EXHIBIT 99.A
MERGER AGREEMENT
(Attached hereto)
EXHIBIT 99.A
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
LITRONIC INC.
AND
BIZ INTERACTIVE ZONE, INC.
JULY 3, 2001
TABLE OF CONTENTS
PAGE
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1. FORMATION OF SUBSIDIARY............................................................1
1.1 Organization of Merger Subsidiary...........................................1
1.2 Actions of Directors and Officers...........................................1
2. PLAN OF REORGANIZATION.............................................................2
2.1 The Merger..................................................................2
2.2 Effective Time; Closing.....................................................2
2.3 Effect of the Merger........................................................2
2.4 Certificate of Incorporation; Bylaws. .....................................2
2.5 Directors and Officers......................................................2
2.6 Effect on Capital Stock.....................................................3
2.7 Dissenting Shares...........................................................3
2.8 Surrender of Certificates...................................................4
2.9 Tax Consequences. ..........................................................7
2.10 Taking of Necessary Action; Further Action..................................7
2.11 Stock Options and Warrants..................................................7
2.12 Proxy Statement.............................................................8
2.13 Reorganization..............................................................9
3. REPRESENTATIONS AND WARRANTIES OF BIZ..............................................9
3.1 Organization; Good Standing; Qualification and Power........................9
3.2 Capital Structure..........................................................10
3.3 Authority..................................................................11
3.4 Financial Statements.......................................................12
3.5 Information Supplied.......................................................12
3.6 Compliance with Applicable Laws............................................12
3.7 Insurance..................................................................12
3.8 Litigation.................................................................13
3.9 ERISA and Other Compliance.................................................13
3.10 Absence of Undisclosed Liabilities.........................................15
3.11 Absence of Certain Changes or Events.......................................15
3.12 Certain Agreements.........................................................17
3.13 Taxes......................................................................17
3.14 Intellectual Property......................................................19
3.15 Fees and Expenses..........................................................20
3.16 Environmental Matters......................................................20
3.17 Interested Party Transactions..............................................20
3.18 Vote Required..............................................................21
3.19 Disclosure.................................................................21
3.20 Restrictions on Business Activities........................................21
3.21 Accounts Receivable........................................................21
3.22 Personal Property..........................................................21
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3.23 Real Property..............................................................21
3.24 Warranties.................................................................22
3.25 Contracts..................................................................22
3.26 Products and Distribution..................................................22
4. REPRESENTATIONS AND WARRANTIES OF LITRONIC........................................23
4.1 Organization; Good Standing; Qualification and Power.......................23
4.2 Capital Structure..........................................................24
4.3 Authority..................................................................24
4.4 SEC Documents..............................................................26
4.5 Information Supplied.......................................................29
4.6 Litigation.................................................................29
4.7 Fees and Expenses..........................................................29
4.8 Interested Party Transactions..............................................29
4.9 Board Approval.............................................................29
4.10 Vote Required..............................................................29
4.11 Disclosure.................................................................29
4.12 Fairness Opinion...........................................................30
4.13 Shares of Litronic Common Stock............................................30
4.14 Compliance with Applicable Laws............................................30
4.15 Intellectual Property......................................................30
4.16 Taxes......................................................................31
4.17 No Investment Company......................................................33
4.18 ERISA and Other Compliance.................................................33
4.19 Environmental Matters......................................................35
4.20 Directors and Officers Liability Insurance.................................35
4.21 Restrictions on Business Activities........................................35
4.22 Warranties.................................................................36
4.23 Products and Distribution..................................................36
4.24 Accounts Receivable. ......................................................36
4.25 Personal Property. ........................................................37
4.26 Real Property. ............................................................37
4.27 Insurance. ................................................................37
5. BIZ COVENANTS.....................................................................38
5.1 Notification of Changes....................................................38
5.2 Maintenance of Business....................................................38
5.3 Conduct of Business........................................................38
5.4 Stockholder Approval.......................................................40
5.5 Proxy Statement............................................................40
5.6 Regulatory Approvals.......................................................40
5.7 Necessary Consents.........................................................41
5.8 Access to Information......................................................41
5.9 Satisfaction of Conditions Precedent.......................................41
5.10 Confidentiality............................................................41
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6. LITRONIC COVENANTS................................................................41
6.1 Stockholder Approval.......................................................41
6.2 Proxy Statement ...........................................................42
6.3 Regulatory Approvals.......................................................42
6.4 Necessary Consents.........................................................42
6.5 Satisfaction of Conditions Precedent.......................................42
6.6 Confidentiality............................................................42
6.7 Access to Information......................................................43
6.8 Notification of Changes....................................................43
6.9 Maintenance of Business....................................................43
6.10 Current Nasdaq Quotation...................................................43
6.11 Other Covenants............................................................43
6.12 Reservation of Shares......................................................45
7. ADDITIONAL AGREEMENTS.............................................................45
7.1 Employee Matters...........................................................45
7.2 Appointment of Officers....................................................46
7.3 Voting Agreement...........................................................46
7.4 Indemnification of Officers, Directors, Etc................................46
7.5 Tax Matters................................................................47
7.6 No Additional Issuances....................................................47
7.7 Reports Under 1934 Act.....................................................47
7.8 Non-Solicitation...........................................................48
8. CLOSING...........................................................................49
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BIZ........................................49
9.1 Accuracy of Representations and Warranties.................................49
9.2 Covenants..................................................................50
9.3 Absence of Material Adverse Change.........................................50
9.4 Compliance with Law........................................................50
9.5 Corporate Opinion..........................................................50
9.6 Consents...................................................................50
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF LITRONIC...................................50
10.1 Accuracy of Representations and Warranties.................................50
10.2 Covenants..................................................................51
10.3 Absence of Material Adverse Change.........................................51
10.4 Compliance with Law........................................................51
10.5 Consents...................................................................51
10.6 Corporate Opinion..........................................................51
10.7 Fairness Opinion...........................................................51
10.8 Termination of Stockholders Agreement......................................51
10.9 Repurchase of Series A Shares..............................................51
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11. CONDITIONS PRECEDENT TO OBLIGATIONS OF LITRONIC AND BIZ...........................52
11.1 Government Consents........................................................52
11.2 Investment Representation Statement........................................52
11.3 Stockholder Approvals......................................................52
11.4 No Legal Action............................................................52
11.5 Dissenting Shares..........................................................52
11.6 Nasdaq Listing and Trading Symbol..........................................52
11.7 Election of Litronic Directors.............................................52
12. TERMINATION OF AGREEMENT..........................................................52
12.1 Termination................................................................52
12.2 Due Diligence Investigations...............................................53
12.3 Notice of Termination......................................................54
12.4 Effect of Termination......................................................54
13. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.............................54
14. MISCELLANEOUS.....................................................................54
14.1 Governing Law..............................................................54
14.2 Assignment: Binding Upon Successors and Assigns............................54
14.3 Severability...............................................................55
14.4 Counterparts...............................................................55
14.5 Other Remedies.............................................................55
14.6 Amendment and Waivers......................................................55
14.7 Expenses...................................................................55
14.8 Attorneys' Fees............................................................55
14.9 Notices....................................................................55
14.10 Construction of Agreement..................................................56
14.11 No Joint Venture...........................................................56
14.12 Further Assurances.........................................................57
14.13 Absence of Third Party Rights..............................................57
14.14 Public Announcement........................................................57
14.15 Entire Agreement...........................................................57
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is entered into as of
this 3rd day of July, 2001, by and among Litronic Inc., a Delaware
corporation ("Litronic") Litronic Merger Corp., a Delaware corporation and
wholly owned subsidiary of Litronic ("Litronic Merger Corp.") and BIZ
Interactive Zone, Inc., a Delaware corporation ("BIZ").
R E C I T A L S
A. BIZ is a provider of broadband security solutions for electronic business.
Litronic desires to acquire all of the outstanding capital stock of BIZ pursuant
to a strategic merger under the applicable provisions of Delaware law.
B. The Boards of Directors of BIZ, Litronic and Litronic Merger Corp. believe it
is in the best interests of their respective companies and the stockholders of
their respective companies that BIZ and Litronic Merger Corp. combine into a
single company through the statutory merger of Litronic Merger Corp. with and
into BIZ with BIZ to be the surviving corporation ("Merger") and, in furtherance
thereof, have approved the Merger.
C. The Merger is intended to be treated as a tax-free reorganization pursuant to
the provisions of Section 368 of the Internal Revenue Code of 1986, as amended
("Code").
D. Pursuant to the Merger, among other things, the outstanding shares of BIZ
Stock (as defined in Section 3.2.1) shall be converted into the right to receive
shares of Litronic Common Stock (as defined in Section 4.2) upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. FORMATION OF SUBSIDIARY.
1.1 ORGANIZATION OF MERGER SUBSIDIARY. Litronic has formed Litronic Merger
Corp., a corporation organized under the laws of the State of Delaware. The
authorized capital stock of Litronic Merger Corp. consists of 1,000 shares of
Common Stock, $0.001 par value, which shall be issued to Litronic at a price of
$0.01 per share.
1.2 ACTIONS OF DIRECTORS AND OFFICERS. Prior to the execution of this Agreement,
Litronic shall (i) elect the directors of Litronic Merger Corp. and (ii) cause
the directors of Litronic Merger Corp. to elect officers. As promptly as
practicable following the execution of this Agreement, Litronic shall (i) cause
the Merger Agreement (as defined in Section 2.2) to be executed on behalf of
Litronic Merger Corp., (ii) cause the directors and officers of Litronic Merger
Corp. to take such steps as may be necessary or appropriate to complete the
organization of Litronic Merger Corp. and to approve the Merger Agreement, and
(iii) take all necessary action as the stockholder of Litronic Merger Corp. to
adopt and approve this Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby.
2. PLAN OF REORGANIZATION.
2.1 THE MERGER. At the Effective Time (as defined in Section 2.2) and subject to
and upon the terms and conditions of this Agreement and the applicable
provisions of Delaware law, Litronic Merger Corp. shall be merged with and into
BIZ, the separate corporate existence of Litronic Merger Corp. shall cease and
BIZ shall continue as the surviving corporation. BIZ, as the surviving
corporation after the Merger, is sometimes referred to herein as the "Surviving
Corporation," which shall be a wholly owned subsidiary of Litronic.
2.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement, the
parties hereto shall cause the Merger to be consummated by filing an Agreement
of Merger substantially in the form of Exhibit 2.2 ("Merger Agreement") with the
Secretary of State of the State of Delaware in accordance with the relevant
provisions of Delaware law (the time of filing (or such later time as may be
agreed in writing by the parties and specified in the Merger Agreement) being
referred to as the "Effective Time") as soon as practicable on or after the
Closing Date (as defined below). The closing of the Merger ("Closing") shall
take place at the offices of Xxxxx & Xxxxxx, LLP, 000 Xxxxx Xxxxxxxxx, Xxxxx
0000, Xxxxx Xxxx, Xxxxxxxxxx 00000, at a time and date to be specified by the
parties, which shall be no later than the fifth business day after the
satisfaction or waiver of the conditions set forth in Sections 9, 10 and 11, or
at such other time, date and location as the parties hereto agree in writing
("Closing Date"). The parties acknowledge that it is their express current
intent that, to the extent practicable, the Closing Date shall occur as promptly
as reasonably practicable following approval by the Litronic stockholders and
the BIZ stockholders and on or before August 31, 2001.
2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger shall
be as provided in this Agreement and the applicable provisions of Delaware law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
BIZ and Litronic Merger Corp. shall vest in the Surviving Corporation, and all
debts, liabilities and duties of BIZ and Litronic Merger Corp. shall become the
debts, liabilities and duties of the Surviving Corporation. At the Effective
Time, the separate existence of Litronic Merger Corp. will cease and Litronic
Merger Corp. will be merged with and into BIZ.
2.4 CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective Time, the Certificate
of Incorporation and Bylaws of Litronic Merger Corp., as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation until thereafter amended as provided by law
and by the Certificate of Incorporation of the Surviving Corporation.
2.5 DIRECTORS AND OFFICERS. The directors of the Surviving Corporation shall be
the directors of Litronic Merger Corp. immediately prior to the Effective Time,
until their successors are duly elected or appointed and qualified. The initial
officers of the Surviving Corporation shall be the officers of Litronic Merger
Corp. immediately prior to the Effective Time, until their successors are duly
appointed.
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2.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger and
without any action on the part of Litronic Merger Corp., BIZ or the holders of
any of the following securities:
2.6.1 CONVERSION OF BIZ STOCK. Each share of BIZ Common Stock issued and
outstanding immediately prior to the Effective Time will be canceled and
extinguished and automatically converted (subject to Section 2.6.4) into
0.4751248 ("Exchange Ratio") shares of Litronic Common Stock (as defined in
Section 4.2.1), and each share of BIZ Series B Preferred (as defined in Section
3.2.1 issued and outstanding immediately prior to the Effective Time will be
canceled and extinguished and automatically converted (subject to Section 2.6.4)
into 0.8564122 shares of Litronic Common Stock.
2.6.2 CAPITAL STOCK OF LITRONIC MERGER CORP. Each share of Common Stock, $0.001
par value per share, of Litronic Merger Corp. ("Litronic Merger Corp. Common
Stock") issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of Common
Stock, $0.001 par value per share, of the Surviving Corporation. Each
certificate evidencing ownership of shares of Litronic Merger Corp. Common Stock
shall evidence ownership of shares of capital stock of the Surviving
Corporation.
2.6.3 ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Litronic Common Stock or BIZ Stock, as defined in Section 3.2.1),
reorganization, recapitalization, reclassification or other like change with
respect to Litronic Common Stock or BIZ Stock occurring or having a record date
on or after the date hereof and prior to the Effective Time.
2.6.4 FRACTIONAL SHARES. No fraction of a share of Litronic Common Stock will be
issued by virtue of the Merger, but in lieu thereof each holder of shares of BIZ
Stock who would otherwise be entitled to a fraction of a share of Litronic
Common Stock (after aggregating all fractional shares of Litronic Common Stock
that otherwise would be received by the holder) shall receive from Litronic an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
that fraction, multiplied by (ii) the average closing price of one share of
Litronic Common Stock for the five most recent days that Litronic Common Stock
has traded ending on the trading day immediately prior to the Effective Time, as
reported on the Nasdaq National Market.
2.6.5 CANCELLATION OF LITRONIC WARRANT. At the Effective Time, the warrant to
purchase 400,000 shares of BIZ Common Stock issued to Litronic on July 31, 2000
shall be canceled and extinguished ("Litronic Warrant").
2.7 DISSENTING SHARES. Notwithstanding anything to the contrary herein, any
shares of BIZ Stock held by a holder who has demanded and perfected such
holder's right for appraisal of such shares in accordance with applicable law
and who, as of the Effective Time, has not effectively withdrawn or lost such
right to appraisal ("Dissenting Shares"), if any, shall not be converted into
Litronic Common Stock but shall instead be converted into the right to receive
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such consideration as may be determined to be due with respect to such
Dissenting Shares. BIZ shall give Litronic prompt notice of any demand received
by BIZ to require BIZ to purchase shares of Common Stock of BIZ, and Litronic
and BIZ shall mutually direct and participate in all negotiations and
proceedings with respect to such demand. BIZ agrees that, except with the prior
written consent of Litronic, or as required under applicable law, it will not
voluntarily make any payment with respect to, or settle or offer to settle, any
such purchase demand. Each holder of Dissenting Shares ("Dissenting
Stockholder") who becomes entitled to payment of the fair value for shares of
BIZ Stock shall receive payment therefor (but only after the value therefor has
been agreed upon or finally determined pursuant to such provisions). If, after
the Effective Time, any Dissenting Shares shall lose their status as Dissenting
Shares, Litronic shall issue and deliver, upon surrender by such stockholder of
a certificate or certificates representing shares of BIZ Stock, the shares of
Litronic Common Stock to which such stockholder would otherwise be entitled
under Section 2.6.
2.8 SURRENDER OF CERTIFICATES.
2.8.1 EXCHANGE AGENT. American Stock Transfer & Trust Company shall act as the
exchange agent ("Exchange Agent") in the Merger.
2.8.2 LITRONIC TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
Litronic shall make available to the Exchange Agent, for exchange in accordance
with this Section 2, the shares of Litronic Common Stock issuable pursuant to
Section 2.6 in exchange for outstanding shares of BIZ Stock, and cash in an
amount sufficient for payment in lieu of fractional shares pursuant to Section
2.6.4 and any dividends or distributions to which holders of shares of BIZ Stock
may be entitled pursuant to Section 2.8.4.
2.8.3 EXCHANGE PROCEDURES. Promptly after the Effective Time, Litronic shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates ("Certificates") which immediately prior
to the Effective Time represented outstanding shares of BIZ Stock whose shares
were converted into shares of Litronic Common Stock pursuant to Section 2.6,
cash in lieu of any fractional shares pursuant to Section 2.6.4 and any
dividends or other distributions pursuant to Section 2.8.4, (i) a letter of
transmittal in customary form (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall contain such other
provisions as Litronic may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Litronic Common Stock, cash in lieu of any fractional
shares pursuant to Section 2.6.4 and any dividends or other distributions
pursuant to Section 2.8.4. Upon surrender of Certificates for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Litronic, together with the letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holders of
Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Litronic Common Stock into which
their shares of BIZ Stock were converted at the Effective Time, payment in lieu
of fractional shares which the holders have the right to receive pursuant to
Section 2.6.4 and any dividends or distributions payable pursuant to Section
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2.8.4, and the Certificates surrendered shall be canceled. Until surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes, subject to Section 2.8.4 as to the payment of dividends,
to evidence the ownership of the number of full shares of Litronic Common Stock
into which shares of BIZ Stock have been converted and the right to receive an
amount in cash in lieu of the issuance of any fractional shares in accordance
with Section 2.6.4 and any dividends or distributions payable pursuant to
Section 2.8.4.
2.8.4 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions declared or made after the date of this Agreement with respect to
Litronic Common Stock with a record date after the Effective Time will be paid
to the holders of any unsurrendered Certificates with respect to the shares of
Litronic Common Stock represented thereby until the holders of record of the
Certificates surrender the Certificates, and no cash payment in lieu of
fractional shares shall be paid to the holders of Certificates until the holders
of record of those Certificates surrender the Certificates. Subject to
applicable law, following surrender of the Certificates, the Exchange Agent
shall deliver to the record holders, without interest, certificates representing
whole shares of Litronic Common Stock issued in exchange therefor along with
payment in lieu of fractional shares pursuant to Section 2.6.4 and the amount of
any dividends or other distributions with a record date after the Effective Time
payable with respect to whole shares of Litronic Common Stock.
