxxx Xxxxxxxx LLP, dated as of the Closing
Date, confirming that no transaction entered into by the Company, and no
other fact or circumstance relating to the Company, will prevent Parent from
accounting for the Merger as a "pooling of interests" in accordance with
generally accepted principles, Accounting Principles Board Opinion No. 16 and
all published rules, regulations and policies of the SEC;
41.
(g) a certificate executed by the Company's Chief Executive
Officer (solely in his capacity as such and not in his capacity as a
Designated Stockholder) and containing the representation and warranty that
each of the representations and warranties set forth in Section 2 is accurate
in all respects as of the Closing Date as if made on the Closing Date and
that the conditions set forth in Sections 8.1, 8.2, 8.3 and 8.4 have been
duly satisfied (the "Company Closing Certificate"); and
(h) if requested by Parent, written resignations of all officers
and directors of the Acquired Corporations and the Company ESOP Trustees and
401(k) Trustees, effective as of the Effective Time, except as otherwise
provided herein or otherwise agreed by Parent and the Company.
8.6 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 7.10(b).
8.7 COMPLIANCE WITH THE SECURITIES ACT. All applicable requirements of
the Securities Act and state securities laws shall have been satisfied.
8.8 LISTING. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing (subject to notice of issuance)
on the New York Stock Exchange.
8.9 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
8.10 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no stop order shall have been issued or threatened by
the SEC with respect to the S-4 Registration Statement.
8.11 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to
prohibit or limit the exercise by Parent of any material right pertaining to
its ownership of stock of the Surviving Corporation.
8.12 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act (if applicable) shall have expired or been
terminated.
8.13 AVERAGE SALES PRICE. The Average Sales Price shall be less than or
equal to $8.75 per share.
8.14 STOCK VOTING AGREEMENT. The Stock Voting Agreement shall be in
full force and effect and enforceable against each Designated Stockholder.
8.15 TAX REPRESENTATION LETTERS. Each of Parent and the Company shall
have executed and delivered a tax representation letter as set forth in
Section 7.9.
42.
8.16 REPRESENTATION AND WARRANTY INSURANCE. The Representation and
Warranty Insurance shall have been purchased and shall be in full force and
effect.
SECTION 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
9.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement and in each of the
other agreements and instruments delivered to Company in connection herewith,
shall have been accurate in all material respects as of the date of this
Agreement (without giving effect to any "Materially Adverse Effect" or other
materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties),
and shall be accurate in all material respects as of the Scheduled Closing
Time as if made at the Scheduled Closing Time (without giving effect to any
"Material Adverse Effect" or other materiality qualifications, or any similar
qualifications, contained in such representations and warranties).
9.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that Parent and Merger Sub are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all
respects.
9.3 DOCUMENTS. The Company shall have received the following documents:
(a) a legal opinion of Xxxxxx Godward LLP, dated as of the Closing
Date, in the form of Exhibit I;
(b) a legal opinion of Jenkens & Xxxxxxxxx, P.C., dated as of the
Closing Date, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368 of the Code (it being understood that, in
rendering such opinion, such counsel may rely upon the tax representation
letters referred to in Section 7.9); provided, however, that if such counsel
does not render such opinion, this condition shall nonetheless be deemed
satisfied with respect to the Company if Xxxxxx Godward LLP renders such
opinion to the Company; and
(c) a certificate executed by Parent's Chief Executive Officer and
containing the representation and warranty that each of the representations
and warranties set forth in Section 4 is accurate in all respects as of the
Closing Date as if made on the Closing Date and that the conditions set forth
in Sections 9.1 and 9.2 have been duly satisfied (the "Parent Closing
Certificate"); and
9.4 LISTING. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing (subject to notice of issuance)
on the New York Stock Exchange.
9.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal
43.
Requirement enacted or deemed applicable to the Merger that makes
consummation of the Merger illegal.
9.6 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no stop order shall have been issued by the SEC with
respect to the S-4 Registration Statement.
9.7 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act (if applicable) shall have expired or been
terminated.
9.8 AVERAGE SALES PRICE. The Average Sales Price shall be greater than
or equal to $5.25 per share.
SECTION 10. TERMINATION
10.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing without either party (except as provided in Section 10.1(e))
incurring any termination fee:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 8 (other than as related
to the Company Stockholders' Meeting covered by Section 7.2) has become
impossible (other than as a result of any failure on the part of Parent or
Merger Sub to comply with or perform any covenant or obligation of Parent or
Merger Sub set forth in this Agreement);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 9 has become
impossible (other than as a result of any failure on the part of the Company
or any of the Designated Stockholders to comply with or perform any covenant
or obligation set forth in this Agreement or in any other agreement or
instrument delivered to Parent);
(c) by Parent if the Closing has not taken place on or before June
30, 1998 (other than as a result of any failure on the part of Parent to
comply with or perform any covenant or obligation of Parent set forth in this
Agreement);
(d) by the Company if the Closing has not taken place on or before
June 30, 1998 (other than as a result of the failure on the part of the
Company or any of the Designated Stockholders to comply with or perform any
covenant or obligation set forth in this Agreement or in any other agreement
or instrument delivered to Parent);
(e) by the Company (at any time prior to stockholder approval of
this Agreement, the Merger and the transactions contemplated hereby) if,
pursuant to and in compliance with Section 5.4, the Company and its Board of
Directors conclude in good faith that the Company must accept an unsolicited
bona fide written proposed Acquisition Transaction which could reasonably be
expected to result in a transaction that is more favorable to the Company's
stockholders than the Merger (any such more favorable proposed Acquisition
Transaction being referred to in this Agreement as a "Superior Proposal");
PROVIDED, HOWEVER, that if this Agreement is terminated pursuant to this
Section 10.1(e), the Company shall pay to
44.
Parent a nonrefundable fee of $250,000 in cash (and no additional fee will be
required under Section 10.3) upon the Company's (or its Board of Directors')
election to accept such Superior Proposal. In reaching such conclusion, the
Board of Directors shall consult with outside legal counsel(and other
advisors as appropriate);
(f) by the mutual consent of Parent and the Company; or
(g) by Parent as provided in Section 10.3.
10.2 TERMINATION PROCEDURES. If Parent wishes to terminate this
Agreement pursuant to Section 10.1(a), Section 10.1(c) or Section 10.1(f),
Parent shall deliver to the Company prompt written notice stating that Parent
is terminating this Agreement and setting forth a brief description of the
basis on which Parent is terminating this Agreement. If the Company wishes
to terminate this Agreement pursuant to Section 10.1(b), Section 10.1(d) or
Section 10.1(e), the Company shall deliver to Parent prompt written notice
stating that the Company is terminating this Agreement and setting forth a
brief description of the basis on which the Company is terminating this
Agreement.
10.3 TERMINATION FEES.
(a) Parent may terminate this Agreement immediately (unless
already terminated as provided in subsection (iii) below) and the Company
shall pay to Parent a termination fee of $250,000, payable upon termination
of this Agreement, if (i) at any time prior to the Closing Date, Company
accepts a third party proposal or offer relating to a possible Acquisition
Transaction that it determines is more favorable than the proposal or offer
by Parent; (ii) the Company fails to complete the Company Stockholders'
Meeting as required herein or if the stockholders of the Company fail to
approve the Merger and this Agreement at the Company Stockholders' Meeting;
or (iii) the Company terminates this Agreement other than pursuant to Section
10.1.
(b) Parent shall pay to the Company a termination fee of $250,000,
payable upon termination of this Agreement, if Parent terminates this
Agreement other than pursuant to Section 10.1 or this Section 10.3.
10.4 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 10.1, all further obligations of the parties under this Agreement
shall terminate; provided, however, that: (a) neither the Company nor Parent
shall be relieved of any obligation or liability arising from any prior
breach by such party of any provision of this Agreement or any obligation to
pay a termination fee as set forth in Section 10.3; (b) the parties shall, in
all events, remain bound by and continue to be subject to the provisions set
forth in Section 12; and (c) the Company shall, in all events, remain bound
by and continue to be subject to Section 7.3.
45.
SECTION 11. SURVIVAL OF REPRESENTATIONS, ETC.; INDEMNIFICATION, ETC.