2.8.5 TRANSFERS OF OWNERSHIP. If certificates representing shares of Litronic
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting the exchange have paid to Litronic or any agent designated by it any
transfer or other taxes required by reason of the issuance of certificates
representing shares of Litronic Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Litronic or any agent designated by it that the tax has been
paid or is not payable.
2.8.6 NO LIABILITY. Notwithstanding anything to the contrary in this Section
2.8, neither the Exchange Agent, Litronic, the Surviving Corporation nor any
party hereto shall be liable to a holder of shares of Litronic Common Stock or
BIZ Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
2.8.7 TERMINATION OF EXCHANGE AGENT PROVISIONS. On the demand of Litronic, any
Litronic Common Stock issuable or cash payable in accordance with this Agreement
that is made available to the Exchange Agent, if not distributed to the
stockholders of BIZ within one year after the Effective Time, shall no longer be
made available to the Exchange Agent, and any former stockholders of BIZ who
have not complied with this Section 2.8 shall thereafter look only to Litronic
for payment of their claim for Litronic Common Stock, any cash in lieu of
fractional shares of Litronic Common Stock and any dividends or distributions
with respect to Litronic Common Stock.
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2.8.8 NO FURTHER OWNERSHIP RIGHTS IN BIZ STOCK. All shares of Litronic Common
Stock issued in accordance with the terms hereof (including any cash paid
pursuant to Sections 2.6.4 and 2.8.4) shall be deemed to have been issued in
full satisfaction of all rights pertaining to shares of BIZ Stock, and there
shall be no further registration of transfers on the records of the Surviving
Corporation of shares of BIZ Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Section.
2.8.9 LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificates have been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for the
lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder, certificates representing the shares of Litronic Common
Stock into which the shares of BIZ Stock represented by those Certificates were
converted pursuant to Section 2.6, cash for fractional shares, if any, as may be
required pursuant to Section 2.6.4 and any dividends or distributions payable
pursuant to Section 2.8.4; provided, however, that Litronic may, in its
discretion and as a condition precedent to the issuance of the certificates
representing shares of Litronic Common Stock, require the owner of the lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Litronic, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
2.8.10 DISSENTING SHARES. The provisions of this Section 2.8 shall also apply to
Dissenting Shares that lose their status as such, except that the obligations of
Litronic under this Section 2.8 shall commence on the date of loss of such
status and the holder of such shares shall be entitled to receive in exchange
for such shares of Litronic Common Stock to which such holder is entitled
pursuant to Section 2.6.
2.8.11 CERTIFICATE LEGENDS. The shares of Litronic Common Stock to be issued
pursuant to this Section 2 shall not have been registered and shall be
characterized as "restricted securities" under the federal securities laws, and
under such laws such shares may be resold without registration under the
Securities Act of 1933, as amended (the "Securities Act"), only in certain
limited circumstances. Each certificate evidencing shares of Litronic Common
Stock to be issued pursuant to this Section 2 shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION WITHOUT
AN EXEMPTION UNDER THE SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
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2.9 TAX CONSEQUENCES. The parties intend that the Merger constitute a
reorganization within the meaning of Section 368 of the Code, and adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.
2.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. Litronic and BIZ will each take
all such reasonable and lawful action as may be necessary or desirable in order
to effectuate the Merger in accordance with this Agreement as promptly as
possible. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of BIZ and Litronic Merger
Corp., the officers and directors of BIZ and Litronic Merger Corp. will take all
such lawful and necessary action. Litronic shall cause Litronic Merger Corp. to
perform all of its obligations relating to this Agreement and the transactions
contemplated hereby.
2.11 STOCK OPTIONS AND WARRANTS.
2.11.1 CONVERSION. At the Effective Time, each of the then outstanding options
("BIZ Options"), to purchase BIZ Common Stock (whether vested or unvested) will,
by virtue of the Merger and without any further action on the part of any such
holder, be converted into an option (collectively, the "Assumed Options") to
purchase that number of shares of Litronic Common Stock determined by
multiplying the number of shares of BIZ Common Stock subject to the BIZ Option
at the Effective Time by the Common Exchange Ratio (the "Adjusted Option
Shares"), at an exercise price per share of Litronic Common Stock equal to the
exercise price per share of the BIZ Option immediately prior to the Effective
Time divided by the Common Exchange Ratio and rounded up to the nearest whole
cent (the "Adjusted Exercise Price"). If the foregoing calculation results in an
Assumed Option being exercisable for a fraction of a share of Litronic Common
Stock, then the number of shares of Litronic Common Stock subject to that option
will be rounded to the nearest whole number of shares (rounded down, in the case
of BIZ Options that are "incentive stock options" ("ISOs") under Section 422 of
the Code). The term, exercisability, vesting schedule, status as an ISO, if
applicable, shall be as set forth in the BIZ Disclosure Schedule (as defined in
Section 3). Continuous employment with BIZ will be credited to an optionee of
BIZ for purposes of vesting of Assumed Options. Litronic shall issue, upon any
partial or total exercise of Assumed Option in lieu of shares of BIZ Common
Stock, the number of shares of Litronic Common Stock to which the holder of the
Assumed Option is entitled. Each BIZ Option so assumed by Litronic under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in BIZ's 2000 Stock Option Plan (the "BIZ Plan") and any
other document governing such option immediately prior to the Effective Time,
except that (i) such BIZ Option will be exercisable for the Adjusted Option
Shares, (ii) the per share exercise price for the shares of Litronic Common
Stock issuable upon exercise of such Assumed Option will be equal to the
Adjusted Exercise Price and (iii) any restriction on the exercisability of such
BIZ Option shall continue in full force and effect, and the term,
exercisability, vesting schedule and other provisions of such BIZ Option shall
remain unchanged. Consistent with the terms of the BIZ Plan and the documents
governing the outstanding options under such plan, the Merger will not terminate
any of the outstanding
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options under the BIZ Stock Option Plan or accelerate the exercisability or
vesting of such options or the shares of Litronic Common Stock which will be
subject to those options upon Litronic's assumption of the options in the
Merger. It is the intention of the parties that the Assumed Options will remain
ISOs as defined in Section 422 of the Code to the extent such options qualified
as ISOs prior to the Effective Time.
2.11.2 REGISTRATION ON FORM S-8. Litronic will cause a Form S-8 registration
statement ("Form S-8") to be filed under the Securities Act of 1933, as amended
("Securities Act") with respect to the Litronic Common Stock issuable upon
exercise of the Assumed Options (with respect to all BIZ Options granted to
persons who are eligible to receive registered shares under a Form S-8) as soon
as practicable after the Closing, and will use its best efforts to maintain the
effectiveness (and current status) of the Form S-8 for so long as any Assumed
Options remain outstanding. Litronic will reserve a sufficient number of shares
of Litronic Common Stock for issuance upon exercise of Assumed Options. With
respect to those individuals, if any, who subsequent to the Merger will be
subject to the reporting requirements under Section 16(a) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), where applicable, Litronic
shall administer those individuals' Assumed Options in a manner that complies
with Rule 16b-3 promulgated under the Exchange Act.
2.11.3 CONVERSION OF WARRANTS. At the Effective Time (except as set forth under
Section 2.6.5), each of the then outstanding Warrants ("BIZ Warrants") to
purchase BIZ Common Stock will, by virtue of the Merger and without any further
action on the part of any holder, be converted into a Warrant (collectively, the
"Assumed Warrants") to purchase that number of shares of Litronic Common Stock
determined by multiplying the number of shares of BIZ Common Stock subject to
the BIZ Warrants at the Effective Time by the Exchange Ratio, at an exercise
price per share of Litronic Common Stock equal to the exercise price per share
of the BIZ Warrant immediately prior to the Effective Time divided by the
Exchange Ratio and rounded up to the nearest whole cent. If the foregoing
calculation results in an Assumed Warrant being exercisable for a fraction of a
share of Litronic Common Stock, then the number of shares of Litronic Common
Stock subject to that warrant will be rounded to the nearest whole number of
shares.
2.12 PROXY STATEMENT. As promptly as practicable after execution of this
Agreement, Litronic, with assistance from BIZ (to the extent reasonably
requested by Litronic), shall prepare and file with the Securities and Exchange
Commission ("SEC") a proxy statement ("Proxy Statement") in connection with the
Merger. Each of Litronic and BIZ shall use its best effort to respond promptly
to any SEC comments. Litronic shall mail the Proxy Statement to its stockholders
at the earliest possible time. BIZ shall promptly furnish to Litronic all
information concerning BIZ and its stockholders as may be reasonably required in
connection with the Proxy Statement or any SEC comments. The Proxy Statement
shall comply in all material respects with all applicable requirements of law.
The Proxy Statement shall contain proposals to vote regarding the Merger, to
elect directors as specified in Section 11.7, to change the name of Litronic to
"SSP Solutions, Inc.," to increase the size of the Litronic Plan to 4,000,000
shares, to adopt an Employee Stock Purchase Plan with 1,000,000 shares
available, and to increase the number of authorized shares of Litronic Common
Stock from 25,00,000 to 100,000,000.
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2.13 REORGANIZATION. The parties intend to adopt this Agreement and the Merger
Agreement as a plan of reorganization under Section 368(a) of the Code. The
Litronic Common Stock issued in the Merger will be issued solely in exchange for
BIZ Stock, and no other transaction other than the Merger represents, provides
for or is intended to be an adjustment to the consideration paid for the BIZ
Stock. Except for cash paid in lieu of fractional shares or as a result of
Dissenting Shares, no consideration that could constitute "other property"
within the meaning of Section 356(b) of the Code is being transferred by
Litronic for BIZ Stock in the Merger. The parties shall not take a position on
any tax return inconsistent with this Section 2.13. In addition, BIZ, Litronic
and Litronic Merger Corp. represent as of the date of this Agreement, and as of
the Closing Date, that neither they nor their affiliates has taken or agreed to
take any action, or has any plan or intention or arrangement to take any action
that would prevent the Merger from qualifying as a tax-free reorganization under
the provisions of Section 368(a) of the Code.
3. REPRESENTATIONS AND WARRANTIES OF BIZ.
Except in each case as set forth in a schedule dated the date of this Agreement
and delivered by BIZ to Litronic concurrently herewith ("BIZ Disclosure
Schedule") specifically identifying the Section of this Agreement requiring the
delivery of such disclosure (except to the extent disclosure in any numbered and
lettered Section of BIZ Disclosure Schedule is specifically cross referenced in
another numbered and lettered section of BIZ Disclosure Schedule). As the date
hereof, BIZ represents and warrants to Litronic as set forth below. In this
Agreement, any reference to any event, change or effect being "material" with
respect to any entity or group of entities means any material event, change or
effect related to the condition (financial or otherwise), properties, assets,
liabilities, businesses, operations, results of operations or prospects of such
entity or group of entities taken as a whole. In this Agreement, the term
"Material Adverse Effect" used in connection with a party or any of that party's
subsidiaries means any event, change or effect that is, singly or in the
aggregate, materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of operations
or prospects of that party and its subsidiaries, taken as a whole; provided,
however, that a Material Adverse Effect shall not include any adverse effect
resulting from general economic conditions or conditions affecting the
engineering software market. In this Agreement, a "subsidiary" means a
corporation, partnership or other entity in which a party owns directly or
indirectly more than 50% of the voting stock, equity interests or beneficial
interests. In this Agreement, "knowledge" means actual knowledge, and with
respect to any party that is an entity, the entity shall not be deemed to have
knowledge of any particular fact or matter unless any member of the Board of
Directors or any executive officer (within the meaning of Rule 405 under the
Securities Act of 1933, as amended) of the entity has actual knowledge thereof.
3.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each of BIZ and its
only subsidiary, Broadband Consumer Products, Inc., a Delaware corporation
("BCP") is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes qualification necessary,
other than in jurisdictions where the failure to so qualify or be in good
standing would not have a Material Adverse Effect
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on BIZ. BIZ has made available to Litronic or its counsel complete and correct
copies of the certificate of incorporation and bylaws of BIZ and BCP, in each
case as amended to the date of this Agreement, and copies of all minutes of
meetings and actions by written consent of stockholders, directors and board
committees of each such entity.
3.2 CAPITAL STRUCTURE.
3.2.1 STOCK AND OPTIONS. The authorized capital stock of BIZ consists of
30,000,000 shares of Common Stock, $0.001 par value ("BIZ Common Stock"), and
7,000,000 shares of Preferred, $0.001 par value ("BIZ Preferred Stock"; the BIZ
Common Stock and the BIZ Preferred Stock are sometimes collectively referred to
as the "BIZ Stock"). At the close of business on July 2, 2001, 16,400,000 shares
of BIZ Common Stock were issued and outstanding, 187,970 shares of BIZ Preferred
Stock convertible into 187,970 shares of BIZ Common Stock were issued and
outstanding and designated as "Series A" ("BIZ Series A Preferred"), 3,600,000
shares of BIZ Preferred Stock convertible into 3,600,000 shares of BIZ Common
Stock were issued and outstanding and designated as "Series X" ("XXX Series B
Preferred"), 450,000 shares of BIZ Common Stock were reserved for issuance upon
the exercise of outstanding BIZ Warrants and 1,756,500 shares of BIZ Common
Stock were reserved for issuance upon the exercise of outstanding BIZ Options
and 1,843,500 shares of BIZ Common Stock were reserved for future option grants.
All outstanding shares of BIZ Stock are validly issued, fully paid and
nonassessable and not subject to preemptive rights and were not issued in
violation of any preemptive rights. BIZ has made available to Litronic a true
and correct copy of the BIZ Plan, and the BIZ Disclosure Schedule contains a
correct and complete list of each BIZ Option and BIZ Warrant outstanding as of
the date hereof, including the name of the holder of each BIZ Option and BIZ
Warrant, the security and number of shares covered by each BIZ Option and BIZ
Warrant, the per share exercise price of each BIZ Option and BIZ Warrant and the
vesting schedule applicable to each BIZ Option and BIZ Warrant. BIZ Disclosure
Schedules list all option agreements that contain accelerated vesting upon
change of control provisions along with the material terms of such option
agreements.
3.2.2 NO OTHER COMMITMENTS. Except for the BIZ Options and BIZ Warrants
disclosed in or pursuant to Section 3.2.1, there are no options, warrants,
calls, rights, commitments, conversion rights, exchange rights or agreements of
any character to which BIZ or BCP is a party or by which BIZ or BCP is bound
obligating BIZ or BCP to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock of BIZ or BCP or securities
convertible into or exchangeable for shares of capital stock of BIZ or BCP, or
obligating BIZ or BCP to grant, extend or enter into any option, warrant, call,
right, commitment, conversion right or agreement. There are no voting trusts or
other agreements or understandings to which BIZ or BCP or, to the knowledge of
BIZ, any of its stockholders is a party with respect to the voting of the
capital stock of BIZ or BCP. There are no put agreements or registration rights
agreements, or any other agreements of any character or nature to which BIZ is a
party or by which BIZ is bound, obligating BIZ to purchase or register, or cause
to be purchased or registered, any shares of capital stock of BIZ or securities
convertible into or exchangeable for shares of capital stock of BIZ.
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3.3 AUTHORITY.
3.3.1 CORPORATE ACTION. BIZ has all requisite corporate power and authority to
enter into this Agreement and, subject to approval of this Agreement, the Merger
Agreement and the Merger by the stockholders of BIZ, to perform its obligations
hereunder and to consummate the Merger and the other transactions contemplated
by this Agreement. The execution and delivery of this Agreement by BIZ and,
subject to approval of this Agreement, the Merger Agreement and the Merger by
the stockholders of BIZ, the consummation by BIZ of the Merger and the other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of BIZ. This Agreement has been duly executed and
delivered by BIZ and is the valid and binding obligation of BIZ, enforceable in
accordance with its terms, except that enforceability may be subject to (i)
bankruptcy, insolvency, reorganization or other laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable principles
regardless of whether considered at law or in equity.
3.3.2 NO CONFLICT. Neither the execution, delivery and performance of this
Agreement or the Merger Agreement, nor the consummation of the transactions
contemplated hereby or thereby nor compliance with the provisions hereof or
thereof will: (i) conflict materially with, or result in any material violations
of, or cause a material default (with or without notice or lapse of time, or
both) under, or give rise to a material right of termination, amendment,
cancellation or acceleration of any obligation contained in, or the loss of any
material benefit under, or result in the creation of any material lien, security
interest, charge or encumbrance upon any of the material properties or assets of
BIZ or BCP under, any term, condition or provision of (x) the certificate of
incorporation or bylaws of BIZ or BCP or (y) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other material agreement, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to BIZ or BCP or
their respective properties or assets, other than any such conflicts,
violations, defaults, losses, liens, security interests, charges, or
encumbrances which, individually or in the aggregate, would not have a Material
Adverse Effect; or (ii) require the affirmative vote of the holders of greater
than a majority of the issued and outstanding shares of BIZ Common Stock and BIZ
Preferred Stock, each voting as a separate class.
3.3.3 CONSENTS.
(a) No consent, approval, order or authorization of, or registration,
declaration or filing with (collectively, "Governmental Consents"), any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (each a "Governmental Entity"), is required
to be obtained by BIZ or BCP in connection with the execution and delivery of
this Agreement or the Merger Agreement or the consummation of the transactions
contemplated hereby or thereby, except for: (i) the filing of Merger Agreement
with the Secretary of State of Delaware and appropriate documents with the
relevant authorities of other states in which BIZ is qualified to do business;
(ii) such filings, authorizations, orders and approvals as may be required under
state "control share acquisition," "anti-takeover" or other similar statutes and
regulations (collectively, "State Takeover Laws"); and (iii) where the failure
to obtain or make such
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Governmental Consents would not prevent or materially delay the consummation of
the Merger and would not reasonably be expected to have a Material Adverse
Effect on BIZ. (b) No other consent is required to be obtained by BIZ or BCP in
connection with the execution and delivery of this Agreement or the Merger
Agreement or the consummation of the transactions contemplated hereby or
thereby.
3.4 FINANCIAL STATEMENTS. BIZ has furnished to Litronic copies of: (a) the
audited consolidated balance sheet of BIZ at December 31, 2000, and the related
statement of income and changes in financial position for the period then ended,
together with the related notes thereto and the auditors' report thereon of KPMG
LLP, independent auditors, and (b) the unaudited consolidated balance sheet of
BIZ at March 31, 2001, and the related statement of income and changes in
financial position for the period then ended, together with the related notes
thereto. All financial statements referred to in this Section 3.4 ("BIZ
Financial Statements") are complete and correct in all material respects, have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the respective periods, and fairly
present the consolidated financial condition of BIZ and BCP as at the respective
dates thereof and the consolidated results of operation and cash flow of BIZ and
BCP for the respective periods covered by the statements of income and cash flow
contained therein.