11.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) Subject to the indemnification limitations set forth in
Section 11.2, the representations and warranties made by the Designated
Stockholders in Section 3 shall survive the Closing and shall expire on the
first anniversary of the Closing Date (the "Claim Deadline"); provided,
however, that if, at any time prior to the first anniversary of the Closing
Date, any Indemnitee (acting in good faith) delivers to any of the Designated
Stockholders or the appropriate Person under the terms of the Representation
and Warranty Insurance, a written notice asserting a claim for recovery under
Section 11.2, then the claim asserted in such notice shall survive the first
anniversary of the Closing until such time as such claim is fully and finally
resolved. All representations and warranties made by Parent, Merger Sub and
the Company shall terminate and expire as of the Effective Time, and any
liability of Parent, Merger Sub, or Company with respect to such
representations and warranties shall thereupon cease.
(b) The representations, warranties, covenants and obligations of
the parties hereto, and (except as provided herein) the rights and remedies
that may be exercised pursuant hereto, shall not be limited or otherwise
affected by or as a result of any information furnished to or any
investigation made by or knowledge of (except as provided herein or in the
Company Disclosure Schedule), any of the parties or any of their
Representatives.
(c) For purposes of this Agreement, each statement or other item
of information set forth in the Company Disclosure Schedule or in any update
to the Company Disclosure Schedule shall be deemed to be a representation and
warranty made by the Company in this Agreement.
11.2 INDEMNIFICATION.
(a) From and after the Effective Time (but subject to Section
10.1(a)), Indemnitees shall be held harmless and indemnified under the terms
of the Representation and Warranty Insurance from and against, and shall be
compensated and reimbursed out of the Representation and Warranty Insurance
for, any Damages which are directly or indirectly suffered or incurred by any
of the Indemnitees or to which any of the Indemnitees may otherwise become
subject (regardless of whether or not such Damages relate to any third-party
claim) and which arise from or as a result of, or are directly or indirectly
connected with: (i) any inaccuracy in or breach of any representation or
warranty of the Designated Stockholders set forth in Section 3; (ii) any
Legal Proceeding relating to any inaccuracy or breach of the type referred to
in clause "(i)" above (including any Legal Proceeding commenced by any
Indemnitee for the purpose of enforcing any of its rights under this Section
11.
(b) The Parties acknowledge and agree that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation of the Designated
Stockholders set forth in Section 3, then (without limiting any of the rights
of the Surviving Corporation as an Indemnitee) Parent shall also be deemed,
by virtue of its ownership
46.
of the stock of the Surviving Corporation, to have incurred Damages as a
result of and in connection with such inaccuracy or breach.
11.3 LIMITS ON INDEMNIFICATION AND LIABILITY. The only liability of the
Designated Stockholders under Sections 11.2, 11.4 and 11.5 shall be limited
to the amount actually recovered by the Indemnitee(s) under the
Representation and Warranty Insurance.
11.4 INTEREST. Any Indemnitee provided indemnification pursuant to this
Section 11 with respect to any Damages shall also be entitled to receive
interest on the amount of such Damages (for the period commencing as of the
date of a claim for recovery by such Indemnitee and ending on the date on
which the liability to such Indemnitee is fully satisfied pursuant hereto) at
a floating rate equal to the rate of interest publicly announced by Bank of
America, N.T. & S.A. from time to time as its prime, base or reference rate.
11.5 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
the Surviving Corporation, against Parent or against any other Person) with
respect to which any Indemnitee may be entitled to payment pursuant to this
Section 11, Parent shall have the right, at its election, to proceed with the
defense of such claim or Legal Proceeding on its own. If Parent so proceeds
with the defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim
or Legal Proceeding shall be borne and paid exclusively out of the
Representation and Warranty Insurance;
(b) the parties shall use reasonable efforts to make available to
Parent any documents and materials in their possession or control that may be
necessary to the defense of such claim or Legal Proceeding; and
(c) Parent shall have the right to settle, adjust or compromise
such claim or Legal Proceeding as permitted under the terms of the
Representation and Warranty Insurance.
11.6 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT. No
Indemnitee (other than Parent or any successor thereto or assign thereof)
shall be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless Parent (or any successor thereto or assign
thereof) shall have consented to the assertion of such indemnification claim
or the exercise of such other remedy.
SECTION 12. MISCELLANEOUS PROVISIONS.
12.1 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
12.2 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are
47.
incurred by such party in connection with the transactions contemplated by
this Agreement, including all fees, costs and expenses incurred by such party
in connection with or by virtue of (a) the investigation and review conducted
by Parent and its Representatives with respect to the Company's business (and
the furnishing of information to Parent and its Representatives in connection
with such investigation and review), (b) the negotiation, preparation and
review of this Agreement (including the Company Disclosure Schedule) and all
agreements, certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the transactions contemplated
by this Agreement, (c) the preparation and submission of any filing or notice
required to be made or given in connection with any of the transactions
contemplated by this Agreement, and the obtaining of any Consent required to
be obtained in connection with any of such transactions, and (d) the
consummation of the Merger; provided, and Parent shall bear the filing fees
associated with the printing and filing of the S-4 Registration Statement and
forms and notifications required to be filed by the Company or Parent under
the HSR Act; provided, further, that any fees associated with the filing of
any notifications required to be filed by any Company stockholder under the
HSR Act shall be borne exclusively by the Company.
12.3 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled.
12.4 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the
other parties hereto):
if to Parent:
The Titan Corporation
Attn: Legal Department
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxx Godward LLP
Attn: X. Xxxxxxxxxx Xxxxxxxx, Esq.
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
48.
if to the Company:
Horizons Technology, Inc.
Attn: Chief Executive Officer
0000 Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Jenkens & Xxxxxxxxx, P.C.
Attn: Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxx. 000
Xxxxxxxxxx, X.X. 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Designated Stockholders (respectively):
J.P. (Xxx) Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Xx. Xxxxx X. Xxxxxx
0000 Xxxxx Xxxx Xxxx
Xx Xxxxx, XX 00000
Xxxx X. Xxxxxxx
000 Xxx Xxxxxxxxxx
Xxxxx Xxxxx, XX 00000
12.5 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 7.3, on and at all times after the Closing Date, each
Designated Stockholder shall keep confidential, and shall not use or disclose
to any other Person, any non-public document or other non-public information
in such Designated Stockholder's possession that relates to the business of
the Company or Parent; provided, however, agreement among the parties with
respect to confidentiality and proprietary information shall remain in full
force and effect, unaffected by the execution of this Agreement or by the
Merger.
12.6 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
49.
12.7 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
12.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
12.9 GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws), except to the
extent the Delaware General Corporation Law governs.
12.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon:
the Company and its successors and assigns (if any); the Designated
Stockholders and their respective personal representatives, executors,
administrators, estates, heirs, successors and assigns (if any); Parent and
its successors and assigns (if any); and Merger Sub and its successors and
assigns (if any). This Agreement shall inure to the benefit of: the Company;
the Company's stockholders (to the extent set forth in Section 1.5); the
holders of assumed Company Options and Company Warrants (to the extent set
forth in Section 1.6); the Designated Stockholders; Parent; Merger Sub; the
other Indemnitees (subject to Section 11.2); and the respective successors
and assigns (if any) of the foregoing. Parent may not assign any or all of
its rights under this Agreement to an unrelated Entity, in whole or in part,
without obtaining the prior written consent of the Company; and neither the
Company nor any Designated Stockholder may assign any or all of its rights
hereunder, in whole or in part, without obtaining the prior written consent
of Parent.
12.11 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative).
The parties to this Agreement agree that, in the event of any breach or
threatened breach by any party to this Agreement of any covenant, obligation
or other provision set forth in this Agreement for the benefit of any other
party to this Agreement, such other party shall be entitled (in addition to
any other remedy that may be available to it) to (a) a decree or order of
specific performance or mandamus to enforce the observance and performance of
such covenant, obligation or other provision, and (b) an injunction
restraining such breach or threatened breach.
12.12 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy
is expressly set forth in a written instrument duly
50.
executed and delivered on behalf of such Person; and any such waiver shall
not be applicable or have any effect except in the specific instance in which
it is given.
12.13 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of all of the parties hereto.
12.14 SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as
to which it is determined to be invalid, unlawful, void or unenforceable,
shall not be impaired or otherwise affected and shall continue to be valid
and enforceable to the fullest extent permitted by law.
12.15 PARTIES IN INTEREST. Except for the provisions of Sections
1.5, 1.6 and 11, none of the provisions of this Agreement is intended to
provide any rights or remedies to any Person other than the parties hereto
and their respective successors and assigns (if any).