3.5 INFORMATION SUPPLIED. None of the information supplied or to be supplied by
BIZ in writing for inclusion or incorporation by reference in the Proxy
Statement will, at the date the Proxy Statement is mailed to the stockholders of
Litronic, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
3.6 COMPLIANCE WITH APPLICABLE LAWS. The businesses of BIZ and BCP are not being
conducted in violation of any law, ordinance, regulation, rule or order of any
Governmental Entity where the violation would have a Material Adverse Effect on
BIZ. BIZ has not been notified by any Governmental Entity that any investigation
or review with respect to BIZ or BCP is pending or, to the knowledge of BIZ,
threatened, nor has any Governmental Entity notified BIZ of its intention to
conduct an investigation or review. BIZ and BCP have all permits, licenses and
franchises from Governmental Entities required to conduct their businesses as
now being conducted, except for those whose absence would not have a Material
Adverse Effect with respect to BIZ.
3.7 INSURANCE. BIZ maintains and at all times since its inception has maintained
fire and casualty and general liability insurance that BIZ believes or believed
at that time to be reasonably prudent for the business of BIZ and BCP as
conducted at that time. The BIZ Disclosure Schedule contains a complete and
correct list and summary description of all insurance policies maintained by
BIZ. BIZ has delivered or made available to Litronic complete and correct
certificates of insurance setting forth the summary terms of the insurance
policies. These policies are in full force and effect in all material respects,
and all premiums due thereon have been paid, except for such failure of payment
that would not have a Material Adverse Effect on BIZ. BIZ has complied in all
material respects with the terms and provisions of the
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policies. The BIZ Disclosure Schedule summarizes all material claims made by BIZ
under any policy of insurance since BIZ's inception.
3.8 LITIGATION. There is no suit, action, arbitration, demand, claim or
proceeding pending or, to the knowledge of BIZ, threatened against BIZ or BCP in
connection with or relating to the transactions contemplated by this Agreement
or of any action taken or to be taken in connection herewith or the consummation
of the transactions contemplated hereby. BIZ has made available to Litronic or
its counsel correct and complete copies of all correspondence prepared by its
counsel for BIZ's auditors in connection with the last two completed audits of
BIZ's financial statements and any such correspondence since the date of the
last audit. There is no suit, action, arbitration, demand, claim or proceeding
pending or, to the best knowledge of BIZ, threatened against BIZ or BCP, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against BIZ or BCP that could reasonably be expected
to have a Material Adverse Effect with respect to BIZ.
3.9 ERISA AND OTHER COMPLIANCE.
(a) BIZ has made available to Litronic a list of all employees of BIZ and
their salaries as of the date of this Agreement. BIZ has made available to
Litronic copies of (i) each "employee benefit plan," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and (ii) all other written or formal plans or agreements involving direct or
indirect compensation or benefits (including any employment agreements entered
into between BIZ or BCP and any employee of BIZ or BCP, but excluding workers'
compensation, unemployment compensation and other government-mandated programs)
currently or previously maintained, contributed to or entered into by BIZ or BCP
under which BIZ or BCP or an ERISA Affiliate (as defined below) thereof has any
present or future material obligation or liability (collectively, "BIZ Employee
Plans"). "ERISA Affiliates" means any entity which is a member of (A) a
"controlled group of corporations," as defined in Section 414(b) of the Code,
(B) a group of entities under "common control," as defined in Section 414(c) of
the Code, or (C) an "affiliated service group," as defined in Section 414(m) of
the Code, or treasury regulations promulgated under Section 414(o) of the Code,
any of which includes BIZ. Copies of all BIZ Employee Plans (and, if applicable,
related trust agreements) and all amendments thereto and written interpretations
thereof (including summary plan descriptions) have been made available to
Litronic or its counsel, together with the three most recent annual reports
(Form 5500, including, if applicable, Schedule B thereto) prepared in connection
with any BIZ Employee Plans. Copies of all BIZ Employee Plans which individually
or collectively would constitute an "employee pension benefit plan," as defined
in Section 3(2) of ERISA (collectively, "BIZ Pension Plans"), have been made
available to Litronic. All contributions due from BIZ or BCP through the date
hereof with respect to any of the BIZ Employee Plans have been made as required
under ERISA or have been accrued on BIZ's financial statements as of December
31, 2000. To BIZ's knowledge, each of the BIZ Employee Plans has been maintained
in compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including, without limitation, ERISA
and the Code, which are applicable to the BIZ Employee Plans except for
noncompliance that would not have a Material Adverse Effect on BIZ.
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(b) None of the BIZ Pension Plans constitutes, or has since the enactment
of ERISA constituted, a "multiemployer plan," as defined in Section 3(37) of
ERISA. No BIZ Pension Plans are subject to Title IV of ERISA. No "prohibited
transaction," as defined in Section 406 of ERISA or Section 4975 of the Code,
has occurred with respect to any of the BIZ Employee Plans that is covered by
Title I of ERISA that would result in a material liability to BIZ, excluding
transactions effected pursuant to a statutory or administrative exemption. To
BIZ's knowledge, nothing done or omitted to be done and no transaction or
holding of any asset under or in connection with any of the BIZ Employee Plans
has or will make BIZ or any officer or director of BIZ or BCP subject to any
material liability under Title I of ERISA or liable for any material tax or
penalty pursuant to Sections 4972, 4975, 4976 or 4979 of the Code or Section 502
of ERISA.
(c) Any of the BIZ Pension Plans that is intended to be qualified under
Section 401(a) of the Code (a "BIZ 401(a) Plan") is so qualified and has been so
qualified during the period from its adoption to date, and the trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code.
(d) BIZ has made available to Litronic a list of each employment, severance
or other similar contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, severance benefits,
disability benefits, death benefits, hospitalization benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits for
employees, consultants or directors which (i) is not one of the BIZ Employee
Plans, (ii) is entered into, maintained or contributed to, as the case may be,
by BIZ or BCP and (iii) covers any employee or former employee of BIZ. The
contracts, plans and arrangements described in this paragraph 3.9(d) are
referred to collectively as the "BIZ Benefit Arrangements." To BIZ's knowledge,
each of the BIZ Benefit Arrangements has been maintained in material compliance
(i) with its terms and (ii) with the requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable to BIZ Benefit
Arrangements. BIZ has made available to Litronic or its counsel a complete and
correct copy or description of each of the BIZ Benefit Arrangements.
(e) There has been no amendment to, written interpretation or announcement
(whether or not written) by BIZ or BCP relating to, or change in employee
participation or coverage under, any of the BIZ Employee Plans or BIZ Benefit
Arrangements that would increase materially the expense of maintaining the BIZ
Employee Plans or BIZ Benefit Arrangements above the level of the expense
incurred in respect thereof for the fiscal year ended December 31, 2000.
(f) BIZ has provided, or will have provided prior to the Closing, to
individuals entitled thereto all required notices and coverage pursuant to
Section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), with respect to any "qualifying event" (as
defined in Section 4980B(f)(3) of the Code) occurring prior to and including the
Closing Date, and no
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material tax payable on account of Section 4980B of the Code has been incurred
with respect to any current or former employees (or their beneficiaries) of BIZ.
(g) No benefit or compensation payable or which may become payable by BIZ
or BCP pursuant to any of the BIZ Employee Plans or any BIZ Benefit Arrangements
or as a result of or arising under this Agreement shall (i) constitute an
"excess parachute payment" (as defined in Section 280G(b)(1) of the Code) which
is subject to the imposition of an excise tax under Section 4999 of the Code or
which would not be deductible by reason of Section 280G of the Code or (ii) be
nondeductible by reason of Section 162(m) of the Code.
(h) BIZ and BCP are in compliance in all material respects with all
applicable laws, agreements and contracts relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including, but
not limited to, employee compensation matters, but not including ERISA.
(i) Neither BIZ nor BCP has any knowledge of any facts indicating that the
consummation of the transactions contemplated hereby will have a Material
Adverse Effect on labor relations, and has no actual knowledge that any of its
key employees intends to leave its or their employ.
3.10 ABSENCE OF UNDISCLOSED LIABILITIES. The consolidated balance sheet of BIZ
as of December 31, 2000 and delivered to Litronic by BIZ is referred to herein
as the "BIZ Balance Sheet." At the date of the BIZ Balance Sheet ("BIZ Balance
Sheet Date"), BIZ had no liabilities or obligations, secured or unsecured
(whether accrued or absolute) and of a nature required to be reflected in the
liabilities column of a balance sheet prepared in accordance with GAAP, not
reflected on the BIZ Balance Sheet.
3.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the BIZ Balance Sheet Date (and
other than in compliance with Section 5.3) there has not occurred:
(a) a Material Adverse Effect with respect to BIZ and BCP, taken as a
whole;
(b) any amendments or changes in BIZ's certificate of incorporation or
bylaws;
(c) any damage, destruction or loss, whether covered by insurance or not,
that could reasonably constitute a Material Adverse Effect with respect to BIZ;
(d) any redemption, repurchase or other acquisition of shares of capital
stock of BIZ or BCP (other than pursuant to arrangements with terminated
employees or consultants), or any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any capital stock of BIZ or BCP;
(e) any material increase in or modification of the compensation or
benefits payable or to become payable by BIZ or BCP to any of its directors or
employees, except in the ordinary course of business consistent with past
practice;
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(f) any material increase in or modification of any bonus, pension,
insurance or any of the BIZ Employee Plans or BIZ Benefit Arrangements
(including, but not limited to, the granting of stock options, restricted stock
awards or stock appreciation rights) made to, for or with any of its employees,
other than in the ordinary course of business consistent with past practice;
(g) any acquisition or sale of a material amount of property or assets of
BIZ or BCP, other than in the ordinary course of business consistent with past
practices;
(h) any alteration in any term of any outstanding security of BIZ or BCP
other than as required under the terms thereof;
(i) any (A) incurrence, assumption or guarantee by BIZ or BCP of any debt
for borrowed money other than pursuant to credit lines or loan agreements
disclosed in the BIZ Balance Sheet or the notes thereto; (B) issuance or sale of
any securities convertible into or exchangeable for debt securities of BIZ; or
(C) issuance or sale of options or other rights to acquire from BIZ or BCP,
directly or indirectly, debt securities of BIZ or BCP or any securities
convertible into or exchangeable for any such debt securities;
(j) any creation or assumption by BIZ or BCP of any mortgage, pledge,
security interest or lien or other encumbrance on any material asset (other than
liens for taxes not yet delinquent and liens and encumbrances which are not
material in character, amount or extent and which do not materially interfere
with the use of the asset subject thereto or affected thereby);
(k) any making of any loan, advance or capital contribution to or
investment in any person other than (i) travel loans or advances made in the
ordinary course of business, (ii) other loans and advances in an aggregate
amount which does not exceed $25,000 outstanding at any time and (iii) purchases
on the open market of liquid, publicly traded securities;
(l) any entering into, amendment of, relinquishment, termination or
non-renewal by BIZ or BCP of any material contract, lease commitment or other
material right or obligation other than in the ordinary course of business;
(m) any transfer or grant of a right under the BIZ IP Rights (as defined in
Section 3.14), other than in the ordinary course of business;
(n) any material labor dispute or written charge of unfair labor practice
(other than routine individual grievances), or, to the knowledge of BIZ, any
material activity or proceeding by a labor union or representative thereof to
organize any employees of BIZ or BCP; or
(o) any agreement or arrangement made by BIZ or BCP to take any action,
which, if taken prior to the date hereof, would have made any representation or
warranty, set forth in this Agreement untrue or incorrect unless otherwise
disclosed.
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3.12 CERTAIN AGREEMENTS. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of BIZ or BCP, under any of the BIZ Employee Plans, BIZ Benefit
Arrangements or otherwise, (ii) materially increase any benefits otherwise
payable under any of the BIZ Employee Plans, the BIZ Benefit Arrangements or
otherwise or (iii) result in the acceleration of the time of payment or vesting
of any benefits.
3.13 TAXES. For purposes of this Agreement, "Tax" or collectively "Taxes" means
any and all federal, state, local, and foreign taxes, assessments, and other
governmental charges, duties, impositions, and liabilities, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, estimated, excise and property taxes, together
with all interest, penalties, and additions imposed with respect to those
amounts and any obligations under any agreements or arrangements with any other
person with respect to those amounts and including any liability for taxes of a
predecessor entity. For purposes of this Agreement, "Income Tax" or collectively
"Income Taxes" means any Tax on income, including any interest, penalty or
addition thereto.
(a) As of the Closing, BIZ and each consolidated, combined or unitary group
of which BIZ is a member ("BIZ Group") will have prepared and filed all required
material federal, state, local, and foreign returns, information statements, and
reports relating to any and all Taxes ("Returns") of BIZ or any BIZ Group that
it was required to file, and each such Return was true, correct, and complete in
all material respects;
(b) As of the Closing, BIZ and any BIZ Group: (A) will have paid or accrued
in accordance with generally accepted accounting principles all material Taxes
concerning or attributable to BIZ and any BIZ Group relating to periods ending
on or before the month-end prior to the Closing regardless of whether reflected
on BIZ's or any BIZ Group's Returns and (B) will have withheld with respect to
their employees all federal and state income taxes, FICA, FUTA and other Taxes
which, to BIZ's knowledge, were required to be withheld;
(c) Neither BIZ nor any member of any BIZ Group has any material Tax
deficiency outstanding, proposed in writing or as to which any director of
officer has actual knowledge or assessed, nor has BIZ or any member of any BIZ
Group executed any waiver of the statute of limitations on or extending the
period for the assessment or collection of any Taxes;
(d) No audit or other examination of any Return of BIZ or any member of any
BIZ Group is presently in progress, nor, to BIZ's knowledge, has BIZ or any
member of any BIZ Group been notified of any request for an audit or
examination;
(e) As of December 31, 2000, neither BIZ nor any member of any BIZ Group
has any material liabilities for unpaid federal, state, local and foreign Taxes
which have not been accrued or reserved in accordance with generally accepted
accounting principles on the BIZ Balance Sheet;
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(f) BIZ has made available to Litronic copies of all federal and state
income and all state sales and use Tax returns for all periods since BIZ's
inception;
(g) There are (and as of the Closing there will be) no liens, pledges,
security interests or other encumbrances of any sort ("Liens") on the assets of
BIZ for Taxes other than Liens for Taxes not yet due and payable;
(h) To BIZ's knowledge, BIZ has not taken or omitted to take any action
relating or attributable to Taxes that would result in any Lien on the assets of
BIZ or any member of any BIZ Group other than Liens for Taxes not yet due and
payable.
(i) None of the assets of BIZ or any member of any BIZ Group is treated as
"tax-exempt use property" within the meaning of Code Section 168(h);
(j) Neither BIZ nor any member of any BIZ Group has filed any consent
agreement under Code Section 341(f) or agreed to have Code Section 341(f) apply
to any disposition of a "subsection (f) asset" (as defined in Code Section
341(f)(4)) owned by BIZ or any member of any BIZ Group;
(k) Neither BIZ nor any member of any BIZ Group is a party to any material
Tax sharing, allocation, indemnification or similar Tax agreement or
arrangement, nor does BIZ or any member of any BIZ Group owe any amount under
any such agreement or arrangement;
(l) No Return of BIZ or any member of any BIZ Group contains a disclosure
statement under Code Section 6662 (or predecessor provision) or any similar
provision of state, local or foreign law;
(m) Neither BIZ nor any member of any BIZ Group is or has been at any time
a "United States real property holding corporation" within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii);
(n) No material indebtedness of BIZ or any member of any BIZ Group consists
of "corporate acquisition indebtedness" within the meaning of Code Section 279;
(o) Neither BIZ nor any member of any BIZ Group has taken any action not in
accordance with past practice that would have the effect of deferring any
material Tax liability of BIZ or any member of any BIZ Group from any period
ending on before the Closing Date to any taxable period ending after the Closing
Date;
(p) Neither BIZ nor any member of any BIZ Group was acquired in a
"qualified stock purchase" under Code Section 338(d)(3), and no elections under
Code Section 338(g), protective carryover basis elections or offset prohibition
elections are applicable to BIZ or any predecessor corporations; and
(q) The tax bases of the assets of BIZ and of the members of any BIZ Group
for purposes of determining future amortization, depreciation and other federal
income tax deductions are, in all material respects, accurately reflected on the
tax books and
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records of BIZ and of the members of any BIZ Group (which means, for purposes of
this clause (xvii), that any inaccurate reflection of such tax bases would not
result in the loss of a material Tax deduction which is not able to be offset by
a refund resulting from amendment of a prior year's Return).
3.14 INTELLECTUAL PROPERTY.
(a) BIZ and BCP own or have acquired (by license or otherwise) all material
Intellectual Property Rights (as defined below), including rights to make, use
and sell goods and services, as necessary or required for the conduct of their
respective businesses as presently conducted (such Intellectual Property Rights
being referred to as the "BIZ IP Rights"), and these rights are reasonably
sufficient for the conduct of its business;
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any BIZ IP Rights ("BIZ
IP Rights Agreements"), will not cause the forfeiture or termination or give
rise to a right of forfeiture or termination of any BIZ IP Right or materially
impair the right of BIZ or Litronic to use, sell or license any BIZ IP Right or
portion thereof (except where the breach, forfeiture or termination would not
have a Material Adverse Effect on BIZ);
(c) Neither the manufacture, marketing, license, sale or intended use of
any product currently licensed or sold by BIZ or BCP or currently under
development by BIZ or BCP violates any license or agreement between BIZ or BCP
and any third party or, to the knowledge of BIZ, infringes any Intellectual
Property Right of any other party; and there is no pending or, to the knowledge
of BIZ, threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any BIZ IP Right nor, to the knowledge
of BIZ, is there any basis for any claim, nor has BIZ received any written
notice asserting that any BIZ IP Right or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party, nor, to the actual knowledge of BIZ, is there any basis for any
assertion; and
(d) BIZ and BCP have taken reasonable and practicable steps designed to
safeguard and maintain their proprietary rights in all material BIZ IP Rights.
All officers, employees and consultants of BIZ and BCP have executed and
delivered to BIZ an agreement regarding the protection of proprietary
information and the assignment to BIZ of all Intellectual Property Rights
arising from the services performed for BIZ or BCP by those persons. To the
knowledge of BIZ, no current or prior officer, employee or consultant of BIZ or
BCP claims an ownership interest in any BIZ IP Rights as a result of having been
involved in the development of that property while employed by or consulting to
BIZ or BCP, or otherwise.
The term "Intellectual Property Rights" means all worldwide industrial and
intellectual property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark registrations, trademark
registration applications, trade names, service marks, service xxxx
registrations, service xxxx registration applications, copyrights, copyright
registrations, copyright registration applications, franchises, licenses,
inventories, know-how,
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trade secrets, customer lists, proprietary processes and formulae, all source
and object codes, algorithms, architecture, structure, display screens, layouts,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records.