12.16 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof; provided, however, that any agreement
with respect to confidentiality or proprietary information executed on behalf
of Parent and the Company prior to the date hereof shall not be superseded by
this Agreement and shall remain in effect in accordance with its terms and
until the earlier of (a) the Effective Time, or (b) the date on which such
agreement is terminated in accordance with its terms.
12.17 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
51.
The parties hereto have caused this Agreement to be executed and
delivered as of February 26, 1998.
THE TITAN CORPORATION,
a Delaware corporation
By: /s/Xxxx X. XxXxxxx, Chief Financial Officer
-------------------------------------------
Xxxx X. XxXxxxx, Chief Financial Officer
SUNRISE ACQUISITION SUB, INC,
a Delaware corporation
By: /s/Xxxxxx X. Xxxx, Secretary
------------------------------------------
------------------------------------------
[Print Name and Title]
HORIZONS TECHNOLOGY, INC.,
a Delaware corporation
By: /s/Xxxxx X. Xxxxxx, CEO
------------------------------------------
------------------------------------------
[Print Name and Title]
THE DESIGNATED STOCKHOLDERS:
/s/J.P. (Xxx) Xxxxx
------------------------------------------
J.P. (Xxx) Xxxxx
/s/Xx. Xxxxx X. Xxxxxx
------------------------------------------
Xx. Xxxxx X. Xxxxxx
/s/Xxxx X. Xxxxxxx
------------------------------------------
Xxxx X. Xxxxxxx
52.
EXHIBIT A
DESIGNATED STOCKHOLDERS
Xxxxx X. Xxxxxx
J. Xxxxxxx Xxxxx
Xxxx X. Xxxxxxx
A-1
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
ACQUIRED CORPORATION. "Acquired Corporation" and "Acquired
Corporations"{ shall have the meanings set forth in Section 2.1.
ACQUIRED CORPORATION CONTRACT. "Acquired Corporation Contract" shall
mean any material Contract: (a) to which the Company or any other Acquired
Corporation is a party; (b) by which the Company or any other Acquired
Corporation or any assets of any of them is or may become bound or under
which the Company or any other Acquired Corporation has, or may become
subject to, any obligation; or (c) under which the Company or any other
Acquired Corporation has or may acquire any right or interest.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common stock
issued to employees of the Company, upon exercise of Company Options or
otherwise, in routine transactions in accordance with the Company's past
practices), (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock or other equity
security of the Company (other than stock options granted to employees of
the Company in routine transactions in accordance with the Company's past
practices), or (iii) any security, instrument or obligation that is or may
become convertible into or exchangeable for any capital stock or other
equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit B is attached (including the Company
Disclosure Schedule), as it may be amended from time to time.
COMMERCIAL CONTRACT. "Commercial Contract" shall mean any customer
Contract [relating to the Company's commercial division] entered into by the
Company that contemplates or includes (A) the payment or delivery of cash or
other consideration in an amount of having a value in excess of $10,000 in the
aggregate, or (B) the performance of services having a value in excess of
$10,000 in the aggregate.
COMPANY DISCLOSURE SCHEDULE. "Company Disclosure Schedule" shall mean the
schedule (dated as of the date of the Agreement) delivered to Parent on behalf
of the Company.
B-1
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or any other Acquired
Corporation or otherwise used by the Company or any other Acquired
Corporation.
COMPANY STOCKHOLDERS' MEETING. "Company Stockholders' Meeting" shall
have the meaning set forth in Section 7.2.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental
Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking
of any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment,
award, fine, penalty, Tax, fee (including reasonable attorneys' fees),
charge, cost (including costs of investigation) or expense of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on
the voting of any security, any restriction on the transfer of any security
or other asset, any restriction on the receipt of any income derived from any
asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ESOP LENDER. "ESOP Lender" shall mean the lender with respect to any
loan arrangement by and between the Company and such ESOP Lender ("ESOP
Outside Loan Agreement").
ESOP LOANS. "ESOP Loans" shall mean any loan from an ESOP Lender to the
Company pursuant to an ESOP Outside Loan Agreement and any loan from the
Company to the Company ESOP ("ESOP Inside Loan Agreement").
ESOP SHARES. "ESOP Shares" shall mean any equity securities of any
Acquired Corporation held beneficially or of record by the Company ESOP.
ESOP STOCK PURCHASE AGREEMENT. "ESOP Stock Purchase Agreement" shall
any stock agreement relating to the ESOP Shares.
ESOP TRANSACTION DOCUMENTS. "ESOP Transaction Documents" shall mean any
and all of the ESOP Stock Purchase Agreement, ESOP Outside Loan Agreement,
ESOP Inside Loan Agreement and such other agreements entered into in
connection with the transactions
B-2
contemplated thereby or the consummation thereof or performance thereunder,
and all amendments, modifications and supplements thereto.
ESOP TRANSACTIONS. "ESOP Transactions" shall mean the transactions
contemplated by the ESOP Transaction Documents and such other transactions
entered into in connection with the consummation thereof or performance
thereunder.
ESOP TRUST. "ESOP Trust" shall mean the trust established pursuant to
the Company ESOP to hold the assets of the Company ESOP.
ESOP TRUSTEE. "ESOP Trustee" shall mean the trustee(s) of the ESOP
Trust pursuant to the Company ESOP.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENT BID. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor
or higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body
or any such prime contractor or subcontractor otherwise has or may acquire
any right or interest; and shall constitute a Contract as determined herein.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement; or (b) right under any Contract with
any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government; or (c) governmental or quasi-governmental
authority of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or
Entity and any court or other tribunal).
HSR ACT. "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
INDEMNITEES. "Indemnitees" shall mean Parent and any other insured
party under the Representation and Warranty Insurance.
KNOWLEDGE. An individual will be deemed to have "knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
B-3
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence
of such fact or other matter.
A Person (other than an individual) will be deemed to have "knowledge"
of a particular fact or other matter if any individual who is serving as a
director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has knowledge of such fact or other matter.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit, examination or investigation commenced, brought, conducted or heard by
or before, or otherwise involving, any court or other Governmental Body or
any arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement
or in the Company Closing Certificate but for the presence of "Material
Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on the business, condition, assets, liabilities, operations,
financial performance or prospects of the Acquired Corporations, considered
as a whole.
MATERIAL COMPANY CONTRACT. "Material Company Contract" shall have the
meaning set forth in Section 2.10(a).
NYSE. "NYSE" shall mean the New York Stock Exchange.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, application,
trade secret, know-how, customer list, franchise, system, computer software,
computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
B-4
RELATED PARTY. "Related Party" shall mean (i) each of the Designated
Stockholders; (ii) each individual who is, or who has at any time since
January 31, 1995 been, an officer any of the Acquired Corporations; (iii)
each member of the immediate family of each of the individuals referred to in
clauses "(i)" and "(ii)" above; and (iv) any trust or other Entity (other
than the Acquired Corporations) in which any one of the individuals referred
to in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more than
one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest.
S-4 REGISTRATION STATEMENT. "S-4 Registration Statement" shall have the
meaning set forth in Section 7.7(a).
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
STOCKHOLDERS. "Stockholders" shall mean all stockholders of the Company
immediately prior to the Closing whose shares of Company Common Stock are
converted into shares of Parent Common Stock at the Closing as a result of
the Merger, and shall include the Designated Stockholders.
SUPERIOR PROPOSAL. "Superior Proposal" shall have the meaning set forth
in Section 10.1(e).
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax,
ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, withholding tax or payroll tax), levy, assessment, tariff, duty
(including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule,
notice, notification, form, election, certificate or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
WORKING CAPITAL. "Working Capital" shall mean tangible current assets
less current liabilities, excluding any intercompany payables and
receivables, prepaid salaries and notes receivable from affiliated parties,
as determined in accordance with GAAP; provided, however, that, consistent
with the Company's presentation with respect to working capital set forth in
Appendix 2.4(a)(ii) to the Company Disclosure Schedule, current liabilities
shall not include accrued rent for any period subsequent to January 31, 1998,
"reserves" of $100,000 or up to $175,000 of costs and expenses ("Merger
Expenses") of the Company associated with the Merger. Notwithstanding the
foregoing, the Merger Expenses shall include financial advisor costs and
expenses not in excess of $25,000. Further, $50,000 in premiums for
insurance policies obtained pursuant to the terms of this Agreement shall be
included as current liabilities as part of the Working Capital calculation.
B-5
EXHIBIT C
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
DIRECTORS
-----------------------
Xxxx X. Xxxxxxx
Xxxx X. Xxx
Xxxx X. Xxxxx
X. X. Xxxx
OFFICERS TITLE
----------------------- ------------------------------------
X. X. Xxxx Chief Executive Officer
Xxxx X. Xxxxxxx President, Chief Operating Officer
Xxxxxx X. Xxxxxxxx Vice President
Xxxxx X. Xxxxx Vice President
Xxxxxxx X. Xxxxxxxx Vice President
Xxxxxxx X. Xxxxxxx Assistant Treasurer
Xxxxxxxx X. Xxxxxxxxx Assistant Vice President
Xxxx X. XxXxxxxxxx Assistant Vice President, Corporate Secretary
Xxxx X. Xxxxxxxxx Vice President
Xxxx X. Xxxx Vice President
Xxxxxx X. Xxxxxxx Vice President/Group Controller
Xxxxxx Xxxxxxx Vice President
Xxx X. Xxxx Assistant Secretary
C-1
EXHIBIT D-1
AFFILIATE AGREEMENT
This Affiliate Agreement (this "Agreement") is entered into as of
___________, 1998, by and between THE TITAN CORPORATION, a Delaware
corporation ("Parent"), and the undersigned officer ("Officer") of HORIZONS
TECHNOLOGY, INC., a Delaware corporation (the "Company").
A. Pursuant to that certain Agreement and Plan of Merger and
Reorganization (the "Merger Agreement"), dated as of February __, 1998, by
and among Parent; SUNRISE ACQUISITION SUB, INC. ("Merger Sub"), a Delaware
corporation and a wholly-owned subsidiary of Parent; the Company; and certain
stockholders of the Company; Merger Sub will merge with and into the Company
(the "Merger").
B. As a result of the Merger and certain related transactions, the
stockholders of the Company will receive shares (the "Shares") of Parent
Common Stock (as defined in the Merger Agreement). Officer understands the
definitions of an "affiliate" of the Company as such term is defined in
paragraphs (c) and (d) of Rule 145 ("Rule 145") under the Securities Act of
1933, as amended (the "Act"), and the Securities and Exchange Commission
Accounting Series Release Nos. 130 and 135 (the "Pooling Rules"), as amended.
C. Officer understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, Merger Sub and the
Company, and their respective counsel and accounting firms.
NOW, THEREFORE, Officer hereby certifies and agrees as follows:
1. Capitalized terms used in this Agreement and not otherwise defined
shall have the meanings given them in the Merger Agreement.
2. Officer certifies and agrees that:
1.1 Officer has full power and capacity to execute and deliver this
Agreement.
1.2 Officer has discussed with counsel the requirements, limitations
and restrictions on his ability to sell, transfer or otherwise dispose of the
Shares he may receive and understands the requirements, limitations and
restrictions this Agreement places upon Officer's ability to transfer, sell
or otherwise dispose of such Shares.
1.3 Officer will not, publicly or privately, sell, transfer or
otherwise dispose of, or reduce Officer's interest in or risk relating to,
any Shares held by Officer until such time as the financial results covering
at least 30 days of post-Closing combined operations of the Company and
Parent have been published by Parent (within the meaning of the Pooling
Rules).
D-1
1.4 Until the earlier of (i) the Closing Date or (ii) the termination
of the Merger Agreement, Officer will not sell, transfer or otherwise dispose
of, or reduce Officer's interest in or risk relating to, any Company Common
Stock and/or Series A Preferred Stock held by Officer.
1.5 Subject to Section 2(c) above, Officer will not sell, pledge,
transfer or otherwise dispose of any of the Shares held by Officer unless at
such time as such transfer shall be in conformity with the provisions of Rule
145(d) (or any successor rule then in effect), to the extent such Rule is
applicable to Officer.
3. Officer further certifies that he is the beneficial owner of the
Company Common Stock and/or Series A Preferred Stock set forth below, or, if
not set forth below, that he is not the beneficial owner of any Company
Common Stock and/or Series A Preferred Stock.
4. Each party hereto acknowledges that (i) it will be impossible to
measure in money the damage to Parent if Officer fails to comply with any of
the obligations imposed by this Agreement, (ii) every such obligation is
material and (iii) in the event of any such failure, Parent will not have an
adequate remedy at law or damages and, accordingly, each party hereto agrees
that injunctive relief or other equitable remedy, in addition to remedies at
law or damages, is an appropriate remedy for any such failure; provided
however, each party shall use reasonable efforts to notify the other in the
event of a breach of this Agreement.
5. This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of
California.
6. This Agreement shall be binding upon, enforceable by and inure to
the benefit of the parties named herein and their respective successors; this
Agreement may not be assigned by any party without the prior written consent
of Parent. Any attempted assignment not in compliance with this Section 7
shall be void and have no effect.
7. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same agreement.
D-2
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
THE TITAN CORPORATION
By:____________________________________
____________________________________
[Print Name and Title]
OFFICER
_______________________________________
_______________________________________
[Print Name]
Address:_______________________________
_______________________________________
_______________________________________
Shares of Company Common Stock
Beneficially Owned: _____________
Shares of Series A Preferred Stock
Beneficially Owned: _____________
X-0
XXXXXXX X-0
PERSONS TO EXECUTE AFFILIATE AGREEMENTS
Xxxxx X. Xxxxxx
J. Xxxxxxx Xxxxx
Xxxx X. Xxxxxxx
X-0
EXHIBIT E
FORM OF TAX REPRESENTATION LETTER
TO BE EXECUTED BY PARENT AND MERGER SUB
Xxxxxx Godward, LLP Jenkens & Xxxxxxxxx, P.C.
Xxx Xxxxxxxx Xxxxx, 00xx Xx. 0000 Xxxxxxxxxxxx Xxx. X.X., Xxx. 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000 Xxxxxxxxxx, X.X. 00000-0000
RE: MERGER PURSUANT TO THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(THE "REORGANIZATION AGREEMENT") DATED FEBRUARY __, 1998, AMONG THE TITAN
CORPORATION, A DELAWARE CORPORATION ("PARENT"), SUNRISE ACQUISITION SUB,
INC., A DELAWARE CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF PARENT
("MERGER SUB"), HORIZONS TECHNOLOGY, INC., A DELAWARE CORPORATION (THE
"COMPANY"), AND CERTAIN STOCKHOLDERS OF THE COMPANY AND THE RELATED
CERTIFICATE OF MERGER BETWEEN MERGER SUB AND THE COMPANY (THE "CERTIFICATE
OF MERGER").
Gentlemen:
This letter is supplied to you in connection with your rendering of opinions
regarding certain federal income tax consequences of the Merger. Unless
otherwise indicated, capitalized terms not defined herein have the meanings
set forth in the Reorganization Agreement. The Reorganization Agreement and
the Certificate of Merger, including exhibits and schedules attached thereto,
are collectively referred to as the "AGREEMENTS."
After consulting with their counsel and auditors regarding the meaning of and
factual support for the following representations, the undersigned hereby
certify and represent that the following facts are now true and will continue
to be true as of the Effective Time of the Merger and thereafter where
relevant:
1. Pursuant to the Merger, Merger Sub will merge with and into the
Company, and the Company will acquire all of the assets and liabilities of
Merger Sub. Specifically, the assets transferred to the Company pursuant to
the Merger will represent at least ninety percent (90%) of the fair market
value of the net assets and at least seventy percent (70%) of the fair market
value of the gross assets held by Merger Sub immediately prior to the Merger.