3.15 FEES AND EXPENSES. Neither BIZ nor BCP has paid or become obligated to pay
any fee or commission to any broker, finder or similar intermediary in
connection with the transactions contemplated by this Agreement.
3.16 ENVIRONMENTAL MATTERS.
(a) To BIZ's knowledge, none of the properties or facilities owned or
leased by BIZ or BCP as of the date hereof ("BIZ Facilities") is in violation of
any federal, state or local law, ordinance, regulation, permit or order relating
to industrial health and safety or to the environmental conditions on, under or
about the properties or facilities, (including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.), the
Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. 2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. 651 et
seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C.
11001 et seq.)) (collectively, the "Environmental Laws") except where the
violations would not constitute a Material Adverse Effect. During the time that
BIZ or BCP has owned or leased the BIZ Facilities, neither BIZ nor BCP nor, to
BIZ's knowledge, any third party, has engaged in any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, dumping or disposing ("Release") on,
under or about the BIZ Facilities of any chemicals, materials, substances, or
items in any form, whether solid, liquid, gaseous, semisolid, or any combination
thereof, which because of their physical, chemical, or other characteristics may
pose a risk of endangering human health or safety or of degrading the
environment and are regulated under any Environmental Law ("Hazardous
Materials").
(b) During the time that BIZ or BCP has owned or leased the BIZ Facilities,
there has been no litigation brought or, to the knowledge of BIZ, threatened
against BIZ by, or any settlement reached by BIZ or BCP with, any party or
parties alleging the Release or threatened Release of any Hazardous Materials
on, from or under any of the BIZ Facilities.
3.17 INTERESTED PARTY TRANSACTIONS. No officer or director of BIZ or any
"affiliate" or "associate" (as those terms are defined in Rule 405 promulgated
under the Securities Act) of any such person has had, either directly or
indirectly, a material interest in: (i) any person or entity which purchases
from or sells, licenses or furnishes to BIZ or BCP any material amount of goods,
property, technology or intellectual or other property rights or services; or
(ii) any material contract or agreement to which BIZ or BCP is a party or by
which it may be bound or affected.
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3.18 VOTE REQUIRED. The affirmative vote of a majority of the votes that holders
of the outstanding shares of (i) BIZ Common Stock and (ii) BIZ Preferred Stock,
each voting as a separate class, are entitled to cast are the only votes of the
holders of any class or series of BIZ's capital stock necessary to approve this
Agreement and the Merger.
3.19 DISCLOSURE. No representation or warranty made by BIZ in this Agreement,
nor any schedule, certificate or exhibit prepared and furnished or to be
prepared and furnished by BIZ or its representatives pursuant hereto, when taken
together, contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were made.
3.20 RESTRICTIONS ON BUSINESS ACTIVITIES. Other than this Agreement, there is no
material agreement, judgment, injunction, order or decree binding upon BIZ or
BCP that has or could reasonably be expected to have the effect of prohibiting
or materially impairing any business practice of BIZ or BCP, any acquisition of
property by BIZ or BCP or the conduct of business by BIZ or BCP as currently
conducted.
3.21 ACCOUNTS RECEIVABLE. The accounts receivable shown on the BIZ Balance Sheet
as of the BIZ Balance Sheet Date, or thereafter acquired prior to the date
hereof, have been or are (as the case may be) collectible within 120 days from
the Closing Date (or, if later, when due) in amounts not materially less than
the aggregate amounts thereof carried on the books of BIZ reduced by the
reserves for discounts and bad debts taken on the BIZ Balance Sheet.
3.22 PERSONAL PROPERTY. Other than the BIZ Intellectual Property Rights (which
are the subject of Section 3.14), BIZ and BCP have good title, free and clear of
all title defects, objections and liens, including without limitation, leases,
chattel mortgages, conditional sales contracts, collateral security arrangements
and other title or interest-retaining arrangements (other than liens for taxes
not yet delinquent and liens, objections, encumbrances and title defects which
are not material in character, amount or extent and which do not materially
interfere with the use of the asset subject thereto or affected thereby), to all
of its machinery, equipment, furniture, inventory and other personal property.
All tangible personal property used in and material to the business of BIZ and
BCP is in good operating condition (ordinary wear and tear excepted). All of the
leases to personal property utilized in the business of BIZ and BCP are valid
and enforceable against BIZ or BCP (except as enforceability may be subject to
bankruptcy, insolvency, reorganization or other laws affecting or relating to
enforcement of creditors' rights generally and by general equitable principles,
regardless of whether considered at law or in equity) and neither BIZ nor BCP is
in material default thereunder and, to the knowledge of BIZ, none of the other
parties thereto is in material default thereof, except in each case where the
unenforceability or default would not have a Material Adverse Effect with
respect to BIZ.
3.23 REAL PROPERTY. Neither BIZ nor BCP owns any real property. The BIZ
Disclosure Schedule contains a list of all leases for real property to which BIZ
or BCP is a party, the square footage leased with respect to each lease and the
expiration date of each lease. These leases are valid and enforceable
obligations of BIZ or BCP (except as enforceability may be subject to
bankruptcy, insolvency, reorganization or other laws affecting or relating to
enforcement of
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creditors' rights generally and by general equitable principles, regardless of
whether considered at law or in equity) and neither BIZ or BCP is in material
default of any material provision thereof. To the knowledge of BIZ, the real
property leased or occupied by BIZ or BCP, the improvements located thereon, and
the furniture, fixtures and equipment relating thereto (including plumbing,
heating, air conditioning and electrical systems), conform to any and all
applicable health, fire, safety, zoning, land use and building laws, ordinances
and regulations except where the failure to so conform would not reasonably be
expected to have a Material Adverse Effect on BIZ. There are no outstanding
contracts made by BIZ or BCP for any improvements made to the real property
leased or occupied by BIZ or BCP that have material amounts remaining unpaid
thereunder.
3.24 WARRANTIES. Neither BIZ nor BCP has made any warranties or guarantees
relating to its products other than in the ordinary course of business or as
implied or required by law. The BIZ Disclosure Schedule contains a list of all
warranty and indemnification obligations of BIZ or BCP, other than as implied or
required by law, relating to patents and other proprietary rights.
3.25 CONTRACTS. The BIZ Disclosure Schedule lists all oral or written
agreements, notes, instruments, or contracts to which BIZ or BCP is a party or
by which its assets or properties may be bound, in each case as of the date
hereof, which involve the future payment or receipt of more than $100,000 (on an
annual basis), or which have a term of more than one year, or which involve any
material BIZ IP Rights, or which are employment or consulting agreements ("BIZ
Contracts"). Neither BIZ nor BCP is in default in performance of its obligations
under any material provisions of the BIZ Contracts, except for defaults that
would not have a Material Adverse Effect on BIZ. BIZ has no knowledge of any
material violation of any BIZ Contract by any other party thereto.
3.26 PRODUCTS AND DISTRIBUTION.
(a) The BIZ Disclosure Schedule sets forth, for each BIZ Product (as
defined below), the following: (i) a list of all material contracts and
agreements (including without limitation all material development, trademark
license, technology license, distribution or other agreements) relating to the
BIZ Product (provided, however, that with respect to distribution agreements,
clause (iv) shall apply); (ii) whether the BIZ Product has been developed
internally (i.e., substantially entirely by employees of BIZ or BCP) or
externally (i.e., including substantive contributions by one or more independent
contractors to BIZ or BCP) and, if externally, the BIZ Disclosure Schedule sets
forth the identity of the significant independent contractors and a list of the
material agreements with those independent contractors; (iii) the material
advances paid or payable, and the material royalties payable, to any third
parties with respect to that BIZ Product; and (iv) a copy of BIZ's standard
distribution agreement used with respect to that BIZ Product together with a
description of the territories in which BIZ or BCP have granted distribution
rights with respect to that BIZ Product.
(b) The BIZ Disclosure Schedule sets forth, for each BIZ Product Under
Development, the following (as of the date of this Agreement): (i) the currently
scheduled public availability date without regard to the Merger (which dates BIZ
believes to be reasonable); (ii) a schedule of development milestone events and
any material related
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payments, including both milestones already achieved in the past six months and
those scheduled for the future; and (iii) whether any significant development
milestone for the BIZ Product has been missed in the past six months by more
than 30 days.
(c) For purposes of this Section 3.26, "BIZ Developed Products" means
products developed, sold, published and/or distributed by BIZ or BCP. "BIZ
Products Under Development" means products under development or consideration by
BIZ or BCP with a scheduled ship date on or prior to December 31, 2001. "BIZ
Products" includes both BIZ Developed Products and BIZ Products Under
Development.
4. REPRESENTATIONS AND WARRANTIES OF LITRONIC.
Except as set forth in a schedule dated the date of this Agreement and delivered
by Litronic to BIZ concurrently herewith ("Litronic Disclosure Schedule")
specifically identifying the Section of this Agreement requiring the delivery of
the disclosure, Litronic hereby represents and warrants to BIZ as set forth
below. In this Agreement, any reference to any event, change or effect being
"material" with respect to any entity or group of entities means any material
event, change or effect related to the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations, results of operations
or prospects of such entity or group of entities taken as a whole. In this
Agreement, the term "Material Adverse Effect" used in connection with a party or
any of that party's subsidiaries means any event, change or effect that is,
singly or in the aggregate, materially adverse to the condition (financial or
otherwise), properties, assets, liabilities, businesses, operations, results of
operations or prospects of that party and its subsidiaries, taken as a whole;
provided, however, that a Material Adverse Effect shall not include any adverse
effect resulting from general economic conditions or conditions affecting the
engineering software market. In this Agreement, a "subsidiary" means a
corporation, partnership or other entity in which a party owns directly or
indirectly more than 50% of the voting stock, equity interests or beneficial
interests. In this Agreement, "knowledge" means actual knowledge, and with
respect to any party that is an entity, the entity shall not be deemed to have
knowledge of any particular fact or matter unless any member of the Board of
Directors or any executive officer (within the meaning of Rule 405 under the
Securities Act of 1933, as amended) of the entity has actual knowledge thereof.
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Litronic and each of
its subsidiaries ("Litronic Subsidiaries") is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted, and
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes qualification necessary, other than in jurisdictions where the failure to
so qualify or be in good standing would not have a Material Adverse Effect. The
Litronic Disclosure Schedule sets forth a correct and complete list of the
Litronic Subsidiaries. Litronic has made available to BIZ or its counsel
complete and correct copies of the certificates or articles of incorporation and
bylaws (or similar charter documents) of Litronic and each of the Litronic
Subsidiaries, in each case as amended to the date of this Agreement, and copies
of all minutes of meetings and actions by written consent of stockholders,
directors and board committees of each such entity.
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4.2 CAPITAL STRUCTURE.
4.2.1 STOCK, OPTIONS AND WARRANTS. The authorized capital stock of Litronic
consists of 25,000,000 shares of Common Stock, $0.01 par value ("Litronic Common
Stock"), and 5,000,000 shares of Preferred Stock, $0.01 par value ("Litronic
Preferred Stock"). At the close of business on July 2, 2001, 9,747,526 shares of
Litronic Common Stock were issued and outstanding, and 548,142 shares of
Litronic Common Stock were reserved for issuance upon the exercise of
outstanding options ("Litronic Options") and outstanding warrants ("Litronic
Warrants") to purchase Litronic Common Stock and 954,858 shares of Litronic
Common Stock were reserved for future option grants. No shares of Litronic
Preferred Stock are issued or outstanding. All outstanding shares of Litronic
Common Stock are validly issued, fully paid and nonassessable and not subject to
preemptive rights and were not issued in violation of any preemptive rights.
Litronic has made available to BIZ true and correct copies of its 1998 and 1999
Stock Option Plans (each a "Litronic Plan" and collectively, the "Litronic
Plans"), and the Litronic Disclosure Schedule contains a correct and complete
list of each Litronic Option and Litronic Warrant outstanding as of the date
hereof, including the name of the holder of each Litronic Option or Litronic
Warrant, the Litronic Plan (if any) pursuant to which the Litronic Option or
Litronic Warrant was issued, the security and number of shares covered by each
Litronic Option or Litronic Warrant, the per share exercise price of the
Litronic Option or Litronic Warrant and the vesting schedule applicable to each
Litronic Option or Litronic Warrant. Litronic Disclosure Schedules list all
option agreements that contain accelerated vesting upon change of control
provisions along with the material terms of such option agreements.
4.2.2 NO OTHER COMMITMENTS. Except for the Litronic Options and Litronic
Warrants disclosed in or pursuant to Section 4.2.1, there are no options,
warrants, calls, rights, commitments, conversion rights, exchange rights or
agreements of any character to which Litronic or any of the Litronic
Subsidiaries is a party or by which Litronic or any of the Litronic Subsidiaries
is bound obligating Litronic or any of the Litronic Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, any shares of capital
stock of Litronic or any of the Litronic Subsidiaries or securities convertible
into or exchangeable for shares of capital stock of Litronic or any of the
Litronic Subsidiaries, or obligating Litronic or any of the Litronic
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, commitment, conversion right or agreement. There are no voting trusts or
other agreements or understandings to which Litronic or any of the Litronic
Subsidiaries is a party with respect to the voting of the capital stock of
Litronic or any of the Litronic Subsidiaries. There are no put agreements or
registration rights agreements, or any other agreements of any character or
nature to which Litronic is a party or by which Litronic is bound, obligating
Litronic to purchase or register, or cause to be purchased or registered, any
shares of capital stock of Litronic or securities convertible into or
exchangeable for shares of capital stock of Litronic.
4.3 AUTHORITY.
4.3.1 CORPORATE ACTION. Litronic has all requisite corporate power and authority
to enter into this Agreement and, subject to approval of this Agreement, the
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Merger Agreement and the Merger by the stockholders of Litronic, to perform its
obligations hereunder and to consummate the Merger and the other transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
Litronic and, subject to approval of this Agreement, the Merger Agreement and
the Merger by the stockholders of Litronic, the consummation by Litronic and
Litronic Merger Corp. of the Merger and the other transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Litronic and Litronic Merger Corp., including any necessary approval by
Litronic as the stockholder of Litronic Merger Corp. This Agreement has been
duly executed and delivered by Litronic and is the valid and binding obligation
of Litronic, enforceable in accordance with its terms, except that
enforceability may be subject to (i) bankruptcy, insolvency, reorganization or
other laws affecting or relating to enforcement of creditors' rights generally
and (ii) general equitable principles regardless of whether considered at law or
in equity.
4.3.2 NO CONFLICT. Neither the execution, delivery and performance of this
Agreement or the Merger Agreement, nor the consummation of the transactions
contemplated hereby or thereby nor compliance with the provisions hereof or
thereof will: (i) conflict with, or result in any violations of, or cause a
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, amendment, cancellation or acceleration of any
obligation contained in, or the loss of any material benefit under, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the material properties or assets of Litronic or any of the Litronic
Subsidiaries under, any term, condition or provision of (x) the certificate or
articles of incorporation or bylaws (or similar charter documents) of Litronic
or any of the Litronic Subsidiaries or (y) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other material agreement, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Litronic or
any of the Litronic Subsidiaries or their respective properties or assets, other
than any such conflicts, violations, defaults, losses, liens, security
interests, charges or encumbrances which, individually or in the aggregate,
would not have a Material Adverse Effect; or (ii) require the affirmative vote
of the holders of greater than a majority of the issued and outstanding shares
of Litronic Common Stock.
4.3.3 CONSENTS.
(a) No Governmental Consent is required to be obtained by Litronic or any
of the Litronic Subsidiaries in connection with the execution and delivery of
this Agreement or the Merger Agreement or the consummation of the transactions
contemplated hereby or thereby, except for: (i) the filing with the SEC of the
Proxy Statement relating to the meeting of the stockholders of Litronic
("Litronic Stockholders Meeting") to be held with respect to the approval by
Litronic's stockholders of this Agreement, the Merger and the issuance of shares
of Litronic Common Stock pursuant to the Merger, and such reports and
information under the Exchange Act and the rules and regulations promulgated by
the SEC thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby; (ii) the filing of the Merger Agreement with
the Secretary of State of Delaware and appropriate documents with the relevant
authorities of
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other states in which Litronic is qualified to do business; (iii) such filings,
authorizations, orders and approvals as may be required under State Takeover
Laws; (iv) such filings, authorizations, orders and approvals as may be required
under foreign laws, state securities laws and the Bylaws of the National
Association of Securities Dealers, Inc. ("NASD"); and (v) where the failure to
obtain or make such Governmental Consents would not prevent or materially delay
the consummation of the Merger or otherwise prevent Litronic from performing its
obligations under this Agreement and would not reasonably be expected to have a
Material Adverse Effect on Litronic and the Litronic Subsidiaries taken as a
whole. (b) No other consent is required to be obtained by Litronic or any of the
Litronic Subsidiaries in connection with the execution and delivery of this
Agreement or the Merger Agreement or the consummation of the transactions
contemplated hereby or thereby.
4.4 SEC DOCUMENTS.
4.4.1 SEC REPORTS. Litronic has made available to BIZ or its counsel correct and
complete copies of each report, schedule, registration statement and definitive
proxy statement filed by Litronic with the SEC on or after June 11, 1999
("Litronic SEC Documents"), which are all the documents (other than preliminary
material) that Litronic was required to file with the SEC on or after that date.
In addition, Litronic has made available to BIZ all exhibits to the Litronic SEC
Documents filed prior to the date hereof which are (i) requested by BIZ and (ii)
are not available in complete form through XXXXX ("Requested Confidential
Exhibits") and will promptly make available to BIZ all Requested Confidential
Exhibits to any additional Litronic SEC Documents filed prior to the Effective
Time. As of their respective dates or, in the case of registration statements,
their effective dates (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing), none of the Litronic SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and the Litronic SEC Documents
complied when filed in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder. Litronic has filed
all documents and agreements that were required to be filed as exhibits to the
Litronic SEC Documents and all material contracts so filed (and those to be
filed with any Litronic SEC Documents) as exhibits are in full force and effect
except those which have expired in accordance with their terms, and neither
Litronic nor any of the Litronic Subsidiaries is in default thereunder. The
Litronic Disclosure Schedule lists such material contracts required to be filed
with the SEC that have not yet been filed with any Litronic SEC Documents.
4.4.2 FINANCIAL STATEMENTS. The financial statements of Litronic included in the
Litronic SEC Documents (including, in each case, any related notes) complied as
to form in all material respects with the then applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in
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accordance with GAAP applied on a consistent basis during the periods involved
(except as may have been indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q) and fairly present the
consolidated financial position of Litronic and the Litronic Subsidiaries as at
the respective dates thereof and the results of the operations and cash flows of
Litronic and the Litronic Subsidiaries for the respective periods then ended.