In addition, at least ninety percent (90%) of the fair market value of the
net assets and at least seventy percent (70%) of the fair market value of the
gross assets held by the Company immediately prior to the Merger will
continue to be held by the Company immediately after the Merger. For the
purpose of determining the percentage of the Company's and Merger Sub's net
and gross assets held by the Company immediately following the Merger, the
following assets will be treated as property held by Merger Sub or the
Company, as the case may be, immediately prior but not subsequent to the
Merger: (i) assets disposed of by the Company or Merger Sub (other than
assets transferred from Merger Sub to the Company in the Merger) prior to or
subsequent to the Merger and in contemplation thereof (including without
limitation any asset disposed of by the Company, other than in the ordinary
course of business, pursuant to a plan or intent existing during the period
ending at the Effective Time of the Merger and beginning with the
E-1
commencement of negotiations (whether formal or informal) with Parent
regarding the Merger (the "PRE-MERGER PERIOD"); (ii) assets used by the
Company or Merger Sub to pay stockholders perfecting appraisal rights or
other expenses or liabilities incurred in connection with the Merger; and
(iii) assets used to make distribution, redemption or other payments in
respect of stock of the Company or rights to acquire such stock (including
payments treated as such for tax purposes) that are made in contemplation of
the Merger or that are related thereto;
2. Parent's principal reasons for participating in the Merger are bona
fide business purposes not related to taxes;
3. Prior to the Merger, Parent will be in "CONTROL" of Merger Sub. As
used in this letter, "CONTROL" shall consist of direct ownership of shares of
stock possessing at least eighty percent (80%) of the total combined voting
power of all classes of stock entitled to vote and at least eighty percent
(80%) of the total number of shares of all other classes of stock of the
corporation. For purposes of determining Control, a person shall not be
considered to own shares of voting stock if rights to vote such shares (or to
restrict or otherwise control the voting of such shares) are held by a third
party (including a voting trust) other than an agent of such person;
4. In the Merger, shares of stock of the Company representing Control
of the Company will be exchanged solely for shares of Parent Common Stock.
For purposes of this paragraph, shares of stock of the Company exchanged in
the Merger for cash and other property (including, without limitation, cash
paid to stockholders of the Company perfecting appraisal rights, if any, or
in lieu of fractional shares of Parent Common Stock) will be treated as
shares of stock of the Company outstanding on the date of the Merger but not
exchanged for shares of Parent Common Stock;
5. Parent has no plan or intention to cause the Company to issue
additional shares of stock after the Merger, or take any other action, that
would result in Parent losing Control of the Company;
6. Parent has no plan or intention to reacquire any of its stock
issued pursuant to the Merger;
7. Except for transfers described in both Section 368(a)(2)(C) of the
Code and Treasury Regulation Section 1.368-2(j)(4), Parent has no plan or
intention to: (a) liquidate the Company; (b) merge the Company with or into
another corporation including Parent or its affiliates; (c) sell, distribute
or otherwise dispose of the stock of the Company, to cause the Company to
sell or otherwise dispose of the stock of the Company; or (d) cause the
Company to sell or otherwise dispose of any of its assets or of any assets
acquired from Merger Sub, except for dispositions made in the ordinary course
of business or payment of expenses incurred by the Company pursuant to the
Merger;
8. In the Merger, Merger Sub will have no liabilities assumed by the
Company and will not transfer to the Company any assets subject to
liabilities, except to the extent incurred in connection with the
transactions contemplated by the Agreements;
9. Parent intends that, following the Merger, the Company will
continue its historic business or use a significant portion of its historic
business assets in a business;
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10. During the past five (5) years, none of the outstanding shares of
capital stock of the Company, including the right to acquire or vote any such
shares have, directly or indirectly, been owned by Parent or affiliates of
Parent;
11. Parent is not an investment Company within the meaning of Section
368(a)(F)(iii) and (iv) of the Code;
12. No stockholder of the Company is acting as agent for Parent in
connection with the Merger or the approval thereof; Parent will not reimburse
any stockholder of the Company for any stock of the Company such stockholder
may have purchased or for other obligations such stockholder may have
incurred;
13. Neither Parent nor Merger Sub is, or will be at the Effective Time
of the Merger, under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code;
14. Except for repurchases or redemptions of Parent Common Stock that
are consistent with past practices and pursuant to pre-existing purchase
programs that were not created or modified in connection with the Merger,
neither Merger Sub nor Parent nor any "RELATED PERSON" of Merger Sub or
Parent (as such term is defined by Treasury Regulation Section 1.368-1(e)(3))
will repurchase or redeem any of the Parent Common Stock to be issued to the
stockholders of the Company in connection with the Merger;
15. Except with respect to (i) payments of cash to stockholders of the
Company perfecting appraisal rights and (ii) payments of cash to stockholders
of the Company in lieu of fractional shares of Parent Common Stock, one
hundred percent (100%) of the stock of the Company outstanding immediately
prior to the Merger will be exchanged solely for Parent Common Stock. Thus,
except as set forth in the preceding sentence, Merger Sub and Parent intend
that no consideration be paid or received (directly or indirectly, actually
or constructively) for stock of the Company other than Parent Common Stock;
16. The total fair market value of all consideration other than Parent
Common Stock received by stockholders of the Company in the Merger
(including, without limitation, cash paid to stockholders of the Company
perfecting appraisal rights) will be less than ten percent (10%) of the
aggregate fair market value of stock of the Company outstanding immediately
prior to the Merger;
17. The fair market value of the Parent Common Stock received by each
stockholder of the Company will be approximately equal to the fair market
value of the stock of the Company surrendered in exchange therefor, and the
aggregate consideration received by stockholders of the Company in exchange
for their stock of the Company will be approximately equal to the fair market
value of all of the outstanding shares of stock of the Company immediately
prior to the Merger;
18. Each of Merger Sub, Parent, the Company and each stockholder of the
Company will each pay separately his, her or its own expenses relating to the
Merger;
X-0
00. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired
or will be settled at a discount as a result of the Merger, and Parent will
assume no liabilities of the Company or any stockholder of the Company in
connection with the Merger;
20. The terms of the Reorganization Agreement and the agreements
related thereto are the product of arm's length negotiations;
21. None of the compensation received by any stockholder-employee of
the Company will be separate consideration for, or allocable to, any of their
shares of stock of the Company; none of the shares of Parent Common Stock
received by any stockholder-employee of the Company will be separate
consideration for, or allocable to, any employment agreement or any covenants
not to compete; and the compensation paid to any stockholder-employee of the
Company will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar services;
22. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purpose of avoiding the expense and inconvenience to
Parent of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be paid
in the transaction to the Company stockholders instead of issuing fractional
shares of Parent Common Stock will not exceed one percent (1%) of the total
consideration that will be issued in the transaction to the Company
stockholders in exchange for their shares of Company capital stock. The
fractional share interests of each Company stockholder will be aggregated,
and no Company stockholder will receive cash in an amount equal to or greater
than the value of one full share of Parent Common Stock;
23. With respect to each instance, if any, in which shares of stock of
the Company have been purchased by a stockholder of Parent (a "STOCKHOLDER")
during the Pre-Merger Period (a "STOCK PURCHASE"): (i) the Stock Purchase
was made by such Stockholder on its own behalf and not as a representative,
or for the benefit, of Parent; (ii) the purchase price paid by such
Stockholder pursuant to the Stock Purchase was the product of arm's length
negotiations, was funded by such Stockholder's own assets, was not advanced,
and will not be reimbursed, either directly or indirectly, by Parent; (iii)
at no time was such Stockholder or any other party required or obligated to
surrender to Parent the Company capital stock acquired in the Stock Purchase,
and neither such Stockholder nor any other party will be required to
surrender to Parent the Parent Common Stock for which such shares of stock of
the Company will be exchanged in the Merger; and (iv) the Stock Purchase was
not a formal or informal condition to consummation of the Merger and was
entered into solely to satisfy the separate interests of such Stockholder and
the seller; and
24. Parent and Merger Sub are authorized to make all of the
representations set forth herein.
The undersigned recognize that (i) your opinions will be based on the
representations set forth herein and on the statements contained in the
Agreements and documents related thereto, and (ii) your opinions will be
subject to certain limitations and qualifications including that they may not
be relied upon if any such representations are not accurate in all material
respects.
E-4
The undersigned recognize that your opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except
as expressly set forth in such opinions.
Very truly yours,
THE TITAN CORPORATION,
a Delaware corporation
By:_____________________________________
Title:__________________________________
SUNRISE ACQUISITION SUB, INC.,
a Delaware corporation
By:_____________________________________
Title:__________________________________
E-5
EXHIBIT F
FORM OF TAX REPRESENTATION LETTER
TO BE EXECUTED BY THE COMPANY
Xxxxxx Godward llp Jenkens & Xxxxxxxxx, P.C.