4.4.3 CERTAIN LIABILITIES. The consolidated balance sheet of Litronic as of
December 31, 2000 is referred to herein as the "Litronic Balance Sheet." At the
date of the Litronic Balance Sheet ("Litronic Balance Sheet Date"), Litronic had
no liabilities or obligations, secured or unsecured (whether accrued or
absolute) and of a nature required to be reflected in the liabilities column of
a balance sheet prepared in accordance with GAAP, not reflected on the Litronic
Balance Sheet or the accompanying notes thereto.
4.4.4 ABSENCE OF CERTAIN CHANGES. Since the Litronic Balance Sheet Date, there
has not occurred:
(a) a Material Adverse Effect with respect to Litronic and the Litronic
Subsidiaries, taken as a whole;
(b) any amendments or changes in Litronic's certificate of incorporation or
bylaws;
(c) any damage to, destruction of or loss of any assets of Litronic
(whether or not covered by insurance) that resulted or would reasonably be
expected to result in a Material Adverse Effect on Litronic;
(d) any agreement or arrangement made by Litronic to take any action which,
if taken prior to the date hereof, would have made any representation or
warranty set forth in this Agreement untrue or incorrect unless otherwise
disclosed;
(e) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
capital stock of Litronic or any of the Litronic Subsidiaries;
(f) any acquisition or sale of a material amount of property or assets
other than in the ordinary course of business consistent with past practices;
(g) any (A) incurrence, assumption or guarantee by Litronic of any debt for
borrowed money other than pursuant to credit lines or loan agreements disclosed
in the Litronic Disclosure Schedule, Litronic's Form 10-K filed on April 19,
2001, Form 10-K/A No. 1 filed on April 30, 2001 or Form 10-Q filed on May 15,
2001; (B) issuance or sale of any securities convertible into or exchangeable
for debt securities of Litronic; or (C) issuance or sale of options or other
rights to acquire from Litronic, directly or indirectly, debt securities of
Litronic or any securities convertible into or exchangeable for any such debt
securities;
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(h) any creation or assumption by Litronic of any mortgage, pledge,
security interest or line or other encumbrance on any material asset (other than
liens for taxes not yet delinquent and liens and encumbrances which are not
material in character, amount or extent and which do not materially interfere
with the use of the asset subject thereto or affected thereby);
(i) any entering into, amendment of, relinquishment, termination or
non-renewal by Litronic or any of the Litronic Subsidiaries of any material
contract, lease commitment or other material right or obligation other than in
the ordinary course of business;
(j) any material change in accounting methods, principles or practices by
Litronic.
(k) any redemption, repurchase or other acquisition of shares of capital
stock of Litronic or any of the Litronic Subsidiaries (other than pursuant to
arrangements with terminated employees or consultants), or any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any capital stock of Litronic or any of the
Litronic Subsidiaries;
(l) any material increase in or modification of the compensation or
benefits payable or to become payable by Litronic or any of the Litronic
Subsidiaries to any of its directors or employees, except in the ordinary course
of business consistent with past practice;
(m) any material increase in or modification of any bonus, pension,
insurance or any of the Litronic Employee Plans or Litronic Benefit Arrangements
(including, but not limited to, the granting of stock options, restricted stock
awards or stock appreciation rights) made to, for or with any of its employees,
other than in the ordinary course of business consistent with past practice;
(n) any alteration in any term of any outstanding security of Litronic or
any of the Litronic Subsidiaries other than as required under the terms thereof;
(o) any making of any loan, advance or capital contribution to or
investment in any person other than (i) travel loans or advances made in the
ordinary course of business, (ii) other loans and advances in an aggregate
amount which does not exceed $25,000 outstanding at any time and (iii) purchases
on the open market of liquid, publicly traded securities;
(p) any transfer or grant of a right under Litronic's Intellectual Property
Rights (as defined in Section 3.14), other than in the ordinary course of
business; or
(q) any material labor dispute or written charge of unfair labor practice
(other than routine individual grievances), or, to the knowledge of Litronic,
any material activity or proceeding by a labor union or representative thereof
to organize any employees of Litronic or any of the Litronic Subsidiaries.
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4.5 INFORMATION SUPPLIED. None of the information supplied or to be supplied by
Litronic in writing for inclusion or incorporation by reference in the Proxy
Statement will, at the date the Proxy Statement is mailed to the stockholders of
Litronic, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder.
4.6 LITIGATION. There is no suit, action, arbitration, demand, claim or
proceeding pending or, to the knowledge of Litronic, threatened against Litronic
or any of the Litronic Subsidiaries in connection with or relating to the
transactions contemplated by this Agreement or of any action taken or to be
taken in connection herewith or the consummation of the transactions
contemplated hereby. There is no suit, action, arbitration, demand, claim or
proceeding pending or, to the best knowledge of Litronic, threatened against
Litronic or any of the Litronic Subsidiaries, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Litronic or any of the Litronic Subsidiaries that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect
with respect to Litronic.
4.7 FEES AND EXPENSES. Neither Litronic nor any Litronic Subsidiary has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
4.8 INTERESTED PARTY TRANSACTIONS. Except as disclosed under Item 12 of
Litronic's most recent Form 10-K or under the "Certain Transactions" section of
the Proxy Statement, no officer or director of Litronic or any "affiliate" or
"associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of any such person has had, either directly or indirectly, a
material interest in: (i) any person or entity which purchases from or sells,
licenses or furnishes to Litronic or any of the Litronic Subsidiaries any
material amount of goods, property, technology or intellectual or other property
rights or services; or (ii) any material contract or agreement to which Litronic
or any of the Litronic Subsidiaries is a party or by which it may be bound or
affected.
4.9 BOARD APPROVAL. The Board of Directors of Litronic has, on or prior to the
date hereof, unanimously (i) approved this Agreement, the Merger Agreement and
the Merger, (ii) determined that the Merger is in the best interests of the
stockholders of Litronic and are on terms that are fair to the stockholders and
(iii) recommended that the stockholders of Litronic approve this Agreement and
the Merger.
4.10 VOTE REQUIRED. The affirmative vote of a majority of the votes that holders
of the outstanding shares of Litronic Common Stock are entitled to cast is the
only vote of the holders of any class or series of Litronic capital stock
necessary to approve this Agreement and the Merger.
4.11 DISCLOSURE. No representation or warranty made by Litronic in this
Agreement, nor any schedule, certificate or exhibits prepared and furnished or
to be prepared and furnished
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by Litronic or its representatives pursuant hereto or in connection with the
transactions contemplated hereby, when taken together, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in light
of the circumstances under which they were furnished.
4.12 FAIRNESS OPINION. Litronic's Board of Directors has received a written
opinion from L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, LLC that as of July 2,
2001, the consideration to be paid by Litronic in the Merger is fair to Litronic
and its stockholders from a financial point of view.
4.13 SHARES OF LITRONIC COMMON STOCK. The shares of Litronic Common Stock to be
issued pursuant to the Merger will, when issued and delivered pursuant to the
Merger, and the shares of Litronic Common Stock to be issued pursuant to the
Assumed Options will, when issued and delivered to the holders thereof on
payment of the consideration provided for therein, be validly issued, fully paid
and non-assessable.
4.14 COMPLIANCE WITH APPLICABLE LAWS. The businesses of Litronic and the
Litronic Subsidiaries are not being conducted in violation of any law,
ordinance, regulation, rule, permit or order of any Governmental Entity where
the violation would have a Material Adverse Effect on Litronic. Litronic has not
been notified by any Governmental Entity that any investigation or review with
respect to Litronic or any of the Litronic Subsidiaries is pending or
threatened, nor has any Governmental Entity notified Litronic of its intention
to conduct an investigation or review. Litronic and the Litronic Subsidiaries
have all permits, licenses and franchises from Governmental Entities required to
conduct their businesses as now being conducted, except for those whose absence
would not have a Material Adverse Effect with respect to Litronic.
4.15 INTELLECTUAL PROPERTY.
(a) Litronic and the Litronic Subsidiaries own or have acquired (by license
or otherwise) all material Intellectual Property Rights (as defined in Section
3.14), including rights to make, use and sell goods and services, as necessary
or required for the conduct of their respective businesses as presently
conducted (such Intellectual Property Rights being referred to as the "Litronic
IP Rights"), and these rights are reasonably sufficient for the conduct of their
respective businesses.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any Litronic IP Rights,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any Litronic IP Right or materially impair the
right of Litronic to use, sell or license any Litronic IP Right or portion
thereof (except where the breach, forfeiture or termination would not have a
Material Adverse Effect on Litronic).
(c) Neither the manufacture, marketing, license, sale or intended use of
any product currently licensed or sold by Litronic or any of the Litronic
Subsidiaries or currently under development by Litronic or any of the Litronic
Subsidiaries violates any license or agreement between Litronic or any of the
Litronic Subsidiaries and any third
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party or, to the knowledge of Litronic, infringes any Intellectual Property
Right of any other party; and there is no pending or, to the knowledge of
Litronic, threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any Litronic IP Right nor, to the
knowledge of Litronic, is there any basis for any claim, nor has Litronic
received any written notice asserting that any Litronic IP Right or the proposed
use, sale, license or disposition thereof conflicts or will conflict with the
rights of any other party, nor, to the actual knowledge of Litronic, is there
any basis for any assertion.
(d) Litronic and any of the Litronic Subsidiaries have taken reasonable and
practicable steps designed to safeguard and maintain their proprietary rights in
all material Litronic IP Rights. All officers, employees and consultants of
Litronic and any of the Litronic Subsidiaries have executed and delivered to
Litronic an agreement regarding the protection of proprietary information and
the assignment to Litronic of all Intellectual Property Rights arising from the
services performed for Litronic or any of the Litronic Subsidiaries by those
persons. To the knowledge of Litronic, no current or prior officer, employee or
consultant of Litronic or any of the Litronic Subsidiaries claims an ownership
interest in any Litronic IP Rights as a result of having been involved in the
development of that property while employed by or consulting to Litronic or any
of the Litronic Subsidiaries, or otherwise.
4.16 TAXES.
(a) As of the Closing, Litronic and each consolidated, combined or unitary
group of which Litronic is a member ("Litronic Group") will have prepared and
filed all required of Litronic or any Litronic Group that it was required to
file, and each such Litronic or Litronic Group's Return was true, correct, and
complete in all material respects;
(b) As of the Closing, Litronic and any Litronic Group: (A) will have paid
or accrued in accordance with generally accepted accounting principles all
material Taxes concerning or attributable to Litronic and any Litronic Group
relating to periods ending on or before the month-end prior to the Closing
regardless of whether reflected on Litronic or Litronic Group's Returns and (B)
will have withheld with respect to their employees all federal and state income
taxes, FICA, FUTA and other Taxes which, to Litronic's knowledge, were required
to be withheld;
(c) Neither Litronic nor any member of any Litronic Group has any material
Tax deficiency outstanding, proposed in writing or as to which any director of
officer has actual knowledge or assessed, nor has Litronic or any member of any
Litronic Group executed any waiver of the statute of limitations on or extending
the period for the assessment or collection of any Taxes;
(d) No audit or other examination of any Return of Litronic or any member
of any Litronic Group is presently in progress, nor, to Litronic's knowledge,
has Litronic or any member of any Litronic Group been notified of any request
for an audit or examination;
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(e) As of December 31, 2000, neither Litronic nor any member of any
Litronic Group has any material liabilities for unpaid federal, state, local and
foreign Taxes which have not been accrued or reserved in accordance with
generally accepted accounting principles on the Litronic Balance Sheet;
(f) Litronic has made available to BIZ copies of all federal and state
income and all state sales and use Tax returns for all periods since January 1,
1997;
(g) There are (and as of the Closing there will be) no Liens on the assets
of Litronic or any member of any Litronic Group for Taxes other than Liens for
Taxes not yet due and payable;
(h) To Litronic's knowledge, Litronic has not taken or omitted to take any
action relating or attributable to Taxes which would result in any Lien on the
assets of Litronic or any member of any Litronic Group other than Liens for
Taxes not yet due and payable.
(i) None of the assets of Litronic or any member of any Litronic Group is
treated as "tax-exempt use property" within the meaning of Code Section 168(h);
(j) Neither Litronic nor any member of any Litronic Group has filed any
consent agreement under Code Section 341(f) or agreed to have Code Section
341(f) apply to any disposition of a "subsection (f) asset" (as defined in Code
Section 341(f)(4)) owned by Litronic or any member of any Litronic Group;
(k) Neither Litronic nor any member of any Litronic Group is a party to any
material tax sharing, allocation, indemnification or similar agreement or
arrangement, nor does Litronic or any member of any Litronic Group owe any
amount under any such agreement or arrangement;
(l) No Return of Litronic or any member of any Litronic Group contains a
disclosure statement under Code Section 6662 (or predecessor provision) or any
similar provision of state, local or foreign law;
(m) Neither Litronic nor any member of any Litronic Group is or has been at
any time a "United States real property holding corporation" within the meaning
of Code Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii);
(n) No material indebtedness of Litronic or any member of any Litronic
Group consists of "corporate acquisition indebtedness" within the meaning of
Code Section 279;
(o) Neither Litronic nor any member of any Litronic Group has taken any
action not in accordance with past practice that would have the effect of
deferring any material Tax liability of Litronic or any member of any Litronic
Group from any period ending on before the Closing Date to any taxable period
ending after the Closing Date;
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(p) Neither Litronic nor any member of any Litronic Group was acquired in a
"qualified stock purchase" under Code Section 338(d)(3), and no elections under
Code Section 338(g), protective carryover basis elections or offset prohibition
elections are applicable to Litronic or any member of any Litronic Group or any
predecessor corporations of any of them; and
(q) The tax bases of the assets of Litronic and of the members of any
Litronic Group for purposes of determining future amortization, depreciation
and other federal income tax deductions are, in all material respects,
accurately reflected on the tax books and records of Litronic and of the
members of any Litronic Group (which shall mean, for purposes of this clause
(xvii), that any inaccurate reflection of such tax bases would not result in
the loss of a material Tax deduction which is not able to be offset by a
refund resulting from amendment of a prior year's Return).
4.17 NO INVESTMENT COMPANY. Neither Litronic nor Litronic Merger Corp. is an
"investment company" as defined in Section 368(a)(2)(F)(iii) and (iv) of the
Code.
4.18 ERISA AND OTHER COMPLIANCE.
(a) Litronic has made available to BIZ copies of (i) each "employee benefit
plan," as defined in Section 3(3) of ERISA, and (ii) all other written or formal
plans or agreements involving direct or indirect compensation or benefits
(including any employment agreements entered into between Litronic or any of the
Litronic Subsidiaries and any employee of Litronic or any of the Litronic
Subsidiaries, but excluding workers' compensation, unemployment compensation and
other government-mandated programs) currently or previously maintained,
contributed to or entered into by Litronic or any of the Litronic Subsidiaries
under which Litronic or any of the Litronic Subsidiaries or an ERISA Affiliate
thereof has any present or future obligation or liability (collectively,
"Litronic Employee Plans"). Copies of all Litronic Employee Plans (and, if
applicable, related trust agreements) and all amendments thereto and written
interpretations thereof (including summary plan descriptions) have been made
available to BIZ or its counsel, together with the three most recent annual
reports (Form 5500, including, if applicable, Schedule B thereto) prepared in
connection with any Litronic Employee Plan. Copies of all Litronic Employee
Plans which individually or collectively would constitute an "employee pension
benefit plan," as defined in Section 3(2) of ERISA (collectively, "Litronic
Pension Plans"), have been made available to BIZ. All contributions due from
Litronic or any of the Litronic Subsidiaries through the date hereof with
respect to any of the Litronic Employee Plans have been made as required under
ERISA or have been accrued on Litronic's financial statements as of December 31,
2000. Each of the Litronic Employee Plans has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including, without limitation, ERISA and the Code, which
are applicable to the Litronic Employee Plans except for noncompliance which
would not have a Material Adverse Effect on Litronic.
(b) None of the Litronic Pension Plans constitutes, or has since the
enactment of ERISA constituted, a "multiemployer plan," as defined in Section
3(37) of XXXXX. Xx
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Xxxxxxxx Xxxxxxx Plans are subject to Title IV of ERISA. No "prohibited
transaction," as defined in Section 406 of ERISA or Section 4975 of the Code,
has occurred with respect to any of the Litronic Employee Plans that is covered
by Title I of ERISA which would result in a material liability to Litronic,
excluding transactions effected pursuant to a statutory or administrative
exemption. Nothing done or omitted to be done and no transaction or holding of
any asset under or in connection with any of the Litronic Employee Plans has or
will make Litronic or any officer or director of Litronic or any of the Litronic
Subsidiaries subject to any material liability under Title I of ERISA or liable
for any material tax or penalty pursuant to Sections 4972, 4975, 4976 or 4979 of
the Code or Section 502 of ERISA.
(c) Any of the Litronic Pension Plans that is intended to be qualified
under Section 401(a) of the Code (a "Litronic 401(a) Plan") is so qualified and
has been so qualified during the period from its adoption to date, and the trust
forming a part thereof is exempt from tax pursuant to Section 501(a) of the
Code.
(d) Litronic has made available to BIZ a list of each employment, severance
or other similar contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, severance benefits,
disability benefits, death benefits, hospitalization benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits for
employees, consultants or directors which (i) is not one of the Litronic
Employee Plans, (ii) is entered into, maintained or contributed to, as the case
may be, by Litronic or any of the Litronic Subsidiaries and (iii) covers any
employee or former employee of Litronic or any of the Litronic Subsidiaries. The
contracts, plans and arrangements described in this paragraph 4.18(d) are
referred to collectively as the "Litronic Benefit Arrangements." Each of the
Litronic Benefit Arrangements has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to Litronic Benefit Arrangements.
Litronic has made available to Litronic or its counsel a complete and correct
copy or description of each of the Litronic Benefit Arrangements.
(e) There has been no amendment to, written interpretation or announcement
(whether or not written) by Litronic or any of the Litronic Subsidiaries
relating to, or change in employee participation or coverage under, any of the
Litronic Employee Plans or Litronic Benefit Arrangements that would increase
materially the expense of maintaining the Litronic Employee Plans or Litronic
Benefit Arrangements above the level of the expense incurred in respect thereof
for the fiscal year ended December 31, 2000.
(f) Litronic has provided, or will have provided prior to the Closing, to
individuals entitled thereto all required notices and coverage pursuant to
Section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), with respect to any "qualifying event" (as
defined in Section 4980B(f)(3) of the Code) occurring prior to and including the
Closing Date, and no
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material tax payable on account of Section 4980B of the Code has been incurred
with respect to any current or former employees (or their beneficiaries) of
Litronic or any of the Litronic Subsidiaries.
(g) No benefit or compensation payable or which may become payable by
Litronic or any of the Litronic Subsidiaries pursuant to any of the Litronic
Employee Plans or any Litronic Benefit Arrangements or as a result of or arising
under this Agreement shall (i) constitute an "excess parachute payment" (as
defined in Section 280G(b)(1) of the Code) which is subject to the imposition of
an excise tax under Section 4999 of the Code or which would not be deductible by
reason of Section 280G of the Code or (ii) be nondeductible by reason of Section
162(m) of the Code.
(h) Litronic and each Litronic Subsidiary is in compliance in all material
respects with all applicable laws, agreements and contracts relating to
employment, employment practices, wages, hours, and terms and conditions of
employment, including, but not limited to, employee compensation matters, but
not including ERISA.
(i) Neither Litronic nor any Litronic Subsidiary has any knowledge of any
facts indicating that the consummation of the transactions contemplated hereby
will have a Material Adverse Effect on labor relations, and, except for
reductions in force specifically contemplated by Litronic in connection with the
Merger, has no knowledge that any of its key employees intends to leave its or
their employ.
4.19 ENVIRONMENTAL MATTERS.
(a) To Litronic's knowledge, none of the properties or facilities owned or
leased by Litronic or the Litronic Subsidiaries as of the date hereof ("Litronic
Facilities") is in violation of any Environmental Laws except where the
violations would not constitute a Material Adverse Effect. During the time that
Litronic or the Litronic Subsidiaries have owned or leased the Litronic
Facilities, neither Litronic nor any of the Litronic Subsidiaries nor, to
Litronic's knowledge, any third party, has engaged in any Release on, under or
about the Litronic Facilities of any Hazardous Materials.
(b) During the time that Litronic or the Litronic Subsidiaries have owned
or leased the Litronic Facilities, there has been no litigation brought or, to
the knowledge of Litronic, threatened against Litronic or any of the Litronic
Subsidiaries by, or any settlement reached by Litronic or any of the Litronic
Subsidiaries with, any party or parties alleging the Release or threatened
Release of any Hazardous Materials on, from or under any of the Litronic
Facilities.
4.20 DIRECTORS AND OFFICERS LIABILITY INSURANCE. Litronic currently maintains
the directors and officers liability insurance that Litronic believes to be
sufficient on the date hereof. Such director and officers liability insurance is
described on the Litronic Disclosure Schedule.
4.21 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material agreement,
judgment, injunction, order or decree binding upon Litronic or any of the
Litronic Subsidiaries that has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Litronic
or any of the Litronic Subsidiaries, any acquisition of property by
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Litronic or any of the Litronic Subsidiaries or the conduct of business by
Litronic or any of the Litronic Subsidiaries as currently conducted.
4.22 WARRANTIES. Neither Litronic nor any of the Litronic Subsidiaries have made
any warranties or guarantees relating to its products other than in the ordinary
course of business or as implied or required by law. The Litronic Disclosure
Schedule contains a list of all warranty and indemnification obligations of
Litronic or any of the Litronic Subsidiaries, other than as implied or required
by law, relating to patents and other proprietary rights.
4.23 PRODUCTS AND DISTRIBUTION.
(a) The Litronic Disclosure Schedule sets forth, for each Litronic Product
(as defined below), the following: (i) a list of all material contracts and
agreements (including without limitation all material development, trademark
license, technology license, distribution or other agreements) relating to the
Litronic Product (provided, however, that with respect to distribution
agreements, clause (iv) shall apply); (ii) whether the Litronic Product has been
developed internally (i.e., substantially entirely by employees of Litronic or
any of the Litronic Subsidiaries) or externally (i.e., including substantive
contributions by one or more independent contractors to Litronic or any of the
Litronic Subsidiaries) and, if externally, the Litronic Disclosure Schedule sets
forth the identity of the significant independent contractors and a list of the
material agreements with those independent contractors; (iii) the material
advances paid or payable, and the material royalties payable, to any third
parties with respect to that Litronic Product; and (iv) a copy of Litronic's
standard distribution agreement used with respect to that Litronic Product
together with a description of the territories in which Litronic or any of the
Litronic Subsidiaries have granted distribution rights with respect to that
Litronic Product.
(b) The Litronic Disclosure Schedule sets forth, for each Litronic Product
Under Development, the following (as of the date of this Agreement): (i) the
currently scheduled public availability date without regard to the Merger (which
dates Litronic believes to be reasonable); (ii) a schedule of development
milestone events and any material related payments, including both milestones
already achieved in the past six months and those scheduled for the future; and
(iii) whether any significant development milestone for the Litronic Product has
been missed in the past six months by more than 30 days.
(c) For purposes of this Section 4.23, "Litronic Developed Products" means
products developed, sold, published and/or distributed by Litronic or any
Litronic Subsidiaries. "Litronic Products Under Development" means products
under development or consideration by Litronic or any Litronic Subsidiaries with
a scheduled ship date on or prior to December 31, 2001. "Litronic Products"
includes both Litronic Developed Products and Litronic Products Under
Development.
4.24 ACCOUNTS RECEIVABLE. The accounts receivable shown on the Litronic Balance
Sheet as of the Litronic Balance Sheet Date, or thereafter acquired prior to the
date hereof, have been or are (as the case may be) collectible within 120 days
from the Closing Date (or, if later,
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when due) in amounts not materially less than the aggregate amounts thereof
carried on the books of Litronic reduced by the reserves for discounts and bad
debts taken on the Litronic Balance Sheet.
4.25 PERSONAL PROPERTY. Other than the Litronic IP Rights (which are the subject
of Section 4.15), Litronic and each of the Litronic Subsidiaries has good title,
free and clear of all title defects, objections and liens, including without
limitation, leases, chattel mortgages, conditional sales contracts, collateral
security arrangements and other title or interest-retaining arrangements (other
than liens for taxes not yet delinquent and liens, objections, encumbrances and
title defects which are not material in character, amount or extent and which do
not materially interfere with the use of the asset subject thereto or affected
thereby), to all of its machinery, equipment, furniture, inventory and other
personal property. All tangible personal property used in and material to the
business of Litronic and any of the Litronic Subsidiaries is in good operating
condition (ordinary wear and tear excepted). All of the leases to personal
property utilized in the business of Litronic and each of the Litronic
Subsidiaries are valid and enforceable against Litronic or the particular
Litronic Subsidiary (except as enforceability may be subject to bankruptcy,
insolvency, reorganization or other laws affecting or relating to enforcement of
creditors' rights generally and by general equitable principles, regardless of
whether considered at law or in equity) and neither Litronic nor any of the
Litronic Subsidiaries is in material default thereunder, except in each case
where the unenforceability or default would not have a Material Adverse Effect
with respect to Litronic and, to the knowledge of Litronic, none of the other
parties thereto is in material default thereof.
4.26 REAL PROPERTY. Neither Litronic nor any of the Litronic Subsidiaries owns
any real property. The Litronic Disclosure Schedule contains a list of all
leases for real property to which Litronic or any of the Litronic Subsidiaries
is a party, the square footage leased with respect to each lease and the
expiration date of each lease. These leases are valid and enforceable
obligations of Litronic or the particular Litronic Subsidiary (except as
enforceability may be subject to bankruptcy, insolvency, reorganization or other
laws affecting or relating to enforcement of creditors' rights generally and by
general equitable principles, regardless of whether considered at law or in
equity) and neither Litronic or any of the Litronic Subsidiaries is in material
default of any material provision thereof. To the knowledge of Litronic, the
real property leased or occupied by Litronic or any of the Litronic
Subsidiaries, the improvements located thereon, and the furniture, fixtures and
equipment relating thereto (including plumbing, heating, air conditioning and
electrical systems), conform to any and all applicable health, fire, safety,
zoning, land use and building laws, ordinances and regulations except where the
failure to so conform would not reasonably be expected to have a Material
Adverse Effect on Litronic. There are no outstanding contracts made by Litronic
or any of the Litronic Subsidiaries for any improvements made to the real
property leased or occupied by Litronic or any of the Litronic Subsidiaries that
have material amounts remaining unpaid thereunder.
4.27 INSURANCE. Litronic maintains and at all times since its inception has
maintained fire and casualty and general liability insurance that Litronic
believes or believed at that time to be reasonably prudent for the business of
Litronic and the Litronic Subsidiaries as conducted at that time. The Litronic
Disclosure Schedule contains a complete and correct list and summary description
of all insurance policies maintained by Litronic. Litronic has delivered or made
available to BIZ complete and correct certificates of insurance setting forth
the summary terms
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of the insurance policies. These policies are in full force and effect in all
material respects, and all premiums due thereon have been paid, except for such
failure of payment that would not have a Material Adverse Effect on Litronic.
Litronic has complied in all material respects with the terms and provisions of
the policies. The Litronic Disclosure Schedule summarizes all material claims
made by Litronic under any policy of insurance since Litronic's inception.
5. BIZ COVENANTS.
BIZ further covenants and agrees as follows:
5.1 NOTIFICATION OF CHANGES. During the period from the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, BIZ will promptly notify Litronic in writing (a) of
any event occurring subsequent to the date of this Agreement that would render
any representation or warranty of BIZ contained in this Agreement, if made on or
as of the date of the event or the Closing Date, untrue or inaccurate in any
material respect, (b) of any Material Adverse Effect with respect to BIZ or BCP
and (c) of any breach by BIZ of any covenant or agreement contained in this
Agreement, and in each case listed in clauses (a), (b) and (c) of this Section
5.1, such inaccuracy, breach or Material Adverse Effect would result in either
the condition set forth in Section 10.1 or the condition set forth in Section
10.2 not being satisfied at the Closing. BIZ shall deliver to Litronic as soon
as practicable after the end of each monthly accounting period ending after the
date of this Agreement and before the earlier of the Closing Date or the
termination of this Agreement in accordance with its terms, an unaudited
consolidated balance sheet, statement of operations and statement of cash flows
for BIZ, which financial statements shall be prepared in the ordinary course of
business, in accordance with BIZ's books and records and GAAP and shall fairly
present the consolidated financial position of BIZ as of their respective dates
and the results of BIZ's operations for the periods then ended.
5.2 MAINTENANCE OF BUSINESS. During the period from the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, BIZ will use commercially reasonable efforts to carry
on and preserve its business and its relationships with customers, suppliers,
employees and others in substantially the same manner as it has prior to the
date hereof. If BIZ becomes aware of any material deterioration in its
relationship with any material customer, material supplier or key employee, it
will promptly bring that information to the attention of Litronic.
5.3 CONDUCT OF BUSINESS. During the period from the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, BIZ will continue to conduct its business and
maintain its business relationships in the ordinary and usual course and will
not, and will not permit BCP to, without the prior written consent of Litronic,
except with respect to a repurchase of Series A Preferred Stock from the holder
thereof:
(a) borrow any money except for amounts that would not, in the aggregate,
have a Material Adverse Effect on the financial condition of BIZ;
(b) enter into any material transaction not in the ordinary course of its
business;
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(c) encumber or permit to be encumbered any of its assets except in the
ordinary course of its business;
(d) dispose of any of its assets except in the ordinary course of
business consistent with past practice;
(e) enter into any material lease or contract for the purchase or sale or
license of any property, real or personal, except in the ordinary course of
business;
(f) fail to maintain its equipment and other assets in good working
condition and repair in all material respects to the standards it has maintained
to the date of this Agreement, subject only to ordinary wear and tear;
(g) pay (or make any oral or written commitments or representations to pay)
any bonus, increased salary or special remuneration to any officer, employee or
consultant (except for normal salary increases consistent with past practice not
to exceed 10% per year) or enter into or vary the terms of any employment,
consulting or severance agreement with any person, pay any severance or
termination pay (other than payments made in accordance with plans or agreements
existing on the date hereof), grant any stock option or issue any restricted
stock, or enter into or modify any agreement or plan of the type described in
Section 3.9, provided that BIZ shall be entitled to pay annual bonuses or to
make changes to compensation (i) in the ordinary course of business consistent
with past practice or (ii) with prior written notice to Litronic if the changes
are required, in the good faith judgment of BIZ and after consultation with
Litronic, to retain its key employees following the Closing;
(h) change accounting methods (except as disclosed in the financial
statements listed in Section 3.4);
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire any of
its capital stock (other than pursuant to arrangements with terminated employees
or consultants in the ordinary course of business consistent with BIZ's past
practice);
(j) amend or terminate any material contract, agreement or license to which
it is a party and except those amended or terminated in the ordinary course of
its business, or which are not material in amount or effect;
(k) lend any amount to any person or entity, other than (i) advances for
travel and expenses which are incurred in the ordinary course of business
consistent with past practice, not material in amount and documented by receipts
for the claimed amounts, or (ii) any loans pursuant to any BIZ 401(a) Plan;
(l) guarantee or act as a surety for any obligation, except for obligations
in amounts that are not material;
(m) waive or release any material right or material claim except for the
waiver or release of non-material claims in the ordinary course of business,
consistent with past
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practice or the waiver or release of rights or claims set forth in the BIZ
Disclosure Schedule;
(n) issue or sell any shares of its capital stock of any class (except upon
the exercise of options or convertible securities currently outstanding or
permitted to be granted or sold in accordance with this Section), or any other
of its securities, or issue or create any warrants, obligations, subscriptions,
options, convertible securities or other commitments to issue shares of capital
stock, or accelerate the vesting of any outstanding option or other security
(except as required pursuant to the terms thereof);
(o) split or combine the outstanding shares of its capital stock of any
class or enter into any recapitalization or agreement affecting the number or
rights of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(p) merge, consolidate or reorganize with, or acquire any entity;
(q) amend its certificate of incorporation or bylaws;
(r) license any BIZ IP Rights except in the ordinary course of business
consistent with past practice;
(s) agree to any audit assessment by any tax authority;
(t) change materially any insurance coverage; or
(u) agree to do, or enter into negotiations with respect to, any of the
things described in the preceding clauses in this Section 5.3.
5.4 STOCKHOLDER APPROVAL. BIZ shall obtain BIZ Stockholders' approval of this
Agreement, the Merger Agreement, the Merger and related matters by written
consent of the BIZ Stockholders in accordance with applicable law. Approval will
be recommended by BIZ's Board of Directors and management, and such
recommendation will not be withdrawn or modified adversely. BIZ shall take all
lawful action to solicit such approval of its stockholders and shall use its
best efforts to obtain the approval of its stockholders.
5.5 PROXY STATEMENT. BIZ will promptly provide all information relating to its
business or operations necessary for inclusion in the Proxy Statement to satisfy
all requirements of applicable laws. BIZ shall be solely responsible for any
statement, information or omission in the Proxy Statement relating to it or its
affiliates based upon written information furnished by it. BIZ will not provide
or publish to its stockholders any material concerning it or its affiliates that
constitutes a prospectus within the meaning of the Securities Act.
5.6 REGULATORY APPROVALS. BIZ will promptly execute and file, or join in the
execution and filing of, any application or other document that may be necessary
in order to obtain the authorization, approval or consent of any governmental
body, federal, state, local or foreign, which may be required, or which Litronic
may reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. BIZ will use its best efforts to obtain promptly
all such authorizations, approvals and consents.
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5.7 NECESSARY CONSENTS. During the term of this Agreement, BIZ will use its best
efforts to obtain such written consents and take such other actions as may be
necessary or appropriate in addition to those set forth in Section 5.6 to allow
the consummation of the transactions contemplated hereby.
5.8 ACCESS TO INFORMATION. BIZ will allow Litronic and its agents reasonable
access to the files, books, records and offices of BIZ and BCP, including,
without limitation, any and all information relating to BIZ's taxes,
commitments, contracts, leases, licenses and real, personal and intangible
property and financial condition. BIZ will cause its accountants to cooperate
with Litronic and its agents in making available to Litronic all financial
information reasonably requested, including, without limitation, the right to
examine all working papers pertaining to all tax returns and financial
statements prepared or audited by the accountants.
5.9 SATISFACTION OF CONDITIONS PRECEDENT. During the term of this Agreement, BIZ
will use its best efforts to satisfy or cause to be satisfied all the conditions
precedent that are set forth in Sections 10 and 11, and BIZ will use its best
efforts to cause the Merger and the other transactions contemplated by this
Agreement to be consummated.
5.10 CONFIDENTIALITY. All information concerning Litronic or the Litronic
Subsidiaries received by BIZ (other than that information which is a matter of
public knowledge or which has been published for public distribution or filed as
public information with any governmental authority) shall not at any time,
except in connection with this Agreement and the transactions contemplated
hereby, be used for BIZ's advantage or disclosed by BIZ to any third person
without the prior written consent of Litronic. BIZ may disclose that information
on a confidential basis to its affiliates, employees, officers, agents,
auditors, investment bankers, consultants, counsel, directors, present and
prospective lenders, and state and federal regulatory agencies and, to the
extent provided elsewhere in this Agreement, may disclose such information in
press releases and like disclosures, filings with the SEC or other governmental
or self-regulatory agencies or as otherwise required by law. This covenant shall
expire at the Effective Time; provided, however, that if the Closing does not
occur, it shall expire three years after the date of this Agreement.
6. LITRONIC COVENANTS.
Litronic further covenants and agrees as follows:
6.1 STOCKHOLDER APPROVAL. Litronic will call the Litronic Stockholders Meeting
to be held within 45 days after either (a) having been informed by the SEC that
all comments on the Proxy Statement have been satisfactorily resolved or (b) the
time for SEC comments on the Proxy Statement has expired, to submit this
Agreement, the Merger and related matters for the consideration and approval of
the stockholders of Litronic. Litronic's Board of Directors and management will
recommend such approval, such recommendation will be included in the Proxy
Statement and will not be withdrawn or modified adversely, Litronic shall take
all lawful action to solicit such approval, and Litronic shall use its best
efforts to obtain such approval of its stockholders. The meeting will be called,
held and conducted, and any proxies will be solicited, in compliance with
applicable law.
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6.2 PROXY STATEMENT. Litronic will prepare and file with the SEC, will use its
best efforts to have cleared by the SEC, and will thereafter mail to its
stockholders as promptly as practicable, for the purpose of considering and
voting upon the Merger at the Litronic Stockholders Meeting, the Proxy
Statement. Litronic will promptly provide all information relating to its
business or operations necessary for inclusion in the Proxy Statement to satisfy
all requirements of applicable laws. Litronic shall be solely responsible for
any statement, information or omission in the Proxy Statement relating to it or
its affiliates other than information furnished by BIZ and BIZ's affiliates.
Litronic will not provide or publish to its stockholders any material concerning
it or its affiliates that violate the Exchange Act with respect to the
transactions contemplated hereby. Litronic shall provide BIZ a copy of the Proxy
Statement for review prior to filing the Proxy Statement with the SEC and shall
notify BIZ of its intention to mail the Proxy Statement at least five (5) days
prior to the mailing of the Proxy Statement.