Xxx Xxxxxxxx Xxxxx, 00xx Xx. 0000 Xxxxxxxxxxxx Xxx. N.W., Suite 600
San Francisco, California CA 94111-3580 Xxxxxxxxxx, X.X. 00000-0000
RE: MERGER PURSUANT TO THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(THE "REORGANIZATION AGREEMENT"), DATED FEBRUARY __, 1998, AMONG THE TITAN
CORPORATION, INC., A DELAWARE CORPORATION ("PARENT"), SUNRISE ACQUISITION
SUB, INC., A DELAWARE CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF PARENT
("MERGER SUB"), HORIZONS TECHNOLOGY, INC., A DELAWARE CORPORATION (THE
"COMPANY"), AND CERTAIN STOCKHOLDERS OF THE COMPANY, AND THE RELATED
CERTIFICATE OF MERGER BETWEEN THE COMPANY AND MERGER SUB (THE "CERTIFICATE
OF MERGER").
Gentlemen:
This letter is supplied to you in connection with your rendering of opinions
regarding certain federal income tax consequences of the Merger. Unless
otherwise indicated, capitalized terms not defined herein have the meanings
set forth in the Reorganization Agreement or the Certificate of Merger. The
Reorganization Agreement and the Certificate of Merger, including exhibits
and schedules attached thereto, are collectively referred to as the
"AGREEMENTS."
After consulting with its counsel and auditors regarding the meaning of and
factual support for the following representations, the undersigned hereby
certifies and represents that the following facts are now true and will
continue to be true as of the Effective Time of the Merger and thereafter
where relevant:
1. Pursuant to the Merger, Merger Sub will merge with and into the
Company, and the Company will acquire all of the assets and liabilities of
Merger Sub. Specifically, the assets transferred to the Company pursuant to
the Merger will represent at least ninety percent (90%) of the fair market
value of the net assets and at least seventy percent (70%) of the fair market
value of the gross assets held by Merger Sub immediately prior to the Merger.
In addition, at least ninety percent (90%) of the fair market value of the net
assets and at least seventy percent (70%) of the fair market value of the gross
assets held by the Company immediately prior to the Merger will continue to be
held by the Company immediately after the Merger. For the purpose of
determining the percentage of the Company's and Merger Sub's net and gross
assets held by the Company immediately following the Merger, the following
assets will be treated as property held by Merger Sub or the Company, as the
case may be, immediately prior but not subsequent to the Merger: (i) assets
disposed of by the Company or Merger Sub (other than assets transferred from
Merger Sub to the Company in the Merger) prior to or subsequent to the Merger
and in contemplation thereof (including without limitation any asset disposed
of by the Company, other than in the ordinary course of business, pursuant to a
plan or intent existing during the period ending on the Effective Time of the
Merger and beginning with the
F-1
commencement of negotiations (whether formal or informal) with Parent
regarding the Merger (the "PRE-MERGER PERIOD"); (ii) assets used by the
Company or Merger Sub to pay stockholders perfecting appraisal rights or
other expenses or liabilities incurred in connection with the Merger; and
(iii) assets used to make distribution, redemption or other payments in
respect of stock of the Company or rights to acquire such stock (including
payments treated as such for tax purposes) that are made in contemplation of
the Merger or that are related thereto;
2. Other than in the ordinary course of business or pursuant to its
obligations under the Agreements, the Company has made no transfer of any of
its assets (including any distribution of assets with respect to, or in
redemption of, stock) in contemplation of the Merger or during the Pre-Merger
Period;
3. The Company's principal reasons for participating in the Merger are
bona fide business purposes unrelated to taxes;
4. On the Effective Time of the Merger, the Company will have no
outstanding equity interests other than those disclosed in Section 2.3 of the
Reorganization Agreement. At the time of the Merger, except as specified in
the Reorganization Agreement, the Company will have no outstanding warrants,
options, or convertible securities or any other type of right outstanding
pursuant to which any person could acquire shares of the Company capital
stock or any other equity interest in the Company, other than those disclosed
in Section 2.3 of the Reorganization Agreement or the Disclosure Schedule
with respect thereto;
5. In the Merger, shares of stock of the Company representing "CONTROL"
of the Company will be exchanged solely for shares of voting stock of Parent.
At the Effective Time of the Merger, there will exist no rights to acquire
the Company capital stock or to vote (or restrict or otherwise control the
vote of) shares of stock of the Company which, if exercised, would affect
Parent's acquisition and retention of control of the Company. For purposes
of this paragraph, shares of the stock of Company exchanged in the Merger for
cash and other property (including, without limitation, cash paid to
stockholders of the Company perfecting appraisal rights, if any, or in lieu
of fractional shares of Parent Common Stock) will be treated as shares of
stock of the Company outstanding on the date of the Merger but not exchanged
for shares of voting stock of Parent. As used in this letter, "CONTROL"
shall consist of direct ownership of shares of stock possessing at least
eighty percent (80%) of the total combined voting power of shares of all
classes of stock entitled to vote and at least eighty percent (80%) of the
total number of shares of all other classes of stock of the corporation. For
purposes of determining Control, a person shall not be considered to own
shares of voting stock if rights to vote such shares (or to restrict or
otherwise control the voting of such shares) are held by a third party
(including a voting trust) other than an agent of such person;
6. The total fair market value of all consideration other than shares
of Parent Common Stock received by stockholders of the Company in the Merger
(including, without limitation, cash paid to Company stockholders perfecting
appraisal rights or in lieu of fractional shares of Parent Common Stock) will
be less than ten percent (10%) of the aggregate fair market value of shares
of stock of the Company outstanding immediately prior to the Merger;
F-2
7. The Company has no plan or intention to issue additional shares of
stock after the Merger, or take any other action, that would result in Parent
losing Control of the Company;
8. Except for transfers described in both Section 368(a)(2)(C) of the
Code and Treasury Regulation Section 1.368-2(j)(4), the Company has no plan
or intention to sell or otherwise dispose of any of its assets or of any of
the assets acquired from Merger Sub in the Merger except for dispositions
made in the ordinary course of business or to pay expenses incurred by the
Company pursuant to the Merger;
9. The Company intends to continue its historic business or use a
significant portion of its historic business assets in a business following
the Merger;
10. The liabilities of the Company have been incurred by the Company in
the ordinary course of its business;
11. The fair market value of the Company's assets will, on the
Effective Time of the Merger, exceed the aggregate liabilities of the Company
plus the amount of liabilities, if any, to which such assets are subject;
12. The Company is not and will not be on the Effective Time of the
Merger an "INVESTMENT COMPANY" within the meaning of Section
368(a)(2)(F)(iii) and (iv) of the Code;
13. The Company is not and will not be on the Effective Time of the
Merger under the jurisdiction of a court in a Title 11 or similar case within
the meaning of Section 368(a)(3)(A) of the Code;
14. The Company has made no extraordinary distributions within the
meaning of Temporary Federal Treasury Regulation Section 1.368-1T(e) with
respect to its stock, prior to and in connection with the Merger;
15. The Company has not redeemed and no "RELATED PERSON" with respect
to the Company, as such term is defined by Treasury Regulation Section
1.368-1(e)(3), (without regard to Section 1.368-1(e)(3)(i)(a)), has purchased
any Company capital stock prior to and in connection with the Merger;
16. Except with respect to (i) payments of cash to stockholders of the
Company in lieu of fractional shares of Parent Common Stock, and (ii)
payments of cash to stockholders of the Company perfecting appraisal rights,
one hundred percent (100%) of the shares of stock of the Company outstanding
immediately prior to the Merger will be exchanged solely for shares of Parent
Common Stock. Thus, except as set forth in the preceding sentence, the
Company intends that no consideration be paid or received (directly or
indirectly, actually or constructively) for shares of stock of the Company
other than shares of Parent Common Stock;
17. The fair market value of the shares of Parent Common Stock received
by each stockholder of the Company will be approximately equal to the fair
market value of the shares of stock of the Company surrendered in exchange
therefor and the aggregate consideration received by stockholders of the
Company in exchange for their shares of stock of the Company will be
F-3
approximately equal to the fair market value of all of the outstanding shares
of stock of the Company immediately prior to the Merger;
18. Each of Merger Sub, Parent, the Company and each stockholder of the
Company will each pay separately his, her or its own expenses relating to the
Merger;
19. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired,
or will be settled at a discount as a result of the Merger; Parent will
assume no liabilities of the Company or any stockholder of the Company in
connection with the Merger;
20. The terms of the Reorganization Agreement and the other agreements
relating thereto are the product of arm's length negotiations;
21. None of the compensation received by any stockholder-employees of
the Company will be separate consideration for, or allocable to, any of their
shares of stock of the Company; none of the shares of Parent Common Stock
received by any stockholder-employees of the Company will be separate
consideration for, or allocable to, any employment agreement or any covenants
not to compete; and the compensation paid to any stockholder-employees of the
Company will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar services;
22. With respect to each instance, if any, in which shares of stock of
the Company have been purchased by a stockholder of Parent (a "STOCKHOLDER")
during the Pre-Merger period (a "STOCK PURCHASE"): (i) to the best knowledge
of the Company, (A) the Stock Purchase was made by such Stockholder on its
own behalf, rather than as a representative, or for the benefit, of Parent,
(B) the Stock Purchase was entered into solely to satisfy the separate
interests of such Stockholder and the seller, and (C) the purchase price paid
by such Stockholder pursuant to the Stock Purchase was the product of arm's
length negotiations; and (ii) the Stock Purchase was not a formal or informal
condition to consummation of the Merger; and
23. The Company is authorized to make all of the representations set
forth herein.