6.3 REGULATORY APPROVALS. Litronic will promptly execute and file or cause to be
filed, or join in the execution and filing of, any application or other document
that may be necessary in order to obtain the authorization, approval or consent
of any governmental body, (federal, state, local or foreign) which may be
required, or which BIZ may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. Litronic will
use its best efforts to obtain promptly all such authorizations, approvals and
consents. Without limiting the generality of the foregoing, Litronic shall take
such steps as may be necessary to comply with the securities and "Blue Sky" laws
of all jurisdictions which are applicable to the issuance of shares of Litronic
Common Stock in the Merger and pursuant to Assumed Options and Assumed Warrants
as provided herein.
6.4 NECESSARY CONSENTS. During the term of this Agreement, Litronic will use its
best efforts to obtain such written consents and take such other actions as may
be necessary or appropriate in addition to those set forth in Section 6.3 to
allow the consummation of the transactions contemplated hereby.
6.5 SATISFACTION OF CONDITIONS PRECEDENT. During the term of this Agreement,
Litronic will use its best efforts to satisfy or cause to be satisfied all the
conditions precedent that are set forth in Sections 9 and 11, and Litronic will
use its best efforts to cause the Merger and the other transactions contemplated
by this Agreement to be consummated.
6.6 CONFIDENTIALITY. All information concerning BIZ or BCP received by Litronic
(other than that information which is a matter of public knowledge or which has
been published for public distribution or filed as public information with any
governmental authority) shall not at any time, except in connection with this
Agreement and the transactions contemplated hereby, be used for Litronic's
advantage or disclosed by Litronic to any third person without the prior written
consent of BIZ. Litronic may disclose that information on a confidential basis
to its affiliates, employees, officers, agents, auditors, investment bankers,
consultants, counsel, directors, present and prospective lenders, and state and
federal regulatory agencies and, to the extent provided elsewhere in this
Agreement, may disclose such information in press releases and like disclosures,
filings with the SEC or other governmental or self-regulatory agencies or as
otherwise required by law. This covenant shall expire at the Effective Time;
provided, however, that if the Closing does not occur, it shall expire three
years after the date of this Agreement.
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6.7 ACCESS TO INFORMATION. Litronic will allow BIZ and its agents reasonable
access to the files, books, records and offices of Litronic and each Litronic
Subsidiary, including, without limitation, any and all information relating to
Litronic's taxes, commitments, contracts, leases, licenses and real, personal
and intangible property and financial condition. Litronic will cause its
accountants to cooperate with BIZ and its agents in making available to BIZ all
financial information reasonably requested, including, without limitation, the
right to examine all working papers pertaining to all tax returns and financial
statements prepared or audited by the accountants.
6.8 NOTIFICATION OF CHANGES. During the period from the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Litronic will promptly notify BIZ in writing (a) of
any event occurring subsequent to the date of this Agreement that would render
any representation or warranty of Litronic contained in this Agreement, if made
on or as of the date of the event or the Closing Date, untrue or inaccurate in
any material respect, (b) of any Material Adverse Effect with respect to
Litronic or the Litronic Subsidiaries and (c) of any breach by Litronic of any
covenant or agreement contained in this Agreement, and in each case listed in
clauses (a), (b) and (c) of this Section 6.8, such inaccuracy, breach or
Material Adverse Effect would result in either the condition set forth in
Section 9.1 or the condition set forth in Section 9.2 not being satisfied at the
Closing. Litronic shall deliver to BIZ as soon as practicable after the end of
each monthly accounting period ending after the date of this Agreement and
before the earlier of the Closing Date or the termination of this Agreement in
accordance with its terms, an unaudited consolidated balance sheet, statement of
operations and statement of cash flows for Litronic, which financial statements
shall be prepared in the ordinary course of business, in accordance with
Litronic's books and records and GAAP and shall fairly present the consolidated
financial position of Litronic as of their respective dates and the results of
Litronic's operations for the periods then ended.
6.9 MAINTENANCE OF BUSINESS. During the period from the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Litronic will use its commercially reasonable efforts
to carry on and preserve its business and relationships with customers,
supplies, employees and others in substantially the same manner as it has prior
to the date hereof. If Litronic becomes aware of any material deterioration in
its relationship with any material customer, material supplier or key employee,
it will promptly bring that information to the attention of BIZ.
6.10 CURRENT NASDAQ QUOTATION. Litronic shall use its best efforts to continue
the quotation of Litronic Common Stock on the Nasdaq National Market through and
including the Effective Time and to take all actions necessary to provide for
the listing on the Nasdaq National Market, at or prior to the Closing, of the
shares of Litronic Common Stock issuable pursuant to the Merger and upon
exercise of all Assumed Options and Assumed Warrants.
6.11 OTHER COVENANTS. During the period from the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Litronic will continue to conduct its business and
maintain its business relationships in the ordinary and usual course, and will
not, and will not permit any of the Litronic Subsidiaries to,
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without the prior written consent of BIZ, except with the respect to a
disposition of its Pulsar Data Systems, Inc. subsidiary:
(a) borrow any money except for amounts that would not, in the aggregate,
have a Material Adverse Effect on the financial condition of Litronic;
(b) enter into any material transactions not in the ordinary course of
business;
(c) dispose of any of its assets (including without limitation by way of
spin-off or other distribution) except in the ordinary course of business
consistent with past practice;
(d) encumber or permit to be encumbered any of its assets except in the
ordinary course of its business;
(e) enter into any material lease or contract for the purchase or sale or
license of any property, real or personal, except in the ordinary course of
business;
(f) fail to maintain its equipment and other assets in good working
condition and repair in all material respects to the standards it has maintained
to the date of this Agreement, subject only to ordinary wear and tear;
(g) pay (or make any oral or written commitments or representations to pay)
any bonus, increased salary or special remuneration to any officer, employee or
consultant (except for normal salary increases consistent with past practice not
to exceed 10% per year) or enter into or vary the terms of any employment,
consulting or severance agreement with any person, pay any severance or
termination pay (other than payments made in accordance with plans or agreements
existing on the date hereof, grant any stock option or issue any restricted
stock, or enter into or modify any agreement or plan of the type described in
Section 4.18, provided that Litronic shall be entitled to pay annual bonuses or
to make changes to compensation (i) in the ordinary course of business
consistent with past practice or (ii) with prior written notice to BIZ if the
changes are required, in the good faith judgment of Litronic and after
consultation with BIZ, to retain its key employees following the Closing;
(h) change accounting methods (except as disclosed in the financial
statements listed in Section 4.4);
(i) amend or terminate any material contract, agreement or license to which
it is a party and except those amended or terminated in the ordinary course of
its business, or which are not material in amount or effect;
(j) lend any amount to any person or entity, other than (i) advances for
travel and expenses which are incurred in the ordinary course of business
consistent with past practices, not material in amount and documented by receipt
for the claimed amounts, or (ii) any loan pursuant to any Litronic 401(a) Plan;
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(k) guarantee or act as surety for any obligation, except for obligations
in amounts that are not material;
(l) waive or release any material right or material claim except for the
waiver or release of non-material claims in the ordinary course of business
consistent with past practice or the waiver or release of rights or claims set
forth in the Litronic Disclosure Schedule;
(m) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire any of
its capital stock (other than pursuant to arrangements with terminated employees
or consultants in the ordinary course of business consistent with Litronic's
past practice);
(n) issue or sell any shares of its capital stock of any class (except upon
the exercise of options currently outstanding), or any other of its securities,
or issue or create any warrants, obligations, subscriptions, options,
convertible securities or other commitments to issue shares of capital stock, or
accelerate the vesting of any outstanding option, warrant or other security;
(o) split or combine the outstanding shares of its capital stock of any
class or enter into any recapitalization or agreement affecting the number or
rights of outstanding shares of its capital stock, of any class or affecting any
other of its securities;
(p) merge, consolidate or reorganize with, or acquire any entity;
(q) amend its certificate of incorporation (or, in the case of
subsidiaries, articles of incorporation or similar charter documents) or bylaws;
(r) license any Litronic IP Rights except in the ordinary course of
business consistent with past practice;
(s) agree to any audit assessment by any tax authority;
(t) change materially any insurance coverage; or
(u) agree to do, or enter into negotiations with respect to, any of the
things described in the preceding clauses in this Section 6.11.
6.12 RESERVATION OF SHARES. Litronic shall reserve for issuance the maximum
number of shares of Litronic Common Stock issuable upon exercise of all Assumed
Options and Assumed Warrants.
7. ADDITIONAL AGREEMENTS.
7.1 EMPLOYEE MATTERS. Promptly following the Merger, employees of BIZ, at the
option of Litronic, will either (i) become eligible to Litronic's standard
employee benefit plans on an equivalent basis with other similarly situated
employees of Litronic and will receive full credit pursuant to those plans for
years of service at BIZ; or (ii) participate in such employee
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benefit plans to be established or maintained by BIZ and/or Litronic for the
benefit of BIZ employees, with full credit pursuant to such plan for years of
service at BIZ, or (iii) any combination of options (i) and (ii). Litronic
agrees to recognize all vacation time accrued through the Effective Time under
BIZ's vacation policy as of the Effective Time.
7.2 APPOINTMENT OF OFFICERS. Litronic's Board of Directors shall appoint Xxxxxx
Xxxxxxx as Co-Chairman and Chief Executive Officer, Xxx Xxxxxx as President of
the Global Marketing division, Xxxxxx Xxxxxx as Executive Vice President and
Chief Financial Officer and Xxxx Xxxx as Co-Chairman and President of the
Software and Embedded Systems division of Litronic, effective as of the
Effective Time. It is anticipated that within ten days after the Effective Time,
these individuals (other than Xxxx Xxxx) will file with the SEC and Nasdaq
Initial Statements of Beneficial Ownership on Form 3.
7.3 VOTING AGREEMENT. Simultaneously with the execution of this Agreement, Xxxx
Xxxx and certain of his affiliates and family members, Xxxxxx Xxxxxxx and
certain of his affiliates, and Wave Systems Corp. shall execute a Voting
Agreement in the form of Exhibit 7.3.
7.4 INDEMNIFICATION OF OFFICERS, DIRECTORS, ETC.
(a) From and after the Effective Time, Litronic shall, to the fullest
extent permitted under applicable law, indemnify and hold harmless, each present
and former director and officer of BIZ ("Indemnified Executives") against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to the transactions contemplated by this Agreement or any other matter arising
out of or attributable to the Indemnified Executive's status as a director,
officer, employee or agent of BIZ or BCP, whether or not the matter was existing
prior to the Effective Time. In the event of any claim, action, suit, proceeding
or investigation as to which this paragraph 7.4(a) applies (whether arising
before or after the Effective Time), (i) any counsel retained by the Indemnified
Executives to defend them with respect to any such claim, action, suit,
proceeding or investigation for any period after the Effective Time shall be
reasonably satisfactory to Litronic, (ii) after the Effective Time, Litronic
shall pay the reasonable fees and expenses of that counsel, promptly after
statements therefor are received and (iii) Litronic will cooperate in the
defense of any such matter; provided, however, that Litronic shall not be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld). The Indemnified Executives as a group may retain only
one law firm to represent them with respect to any single action unless there
is, under applicable standards of professional conduct, a conflict or potential
conflict between the positions of any two or more Indemnified Executives.
(b) For a period of three (3) years after the Effective Time, Litronic
shall maintain in effect directors and officers liability insurance covering the
executive officers and directors of BIZ on the date hereof on terms at least as
favorable as those currently applicable to the current directors and officers of
Litronic.
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(c) Without limiting any other obligation herein, after the Effective Time,
Litronic will fulfill and honor (and will cause Surviving Corporation to fulfill
and honor) in all respects the obligations of BIZ pursuant to indemnification
agreements with, and indemnification provisions (including provisions relating
to advancement of expenses) of the certificate of incorporation and bylaws of
BIZ with respect to, BIZ's officers, directors and key employees as those
agreements and provisions are in existence at the Effective Time.
(d) If Litronic or any of its successors or assigns (i) consolidates
with or merges into any other corporation or entity and is not the continuing
or surviving corporation or entity of the consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of Litronic shall
assume all of the obligations set forth in this Section 7.4. Litronic shall
bear and pay, and shall reimburse the Indemnified Executives for, all costs
and expenses, including attorneys' fees, that may be incurred by the
Indemnified Executives in seeking to enforce their rights against Litronic
and the Surviving Corporation under this Section 7.4. The provisions of this
Section 7.4 are intended to be for the benefit or, and shall be enforceable
by, each of the Indemnified Executives, their heirs and their
representatives, and shall survive the Effective Time.
7.5 TAX MATTERS. Litronic and BIZ will deliver tax representation letters
substantially in the form of Exhibit 7.5 dated as of the Closing Date, to each
other. Neither Litronic, BIZ, BCP nor any direct or indirect Litronic Subsidiary
shall take any action or agree to take any action that would jeopardize the
treatment of the Merger as a reorganization within the meaning of Section 368(a)
of the Code. Litronic shall cause BIZ to, and BIZ shall, continue the
significant historic business line of BIZ, or use at least a significant portion
of the historic business assets of BIZ in a business, in each case within the
meaning of Treasury Regulations Section 1.368-1(d).
7.6 NO ADDITIONAL ISSUANCES. Between the date hereof and the Closing, neither
Litronic nor BIZ shall issue any common stock (except in connection with the
exercise of options or warrants outstanding on the date hereof), preferred
stock, options, warrants, convertible debt or other securities without the prior
written consent of the other.
7.7 REPORTS UNDER 1934 ACT. With a view to making available to the stockholders
of BIZ who acquire shares of Litronic Common Stock in the Merger ("Holders") the
benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
Litronic to the public without registration, Litronic agrees to use its best
efforts to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144:
(b) File with the SEC in a timely manner all reports and other documents
required of Litronic under the Securities Act and the 1934 Act; and
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(c) Furnish to any Holder so long as such Holder owns any of the shares of
Litronic Common Stock it received in the Merger upon request (i) a written
statement by Litronic that it has complied with the reporting requirements of
Rule 144 and of the Securities Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of Litronic, and (iii) such other reports and
documents so filed by Litronic as may be reasonably requested in availing any
Holder or any rule or regulation of the SEC permitting the selling of any such
securities without registration.
7.8 NON-SOLICITATION.
(a) Neither BIZ nor Litronic will, nor will it authorize or permit any
officer, director, employee, consultant or contractor of or any investment
banker, attorney, accountant or other advisor or representative of, either party
to, directly or indirectly, (i) solicit, initiate or encourage the submission of
any Acquisition Proposal (as hereinafter defined) or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
in respect of, or take any other action to facilitate, any Acquisition Proposal
or any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal. Notwithstanding the
foregoing, in the event that either BIZ or Litronic, as the case may be,
receives an unsolicited Acquisition Proposal, it shall be entitled to negotiate
with the third party making such proposal and to provide information to such
third party if the Board of Directors' of either BIZ or Litronic, as the case
may be, fiduciary duty to its respective stockholders requires that either BIZ
or Litronic, as the case may be, conduct such negotiations and provide such
material in order to make its recommendation to its respective stockholders
regarding the approval or disapproval of the Merger. Each BIZ or Litronic, as
the case may be, shall notify the other party of any Acquisition Proposal
(including the material terms and conditions thereof and the identity of the
person making it) as promptly as practicable after its receipt thereof, and
shall provide the other party with a copy of any written Acquisition Proposal or
amendments or supplements thereto, and shall thereafter inform the other party
on a prompt basis of the status of any discussions or negotiations with such a
third party, and any material changes to the terms and conditions of such
Acquisition Proposal, and shall promptly give the other party a copy of any
information delivered to such person which has not previously been reviewed by
the other party. Immediately after the execution and delivery of this Agreement,
each of BIZ and Litronic will, and will use its reasonable best efforts to cause
its affiliates, and their respective officers, directors, employees,
consultants, contractors, investment bankers, attorneys, accountants and other
agents and representatives to, cease and terminate any existing activities,
discussions or negotiations with any parties conducted heretofore in respect of
any possible Acquisition Proposal. Each of BIZ and Litronic shall take all
necessary steps to promptly inform the individuals or entities referred to in
the first sentence of this Section 7.8 of the obligations undertaken in this
Section 7.8. "Acquisition Proposal" means an inquiry, offer or proposal
regarding any of the following (other than the transactions contemplated by this
Agreement) involving either BIZ or Litronic, as the case may be: (v) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (w) any sale of shares of capital stock of either BIZ or
Litronic, as the case may be, (x) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of all or substantially all the
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assets of either BIZ or Litronic, as the case may be, in a single transaction or
series of related transactions; (y) any tender offer or exchange offer for 20%
or more of the outstanding capital stock of or the filing of a registration
statement under the Securities Act in connection therewith; or (z) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
(b) Each of BIZ's and Litronic's Board of Directors will not withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the other
party, its approval or recommendation of this Agreement or the Merger unless
either BIZ's or Litronic's Board of Directors, as applicable, after consultation
with independent legal counsel, determines in good faith that such action is
necessary to avoid a breach by either BIZ's or Litronic's Board of Directors, as
the case may be, of its fiduciary duties to its respective stockholders under
applicable law. Nothing contained in this Section 7.8(b) shall prohibit either
BIZ or Litronic, as the case may be, from making any disclosure to its
stockholders which, in the good faith reasonable judgment of either BIZ's and
Litronic's Board of Directors, as the case may be; after consultation with
independent legal counsel, is required under applicable law; provided that
except as otherwise permitted in this Section 7.8(b), each of BIZ and Litronic
may not withdraw or modify, or propose to withdraw or modify, its position with
respect to the Merger or approve or recommend, or propose to approve or
recommend, an Acquisition Proposal. Notwithstanding anything contained in this
Agreement to the contrary, any action by each of BIZ's and Litronic's Board of
Directors permitted by, and taken into accordance with, this Section 7.8(b)
shall not constitute a breach of this Agreement by either BIZ or Litronic, as
the case may be. Nothing in this Section 7.8(b) shall (i) permit either BIZ or
Litronic, as the case may be, to terminate this Agreement (except as provided in
Section 12) or (ii) affect any other obligations of either BIZ or Litronic, as
the case may be, under this Agreement.
8. CLOSING.
Subject to the termination of this Agreement as provided in Section 12, the
Closing of the transactions contemplated by this Agreement will take place at
the offices of R&T, 000 Xxxxx Xxxx., Xxxxx 0000, Xxxxx Xxxx, Xxxxxxxxxx 00000 on
the Closing Date, unless another place, time and date is selected by BIZ and
Litronic. Concurrently with the Closing, the Merger Agreement will be filed in
the Office of the Secretary of State of the State of Delaware.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BIZ.