The undersigned recognizes that (i) your opinions will be based on the
representations set forth herein and on the statements contained in the
Agreements and documents related thereto, and (ii) your opinions will be
subject to certain limitations and qualifications including that they may not
be relied upon if any such representations are not accurate in all material
respects.
Notwithstanding anything herein to the contrary, the undersigned makes no
representations regarding any actions or conduct of the Company pursuant to
Parent's exercise of control over the Company after the Merger.
F-4
The undersigned recognizes that your opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except
as expressly set forth in such opinions.
Very truly yours,
HORIZONS TECHNOLOGY, INC.,
a Delaware corporation
By:____________________________________
Title:_________________________________
F-5
EXHIBIT G
ACKNOWLEDGMENT AND RELEASE
THIS ACKNOWLEDGMENT AND RELEASE ("Release") is being executed and
delivered as of ______________, 1998, by __________________________________
("Releasor") in favor of, and for the benefit of, HORIZONS TECHNOLOGY, INC., a
Delaware corporation (the "Corporation"), THE TITAN CORPORATION, a Delaware
corporation ("Parent"), and the other Releasees (as defined in Section 2).
RECITALS
A. Contemporaneously with the execution and delivery of this Release,
pursuant to an Agreement and Plan of Merger and Reorganization, dated as of
February ___, 1998, among the Corporation, Parent, Sunrise Acquisition Sub.,
Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), and certain other stockholders of the Corporation (the "Merger
Agreement"), Merger Sub is merging into the Corporation (the merger of Merger
Sub into the Corporation being referred to in this Release as the "Merger").
As a result of the Merger, the Corporation's stockholders are receiving shares
of common stock of Parent in exchange for their shares of common stock of the
Corporation, and the Corporation will survive as a wholly owned subsidiary of
Parent.
B. Parent has required, as a condition to consummating the Merger and
the other transactions contemplated by the Merger Agreement, that Releasor
execute and deliver this Release.
AGREEMENT
In order to induce Parent to consummate the transactions contemplated by
the Merger Agreement, and for other valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by Releasor), Releasor hereby
covenants and agrees as follows:
1. RELEASE. Releasor, for himself and for each of his Associated
Parties (as defined in Section 2), hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. DEFINITIONS.
(a) The term "Associated Parties," when used herein with respect to
Releasor, shall mean and include: (i) Releasor's predecessors, successors,
executors, administrators, assigns, heirs and estate; and (ii) each entity of
which Releasor owns, at least 50% of the outstanding voting interests.
(b) The term "Releasees" shall mean and include: (i) Parent; (ii) the
Corporation; (iii) each of the subsidiaries of Parent; and (iv) the past and
present directors, officers,
G-1
employees, agents, attorneys and representatives of the respective entities
identified or otherwise referred to in clauses "(i)" through "(iii)" of this
sentence, other than Releasor.
(c) The term "Released Claims" shall mean and include each and every
claim that has arisen or arises out of any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or prior to the date
of this Release PROVIDED, HOWEVER, that the Released Claims shall not include:
(i) Releasor's rights, if any, against Parent under the Merger
Agreement;
(ii) Releasor's rights against the Corporation under any other
agreement being entered into by Releasor and the Corporation contemporaneously
with the execution and delivery of this Release; or based upon obligations of
the Corporation to make payments under existing compensation or benefit plans
or as required under applicable law; or
(iii) any right of indemnification Releasor may have against the
Corporation under the Corporation's Certificate of Incorporation or otherwise
in his capacity as an officer or director of the Corporation as such rights
shall survive the Merger as expressly set forth in the Merger Agreement.
3. REPRESENTATIONS AND WARRANTIES. Releasor represents and warrants
that:
(a) Releasor has not assigned, transferred, conveyed or otherwise
disposed of any claim against any of the Releasees, or any direct or indirect
interest in any such claim, in whole or in part;
(b) to the best of Releasor's knowledge, no other person or entity has
any interest in any of the Released Claims;
(c) this Release has been duly and validly executed and delivered by
Releasor;
(d) this Release is a valid and binding obligation of Releasor and
Releasor's Associated Parties, and is enforceable against Releasor and each of
his Associated Parties in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium
or other similar laws affecting creditors' rights, and subject to general
equity principles and to limitations on availability of equitable relief,
including specific performance;
(e) neither the execution and delivery of this Release nor the
performance hereof will result in any violation or breach of any agreement or
other instrument to which Releasor is a party or by which Releasor is bound;
4. NOTICES. Any notice or other communication required or permitted to
be delivered to Releasor, the Corporation or Parent under this Release shall be
in writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery service
or by facsimile) to the address or facsimile telephone number of the party to
receive the notice.
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5. SEVERABILITY. If any provision of this Release or any part of any
such provision is held under any circumstances to be invalid or unenforceable
in any jurisdiction, then (a) such provision or part thereof shall, with
respect to such circumstances and in such jurisdiction, be deemed amended to
conform to applicable laws so as to be valid and enforceable to the fullest
possible extent and (b) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the remainder
of such provision or the validity or enforceability of any other provision of
this Release. Each provision of this Release is separable from every other
provision of this Release, and each part of each provision of this Release is
separable from every other part of such provision.
6. GOVERNING LAW; WAIVER OF SECTION 1542 AND RELATED STATUTES. This
Release shall be construed in accordance with, and governed in all respects by,
the laws of the State of California (without giving effect to principles of
conflicts of laws). Notwithstanding the foregoing, Releasor expressly waives
and relinquishes all rights and benefits that may be afforded by Section 1542
of the Civil Code of the State of California and any similar statute applicable
to this Release (including, without limitation, any applicable statute, rule or
regulation of the State of Minnesota), and does so understanding and
acknowledging the significance of this specific waiver of such statute(s).
Section 1542 of the Civil Code of the State of California states as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
7. WAIVER. No failure on the part of any Releasee to exercise any
power, right, privilege or remedy under this Release, and no delay on the part
of any Releasee in exercising any power, right, privilege or remedy under this
Release, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Releasee shall be deemed to have waived any
claim arising out of this Release, or any power, right, privilege or remedy
under this Release, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
8. CAPTIONS. The captions contained in this Release are for convenience
of reference only, shall not be deemed to be a part of this Release and shall
not be referred to in connection with the construction or interpretation of
this Release.
9. ENTIRE AGREEMENT. This Release sets forth the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings between the parties relating to the subject
matter hereof.
10. AMENDMENTS. This Release may not be amended, modified, altered, or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Releasor, Parent and the Corporation.
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11. BINDING NATURE. This Release will be binding upon Releasor and
Releasor's Associated Parties and will inure to the benefit of each of the
Releasees.
12. CONSTRUCTION.
(a) For purposes of this Release, whenever the context requires: the
singular number shall include the plural, and vice versa.
(b) As used in this Release, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
(c) Except as otherwise indicated, all references in this Release to
"Sections" are intended to refer to Sections of this Release.
Releasor has executed this Release as of the date first above written.
________________________________
[Releasor]
Name:___________________________
Address:________________________
________________________
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EXHIBIT H
SUBSTANTIVE PROVISIONS OF THE OPINION OF
JENKENS & XXXXXXXXX, P.C.
[Capitalized terms defined as in the Merger Agreement]
13. Each of the Acquired Corporations is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation. Each of the Acquired Corporations has the
corporate power and authority to own, lease and operate its properties and to
carry on its business as now conducted. Each of the Acquired Corporations is
qualified as a foreign corporation to do business and is in good standing in
each jurisdiction in the United States in which the ownership of its property
or the conduct of its business requires such qualification except for such
jurisdictions where the failure to be so qualified would not have a Material
Adverse Effect on the Acquired Corporations.