The obligations of BIZ hereunder are subject to the fulfillment or satisfaction
on or before the Closing of each of the following conditions (any one or more of
which may be waived by BIZ, but only in a writing signed by BIZ):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Litronic set forth in Section 4 (as qualified by the Litronic
Disclosure Schedule, as updated) shall be true and accurate in all material
respects on and as of the Closing Date (except for changes contemplated by this
Agreement and except for representations which address matters only as of a
specific date (which shall be true as of that specific date)) with the same
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force and effect as if they had been made at the Closing except to the extent
the failure of the representations and warranties to be true and accurate in
such respects has not had and could not reasonably be expected to have a
Material Adverse Effect on Litronic, and BIZ shall have received a certificate
to that effect executed by Litronic's Chief Executive Officer and Chief
Financial Officer.
9.2 COVENANTS. Litronic shall have performed and complied in all material
respects with all of its covenants required to be performed by it under this
Agreement and the Merger Agreement on or before the Closing, and BIZ shall have
received a certificate to that effect signed by Litronic's Chief Executive
Officer and Chief Financial Officer.
9.3 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have been any material
adverse change in the condition (financial or otherwise), properties, assets,
liabilities, businesses, operations, results of operations or prospects of
Litronic and the Litronic Subsidiaries, taken as a whole, other than any change
that shall result from general economic conditions, or conditions generally
affecting the engineering software market, and BIZ shall have received a
certificate to that effect executed by Litronic's Chief Executive Officer and
Chief Financial Officer.
9.4 COMPLIANCE WITH LAW. There shall be no order, decree or ruling of any
governmental agency or written threat thereof, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Merger, which
would prohibit or render illegal the transactions contemplated by this
Agreement.
9.5 CORPORATE OPINION. BIZ shall have received the opinion of R&T, based upon
reasonably requested certifications as to factual matters and dated the Closing
Date, regarding the status, authority and capitalization of Litronic, the
authorization of this Agreement and the transactions contemplated hereby by
Litronic, and the binding effect of this Agreement on Litronic. The opinion
shall be substantially similar to the opinion rendered by GCW&F with respect to
BIZ as to the foregoing. Such opinion shall also confirm the validity of the
shares issuable in the Merger and upon exercise of the Assumed Options and
Assumed Warrants and shall be reasonably satisfactory to GCW&F.
9.6 CONSENTS. BIZ shall have been furnished with evidence satisfactory to it
that Litronic has obtained the Governmental Consents and other third party
consents set forth in the Litronic Disclosure Schedule pursuant to
Section 4.3.3.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF LITRONIC.
The obligations of Litronic hereunder are subject to the fulfillment or
satisfaction on or before the Closing, of each of the following conditions (any
one or more of which may be waived by Litronic, but only in a writing signed by
Litronic).
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of BIZ set forth in Section 3 (as qualified by the BIZ Disclosure
Schedule, as updated) shall be true and accurate in all material respects on and
as of the Closing Date (except for changes contemplated by this Agreement and
except for representations which address matters only as of a specific date
(which shall be true as of that specific date)) with the same force and effect
as if they had been made at the Closing except to the extent the failure of the
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representations and warranties to be true and accurate in such respects has not
had and could not reasonably be expected to have a Material Adverse Effect on
BIZ, and Litronic shall receive a certificate to that effect executed by BIZ's
Chief Executive Officer and Chief Financial Officer.
10.2 COVENANTS. BIZ shall have performed and complied in all material respects
with all of its covenants required to be performed by it under this Agreement
and the Merger Agreement on or before the Closing, and Litronic shall receive a
certificate to that effect signed by BIZ's Chief Executive Officer and Chief
Financial Officer.
10.3 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have been any material
adverse change in the condition (financial or otherwise), properties, assets,
liabilities, businesses, operations, results of operations or prospects of BIZ,
other than any change that shall result from general economic conditions, or
conditions generally affecting the engineering software market, and Litronic
shall receive a certificate to that effect executed by BIZ's Chief Executive
Officer and Chief Financial Officer.
10.4 COMPLIANCE WITH LAW. There shall be no order, decree or ruling by any
governmental agency or written threat thereof, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Merger, which
would prohibit or render illegal the transactions contemplated by this
Agreement.
10.5 CONSENTS. Litronic shall have been furnished with evidence satisfactory to
it that BIZ has obtained the Governmental Consents and other third party
consents set forth in the BIZ Disclosure Schedule pursuant to Section 3.3.3.
10.6 CORPORATE OPINION. Litronic shall have received the opinion of GCW&F based
upon reasonably requested certifications as to factual matters and dated the
Closing Date regarding the status and authority of BIZ, the authorization of
this Agreement and the transactions contemplated hereby by BIZ, and the binding
effect of this Agreement on BIZ. The opinion shall be reasonably satisfactory to
R&T, and shall be substantially similar to the opinion rendered by R&T with
respect to Litronic.
10.7 FAIRNESS OPINION. Litronic shall have received a "bring down" of the
fairness opinion addressed to its Board of Directors referred to in Section
4.12, making that opinion effective as of the Closing Date.
10.8 TERMINATION OF STOCKHOLDERS AGREEMENT. The Amended and Restated
Stockholders Agreement dated as of December 6, 2000 among BIZ and certain of its
stockholders shall have terminated and ceased to be of any further force and
effect.
10.9 REPURCHASE OF SERIES A SHARES. BIZ shall have completed the repurchase of
all outstanding shares of BIZ Series A Preferred (it being understood that BIZ's
promissory note in the principal amount of $500,000, representing a portion of
the repurchase price, may still be outstanding on the Closing Date).
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11. CONDITIONS PRECEDENT TO OBLIGATIONS OF LITRONIC AND BIZ.
The respective obligations of Litronic and BIZ hereunder are subject to the
fulfillment or satisfaction on or before the Closing, of each of the following
conditions (any one or more of which may be waived by Litronic or BIZ, but only
in a writing signed by Litronic or BIZ).
11.1 GOVERNMENT CONSENTS. There shall have been obtained on or before the
Closing such consents, material permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to requirements, if any, under
applicable federal and state securities laws and any third party.
11.2 INVESTMENT REPRESENTATION STATEMENT. Litronic shall have received from each
holder of BIZ Stock an Investment Representation Statement in the form of
Exhibit 11.2.
11.3 STOCKHOLDER APPROVALS. The principal terms of this Agreement and of the
Merger shall have been approved by the stockholders of Litronic and of BIZ,
respectively, in accordance with applicable law and their respective
certificates of incorporation and bylaws.
11.4 NO LEGAL ACTION. No temporary restraining order, preliminary injunction or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any Federal or state court and remain in effect, nor
shall any proceeding initiated by the U.S. Government seeking any of the
foregoing be pending.
11.5 DISSENTING SHARES. Holders of shares representing more than 5% of the
issued and outstanding shares of capital stock of BIZ shall not have exercised,
nor shall they have any continued right to exercise, dissenters', appraisal or
similar rights under applicable law with respect to their shares of BIZ Stock by
virtue of the Merger.
11.6 NASDAQ LISTING AND TRADING SYMBOL. The shares of Litronic Common Stock
issuable to stockholders of BIZ pursuant to this Agreement and such other shares
required hereunder to be reserved for issuance in connection with the Merger
(including without limitation the maximum number of shares of Litronic Common
Stock issuable pursuant to all Assumed Options and Assumed Warrants) shall have
been authorized for listing on the Nasdaq National Market upon official notice
of issuance, and Litronic's Nasdaq trading symbol shall have been changed to
"SSPX."
11.7 ELECTION OF LITRONIC DIRECTORS. There shall have been elected at the
Litronic Stockholders Meeting, in accordance with the Voting Agreement, three
directors nominated by Xxxxxx Xxxxxxx, three directors nominated by Xxxx Xxxx,
and one director nominated jointly by Xxxxxx Xxxxxxx and Xxxx Xxxx, and the
Litronic Board of Directors shall consist of seven directors.
12. TERMINATION OF AGREEMENT.
12.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger by the
stockholders of Litronic and of BIZ, respectively:
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(a) by written agreement of BIZ and Litronic;
(b) by BIZ, if there has been a breach by Litronic of any of its
representations, warranties, covenants or agreements set forth in this Agreement
and as a result of such breach the conditions set forth in Section 9.1 or 9.2
would not be satisfied as of the time of such breach; provided that if such
breach is curable by Litronic through the exercise of reasonable efforts within
45 days after the time of such breach or the time such representation shall have
become inaccurate, then BIZ may not terminate this Agreement under this
paragraph during such 45-day period so long as Litronic continues to exercise
such reasonable efforts (except that no cure period shall be provided for a
breach by Litronic which by its nature cannot be cured);
(c) by Litronic, if there has been a breach by BIZ of any of its
representations, warranties, covenants or agreements set forth in this Agreement
and as a result of such breach the conditions set forth in Section 10.1 or 10.2
would not be satisfied as of the time of such breach; provided that if such
breach is curable by BIZ through the exercise of reasonable efforts within 45
days after the time of such breach or the time such representation shall have
become inaccurate, then Litronic may not terminate this Agreement under this
paragraph during such 45-day period so long as BIZ continues to exercise such
reasonable efforts (except that no cure period shall be provided for a breach by
BIZ which by its nature cannot be cured); or
(d) by BIZ or Litronic, if:
(i) the required vote of the stockholders of BIZ or of Litronic in
favor of the Merger has not been obtained;
(ii) if the Merger has not occurred on or before August 31, 2001 (or
such later date as all parties hereto may agree in writing) other than as a
result of a breach of this Agreement by the party seeking to terminate this
Agreement under this paragraph; or
(iii) if a permanent injunction or other order by any federal or state
court which would make illegal or otherwise restrain or prohibit the
consummation of the Merger has been issued and has become final and
nonappealable.
12.2 DUE DILIGENCE INVESTIGATIONS.
(a) In recognition of the fact that BIZ as of the date hereof has not
completed its due diligence review of Litronic and the Litronic Subsidiaries, in
addition to the other termination rights set forth in this Section 12, BIZ shall
have the right, at any time after the date of this Agreement through and
including the date which is the day before the mailing of the Proxy Statement,
to terminate this Agreement if BIZ identifies any circumstance which, in the
reasonable business judgment of the Board of Directors (including any committee
thereof) of BIZ, acting in good faith and with due regard for principles of fair
dealing, could materially and adversely impact the reasonably expected financial
or business benefits to BIZ of the transactions contemplated by this Agreement
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or otherwise constitute a breach of their fiduciary duty if BIZ were to
consummate the Merger under the terms set forth in this Agreement.
(b) In recognition of the fact that Litronic as of the date hereof has
not completed its due diligence review of BIZ and BCP, in addition to the
other termination rights set forth in this Section 12, Litronic shall have
the right, at any time after the date of this Agreement through and including
the date which is the day before the mailing of the Proxy Statement, to
terminate this Agreement if Litronic identifies any circumstance which, in
the reasonable business judgment of the Board of Directors (including any
committee thereof) of Litronic, acting in good faith and with due regard for
principles of fair dealing, could materially and adversely impact the
reasonably expected financial or business benefits to Litronic of the
transactions contemplated by this Agreement or otherwise constitute a breach
of their fiduciary duty if Litronic were to consummate the Merger under the
terms set forth in this Agreement.
12.3 NOTICE OF TERMINATION. Any termination of this Agreement under
Section 12.1 or 12.2 will be effective by the delivery of written notice of the
terminating party to the other parties hereto.
12.4 EFFECT OF TERMINATION. In the case of any termination of this Agreement as
provided in this Section 12, this Agreement shall be of no further force and
effect and nothing herein shall relieve any party from liability for any breach
of this Agreement. In case of any termination as a result of a breach by a party
or the failure of a party to satisfy Closing conditions to be satisfied by it
and which are within its control, that party shall bear all of the expenses
(including, without limitation, reasonable legal, accounting and other advisory
fees as identified in the BIZ and Litronic Disclosure Schedules) of both BIZ and
Litronic incurred in connection with the failed transaction. In all other cases
of termination, each party shall be responsible for its own expenses.
13. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties and covenants of the parties contained in this
Agreement will remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the parties to this Agreement, until the
earlier of the termination of this Agreement or the Closing Date, whereupon the
representations, warranties and covenants of the parties will expire (except for
covenants, such as those contained in Sections 5.11, 6.6, 6.12, 6.13, 7.1, and
7.4, that by their terms survive for a longer period).
14. MISCELLANEOUS.
14.1 GOVERNING LAW. The internal laws of the State of California (irrespective
of its choice of law principles) will govern the validity of this Agreement, the
construction of its terms and the interpretation and enforcement of the rights
and duties of the parties hereto, except to the extent that the Delaware General
Corporation Law governs the legality and effectiveness of the Merger.
14.2 ASSIGNMENT: BINDING UPON SUCCESSORS AND ASSIGNS. No party hereto may assign
any of its rights or obligations hereunder without the prior written consent of
the other
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parties hereto. This Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
14.3 SEVERABILITY. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the interest of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, business and
other purpose of the void unenforceable provision.
14.4 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original as regards any party whose signature
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, will bear the signatures of all the
parties reflected hereon as signatories.
14.5 OTHER REMEDIES. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby or by law on such party, and the
exercise of any one remedy will not preclude the exercise of any other.
14.6 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a writing signed by the party to be bound thereby. The waiver by a party
of any breach hereof or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
This Agreement may be amended by the parties hereto at any time before or after
approval of the stockholders of BIZ or of Litronic, but, after approval, no
amendment will be made which by applicable law requires the further approval of
the stockholders of BIZ or of Litronic without obtaining such further approval.
14.7 EXPENSES. Except as provided in Section 12.4, each party will bear its
respective expenses and legal fees incurred with respect to this Agreement, and
the transactions contemplated hereby. It is understood that Litronic shall pay
the SEC and Nasdaq fees and all other fees and expenses incurred in relation to
the printing, filing and mailing of the Proxy Statement, other than fees and
disbursements of BIZ's attorneys, accountants and financial advisors.
14.8 ATTORNEYS' FEES. Should suit be brought to enforce or interpret any part of
this Agreement, the prevailing party will be entitled to recover, as an element
of the costs of suit and not as damages, reasonable attorneys' fees to be fixed
by the court (including, without limitation, costs, expenses and fees on any
successful appeal).
14.9 NOTICES. All notices and other communications pursuant to this Agreement
shall be in writing and deemed to be sufficient if contained in a written
instrument and shall be deemed given if delivered personally, telecopied, sent
by nationally-recognized overnight courier
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or mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following address (at such other address for a
party as shall be specified by like notice):
If to BIZ to: BIZ Interactive Zone, Inc.
0000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx, President
Telecopier: (000) 000-0000
With a copy to: Xxxx Xxxx Xxxx & Freidenrich
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
If to Litronic to: Litronic Inc.
00000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxx, Chairman
Telecopier: (000) 000-0000
With a copy to: Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxx., Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx, Esq.
Telecopier: (000) 000-0000
All notices and other communications shall be deemed to have been received (a)
in the case of personal delivery, on the date of delivery, (b) in the case of a
telecopy, when the party receiving the copy shall have confirmed receipt of the
communication, (c) in the case of delivery by nationally-recognized overnight
courier, on the business day following dispatch, and (d) in the case of mailing,
on the third business day following such mailing.
14.10 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof will not
be construed for or against either party. A reference to a Section or an Exhibit
will mean a Section of, or Exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
14.11 NO JOINT VENTURE. Nothing contained in this Agreement will be deemed or
construed as creating a joint venture or partnership between any of the parties
hereto. No party is by virtue of this Agreement authorized as an agent, employee
or legal representative of any other party. No party will have the power to
control the activities and operations of any other. The status of the parties
hereto is, and at all times will continue to be, that of independent contractors
with respect to each other. No party will have any power or authority to bind or
commit any
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other. No party will hold itself out as having any authority or relationship in
contravention of this Section.
14.12 FURTHER ASSURANCES. Each party agrees to cooperate fully with the other
parties and to execute such further instruments, documents and agreements and to
give such further written assurances as may be reasonably requested by any other
party to evidence and reflect the transactions described herein and contemplated
hereby and to carry into effect the intents and purposes of this Agreement.
14.13 ABSENCE OF THIRD PARTY RIGHTS. No provisions of this Agreement are
intended, nor will be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, stockholder or partner of any party hereto or any other person or
entity unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement. Anything contained herein to the contrary notwithstanding, (a)
the holders of BIZ Options and BIZ Warrants are intended beneficiaries of
Section 2.11, (b) the employees of BIZ are intended beneficiaries of Section
7.1; (c) the officers and directors of BIZ are intended beneficiaries of Section
7.4; and (d) the stockholders of BIZ are intended beneficiaries of Section 7.7.
14.14 PUBLIC ANNOUNCEMENT. Upon execution of this Agreement, Litronic and BIZ
promptly will issue a joint press release approved by both parties announcing
the execution of this Agreement. Thereafter, Litronic or BIZ may issue such
press releases, and make such other disclosure regarding the proposed Merger, as
it determines (after consultation with legal counsel and after having given the
other a reasonable opportunity to review and comment on the disclosure unless,
under the circumstances, there is no time to do so) are required under
applicable state and federal securities laws or NASD rules.
14.15 ENTIRE AGREEMENT. This Agreement and the schedules and exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto. The express terms
hereof control and supersede any course of performance or usage of trade
inconsistent with any of the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to
be executed by their duly authorized respective officers as of the date first
above written. LITRONIC INC., a Delaware corporation
By: /s/ Xxxx Xxxx
-------------------------------------------------
Xxxx Xxxx, Chairman and Chief Executive Officer
By: /s/ Xxx Xxxx
-------------------------------------------------
Xxx Xxxx, Chief Financial Officer
BIZ INTERACTIVE ZONE, INC.
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------------------
Xxxxxx Xxxxxxx, President and Chief Executive
Officer
By: /s/ Xxx Xxxxxx
-------------------------------------------------
Xxxxxx Xxxxxx, Chief Financial Officer
LITRONIC MERGER CORP., a Delaware corporation
By: /s/ Xxxx Xxxx
-------------------------------------------------
Xxxx Xxxx, Chairman and Chief Executive Officer
By: /s/ Xxx Xxxx
-------------------------------------------------
Xxx Xxxx, Chief Financial Officer
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EXHIBIT 2.2
FORM OF MERGER AGREEMENT
EXHIBIT 7.3
FORM OF VOTING AGREEMENT
EXHIBIT 7.5
FORM OF TAX REPRESENTATION LETTER
EXHIBIT 11.2
FORM OF INVESTMENT REPRESENTATION STATEMENT
BIZ DISCLOSURE SCHEDULE
LITRONIC DISCLOSURE SCHEDULE