14. The authorized capital stock of the Company consists (i) 12,000,000
shares of Common Stock, $.01 par value, of which [7,996,953] shares have been
issued and are outstanding as of the date hereof and (ii) 2,500,000 shares of
Preferred Stock (with par value $.01, all of which have been designated "Series
A Preferred Stock"), of which 500,000 shares have been issued and are
outstanding as of the date hereof. All of the outstanding shares of Company
Common Stock and Series A Preferred Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. All of the outstanding shares of
capital stock or other securities of the Acquired Corporations have been duly
authorized and validly issued, are fully paid and nonassessable and are owned
by the Company.
15. To the best of our knowledge, there are no options, warrants, calls,
rights, commitments, conversion rights or agreements of any character to which
the Company or any Acquired Corporation is a party or by which the Company or
any Acquired Corporation is bound obligating the Company or any Acquired
Corporation to issue, deliver or sell, or cause to be issued, delivered or
sold, any shares of capital stock of the Company or any Acquired Corporation or
securities convertible into or exchangeable for shares of capital stock of the
Company or any Acquired Corporation, or obligating the Company or any Acquired
Corporation to grant, extend or enter into any such option, warrant, call,
right, commitment, conversion right or agreement, other than as described in
the Merger Agreement or the Company Disclosure Schedule.
16. The Company has the requisite corporate power and authority to
perform its obligations under the Merger Agreement and documents executed by
the Company in connection therewith (collectively, the "Agreements"). The
execution, delivery and performance of the Agreements by the Company have been
duly authorized by all necessary action on the part of the Company's
stockholders and board of directors. The Agreements have been duly and validly
executed and delivered by the Company. The Company Agreements constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with their terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar laws affecting creditors' rights, and subject to
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(i) general equity principles and limitations on availability of equitable
relief, including specific performance, and (ii) limitations on the
availability of indemnity under applicable laws.
17. Neither the execution and delivery of the Agreements by the Company
nor the consummation by the Company of the transactions provided for therein
(including, without limitation, the Merger) nor the performance by the Company
of its obligations thereunder, will (a) conflict with or result in any breach
or violation of any provision of the Certificate of Incorporation or Bylaws of
the Company, (b) constitute a material default (or with the provision of notice
or the passage of time would constitute a material default) under the
provisions of any material agreement to which the Company is a party or by
which it is bound (as set forth in the Company Disclosure Schedule), or (c)
violate any governmental statute, rule or regulation applicable to the Company,
order, writ, injunction, decree or arbitration award applicable to the Company
or its assets, excluding in the case of subclauses (b) and (c) such defaults
and violations (A) which would not have a Material Adverse Effect on the
Acquired Corporations and (B) would not adversely affect the ability of the
Company to consummate the transactions contemplated by the Merger Agreement.
18. No governmental consent, approval, authorization, registration,
declaration or filing, or any other Governmental Authorization, is required for
the execution and delivery of the Merger Agreement on behalf of the Company or
for the Merger except for such consents, approvals or filings where the failure
to obtain such consent or approval or make such filing (A) would not have a
Material Adverse Effect on the Acquired Corporations and (B) would not
adversely affect the ability of the Company to consummate the transactions
contemplated by the Merger Agreement.
19. To the best of our knowledge, there is no action, proceeding or
investigation pending or threatened against the Company before any court or
administrative agency that challenges or seeks to prohibit the consummation of
the transactions contemplated in the Agreements or that, if determined
adversely to the Company, may reasonably be expected to have a Material Adverse
Effect on the Acquired Corporations.
20. Assuming that all necessary corporate actions in respect of the
Merger have been duly and validly taken by Parent and Merger Sub, then upon the
consummation of the transactions contemplated by the Merger Agreement and the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware as contemplated by the Merger Agreement, the Merger will have been
validly effected in accordance with Delaware Law.
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EXHIBIT I
_______________, 1998
Ladies and Gentlemen:
We have acted as counsel for The Titan Corporation, a Delaware corporation
("Parent"), in connection with the merger of Sunrise Acquisition Sub, Inc.
("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of Parent,
with and into Horizon Technology, Inc., a Delaware corporation (the "Company"),
pursuant to an Agreement and Plan of Merger and Reorganization, amended as of
February __, 1998 among Parent, Merger Sub and the Company (the "Merger
Agreement"). We are rendering this opinion pursuant to Section 8.5(f) of the
Merger Agreement. Capitalized terms used but not defined herein have the
respective meanings given to them in the Merger Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Merger Agreement and the agreements entered into in connection
therewith (collectively, the "Agreements") by the various parties, and
originals or copies certified to our satisfaction of such records, documents,
certificates, opinions, memoranda and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinion expressed below.
In rendering this opinion, we have assumed: the genuineness and authenticity
of all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by Parent and Merger Sub of the Agreements) where authorization, execution and
delivery are prerequisites to the effectiveness of such documents. We have
also assumed: that all individuals executing and delivering documents had the
legal capacity to execute and deliver such documents; that the Company has
received all documents that the Company was to receive under the Agreements;
that the Agreements are binding upon the Company; that the Company has filed
any required state franchise or income tax returns and has paid any required
state franchise or income taxes; and that there are no extrinsic agreements or
understandings among any of the parties to the Agreements that would modify or
interpret the terms of the Agreements or the respective rights or obligations
of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent
that the laws of any jurisdiction other than those identified above are
applicable to the subject matter hereof. We are not rendering any opinion:
(i) as to compliance with, or the effects upon obligations arising under the
Agreements of, any law, rule or regulation relating to securities or to the
sale or issuance thereof; (ii) as to compliance with, or the effects upon
obligations arising under the Agreements of, any law, rule or regulation
relating to
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antitrust, trade regulation or unfair competition; or (iii) as to
the enforceability of any of the agreements attached as exhibits to the Merger
Agreement.
With regard to our opinion in paragraph 4 below, our opinion is expressed only
with respect to the General Corporation Law of the State of Delaware and the
laws of the State of California; with respect to our opinion regarding the
violation of any order, writ, injunction, decree or arbitration award
applicable to Parent or Merger Sub, we have relied solely upon inquiries of
officers of Parent and Merger Sub and have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. Each of Parent and Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
2. Each of Parent and Merger Sub has the requisite corporate power and
authority to perform its obligations under the Merger Agreement. The
execution, delivery and performance of the Merger Agreement by Parent have been
duly authorized by all necessary action on the part of Parent's stockholders
and Parent's board of directors. The execution, delivery and performance of
the Merger Agreement by Merger Sub have been duly authorized by all necessary
action on the part of Merger Sub's sole director and stockholder. The Merger
Agreement has been duly and validly executed and delivered by each of Parent
and Merger Sub.
3. The Merger Agreement constitutes the legal, valid and binding
obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub
in accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
affecting creditors' rights, and subject to (i) general equity principles and
limitations on availability of equitable relief, including specific
performance, and (ii) limitations on the availability of indemnity under
applicable laws.
4. Neither the execution and delivery of the Agreements by Parent and
Merger Sub, as applicable, nor the consummation by Parent and Merger Sub, as
applicable, of the transactions provided for therein nor the performance by
Parent and Merger Sub, as applicable, of their respective obligations
thereunder, will (a) conflict with or result in any breach or violation of any
provision of the Certificate of Incorporation or Bylaws of Parent or the
Certificate of Incorporation or Bylaws of Merger Sub, or (b) to our knowledge
violate any governmental statute, rule or regulation applicable to Parent,
order, writ, injunction, decree or arbitration award applicable to Parent or
Merger Sub or their respective assets, excluding in the case of subclause (b)
such defaults and violations (A) which would not have a Material Adverse Effect
on Parent or Merger Sub and (B) would not adversely effect the ability of
Parent or Merger Sub to consummate the transactions contemplated by the Merger
Agreements.
5. The Parent Common Stock to be issued in connection with the Merger
will be, upon issuance pursuant to the terms of the Merger Agreement, validly
issued, fully paid and nonassessable.
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This opinion letter and the opinions expressed herein are intended for your
benefit and are not to be made available to or be relied upon by any other
person, firm or entity without our prior written consent.
Very truly yours,
Xxxxxx Godward LLP
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